Connolly Environmental Pty Ltd v Foscari Holdings Pty Ltd
[2015] VCC 1430
•20 August 2015
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted Suitable for Publication |
AT MELBOURNE
COMMERCIAL DIVISION
Case No. CI-14-04049
| CONNOLLY ENVIRONMENTAL PTY LTD | Plaintiff |
| v | |
| FOSCARI HOLDINGS PTY LTD | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27, 28, 29, 30 April, 4, 5 May, 3, 4, 5, 11 August 2015 | |
DATE OF JUDGMENT: | 20 August 2015 | |
CASE MAY BE CITED AS: | Connolly Environmental Pty Ltd v Foscari Holdings Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2015] VCC 1430 | |
REASONS FOR JUDGMENT
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Subject: Claim for moneys owing under contract and counterclaim for damages.
Catchwords: Contract of service; plaintiff to provide environmental consultancy services to defendant to satisfy requirements under the Environment Protection Act 1970; contract partly in writing, partly oral and partly implied; scope of works; whether remuneration for work outside original fee proposal recoverable; whether plaintiff estopped from recovery of additional remuneration by reason of unfulfilled promise to provide documents created during the consultancy to the defendant; whether plaintiff may recover damages for repudiation of contract; additional work and remuneration recoverable under original contract; no damages for repudiation.
Legislation Cited: Environment Protection Act 1970; Domestic Building Contracts Act 1995
Cases Cited:Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL & Ors
[2005] VSCA 228; Jackson v Rotax Motor & Cycle Co [1910] 2 KB 937; Metropolitan Water Board v Johnson & Co [1913] 3 KB 900; GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50 (Finn J); Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Browne v Dunn (1894) 6 R 67; Strategic Property Reservoir Pty Ltd v Condec Pty Ltd [2012] VSC 634 (Almond J); Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 338 (Brennan J); Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106; Hyundai Heavy Industries Co Ltd v Papadopoulos [1980] 2 All ER 29, (Viscount Dilhorne); Shepherd v Felt and Textiles of Australia Ltd [1931] 45 CLR 359
Judgment:(1) Within 14 days of this day the parties must bring in short minutes to give effect to these reasons; (2) Costs reserved
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. McKay | Hassall’s Litigation Services |
| For the Defendant | Mr A. Meagher | Ellis Evans |
HIS HONOUR:
Background
1 In February 2013, the Chilean Club of Victoria owned a large vacant parcel of land at 99 Palmers Road, Truganina, a western suburb of Melbourne. The club offered it for sale by auction and it was knocked down to an individual purchaser. Pursuant to a nomination clause in the contract Foscari Holdings Pty Ltd (“Foscari”), the defendant in this proceeding, was in due course substituted as purchaser.
2 During the course of the auction, a solicitor from a firm representing the defendant, Foscari, announced that in his view it would cost some $10 million to remediate pollution of the site, which had led the Environment Protection Authority (“the EPA”) to serve a Pollution Abatement Notice (colloquially known as a PAN), which continued to affect the land.
3 According to Mr Grochowski of Project Management (Australia) Pty Ltd (“PMA”), the principal of Foscari’s project manager for the development of the site who was present at the auction, this statement was made for the purpose of deterring other bidders from bidding in competition. (T977, L7-14)
4 Foscari intends to subdivide the property into some 194 residential land blocks, approximately half of which would provide for the erection of townhouses, with the balance in traditional detached houses. In addition, the development plan includes the proposal for what has been described as a “super lot”, which would entail, in addition to the townhouses and detached dwellings, some 95 apartments. (T858, L24 to T859, L6)
5 Later that month, Mr Grochowski was referred to the plaintiff, Connolly Environmental Pty Ltd (“Connolly”) for the purposes of carrying out the necessary investigations and certifications to obtain the revocation of the PAN and the completion of an environmental audit in accordance with the Environment Protection Act 1970, which would be required as a condition of the planning permit for Foscari’s development proposal.
6 The referral to Connolly appears to have come from a Mr Jim Buckley. (T53, L1-8) Mr Grochowski spoke to Mr Mark Connolly, who is the principal of Connolly and its sole director and secretary.
7 The PAN was evidently issued by the EPA as a result of the illegal deposit of a large volume of overburden on the surface of the site, with the possibility that that overburden might have contained contaminated material. (T54, L10-16)
8 Mr Connolly advised Mr Grochowski that it would be necessary both to obtain the revocation of the PAN and a statutory environmental audit; the two went hand in hand. (T55-6)
9 The requirement for audit was said to arise under s57 of the Environment Protection Act. According to Mr Connolly, the process which his consultancy was asked to undertake involved only the removal of the overburden and did not require the remediation or removal of any form of waste other than material deposited on the surface. (T60) He said:
“…it was a very straightforward procedure merely providing some overarching supervision of the work of the civil works contractor who was going to sort that waste into different types of waste and dispose of it to landfill as needed.” (T60, L15-19)
10 The contractor who, it was proposed, would do the civil works and perform the physical work of removing the overburden, was Richard Eagles of Eagles Demolitions.
11 Mr Connolly issued a fee proposal addressed to Mr Grochowski who, as previously noted, was Foscari’s project manager, in the form of a letter dated 19 February 2013. The letter opened:
“I am pleased to provide you with a scope and cost estimate for the above work. We have provided separate scopes and cost estimates for the two parts of the work.”
12 The letter noted that the site comprised approximately 12 hectares, of which 8.6 was proposed to be developed for residential use with other parts set aside for reserves, local roads, the widening of Palmers Road, et cetera. The estimates themselves were to be found in attachments. The cost estimates for dealing with the PAN was $14,450 exclusive of GST. The second attachment provided for an estimate for the audit work which, exclusive of GST, came to $83,520. A further attachment said it would not be possible to provide an estimate for the costs of “lab analysis” for the PAN because the extent of that work would “depend on the volume and type of any material to be removed from site”.
13 There was an estimate for the number of steps of laboratory analysis for the purposes of the environmental audit relative to soil and groundwater. Schedules of rates were provided for staff and equipment and laboratory analysis. All of these amounts were expressed exclusive of GST.
14 The covering comments included a section headed “Potential Contaminants” which stated:
“Based on the historical landfill at the site the [sic] was identified potential for a wide range of potential contaminants, including metals, petroleum hydrocarbons, monoaromatic hydrocarbons, polyaromatic hydrocarbons, asbestos, pesticides, weedicides.”
15 Under the heading “Assumptions and Allowances”, one of the bullet points stated:
“Any encountered fill material will be able to be penetrated readily. If rubble or other objects are identified, additional time and costs may be incurred. If additional layers of fill are identified additional laboratory analysis of soil sampling may be required.”
16 Another section was headed “Likelihood of Further Work Being Required”. This stated:
“When complying with a pollution abatement notice or working through the statutory environmental audit process it is not possible to scope beforehand every aspect of the work that will be required. The reason for this is that as site work proceeds, site conditions can be identified that need additional investigation or consideration in order to meet the requirements of the pollution abatement notice or audit. Despite our best efforts to provide a realistic scope and costing, these uncertainties can result in the need for additional work, and extra costs.”
17 Later in the section it was stated:
“We have listed below some of the things which can increase the scope of work required for the pollution abatement notice and audit. Please note that this list is not exhaustive.”
18 The items identified were:
· Additional liaison and meetings with client, auditor and contractors required as a result of aspects of the site identified as work proceeds.
· Additional soil investigation including sampling and analysis of soil at the site to classify soils for offsite disposal or to establish that soil meets audit requirements. With reference to audit requirements, this could include risk assessment of concentrations of chemicals (such as fluoride and arsenic) which may be present is [sic] soil proposed to be retained on residential allotments.
· Further investigation of groundwater if contamination is identified. This could involve installation and sampling of additional groundwater wells.
19 In a covering email, Mr Connolly said:
“Both costs are more than I would like them to be, but I am concerned that if I cut out more work to reduce the cost, we will end up unable to do the work I cut out anyway.”
20 Mr Grochowski said that he had directed his assistant, Mr Jason Webster, also of PMA, to “proceed with your fee proposal, and agree re your comments … but if you think we can reduce costs anywhere without comprising [scil compromising] our desired outcomes then of course I would like to pursue that”. (PCB 222)
21 The proposal stipulated payment terms as “21 days from date of invoice. We issue monthly progress invoices for ongoing work, and would carry it out under our standard terms of engagement.” (PCB 216)
22 Connolly’s terms of engagement were headed “Contract for Services General Conditions”. Under the heading “Cost Estimates or Quotations”, the following appears:
“9.A Quotation is an estimate of the cost of any work for which a quote is provided. A quotation or series of quotations may be provided for stages of work to be carried out by Connolly and the Client acknowledges that delays in acceptance of the quotes, the progress of the work and in payment of a Tax Invoice delivered by Connolly may result in an increase in the cost of the work quoted, but the rates charged may change from time to time in the absolute discretion of Connolly.
10.Each quotation provided by Connolly will be calculated taking account of all information reasonably available and provided by the Client to Connolly at the date the quote is given.
11.Where a cost estimate or quotation is given and work is undertaken by Connolly at the request of the Client on the basis of the quotation and
a. It becomes apparent to Connolly from the nature of the work or other factors encountered or arising upon the work commencing that the amount quoted will be or is likely to be exceeded by AUD$1,000.00 or more then
b. Connolly may suspend the work and within 7 days give written notice to the Client of the reason for the suspension of work and provide a written quotation (‘a cost increase quote’) for the likely increase in the cost of the work being undertaken; and
c. The Client or its authorised Agent (e.g. the Project Manager, Architect or Builder) will give written approval within 7 days of the cost increase quote, and
d. In the absence of receipt by Connolly of the written approval within 7 days of the cost increase quote the contract shall end.”
Clause 4, under the heading “The Client’s Obligation”, provided:
“4.The Client agrees to pay Connolly for any additional or varied services as required after commencement of work. Connolly reserves the right to bill more than the estimated cost for each stage should unforeseen circumstances arise.”
Clause 19, under the heading “Termination”, provided for the contract to be terminated by 7 days’ written notice given by one party to the other or by written agreement between the parties, and
“Upon termination any sum then due becomes immediately payable together with interest thereon.”
Clause 26, under the heading “Retention of Title”, provided:
“26.Property in the information and documentation obtained and supplied by Connolly pursuant to this contract remains with Connolly and shall not pass to the client by any third party to whom Connolly has supplied the same or otherwise used, published or disseminated in any form by any third party to the Client, or by the client, or for and on behalf of the client, until payment of all outstanding monies have been paid to Connolly by the client in respect to this and any other contract or agreement the Client may have with Connolly.”
(PCB 238‒242)
These terms of engagement attached the fee proposal letter of 19 February.
The proposal included a schedule of hourly rates for Connolly’s employees as Attachment 6.
23 The Statement of Claim and Defence concur in the parties having reached an agreement that was partly in writing with the written portions of the agreement being constituted by the fee proposal and the terms of engagement. According to the Statement of Claim, the agreement between the parties was partly written, partly oral and partly to be implied. According to the Defence, paragraph 3 of the agreement was partly in writing constituted by the two documents already mentioned and “partly to be implied”, the implication being “to give business efficacy to the agreement”. The defence also alleged the existence of a further, distinct, oral agreement.
24 The conduct of an environmental audit required the engagement of an environmental auditor. (PCB 212, T66, L23‒T67, L11) Environmental audits are governed by Part IXD of the Environment Protection Act 1970. Section 53ZC renders it an offence for an auditor to give false or misleading certificates or conceal relevant information or documents from the Environment Protection Authority. The section provides for a penalty of 2,400 penalty units or imprisonment for two years or both. The auditor is therefore required to express independent opinion, subject to very heavy penalties for failing to do so. There is nothing in the provisions to indicate that an environmental auditor is in any different position from a financial auditor; that is, charged with an independent responsibility to investigate and report, and clothed with the authority to require provision of all information he or she reasonably requires and authority to carry out any investigation reasonably necessary for the purpose of providing the audit report and certificate. The effect, then, is that a landowner or occupier and the consultant engaged by such an owner or occupier is, as a matter of practicality, compelled to comply with all reasonable requests by the environmental auditor if the appropriate audit certificate is to be obtained.
25 In this case, the environmental auditor appointed was Mr Charlie Barber of Australian Environmental Auditors Pty Ltd. Mr Barber was assisted by his company’s employees, Mr Greg Foster and Mr Stuart Thurlow. Mr Connolly had an initial meeting with Mr Barber and his assistant, Mr Foster, on 13 March 2013. (PCB 284) Mr Barber stated at that meeting that two more groundwater wells would be required for the site. The proposal by Mr Connolly initially envisaged four. The two extra wells would take the number required to six. According to Mr Connolly, the purpose of these additional wells was not because Mr Barber had serious concerns as to contaminants on site, but merely because “he thought that would better characterise the overall conditions at the site”. (T154, L9‒17)
26 As at 16 April 2013, Mr Eagles had informed Mr Connolly that he had identified a small area of rubbish buried at the front of the site ‒ “dry rubbish, plastic, bricks, concrete etc.” From then on, Mr Connolly said, it was clear that there was at least a small area of buried rubbish at the site. This represented an environmental issue additional to the overburden. The rubbish was buried, as I understand the evidence, below natural ground level. It was not simply part of the overburden lying above natural ground level. (T155, L1‑8) The assumption as at 30 April was that the rubbish buried at the front was a small area. (T157, L4‒6) An email from Mr Connolly to one of his assistants, Ms Meek (later Ms Leviston), indicates that a groundwater strategy had been prepared to be submitted to the auditor, Mr Barber. (PCB 325) The email said that Mr Connolly would “call Michael Grochowski” relative to tentative timing. The revised strategy was, according to an email earlier that day from Ms Meek to Mr Connolly, in accordance with the auditor’s direction. She had “added more wells and broadened the analysis to include anions and cations, alkalinity to get an idea of background conditions etc.”
27
On 2 May 2013, Mr Grochowski sent an email to Mr Connolly authorising Connolly, on behalf of Foscari Holdings, “to install ground wells as required”. This written authority seems to have been, at least to some extent, necessitated by legislation governing the accessing of groundwater rather than merely for contractual relations between the parties. (PCB 342) These were the wells required by the strategy referred to earlier. (T159, L2‒6) By then, the “final agreed number” of groundwater wells was eight. (T159, L13) By an email of
8 May 2013, Mr Grochowski asked Mr Connolly to proceed with the groundwater investigations. (PCB 368) This authorisation was given in response to an email earlier that day in which Mr Connolly said:
“I believe that given the extent of the buried rubbish at the site, the additional wells and testing now will save significant time delays and expense later.” (PCB 360)
28 On 8 May 2013, Mr Connolly submitted a cost variation based on accelerated additional groundwater assessment providing for the installation of two rounds of sampling analysis of an additional four groundwater wells “to allow for additional site coverage and to target areas in the eastern portion of the site, associated with deep fill and buried rubbish”. The costing was $45,340 exclusive of GST. (PCB 361‒6) This proposal was accepted by Mr Grochowski of PMA on behalf of Foscari. (PCB 368)
29 As from May 2013, Mr Eagles was requested by Connolly —
“… to do what looked like a mini-scale open-cut coal mine working across the site following all places of buried rubbish as they proceeded across the site and going deeper as they needed to, to get to the base of it, or where the buried waste wasn’t quite as deep, shallower, down to a depth as I’ve mentioned of almost 7 metres in one area where asbestos had been buried.” (T101, L7‒14)
Mr Connolly said he suggested this process “at a couple of site meetings to Richard Eagles, one of which site meetings I believe Michael Grochowski was present at”. (T101, L14‒16) Mr Connolly commented upon “Michael’s extreme and very understandable nervousness about how far was this buried waste going to go and what was it going to cost to deal with it”. (T101, L17‑19) This process began, according to Mr Connolly, “quite early on, so probably somewhere around May, perhaps, June, at the latest, 2013”. (T102, L8‒9) The process continued throughout working hours, weather permitting. (T102, L13‑25) This was the start of a process of discovery and removal of rubbish which persisted until April 2014. (T103, L17‒22) The rubbish was not contained entirely in contiguous sites and was discovered in some cases serendipitously by Mr Eagles. (T104, L8‒10, L14‒22) Further rubbish was discovered during test pit verification programs conducted at the direction of the auditor’s assistant. Some 70 of those up to a depth of 4 metres were dug on one day and several revealed buried waste. (T104, L22‒T105, L4).
30 It would seem that the groundwater sampling began on or about 15 May 2013. (PCB 385, T164)
31 On 21 June 2013, Mr Connolly emailed a report on buried rubbish to Mr Grochowski. As at that date, according to Mr Connolly, the buried rubbish “was known [to be] a potentially significant problem”, a big problem but he was uncertain how big. (T166, L17‒20)
32 By an email dated 8 July 2013, Mr Connolly reported to the auditor, with copies to Mr Grochowski and Mr Webster of PMA, that the site excavation had reached about 2 metres below final surface level. (PCB 473) The projected excavation level was to 7 metres below original ground surface. (T170, L19‑21) The scale of the excavations which had taken place and were continuing must be judged in light of the fact that the overburden originally stood 3 metres above natural ground level. (T170, L25‒31)
33 Excavation proceeded. On 12 August 2013, Mr Connolly sent an email to Mr Grochowski dealing with a claim for additional costs made by the auditor. Mr Connolly was prepared to support the auditor’s claim, “whilst it is not in my nature to be an apologist for auditors”. He also said:
“As we now know the very large volume of the buried rubbish which has been unearthed beneath totally altered the amount of work required at the site:
a.For Richard Eagles: Months of additional sorting and processing of buried rubbish which had been placed into excavations beneath the original natural surface.
b.For us [viz Connolly]: Additional meetings, communications, site inspections to document this process both for the PAN and for the audit. Also, additional groundwater wells and additional groundwater analysis to test for contaminants potentially leaching from the rubbish to groundwater.
c.For the auditor: Additional work as explained in Stuart Thurlow’s email.”
The penultimate paragraph noted that, in a conversation with Mr Webster, Mr Connolly said he had informed him that:
“…we [viz Connolly] have exhausted our original budget in several areas. We are working out at the moment what we think will be needed to finish the work and will give you a detailed report on this asap.” (PCB 517‒18)
Mr Grochowski had complained to Mr Connolly:
“It is frustrating for us to obtain fees then only have them increase based on increased scope, as there is no commercial risk for the auditor in assessing the scope of works in the first place.” (PCB 519)
34 On 21 August, Mr Connolly reported to his assistant, Ms Meek, that Mr Eagles had removed 500,000 to 600,000 cubic metres of material, excavating and replacing it. He asked Ms Meek for “… an updated budget projection for Foscari”. (PCB 520)
35 Mr Connolly sent an email on 5 September to Mr Webster of PMA noting that, at a site inspection he had carried out, he was informed that Mr Eagles had found buried timber and tree trunks in a test pit about 40 metres west of “where he has got to in his buried rubbish chasing”. This was an area where the overburden had already been removed and the ground was believed to be clear. He continued:
“The discovery of more buried rubbish in an area previously thought to be clear means that we are going to have to conduct test pitting to establish subsurface conditions across the rest of the site, outside of the known buried rubbish area.” (PCB 533)
36 As to the rubbish problem, Mr Connolly, in his evidence, said that this discovery “showed it was bigger still and it showed to me, and I pointed out (to) Richard, that there had to my mind clearly been an attempt to have this material remain unknown into the future by placing a layer of soil over the surface so that it looked like the natural ground surface.” (T181, L25‒30) It seemed that, by early September, all of the original overburden had been removed “and the focus and all of the attention was on working through this buried rubbish”. (T183, L22‒25)
37 An email of 10 September 2013 records a site meeting attended by the auditor, Mr Barber, his assistant, Mr Thurlow, Mr Webster of PMA, Mr Connolly and Mr Eagles. Mr Barber suggested that the area to the east of the buried rubbish area be excavated “systematically by a series of contiguous trenches dug to natural soil”. Connolly would be required to “regularly inspect, photograph, document and collect and test soil samples as the strip excavation process proceeds”. It would have to liaise with Mr Thurlow of the auditor’s office “so that he can make inspections during the process” (PCB 535). The email said the need for the further investigations was —
“… that there is demonstrated high potential for further buried rubbish to be present outside of the identified buried rubbish area, and as Auditor, Charlie [Barber] has a requirement to be confident about the status of the site for which he is signing an Audit Certificate or Statement. Apart from this and from a practical perspective, if buried rubbish is left on site at the conclusion of the audit, and is uncovered during site redevelopment, there are potentially serious liability implications for all parties.”
Mr Barber responded to the email summarising the meeting and agreeing with its accuracy. He noted:
“… the PAN currently requires removal of all buried waste, so not pursuing this could also be a breach of the PAN.” (PCB 541)
38 The trenching process agreed upon had not commenced by 1 October 2013, apparently because of weather problems. (PCB 565, T192, L10‒13) The process did not apparently commence for another week. (T192, L16‒18)
39 By an email of 6 November 2013 addressed to the auditor, Mr Barber, Ms Meek reported:
“No further exploratory/verification trenching work has been conducted in the rear (western) portion of the site since our site meeting on Thursday 17 October 2013. As discussed at that meeting, Richard Eagles will conduct this work on a broad front as an extension of his buried rubbish work, once the buried rubbish removal is complete.”
The same email noted that Connolly had conducted a site inspection on 31 October 2013 “following a call from Richard Eagles in relation to a localised patch of asbestos that had been encountered in the south-east portion of the site”. The asbestos was buried at a depth of 3 to 4 metres. Adjacent to loose asbestos there was wrapped asbestos and, as at that date, the extent of the material had not been ascertained. The removal would continue on 11 November and the removal was being supervised by Challenge Safety who would “… facilitate, document and report the appropriate disposal”. (PCB 637)
40 Mr Connolly reported to the auditor by email of 2 December 2013 that Eagles Demolition was carrying out bulk excavating “to exhume the buried timber using two 46 tonne excavators”. Test pitting would provide “an indication of the extent of the buried timber”. Mr Connolly also referred to test pits further to the rear of the site which were “beyond the now-identified extent of the buried timber, in an area which I believe (subject to your [that is, the auditor’s] appraisal) may not warrant or require broad scale contiguous trenching”. (PCB 651) By an email of 9 December, Ms Meek reported to the auditor that rain had delayed earth work. She said, “No work has been conducted since Wednesday last week (4/12/13)”. (PCB 658)
41 To begin the new year of 2014, Mr Connolly provided a lengthy report to Mr Webster of PMA and to the auditor. He described in some six paragraphs the earth works yet to be completed which entailed, generally, the completion of the removal of rubbish, spreading cover material and giving a final roll to the site “with laden Moxies (50 tonne gross weight)”. The assessment of what remained to be done came with a number of provisos, principally, that further rubbish and like material beyond what was believed to be onsite was not discovered. Subject to those provisos and “subject to the remaining buried rubbish not being more than about 1m thick, the above work [would] take about 6 weeks to complete”. In broad terms, this would have the earth works complete at the beginning of March 2014. Mr Connolly then turned to the “environmental” work to be done which would entail, amongst other things, “our final validation sampling and the auditor verification testing” which he said could begin as soon as the spreading of cover material to achieve finished levels with 1 metre of “aesthetically acceptable cover material over the site”. He hoped that the groundwater sampling wells could be decommissioned before the final spreading of material and a final site inspection could be completed at the conclusion of the earth works. (PCB 700)
42 This report and assessment may be compared with an email from Mr Connolly in draft form dated 17 December 2013 addressed to “Michael Grochowski, Foscari Pty Ltd, xx Sturt Street, South Melbourne, Vic xxxx”. The email began:
“Dear Michael,
The purpose of this letter is to provide you with an update on progress with the assessment and remediation work …”
The draft stated that the work for the removal of the PAN to achieve a Statutory Environmental Order was “now almost complete”. It continued:
“1.Eagles Demolition has approximately two days’ work left to complete the excavation of all waste material from the site.
2.Following completion of this final stage of the excavation work, there remains one two [sic] weeks’ work to screen the remaining excavated and stockpiled material, and to dispose of the waste component of the material to landfill.
3.Eagles Demolition will then spread the stockpiled cover layer soil over the site to meet the Auditor’s specification.
4.Connolly Environmental will then take final validation samples across the site surface, the Auditor will collect auditor check samples and site work will then be complete.
5.Connolly Environmental will then incorporate the final site validation data into the assessment and remediation report and provide this report to the Auditor to enable the Auditor to finalise the statutory environmental audit.”
The letter then said:
“We do not anticipate any obstacles to the satisfactory completion of the audit, and EPA has informed us that they will accept completion of the audit as satisfactory completion of the requirements of the pollution abatement notice.”
43 In his evidence-in-chief at T872‒3, Mr Grochowski referred to this report as being an update report and it acquainting him with the progress of the civil and environmental works on site. He said:
“…essentially we were, you know, we were so close – so close to finish that, you know, I could take some – I could take some comfort.” (T873, L29‑31)
This report gave a more optimistic impression as to the progress of operations towards completion of the audit than the email of 10 January the following year. Specifically absent is the suggestion to be found in the email of 10 January that earthworks would be continuing until approximately the beginning of March 2014. In the particularisation of services for December 2013 (at PCB 650), there is a reference to work done on 2 and 4 December and speaking to Mr Grochowski “to find out what he needs in the way of a letter of comfort from the auditor”, and a follow-up “re letter of comfort; review finished site cover requirements re validation”. (T290‒291) Mr Connolly referred to “letters of comfort” and at reassuring potential financiers that his evidence referred to such letters emanating from the environmental auditor. He commented at T291, L10‑11:
“…these are getting harder to have an auditor provide because the EPA takes a dim view of the auditors pre-judging the outcome of an audit before the audit is actually completed.”
44 The draft letter of 17 December appears to be in the nature of a “letter of comfort” rather than a simple update. Mr Grochowski responded late on the evening of 17 December 2013, saying “That is great, can you just remove my name from the top and make it out to “Foscari Holdings Pty Ltd, Level 2, 455 Bourke Street, Melbourne”. He closed by asking that his name be removed and that the letter be addressed “Dear Sir”. (PCB 670) There was some delay in providing the letter because Mr Connolly was in Perth. It was eventually provided at 11.58am on 18 December. (PCB 675) In examination-in-chief at T874, Mr Grochowski agreed with a question from me that, as a result of the 17 December quote, he could “see the winning post”. Defendant’s counsel, Mr Meagher, then asked:
Q.“Did Connolly Environmental or anyone else say anything to you that changed that impression or your understanding?---
A.No.” (T874, L15‒17)
45 According to Mr Connolly’s evidence, the letter the first draft of which is at PCB 665, was written by him at Mr Grochowski’s request as a letter of comfort from Mr Connolly’s company when no letter of comfort could be obtained from the auditor. The intention was to put the best face on things to enable Foscari to obtain finance rather than to provide a hard-headed timing assessment to Foscari itself. (T378)
46
On 16 January 2014, Mr Connolly sent an email to Mr Grochowski and
Mr Webster explaining that the auditor was requiring a third round of groundwater sampling because of his concern as to the length of time that had elapsed since the previous round, having regard to the extent of site work, excavation and so forth, and the depth of the excavations which had been
carried out. Mr Barber, it was said, was also concerned to ensure that the Environment Protection Authority did not request any additional groundwater assessment after the wells had been decommissioned “as this would be a disaster in both costs and time, as new groundwater wells would have to be installed”. As a result, Mr Connolly said that he had to agree with Mr Barber “that the prudent path to ensure that the audit goes through without issue is to do the third round of groundwater sampling”. He provided the detail of the proposed third round, including laboratory analysis, providing a costing for the sampling of $16,160 exclusive of GST.
47 Seventy verifications were done on 25 February 2014. (T211, L20‒28)
48 On 5 March 2014, there was an exchange of emails relative to obtaining owner consent for the sinking of groundwater wells. (PCB 795)
49 On 17 March 2014, Mr Connolly sent an email to Mr Grochowski covering a notice from the Environment Protection Authority revoking the Pollution Abatement Notice. The following day, however, the auditor communicated some bad news. As a result of the proposed development on the site, Mr Barber said that he would have to certify it as suitable for low density residential use. He would divide the site into three general types of land:
Alow risk;
Bmedium risk; and
Chigh risk.
The last would include the residential lots and reserves. He continued:
“With regard to these, I would like to see a heavier density of sampling on the Type C lots than the (Type) B, which would be heavier again than Type A lots.”
Connolly’s original proposal was for some 88 bore sites for sampling. Mr Barber said, “I’m thinking closer to 150 locations rather than 95”. (PCB 808)
50 The sinking of the validation soil bores took place over some five days, commencing 31 March 2014 and ending 4 April 2014. (T221, L26‒T222, L4) Because the entire site was not available for testing, only 118 of the 150 validation soil bores stipulated by the auditor were in fact sunk in this period. According to Mr Connolly’s evidence (T236, L16‒20), Mr Grochowski of PMA was aware that the validation soil bores could not be sunk until the stockpile of unprocessed material then located on the site was moved.
51 As at 28 April, Mr Connolly reported to the auditor that Mr Eagles was “still removing asbestos from the excavation adjacent to the site shed, and is probably a week or two away from having the front of the site ready for verification test pitting and our final validation sampling”. [Emphasis added.] (PCB 880) The projection of the site works being complete by the beginning of March was therefore not met and, on this indication, the process may have dragged on until mid-May.
52 By the beginning of May 2014, Connolly had been rendering monthly invoices since the commencement of its work. The invoices for 2013 had been paid, but none of the invoices rendered monthly from January onwards had been paid. A bookkeeper at Connolly, Ms Palmer, made contact with Mr Webster as to the unpaid invoices. She reported to Mr Connolly that Mr Webster could not arrange payment “until Michael [Grochowski] authorises it”. She reported that she had asked Mr Webster to raise the issue with Mr Grochowski as a matter of urgency. (PCB 906) On the same day, Ms Leviston (as Ms Meek had become) had reported to the auditor’s office, copied to Mr Grochowski and Mr Webster, that 118 validation soil bores had been installed and that further testing was proposed at certain “hot spot locations, where concentrations exceed the adopted assessment criteria for the site”. In the absence of queries or objections, she said:
“We will commence with preparation of a formal remediation plan including a detailed review of all results obtained to date, along with the proposed remediation methodology and additional validation schedule.” (PCB 907)
53 On 19 May 2014, Mr Connolly sent an email to Mr Grochowski complaining that he was “unable to contact you by phone”. He continued:
“I am extremely concerned that our invoices dating back to January this year remain unpaid.
Unless we receive payment in full for all invoices issued to Foscari by Thursday this week, 22 May I will engage Dun & Bradstreet to initiate the collection process. I have taken this decision to preserve the viability of our business. We cannot afford to carry these costs.”
54 Mr Grochowski requested a breakdown and particularisation of the most recent invoice which had been rendered for work carried out in April 2014. The breakdown was furnished under cover of an email of 20 May 2014. (PCB 912 and Exhibit C) Around this time, Connolly ceased work. An invoice for work carried out in May was rendered under cover of an email of 21 May from Mr Connolly to Mr Grochowski. (PCB 914) Mr Connolly and Mr Grochowski met on 26 May. Amongst the things raised by Mr Grochowski was an objection to a separate charge for decommissioning groundwater wells. He said that, in establishing the well, it must have been known to Connolly that they would have to be decommissioned and he expected the cost of decommissioning to have been included in the fee proposal for the commissioning. According to Mr Connolly, the explanation he gave to Mr Grochowski at the meeting was as follows:
“…we do not ever include well decommissioning in our quotations for assessment of sites for audit for two reasons; the first reason being that we do not know how many wells we are going to finish up installing at a site and the second reason is we have no idea when wells will be able to be decommissioned. We’re working on a site at the moment, Your Honour, where we completed the work for the audit about 8 years ago and we are still sampling groundwater as a condition of the audit. So for those reasons, we don’t ever include that [amount] in our proposals.” (T255, L19‒29)
At T255, L29 ‒ T256, L2, Mr Grochowski allegedly said that he did not believe there was any issue about the invoices being paid and said further that he would arrange payment of the January invoice as a matter of good faith. Mr Connolly said:
“I did suggest to him that payment of the January invoice was required, apart from being a measure of good faith. But I thanked him anyway for arranging that and I looked forward to having the other invoices settled.” (T256, L2‒6)
Payment of the January bill was made and Mr Grochowski sent a follow-up email of 30 May 2014 where he said as to the remaining outstanding invoices:
“Can I request of you on what basis you would be prepared to discount those amounts to enable immediate full and final settlement of those invoices immediately without the need for ongoing discussion or any argument on any matters.
I trust you can appreciate that substantial monies have been paid to you, in excess of $100,000 to date, solely based on hourly rate work without any discount.” (PCB 916)
55 Mr Connolly sent an email to Mr Grochowski dated 4 June 2014. He again complained about lack of success in contacting Mr Grochowski by telephone. He said:
“On Friday 30 May 14 I made an offer of 7.5% discount for immediate full and final settlement of our February, March and April invoices.
I have had no response to this offer beyond your informing me that you passed the offer to the owners on Monday 2 June 14, that you were hopeful that the offer would be accepted, and that we would talk yesterday 3 June 14. I phoned you yesterday, and again today, and sent you a text message this morning asking you to call me, but have had no reply.”
Mr Connolly said that, unless a reply was made by 5pm that day to the effect that the invoices would be paid by 5pm the following day, 5 June, the offer of the discount would be withdrawn and the matter referred to Dun & Bradstreet. (PCB 929) At 5.20pm, Mr Grochowski responded by email, saying that Foscari would be generally agreeable to finalising matters as proposed, but it requested “the revised fee proposal from you to finalise the balance of work in order to obtain the audit statement”. The email continued:
“In addition they [viz Foscari] have requested all work for which you have completed, invoiced and been paid for be provided to them, as evidence of the work completed and paid to date prior to agreeing to any arrangement.”
There then followed a list of some 13 items. (PCB 930) A few moments later, Mr Connolly responded, refusing to provide documentation until “we are paid for the work we have done”, and refusing to spend more time calculating costs “until we are paid for the work we have done”. He concluded “When and only when we are paid up to date will I provide files, documentation and cost estimates for completion.” (PCB 931)
56 By letter dated 27 June 2014, Clamenz Evans Ellis Lawyers wrote to Mr Connolly announcing that they acted for Foscari. The letter recited the history of matters as Foscari saw it and, at paragraph 9, said:
“To date, we are instructed that our client has duly paid for various works, including but not limited to [and there followed a list of items numbered (a) to (i)]”
These were described as the “paid works”. The letter demanded that by 4pm on 1 July, Connolly provide all paid works and comprehensive evidence that the outstanding invoices had been fairly and accurately determined or withdraw the demands under the invoice and any purported termination or threat of termination. Failure to meet the demand would, it was said, lead to the engagement of an alternative environmental consultant and commence proceedings for damages and requiring that the “paid works” be delivered to Foscari immediately. (DCB 357‒361) Hassall’s Litigation Services responded on behalf of Connolly in an email dated 4 July 2014 (DCB 362‒5), taking issue with much of what was said on behalf of Foscari. The letter stated:
“Our client has agreed to provide time sheets, copies of all communications and have the auditor confirm the balance of the work required.”
According to Hassall’s:
“Connolly estimates that there is about $50,000 of work to be completed including site work and laboratory analysis which is necessary to enable the auditor to conduct his statutory environmental audit. This estimate will require verification following discussion with the auditor regarding finalisation of works.”
57 Clamenz Evans Ellis responded in an email of 11 July 2014, taking issue with much of what was said by Hassall’s. In answer to a question raised by Hassall’s, they said they had instructions to accept service of proceedings on behalf of Foscari and concluded:
“8.In summary, your client is to agree to provide our client with:
(a) the paid works (as defined and detailed at point 9 of our letter under cover dated 30 June 2014);
(b) details, methodologies, time sheets and calculations for all works undertaken (both paid and unpaid) together with supporting evidence of same with reference to the original fee agreement and evidence where there was a deviation from such works
by 5pm Monday 14 July 2014.
9.Failure to do so will see our client left with no choice but to go to the extra expense and costs in instructing a new contractor to undertake the works your client ought to have completed. Further, after such time has elapsed our client hereby reserves the right to bring a proceeding without any further reference to you or your client.” (DCB 369-71)
58 Hassall’s responded in a letter dated 14 July 2014, agreeing to provide the material demanded, but stating that the stipulated time limit could not be met. The letter referred inter alia to the absence of the practitioner managing the dispute in hospital undergoing tests. Hassall’s then sent a facsimile of 18 July 2014, referring to the enclosure of various timesheets. (DCB 372‒381) They followed with a facsimile of 30 July 2014, noting that the invoices for February to May remained unpaid. The letter purported to be a seven days’ notice of default, stating that unless payment was made, “Connolly intends to terminate the agreement and issue legal proceedings …”. (DCB 382‒3)
59 Clamenz Ellis Evans wrote a letter dated 6 August 2014 to Australian Environmental Auditors marked for the attention of Mr Charlie Barber, terminating the appointment of Mr Barber and his firm as environmental auditor in light of the dispute with Connolly, termination taking effect on 20 August 2014. (DCB 384‒5)
60 A new consultant, namely EnviroProtect (Vic) Pty Ltd, whose principal is a Mr Sepulveda, was appointed. Mr Sepulveda gave evidence to the effect that his firm had taken on the role of environmental consultant to obtain an audit for the site on the basis that it would receive payment only when the audit was complete. He said that the audit was in all respects complete except that the local council had to “sign off”. (T1046)
Invoices
61 The following invoices were rendered to Foscari and paid in the ordinary course of business. The amounts are inclusive of GST.
| Month | Year | Amount |
| February | 2013 | $ 7,187.88 |
| March | 2013 | $ 10,075.45 |
| April | 2013 | $ 5,794.25 |
| May | 2013 | $ 64,127.60 |
| June | 2013 | $ 16,056.65 |
| July | 2013 | $ 19,972.19 |
| August | 2013 | $ 2,937.13 |
| September | 2013 | $ 8,767.42 |
| October | 2013 | $ 18,760.78 |
| November | 2013 | $ 6,126.62 |
| December | 2013 | $ 16,530.91 |
| January | 2014 | $ 27,059.70 |
| TOTAL | $203,396.58 |
62 All of those amounts were paid, in effect, within a month after their being rendered, except for the January 2014 invoice, which was paid in May of 2014.
63 The following further invoices were rendered, but remain unpaid and are part of the subject matter of this proceeding:
February 2014 $19,850.55 March 2014 $24,269.26 April 2014 $51,331.63 May 2014 $35,612.53 TOTAL $131,063.97
The present proceeding
Claim
64 The Statement of Claim endorsed on the Writ seeks to recover the sum of $131,063.97, being the total of the amount of the unpaid invoices in accordance with the terms of an agreement alleged between Connolly and Foscari as a liquidated sum. Secondly, the Writ seeks the same amount as damages for breach of contract. Thirdly, it alleges that Foscari repudiated the contract with Connolly seeking damages of $48,000 being “the fees that would have been payable to [it] for the completion of the works provided for under the agreement …”.
65 As I understand it, the claim based on repudiation was not pursued.
Defence and counterclaim
66 In its Amended Defence and Counterclaim, Foscari admits it entered into an agreement with Connolly, pursuant to which [Connolly] “agreed to provide management, documentation and reporting for compliance with the Pollution Abatement Notice and the assessment and remediation for a Statutory Environmental Audit … and [that Foscari] agreed to pay [Connolly] in return”.
67 According to paragraph 3 of the pleading, the agreement was partly in writing and partly to be implied. The written portion of the contract was constituted by the fee proposal and the terms of engagement for Connolly Environmental. It was said that the total cost to the plaintiff for the provision of all works would be $83,520 exclusive of GSTax for statutory environmental work and $14,450 exclusive of GST for work relative to the Pollution Abatement Notice. It referred to clause 11 of the terms of engagement used by Connolly, which is referred to above. The Defence said that there were terms implied in the agreement that the parties would act in good faith and would cooperate. Those terms were implied by law.
68 The Defence refers to what it describes as the Second Quote, being a letter from Connolly to Mr Grochowski, with a fee proposal entitled “Cost Variation for Accelerated Additional Groundwater Assessment …” dated 8 May 2013. There was a further agreement, it was said, described as an hourly fee agreement which was oral and to be implied, arising out of discussions between Mr Grochowski on behalf of Foscari and Mr Connolly on behalf of the plaintiff in mid-2013. The agreement was also to be implied from the conduct of the parties, the relevant amounts were $4,593.22, being part of the sums rendered for payment in Connolly’s June invoice, $3,885, being part of the amount rendered in Connolly’s July invoice and $2,670.12 being part of the sums rendered in Connolly’s August 2013 invoice. The total amounts involved were $11,148.34, all of which were paid.
69 The Defence referred to a Third Quote for $16,160 exclusive of GST for further groundwater sampling. The parties, it was said, agreed to the performance of works in accordance with the quotation and the agreement was partly written and partly oral. It was constituted by the email proposal involving the quotation insofar as it was in writing, and to the extent that it was oral, it was constituted by discussions between Mr Connolly for the plaintiff and Mr Grochowski for Foscari in “early to mid-January 2014”. Fourteen thousand, nine hundred and ten dollars ($14,910) was invoiced and that amount, it was said, had not been paid. Further, it was said that in the period November 2013 to February 2014, Connolly invoiced Foscari a further $45,623.38, which Foscari paid. The Defence states:
“… in making the payments alleged [Foscari] acted in good faith relying on the good faith, cooperation and honesty of the plaintiff”.
70 Foscari denied that Connolly had rendered services to it as Connolly alleged because, aside from obtaining the revocation of the Pollution Abatement Notice and providing groundwater test results, Connolly had:
“… never provided to [Foscari] any documents, reports, photographs, management or analysis required pursuant to the terms of the Agreement.”
71 The Defence said that, despite demands, Connolly has refused to provide the work which it had done or reasonable proof of the work.
72 The pleading alleges that the face value of the quotations provided by Connolly was $170,618 and Foscari had paid it $203,396, inclusive of GST which payments, it was said, were:
“… in reliance upon the honesty and good faith of [Connolly] and its purported provision of works pursuant to the Agreement and the Hourly Fee Agreement.”
Foscari agreed it had not paid the invoices from February onward but said that, by virtue of the implied terms of good faith and cooperation, Connolly was “obligated to provide a quotation for the invoices … prior to performing the work the invoices relate to” and Connolly provided no such quotation. Further, it was alleged that those invoices did not relate to circumstances which were unforseen and Foscari had not received the benefit of the work. Therefore, it was said, Connolly had no right to bill more than what had been quoted for and no right to recover those amounts.
73 Next it alleged that Connolly was not entitled, as it purported to do, to terminate the agreement. The amounts invoiced were not properly rendered and therefore the notice served as the basis for the purported termination was invalid. The purported determination by Connolly was, therefore, a repudiation by Connolly.
74 Next, the Defence referred to Foscari’s proposal on 30 May 2014 for Connolly to discount its fees, which evoked a response of a proposal to discount by 7.5 per cent.
75 The events of June 2014 were traversed, including a request by Foscari for a fee proposal for the cost of the works yet to be completed with all “paid works” to be provided to Foscari, which Connolly declined to undertake unless paid the amounts which it sought. In those circumstances, it was said, Foscari did not evince an intention not to comply with its obligations pursuant to the agreement and its conduct did not constitute a repudiation.
76 Connolly was said to have breached its duty of cooperation and good faith by the invalid purported termination. It said Foscari’s refusal to make payment was reasonable in the circumstances and there was no obligation upon it to pay the amounts claimed and therefore there was no repudiation.
77 By way of Counterclaim Foscari said that Connolly, whilst purporting to perform work and invoicing for it, did not provide “the works nor the benefit of the works” to Foscari, by reason of which Foscari said it suffered loss and damage. It derived no benefit for the payment of $203,396.58 save for the removal of the Pollution Abatement Notice and the groundwater testing material. As a result, it had to engage an alternative consultant and sought damages based on the cost incurred to the new consultant. Foscari sought damages, interest and costs.
Reply and defence to counterclaim
78 In its Amended Reply and Defence to Counterclaim, Connolly denied that the fee proposal or its terms of engagement:
“… contained any contractual promise that the total cost of the works… would be limited to] $83,520, excluding GST for the statutory environmental audit work; and $14,450 excluding GST for the pollution abatement notice work.”
These amounts, it was said, were merely “initial estimates of the fees”, and it said Foscari had agreed that the quoted amounts were merely estimates and Connolly was entitled to bill more, should unforeseen circumstances arise. The pleading referred to clause 4 of the Standard Terms. As to clause 11 of the terms of engagement referred to in the Defence and Counterclaim of Foscari, Connolly said it was “drafted in a permissive or discretionary manner that gave [Connolly] a right to provide further quotations if it saw fit, and a further right to cease work until those quotations were approved”, but did not require Connolly to issue quotations as a precondition to its right to recover payment for any particular work.
79 It said that there was no obligation of good faith implied in contracts formed in the state of Victoria. The pleading referred to a decision of the Court of Appeal in Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL & Ors [2005] VSCA 228. Further, it said the implied duty of cooperation could have no relevance to the defence. The initial fee estimates plus GST was, according to the pleading, $107,767, the whole of which it had said had been invoiced by Connolly to Foscari and Connolly had invoiced a further $226,693.55, making total amounts invoiced $334,460.55 inclusive of GST. It was said the plaintiff [scil Foscari] has paid the defendant [scil Connolly] $203,396.
80 It said that the buried waste referred to in the Defence was unknown to Connolly at the time of its initial fee proposal and the work associated with the buried waste “was the sole reason” that Connolly’s fees exceeded the original proposal. The buried waste, it was said, was an unforeseen circumstance and Connolly was entitled to charge for its additional services.
81 Next it was said that, insofar as it gave an additional quotation relative to groundwater, it did so by reason of the discovery of buried waste and the Second Quotation “… did not purport to be an exhaustive quotation of the additional fees that would or may be charged as a consequence of the buried waste”. Connolly agreed that there was an oral agreement that it would carry out additional work beyond that stated in the previous quotation to deal with the buried waste and would proceed as expeditiously as possible. It would charge its hourly rates for the additional work. Agreement was said to have been reached in May 2013. It was said not to constitute a new separate legal contract existing outside the main agreement, rather it was a confirmation by Foscari that the additional works connected with the buried waste were to be carried out by Connolly in accordance with and pursuant to the main agreement. Further, it was said that insofar as Mr Grochowski on behalf of Foscari gave a direction to carry out additional work connected with buried waste, that direction was “general and all encompassing, and was not confined to specific items of work.” This direction was said to have been given in or around May 2013. The pleading noted Foscari’s payment of amounts beyond that which had been quoted and said that from February 2014, Foscari “by its conduct, intimated to [Connolly] that [Connolly] should continue to perform the works … “. Accordingly, it was said that any restriction on Foscari’s obligations for amounts beyond those quoted relative only to unforeseen circumstances was waived by that conduct or the agreement was varied with the effect that Connolly was not required to give a quotation in order to be paid for works completed from February 2014 onwards. Further, it was said that, in the circumstances, Connolly believed that Foscari was willing to pay for work completed from and after February 2014 and in reliance on that belief, had completed the work. Had Connolly known that Foscari would assert it was not liable to pay for the works after February 2014, it would have ceased to perform those works and Connolly would suffer a detriment if Foscari were allowed to resile from the belief. Therefore, it was said, Foscari was estopped from asserting that Connolly was not entitled to be paid from February to May 2014. Connolly said it had maintained “all of its records, test results, bore logs and other relevant documents and [was] willing to hand them over to [Foscari] in the event the outstanding amounts stated in its claim [were] paid”. Any failure of Foscari to receive benefit from the work done by Connolly was said to be because of Foscari’s repudiation.
Rejoinder filed pursuant to leave granted by Judge Cosgrave on 21 April 2015
82 In its Rejoinder, Foscari said that the unpaid invoices did not relate to work performed that was solely connected to buried waste and that the buried waste was not an unforeseen circumstance within the meaning of the term alleged by Connolly. It said that Connolly was not entitled to charge fees that exceeded those estimated in the first quote from and after 5 May 2013.
83 It said that Mr Grochowski rang Mr Connolly in or about April 2014 and queried the invoices up until that date. As to the alleged variation of agreement asserted by Connolly, it said that Connolly provided no consideration for the alleged variation and so it was “null and void”.
84 Next, it was said that Connolly “knew that time was of the essence at all material times in the performance and provision of the work, and in providing the reasonable proof of the work performed and charged for at a reasonable price”. Further, it was said Connolly agreed that, prior to Foscari paying the unpaid invoices, it would provide all the “paid works” and reliance was placed on a letter from Hassall’s Litigation Services of 14 July 2014 that it would provide timesheet evidence in the week of 14 July 2014. As a result, it was said Foscari assumed, believed and expected that, unless the further material was provided, Connolly was not entitled to payment and would not withdraw from that obligation. Connolly, it was said, induced Foscari to adopt that assumption and knew that it had done so and on 22 July 2014, Connolly’s solicitors sent some of the timesheets to Foscari’s solicitors. It was said they were purportedly enclosed with a letter of 18 July “however, the enclosures were not delivered to [Foscari’s] lawyers until 22 July 2014”. The material then provided, it was said, was incomplete and not intelligible to a reasonable person. The “paid works” were not provided at any time prior to 11 August 2014, Connolly knew Foscari did not pay the unpaid invoices because it was relying on the assumption, and Connolly’s failure to provide the unpaid works and timesheet evidence occasioned a detriment to Foscari, and therefore Connolly was estopped from asserting that he was not obliged to provide the paid works and evidence of timesheets in the week of 14 July 2014 and that it was entitled to payment.
Scope of contract
85 According to the plaintiff, the contract which the parties entered into in February covered all of the work which the plaintiff in due course invoiced, including the work relative to the unpaid and disputed invoices. Its case was that the obligations created in that contract were extensive enough to oblige the defendant to make payment for the unpaid invoices.
86 The defendant’s contention was that the original contract was entirely in writing or to be implied, and that the defendant’s obligation to make payment for any matters beyond those specifically dealt with in the original fee proposal arose under a separate oral contract entered into, according to the defendant’s case, in or around June 2013. This oral contract provided a basis of liability for items of work beyond the original fee proposal mentioned in a number of the 2013 invoices. According to Mr Grochowski, a principal of the defendant’s project manager PMA, however, the authority to do those extra works and the acceptance on behalf of the defendant of liability to pay for them was specific, and extended only to work carried out in 2013. On the defendant’s case, therefore, there was simply no contractual liability to pay for works done or alleged to be done in 2014 additional to those mentioned in the original fee proposal. Mr Grochowski said he requested the additional work “probably on site. If there’s not a record of it on email then I can only speculate that it was either in person or on the phone.” (T841, L1–3)
87 Mr Grochowski said:
“I asked Mr Connolly to provide me some letters and advice in respect of, you know, the extra buried waste material so we could ascertain the – you know, or get a sense of the likely timing and cost that was going to be involved to deal with it.” (T841, L17–22)
88 This work was to be done at the hourly rates set out in Connolly’s fee proposal, (T841, L25–26). According to final submissions by Mr Meagher, the defendant’s counsel, Mr Grochowski accepted that his direction to perform works necessitated by the buried rubbish was general; But, in relation to known works, where there was a fee proposal, he did not accept that the plaintiff had a right to bill him on an hourly basis for them. Mr Meagher referred to Mr Grochowski’s evidence under cross-examination at T966, L4–22. Mr Grochowski stressed that there had been a supplementary fee proposal with respect to additional work relative to groundwater which he had considered and accepted on behalf of Foscari. It was not competent for Connolly to enlarge the scope of work without either a specific oral direction from him, leaving that additional work to be performed under a separate contract or supplementary fee proposals as was done relative to additional groundwater work.
89 Mr Meagher then submitted that “the fees in dispute were charged in addition to those provided for in the estimate, and were not in relation to the buried rubbish.”
90 Mr McKay, the plaintiff’s counsel, submitted, however, “the [original] agreement was a highly flexible relationship that was capable of extension to cover new and varied works that were not contemplated at the time of formation. For this reason, the price payable under the contract was malleable, and could fluctuate as the scope of works was increased or varied to meet the underlying contractual objectives”, the objectives being the removal of the PAN and the completion of the environmental audit. Mr McKay placed reliance on a bullet point in the fee proposal under the heading ‘Pollution abatement notice, Proposed scope of works’, as follows:
“· On an ongoing basis, conduct any sampling and analysis required for soil or other material scheduled for removal from site, and prepare documentation to enable disposal in compliance with EPA regulations. The need and timing for this will be determined in consultation with PMA and Eagles Demolition. Please note that we are unable to include a cost estimate for this work in our scope as we do not yet know what material requiring testing is yet to be removed from site.” (PCB 245)
91 Mr McKay submitted that, given the uncertainty as to what material would have to be removed, the precise extent of this obligation and the scope of works which it entailed could be determined only as work continued and following consultations with the civil works contractor, Eagles Demolition. He submitted:
“Given that the physical condition of any polluted site is unknown before any scientific testing, it would have been obvious to both parties that this work could vary to a significant degree.”
92 Both parties agreed that clause 4 of Connolly’s terms of engagement quoted at [22] was of central significance.
93 In broad terms, I accept Mr McKay’s contentions as to the proper operation of the arrangements between the parties in preference to those put by Mr Meagher on behalf of Foscari.
94 The fee proposal and associated terms of engagement were replete with what a cynic might describe as “weasel words”. Connolly seemed to be at pains to state that the fees quoted were merely an “estimate”. This is an expression that occurs repeatedly throughout the documentation and in the passages which I have quoted above. There are provisos about “assumptions and allowances” – see for instance the passage quoted at [15] above and the passage entitled ‘Likelihood of further work being required’ quoted at [16] above. All of this is consistent with Connolly, as the proponent of this documentation, seeking to establish a regime in which it was not tied down to a particular quoted sum of money or scope of works should further information become available as to the nature of the work necessary to achieve the result or as to the scope of works. I will return, below, to the issue of whether the contract could be regarded as stipulating any sort of fixed price. At present, I am concerned with the issue as to the scope of works involved. In this context, the contention that further works which were undertaken for the purpose of achieving either of the two objectives described in the fee proposal, namely the removal of the PAN or the completion of the order, could be regarded as falling outside the purview of the fee proposal and the terms of engagement, seems implausible, on the basis of the language used in the written documents.
95 Moreover, I find the account given by Mr Grochowski of certain specific authorities given in 2013 and not given in 2014 intrinsically implausible.
96 Somewhat annoyingly, neither Mr Grochowski nor Mr Connolly kept any sort of diary or minutes of site meetings. The narrative as to the development of this project must be based upon inferences drawn from the interstices of the email correspondence which the parties exchanged. Except to the extent that the narrative can be gathered from this material, both Mr Grochowski and Mr Connolly had only the most general of recollections, and in the evidence of both they were reduced to saying things along the lines of “I would have informed him of this” or “I must have informed him of that” – mere reconstruction and supposition. With that level of recollection, or rather non-recollection, Mr Grochowski cannot credibly depose to having given a series of specific and limited authorities to do extra work in 2013 and of having abstained from giving any further such limited and specific directions in 2014. He lacks the specific recollection to do that, based simply on his own memory, and no pattern emerged from the email exchanges which would support this interpretation.
97 The tenor of Mr Connolly’s evidence was to the effect that at an early stage of the project, when the existence of the buried rubbish was first revealed, he was given a general mandate to do what was necessary relative to the buried rubbish to achieve the twin objectives of the removal of the PAN and the completion of the audit, and there followed specific consultations between him and Mr Grochowski as to particular measures, excavations in particular areas by Eagles and so forth, with no distinct change in pattern between 2013 and 2014 whatsoever.
98 There were a number of items which were the subject of invoiced claims which were clearly not within the original fee proposal. Two of them related to groundwater investigations which were the subject of supplementary fee proposals. This work was done, and the results were obtained by Foscari. Foscari used this groundwater material for the purposes of the second environmental audit process in which EnviroProtect acted as its consultant. There is no challenge to the propriety of the carrying out of this work or its invoicing. Next, there was a relatively modest charge for attendance at a meeting convened by Wyndham City Council relative to the wording of a condition in Foscari’s planning permit. Again, this matter is not in dispute.
99 Two matters which were in dispute were a charge for decommissioning of groundwater wells which Mr Grochowski said should have been regarded as comprised in the charges which were quoted for and invoiced for the groundwater investigation, and finally there were charges for additional soil bores. The original proposal provided for some 88 soil bores to be sunk to a depth of one metre. As recorded at [49], in 2014, following all the additional complications which occurred as a result of the extensive earthworks to remove buried rubbish, the auditor stipulated for some 150 soil bores rather than the original 88. Some 118 of those 150 bores were sunk, and, because of the discovery of buried rubbish, apparently to a greater depth than the one metre originally contemplated (T78). No specific written authorisation was obtained from Mr Grochowski for that more extensive work.
100 The additional work, therefore, seems to have been relative to the soil bores. In requiring the additional testing, the auditor, Mr Barber, said “Given the uncertain nature of the waste filling at the site, and considering the future sensitive use and subdivided land ...” (PCB 808). I therefore reject the submission of Mr Meagher on behalf of Foscari that most of the additional work beyond the scope in the original fee estimate could not be regarded as the result of the discovery of the buried rubbish; but that is not the only consequence of the discovery of the additional rubbish. As Mr Connolly pointed out in his email of 12 August 2013 quoted above at [33], all of the additional investigations and excavations relative to buried rubbish required “additional meetings, communications, site inspections to document [the] process ...” According to Mr Connolly, his firm had to document not merely the removal but also the proper disposal of the additional rubbish and other materials removed from the site.
An obligation to provide further quotations?
101 Mr Grochowski drew a comparison between the submission of the supplementary quotations for additional groundwater work which he considered and accepted on the one hand, and the absence of any quotation for additional work to be done with respect to the additional soil bores. Mr Meagher submitted that it was not competent for Connolly to make additional charges for works not covered in the original scope without completing this process.
102 Mr McKay submitted that in the circumstances I should find that, even in the absence of a quotation for additional soil-boring work, Mr Grochowski was aware that this additional work was being carried out. Mr Grochowski was clear in his evidence that he was not told. The very extensive record of email exchanges shows that, whilst the further soil-boring work was the subject of email exchanges between Connolly and the auditor’s office, those emails do not seem to have been copied to either Mr Grochowski or Mr Webster at PMA on behalf of Foscari. Mr McKay said that the evidence of Mr Grochowski as to his site visit and what could be inferred from timesheets prepared by Connolly as to on-site consultations indicated that Mr Grochowski was on site and was therefore aware of the extent of the soil-boring program. All this is, in my view, too speculative. Mr Connolly believed that he “would have” told Mr Grochowski, but could not be more definite. To say that Mr Grochowski’s attendances on site could have informed him of the extent of the soil-boring program assumes that he took the trouble to count the number of bores that were being sunk. In the circumstances, I believe I should proceed on the footing that Foscari, through its project manager PMA (Messrs Grochowski and Webster), did not have advance notice of the enlarged soil-bore program; But, is that finding ultimately legally significant for the outcome of this dispute?
103 There was no suggestion that it would have been impossible for Connolly to prepare a supplementary fee proposal for the extended soil-bore program. Clause 11 of the terms of engagement quoted at [22] above clearly does contemplate that in circumstances such as the present a further cost estimate might be provided. This clause was specifically mentioned in Foscari’s pleadings and by Mr Grochowski in his evidence. Connolly’s position was that this clause gave it a discretion, if it thought it prudent to do so, to provide a supplementary quotation, but was in no way mandatory. No doubt in certain circumstances, especially in statutes of the older type (cf s45 Interpretation of Legislation Act 1984), the word “may” can mean “must”. There is no reason, however, to think that in this private contractual arrangement the word “may” carries other than its ordinary meaning in popular speech as indicating something that a person is at liberty to do but not obliged to do.
104 It would have been good and prudent practice for Connolly to have provided a supplementary quotation for the additional soil-boring work, but I find nothing in the contractual arrangement which would oblige it to do so. Foscari alleged that there was an implied obligation of good faith in performance between the parties and also an obligation of cooperation. The assertion of an implied obligation of good faith was not pressed in final submissions by Mr Meagher. One may accept that there is, as in all contracts, an implied obligation of cooperation, but it does not seem to me that such an obligation can go the distance of requiring a supplementary quotation where the express terms of the contractual arrangements require none.
105 What I have said already indicates that the absence of a more general supplementary fee proposal dealing more generally with the additional work necessitated by the discovery of the buried rubbish is not an obstacle to success for Connolly. Such a supplementary quotation was promised as early as the email of 12 August 2013 but never provided. Mr Connolly’s evidence was that the continuing delays and discoveries of additional buried rubbish and the uncertainty as to whether further deposits would be unearthed meant it was never possible to be confident that that point had been reached, at least until the availability of the test results from the soil bores on 7 May. By that time, relations between the parties were souring as a result of the dispute over the unpaid invoices. In my view, this is a plausible explanation as to how matters developed. Ultimately, however, as explained, I do not think that the absence of the promised quotation, even if it had been otherwise practicable to provide it, would have been legally significant.
106 It is instructive to compare the contractual clauses applying to this arrangement between the parties with the provisions for variations of plans and specifications in major domestic building contracts governed by the Domestic Building Contracts Act 1995. Those provisions are to be found at sections 37 and 38, which provide as follows:
“37 Variation of plans or specifications—by builder
(1) A builder who wishes to vary the plans or specifications set out in a major domestic building contract must give the building owner a notice that—
(a)describes the variation the builder wishes to make; and
(b)states why the builder wishes to make the variation; and
(c)states what effect the variation will have on the work as a whole being carried out under the contract and whether a variation to any permit will be required; and
(d)if the variation will result in any delays, states the builder’s reasonable estimate as to how long those delays will be; and
(e)states the cost of the variation and the effect it will have on the contract price.
(2) A builder must not give effect to any variation unless—
(a)the building owner gives the builder a signed consent to the variation attached to a copy of the notice required by subsection (1); or
(b)the following circumstances apply—
(i)a building surveyor or other authorised person under the Building Act 1993 requires in a building notice or building order under that Act that the variation be made; and
(ii)the requirement arose as a result of circumstances beyond the builder’s control; and
(iii)the builder included a copy of the building notice or building order in the notice required by subsection (1); and
(iv)the building owner does not advise the builder in writing within 5 business days of receiving the notice required by subsection (1) that the building owner wishes to dispute the building notice or building order.
(3) A builder is not entitled to recover any money in respect of a variation unless—
(a)the builder—
(i)has complied with this section; and
(ii)can establish that the variation is made necessary by circumstances that could not have been reasonably foreseen by the builder at the time the contract was entered into; or
(b)the Tribunal is satisfied—
(i)that there are exceptional circumstances or that the builder would suffer a significant or exceptional hardship by the operation of paragraph (a); and
(ii)that it would not be unfair to the building owner for the builder to recover the money.
(4) If subsection (3) applies, the builder is entitled to recover the cost of carrying out the variation plus a reasonable profit.
(5)This section does not apply to contractual terms dealing with prime cost items or provisional sums.
38 Variation of plans or specifications—by building owner
(1) A building owner who wishes to vary the plans or specifications set out in a major domestic building contract must give the builder a notice outlining the variation the building owner wishes to make.
(2) If the builder reasonably believes the variation will not require a variation to any permit and will not cause any delay and will not add more than 2% to the original contract price stated in the contract, the builder may carry out the variation.
(3) In any other case, the builder must give the building owner either—
(a)a notice that—
(i)states what effect the variation will have on the work as a whole being carried out under the contract and whether a variation to any permit will be required; and
(ii)if the variation will result in any delays, states the builder’s reasonable estimate as to how long those delays will be; and
(iii)states the cost of the variation and the effect it will have on the contract price; or
(b)a notice that states that the builder refuses, or is unable, to carry out the variation and that states the reason for the refusal or inability.
(4) The builder must comply with subsection (3) within a reasonable time of receiving a notice under subsection (1).
(5) A builder must not give effect to any variation asked for by a building owner unless—
(a)the building owner gives the builder a signed request for the variation attached to a copy of the notice required by subsection (3)(a); or
(b)subsection (2) applies.
(6) A builder is not entitled to recover any money in respect of a variation asked for by a building owner unless—
(a)the builder has complied with this section; or
(b)the Tribunal is satisfied—
(i)that there are exceptional circumstances or that the builder would suffer a significant or exceptional hardship by the operation of paragraph (a); and
(ii)that it would not be unfair to the building owner for the builder to recover the money.
(7) If subsection (6) applies, the builder is entitled to recover the cost of carrying out the variation plus a reasonable profit.
(8) This section does not apply to contractual terms dealing with prime cost items or provisional sums.”
107 Contractual clauses along these lines would have been a necessary element in the contract between Foscari and Connolly if Foscari were to have the protection which, by its Defence and Counterclaim, it asserts it is entitled to in this proceeding.
Variation of Contract
108 Mr McKay submitted on behalf of the Plaintiff that, if the works, the subject of the proceeding were not within the scope of the original contract, the parties should be regarded as having varied the contract by conduct so as to bring those works within its scope. He referred to GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50 (Finn J) and Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540. Mr Meagher, on behalf of the Defendant, submitted there was no consideration to support the alleged contract variation. Since I have concluded that the Plaintiff’s claim succeeds under the original terms of the contract, it is unnecessary for me to determine any variation issues.
Fixed price contract?
109 What I have said so far indicates that the contract between Foscari and Connolly was in no sense a fixed price contract. Mr Webster, who was Foscari’s first witness, took a position which assumed that the arrangement between the parties was a fixed contract arrangement such that without very specific authorisation additional works beyond those specifically quoted for could not be undertaken, and additional liabilities could not be incurred. This view of the contract finds no foothold in the express written terms to which the parties committed.
110 Mr Meagher drew attention to the evidence from a number of witnesses that the giving of a quotation before additional work was performed was the “norm” in the construction industry. One may accept this as being correct, but it did not go the distance of establishing some sort of practice in the trade which would lead to the implication, either as a matter of fact or law, that no recovery could be made for additional work unless a prior quotation was submitted and accepted. Moreover, the fact that Parliament felt it necessary, in the domestic building contracts field, to legislate in the very extensive and specific manner that it has, seems to indicate that matters were by no means as clear-cut in the industry as the evidence and the submissions might suggest.
Terms of Engagement - Clause 4
111 The parties were agreed that the central contractual provision for the purposes of the present dispute was clause 4 of the terms of engagement. Given its importance, I take the liberty of quoting it a second time:
“4.The Client agrees to pay Connolly for any additional or varied services as required after the commencement of work. Connolly reserves the right to bill more than the estimated cost for each stage should unforeseen circumstances arise.”
112 Mr McKay submitted that this clause was engaged and authorised the rendering of the additional costs and fees by Connolly because of the existence of unforeseen circumstances, namely the extensive deposits of buried rubbish below natural ground level on the site. I have already given my reasons for rejecting the submission by Mr Meagher that most of the additional work billed could not be attributed to those unforeseen circumstances. Further, it is clear that the circumstances were unforeseen. I have already quoted Mr Connolly’s evidence that, when he quoted initially for the job, he regarded it as a fairly straightforward one entailing nothing other than the removal of possibly contaminated overburden from the site. That is, there would be no need to carry out extensive investigations below the natural ground level. The environmental problems were solely in the overburden dumped on the site above its natural ground level. Again, when Mr Grochowski, as the Defendant’s major witness, was cross-examined relative to the defence filed in proceedings which had been brought on behalf of the Foscari interests against the Chilean Club, he said that he had no knowledge of the buried waste before it was discovered during the remediation processes involving Connolly and Eagles Demolition. It may be accepted, therefore, that the circumstances were “unforeseen” by either the plaintiff or the defendant.
113 Mr Meagher focused his submissions as to the operation of the clause on the phrase “as required”. He took me to a number of definitions of the phrase to be found in case law and in dictionaries. He referred me to the entry in Stroud’s Legal Dictionary which referred to Jackson v Rotax Motor & Cycle Co [1910] 2 KB 937, where the contract for sale of goods in dispute related to horns for motorcars “delivery as required ...” One of the issues which appears to have arisen before the English Court of Appeal was whether there was one entire contract for the sale of goods at a lump sum of an entire number of goods on the one hand, or deliveries from time to time. Some horns had apparently been accepted, and the question was whether acceptance of some precluded the buyer from rejecting a later consignment. The Court held that the provision for delivery as required indicated that the contract was one for the sale of separate instalments of goods, and therefore the buyer was not obliged to accept a later delivery merely because it had accepted an earlier instalment. The Court’s analysis proceeded from the point that it was the customer or buyer who had the right to stipulate when a particular instalment was “required”.
114 To similar effect, in Mr Meagher’s submission, was Metropolitan Water Board v Johnson & Co [1913] 3 KB 900 where the English Court of Appeal found that a provision in the Metropolitan Water Board (Charges) Act 1907 stating “any builder being about to erect any building or part of a building, who shall require a supply of water for that purpose ...” described a situation, not where a person had an objective need for a supply of water, but rather when that person asked for or requested the supply. According to Mr Meagher, a similar construction should be applied to the phrase “as required” in clause 4. Mr Meagher said:
“If the court were to find that the use of the phrase ‘as required’ conferred a right upon the Plaintiff to charge the Defendant for any additional work the Defendant needed or had occasion for, be that need determined by the Plaintiff and auditor exercising their professional judgment without the approval of the Defendant, clause 4 of the Standard Terms would allow the Plaintiff to compel the Defendant and any other party in the position of the Defendant to pay the plaintiff for additional services the Defendant had not had the opportunity to negotiate and agree to. Such a construction of the meaning of ‘as required’ would not be a commercial construction because it would deny the Defendant the opportunity to negotiate the agreement.”
115 He then took me to a number of dictionary definitions from the Macquarie Dictionary and the Oxford English Dictionary online, most of which entailed some sort of request or demand. Notably, however, the first meaning ascribed to the verb ‘to require’ in the Macquarie Dictionary was “to have need of; need: he requires medical care.” To adopt the meaning for the phrase which requires a request or demand from Foscari as the customer was, he submitted, commercial and realistic in the context. He noted that all witnesses accepted that cost on this project was of great importance. So much was conceded by Mr Connolly. (T299, L24-26) Therefore, submitted Mr Meagher, this construction should be applied to clause 4 and it should not be regarded as operating with respect to any additional work which was not disclosed in advance to Foscari and requested by its authorised representatives to be carried out. He said:
“The Defendant submits that in the context of the industry, it would have been the expectation of a reasonable business person that any works performed pursuant to such a plan would have been approved by the Defendant having been made aware of the cost of the works prior to the performance of them.”
116 It may be conceded that the terms of written commercial contracts should be construed as far as possible consistent with their plain meaning to have a commercial operation. Contrariwise, constructions which produce uncommercial results should generally be avoided. Mr Meagher took me in some detail to the well-known recent authoritative pronouncements to this effect from the High Court of Australia, which may be accepted as well established and need not be traversed in this judgment. In my view, however, what this authoritatively mandated process of construction requires is a commencement with the words in the relevant commercial contract with a construction of those words so far as they reasonably can be adopted to achieve a commercial result. The submissions of Mr Meagher tended to invert the process so that what is said to be a “commercial” outcome is posited, and the words used in the relevant contract are to be tortured to the extent necessary to reach that result. In my view, there is no authority which would support this type of approach.
117 Moreover, put at the level of generality at which it was, it tended to distract attention from the particular commercial context in which these events were unfolding. I deal below with the relative reliability of the principal witnesses Mr Connolly and Mr Grochowski, which was the subject of specific submission by Mr Meagher. As I explain, I find the narrative of events given by Mr Connolly generally more plausible and convincing than the one given by Mr Grochowski.
118 On Mr Connolly’s account, whilst the written record of emails is not peppered with expostulations as to urgency from PMA, the urgency which overhung this project by late 2013 was obvious enough. It was testified to by the requirement placed on Connolly to provide a “letter of comfort” to lenders trying to put the best face on the progress of the environmental remediation program. Once the text of this was settled, matters were of such urgency that even though Mr Connolly was some 2000 miles away in Perth he was harried to provide the revised and readdressed version.
119 The scale of civil engineering works that were ultimately necessitated stood in stark contrast to the relatively straightforward proposal which initially appeared to present. Mr Grochowski conceded that in the course of 2013 there was a general mandate given to Connolly to do what was necessary to deal with the complications caused by the buried rubbish. When, in March 2014, the auditor stipulated additional audit requirements, the reasoning which he adopted was difficult to refute. Under the arrangement for statutory audits, the audit result could not be obtained unless the auditor’s requirements were met. It was commercially realistic, therefore, for Connolly in the circumstances to think the interests of Foscari were best served by simply getting on with the soil-boring process rather than spending further time on the submission of a quotation where, based both upon the underlying logic of the requirements and the ultimate authority of the auditor, there could be no ultimate outcome other than that the work should be done. The new audit arrangement which had been implemented by Foscari required a similar level of investigation, namely, the sinking of 140 pits.
120 Again, insofar as the additional work entailed further consultations, supervision, certifications, documentations and so forth of material removed from site, the need to do this work seemed to be inescapable.
121 These terms of engagement were entered into as part of a commission to Connolly to achieve two results, namely, the removal of the PAN and the completion of the statutory audit process to a satisfactory result. This is a dramatically different context from the one in which the English Court of Appeal had to determine the meaning of the verb “to require” in the cases relied on by Mr Meagher. In the present context, the primary meaning given in the Macquarie Dictionary, namely that something is required if it is needed, is obviously the preferable, reasonable and commercial one to apply.
The accounts of events by Mr Connolly and Mr Grochowski
122 Mr Meagher, on behalf of Foscari, submitted that I should prefer the evidence of Mr Grochowski, generally, to the evidence of Mr Connolly. He said that Mr Connolly’s credit was impaired by two matters. First, he said that insofar as Hassall’s Litigation Services had, in a letter of 14 July 2014, agreed to provide the “paid works” and ultimately they were not provided. Mr Connolly’s explanation as to how this occurred was unreliable. Mr Connolly had said that he failed adequately to review Hassall’s draft letter which was submitted to him for approval and he never intended and would not authorise the release of the paid works. Mr Meagher was critical of the failure to call any practitioner from Hassall’s to clarify that matter. Secondly, Mr Meagher drew attention to the fact that, on Mr Connolly’s account, the letter of December 2013 which put the best face on the progress of the environmental remediation process was given for the purpose of putting the best possible face on matters for prospective lenders to Foscari. Mr Meagher submitted that, insofar as Mr Connolly was prepared to lend himself to a process which might mislead prospective lenders, he showed himself to be a person lacking in veracity.
123 Dealing with the second matter first, if one accepts Mr Connolly’s evidence as to the circumstances in which the December letter was prepared, which I do, he prepared this letter, not of his own initiative, but rather at the request of Mr Grochowski. If what was done was dishonourable, as distinct from merely an exercise in “accentuating the positive and eliminating the negative”, the instigator was Mr Grochowski. Mr Connolly’s part in the matter can scarcely be a reason for regarding him as more lacking in veracity than Mr Grochowski, who on this assumption was the principal offender.
124 Mr Meagher said that the rule in Browne v Dunn (1894) 6 R 67 had been breached in that, whilst Mr Connolly had given evidence that the December letter to Foscari was prepared as a “letter of comfort” to encourage prospective lenders, Mr Grochowski’s evidence was that it was a simple update to inform him and Foscari. The contrary interpretation of events advanced by Mr Connolly was not “put” to Mr Grochowski. This is undoubtedly correct. Mr McKay in final submissions said the failure to “put” Mr Connolly’s version to Mr Grochowski was a matter of inadvertence on his part. This breach of the rule in Browne v Dunn is most regrettable. Nevertheless, I observe that since Mr Connolly’s evidence was given first, even although Mr Grochowski was not in Court to hear it, defendant’s counsel was well aware of and could, had he wished to do so, have referred Mr Grochowski to that evidence and invited any response he wished to make. In any event, in my view, despite the breach of the rule, the account given by Mr Connolly was so much more plausible than the one given by Mr Grochowski that it should be accepted.
125 In light of the positive tone of the December letter, the far more sober and realistic assessment given in the email of 10 January, from which I have quoted extensively above, would have called for some expostulation from Mr Grochowski and others on behalf of Foscari, drawing attention to the inconsistency between the two assessments of how advanced the environmental remediation was. The fact that no such expostulation was made is consistent with Mr Grochowski’s well knowing that the December letter was merely trying to put the best face on things, rather than being a coldly realistic assessment. The manner in which Mr Grochowski pressed for a final version of the letter addressed in a particular way was also supportive of the letter’s being required for use outside the immediate circle of developer, developer’s project manager and consultant.
126 Mr Grochowski’s account of the unfolding of events was that he kept a general watch on progress of matters as his role of principal of the project manager required him to do. He gave specific authorities for additional work in 2013 but none in 2014. By early 2014, he became concerned as to the escalation of charges by Connolly and he called a meeting in April following the submission of the invoice for work in March and required Mr Connolly to provide particularisation and timesheets supporting the claims for March, which Mr Connolly agreed to do but simply failed to do. In the absence of this supporting particularisation, Mr Grochowski left the bill for work in April, submitted in May, unpaid also and matters were to stalemate until Mr Connolly made his threat of referring the unpaid invoices to a debt collector.
127 In contrast, Mr Connolly’s account was that the atmosphere was one where his consultancy was being pressed to complete its work and no objections were being made to the charges that were being rendered until he brought matters to a head by threatening to involve debt collectors. There then ensued a meeting with Mr Grochowski. Again, he says that complaints about unauthorised additional work were not made at that stage and came only later.
128 In my view, the account given by Mr Connolly was more plausible and is more in accord with the written record.
129 There is nothing in the written record which appears to indicate the giving of specific and detailed directions and authorisations for additional work in 2013 with some contrasting pattern in 2014. Rather, the written record in both years says little or nothing about detailed directions apart from the submissions of supplementary fee proposals for groundwater work. The record is therefore consistent with Mr Connolly’s account of being given a general mandate to do what was necessary to deal with the buried waste material without further specific directions aside from those that were operationally necessary in consultation, for instance, with Eagles Demolitions. Again, there is no trace in the written record of the alleged meeting between Mr Connolly and Mr Grochowski where Mr Connolly was called upon to produce substantiation by way of timesheets and the like. Had such a meeting taken place and had Mr Connolly promised that material and failed to deliver, one would expect that, rather than calling a meeting with Mr Connolly in May, Mr Grochowski, or one of his associates, such as Mr Webster, would have responded to the debt collector’s threat with something along the lines of “As you are well aware, we are seeking particularisation of these charges – you promised to provide that particularisation and we are still waiting for it.” No such communication was made, in my view, because the meeting and the promise never took place. Again, on Mr Grochowski’s account, he became concerned about the propriety of the charges that were being made as from the invoice for the work carried out in March. The invoice for the work carried out in January, rendered in February, also remained unpaid. He gave no clear explanation as to why that might be. His account was that in the ordinary course of events, PMA’s bookkeeper would bring accounts to him which had been rendered in the course of a month at the end of the month for him to authorise payment. According to the logic of this, the January invoice would have been submitted to him for authorisation in February and paid in the ordinary course. He suggested that the failure to pay the January invoice until May was a matter of mere inadvertence. In my view, this explanation was a recent invention simply to attempt to bolster the logic of his account of the unrolling of events.
130 I find no corresponding implausibility in Mr Connolly’s account of the events as they unrolled, nor any inconsistency with the written record. I am troubled by the somewhat perplexing promise to provide paid works and failure to deliver. I am troubled as to whether an adequate explanation of this has been given. Nevertheless, I am not so troubled that it would tip the balance away from my accepting Mr Connolly’s more plausible account in preference to Mr Grochowski’s with the difficulties which are inherent in it.
Repudiation claim by plaintiff
131 In his opening statement, Mr McKay appeared to indicate that the plaintiff was abandoning his repudiation claim.
132 In final submissions, however, he returned to it and relied upon it. Assuming for the moment, without deciding, that there were a finding of repudiatory conduct by Foscari which was accepted by Connolly, it is not obvious to me that any substantial damages could be recovered for such a repudiation.
133 Both parties purported to terminate the contract. The contract was, according to its terms, terminable on seven days’ notice by either party. It could not be said, therefore, that absent the supposed repudiation by Foscari, Connolly had any secure contractual entitlement to perform and be paid for further services. Mr McKay’s first thoughts were his better thoughts and the claim for damages for repudiation by Connolly fails.
Estoppel – claim by defendant
134 In final submissions, Mr Meagher said:
“The Plaintiff, when represented by solicitors, and prior to the purported termination of the contract, agreed to provide the works already paid for by the Defendant to it prior to the Defendant paying it for the Unpaid Invoices. Furthermore, it knew that time was important to the Defendant and that it would need to hire another consultant, who would need to start again, if the Plaintiff did not provide the works already paid for. It agreed to provide the works in the week of 14 July 2014. It did not provide them prior to issuing the notice of termination. It knew that the Defendant was acting upon the belief it would be provided with the paid works. The Plaintiff did not provide them at all until discovery, and then only pursuant to an undertaking provided by the Defendant that they would not be used.”
135 For the purposes of that submission, he referred to and relied upon the summary of the law of estoppel by Almond J in Strategic Property Reservoir Pty Ltd v Condec Pty Ltd [2012] VSC 634 [178] – [182]. In that passage, his Honour referred to two distinct species of estoppel; namely, estoppel by convention and equitable estoppel, or estoppel by acquiescence. As to the latter, Almond J adopted the statement of principle by Brennan J (as he then was) in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 338, 428 – 29, which required, for the operation of the doctrine, both a reliance by the claimant upon an assumption or expectation created by the other part and detriment as a result of the reliance. Here, no particular detriment was identified as flowing from Foscari’s being led to believe, albeit for a short time, that it would be provided with the paid works. Mr Grochowski, for instance, did not say that Foscari did anything, or abstained from doing anything, in reliance upon the indication in the solicitor’s letter that the paid works would be provided. As to estoppel by convention, which, as I read the pleading, is the form of estoppel pleaded in the defendant’s Rejoinder, to establish this form of estoppel it is insufficient merely to show that the parties conducted their affairs upon a mutual assumption of fact or law, but rather, it is necessary to establish further that it would be unjust to allow the party against whom the estoppel is claimed to go back upon the assumption. Given the lack of any evidence of reliance on Foscari’s part on what was said by the solicitors, there is to my mind no injustice in allowing Connolly simply to withdraw the representation or promise to provide those paid works without being paid in full for the amounts which it has invoiced.
Uncertainty
136 Mr Meagher quoted a lengthy passage from the judgment of Brooking J (as he then was) in Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106. In the Ken Morgan case, a car dealership’s financier made a proposal to rescue the dealership from insolvency. The rescue plan had been held by the trial judge to constitute a binding contract. The Full Court held that, amongst other things, it was insufficiently certain to constitute a binding contractual obligation. It would be tedious to rehearse the very lengthy analysis of the “rescue plan” which his Honour undertook to reach his conclusion. He found there was even uncertainty as to who the parties to the proposal were. His Honour’s analysis was therefore given in very different context from the present.
137 Mr Meagher submitted that there was an oral authorisation or supplementary oral contract. On the findings I have made, there was no separate oral contract. Rather, the scope of works under the original contract expanded to cover the additional work that was required. The fee proposal included a schedule of rates which was the one employed by Connolly in invoicing for the additional work. Clearly, there is a penumbra of uncertainty when an arrangement is said to contemplate the possibility of additional work. Nevertheless, I reject the submission that the law of contract is so inflexible that it cannot accommodate any such uncertainties. Suppose that a law firm is engaged to act for a litigant as defendant in a proceeding in the Supreme Court upon terms either that it will be remunerated according to the Supreme Court Scale, or, for instance, according to a set of hourly rates stipulated in the same way as was done in the Connolly fee proposal. Mr Meagher was driving to submit that such an arrangement could be enforced only under the law of restitution and not as a contract at all because of uncertainty. I reject that contention.
Plaintiff’s Estoppel Case
138 Since I have accepted and sustained the Plaintiff’s claim in contract, it is unnecessary to consider its case based on Estoppel.
Cost of decommissioning groundwater wells
139 Both in his evidence at trial and in his meeting with Mr Connolly in May 2014, Mr Grochowski was roundly critical of Connolly’s separate invoicing of the cost of decommissioning groundwater wells. He noted that supplementary fee proposals as to the groundwater sampling process had been submitted and accepted. His view was that it was so obvious as to go without saying that the cost of establishing those wells should also incorporate the cost of decommissioning. The sum of money involved is, in comparison to the total amounts in dispute in this proceeding, relatively small. Mr Connolly said that these matters were separately costed because there were a number of uncertainties, including when or if in the foreseeable future the groundwater wells were to be decommissioned. In one case, he said, groundwater wells continued in operation with Connolly obliged to monitor them years after the environmental audit was completed, as a condition of the audit. Whilst I have some sympathy with Mr Grochowski’s view on the subject, ultimately I accept Mr Connolly’s explanation. It has not been suggested that if one critically analyses the words of the proposal and fee estimate for groundwater investigations, given and accepted, that its words directly extend to decommissioning. Accordingly, the plaintiff’s claim for this amount should likewise succeed.
Ownership of `Paid Works’
140 Clause 26 of Connelly’s terms of engagement is not elegantly drafted. Whilst its operation may be open to debate in some scenarios, the situation here, where the documents constituting what Foscari calls the `paid works’, was and always remained in the possession of Connolly, Connolly by its terms retained ownership and the right to possession of that documentation.
141 Mr Meagher observed:
“Mr Barber, the auditor at the relevant times and a witness called by the Plaintiff, gave evidence that in his opinion, if the client has paid an environmental consultant for data, it is owned by the client and the auditor is free to use it.”
142 It is not clear to me how the views of an environmental auditor on the legal position can override the express terms of the contract. In a contract for the sale of land or goods, if the subject matter of the sale is not transferred, it might be contended that there has been a total failure of consideration and the recoverability by the seller of instalments of the price, even if the date for their payment has already passed, may be doubtful. Here, the contract was one for the provision of work and labour, not a contract for sale, and so no such complication arises. (Hyundai Heavy Industries Co Ltd v Papadopoulos [1980] 2 All ER 29, 34-5 per Viscount Dilhorne.)
Timesheets
143 Mr Meagher submitted that the initial refusal of Connolly to provide timesheets was a failure to act reasonably. In the absence of any statutory or contractual entitlement to a process such as “assessment” or “taxation” for an environmental consultant’s bill, whether it was reasonable for Foscari to ask for timesheets or unreasonable for Connolly initially to refuse to give them, does not bear upon Connolly’s contractual entitlement to recover on the unpaid invoice.
144 As was confirmed on a number of occasions, since Connolly’s claim was wholly contractual and not restitutionary in quantum meruit, it was no part of Foscari’s case to say that the timesheets were “loaded up” or in some way bogus, though Mr Grochowski said that he entertained those suspicions.
Alleged failure by Connolly to cooperate and denial of benefit of contract
145 Mr Meagher submitted, correctly, that Connolly was under an obligation to cooperate in performance of the contract with Foscari. The alleged failure to cooperate was a failure to provide updates as to the state of the works. The written record shows a very extensive regime of updating. The sole exception is, as explained previously, the issue relative to the increase in the number of soil bores. While I accept that it would have been more courteous and also good commercial practice for Connolly to have updated and reported to Foscari on this subject as well, since the auditor’s requirements were effectively inescapable both because, in the event, they had substantive logic behind them and the auditor was in an effective position to dictate what was required, no substantive disadvantage was inflicted upon Foscari if there was, indeed, a breach of the obligation of cooperation on this point, which I do not necessarily accept. Again, there was a complaint about the agreement to hand over the paid works which was subsequently retracted or not carried out. Since, on my construction of the contract, there was no obligation to deliver the paid works in the first place, the fact that, for a short time Foscari was left to labour under the belief that they would be provided, seems to be neither here nor there and no particular loss was proven to have flowed as a result.
Alleged repudiation by Connolly
146 Connolly gave a seven day notice cancelling the contract as the express terms of the contract authorised it to do. This entitlement arose independently of establishment of any default on the part of Foscari. Even it if were found that in the circumstances Foscari did not evince an intention not to be bound by the contract, thereby repudiating it, the cancellation or termination of the contract could be upheld based on the contractual clause for termination, whether that was the power in contemplation at the time or not (Shepherd v Felt and Textiles of Australia Ltd [1931] 45 CLR 359, 377-8). Since Connolly’s action in terminating the contract was authorised by the express terms of the contract, there can be no question of its constituting a repudiation. As far as the failure to provide the paid works are concerned, that refusal was also authorised by the contract so it cannot be repudiatory conduct. I therefore reject any contention that Connolly repudiated the contract.
Disposition
147 It followed that the plaintiff’s claim with exception of its claim for repudiation succeeds and the defendant’s counterclaim must be dismissed.
148 I will direct the parties to bring in short minutes to give effect to these reasons.
149 I will reserve the question of costs for further submission.
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