D.R. Design (NSW) Pty Limited v Grand City International Development Pty Ltd

[2017] NSWSC 1778

Supreme Court

New South Wales

Medium Neutral Citation:	D.R. Design (NSW) Pty Limited v Grand City International Development Pty Ltd [2017] NSWSC 1778
Hearing dates:	13 and 14 November 2017
Decision date:	19 December 2017
Before:	Ball J
Decision:	See paragraphs [89] to [91] of this judgment
Catchwords:	CONTRACTS – Construction – Interpretation – Termination clause – How termination clause should be interpreted – Requirement that clause be given sensible and businesslike interpretation CONTRACTS – Formation – Variation – Whether work for which plaintiff claims can be properly characterised as variations CONTRACTS – Termination – Repudiation of contract – Wrongful termination – Whether defendant was entitled to terminate contract – Whether defendant’s notice of termination constituted wrongful repudiation
Legislation Cited:	Evidence Act 1995 (NSW) s 69
Cases Cited:	Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; [1973] HCA 36 Carr v JA Berriman Pty Ltd (1953) 89 CLR 327; [1953] HCA 31 Charter Reinsurance Co Ltd v Fagan [1997] AC 313 Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181; [2001] HCA 70 Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234
Category:	Principal judgment
Parties:	D.R. Design (NSW) Pty Limited t/as Dickson Rothschild (ACN 134 237 540) (Plaintiff) Grand City International Development Pty Ltd (ACN  601 060 600) (Defendant)
Representation:	Counsel: D Weinberger (Plaintiff) Dr A Greinke (Defendant)   Solicitors: Mills Oakley Lawyers (Plaintiff) Auyeung Hencent & Day (Defendant)
File Number(s):	2016/285600
Publication restriction:	None

Judgment

Introduction

1. On 8 October 2014, the plaintiff, D.R. Design (NSW) Pty Limited trading as Dickson Rothschild (DR), and the defendant, Grand City International Pty Ltd (GCI), entered into a contract (the Contract) by which DR agreed for a fixed price of $650,000 (including GST) plus incentives to provide GCI with project management and architectural planning services for a mixed use development which was being undertaken by GCI in Wolli Creek. At the time the Contract was entered into, the plans for the development had already been drawn up and had received Development Approval from Rockdale City Council (the Council).

2. On 24 February 2016, in exercise of a right it claimed to have under the Contract, GCI gave notice to DR terminating the Contract. DR claims that by giving that notice GCI wrongfully repudiated the Contract. It says that it has accepted that repudiation and terminated the Contract. It claims that as a result it is entitled to recover the value of the work it did assessed on the basis of the time spent by its employees on the project calculated at hourly rates as set out in the Contract less the amount paid by GCI. DR issued a final invoice on 8 June 2016 for the amount claimed on that basis in the sum of $947,258 plus interest.

3. In the alternative, DR claims that, even if GCI was entitled to terminate the Contract, it was required to pay all outstanding invoices together with amounts said to be due (and calculated on a time basis) in respect of six variations. The amount claimed in respect of the unclaimed invoices totals $82,550. The amount originally claimed in respect of variations was $324,100.70 (including GST) although that was modified during the hearing.

The Contract

4. The terms of the Contract are contained in an Appointment Letter (the Letter) dated 8 October 2014 issued by DR.

5. The Letter began with a number of introductory paragraphs including the following:

Dickson Rothschild will act as Project Manager and provide programming and strategic advice to the delivery of the project. We will coordinate consultants, coordinate tenders, recommend builder selection, prepare site meeting minutes and attend the site periodically as required.

We will act as the Superintendent under a Lump Sum Tender Contract (RAIA/MB) to overview the construction, OC [Occupancy Certificate] handover and strata liaison. At commencement we will perform a detailed review of the design consented under DA-2014/203 with the objective of increasing the yield by adding additional units and identify cost saving opportunities. Additional units and other changes to the building will have to be consented by Rockdale City Council via a Section 96 application.

The consented development comprises of several commercial premises on ground floor, 2 basement car parking levels and 13 residential levels with a total of 185 apartments above ground floor. The development will be delivered in accordance with Rockdale City Council DA consent No. DA-2014/203.

We believe a number of Section 96 applications will be required. …

6. The Letter then goes on to identify three s 96 applications. One related to the basement carpark “directed to major costs savings”, which involved a single straight internal ramp, garbage pick-up at street level and increased car parking. The second was “to reduce cost of construction and improve yield” by doing the following:

a.   Reduce the commercial space at ground floor

b.   Relocate the substation to street frontage

c.   Add ground level residential units 3-4 possibly

d.   Reduce the lobby size

e.   Reduce steps and access ramps generally

The third was to “increase yield” and involved the following:

a.   Reduce open corridors

b.   Enlarge balconies

c.   Reduce building separation between towers

d.   Add additional units (target 30 units):

i.   3 units on Level 1 in lieu of gym and communal terraces

ii.   3 units on Level 2

iii.   2 units on Levels 3-12

iv.   4 units on Level 13

7. The introductory section of the Letter concludes with the following statement:

Please note this S96 is a high risk application and the exact content of the application may require a Voluntary Planning Agreement (VPA) as well as a legal review.

8. Under the heading “Project Scope”, the letter states:

Dickson Rothschild is to manage the delivery of your mixed use development at … Wolli Creek … As the project manager we will manage the proposal including the attending and leading of meetings, scheduling of meetings, and managing the day to day running of the project. This includes the delivery of architectural and planning professional services for the following stages:

9. The Letter goes on to set out 10 stages of the proposed work and to provide a description of each stage. Under the heading “Schedule of Fees” it also identifies the amount allowed for each stage on a GST exclusive basis and a GST inclusive basis. Ignoring the GST exclusive column, the schedule of fees was in the following terms:

Schedule of Fees

Description

Amount ($)

Incl. GST

1   Preliminaries and Project Management

$242,000

2   Construction Certificate – CC

$60,500

3   Basement S96 Application

NIL

4   Ground Floor S96 Application

   Incentive A:

$10,000 for every new residential unit (X) on ground floor within consented (DA-2014/203) GFA

Incentive B:

$20,000 for every new residential unit (Y) on ground floor outside consented (DA-2014/203) GFA (additional GFA)

X x $11,000

Y x $22,000

5   Additional Units S96 Application

Incentive C:

$20,000 for each additional unit approved above ground floor (Z)

$30,000 +

Z x $22,000

per unit

6   Marketing

$15,000

7   Tender Documentation – TD

$60,500

8   Construction Documentation – CD

$148,500

9   Construction Attendance – CA

$55,000

10   Occupancy Certificate and Hand Over – OC

$38,500

Total Fee (Excluding Disbursements)

$650,000 +

X x $11,000

Y x $22,000

X x $22,000

Following that table, the Letter states:

As discussed at our meeting on 26/09/2014 the incentive payments are regardless of unit type/size. X, Y and Z represent additional number of units approved over the currently approved number of units under DA-2014/203.

The total fees are based on the Project Scope above. Any task required beyond the Project Scope will be charged as a variation at our standard hourly rates, this includes any post lodgement work.

10. The Letter then sets out the standard hourly rates for different categories of employee starting with Director at $390 per hour plus GST and ending with Architectural Student at $90 per hour plus GST.

11. The Letter also contains a Schedule of Payments which states that the fixed price component of the fee would be paid in “30 Monthly instalments payable on the last business day of each month commencing 31 October 14” of $19,500 (including GST) each together with a payment of $65,000 “at issue of OC [Occupancy Certificate] documentation”. The Schedule of Payments also sets out a payment schedule for the incentive payments in respect of additional units.

12. Under the heading “Exclusions” the Letter contains the following:

We have not included any of the following fees or charges:

1.   Specialist or consultant fees.

2.   Council fees and / or other authority application fees and charges.

3.   Physical Model.

4.   Legal or court related work.

5.   All other documentation not directly specified in the project scope including any post lodgement works such as attending hearings at the Land and Environment Court (LEC) and the preparation of statement of evidence.

13. The Letter also attaches some standard terms and conditions which were stated to form part of the Contract. Those standard terms and conditions provided for interest on overdue invoices at the rate of 1.5 percent per month “on any amounts unpaid after twenty eight (28) days”. The standard terms and conditions also state that “Any legal fees or associated costs incurred in collecting any amount unpaid shall be paid by the Client”.

14. The standard terms contain the following termination clauses:

Termination

Termination by Client

The Client may terminate the Project prior to completion, by doing the following:

1.   Provide 48 hours’ notice in writing of termination of the Project to DR: and

2.   Pay DR the value of the work completed to date, including any outstanding invoices, and the value of all work undertaken or disbursements incurred since the last invoice was issued, calculated at the hourly rates current at the time the work was undertaken.

Until such time as 1 and 2 above are undertaken DR will retain all documentation and reports prepared.

Termination by DR

DR reserves the right to terminate work on the Project, in which case the Client is required to pay DR the value of the complete work at the hourly rates current at the time the work was undertaken.

15. Under the heading “Variations”, the standard terms relevantly include the following clauses:

Amended Project Scope

The Project Scope is based on DR’s current undertakings of the Project. Should the Project Scope need to be amended to reflect the Client’s request for DR to undertake work outside the Project Scope, DR reserves the right to do so and to adjust the fees accordingly.

Variations

“Variation” includes any of the following:

1.   Work that is in addition to the Project Scope,

2.   Changes to the Project Scope,

3.   Amendments to be made to documents or plans arising from additional requirements, for example from the Client (including a change in the Client’s desired outcomes such as floor space, unit numbers, landscaped area, urban design outcomes or the like) or arising from consent authority requests for design amendments or information.

If the Client instructs DR to undertake work which is a variation DR reserves the right to revise and adjust the Total Fees set out in the Project Scope or charge the Client for the variation work at hourly rates. …

Was GCI entitled to terminate the Contract?

16. GCI gave notice to DR terminating the Contract by letter dated 24 February 2016. That letter referred to the right to terminate by providing 48 hours’ notice in writing. It then continued:

Dickson Rothschild has missed a number of crucial deadlines and has not achieved what it committed in accordance with the Appointment Letter, which has resulted in significant delay and financial loss to our project. Considering Mr. Nigel Dickson’s health condition and Dickson Rothschild’s capacity to complete the work, while we appreciate your personality, unfortunately we have to make this decision. We hereby give notice that your appointment in accordance with the Appointment Letter is hereby terminated effective immediately.

17. DR raises a number of issues with this letter. First, it says that the letter does not give 48 hours’ notice of termination. Second, it submits that GCI was not entitled to exercise a right of termination in bad faith, which it says the exercise of the right was in this case. Third, it submits that GCI has failed to pay the amounts set out in cl 2 of the termination clause. By reason of those matters, it says that the notice of termination was ineffective; and that it was a wrongful repudiation of the Contract, which DR accepted.

18. In my opinion, the notice was effective to terminate the Contract.

19. I accept GCI’s submission that the termination clause must be given a sensible commercial or businesslike interpretation: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109-110; [1973] HCA 36 per Gibbs J; Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at [43]; [2001] HCA 70 per Gleeson CJ, Gummow and Hayne JJ. In my opinion, adopting that principle, the termination clause should be interpreted as requiring notice in writing and as stating that that notice is effective after 48 hours. It makes no sense to interpret the clause as requiring as a condition of its validity that any notice served under it expressly give 48 hours’ notice of termination. It is hard to see how the parties could have regarded specification of the correct notice period in the notice itself as essential for its validity. What was important was that notice in writing be given and that that notice, whatever it said, took effect 48 hours after it was given.

20. In any event, it is plain that the letter was intended to be given under the termination clause of the Contract. That is what the letter said. Consequently, the letter must be understood as giving notice of a termination that was to take effect 48 hours after the notice was given. If parts of the letter were inconsistent on that point, then any inconsistency must be resolved in a way that permits the letter to take effect according to its clear intention.

21. There is no reason to read the right of termination as qualified by a requirement that it must be exercised reasonably or in good faith.

22. Where the effect of a contract depends on the exercise of a discretion given to one of the parties or the formation of an opinion of one of the parties, courts often take the view that the contract requires the discretion to be exercised or the opinion to be formed reasonably or in good faith. That requirement is said to be implicit in the relevant clause or as arising from an implied term of good faith in the contract. That approach has been applied where the discretion relates to a right of termination or a right akin to a right of termination. So, for example, in Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234, one of the decisions on which DR relies, a construction contract contained a clause which permitted the principal to take over the whole or any part of the work remaining to be completed or to “cancel” the contract if the contractor failed to show cause “to the satisfaction of the Principal” why that power should not be exercised following service of a notice requiring the contractor to do so. The majority of the Court of Appeal (Priestley and Handley JJA) held that the powers conferred by the clause had to be exercised reasonably.

23. Similarly, in Carr v JA Berriman Pty Ltd (1953) 89 CLR 327; [1953] HCA 31, another case relied on by DR, a clause in a building contract provided that “The Architect may in his absolute discretion and from time to time issue …written instructions … in regard to the … omission … of any work” from the contract. The High Court held that that right did not extend to permit the Architect to exclude a substantial part of the work from the contract so that another builder could be engaged to undertake that work.

24. However, in my opinion, these cases and the principles for which they stand have no application in the present context. The right in this case is expressed as a simple right of termination. It is not a right that depends for its exercise on the formation of an opinion by anyone. It is not a right unilaterally to alter the scope of the Contract or any of its other terms. It is a right that may be exercised by either party; and if it is exercised, the Contract provides for the payment for work done up until the date of termination. The language of the Contract is clear in this respect. The Contract is a contract for the provision of professional architectural services. It is common for contracts for the provision of professional services to give both parties a right of termination on notice. There is, therefore, nothing unreasonable or uncommercial in giving effect to the clear meaning of the words.

25. In addition, it is difficult to see by reference to what standard the exercise of an unqualified right of termination could be judged. For example, if the standard is reasonableness, how is the question whether it was reasonable to terminate the Contract to be determined? One way, of course, would be to say that it was only reasonable to terminate the Contract if the other party was in breach. But then the express right of termination would be redundant. That is not what the parties could have intended.

26. Nor do I think that the right of termination should be interpreted as being conditional on payment of the amount set out in para 2 of the termination clause. It seems natural to interpret the payment obligation as a consequence of termination rather than as a condition precedent to the exercise of the right of termination. To interpret it in any other way would have odd results. Clause 1 contemplates that termination will occur 48 hours after notice is given. However, if termination is not effective until payment is made in accordance with cl 2, then termination is unlikely to occur until some time after the expiration of the 48 hours’ notice. The clause contemplates that work undertaken by DR will cease on termination and that DR will be paid for the work that it does up until that point in time. But if termination does not occur until DR is paid, how will DR know when to cease work, and how will GCI know how much to pay?

27. It follows that the notice of termination was effective and that the question of repudiation does not arise.

How is the amount payable under the Contract to be calculated?

28. Clause 2 of the termination clause, which is a standard term, has clearly been drafted in the expectation that DR will charge for its services by reference to the time taken to do the relevant work at agreed or standard hourly rates and that DR will issue periodic invoices for that work, which is a common method by which those providing professional services charge for the work that they do. Where the Contract provides for payment in that way, the paragraph makes perfect sense. It says that the client must pay all outstanding invoices and pay for work since the last invoice at the then current hourly rates.

29. Paragraph 2 is less appropriate where the Contract is a fixed price one and contains a clause assigning agreed values to particular stages of the work, as in this case. Its application makes even less commercial sense where, as here, the Contract provides for monthly payments which do not necessarily bear a close relationship to the value of the completed work. There is no entirely satisfactory way of applying the wording of cl 2 to a situation of that type. The true “value” of work done would normally be determined as a percentage of the work done in relation to a particular stage of the project for which a price has been fixed. It would not normally be determined by reference to invoices that did not bear a direct relationship to the percentage of the work done and the agreed value of that work. In addition, it would not normally be determined by reference to hourly rates. Yet that is what para 2 contemplates.

28. However, the requirement to give the paragraph a sensible and businesslike interpretation does not permit the court to ignore the words of the paragraph altogether. As Lord Mustill said in Charter Reinsurance Co Ltd v Fagan [1997] AC 313 at 338; [1996] 2 WLR 726:

There comes a point at which the court should remind itself that the task is to discover what the parties meant from what they have said, and that to force upon the words a meaning which they cannot fairly bear is to substitute for the bargain actually made one which the court believes could better have been made. This is an illegitimate role for a court.

31. In the present case, what the paragraph requires is reasonably clear. It requires GCI to pay DR “the value of work completed to date”. The date must be the date termination takes effect. The rest of the paragraph states how the value of that work is to be determined. It has two components. It includes “any outstanding invoices”. It also includes “the value of all work undertaken or disbursements incurred since the last invoice was issued, calculated at the hourly rates current at the time the work was undertaken”. The reference to work undertaken “since the last invoice was issued” must be a reference to work done after the period to which the last invoice relates. The parties could not have intended that DR would be paid twice for the same work.

32. Contrary to the submissions of GCI, the paragraph cannot be interpreted as saying that the value of the work completed is that proportion of the fee fixed by the Schedule of Fees that corresponds to the proportion of work completed in relation to each stage of the works for which a fee is fixed. That may have been the logical way to calculate the amount payable on termination. But it is not what the clause says.

33. It my view, it follows that it is not necessary to determine the precise point that each stage of the work had reached. Under the terms of cl 2 of the termination clause, DR is entitled to be paid all unpaid invoices that were due for payment under the Contract and had not been paid at the time of termination. It is also entitled to be paid for the work it did after the period covered by the last invoice at the then current hourly rates.

34. Despite what the Contract says, DR adopted a practice of sending monthly invoices at or near the beginning of the month to which they relate, so that its first invoice covering work done in October was dated 1 October 2014, although it was not payable until 31 October 2014. DR issued monthly invoices dated 2 November 2015, 9 December 2015, 1 January 2016 and 1 February 2016, each for an amount of $19,500. None of those invoices has been paid. In addition, an invoice dated 23 February 2015 for $4,550 has not been paid. That invoice was for a disbursement described as “Council Fees – Rockdale City Council VPA Assessment Fee”. GCI has not advanced any reason why that invoice should not be paid.

35. DR is entitled to be paid the invoices issued in November 2015, December 2015 and January 2016. Although the invoices were issued early, they were issued in accordance with the Contract because they covered periods in respect of which DR was entitled to be paid before the Contract was terminated. However, in my opinion, DR was not entitled to be paid the invoice dated 1 February 2016. Although it might be said that that invoice was issued before termination, the amount claimed in the invoice was not due for payment until 29 February 2016 (the last business day of that month). Notice of termination was given on 24 February 2016. It took effect on 26 February 2016, before the invoice was due for payment.

36. It follows that for the period 1 February 2016 to 26 February 2016, DR is entitled to recover for the work that it did on a time basis. DR kept an electronic database known as eTrack in which persons working on the project recorded their time. According to that database, the total value of the time recorded against the project at the then current rates for the period 1 February 2016 to 26 February 2016 was $15,045. There is no reason why DR should not recover that amount. On that basis, DR is entitled to recover $78,095 (that is $63,050 plus $15,045).

The claim for variations

37. DR makes a claim in respect of six variations. They are:

1. an amount of $7,387.50 in respect of above ground parking (Variation 1);

2. an amount of $7,260.00 in respect of façade redesign (Variation 2);

3. an amount of $14,463.90 in respect of a display suite (Variation 3);

4. an amount of $90,011.35 in respect of a second s 96 application (Variation 4);

5. an amount of $100,695.00 in respect of revised drawings to obtain a construction certificate (Variation 5); and

6. an amount of $19,177.50 in respect of additional marketing (Variation 6).

38. GCI disputes that any of the work for which DR makes a claim could properly be regarded as a variation. It also submits that DR has failed to prove the amount for which it claims in respect of each variation.

39. GCI submits that the Project Scope was very wide. According to it, the meaning of the expression “Project Scope” must be found in the description of the work that DR said in the Letter that it would undertake. It relies particularly on the first two paragraphs of the Letter quoted in para [5] above. In making that submission, it also points out that the introductory words to the paragraph after the heading “Project Scope” states that the description of the Project Scope “includes the delivery of architectural and planning professional services for the following stages …” (emphasis added).

40. In my opinion, GCI puts the definition of “Project Scope” too broadly. The introductory paragraphs of the Letter provide a general explanation of the services that DR proposed to offer. Those services are described in more detail in the rest of the Letter and give context to the introductory words. The term “Project Scope” is capitalised, which suggests that the parties intended it to have a defined meaning. The parties must have intended that meaning to be found in the section headed “Project Scope”. The fact that the introductory paragraph of the section describing the Project Scope uses the word “includes” does not mean that the Project Scope extends beyond the ten stages identified in the section. Rather, the word “includes” is intended to qualify the activities for which DR will be responsible. Those activities are not just “the delivery of architectural and planning professional services” but encompass all activities involved in managing the delivery of the project as the project manager (to paraphrase the introductory words of the paragraph). However, the scope of the project is still to be found in the description of the 10 identified stages.

41. In considering the claims for variations, it is convenient to consider first whether each of the identified variations is a variation and then to deal with the question of costing.

Variation 1

42. Variation 1 arose from a contamination report which had been prepared by a consultant known as EIS in connection with the DA stage of the project, before DR became involved. Mr Kasper Rasmussen, an Associate with DR who was the Project Leader for the project, and Mr Peng (Patrick) Tian, a director of GCI, met with the author of the report on 22 October 2014 to discuss its implications. They were told that because the soil to be excavated in order to build a two-storey basement carpark was contaminated it would need to be disposed of at a certified dumpsite, which could be expensive.

43. Following that meeting, at a project meeting held on 18 November 2014, Mr Tian instructed DR to prepare options for car parking level designs to be above ground so as to reduce the amount of excavation and therefore the remediation work needed. The minutes of the meeting under the heading “Redesign of Basement” relevantly record:

-   DR to prepare plans expressing option of an above ground car park to present to Council.

-   Above ground car park would most likely result in the requirement for a whole new DA

44. DR prepared three options for above ground car parking. Mr Rasmussen instructed DR staff doing that work to record their time on eTrack as Variation #1. The three options were presented to the St George Design Review Panel (the DRP) at a meeting on 4 December 2014. However, the DRP expressed the view that it wanted the underground parking to remain. Following that meeting Option 3, which involved one level of basement parking and additional parking at Level 1, was revised, but the revised plan also proved to be unacceptable to the DRP.

45. GCI relies on the introductory words of the Letter – and, in particular, the words “we will perform a detailed review of the design consented under DA-2014/203 with the objective of increasing the yield by adding additional units and identify cost saving opportunities” – to submit that the work requested by Mr Tian fell within the Scope of Works because it was work done as part of a detailed review to identify cost saving opportunities.

46. I do not accept that submission. The review described in the introductory part of the Letter was not at large and did not place on DR an obligation to identify every possible cost saving. Rather, the words relied on must be read in context. The review was intended to be a review that was consistent with the Scope of Works. The Scope of Works contemplated three s 96 applications which were intended to achieve the costs savings referred to in the introductory section of the Letter. One of those s 96 applications related to the basement. It was described in the introductory section of the letter in the following terms:

A first S96 is nominated to deal with the basement related revisions directed to major cost savings:

a.   Single straight internal ramp

b.   Garbage pick-up at street level

c.   Increase car parking

That description was repeated and expanded upon in the Scope of Works section of the Letter.

47. In my opinion, the work done to move the car parking above ground did not fall within this description of the Scope of Works. It did not involve a reconfiguration of the basement, but involved a separate investigation undertaken at the request of GCI in response to a particular problem. For that reason, it was a variation.

Variation 2

48. Variation 2 related to work done to redesign the façade of the building. The work arose out of concerns raised by members of the DRP about the attractiveness of the façade. Those concerns had been raised in connection with discussions about the s 96 application to increase the residential yield of the project. Following a meeting with the DRP on 4 December 2014, which was attended by Mr Rasmussen, Mr Tian and Mr Nan (Tony) Zhang, the other director of GCI, Mr Tian asked Mr Rasmussen to provide façade design concepts to address the concerns of the DRP. That instruction appears to have been confirmed at Project Meeting 9 held on 9 December 2014. Mr Rasmussen gives evidence that he instructed the members of the project team to record the work they did on the redesign of the façade in eTrack as Variation #2.

49. GCI submits that the redesign of the façade was work addressed to obtaining a successful s 96 application, which was squarely within the Project Scope.

50. I do not accept that submission. The Project Scope contemplated two s 96 applications to increase yield. One was described as “Ground Floor S96”. The work associated with that application was described in the following terms in the Project Scope:

Ground Floor S96:

a.   Major items addressed:

i.   Reduce the commercial space

ii.   Relocate the substation

iii.   Add ground level residential units (4)

iv.   Reduce the lobby size

v.   Reduce steps and access ramps

b.   Services Coordination and integration of spatial requirements

i.   Structure

ii.   Mechanical Services Equipment

iii.   Hydraulic Services Equipment

iv.   Electrical Services Equipment

v.   Traffic Engineer’s Requirements

vi.   BASIX and Section J Report Requirements

vii.   BCA Requirements

viii.   DDA Consultant’s Requirements

c.   Planning reports (SEE)

d.   Project summary sheet

e.   Reviews with client as required

f.   Liaison with and submission to Council

51. The other s 96 application to increase yield was described as “Additional Units S96”. It was described in the following terms in the Project Scope:

Additional Units S96:

a.   Major items addressed:

i.   Reduce open corridors

ii.   Enlarge balconies

iii.   Reduce building separation between towers

iv.   Add additional units (target 30 units):

1.   3 units on Level 1 in lieu of gym and communal terraces

2.   3 units on Level 2

3.   2 units on Levels 3-12

4.   4 units on Level 13

b.   Concept Design

c.   Council Meeting

d.   VPA negotiation (if applicable)

e.   Liaison with legal team (if applicable)

f.   Updated Floor Plans, Elevations and Sections

g.   Photorealistic image

h.   Planning reports (SEE)

i.   Clause 4.6 Objection FSR

j.   Clause 4.6 Objection Height (if required)

k.   Shadow Diagrams

l.   Cross Ventilation and Daylight Access Diagrams

m.   Project summary sheet

n.   Reviews with client as required

o.   Liaison with and submission to Council

52. None of what was described contemplated changes to the façade. There was no direct connection between the work proposed to increase yield and the redesign of the façade. It just happened that members of the DRP expressed concern about the design of the façade and GCI sought to accommodate that concern in the hope that that would improve its chances of having the s 96 applications accepted. But in my opinion that is not sufficient to say that the relevant work fell within the Project Scope. The work involved significant changes to the building that were unconnected to the work involved in preparing the s 96 applications.

Variation 3

53. Variation 3 concerned work on a display suite.

54. Under the heading “Marketing” the Project Scope contemplated, among other things, that DR would prepare “4 Internal Computer Generated Image (CGI) of typical unit covering kitchen, ensuite bathroom, master bedroom, living room”. It said nothing about the preparation of a display suite.

55. Mr Rasmussen’s evidence is that he and Mr Tian first discussed the possibility of a display suite at the progress meeting on 2 December 2014. Following that discussion, at the progress meeting on 5 January 2015, Mr Tian instructed Mr Rasmussen to prepare a Development Application for a temporary display suite and signage to be placed within the boundary of the development. Mr Rasmussen says that he told Mr Tian that a display suite was not included in the Scope of Works to which Mr Tian replied “Its [sic] not a big job. Just go ahead and do it”. Mr Rasmussen also says that he instructed the project team to record the work that they did on the display unit in eTrack as Variation #3.

56. On the other hand, Mr Tian says that Mr Rasmussen said nothing to him at the progress meetings about the work on the display suite falling outside the Scope of Works. According to Mr Tian, the issue was not raised by Mr Rasmussen until March 2015 when Mr Tian complained to Mr Rasmussen that GCI had incurred costs of approximately $24,000 in arranging for a third party to prepare a CGI display because DR had failed to do so. In response, Mr Rasmussen said for the first time that the work DR had done on the display suite was not part of the Contract. Mr Tian says that he assumed from what Mr Rasmussen said that the two expenses were to be offset.

57. It is not seriously contended that the work on the display suite fell within the Scope of Works. Nor could it be. The Scope of Works said nothing about it. GCI’s principal defence in relation to this aspect of the claim is that because DR failed to do the CGI work its marketing fee should be reduced accordingly.

58. I do not accept that submission. There is no cross-claim to that effect. There is no evidence that Mr Rasmussen and Mr Tian actually agreed to set-off one claim against the other; and again there is no pleading to that effect. The work on the display unit was a variation for which DR was entitled to be paid under the Contract. The fact that GCI may have had a claim itself in relation to marketing which it chose for whatever reason not to pursue cannot alter that fact.

Variation 4

59. Variation 4 relates to what Mr Rasmussen describes as a second s 96 application.

60. The Scope of Works contemplated three s 96 applications, which (consistently with the Contract) were combined into one. That application was lodged with the Council on 7 April 2015. It was considered by the DRP at a meeting on 27 April 2015. The minutes of that meeting record that the decision of the panel was that “The design cannot be supported in its present form”. The minutes record a number of reasons. After receiving a copy of those minutes on 8 May 2015, DR, on instructions from GCI, sought an opportunity to submit revised drawings which did not reduce the yield but proposed alternative designs for the façade. However, the Council would not agree to that request because of timeframes imposed by the Joint Regional Planning Panel (the JRPP), which was the consent authority for the application. The JRPP was scheduled to consider the matter on 11 June 2015.

61. On 21 May 2015, Gadens, GCI’s solicitors, wrote to the JRPP stating that GCI was in the process of making amendments to the proposed plans, which were expected to be provided to Council within three weeks. In those circumstances, they requested the application to be deferred. That request was refused on 22 May 2015.

62. On 3 June 2015, Gadens wrote to the Council enclosing amended plans showing two design options which were said to incorporate a number of changes suggested by the DRP. It asked the Council to consider the plans and to include any comments on the updated scheme in Council’s assessment report to the JRPP. In an email dated 4 June 2015, the Council said it was unable to do so, although it pointed out that GCI was still able to withdraw the application or, if it was refused, to have the determination reviewed on the basis of the amended plans.

63. GCI’s s 96 application was refused by the JRPP on 11 June 2015.

64. Mr Rasmussen gives evidence that, following the JRPP’s decision, he told GCI that any further work would be a variation for which DR would charge additional fees, although that is disputed by Mr Tian. Even on Mr Rasmussen’s account, Mr Tian disputed that any additional work involved a variation to the Contract and work proceeded without the issue being resolved, although Mr Rasmussen does say that he instructed the project team to record any further work on the redesign on eTrack as Variation #4.

65. Mr Rasmussen arranged a meeting with the Council on 18 June 2015 to discuss the amended plans. Further work was then done on them. A full set of updated architectural drawings were completed and issued for consideration by the DRP at its meeting on 12 August 2015. On 18 September 2015, the DRP made a decision that “[t]he application cannot be supported”.

66. That decision was discussed at a progress meeting held on 23 September 2015. The minutes of that meeting record that the Council had advised that GCI had three options. One was to build the building in accordance with the existing DA. The second was to build the building with minor modifications but not seek additional floor space. The third was to continue to press for additional floor space. The minutes record that, in order to pursue the third option, GCI would need “to demonstrate public benefit in the design change, higher quality in the design treatment and suitable size [Voluntary Planning Agreement] offer”. The minutes also record that DR said that which option GCI pursued was “a 100% commercial decision that GCI need to make” and that “DR will support GCI in any direction they wish to take”. Following that meeting, GCI took the first option.

67. DR claims that the work that it did following the JRPP’s decision was work done in relation to a variation.

59. In my opinion, it was not. The Contract does not specifically say that DR would only lodge one s 96 application in respect of each category of modification identified in the Scope of Works. The process was an iterative one in which DR would present proposals to the Council, receive feedback and make adjustments. DR sought to postpone consideration of the s 96 application while it submitted revised plans to the Council and had the Council acceded to that request, it is at least possible that further work would have to have been done before the matter could finally be considered by the JRPP. There is no suggestion that that work would have involved a variation. It would be odd if DR was entitled to charge for that work or similar work after the original s 96 application had been refused but not before, when the same work was directed at the same goal of achieving an increase in yield as contemplated by the Contract and for which additional fees were provided in the event that the work achieved success.

60. Moreover, if DR is right, if the s 96 application had ultimately been successful, it would have been rewarded twice. It would have received fees for the work that it did calculated by reference to hourly rates. It would also have been paid the incentive fees set out in the Contract. That is not what could have been intended. It is plain that DR was to be compensated for the work that it did in relation to the s 96 applications by reference to the incentive fees, not by reference to the work done.

61. DR submits that it could not have been required to prepare revised s 96 applications indefinitely. That may well be so. But the issue does not arise in this case. DR was willing to continue to do work on the amended plans after the JRPP’s original decision in the hope that it could satisfy the Council’s requirements. Even on Mr Rasmussen’s account of what happened, there was no agreement that the additional work would involve a variation. The work stopped not because DR took the view that it was not prepared to do further work but because GCI decided not to pursue the s 96 application.

Variation 5

71. Variation 5 relates to work done in relation to the Construction Certificate. That work was done in parallel with the work done in relation to the s 96 application and the work done on redesigning the façade. Consequently, when it was decided not to proceed with the s 96 application, it was necessary to redo the work for the Construction Certificate. DR claims the work as a variation.

72. I do not accept that claim.

73. Mr Tian gave evidence that the decision to program the Construction Certificate work simultaneously with the s 96 application was made by Mr Nigel Dickson, a director of DR, who told Mr Tian before the Contract was signed that that approach would reduce time and avoid delays on the project. Mr Tian was not cross-examined on that evidence and Mr Dickson was not called to deny it. As GCI points out in its written submissions, DR knew that the s 96 application was a high risk one. It decided to program the work knowing of that risk.

74. Preparation of the Construction Certificate documentation clearly fell within the Scope of Works. The fact that DR chose to program that work in a way that made it necessary for the work to be redone does not mean that the redone work fell outside the Scope of Works.

Variation 6

75. Variation 6 raises similar issues to variation 5. DR prepared marketing plans in anticipation that the s 96 variation would be approved. When it was not and was ultimately abandoned, it was necessary for DR to update the marketing plans and marketing floor plates.

76. DR claims the work as a variation. I do not accept that claim. The work done by DR clearly falls within that section of the Scope of Works relating to marketing. The fact that additional work had to be done because the s 96 modifications did not proceed does not alter the position. It was still work that was required to be done by the Contract.

The amount claimed

77. The evidence on the time DR spent on the six variations in respect of which it makes a claim is not satisfactory.

78. Originally, DR sought to lead evidence from Mr Rasmussen on which entries recorded in eTrack related to which variations. However, it was apparent that Mr Rasmussen was simply seeking to interpret the entries of others and to express an opinion on whether the relevant entries related to one of the claimed variations. Apart from his own entries, he had no personal knowledge of the actual work done. For that reason, I rejected that evidence.

79. DR then sought to rely on a printout of a report from eTrack setting out the time entries recorded by each DR employee working on the project and invited the court to draw inferences about which entries related to which variations. It presented various reports reformatting that information to assist the court in that task.

80. Before considering that evidence, it is important to bear in mind that DR bears the onus of proving what work related to which variation. This is not, for example, a case where DR claims damages for breach of contract, where the court can be satisfied that some damage has been suffered and being so satisfied must do the best it can to quantify the damages. Rather, it is a claim for work done in relation to particular variations. DR must prove that it did the work for which it claims in relation to those variations.

81. The principal spreadsheets relied on by DR contain a number of columns. The first sets out the name of the person who did the work. The second sets out the date the work was done. The third is headlined “Task”. It appears to be the field in which employees were expected to enter the variation the work related to where it related to a variation. However, there are a substantial number of entries for which the field is not completed or where the task is not described as relating to a numbered variation. The fourth column is headed “Activity”. Mostly, it is blank. The fifth column is headed “Comment” and often contains a brief description of the work that was done. The remaining columns set out the number of hours worked, the relevant person’s charge out rate and the fee for the item of work.

82. I accept that reports produced from the eTrack system are business records and that, to the extent that they make representations concerning the work that was done and the nature of that work, those representations are admissible under s 69 of the Evidence Act 1995 (NSW). However, the description of the work done must be sufficiently clear from the relevant entry that the court can be satisfied that the relevant entry relates to a particular variation.

83. Despite the instruction that Mr Rasmussen says he gave, there are no entries which refer to Variation #1 or above ground car parking in the Task field. However, there are a number of entries which are classified in the Task field as “2 Section 96” which DR submits must relate to Variation #1. They are the following entries:

Person Name	Task	Comment	Fee
Daniel Covarrubias	2 Section 96	Working on façade research on internet. Reference projects and material. Internal meeting (0.5hrs) Working on new option for parking on level 1 and push building up over height limit	$1,275.00
Daniel Covarrubias	2 Section 96	Issuing sketch for discussion regarding parking	$1,237.50
Daniel Covarrubias	2 Section 96	Working on sections to a level where there only should be minor adjustments Minor work on elevations	$1,200.00
Daniel Covarrubias	2 Section 96	Sections of elevations wrap up to minor adjustments (2hrs) Working on options as requested by client_3 options	$1,200.00
Daniel Covarrubias	2 Section 96	Issuing options for clients review option 1: 2 basement + GI option 2: GI + 2 levels above ground parking option 3: basement + GI + 1 parking above ground	$1,350.00

The table above is extracted from a report from the eTrack system. However, the evidence is that a number of charge out rates were incorrectly entered into the eTrack system for certain staff members for certain periods of time. The table above incorporates the necessary corrections.

84. The only entries that clearly describe work on above ground car parking are the first and last. The first relates both to car parking and the façade. However, since I have concluded that both are properly variations, I would permit recovery of that amount in full. I am also prepared to accept that the second to last entry relates to Variation 1. Having regard to the date of the entry and the reference to “3 options”, the likelihood is that it is a reference to the three options concerning above ground car parking. The other entries claimed by DR either contain no description or the description is too vague to conclude that the work actually relates to the above ground car parking. On that basis, DR is entitled to recover $3,825 in respect of Variation 1.

85. In respect of Variation 2, a number of entries record the relevant task as “V2 Façade Re-Designs”. I am prepared to accept that those entries relate to that variation. They total $7,260, which is the amount claimed.

86. In respect of Variation 3, a number of the entries record the relevant task as “V3 Display Suite”. I am prepared to accept that those entries relate to that variation. They total $14,463.90, which is also the amount claimed in respect of this variation.

87. I have concluded that the other three claimed variations are not variations. Consequently, no amount is recoverable in respect of them. However, in the event that I am wrong, I should say something about the amount claimed in respect of these variations.

88. A number of entries record the relevant task as “V4 Second S96 & Council RFIs”. The total of those entries after making adjustments for the correct chargeout rates is $90,011.35. I am prepared to accept that if this were a variation, DR would be entitled to recover that amount in respect of it. However, I would not have been prepared to permit DR to claim anything in respect of the other two variations. Those claims depend on interpreting descriptions in the comments field of reports from the eTrack system as referring to work done in relation to those variations. There are a large number of entries. It is not practical to examine each entry in detail. However, generally the descriptions are too broad to draw any reasonable conclusions from them. Mr Weinberger, who appeared for DR, submitted that the court could draw inferences from when the relevant work was done. I do not accept that submission. Without a complete understanding of all the work that was done on the project at particular times, which is not provided by the evidence, it is not possible to draw any inferences from when the work was done.

Conclusion and orders

89. I have concluded that DR is entitled to recover:

1. Its unpaid invoices dated 23 February 2015, 2 November 2015, 9 December 2015 and 1 January 2016 totalling $63,050;

2. An amount of $15,045 for work done from 1 February 2016 to 26 February 2016;

3. An amount of $3,825 in respect of Variation 1;

4. An amount of $7,260 in respect of Variation 2; and

5. An amount of $14,463.90 in respect of Variation 3.

90. In addition, I would permit DR to recover interest on the unpaid invoices from the date payment was due until the date of judgment. There is no reason why DR should not recover interest at the contractual rate on unpaid invoices. Interest at that rate is only available on unpaid invoices. Consequently, the balance of the amount that DR is entitled to recover should bear interest at court rates from the date the proceedings were commenced until the date of judgment.

91. I direct that within 8 weeks of the date of this judgment the parties bring in short minutes of order to give effect to these conclusions and, if costs can be agreed, to give effect to their agreement in relation to costs. If the terms of the order or the question of costs cannot be agreed within that time, I will deal with any points of disagreement at a time to be fixed with my Associate.

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Decision last updated: 19 December 2017