Hall Group Victoria Pty Ltd v Birdies Mini Golf Pty Ltd
[2023] VCC 887
•2 June 2023
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Building Cases List
Case No. CI-21-05551
| Hall Group Victoria Pty Ltd | Plaintiff/defendant by counterclaim |
| v | |
| Birdies Mini Golf Pty Ltd | Defendant/plaintiff by counterclaim |
---
JUDGE: | His Honour Judge Woodward | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 6-7 March 2023 | |
DATE OF JUDGMENT: | 2 June 2023 | |
CASE MAY BE CITED AS: | Hall Group Victoria Pty Ltd v Birdies Mini Golf Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2023] VCC 887 | |
REASONS FOR JUDGMENT
---
| Subject: | CONTRACT – BUILDING AND CONSTRUCTION |
| Catchwords: | Execution by “DocuSign” – whether client bound by scope of works not attached to version it executed – whether agreement to vary contract by reducing price – construction of variations clause - defects |
| Cases Cited: | Stefanovski v Digital Central Australia (Assets) Pty Ltd [2018] FCAFC 31; Banque Commerciale S.A, en liquidation v Akhil Holdings Limited (1990) 169 CLR 279; Gould v Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Chapmans Ltd v Australian Stock Exchange Ltd (1936) 137 ALR 433; Bellgrove v Eldridge (1954) 90 CLR 613 |
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | M Tennant | Oldham Fairweather Legal |
| For the Defendant | AVM Carruthers (for written closing submissions only) | James Gray, Solicitor Advocate (for trial), Francis Abourizk Lightowlers (closing submissions) |
HIS HONOUR:
Summary and Outcome
1This matter concerns a dispute over a “Small Works Commercial Contract” bearing the date 22 December 2020 (“Contract”) for fit out works for a mini golf bar (“Works”) at Shop L03, Forest Hill Chase 270 Canterbury Road, Forest Hill, Victoria 3131 (“Site”). The Contract for the Works was entered into by the plaintiff (“Hall Group”), a building company, and the defendant (“Birdies”).
2For the reasons below, I have found that:
(a) the contractual scope of works is SOW-5, sent by Hall Group to Birdies on 10 November 2020;
(b) the parties agreed on 3 March 2021 to vary the Contract by reducing the price by $50,000;
(c) after allowing for a provisional sum adjustment and a credit, the total amount remaining payable by Birdies to Hall Group is $45,297.71;
(d) Hall Group’s claims for variations are wholly rejected; and
(e) damages payable by Hall Group for breach of the Contract in the form of defects in the works is assessed at $22,810.80.
3I will hear the parties on question of costs and interest and the form of final orders disposing of the proceeding.
Factual background
4Ms Doyle is the sole director of Birdies. Her evidence was that Mr Walls is a consultant engaged by Birdies. On 31 August 2020, Ms Doyle sent Hall Group and a number of other builders and shopfitters, an email asking if they would be interested in providing a quote for the fit out of Birdies, which was to be a bar and nightclub offering minigolf in Forest Hill. On 2 September 2020, Hall Group advised by email that his estimator had indicated the works would be around the $900,000 mark. Over ensuing months, Birdies negotiated the cost and terms of the fit out with Hall Group and other parties.
5On 8 November 2020, Ms Doyle emailed Hall Group stating it had received another quote for $900,000 including GST that also included “the glycol system as well as the 8 tables and 18 small tables.” In that email, Ms Doyle stated that Birdies’ preference was to engage Hall Group but it needed to meet the same price.
6On 10 November 2020, Mr Kershaw of Hall Group emailed Birdies a revised tender. Among other items, the revised tender included “signage and table furniture in this latest quote”. I agree with Birdies’ submission that version 5 of the scope of works (“SOW-5”) attached to the email had a price that was unchanged from version 4 (that is, $934,590.13 including GST) but the signage and table furniture reference in the covering email had been added at nil cost.
7On 16 December 2020, Hall Group sent Birdies by email a draft copy of the Contract and program. The email stated (emphasis added): “The completed contract will have all plans, finishes schedule, WHS policy, insurances and scope of works which is Quote you accepted” and that it would be sent through DocuSign. Consistently with the email, the draft did not attach a scope of works and SOW-5 was the only scope of works or quote supplied up to that point. Birdies returned the draft contract with comments.
8Ms Doyle’s evidence was that on 21 December 2020, Hall Group forwarded to Birdies a DocuSign contract. Ms Doyle said that she reviewed the clauses in the contract and wrote back saying that there were errors and changes that needed to be made. There is some dispute about whether the version of the contract signed by Ms Doyle was sent on 22 or 24 December 2020, but nothing turns on this. Ms Doyle said in her witness statement that she initialled and signed the contract on 31 December 2020 and that she initialled only pages 1 to 19. She said:
“Only the contract was initialled that contained the total price, there was no associated electronic SOW and I had no difficulty with that because we had previously agreed to the scope of works being version 5.”
9There is in evidence a “Client Copy” DocuSign “Small Works Commercial Contract” with the DocuSign Envelope ID: D020CEB8-1C2A-4DA5-BCA5-6A178B55CBE5 (“DocuSign ID”) of 19 pages bearing the initials of Ms Doyle on all but the cover page and two pages that are blank apart from the DocuSign ID. This version has Mr Kershaw on every page, apart from the two blank pages. Both have signed on the page numbered 8 of 10. This version of the Contract attaches only seven pages of standard general conditions.
10There is also in evidence a “Contractor Copy” of the contract which has the seven pages of standard general conditions, but also a number of other lengthy attachments, including architectural drawings and a scope of works (“SOW-6”), all bearing the DocuSign ID. The evidence is that this version runs to a total of 214 pages. The initials and signature of Mr Kershaw on this version appear in the same places as the “Client Copy” version, and also on many of the attachments, including SOW-6. Neither Ms Doyle’s signature nor her initials appear anywhere on this version.
11A DocuSign “Certificate of Completion” in respect of the Contract (“DocuSign certificate”) relevantly states:
· The DocuSign ID;
· “Document Pages: 214”;
· “Signatures: 3”;
· “Initials: 133”;
· That it was “Sent”, “Viewed” and “Signed” by Mr Kershaw on 22 December 2020 between 5:08pm and 5:12pm;
· That it was “Sent” to Ms Doyle and Mr Walls on 22 December 2020 at the same time it was sent to Mr Kershaw;
· That the contract was “Viewed” by Ms Doyle at 4:34:04pm on 30 December 202 and “Signed” by her that day at 4:49:43pm;
· That both Mr Kershaw and Ms Doyle adopted a “Pre-selected Style” for their signature and that Ms Doyle (but not Mr Kershaw) used “Freeform Signing”.
12Hall Group commenced work at the site on 13 January 2021. The Works were progressed over the ensuing months, and Hall Group issued the following invoices to Birdies in relation to the Works (excluding alleged variations):
(a) 21 December 2020 for $142,304.00.
(b) 21 January 2021 for $139,154.07.
(c) 21 January for $130,845.94.
(d) 28 January 2021 for $127,696.00.
(e) 22 February 2021 initially for $225,000, but amended on or shortly after 3 March 2021 to $175,000.00.
(f) 24 June 2021 for $168,500.00.
13There is an issue in the proceeding about the effect of an email exchange on 3 March 2020 on the parties’ obligations under the contract. The circumstances leading up to that exchange are largely uncontroversial and conveniently set out in Birdies’ written submissions. I adopt those submissions (with minor amendments) as set out below.
14On 12 February 2021 a series of emails passed between Mr Kershaw and Mr Cheyne Hall of Hall Group and Ms Doyle and Mr Walls, regarding the removal of certain items from the contract. The specific items identified in those communications were lighting ($16,633.80), C-Bus lighting control ($15,256.99), walls/floor ($4,996.20); and Green walls ($13,440.20). The total value of those items, as described, is $50,527.19. The figure for C-Bus lighting control was later adjusted as the original figure was ex-GST, so, in subsequent correspondence, this is documented as $16,782.69.
15On 22 February 2021, Hall Group issued an invoice (“INV-0105”), labelled as Progress Claim 3 (“PC-3”), for $225,000.00. Mr Walls responded on the same day, stating that the amount was “$225,000 - $50,134.89 (say $50,000) = $175,000 (inc GST)” and attaching a schedule of reductions.
16On 26 February 2021, Mr Walls again confirmed the reduction, by email, on the basis that the invoice, “includes SOW items paid by Birdies direct”. Mr Walls also noted that the builders were 10 days behind schedule. Mr Hall responded that Mr Kershaw would “re-submit a progress invoice, reflecting the extension of time & with the associated reduction of scope (Items you are looking after, relative to the contract)”. Mr Walls responded again on the same day confirming the deductions, “The 3rd invoice needs to be for $175k as sent to Aaron previously”.
17On 3 March 2021, Mr Hall, by reply email to Mr Walls, raised a list of additional costs which, “will need to be addressed before we can finalise this invoice”. By reply email on that day, Mr Walls responded that he would review the items but foreshadowed their rejection.
18Mr Walls responded again confirming the reductions for the current progress claim, “Please send an invoice for $175,000 (inc GST) – that is, $225,000 (inc GST) minus $50,314.89 deductions (we rounded down to $50,000 inc GST). [The deductions are attached]”. Mr Hall responded, “Thanks for the quick update & feedback as requested. Everything seems to be in order. Aaron will follow up with the changes to the invoices”. Hall Group later issued ad amended invoice for PC-3 for $175,000 (including GST).
19To the extent that later dealings between the parties are relevant to the issues in dispute, these are referred to below in my examination of those issues. Practical completion of the works was achieved on 25 August 2021 when the building surveyor issued a certificate of practical completion. According to Ms Doyle, Birdies began trading on 19 November 2021 when COVID restrictions in Victoria were lifted.
Terms of the Contract
20Schedule 1 of the Contract also contained information about the documents that comprised the contract documents, which included (emphasis in original):
“Schedule 1. Particulars of Contract
…
5. The works
…
(b) CONTRACTS DOCUMENTS
The works will be carried out in accordance with the following contract documents:
1. Architectures
2. Engineering
3. Project Timeline
4. Scope of Works
5. WHS
6. Insurances
7. Finishes Schedule
If nothing stated the order of precedence is 1. any Special Conditions to the Contract, 2. the Small Works Commercial Contract Terms and Conditions, 3. the Specifications, 4. the Drawings.”
21Schedule 5 of the Contract set out the special conditions of the Contract, the key clauses which are as follows (emphasis in original):
“Schedule 5. Special Conditions
…
4. The following, without limitation, shall constitute a variation, which shall incur an added price or cost: a. Additional building work or specialist work or work not included in the quote. b. Unforeseen building work or specialist work relating to flooring or walls such as electrical, plumbing, gas, air conditioning or any other services not included in the original scope of works. c. Additional work relating to any council application or additional work deemed to be necessary by the council, which is not included in the quote or for which the quote makes no allowance. d. Work involving the removal of contaminated waste.
…
10. To the extent of any inconsistency and to the extent permitted by law, these Special Conditions supersede and prevail over: a. any other terms of this Contract; and b. over any previous agreement or arrangement between the parties relating to building work or specialist work on the site to which this Contract refers.
22The relevant general conditions of of the Contract are as follows (emphasis in original):
…
5 CONTRACT DOCUMENTS
…
5.2The contract documents shall have the order of precedence set out in item 5(b) of schedule 1.
…
8 PAYMENT
8.1 The Client must pay to the Contractor:
…
(b) any other amount which is payable under this contract on demand after the Contractor has carried out the work or incurred the cost.
…
13 PROVISIONAL SUM ITEMS AND ALLOWANCES
13.1The Client must select all allowance items when required by the Contractor.
13.2Each provisional sum allowance must be listed in schedule 3 and have an allowance stated next to it for the price of the supply of the item or of providing the work.
13.3 Where the price is more than the allowance provided, the difference plus the Contractor’s margin specified in schedule 3 is added to the contract price and is payable by the Client.
13.4Where the price is less than the allowance, the difference is deducted from the contract price.
14 VARIATIONS
14.1The Contractor must not vary the works except as agreed or directed in writing or required by law.
14.2A variation must be in writing and signed by or on behalf of the Contractor and the Client. Either the Client or Contractor may ask for a variation.
14.3If the Client requests a variation, the Contractor must, before commencing the variation work and as soon as is reasonable, either:
(a)agree to carry out the variation by giving the Client a written notice; or
(b)refuse to carry out the variation. If the Contractor refuses, the Contractor does not have to give any reasons for such refusal.
14.4If the parties agree to a variation then they are to record the agreement in writing. The agreement should include:
(a)the work required to carry out the variation;
(b)the price of the variation; and
(c)the effect of the variation on the date for practical completion.
14.5If the price of a variation is not agreed prior to it being carried out that price includes:
(a)the deduction of the reasonable cost of all deletions from the works; and
(b)the addition of the total cost of all extra works plus the Contractor’s margin applied to that cost.
14.6 The Client must not unreasonably withhold consent to any variation which is required for the works to comply with the law or a requirement of any statutory or other authority.
…
28 MEANINGS
In this contract (and where appearing in bold);
…
(n)“variation” means any change in the works or the method of carrying out the works;
Issues
23During the course of the trial I provided for the consideration of the parties a list of issues that I had prepared based on a list produced by the parties. That list was later revised based on submissions by Hall Group and the revised version was accepted by the parties and provided the structure for their written submission. As foreshadowed to the parties, they will also form the headings in my reasons. The issues are as follows:
(a) Which version of the scope of works forms part of the Contract?
(b) What does the Contract require before Hall Group is entitled to be paid for a variation?
(c) What is the effect (if any) of the 3 March 2021 email exchange on the parties’ obligations under the Contract?
(d) What (if any) of the variations claimed by Hall Group are payable by Birdies?
(e) Is Birdies obliged to pay Hall Group for the provisional sum adjustment for the vinyl floor?
(f) Is Birdies entitled to claim any credits against the Contract Price?
(g) What (if anything) remains payable by Birdies to Hall Group under the Contract?
(h) What (if any) are the defects in Hall Group’s works?
(i) What (if any) damages are payable by Hall Group to Birdies for any defects?
Issue 1 - Which version of the scope of works forms part of the Contract?
Pleadings issue
24Hall Group submits that the Contract is pleaded in paragraph 3 of its amended statement of claim (ASOC). That paragraph is as follows:
“On or around 22 December 2020, the Plaintiff was engaged by the Defendant to undertake shop fit out works ('the Works') at the Defendant's business premises of L03, Forest Hill Chase, 270 Canterbury Road, Forest Hill ('the Site') in consideration of $933,499.30 ('the Contract').
PARTICULARS
The Contract was partly in writing, partly and partly implied:
i. Insofar as it is in writing, it is constituted by the written agreement in the form of HIA Small Works Commercial Contract (Job Number JI 186) entered by both parties on or around 22 December 2020. A copy of this document is in the possession of the Plaintiffs solicitor and may be inspected by appointment.
ii. Insofar as it is oral, it consists of conversations between Aaron
HallKershaw of the Plaintiff, Stephanie Doyle of the Defendant and David Walls of the Defendant.iii. Insofar as it is implied, it is implied by the conduct of the parties and the operation of law to give business efficacy to the agreement.”
25Hall Group then refers to item 5 of Schedule 1 to the Contract, which sets out the list of “contract documents” which include “Scope of Works”. It then asserts that the Contract including the “contract documents” was contained within the DocuSign ID. Hall Group continues:
“In paragraph [3] of its Defence, Birdies admitted the allegation of how the Contract was constituted. The admission is unconditional and Birdies has not made an application to withdraw it. An admission of a fact alleged in the pleading of the opposite party operates to remove the fact from the arena of controversy and a party will not be permitted to withdraw an admission ‘without good cause’ [citing Collie v Merlaw Nominees Pty Ltd (in liq) & Anor [2001] VSC 39 at [94]-[95]; Gregorich v Khouri [2020] VSC 5 at [10]; Chan v Valmorbida (No 2) [2020] VSC 633 at [3] and [8].”
26The difficulty with this submission, at least to this point of the pleadings, is there no way of knowing whether Hall Group is here referring to the “Client Copy” version of the Contract relied on by Birdies or the “Contractor Copy” relied on by Hall Group. The pleading in the ASOC and the admission in Birdies’ defence could refer to either.
27However, Hall Group next sets out extracts from Birdies’ further and better particulars to its counterclaim which, it argues, are consistent with Birdies referring to SOW-6, not SOW-5. I agree that it does seem that the further and better particulars to counterclaim, at least in part, refer to a version of the scope of works later than SOW-5, but I am not persuaded this is sufficient to elevate Birdies’ earlier pleading to an admission that SOW-6 formed part of the Contract.
28Even if I was wrong about this, in my view, Birdies should not be held to the strict letter of its pleading on this issue. Hall Group submits (and I accept) that Birdies failed to plead expressly that the Contract was constituted by a scope of works dated 10 November 2020 in Birdies’ defence and counterclaim (or the further and better particulars to that pleading). It asserts that this allegation was made for the first time on 20 February 2023 in Birdies’ witness statements dated 17 February 2023.
29Hall Group argues that a fundamental characteristic of the adversarial system is that trials are conducted on the basis of the issues agitated in pleadings, and that relief ought to be confined to that claimed or available on those pleadings.[1] It notes that in Banque Commerciale S.A, en liquidation v Akhil Holdings Limited,[2] the High Court emphasised “that the rules of pleadings are directed at ensuring that a party should be given a fair opportunity to meet the case advanced against it", quoting the following passage:[3]
“The function of pleadings is to state with sufficient clarity the case that must be met: Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (In liq.), per Isaacs and Rich JJ. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party’s right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. See, e.g., Browne v Dunn; Mount Oxide Mines.
Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference.”
[1]Citing Stefanovski v Digital Central Australia (Assets) Pty Ltd [2018] FCAFC 31 at [63]
[2](1990) 169 CLR 279
[3]Ibid per Mason CJ and Gaudron J at 286-287
30However, in that same case, Dawson J held:[4]
“It is, of course, the purpose of pleadings to define the issues between the parties so that they may know the case which they have to meet and in order that the proceedings upon trial may be conducted in an orderly fashion by reference to those issues. The defined issues provide the basis upon which evidence may be ruled admissible or inadmissible upon the ground of relevance. But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. Special procedures apart, cases are determined on the evidence, not the pleadings. It is incumbent upon the trial judge to see that the pleadings or particulars are amended so that the record reflects the proceedings as they have been conducted, but his failure to do so will not result in the invalidity of those proceedings…”
[4]Ibid at 296-297
31Similarly in Gould,[5] cited with approval in Banque Commerciale, the High Court held:[6]
“Undoubtedly, as a general rule of fair play, and one resting on the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him, pleadings should state with sufficient clearness the case of the party whose averments they are. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendment or particulars. But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest. There is abundant authority for this, even if the matter were required to rest on authority only…”
[5]Gould v Mount Oxide Mines Ltd (In Liq) [1916] HCA 81
[6]Ibid, per Isaacs and Rich JJ said at 517
32In my judgment, this is a clear case where the parties chose to “meet each other on issues fairly fought out”. The dispute over which scope of works formed part of the Contract was clearly enlivened by Birdies’ witness statements served comfortably in advance of the trial. I am satisfied that Hall Group had a reasonable opportunity to adduce evidence on this issue or seek an adjournment if it needed more time. It does not suggest otherwise, nor allege any other relevant prejudice. Further, it covered the issue exhaustively in cross-examination. It also agreed that the issue should be included in the list of issues and made a topic for submission, albeit on the basis that it reserved the right to raise the pleadings issue.
Scope of Works negotiations
33Hall Group submits that what it labels as the DocuSign SOW, or SOW-6, forms part of the Contract. It principally relies on the inclusion of SOW-6 in the DocuSign envelope, purportedly sent to Birdies on 22 December 2020, and bearing Mr Kershaw’s initials.
34Ms Doyle gave evidence that while she received the DocuSign contract, it only comprised 19 pages and did not include the extensive attachments included with the “Contractor Copy” version and, notably, did not include any version of the scope of works. Ms Doyle initialled each page and signed the contract. I accept Ms Doyle’s evidence on this issue. To my observation, she was a truthful witness. I agree that she did on occasion lapse into advocating her company’s case, but I did not detect any evasion or dissembling. Her evidence on this issue was particularly forthright.
35Moreover, her evidence concerning her consideration of earlier drafts of the Contract and the scope of works, demonstrated that she was someone who took care to review documents sent to her for accuracy and to ensure they incorporated changes agreed. Indeed, Hall Group submitted that:
“[I]t is inconceivable that Ms Doyle, a details focussed person who understood the importance of the details in the contract, who had carefully reviewed amended the draft contract provided on 16 December 2020 and the initial version of the contract provided via DocuSign on 21 December 2020, would sign a contract which did not contain all the contractual documents referred to in item 5 of Schedule 1 to the contract.”
36To my mind this supports the opposite conclusion. Given Ms Doyle’s familiarity with the other documents and, most notably, SOW-5, it is entirely conceivable that she, as a layperson, would have assumed that the list of contractual documents merely referenced documents the parties had already exchanged and agreed. In my view, had the document she reviewed on 30 December 2020 included SOW-6, it is more likely than not that she would have reviewed it and noticed the changes from SOW-5.
37As I note in the background section above, on 16 December 2020, Hall Group sent Birdies by email a draft copy of the contract and program. The email stated “The completed contract will have all plans, finishes schedule, WHS policy, insurances and scope of works which is Quote you accepted” (emphasis added) and that it would be sent through DocuSign. It is clear that this is a reference to the 10 November 2020 quote and SOW-5. There are two points to be made about this.
38First, from a contract formation perspective, it evidences a clear, objectively ascertained and shared statement of intention that SOW-5 was accepted by Birdies and would form part of the Contract, and I so find. In my view, that is sufficient to support a finding (in the absence of other evidence) that SOW-5 formed part of the Contract.[7] Second, it is surprising that, having described SOW-5 in the email of 16 December as the “Quote you accepted”, Mr Kershaw later made a number of substantive changes to the scope of works on which Hall Group now seeks to rely for (in effect) an increase in the Contract price (SOW-6), without expressly drawing this to Birdie’s attention.
[7]Brimelow v Sharpe [2012] NSWCA 345 per Macfarlan JA, Meagher JA and Tobias AJA agreeing, at [17]
39Having said this, I accept, as submitted by Hall Group, that there were changes to aspects of the Works after SOW-5 that were picked up in SOW-6 (such as in relation to the spiral staircase). However, this does not have the effect of replacing SOW-5 with SOW-6 if the latter was not part of the Contract signed by Birdies or otherwise brought to its attention at or before signing. I also accept Mr Kershaw probably did initial the full contract and may have assumed that Doyle had done the same, except that he does not have a copy with her signature.
40Thus, the only evidence that Birdies signed a version of the Contract containing SOW-6 is the DocuSign process and certificate. Hall Group suggests eleven reasons why I can be satisfied that these matters support a finding on the balance of probabilities that SOW-6 is the contractual scope of works. I have dealt with a number of these above. To the extent that they rely on the DocuSign process and certificate, I disagree.
41In my view, I cannot form any conclusions about how to read the DocuSign certificate or what to make of the differences between the two versions of the Contract, without assistance from a suitably qualified expert on the DocuSign process and the effect of the entries in the DocuSign certificate.
42For example, I have no way of knowing why the certificate has the entry “Freeform Signing” for Ms Doyle, but not for Mr Kershaw. And, by way of a further example submitted by Birdies, given the contract including SOW-6 is marked “Contractor Copy” and the other version of only 19 pages is marked “Client Copy”, I cannot exclude the possibility (absent expert evidence) that the former was signed by Hall Group, but only the latter went to Birdies.
43One thing is clear. Neither party has produced a copy of the 214 page version bearing Ms Doyle’s initials or signature, whether on a copy of SOW-6 or at all, and I have been offered no plausible explanation for this – short of rejecting Ms Doyle’s evidence, and concluding the copy Contract that Birdies produced is (to its knowledge) incomplete. As already stated, I accept Ms Doyle’s evidence on this. In the circumstances, I agree with Birdies that Hall Group “should not be able to rely on the ‘DocuSign envelope’ as evidence that Version 6 was communicated, as there was no expert evidence or satisfactory explanation of how it works”.
Issue 2 – What does the Contract require before Hall Group is entitled to be paid for a variation?
44Hall Group submits that:
(a) general condition 8.1(b) sets out that Birdies must pay Hall Group, on top of the contract price, “any other amount which is payable under this contract on demand after [Hall Group] has carried out the work or incurred the cost”;
(b) pursuant to general condition 5.2 of the Contract, the contract documents have the order of precedence set out in item 5(b) of schedule 1. That item relevantly provides that if “nothing stated the order of precedence is 1. Any Special Conditions to the Contract 2. the Small Works Commercial Contract Terms and Conditions…”; and
(c) special condition 10 further confirms that “to the extent of any inconsistency and to the extent permitted by law, these Special Conditions supersede and prevail over: a. any other terms of this Contract; and b. over any previous agreement or arrangement between the parties relating to building work or specialist work to which this Contract refers.”
45Hall Group then argues that special condition 4 sets out in detail what constitutes a variation and states as follows:
“The following, without limitation, shall constitute a variation, which shall incur an added price or cost: a. Additional building work or specialist work or work not included in the quote. b. Unforeseen building work or specialist work relating to flooring or walls such as electrical, plumbing, gas, air conditioning or any other services not included in the original scope of works. c. Additional work relating to any council application or additional work deemed to be necessary by the council, which is not included in the quote or for which the quote makes no allowance. d. Work involving the removal of contaminated waste.”
46Hall Group submits that when general conditions 5.2, 8.1(b) and special conditions 4 and 10 are read together (and, I interpolate, general condition 14 is largely ignored), Hall Group is entitled to be paid for a variation on demand after it has carried out the work or incurred the cost in respect of work falling within the categories noted in special condition 4. It says that Birdies’ reliance upon the general condition 14 as setting the requirements for “effecting variations” and when Hall Group is paid, is inconsistent with the broad, clear and unqualified wording of special condition 4 that variations within the four identified categories “incur an added price or cost”. It says that construction of the Contract is therefore impermissible pursuant to both special condition 10 and general condition 5.2.
47Birdies submits that on the proper construction of the contract, the requirements do not raise an inconsistency. It says in effect that special condition 4 defines what constitutes a “variation”, while general conditions 14.1 to 14.4 provide the machinery for effecting variations. It submits:
(a) there is no particular ambiguity or conflict in those clauses which would justify departing from their plain and ordinary meaning;
(b) they operate in a typical commercial and businesslike manner;
(c) considering the effort, cost and importance of design in a building project, it is perfectly reasonable (and, I would add, uniformly accepted in the construction industry) for a client to require notice and consent to depart from an agreed scope of works
48Finally, as to variations that are required by law (if this could otherwise be an argument for why the consent clauses may be impractical-which is doubtful), Birdies notes that this is provided for in general condition 14.6, which provides, “[t]he Client must not unreasonably withhold consent to any variation which is required for the works to comply with the law or a requirement of any statutory or other authority”. Birdies also notes that Hall Group raised only one variation that complied with general condition 14 (on 19 January 2021), which was refused.
49The principles of construction that are to be applied to a commercial contract like the Contract are well established.[8] In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. Unless a contrary intention is indicated, the court is entitled to approach the task of giving a commercial contract a businesslike interpretation, on the assumption that the parties intended to produce a commercial result. Put another way, a commercial contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience.
[8]Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, per French CJ, Nettle and Gordon JJ at [46]-[52].
50Consistently with this, a commercial contract should be construed where possible to give effect to all of its provisions and court will strain against an interpretation where a particular clause in it is nugatory or ineffective, particularly if a meaning can be given to it. The principle was stated with great clarity by the Full Court of the Federal Court in Chapmans Ltd v Australian Stock Exchange Ltd,[9] in circumstances where the respondent had apparently made submissions similar to those advanced by Hall Group, as explained in the passage below:[10]
“The argument put on behalf of the Exchange renders Rule 3J(15) nugatory. Indeed senior counsel for the Exchange was forced to concede that Rule 3J(15) in no way affected the generality of the language in the other provisions which left the matter of delisting wholly to the discretion of the Exchange. The procedure in Rule 3J(15) was thus to be seen to be merely one path which the Exchange could take, but not a path which it was bound to take in circumstances which came within it. So, it was said, the Exchange could, if it so desired at its pleasure, remove the name of a company from the Official List without giving the company a right to satisfy requirements or indeed without the giving of any notice.
It is an elementary proposition that a contract will be read as a whole giving weight to all clauses of it, where possible, in an endeavour to give effect to the intention of the parties as reflected in the language which they have used. A court will strain against interpreting a contract so that a particular clause in it is nugatory or ineffective, particularly if a meaning can be given to it consonant with other provisions in a contract. Likewise where there are general provisions in a contract and specific provisions, both will be given effect, the specific provisions being applicable to the circumstances which fall within them.”
[9](1936) 137 ALR 433
[10]Ibid, per Lockhart, Sheppard and Hill JJ, at 442
51Applying these principles, I agree with Birdies. Indeed, the proper construction of these provisions could hardly be clearer. Special condition 4 defines the circumstances in which a variation will arise, and general condition 14 provides the machinery for ensuring that the variation is notified and agreed. The construction suggested by Hall Group is a commercial nonsense, for several reasons:
(a) it would allow Hall Group to undertake for example, any “additional building work or specialist work or work not included in the quote” as it saw fit, with impunity;
(b) thus, taken to its logical conclusion, Hall Group could have decided unilaterally and without notice to construct the bar entirely out of black Italian marble, and (on its case) Birdies would be obliged to pay for it;
(c) general condition 14 is expressed in pre-emptory and unequivocal terms - “the Contractor must not vary the work, except as agreed, or directed in writing or required by law” (emphasis added); and
(d) the construction urged by Hall Group renders general condition 14 nugatory, at least in so far as it applies to variations made unilaterally by Hall Group.
52In any event, there is no inconsistency between special condition 4 and general condition 14 – there is nothing precluding or limiting Hall Group’s capacity to comply with general condition 14 in respect of any of the categories of variation described in special condition 4. The one exception to this may be “c. Additional work relating to any council application or additional work deemed to be necessary by the council, which is not included in the quote or for which the quote makes no allowance”. However, as noted above this is dealt with in general condition 14 in two ways:
(a) general condition 14.1 which provides (emphasis added) “The Contractor must not vary with works except as agreed or directed in writing or required by law”; and
(b) general condition 14.6, discussed above.
53It is not in dispute that Hall Group did not comply with the procedure in general condition 14 in respect of any variations (including all those that it now claims), except one raised on 19 January 2021, which Birdies refused. Accordingly, I agree with Birdies that Hall Group has no grounds under the Contract for claiming the cost of these purported variations. I note that Hall Group does not press for payment for the purported variations on any alternative basis, outside the Contract.
Issue 3 – What is the effect (if any) of the 3 March 2021 email exchange on the parties’ obligations under the Contract?
54Between 12 February 2021 and 3 March 2021, a series of emails passed between Mr Kershaw and Mr Hall of Hall Group and Mr Walls and Ms Doyle of Birdies. The details are set out above. According to Birdies, by the emails, the parties agreed to remove specific items from the scope of works and reduce the Contract price by $50,000.
55Hall Group submits that the 3 March 2021 email exchange has no effect on the parties’ obligations under the Contract. However, Hall Group accepts that on 12 February 2021, the parties agreed to reduce the scope of works and contract price by $33,532.20. Hall Group instead submits that its only dispute is in respect of the “automation works” for the amount of $16,782.69. This is dealt with separately below.
56Hall Group submits that what happened on 3 March 2021 was that Hall Group revised the invoice amount in the expectation that Birdies would not otherwise pay, and Hall Group acquiesced for cash flow reasons. Birdies contends that the 3 March 2021 email exchange had the effect of reducing the price payable under PC-3 to $175,000. In addition to the reduced price, Birdies further asserts that several items were concluded, or ‘closed out’, including security fobs, automation, engineering, framing, bulkhead, and the vinyl floor.
57Birdies submits that the contemporaneous correspondence supports its position. Namely, that there is clearly an inextricable link between the adjusted price and the reduced scope of works and accommodation for delays. In particular, it points to the exchange in which Mr Walls emailed Mr Hall on 3 March 2021 responding “Please send an invoice for $175,000 (inc GST) – that is, $225,000 (inc GST) minus $50,314.89 deductions (we rounded down to $50,000 inc GST). [The deductions are attached]”,[11] and Hall Group responded: “Thanks for the quick update & feedback as requested. Everything seems to be in order. Aaron will follow up with the changes to the invoices”. Hall Group then amended the invoice for PC-3 to $175,000, which was then paid.
[11]Defendant’s closing submissions dated 24 March 2023 at [27]; CB 1080-1801
58In my view, the email exchanges concluding on 3 March 2021 manifest an agreement by the parties to remove listed items from the scope of works and reduce the Contract price by $50,000 accordingly, as submitted by Birdies. All the elements of an agreement are present in the email exchanges and the final email from Hall Group to Birdies and payment of the $175,000 accordingly, an unequivocal acceptance of Birdies offer to reduce scope and pay the $175,000.
59There is also clearly some tension in Hall Group asserting, on the one hand, that the emails had no effect on the parties’ obligations under the Contract and, on the other, accepting that the parties agreed on 12 February 2021 to reduce the scope of works and the Contract price by $33,532.50. There is no doubt that the $33,532.50 and the 12 February 2021 email were then picked up in the later emails and that the $50,000 reduction asserted by Birdies includes the $33,532.50. What Hall Group seems to say, in substance, is that the agreement did not extend to the $16,782.69 in “automation works”, and Hall Group only acceded to forgo this part of the $50,000 because it had cash flow problems.
Automation works
60In case I am wrong about the reach of the 3 March 2021 agreement discussed, I will deal briefly with Hall Group’s claims in respect of the automation works for the amount of $16,782.69. It posits that automation works are expressly excluded from SOW-6 and, therefore, the parties could not agree to remove automation works from Hall Group’s scope and consequentially reduce the Contract price. Hall Group does not put an alternative proposition on this issue if I were to find (as I have) that SOW-5 is the scope of works under the Contract.
61Birdies submits that the automation works formed part of the $50,000 deduction from PC-3 when it was referred to as ‘C-Bus lighting control’. Birdies submits that Mr Kershaw agreed in evidence that automation was “clearly sorted” at PC-3. I interpolate that I am not persuaded that Mr Kershaw’s evidence can be so construed.
62Regardless, Birdies argues (and I agree) that this issue can be resolved based on which version of the scope of works had contractual effect. Birdies explains that SOW-5 provides for “Lighting Controls (automatic)” in item 4.14. As Ms Doyle explained, while certain items were listed as optional in SOW-5 (including automation), it was included in the total price. SOW-6 excludes automation from clause 4.1.
63Birdies notes as that part of the email chain on 12 February 2021, Mr Walls attaches various emails and points out to Hall Group that:
“Laurence was advised on 14 October 2020 to put automation in our build. [see attached email]. The price was then put into your contracted works. Unfortunately, you just cut and pasted this cost from Zelo (as it said optional). But the cost has been included in your $69,404.95
I advised and confirmed to you on the 14 January 2021 the costs were included. [see attached email]
Stephanie then sent you a high level summary of this issue on 15 January 2021. It has always been in your price and is in Version 6. [see attached email]
64Birdies submits that:
(a) the above email is consistent with Ms Doyle’s comment that the reason for the deduction was that Hall Group could not supply the item;
(b) ultimately, after these discussions, the parties agreed to apply the deduction as part of the $50,000 discussed in the 3 March 2021 email exchange;
(c) this deduction was “concluded” on 3 March 2021 by the agreement reached that day and should not have been added to later invoices.
65In my view, if (as I have found) it is SOW-5 and not SOW-6 that constitutes the agreed scope of works, it is clear that the automation works were included in the Contract price. It follows that I agree with Birdies that the 3 March 2021 agreement did extend to the automation works being removed from the scope of works and the Contract price. It is not open to Hall Group to argue that these works were never part of the scope of works and it was entitled to reintroduce a charge for them after issuing the revised PC-3 for $175,000.
66I should add for completeness that even if Hall Group’s version of the agreement were accepted and it is limited to the $33,532.50, and did not extend to the $16,782.69, it is not clear how Hall Group claims an entitlement to raise a new charge for $16,782.69 for automation works. If it purports to do so as a variation, then its entitlement to do so is precluded for the reasons already discussed.
67Finally, Hall Group submits that at trial Birdies went beyond the claims set out in the pleadings against Hall Group and alleged for the first time during cross-examination that the parties also “closed out” certain variations claimed by Hall Group in the 3 March 2021 emails. Hall Group submits that this was not part of Birdies’ pleaded case against it and the allegation should not be permitted as a matter of procedural fairness on the basis that it was raised after Hall Group’s lay evidence had been completed at trial.
68There is no substance to this complaint. In my view, in the three paragraphs of the defence identified in Hall Group’s submissions, Birdies clearly engages the issue of the agreement to the $50,000 deduction from the Contract price. It is self-evident that such an agreement “altered or varied the parties’ obligations under the Contract”, notably on the matter of price. In my view, an express allegation to this effect would be otiose.
69To the extent that the parties gave evidence and made submissions as to what items in the scope of works encompassed by this reduction in price (and thus “closed out”), this is no more than a fleshing out of the broader allegation about the price reduction. The relevant items were clearly identified in the email exchanges and the attached schedules constituting the agreement on the price reduction, and I reject the suggestion that Hall Group were taken by surprise by Birdies’ arguments on these items. I also note Hall Group’s concession that the removal of the automation works from the scope of works was expressly raised in the defence.
Issue 4 – What (if any) of the variations claimed by Hall Group are payable by Birdies?
70For the reasons above, in my view, Hall Group has failed to comply with the Contract in respect of any of the variations claimed (notably the requirements in general condition 14) and, accordingly, all of the claims are disallowed. I also note (as mentioned above) that Hall Group does not press for payment for the purported variations on any alternative basis, outside the Contract. It is therefore unnecessary for me to say any more about this part of Hall Group’s claim.
Issue 5 – Is Birdies obliged to pay Hall Group for the provisional sum adjustment for the vinyl floor?
71Hall Group submits that pursuant to general condition 13.3 of the Contract, where the price for a provisional sum allowance is more than the allowance set out in schedule 3, “the difference plus [Hall Group]’s margin specified in schedule 3 is added to the contract price and is payable by [Birdies]”. Hall Group says that the provisional sum allowance for the vinyl floor in schedule 3 was $1,954.20 and Hall Group’s margin was 10%. Mr Kershaw’s evidence that the cost of the vinyl floor was $6,500.00 was not challenged in cross-examination. Accordingly, the additional amount payable for the provisional sum adjustment is $4,545.80 plus the 10% margin of $454.58 plus GST, giving a total of $5,500.42.
72Birdies argues the provisional sum adjustment relates to the vinyl flooring, which was dealt with in the 3 March 2021 emails when the additional costs, set out in the table of additional costs, were expressly rejected by Birdies and included as part of the negotiations around making the progress payment and arranging that $50,000 reduction.
73Putting aside for the moment the 3 March 2021 email agreement, I am satisfied that on proper construction of the Contract, Hall Group is entitled to seek additional costs for adjustments concerning the cost of the vinyl floor work in the sum claimed. Birdies do not appear to consent otherwise. Thus, the issue is whether the agreement to the reduction in the Contract price concluded on 3 March 2021 extended to the vinyl floor.
74As discussed above, an email dated 3 March 2021 at 7.11am, from Cheyne Hall of Hall Group to David Walls of Birdies states “… Following up on the 3rd Invoice as below. I have attached a list of additional costs that have been incurred through out the construction of the project. These items will need to be addressed before we can finalise this invoice (emphasis added).” The attached list is a spreadsheet, in which Hall Group’s comments on the “Vinyl floor PS [Provisional Sum} increase” states “Provisional Sum is $1,954.20/Cost to Hall Group is $7,438.57”.
75Mr Walls of Birdies responded to that email on the same day at 8:09am saying “I will review but they will all be rejected…It is unacceptable to incur variations and expect them to be paid after the fact without discussion”. At 12.34pm Mr Walls sends a further email to Mr Hall attaching Mr Hall’s spreadsheet, incorporating Mr Walls’ comments on the spreadsheet items. The email then proposes the $50,000 reduction in PC-3 as discussed above.
76In the spreadsheet Mr Wall’s comment on the vinyl floor item is: “REJECTED. No change has ever been made to the vinyl flooring (Drawing no. 104) that you signed off on in the contract”. Then at 2.43pm, Mr Hall sends his “Everything seems to be in order” email discussed above and Hall Group revises PC-3 to $175,000.
77As far as I can tell, the cost of the vinyl flooring was not part of any of the four items that were identified as having been “removed” from the Contract scope in the spreadsheet prepared by Mr Walls and used as the basis for calculating the proposed $50,000 price reduction (for example, at court book 1017). It does include an item “Floor” for $4,996.2, but the surrounding correspondence suggests this relates to an epoxy floor. So the question then is whether the agreement reached on 3 March 2021 extended to Hall Group accepting Mr Walls’ “rejection” of the various sums listed in Hall Group’s later spreadsheet (at court book p1011), despite the fact that the vinyl flooring was not included in the $50,000 reduction.
78In my view, it does not. Mr Hall’s email of 3 March 2021 at 2.43pm must be read in the context of what preceded it as well as the later issue by Hall Group of the reduced invoice for $175,000. So read, in my view, the email acknowledges Birdies’ position on this issue, and does not amount to a binding agreement to forgo forever an otherwise valid provisional sum claim. Properly construed having regard to the $175,000 payment, the compromise only related to the items making up the $50,000 listed in Mr Walls’ spreadsheet (including, as discussed, the automation works), first submitted to Hall Group in February.
79I therefore agree with Hall Group that it is entitled to an order for $5,500.42 in respect of this claim.
Issue 6 – Is Birdies entitled to claim any credits against the Contract Price?
Damaged fridges
80Hall Group submits that although the outer casing of the fridges supplied by the commercial kitchen contractor ICK were damaged in transit, this damage was rectified and the fridges were reinstalled and have been used by Birdies even since without issue. This was conceded by both Ms Doyle and Mr Walls during cross examination. Hall Group also notes that there is no evidence before the court quantifying any alleged credit. The hearsay evidence relied upon in Birdies’ written submissions has been either deleted from its witness statements or not tendered. Mr Kershaw denied receipt of any credit.
81Birdies submit, in essence, that the bar fridges were damaged and would not be accepted. In email discussions between 26 March 2021 and 1 April 2021, there was a general understanding that the fridges would be replaced. Birdies asserts that Hall Group agreed to supply new fridges and the fridges were “not new”. This is doubtful. It seems to me they were new, except they suffered some superficial damage in transit and then were repaired using new skins. Thus they were mechanically new and the skins were new. There is no suggestion that second-hand fridges were substituted for the ones originally supplied.
82In my view, Birdies is not entitled to a credit for the fridges essentially for the reasons submitted by Hall Group. It is not in dispute that the damage was superficial, it was repaired and the fridges have been installed and in use since about April 2021. I accept that at one point Hall Group stated that the fridges would be replaced, but it seems this was based on an assumption that this would be at the cost of the supplier. Birdies do not appear to argue that Hall Group’s initial statements constituted a binding agreement, nor is there any pleading of estoppel or the like. In any event, there is no evidence of any prejudice or damage.
83Birdies’ claim for a credit for the fridges is rejected.
Display stand
84Hall Group submits that the contractual SOW is SOW-6 and that no display stand was included at item 10.2. Accordingly, Hall Group was not required to supply it. Birdies submits the displayed stand was included in the agreed SOW (i.e. SOW-5) at item 10.2. The display stand was not supplied and therefore the credit amount owing is $2,719. As I have found that SOW-5 is the agreed scope of works, I agree with Birdies that Hall Group contracted to supply the display stand and failed to do so. Birdies is entitled to claim a credit of $2,179.
Instagram wall signage
85Hall Group submits it received a variation request on 25 March 2021 from Doyle concerning the “Instagram wall” stating “The Instagram wall needs to be lit (track light). This wasn’t part of the plans as we had specified a logo and neon signage. Instead of refunding the cost of this signage, can you please sort the power (9) and the lighting (track light), which would be significantly less cost”. Hall Group performed the requested varied work but did not claim it as a variation on the basis of the agreement reached with Ms Doyle that Birdies would not be deducting any amount from the contract price.
86Birdies submits it decided to replace the neon signage with a mural that was paid for directly by Birdies, and Hall Group was instead asked to install a GPO and track light which was provided by Birdies. Birdies argues that this requested work was of “significantly less value” than the original neon signage work and the difference should be deducted from any amount payable to Hall Group. In cross-examination, Ms Doyle agreed Birdies changed its mind about the neon sign and no variation request was raised by Hall Group for this work.
87In my view, it is far from clear what arrangement was reached on this item including whether, in requesting the change to scope, Birdies proposed that there be a refund for any difference. In any event, I agree with Hall Group that even if Birdies is entitled to a credit, there is insufficient evidence to establish that the credit ought to be $3,500 as claimed by Birdies or any other amount.
Caddy display stand
88Hall Group submits that it supplied the caddy stand in accordance with drawings 406 and 407 in the Contract and accordingly is entitled to be paid for its work. It notes that nowhere in the drawings, nor in SOW-6 or the Contract was it agreed that Hall Group would supply a “prototype” that Birdies could change or alter without consequence or payment. The caddy display is not referred to at all in SOW-5.
89Birdies submits that a caddy display was not received, rather, only a prototype was supplied, but it did not proceed to final manufacture. It says that Ms Doyle was informed by the supplier that they provided a $3,000 credit to the plaintiff, which should be passed to Birdies.
90As with the Instagram wall signage, the circumstances of the arrangement to supply the caddy display stand are far from clear. Hall Group submitted that it is not in SOW-5, and that seems to be correct (the display stand at 10.2 is the subject of the credit above). In any case, as with the Instagram wall signage, I agree with Hall Group that the evidence of the amount claimed is inadmissible hearsay. No credit will be allowed.
Tables
91Hall Group submits that the small and high table furniture is not within SOW-6 and accordingly, no credit is applicable. If Birdies is entitled to a credit, Hall Group submits there is no evidence to establish the credit ought to be $27,637 claimed by Birdies, or any other amount.
92Birdies submits the tables were included in the SOW at item 10.12 and 10.13 of the November quote. They are shown in SOW-5 at nil cost. Birdies notes that the parties specifically discussed the tables in the negotiation leading up to the Contract, with Ms Doyle sending an email on 8 November 2022 stating that the Defendant’s preference was to engage Hall Group however, “[a]s we had discussed, we did receive another quote today. It’s $900k inc GST and includes the glycol system as well as the 8 tables and 18 small tables”. Mr Kershaw agreed he discussed with Ms Doyle supplying the tables in order to in order to secure the Contract. Mr Kershaw’s email of 10 November 2021 sending SOW-5 confirmed that the tables were included in their revised offer: “we have included signage and table furniture in this latest quote”.
93I accept that Hall Group did agree to supply the small and high tables pursuant to SOW-5. They are shown in SOW-5 as nil value and, as Hall Group submits, there is no evidence that they were worth the $27,637 claimed by Birdies or any other sum. It appears that this figure might have been the value of a variation claimed by Hall Group in an early version of its statement of claim, but later withdrawn. However, there is no evidence as to how this figure was derived or otherwise supporting a credit of that value (such as invoices showing the cost of purchasing the tables elsewhere). The claim must therefore be rejected.
Turf
94Hall Group submits it was required to Hall Group was required to install black, cool play coloured all seasons synthetic turf which is precisely what it did. It says that “the nominated, contractual supplier provided Hall Group with two pieces and was then installed by Hall Group”. However, in an email from Ms Doyle dated 8 May 2021, she made a number of complaints about the turf and said she is making arrangements for higher grade turf. She proposed that Birdies and Hall Group “go halves” on the cost of $1,860 plus GST.
95However, as Hall Group submits, Birdies have provided no documentary, photographic or expert evidence in support of its allegation that the “turf supplied was not fit for purpose and poorly installed”. In the absence of objective evidence about the concerns raised by Ms Doyle or an opinion from a qualified expert on the quality of the product and installation, this claim must be rejected.
Plants
96Hall Group submits that there is insufficient evidence for the claim for a credit for the mezzanine plants to succeed. There was evidence that Hall Group performed additional work after the 28 May 2021 email relied upon by Birdies, the claim was not referred to in Birdies’ payment schedule dated 17 September 2021 and Hall Group submits that neither Ms Doyle nor Mr Walls give any evidence that the plants were not provided or their value. Hall Group further submits that, contrary to the rule in Browne v Dunn, it was not put to Mr Kershaw that the plants were not provided after the 28 May 2021 email.
97Birdies notes that the plants formed part of the SOW and asserts that they were not provided, as confirmed by Ms Doyle’s email of 28 May 2021.
98I agree with Hall Group that there is insufficient evidence for me to find that the plants were not provided or their value. The claim for a credit for the plants must be refused.
Issue 7 – What (if anything) remains payable by Birdies to Hall Group under the Contract?
99Hall Group submits Birdies is liable to pay Hall Group $88,346.36. Birdies submits that no sum is payable by Hall Group under the Contract, unless the court finds otherwise. Before allowing for defects discussed below, the sum payable by Birdies under the Contract is $45,297.71, as set out in the following table.
Item Amount Contract Price $933,499.30 Less agreed 12 February 2021 deductions -$50,000.00 Less payments -$832,960.96 Sub-total – Outstanding balance of Contract
$50,538.34 Plus provisional sum adjustment – vinyl flooring $5,500.42 Less payment on 19 September 2021 -$8,562.05 Less credit for display stand -$2,179.00 Total $45,297.71
Issue 8 – What (if any) are the defects in Hall Group’s works?
100Hall Group submits that the Contract requires Hall Group to carry out the building works and any specialist work with due care and skill and use workmanship to meet the requirements of the Contract, legislative requirements, the National Construction Code, and if a standard is not otherwise stated in the Contract then industry standards applicable to the works.
101It argues that the opinion of its expert, Ken Ryan, should be preferred to that of Nathan Grimes because Mr Ryan’s opinion was based on “his building experience of what would be reasonably acceptable for a commercial building of this use type”, or in other words, the industry standards applicable to the works, which is the contractual standard required. Hall Group says that Grimes was assessing the defects based on allegedly implied warranties that works would be “defect-free, consistent and of an acceptable quality”, which was not a standard referred to in the Contract, pleaded as being implied by Birdies nor explained in the Birdies’ submissions.
102Birdies submits that Hall Group, as the builder, had an obligation to act in accordance with the express terms of the Contract concerning the works. In particular, it points to Schedule 5 Special Conditions, and Clause 15.2 of the General Conditions. Schedule 5 commences:
“The Builder shall carry out the building works and any specialist work with due care and skill.”
103Clause 15.2 of the General Conditions provides:
“15 QUALITY OF MATERIALS AND WORK
…
15.2The Contractor must use workmanship to meet all of the following:
(a)the requirements of the contract;
(b)legislative requirements;
(c)the National Construction Code; and
(d)if a standard is not otherwise stated in the contract then industry standards applicable to the works.”
104Birdies further submits that the opinion of its expert, Nathan Grimes, should be preferred over Mr Ryan’s as Grimes’ training is more aligned to quantity surveying specifically. It points to the Joint Expert Report under item 2(b) of ‘Opening Comments’ which states, “Ryan’s costings are based on practical building experience estimating and costing, whereas Grimes’ costings are based on the experience of a quantity surveyor”. It further notes that Grimes additionally has trade experience and is a Registered Building Practitioner in addition to being a quantity surveyor.
105Birdies also refers to the acknowledgement at item 2(a) of “Opening Comments” in the Joint Expert Report concerning a difference in opinion as to the standard by which the work is assessed. The relevant sections of Item 2 state the following:
“Opening comments
…
2. Where we have not been able to agree, in addition to the specific reasons set out in the Scott schedule below, the bases of disagreement are:
(a) A difference in opinion as to the standard by which the work is to be assessed: Mr Grimes is assessing the works against the builders’ implied warranties (which relates to consistency of finishes and quality of workmanship). Mr Ryan is assessing the works against his building experience of what would be reasonably acceptable for a commercial building of this use type.
(b) Different opinions on the scope of works, derived from our different qualifications and experience with respect to costing: Mr Ryan’s costings are based on practical building experience estimating and costing, whereas Mr Grimes’ costings are based on the experience of a quantity surveyor. We have provided like for like comparisons of our opinions in relation to “on costs” at the last page of the report
106I am satisfied that both experts were well qualified, conscientious in their investigations and considered and truthful in their evidence. They also worked cooperatively and made concessions where appropriate. Subject to that, Mr Grime’s approach on occasion had the air of a counsel of perfection, whereas Mr Ryan was more pragmatic. These differences in approach were nuanced and minor, but where there were divergences, I have generally preferred the evidence of Mr Ryan.
107On quantum, I accept Hall Group’s submission that where the experts have reached a joint opinion as to the fair and reasonable cost for an individual defect, it should be accepted. In a number of instances, despite the experts agreeing a figure, Birdies have submitted I should prefer the (higher) estimate of Mr Grimes. Given the accommodations reached by the experts in arriving at an agreed figure (at my urging), this position taken by Birdies is to be deprecated. I reject it.
108Both parties set out their submissions on the individual defects in the joint Scott Schedule, which will now be dealt with in turn below. Assessments made for defects include GST.
Item 1 – Powdercoated metal framing
109The Joint Experts essentially agree this is a defect and agree that the amount to rectify is between $340-$850. Hall Group concedes the defect is at the top of this range ($850). This defect will be assessed as $850.
Item 2 – Curtain wall glazing to shopfront
110The Joint Experts agree this is a defect and a reasonable amount to rectify is $1,115 (being the median amount between their estimates). Hall Group does not dispute this figure. This defect will be assessed as $1,115.
Item 3 – “BIRDIES MINIGOLF BAR” signage to front entry
111The Joint Experts agree this is a defect and a reasonable amount to rectify is $510. (being the median amount between their estimates). Hall Group does not dispute this figure. This defect will be assessed as $510. Any evidence of more recent damage to the sign was ruled inadmissible and will be disregarded.
Item 4 – Caulking to bar
112The Joint Experts agree there is a defect and that the reasonable amount to rectify is $351.50 (being the median amount between their estimates). Hall Group does not dispute this figure. This defect will be assessed as $352.50.
Item 5 – “Birdies” signage behind the bar
113The Joint Experts agree that the left-hand side signage (looking towards the bar) is slightly brighter than the right-hand side, however, agree to disagree as to whether this is a defect. The Joint Experts agree that if the item is found to be defective, the amount to rectify it would be between $3,000 – $3,850.
114Hall Group submits, in summary, that this was not a defect, and that Birdies has not met its burden to establish that:
(a) the fact that the left hand side signage is slightly brighter than the right hand side is a defect; and
(b) if it is a defect, which is disputed, this defect was caused by Hall Group.
115Hall Group notes that during cross-examination, Mr Grimes conceded that none of the Contract, legislative requirements, the National Construction Code nor industry standards required the lights to perfectly match. Further, the difference was only noticeable if the lights were at 100% capacity, otherwise it was less obvious or (according to Mr Ryan) require someone to “have a very long look” to notice any difference.
116Birdies argues that Mr Ryan’s comment that the difference between the signs is not evident in the photographs in Mr Grimes’ report, is not borne out by the evidence, and is plainly wrong. Despite this comment, the experts agree in the joint report that the left-hand signage is brighter than the right-hand signage. Grimes described it as “quite evident” when the lights were at about 100% capacity.
117Birdies notes that one of the original signs fell and was replaced causing the current issue. It argues that this indicates that, unless signs are from the same batch, they will not be identical despite being from the same supplier. Grimes states that “both signage will require replacement and manufactured with identical materials from the same batch”.
118On balance, I accept this is a defect. The aesthetic of Birdies night club and minigolf is important and inconsistencies in lighting will detract from the impression patrons have of the premises. I agree with Hall Group that the reasonable cost to rectify should be the mid-point in the range given. This defect will be assessed at $3,425.
Item 6 – LED lighting flickering
119The Joint Experts in the Joint Report Scott Schedule do not make any express comment on whether this is defect, but note that:
(a) they agree that when the lights are operated at 45% lighting level there is a defect because the LED lights to the Birdies mural wall and front entry alcove turn off and on intermittently;
(b) they agree that the lighting system at 45% does not function as they would expect;
(c) they observed that when the lights are operated at the fixed “open” setting, the lights do not flicker; and
(d) they are not electrical engineers, but agree that the cause is less likely to be to the light fittings and more probable to be related to the electrical circuitry;
120Mr Grimes further notes that:
(a) on his first inspection he observed two affected lights; and
(b) on his second inspection on 3 March 2023, he observed the number of affected lights had increased to nine, of which two being at approximately 8.5 meters above the ground to the rear of the building, and seven to the front reception area at approximately 3.3 meters high.
121The Joint Experts state that because of their revised opinion, they are unable to accurately estimate the amount to rectify. They recommend that an electrical contractor or electrical engineer confirm a scope of works.
122Hall Group submits that:
(a) as conceded by Mr Grimes in cross-examination, the LED lights that are flickering are operated by the C-Bus automation system and that if the automation works were not within the builder’s scope of works, this is not a defect that Hall Group is responsible for;
(b) whether or not the automation works were originally within Hall Group’s scope of works and subsequently removed (as Birdies alleges) or were never within Hall Group’s scope of works (as Hall Group alleges), there is no dispute that automation works were not performed by Hall Group;
(c) accordingly, Hall Group is not responsible for any defects in the operation of the automation system;
(d) ultimately, the experts did not have the expertise to determine the cause of defect but determined that it was “more probably related to the electrical circuitry”;
(e) this is associated with the automation works as Grimes also conceded stating that it “looks more likely to be circuitry or system-based”.
(f) Birdies has not met its burden to establish that the defect was caused by Hall Group; and
(g) in addition, as the experts are unable to accurately estimate the amount to rectify the defect, Birdies has also not met its burden to establish the fair and reasonable cost to rectify.
123Birdies submits:
(a) Mr Ryan initially did not observe flickering, however in the joint report agrees that when the lights are operated at 45% lighting level there is a defect, and that lighting “does not function as we would expect”;
(b) for this reason, the defect should be considered established and agreed;
(c) given the experts identify in the joint report that it is, “more probably related to the electrical circuitry”, it does not appear to be a problem with the automation, but an electrical problem, which is the Builder’s responsibility;
(d) Mr Ryan’s initial estimate is based on only replacing the lighting capacitors. However, this is not a reasonable conclusion, as it could be caused by other problems, and there is no basis for making that conclusion beyond it being “usually” the problem;
(e) the joint report concludes that it is “less likely to be the light fittings and more probable to be related to the electrical circuitry” and so repairs may require more intensive access and a broader scope of work (such that scaffolding, as provided in the Mr Grimes’ estimate, is required, which is the only point identified by Mr Ryan as to why Grimes’ report costing is excessive and not justified); and
(f) for this reason, the Mr Grimes’ estimate should be preferred.
124Birdies’ submissions must be rejected. The Joint Experts expressly said in their final joint Scott Schedule that “because of our revised opinion, we are unable to accurately estimate the amount to rectify”. Thus Mr Grimes has (quite properly) withdrawn his earlier estimate. The have also been unable to identify a cause for the flickering and it may or may not relate to work done or goods supplied by Hall Group, for the reasons it submits. Thus Birdies have failed to prove either that the flicker is a breach of the Contract or the quantum of any claim. This defect will be assessed as nil.
Item 7 – Timber sliding ladder
125The Joint Experts agree in part that there is a defect and Hall Group has effectively conceded a total rectification cost of $553. This defect will be assessed accordingly.
Item 8 – Round pendant lights to bar/reception – inconsistent heights
126The Joint Experts agree this is no longer a defect, as it is within tolerances. They observed no inconsistency in the light fixtures during their inspection on 3 March 2023. The defect will be assessed at nil.
Item 9 – Round pendant lights to bar/reception – upper base plates
127The Joint Experts agree to disagree whether this is a defect, but Hall Group have conceded it at the top of the suggested range, being $575. It will be assessed accordingly.
Item 10 – Birdies signage lettering to reception
128The Joint Experts agree to disagree whether this is a defect, but Hall Group have conceded it at the jointly assessed cost to rectify of $415. It will be assessed accordingly.
Item 11 – First floor balcony balustrade
129The Joint Experts separated their consideration of the first-floor balcony balustrade works into two components, the first section concerning movement at Item 11, and the second section concerning cladding and timberwork at Item 11A. They note that the timberwork was originally reported at item 11, but is now costed at 11A to enable the costing of the balustrade/mezzanine to be simplified. In line with the Joint Experts Report and the Scott Schedule, I have adopted a similar approach below in considering these issues separately.
130The Joint Experts agree that the balustrade does not meet AS1288, however, it appears to be constructed largely in accordance with the architectural drawings.
131The Joint Experts agree there is movement in the balustrade. They undertook approximate site measurements that showed a varying range of movement between 10 – 22mm in one direction. A video, presumably provided by the experts, demonstrated the range of movement. However, they quite properly concede that they are not suitably qualified to be undertaking this testing, as they cannot appropriately identify the exact amount of load or force required to test effectively.
132The Joint Experts have not been able to confirm that the “as-built” structure has been approved or is within tolerances. They agree this is because:
(a) the building permit and engineering documents do not reference the glass structure;
(b) the detail 04 sheet 805 does not reference a structural engineering design of the connection detail of the balustrade and the structure;
(c) the relevant standard that is referenced throughout the architectural drawings is AS1288;
(d) the “as-built” balustrade does not comply with AS1288 clause 7.3.2 structural balustrade - cantilevered glass, because that clause does not provide for spigot fixings and that clause requires “the bottom of the panels to be fully and rigidly fixed for the full length of the panel usually into a grouted channel”;
(e) The “as-built” design does not comply with the architectural drawing detail 04 Sheet 805 because it requires the posts and spigots to be bolted to the mezzanine flooring and the “as-built” condition is that the spigots are screwed;
(f) the Joint Experts note there is reference in the builder’s quote to fixings being “drilled and bolted” which seems to confirm the use of bolts for the spigots, however they acknowledge there is text missing from this document and it is incomplete.
133Where the Joint Experts differ on matters within their expertise is on whether the timber tops are secretly fixed. Mr Grimes’ opinion is that the timber tops are not secretly fixed, meaning the balustrade does not comply with the architectural detail 04 sheet 805. Mr Ryan disagrees, as he observed that the handrail is fixed by a combination of screws underneath that he considers to be secret fixing. The architectural drawing does not provide detail for the secret fixing and Mr Ryan’s opinion is there is no other way to secretly fix.
134The Joint Experts state their areas of expertise do not extend to structural engineering and therefore they cannot comment further on the structure or structural connections.
135On quantum, the Joint Experts agree that if the balustrade requires rectification only, then the amount is $9,511.25 (being the median amount between their estimates). If the structure or structural connections are found to be defective and replacement is required, the amount to rectify is expected to be in the order of $28,450 subject to accurate costing on a scope of works. Mr Ryan did not provide an opinion on the cost of replacement.
136The amounts exclude the cost to rectify or replace the timber balustrade surround, as the costs of that is dealt with at item 11A.
137Hall Group submits that the experts have conceded in the joint report that they do not have sufficient expertise to:
(a) undertake testing to measure the range of movement in the balustrade; or
(b) assess the structure or structural connections of the balustrade.
They have also not been able to confirm whether or not the “as-built” structure has been approved or is within tolerances.
138Hall Group argues that, in these circumstances, Birdies has not met its burden of proving the balustrade is defective. Hall Group argues that:
(a) the balustrade was constructed in accordance with the architectural drawings which it was contracted to comply with, other than minor issues such as screwing, as opposed to bolting, and possibly secret fixing of screws;
(b) if the architectural design, which was signed off by the building surveyor, was not appropriate or defective (which the experts do not have expertise to determine), this defect would be caused not by Hall Group, but by the architect;
(c) to achieve compliance with AS1288 (if that was necessary) would require a design change which is outside the scope of Hall Group’s obligations under the Contract;
(d) as the experts are unable to determine whether or not the balustrade requires rectification only, replacement or something else, the question of quantum does not arise because the Court cannot be satisfied which of these may be appropriate for the fair and reasonable costs of rectification; and
(e) the replacement cost determined by Grimes is speculative because if a replacement is required, the cost would be completely dependent on the structural engineer’s design.
139Birdies notes that the experts agree that:
(a) “the balustrade does not meet AS1288” and note that “the relevant standard referenced throughout the architectural drawings is AS1288”.
(b) “the “as-built” design does not comply with the architectural drawing detail 04 Sheet 805”.
140Birdies submits that the two above facts were not identified by Mr Ryan when preparing his initial report and estimate but are noted as agreed in the Joint Expert report. Mr Grimes explained that the current build can only be used in a fall of less than one metre. While Mr Ryan says that his opinion is it can be fixed without replacement, rather than proposing how that could specifically be done, he concedes that it requires an engineer to inspect and come up with a proposal.
141Birdies argues that, ultimately, despite the discussion at trial about whether it is the builder, architect or building surveyors fault, for the purpose of the current matter it is the builder’s responsibility to rectify.
142Birdies also submits that the court should prefer Mr Grimes’ estimate ($28,450) as:
(a) the structural integrity of a balustrade is a serious safety concern (Mr Grimes says it is a “high risk balustrade area);
(b) real and important defects have been agreed by the experts beyond the cosmetic issues such as the secret fixings;
(c) the balustrade does not comply with the required standard; and
(d) Mr Grimes’ estimate is the only real estimate for rectification whereas Mr Ryan’s suggestion that it could be repaired rather than replaced is subject to proper assessment by an engineer and therefore hypothetical for present purposes.
143It is clear from the Joint Experts report that there are deficiencies in the construction of the balustrade and that it may be unsafe. However, apart from what Birdies describes as “cosmetic” issues (about which the experts disagree), both experts have frankly conceded in substance that they do not have the expertise to:
(a) undertake proper testing of the balustrade;
(b) make a finding about whether or not the “as-built” balustrade is within tolerances;
(c) attribute responsibility for the defects as between Hall Group and the architect; or
(d) determine whether it can be repaired at one cost, or must be replaced at a much higher cost.
144In those circumstances, I agree with Hall Group for the reasons it has submitted set out above that Birdies has failed to discharge its burden of proving that this is a defect amounting to a breach of the Contract or as to quantum if a breach were found. This defect will be assessed at nil.
Item 11A – Cladding to the front of the first-floor balcony and timberwork to the perimeter of the glazing panels
145The Joint Experts in their report have listed as Item 11A(i) the cladding to the front of the first-floor balcony and Item 11A(ii) the timberwork to the perimeter of the glazing panels. Hall Group and Birdies have similarly adopted this phrasing. The Joint Experts agree that the front face of the mezzanine floor and timber surround of the glass balustrade are defective.
146On quantum for the cladding, the Joint Experts are unable to agree on the amount to rectify, primarily because of the number of coats of paint required (given the commercial setting) and therefore the cost of labour and materials. They note that if it is assumed that only two coats of paint are required and that the rectification works occurs in isolation to any structural rectification, the Joint Experts agree that the amount to rectify would be somewhere between $906 to $945 to rectify the front face of the mezzanine level. Hall Group submits cladding defect is not in dispute. Birdies notes Hall Group’s concession to a maximum of $945.
147On quantum for the timberwork, Grimes agrees with Mr Ryan’s cost to rectify the timber surround to the glass balustrade of $2,050 if it is deemed to not require replacement. Hall Group submits, as Mr Grimes conceded, item 11A(ii) is a cost that is only incurred if the structural engineer determines that the balustrades do not need to be replaced. Hall Group asserts that, as set out above in relation to item 11, there is insufficient expert evidence to determine what is required in respect of the balustrade therefore Birdies has not met its burden in respect of this item either.
148Birdies submits on quantum that items 11A(i) and 11A(ii) are included (or rendered unnecessary) by Mr Grimes’ estimate in item 11, because the balustrade requires replacement. It says that if the Court agrees with Mr Grimes for item 11, then Item 11A should be nil. Alternatively, if I find that Item 11 is instead to be valued less than the Mr Grimes’ estimate for that item, then item 11A should be assessed at $2,995, being:
(a) for Item 11A(i), $945 as conceded, being the cost of repainting; and
(b) for Item 11A(ii), $2,050 as cost of rectification of timberwork agreed by the Joint Experts.
149I accept the views of the Joint Experts that both the cladding and timberwork is defective. For the reasons set out above concerning Item 11 first floor balcony balustrade, I was unable to make a positive finding that there was a defect in breach of the Contract, or as to the quantum of any breach. However, contrary to Hall Group’s submissions, this does not preclude Birdies from an award of damages for a defect constituting a breach, regardless of whether the particular rectification work will not be carried out.[12]
[12]Bellgrove v Eldridge (1954) 90 CLR 613 at 620
150Accordingly, I assess this defect at $2,995, comprising of $945 for the cost of repainting the defective cladding and $2,050 for the defective timberwork.
Item 12 – Items were not supplied as per contract
151This item was not pressed.
Item 13 – Front entry ceiling
152The Joint Experts agree that without specialist paint input there is no way to determine the exact colour that has been used. The defect as expressed is unable to be confirmed by the Joint Experts as it relies on a comparison of the paint colour proposed and what was applied. They note it is not an allegation that the paint is a different colour to another surface in the same paint. On quantum, if this item is proven to be a defect, the Joint Experts agree the amount to rectify would be $4,529.50 (being the median amount between their estimates).
153Hall Group submits, in summary, that Birdies has not met its burden of proof on this defect. It notes that the Joint Experts inspected the premises on three occasions (once each separately and then one joint inspection) and have, in substance, determined that they do not have sufficient expertise to determine whether or not this is a defect.
154Hall Group further submits that if the experts cannot determine, after those three in-person inspections, the exact colour that has been used, the Court cannot reasonably determine that the incorrect colour has been used on the basis of a single photograph, which is skewed by reason of the light and shadows and may not accurately reflect the true colour of the paint used, in comparison with the contract.
155Birdies argues that, notwithstanding the Joint Experts’ opinion, the schedule of finishes shows the colour of these paints as both being a very light grey, the photo showing the ceiling appears to be a darker grey than the specified colours, and that the Court should make its own assessment on the basis of the material provided.
156I agree with Hall Group that if the Joint Experts after three inspections are unable to determine the colour used, it would be highly presumptuous of me to attempt to improve on their assessment from a photograph (particularly as photographs are notorious for altering colours seen by the naked eye). I am therefore unable to find that this item is a defect and it will be assessed at nil.
Issue 9 – What (if any) damages are payable by Hall Group to Birdies for any defects?
Preliminaries
157Hall Group submits that the only disputed ‘preliminaries’ costs are the additional supervision and final clean. It notes that:
(a) Both experts’ calculation of the additional supervision was based on the entirety of the works, including the balustrade and flickering LED lights being undertaken. In addition, Mr Grimes incorrectly allowed four weeks, instead of three. The cost of $600.00 proposed by Hall Group is calculated based on Mr Ryan’s evidence that only five hours would be required if the balustrade replacement and flickering LED light works were not required to be undertaken.
(b) In respect of the final clean, Mr Grimes conceded that his calculation was based on the balustrading works being done and this would need to be reduced if those works were not undertaken. Even with that reduction, the Court should accept Mr Ryan’s quantification as it takes into account ongoing cleaning at other points.
158Birdies submits that preliminaries are not addressed as a single figure estimate in the Joint Report. However, page 16 of the report lists various items which form part of ‘Preliminaries’ and compares the cost estimate from each expert, thus the Court can conclude that both experts agree that preliminaries apply and the experts are only in disagreement on amounts.
159Birdies further submits that Mr Grimes sets out his assessment of preliminaries at p257 of the court book and Mr Ryan sets out his assessment of preliminaries at p361. Many of the items identified are similar between the two assessments. However, Birdies argues that the court should prefer Mr Grimes’ assessment:
(a) for the overarching reasons described above;
(b) as certain items within the category of preliminaries have been conceded by Hall Group on the basis of Mr Grimes’ figures (insurance of $700, and Rubbish bin hire at $750); and
(c) certain obvious under costing by Mr Ryan, for example:
(i)rubbish skip hire of $330. This price is insufficient based on both the size of the bin required and/or the duration of hire. Given Mr Grimes considers the works will, “take 3 weeks to complete” it is likely a bin will be required for more than one day;
(ii)site supervision of only 20 hours (noting the 3 week estimate), which represents the primary difference between the quotes ($8,640 compared to $2,400). It is however noted that Mr Grimes conceded in cross-examination that his estimate was based on four weeks rather than three weeks, so arguably it could be reduced by $2,160 to $6,480; and
(iii)Mr Ryan excludes reasonable expenses included in Mr Grimes’ estimate such as first aid and small tools hire.
160Mr Ryan explained his rationale for calculation of $2,400 for additional supervision, as follows:
“I've put down that additional supervision allowance, and I've put in brackets shopping centre, given the fact that it's a public place. My 30 per cent builder's margin includes an allowance for supervision in that margin, that's the way I treat it, which is different from Nathan. So I've not allowed 50 per cent of the time, but what I have allowed, because it is a shopping centre and trades - well, there will be very few trades coming in, I have allowed a site labourer to attend the site, I've allowed 16 hours there. Most trades will clean up after them, but I've allowed for a little bit of progressive cleaning up.”
161I accept, as Hall Group submits, Mr Ryan’s quantification of the final clean for $260 on the basis that it takes into account ongoing cleaning at other points. I also accept Mr Ryan’s quantification on additional supervision for the amount of $600 on the basis of a reduced need for supervision arising from the reduction in necessary works flowing from my assessment of the defects above.
162Doing the best I can with the disparate information provided and endeavouring to allow for the fact that the assessment must exclude provision for replacing the balustrade and resolving the flickering lights, I will allow preliminaries at $4,250. This is essentially based on the sums submitted by Hall Group (totalling $3,650), which in turn rely on Mr Ryan’s assessment, with some uplift, but increasing the supervision allowance to 50% of Mr Ryan’s assessment, being $1,200.
Overheads and profit
163Hall Group submits that Mr Grimes applied an allowance of 25% for overheads/profit/margin, which is not disputed. I agree. Overheads and profit will be assessed at 25% of the total claim.
Contingency costs
164Hall Group submits that Mr Grimes also allowed a 10% contingency for potential latent conditions, inclement weather, relocation of concealed services, unforeseen works or services and additional unknown/unquantified defective works. Mr Ryan’s evidence that there is no potential latent conditions or concealed services, aside from balustrading and flickering light, should be accepted given the minor nature of the works. As an inside job, there is no inclement weather and Mr Grimes conceded that the additional unknown/unquantified defects not the subject of this proceeding were entirely speculative. Accordingly, a contingency ought not be applied.
165Birdies submits that Mr Grimes proposes contingency costs of 10% of the rectification costs. He provides a strong and fairly detailed justification in the Joint Report at page 16, which, it is submitted, should satisfy the Court. Further, if additional costs are incurred, it will be difficult or impossible for Birdies to recover these from the Hall Group.
166Birdies further submits that Mr Ryan provides two points of rebuttal in the Joint Report at page 16:
(a) The first is that, “[t]he rectification costs are small and not considered necessary to apply contingency”. This argument fails because:
(i)the size of the job does not affect the reasons for a contingency cost as set out by Mr Grimes; and
(ii)contingency may, in fact, be more necessary for smaller jobs where there is no offsetting of cost increases and reductions between the various jobs which are part of a bigger job.
(b) The second is that Mr Ryan considers, “his wastage includes contingency” however:
(i)his proposed costs in the Joint Report do not include his wastage calculation (for example, in item 1 his estimate is $340, with a 5% wastage, bringing the total to $357, however in the Joint Report the lower figure of $340 is used);
(ii)his wastage calculations range from 0% to 5% (and are 0% for the majority of items), rather than the standard contingency of 10%; and
(iii)contingencies is to cover costs other than, or in addition to, wastage (as set out by Mr Grimes).
167Birdies further submits that a real example presented itself at trial, with regard to the repair on the front signage, when Mr Grimes said, “[d]uring the most recent inspection Ken and I noted that one of the letters on the front signage had fallen off. That’s not covered in our reports”. Mr Grimes also explained that this could also lead to difficulties in getting consistency in replacing one letter of a sign.
168Birdies submits that, for the above reasons, the Court should adopt the figure of 10% as proposed by Mr Grimes for contingencies.
169In the Joint Report in relation to contingency, Mr Grimes states:
“Yes, included as a one-off percentage of the rectification costs. 10% construction contingency is widely accepted on all projects which have not yet been completed. Contingency covers unforeseen costs that arise during the performance of the works such as latent conditions, additional works not able to be identified during visual inspections, and delays etc.
- Latent conditions
- Inclement weather
- Relocation of concealed services
- Unforeseen works or services
- Additional unknown/unquantified defective works.
In accordance with prudent budgeting practice, an allowance of 10.0% has been included in the estimate.
170While I accept Mr Ryan’s evidence that the risk of latent conditions (particularly relating to inclement weather, for example) there is force in Birdies’ submission that contingency may, in fact, be more necessary for smaller jobs where there is no offsetting of cost increases and reductions between the various jobs which are part of a bigger job. On balance, I accept Birdies’ submissions and will assess contingencies at 10%.
Escalation costs
171Hall Group submits that Mr Grimes allowed escalation costs of 3% to cover increases in project costs from the date of cost plan until the completion of the works. Given that the experts agreed that the works were minor (except for the balustrade which must be excluded from consideration), the costs were accurate as at the date of their evidence and there was no practical impediment to the works commencing immediately, no escalation costs ought be allowed.
172Birdies submits (referencing the Joint Report at page 16):
(a) the experts agree that, if escalation costs are applied they should be set at 3% of the rectification costs;
(b) Mr Grimes explains that escalation costs should be applied due to, “increases in project costs due to inflation, CPI rises, wage rises and currency fluctuations from the date of the cost plan until completion of the works”;
(c) Mr Ryan argues that no escalation costs should be applied because, “the rectification costs are small and not considered necessary to apply an escalation cost”;
(d) just because the rectification costs are small does not address the justifications identified by Mr Grimes;
(e) further, it must be noted that there were some months between the preparation of the expert reports, and in cross-examination Mr Ryan stated (while noting that the escalation was based on the total amount which has reduced) “…I do agree that time has lapsed, but I repeat my report has been based on no allowance for escalation, but I agree 3 per cent in a reasonable sum”;
(f) Mr Grimes said, “In my opinion 3 per cent is under what is should be, but I don’t have any way of proving what is currently going on in the market because it’s so turbulent”;
(g) it is not onerous to calculate 3% of the rectification costs, so there is no good reason not to include them; and
(h) the court ought apply them as proposed by Grimes in order to best make orders that are just and fair in all the circumstances.
173I agree with Birdies and will apply a 3% escalation cost accordingly. The escalation will be applied on the total cost of the defect rectification including contingency but excluding the 25% margin. The margin will be applied to the total figure including contingency and escalation.
Calculation of damages
174The relevant defect items in respect of which the quantum was either agreed or has been assessed by me above are as follows (the amount assessed is also shown below):
Item Amount Item 1 – Powdercoated metal framing $850.00 Item 2 – Curtain wall glazing $1,115.00 Item 3 – “Birdies Minigolf Bar” Signage to Front $510 Item 4 – Caulking to bar $352.50 Item 5 – “Birdies” signage behind the bar is inconsistent $3,425.00 Item 6 – LED lighting flickering $nil Item 7 – Timber sliding ladder $553.00 Item 8 – Round Pendent Lights to reception are of inconsistent heights $nil Item 9 - Round Pendent Lights to bar/reception are of inconsistent heights – upper base plates $575.00 Item 10 – Birdies signage lettering to reception $415.00 Item 11 – First floor balcony balustrade movement $nil Item 11A i) Cladding to the front of the first floor balcony $945.00 Item 11A ii) Timberwork to the perimeter of the glazing panels $2,050.00 Item 12 – Items not supplied as per contract Not applicable Item 13 – Front Entry Ceiling $nil Sub – Total $10,280.50 ‘Preliminaries’ costs: Insurance $700.00 Temporary barricading $300.00 Rubbish bin hire $750.00 Additional supervision $1,200.00 Site labour progressive cleaning $1,040.00 Final clean $260.00 Sub-total $4,250.00 10% Contingency $1,504.05 3% Escalation $45.12 25% Margin $4,147.42 GST $2,073.71 Total $22,810.80
Certificate
I certify that these 54 pages are a true copy of the judgment of his Honour Judge Woodward delivered on 2 June 2023.
Dated: 2 June 2023
James Occleshaw
Associate to his Honour Judge Woodward
0
12
0