Invictus Development Group Pty Ltd v Versatile Fitout Pty Ltd

Case •

[2022] NSWDC 477

•

17 October 2022

No judgment structure available for this case.

District Court


New South Wales

Medium Neutral Citation: Invictus Development Group Pty Ltd v Versatile Fitout Pty Ltd [2022] NSWDC 477
Hearing dates: 12, 13, 14 September 2022 (supplementary written submissions on 23 September 2022 for the defendant and 30 September 2022 for the plaintiff)
Date of orders: 17 October 2022
Decision date: 17 October 2022
Jurisdiction:Civil
Before: Abadee DCJ
Decision:

See paragraph 222 - 224

Catchwords:

BUILDING AND CONSTRUCTION – dispute between head contractor and sub-contractor – whether there was a defect in the appearance of bowing on stairs after works - whether sub-contractor failed to comply with direction to repair defect within a stipulated timeframe – whether right to issue a direction was an essential term or intermediate term in the subcontract - whether any such failure gave rise to an express right in the contractor to terminate or amounted to a repudiation – whether contractor’s termination lawful – whether sub-contractor elected to terminate for contractor’s repudiation by wrongful termination

DAMAGES – contractor claim for damages for breach of contract – compensation for cost of rectifying defective work – whether, upon termination of the contract, contractor entitled to retain sums withheld under contract – whether contractor entitled to keep monies accrued under provision for retention and damages for breach by sub-contractor

PRACTICE AND PROCEDURE – building disputes – the Court’s expectations of practitioners to consider and raise with the Court the desirability of orders for joint expert conferences and reports well in advance of hearing

Legislation Cited:

Building and Construction (Security of Payment) Act 1999 (NSW) ss 8, 9, 15, 32

Civil Procedure Act 2005 (NSW) s 56

Uniform Civil Procedure Rules 2005 (NSW) r 15.2

Cases Cited:

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544

Harold R Finger & Co Pty Ltd v Karellas Investments Pty Ltd [2016] NSWCA 123

Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26

Ilija Stojanovski v Australian Dream Homes PtyLtd [2015] VSC 404

J Kitchen & Sons Pty Ltd v Stewart’s Cash and Carry Stores (1942) 66 CLR 116

Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313

Koompahtoo Local Aboriginal Land Council v Sanpine (2007) 233 CLR 115

Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560

McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104

Owners of SP 80458 v TQM Design & Construct Pty Ltd [2018] NSWSC 1304

Serong v Dependable Developments Pty Ltd [2009] VCAT 760

Shevill v Builders Licensing Board (1982) 149 CLR 620

Visscher v Honourable President Justice Giudice (2009) 239 CLR 361

Texts Cited:

J Carter, Breach of Contract (2011)

N Dennys and R Clay (eds) Hudson’s Building and Engineering Contracts (14th ed, Sweet and Maxwell) (2020)

Category:Principal judgment
Parties: Invictus Development Group Pty Ltd (plaintiff/cross-defendant)
Versatile Fitout Pty Ltd (defendant/cross-claimant)
Representation:

Counsel:
Mr P Tiliakos for the plaintiff/cross-defendant
Mr F Corsaro SC for the defendant/cross-claimant

Solicitors:
Macquarie Law Group for the plaintiff/cross-defendant
Memcorp Lawyers for the defendant/cross-claimant
File Number(s): 2020/283026
Publication restriction: Nil

JUDGMENT

INTRODUCTION

  1. The plaintiff (‘Invictus’) sues the defendant (‘Versatile’) in debt and for damages following the termination of a contract entered into on 24 May 2017. The contract was for the provision, by Invictus, as sub-contractor, of formwork and concrete works to Versatile, the head contractor, in relation to construction works undertaken at Sydney International Airport, in Mascot. The contract was for a fixed sum ($161,240 excl GST). Versatile purported to terminate the contract on 1 March 2018. Invictus asserts that the purported termination was unlawful and therefore constituted a repudiation. Thereafter, on 26 March 2018, Invictus sent an invoice (numbered 2423) to Versatile, which the latter refused to pay. It sues on the invoice, for monies retained by Versatile and the balance of the contract sum.

  2. In its cross-claim (as amended on the first day of the hearing), Versatile cited terms of the agreement that related to the standard of workmanship and its right to issue directions to Invictus. It asserts that stairs that were constructed by February 2018 for Stage 4 of the construction program were defective and did not conform with the requirements of the agreement, amongst other reasons, because there was bowing. On 23 February 2018 a formal notice to rectify the defects was sent to Invictus. Versatile asserts that Invictus failed to rectify the defects or comply with its direction, that this conduct amounted to repudiation by Invictus of its obligations and, on that basis, it terminated the contract on 1 March 2018. By its cross-claim, Versatile claims damages for loss comprised by its need to rectify the defects.

  3. In its Defence to the cross-claim, Invictus relevantly asserts that the works were rectified or completed within time; disputed that the engineer’s report provided any rectification methodology as Versatile had asserted and; challenged the adequacy and validity of the notice to rectify. It also asserted that Versatile had failed to mitigate its loss.

  4. Prior to the commencement of the hearing, the parties had identified a large number of issues, at varying levels of generality. But by the time of closing argument, the issues had considerably narrowed to the following:

  1. whether the bowing discerned on the stairs was a defect or did not conform with the contractual requirement;

  2. the proper construction of the 23 February 2018 direction;

  3. whether Versatile was entitled to terminate, under an express contractual right, or in exercise of its common law rights, for Invictus’ non-compliance with the 23 February 2018 direction;

  4. (if the purported termination was lawful, or simply if Invictus was in breach of contract) damages on the cross-claim;

  5. (if the purported termination was unlawful), whether Invictus was entitled to the relief it sought in its action on a debt (under contract or sourced in statute), its action for damages or, alternatively, action for restitution.

FACTUAL BACKGROUND

The uncontroversial facts

  1. What follows is largely uncontroversial and is taken from the parties’ respective chronologies (Exhibit A and Exhibit 1). Because of the substantial narrowing of issues that occurred throughout the course of the hearing, I will identify the salient facts.

  2. On 30 November 2016, Sydney Airport Corp engaged Versatile to carry out construction work (‘Airport Work’). The Airport Work included, relevantly, form and concrete work to construct various stairs and ramps at the Airport.

  3. On 24 May 2017, Versatile engaged Invictus under the Subcontract. Essentially, this required Invictus to supply and instal concrete, form work, reinforcement and labour to stairs consistently with drawings and specifications in a range of stages.

  4. In their submissions, the parties drew attention to the following provisions of the Subcontract.

  1. By clause 1.1, in consideration for Invictus’ performance as subcontractor, Versatile agreed to pay Invictus the Subcontract Sum, including all costs, loss, damage or expense arising out of or in execution of the ‘Subcontract Works’;

  2. By cl 4, progress claims were to be submitted (to the contract administrator) no later than the 25th day of each month. On issuing a payment schedule, the amount approved was to be submitted as a tax invoice. Versatile was (by cl 4.2) obliged to release payments to the subcontractor at the end of the month following the date of receipt of the tax invoice;

  3. Under the heading ‘Construction Program’, Clause 5 provides:

“5.1   If the Subcontractor fails to complete the Subcontract Works or any stage by the relevant Practical Completion Date, the Subcontractor shall pay to Versatile or allow by way of liquidated damages the relevant amount stated in the Subcontract Details for each day from the relevant Practical Completion Date until Completion is reached. The Subcontractor acknowledges and agrees that the amounts prescribed by way of liquidated damages in the Subcontract Details are a genuine pre-estimate of the loss that may be suffered by Versatile as a result of the delay.

5.2   If the Subcontractor is delayed in the execution of the Subcontract Works or any stage by events beyond the Subcontractor’s reasonable control and that have not been caused or contributed by the Subcontractor, which the Subcontractor considers to be such as to justify an extension of time for the relevant Completion Date, then the Subcontractor shall within 5 days after the Subcontractor should reasonably have become aware of the commencement of the cause of delay, give notice to Versatile in writing of its claim with all details of the relevant facts including the number of days involved.

…..

5.5   Any delay by Versatile in giving the Subcontractor access to the site will not be a breach of this Subcontract by Versatile, and will not entitle the Subcontractor to any additional payment, concession or other benefit or advantage.

5.6 Versatile may (exclusively for the benefit of Versatile), at any time, extend any Completion Date. The Subcontractor agrees that it is not entitled to costs nor will it make any claim for costs, for any reason whatsoever, in relation to extensions of time to the project.”

  1. Clause 7 provided for variations. Relevantly, cl 7.4 provides for the valuation of a decrease of omission. Clause 7.5 provided that the price of a variation shall be added to or deducted from the Subcontract sum, as the case may require;

  2. Clause 8 provided for defects:

“8.1 The Subcontractor warrants the whole of the Subcontract Works against the defective workmanship and materials and against non-compliance of equipment or complete systems against specified performance and operation requirements for the Defects Liability Period specified in item 14 of the Subcontract Details commencing on:

(a) The Date of Practical Completion of the Head Contract Works; and

(b) For those items excluded at the Date of Practical Completion of the Subcontract Works, the date of completion of each of those items as determined by Versatile; and

(c) In respect of any items repaired or rectified during the Defects Liability Period, from the date of completion of the repair or rectification.

8.2 During the Defects Liability Period the Subcontractor shall be responsible for diligently making good any defects or omissions in the Subcontract Works. Any repairs or rectification works are to be carried out at times set by Versatile and the Principal and any occupants and such costs are to be borne by the Subcontractor.

8.3 At any time prior to the expiry of the Defects Liability Period, Versatile may direct the Subcontractor to rectify a defect or omission in the Subcontract Works. The direction shall identify the defect or omission and may state a date by which the rectification works are to be completed (or if no such date is specified, within 5 days).

8.4 If during the Defects Liability Period, any defects or omissions are not rectified by the Subcontractor within the date specified in Versatile's direction (or if no such date is specified, within 5 days), the Subcontractor agrees that it shall be deemed to have relinquished any rights it may have had to rectify the defects or omissions and Versatile may, without prejudice to any other rights which Versatile may have against the Subcontractor, carry out the rectification works or have them carried out at the Subcontractor's expense.

8.5 Notwithstanding this clause, Versatile may, at any time prior to the expiry of the Defects Liability Period, notify the Subcontractor of a defect or omission in the Subcontract Works, stating that Versatile intends to accept the defect or omission. Versatile may then, in its absolute discretion, deduct or recover from the Subcontractor the rectification cost Versatile would have incurred had Versatile engaged a third party to undertake the rectification works, or the resulting diminution in value of the Subcontract Works, whichever is the greater.”

  1. Clause 9.1(a) provided that if Invictus failed to carry out a direction of Versatile’s representatives within the specified time or (if no time was specified) within a reasonable time, Versatile was entitled to issue a Default Notice (under cl 9.2) or, if the breach was not capable of remedy, Versatile was entitled, without giving a Default Notice, to terminate the subcontract (in accordance with cl 9.3);

  2. Clause 9.1(c) provided that if Invictus failed to use the materials or a standard of workmanship required by the subcontract, Versatile was entitled to issue a Default Notice (under cl 9.2) or, if the breach was not capable of remedy, Versatile was entitled, without giving a Default Notice, to terminate the subcontract (in accordance with cl 9.3);

  3. The requirements of a valid Default Notice were set out in cl 9.2, which were:

  1. state that it is a Default Notice under cl 9.2;

  2. identify the relevant failure(s) or breach(es); and

  3. state that it requires Invictus to remedy the failure(s) or breach(es) within 10 working days after receipt.

  1. Clause 9.3 provided that:

“If

…..

(b) The Subcontractor is in substantial breach of an obligation under this Subcontract which is not capable of remedy; or

(c) Within 10 Working Days of receiving a Default Notice from Versatile requiring it to remedy a breach, the Subcontractor has not remedied the breach of this Subcontract the subject of the Default Notice,

Versatile may, without prejudice to any other rights that Versatile may have under this Subcontract or at law:

(d) Terminate this Subcontract by notice in writing to the Subcontractor effective from the time stated in the notice or, if no time is stated, at the time the notice is given.”

  1. Clause 9.4 generally provided for Versatile’s entitlements after it had validly exercised a right to termination. By cl 9.4(d) in particular, it was entitled to recover from Invictus as a debt due, any costs, expenses, losses or damages incurred or suffered by it as a result of, or arising out of or in any way in connection with, such termination.

  1. From 26 May 2017, Invictus carried out a number of those stages and was remunerated for its work. By that date, Versatile had deducted (Invictus claimed unilaterally) the sum of $4,190 and a further amount ($2,127.83) as retention monies.

  2. On 11 August 2017, Versatile says that it engaged Invictus (in writing) to carry out further construction work for a fixed sum of $16,500 to supply and install concrete, form work, reinforcement and labour to stairs consistently with drawings and specifications for Stage 4 Work. The Stage 4 Work was to reach practical completion by 5 December 2017. (For the Stage 3 work, Versatile’s independent sub-contractor was to reach practical completion by 20 October 2017). On the same date, Mr Andrew Hanna, of Versatile, sent to Mr Maroun a costs breakdown of the subcontract sum of $161,240.

  3. Invictus asserts (and Versatile disputes) that from 20 October 2017 and 27 January 2018, Versatile inhibited Invictus from carrying on the Stage 4 Work. There were text messages between Shuvra Saha (Project Manager for Versatile) and Pierre Maroun (Director of Invictus) about delay in concrete works, the expected installation of steel and commencement date for formwork. A text message of 25 January 2018 indicated that there was still delay to Stage 4 of the stairs. At any rate, on 28 January 2018, Invictus commenced work for Stage 4 by measuring the relevant stairs.

  4. Invictus asserts (and Versatile again disputes) that from 28 January 2018 until 7 February 2018, Versatile again inhibited it from carrying out the Stage 4 work. Mr Maroun deposed that his team had gone on site and discerned that Versatile’s demolition team had not cut back concrete enough and later, realised the steel beam was incorrectly installed. Then it realised that machinery had been left in the area. At any rate, on 7 February 2018, Invictus installed the formwork for the Stage 4 work.

  5. Late, on the evening of 8 February 2018, Invictus poured the concrete for the Stage 4 Work into the formwork and reinforcement work it had done.

  6. On 13 February 2018, Invictus attended the Airport to remove the formwork for the Stage 4 work. It contends that the Stage 4 work was now completed.

  7. On 20 February 2018, Versatile commenced tiling the Stage 4 work through different workers.

  8. On 21 February 2018, Mr Saha, for Versatile, sent an email to Mr Maroun, for Invictus, raising non-conforming work and defects with the stairs and defective pour in relation to the Stage 4 works.

  9. Later that evening, Mr Maroun and Ms Hussein-Smith (Project Director for Versatile) conferred at the Airport with respect to the Stage 4 work. There was disagreement as to how the meeting ended. Invictus asserts, and Versatile disputes, that there was no agreement as to further resolution of the dispute until Invictus completed another job in regional New South Wales other than reconvening a meeting for 3 March 2018.

  10. On 23 February 2018, Versatile sent a notice to rectify to Invictus of the Stage 4 stairs.

  11. On 1 March 2018, Versatile sent (by email) a termination notice to Invictus.

  12. On 2 and 3 March 2018, various emails were exchanged between the parties.

  13. On 26 March 2018, Invictus issued Versatile the invoice (2324) for the sum of $17,117 for the Stage 4 Work. On 10 April 2018, Versatile issued a payment schedule which stipulated that Invictus was entitled to $0 with respect to invoice 2324.

  14. In 2018, Invictus contends that it rectified the allegedly defective work.

  15. On 5 May 2018, Versatile engaged a new subcontractor to continue with the works under the subcontract.

WHETHER INVICTUS WAS IN BREACH OF THE CONTRACT

Invictus’ case as ultimately propounded in closing argument

  1. Versatile contended that the Stage 4 works performed were defective, and/or not in conformity with the contract and/or not properly installed or constructed in a proper and workmanlike manner. But although the alleged defects or lack of conformity were alleged in multiple ways, in paragraphs 8B and 10 of Versatile’s Amended Cross-Claim, for reasons to be indicated later, this aspect of Versatile’s case ultimately reduced to the question of whether there was bowing of 50mm in the middle on the front of the Stage 4 stairs.

  2. It was this feature which Versatile contends was the subject of a direction given by Versatile to Invictus on 23 February 2018; and which, Versatile says, was not complied with in accordance with the requirement of cl 9.1(a) of the subcontract. Versatile went on to argue that given that the defect was also not capable of remedy, Versatile was entitled to terminate in accordance with cl 9.3 of the subcontract [1] , and also in common law. (As to the latter entitlement, Versatile submitted that the subcontract did not exclude a right to terminate under common law).

    1. Versatile conceded that it could not rely upon an entitlement to sue under cl 9.3(c) as there was no ‘Default Notice’ served which fulfilled the requirements of cl 9.2.

  3. The way in which Versatile ultimately put its case and the evidence that emerged, especially from the experts, meant that other questions whether Versatile had other bases to terminate, based upon other defects, or disconformities associated with the ARUP site inspection report, in relation to Stage 4 works, and any other direction to rectify such defects or disconformities, or delay, all fell away; and so did the question of conformity with Stage 1B works.

Was the bow (or ‘belly’) a defect or non-compliance with the contract?

Lay evidence

Rhonda Hussein-Smith

  1. Ms Hussein-Smith was Versatile’s project manager at the relevant time. She had been in the construction industry for 22 years.

  1. Photos of the stairs, before the formwork was removed, and photos of the stairs after the formwork was removed, were included in the exhibit to Ms Hussein-Smith’s first affidavit (Exhibit 2, formerly Exhibit RH11 to her affidavit). It was put to Ms Hussein-Smith, but she did not accept, that two of those photographs [2] must have been taken after 13 or 14 February, when the formwork was removed and, indeed, were not even stairs for Stage 4. (The same proposition was put in relation to photos 13 and 14 of Mr O’Donnell’s report, which was similarly disputed). She said that she could not see exposed reo in relation to the photos in her exhibit. Other photos said to have been taken showing work done by Invictus prior to (4.4) and after (4.5) the pouring appeared in Mr O’Donnell’s report.

    2. Court Book, pp 676-677

  2. Pouring of concrete occurred sometime between 8 and 9 February. Ms Hussein-Smith was asked whether she inspected the stairs after the pouring and she said that she had. She was also referred to a Non-Conformance Report of 9 February 2018. There was nothing in that report which set out issues about the condition of the stairs, but Ms Hussein-Smith said that the report had to do with environmental issues.

  3. Ms Hussein-Smith accepted that Versatile had not received any complaint from Sydney Airports Corporation (SAC) about bellying, or exposed reo, on the stairs or other matters referred to in the ARUP site inspection report. Nor was there any Non-Conformance Report or other written reference until an email on 21 February.

  4. As to this last matter, in her first affidavit, she deposed to a conversation with Pierre Maroun, in the presence of Robert Jreij, Versatile’s Construction Manager, late on 21 February 2018. This was after Shuvra Saha sent an email to Invictus, on that date, that asserted ‘non-conforming’ workmanship and defects. She deposed that the conversation alluded to “the 50mm bow in the stairs” which had led to incorrect heights as well as exposed reinforcement.

  5. She deposed to part of the conversation with Mr Maroun being substantially to the following effect:

Rhonda: “We cannot have bowing, reo exposed and wrong heights, you need to fix this tonight.”

Pierre: “I will make sure it is fixed by tomorrow.”

  1. Ms Hussein-Smith deposed that there was no attendance by Invictus on site after the conversation. She asserted that Invictus did not rectify the work.

  2. Ms Hussein-Smith accepted that there was no specific reference in Mr Saha’s email of 21 February 2018 to a belly of 50mm dimension being apparent. She accepted that she did not measure it personally. She accepted that when she met Mr Maroun on 21 February, it was the first time that any (verbal) request was made for Invictus to fix the steps. There was a dispute about what was otherwise said, but from Ms Hussein-Smith’s perspective, she came away expecting that Mr Maroun would come up with a methodology to fix the stairs.

Shuvra Saha

  1. Shuvra Saha was a project manager for Versatile from December 2017 to July 2019. At the time he swore his first affidavit, Mr Saha had 6 and a half years of experience in the building industry. It emerged through re-examination that he had held a Bachelor of Engineering and he claimed an understanding, derived from engineering study, of the structural requirements for concrete.

  2. Mr Saha deposed (paragraph 22) to arriving on the site on 14 February 2018, after the formwork had been removed. He observed that the front of the stairs had a big belly; or, to put the matter another way, the stairs were bowed in the middle by 50mm laterally. In evidence in chief (given with leave), he clarified that the measurements were performed by himself and the site manager. He said he saw them himself. He had previously had it measured at 50mm, but the measurement had varied at different places; ranging from 0mm-50mm-0mm.

  3. In cross-examination, his evidence of a 50mm dimension to the bowing was challenged, but he maintained his position. Mr Saha said that another person had performed the measurements, but he had crouched down to look at them. He accepted that there was nothing in his affidavit to record any complaint or report to the SAC or ARUP about it. He did not recall whether Versatile issued a Non-Conformance Report on the matter. In re-examination, Mr Saha said that there were no “Non-Conformance” reports since they related to safety or environment issues; not perceived defects.

  4. Further, he accepted that there were not photos of a ‘big belly’ attached to his affidavit. But contrary to what he had said in cross-examination, he indicated in re-examination that there were photographs [3] that depicted the belly, which, could be alternatively described as a protuberance, caused from the weight of the concrete pushing on the riser of the stairs, pushing against the formwork [4] .

    3. These were in Ex 2, (CB 674,676)

    4. T 125-126

  5. He was referred to the text messages he and Mr Maroun exchanged (covering the period from November 2017 and 1 February 2018). There was no text message in which he referred to the issue. Despite this absence of evidence, he maintained that the big belly was there.

  6. He was asked why, with the belly being present, the tiling had commenced? Mr Saha explained that the tilers had tried to adjust the tiling but, in Mr Saha’s view, it became apparent that it was not feasible to do so.

  7. On 21 February 2018 (at 8:42am) Mr Saha sent an email to Mr Maroun. It was expressed in the following terms:

“Hi Pierre,

The tiling commenced on the stairs last night.

To say it very simply, we have a big problem. Three tilers spent most of the night smashing the edges that still has chunks of concrete and trying to get these stairs cleaned. There was also exposed reo which didn’t help. By the end of the night, only two treads were laid.

Cleaning aside, these stairs have a massive belly in the centre, which has now forced us to pack out every riser to ensure they are laid straight and has now also pushed out every tread making them larger. If you see the attached photos, risers are the asked nearly 50mm.

This means the stairs will take almost a week to lay, when normally it can be done in 3 days.

The tilers are rightfully going to charge me for the extra time and materials. This will unfortunately need to be reduced from your next claim.

We cannot have the same things occurring in ITB stairs. These stairs are taller and wider with more scope for error. Please review the method you are using to form up the stairs and ensure the treads are poured straight.”

  1. Mr Saha accepted that between 9 and 21 February 2018, there was no document or record of any conversation in which Versatile had reported to ARUP, or the SAC, about any deformity in the formwork, or in the stairs, or the appearance of the concrete. Nor was there any ‘Non-Conformity Report’ that touched upon those matters.

  2. In his email of 21 February 2018, Mr Saha complained about the tiling behind hindered. It was put to him that the circumstance that tiling had commenced suggested that there was no issue with the quality of the stairs. He disagreed with that. He accepted that the email was the first time in which a reference was made to the reo being exposed. He accepted that Versatile’s collective state of mind, at this point, was that the tilers would fix the problems and there would be a ‘back charge’ to Invictus and that the point of his email was to tell Invictus to watch out for its methodology. There was no thought of termination at that point.

Pierre Maroun

  1. Pierre Maroun is the director of Invictus and swore two affidavits (8 October 2021 and 24 August 2022).

  2. It was in his second affidavit that Mr Maroun responded to the evidence of Ms Hussein-Smith and Mr Shuvra, on the presently relevant subject of defects: the bowing on the stairs.

  3. In relation to the Stage 4 Works, he deposed (paragraph 28) that his first contact with Shuvra was on 21 February 2018, after the pouring of the concrete. He denied that there was a 50mm bowing and said that he had measured them personally to be 20mm. He regarded the photos annexed to Mr Saha’s email of 21 February as supportive of that measurement.

  4. Under cross-examination, Mr Maroun was referred to Mr Saha’s email of 21 February 2018 (Exhibit 2, formerly Exhibit RH12), which relevantly identified a “massive belly in the centre” of the stairs. Mr Maroun accepted that this was not a ‘good thing’, but he did not appear to accept the truth of the assertion that there was a belly; notwithstanding his evidence that he was the supervisor. He accepted that Mr Saha’s reference to this was genuine.

  5. In his first affidavit, Mr Maroun deposed to attending the airport to meet with Ms Hussein-Smith, Robert Jreij and an unidentified tiler (for Versatile) after receiving Mr Saha’s email of 21 February 2018 and having a conversation substantially to the following effect:

“Me: "The tiling has already started. There's not much rectification

for me to do. What would be the simplest solution would be to

trim back the stairs. This is a twenty-minute exercise.

Rhonda: "No, I do not want to do that because of the reo exposed."

Me: "Tiler man, have you seen any reo?"

Tiler: "No, none at all."

Robert: "I am thinking maybe it can be a simple fix. Pack out the stairs

with cement to assist tiler?"

Me: "I do not think this will bond on stairs and will cause more long

term implications. Either way I will be away until 3 March 2018

on a job in regional NSW but I'll see what I can arrange.'

Rhonda: "Okay.”

  1. In his second affidavit, (at paragraph 19) he denied Ms Hussein-Smith’s account of the conversation with him on 21 February 2018. In particular, he maintained that he had informed her that he had another job ‘rurally’ to attend to; and denied that he said he would fix issues tomorrow. He elaborated that whilst in rural NSW, on another job, he was unable to receive calls from Versatile. He considered the timeframe to be unreasonable and argued that the circumstance that Versatile’s tiler had started tiling the stairs gave Invictus limited avenues to rectify issues. He further deposed that whilst he was away, he did not have reception to make calls or respond to emails.

  2. He also deposed (at paragraph 18(c)) that when he inspected the site on 21 February 2018 the belly was no more than 20mm which, he believed could easily have been fixed had he been informed and given the opportunity to fix the stairs before the tilers commenced the tiling of the stairs.

Expert opinion evidence

  1. The experts were Mr Anthony Grieve (Exhibit 3), Mr Patrick O’Donnell (Exhibit 4) and Mr Gordon Xue (Exhibit A).

  2. Mr Grieve is a consultant, civil engineer and project manager with a Bachelor of Civil Engineering and a Master of Project Management (and a Bachelor of Laws). Mr Xue has a Bachelor of Construction Management and Properties, with a Master of Project Management. He is also a registered quantity surveyor. Mr O’Donnell is a quantity surveyor.

  3. Inexplicably, no direction was made for the experts to confer to produce a joint report prior to the commencement of the hearing. Legal practitioners who act for parties to building disputes about defective works should seek a direction from the Court for experts to confer, if not for the appointment of a single expert. That is consistent with their obligation under s 56(3) of the Civil Procedure Act 2005 (NSW) given the general tendency for joint expert reports to narrow issues to be determined in a hearing. Not even a Scott Schedule was generated (per r 15.2 of the Uniform Civil Procedure Rules).

  4. At the conclusion of day 2 of the hearing estimated to run for 3 days, the experts did confer and produce a joint report. However, unsurprisingly, given the haste in which the arrangement was made, the experts’ deliberations bit into the time allocated for hearing, thereby causing some delay and disruption on day 3 of the hearing to enable them to complete their conference, reduce their conclusions to writing and enable the legal practitioners adequate time to consider their conclusions. It goes without saying that all of this could have been avoided had the legal practitioners turned their mind to the idea of a joint expert report well before the hearing at the point where the proceeding was being case managed by the Judicial Registrar. Fortunately, the conference did considerably narrow the issues regarding the extent of any defects, suggested rectifications (and costs). The point is that the lateness of a procedure which should have been attended to a reasonable period in advance of the hearing meant that the case ran for the full length of the estimated days allocated when it could have ended much sooner than it did, thereby freeing up the Court to attend to other litigation.

  5. The effect of the experts’ (joint) evidence was, as foreshadowed earlier in these reasons, that the only matter Versatile pressed to justify its purported termination, was the bowing that existed in the stairs on the Stage 4 works and the failure to comply with a direction which, it asserts, was given to Invictus to fix it. As the oral argument indicated, after close of the evidence, no attention was given to the other matters referred to in paragraphs 8A-8B and 10 of the Amended Cross-Claim.

Expert’s evidence – the joint report (Exhibit 5)

  1. After the conference between Messrs Grieve, Xue and O’Donnell, they (relevantly) partly agreed, and partly disagreed, about the belly in the stairs for Stage 4.

  2. It was the issue of the belly in the stairs which dominated the process of the experts giving evidence jointly in Court.

  3. The experts agreed that there was a bow in the stairs that was evident. They disagreed that the extent of the bow could be measured and, in Mr Xue’s case, he appeared to disagree as to which stairs the bowing related to. They also disagreed as to the nature of the rectification.

  4. The position, as emerged in the joint report, and as elaborated, or clarified by the experts when they gave their evidence concurrently, was as follows.

Clarifying that there was a bow (‘belly’)

  1. The critical photograph was photograph 4 in Mr Xue’s report (Exhibit A [5] ). Mr Grieve deployed a digital version of the photograph and discerned a straight chalk line (used by a tiler to control the setting out of the stairs) which reduced in distance. That indicated a bow, or ‘belly’. Mr Xue did not dispute the existence of the belly. His main point was that he could not discern a 50mm measurement of it.

Attempt to measure the extent of the bowing

5. This was CB 179

  1. Mr Grieve ran the straight edge of a piece of paper along a different photograph (featured in Exhibit 2 [6] ) along a stair tread. He estimated that the bowing was “in the order of” 50mm. This was based on geometry of the straight line: the appearance of a curve in the straight line, as it curved towards a straight line. He was challenged on this methodology. Mr Grieve accepted that although it may not have been a methodology which appeared in any textbook, he stated that it was a method that was taught. He also stated that although he could not discount potential distortions, with that qualification in mind, and to guard against the possibility of a distortion, he had selected a stair facing downwards, rather than sideways.

    6. This was CB 177 (‘photo 2’), 676, 758 (photo ‘15’)

  2. Mr Xue strongly disagreed. One could not measure straight lines on the basis of photographs. There were a range of factors affecting the measurement: the angle the photo was taken, the reproduction of the photo because of issues with the printer. He thought that it could not have exceeded 50mm. That was because of his reading of the design documentation. With reference to the location of the chalk line on photo 4 (CB 179) and comparing it to the installation position of the tray tile, 20 or 30mm from the chalk line, the bow could not have been 50mm. If the belly was 50mm or more, the middle of the stair would be aligned with the front of the tray tile and at the two ends of the stair, the chalk line would have reduced to nil. That was not something depicted in photo 4 (or 3).

  3. Mr O’Donnell’s position was somewhat ‘half-way’: whilst you could use a piece of paper and see deviations, you could not measure it and say that it was 50mm or 30mm from that particular method.

  4. Mr Grieve and Mr Xue disagreed about the relevance of design documentation and/or Australian standards in determining whether the bowing was a defect. The former said it was not normal, and unnecessary to refer to either source: the defect was an obvious non-compliance. Mr Xue maintained that design documentation and Australian Standards should be referenced when determining the extent of the defect.

  5. On the premise that there was a bow with a dimension of 50mm, Mr Grieve said that this would be in breach of several tolerances for the straightness of surfaces in the Concrete Code; and would also not comply with the stair standards of the National Construction Code.

  6. Mr Xue argued, with reference to S3600 of the Concrete Code that there was tolerance, but there was no reference within the National Construction Code. The latter dealt with the rise in the run of the stairs, not the straightness of a stair.

Doubt about the stairs?

  1. There was another dispute as to identification. Mr Xue believed that photograph 2 in his report [7] was not one of stage 4 stairs. Mr Grieve thought that the (black) tiles evident in that photograph had been removed, but thereafter reinstalled, by the time the photograph had been taken. This was explicable through the process of connecting the stair to the slab below. One could not have a tile in the middle of the concrete. There had to be concrete and reinforcements. He surmised that during the process the tile was moved or probably protected by ply. Mr O’Donnell also thought that the photo was taken at different stages.

    7. CB 177

  2. Mr Xue disagreed. He said that the photo showed the tile butting against the stair and that this suggested that the tiles were installed after the formwork had been stripped. By comparison, photo 1 on the same page had indicated the formwork being in place; not showing any tile. Photo 2 showed the tiles above the stairs, after formwork had been stripped. He also referred to photo 4 of his report [8] , which showed no tiles to be installed to the bottom stair: the circumstance that the worker was not standing on any tile was consistent with the removal of the tiles rather than the protection of the tiles, as Mr Grieve had suggested. Mr Xue also emphasised the whiteness of the tiles.

    8. CB 179

  3. Mr Xue believed that these were photographs taken of the Stage 1 works. To him, this was indicated by the tiling at the bottom landing and the rounding of the stair nosing. Mr Xue contrasted photo 2 (and photo 4) of his report with what appeared in photograph 17 in Mr Grieve’s report (Exhibit 3). The former indicated black tiling; the latter indicated a white tile. He reasoned that photograph 2 could not have been installed with the timberwork. He later reasoned through a comparison between photograph 2 (CB 177) and photograph 17 to his report (CB 271). The black coloured tile in the former could not have been installed during the concrete pour as the formwork would have been in place and in the way. It would have been installed after completion. By contrast the latter showed a white (terrazzo) patterned tyle. The tile seen in photo 2 (CB 179) was of the same colour as the tile shown in photo 17 (CB 271).

  4. In response to Mr Xue’s view, both Mr Grieve and Mr O’Donnell considered that the difference in colour was more likely to be explained by the use of protective covering over the tiling; and not tiling; although both experts initially disagreed about the form of the protection: Mr O’Donnell thought it might be a sheet (although he later changed that to a view that it might be plywood or hardboard); and Mr Grieve thought it was something else. Counsel for Invictus challenged both Mr Grieve and Mr O’Donnell about their suggestion of any covering being used, for protective purposes, in photo 4 of Mr Xue’s report [9] . Mr O’Donnell also criticised the logic of Mr Xue’s comparison between the white coloured tiles in photos 2 and 17, given that he had proceeded on the assumption that all of the stairs for stage 14, as photographed, were black. He had not turned his mind to the colour of the tiles at the bottom of the stairs.

Rectification

9. CB 179

  1. On the question of rectification, during the process of concurrent evidence, Mr Xue had altered his position from that which had been expressed in his individual written report. Because of the packing out of the stair that had been performed, it was not possible to cut back the bow with a saw. To do so would have a detrimental effect on the cover of reinforcement for the stairs. The packing out that had occurred was demonstrated in photograph 5 of Mr Xue’s report [10] . It involved building up, in a structural way, the front of the treat, to regularise and straighten the bow.

    10. This was CB 180

  2. But under questioning from Invictus’ Counsel, Mr Xue said that on the assumption that the bow was less than 50mm, the cutting back method would have been appropriate. If it was less than 50mm, the reinforcement would not have been exposed. But with leave being granted to Versatile’s Senior Counsel, he acknowledged that he was not qualified to opine on whether reinforcement cover could be maintained without compromising the reinforcement structure.

Submissions on Defects and rectification works

Versatile’s submissions

  1. Versatile relied on the oral argument of its Senior Counsel. It submitted that the bowing in the stairs for the stage 4 works was either defective or was otherwise not in conformity with the requirements of the contract (or installed or constructed in a proper and workmanlike manner). Whether or not any particular Australian standard was identified as being breached, the contract documents required straightness. The Court should also accept the evidence of Mr Saha, and Ms Hussein-Smith.

  2. The experts also agreed that there was bowing; albeit that there was dispute about the measurement of it and some dispute about appropriate rectification. But no one suggested that nothing needed to be done to repair the bowing. To the extent that there was dispute on these matters, between the experts, the Court would prefer Mr Grieve’s evidence.

  3. In light of the experts’ conclusions, Mr Corsaro SC did not submit that there were any other non-compliances or defects which justified its termination of the subcontract.

Invictus’ submissions

  1. Invictus’ submissions were partly in writing (MFI 1) and partly comprised in its Counsel’s oral argument. Mr Tiliakos’ written submissions were, however, prepared before the experts’ joint conference and concurrent evidence; which, as indicated, considerably narrowed to a focus on the bowing. Given, also the position of Versatile not to make submissions as to the other defects or non-compliances identified in the Cross-Claim, it is unnecessary to consider Mr Tiliakos’ points, in his written submissions, about those other matters.

  2. As to the complaint about a big 50mm belly being found, whilst the experts agreed that there was bowing, there was a contest about the extent of the bowing. If, as Mr Xue appeared to suggest, it was less than what would be permitted, it would not amount to a defect. But alternatively, if it was, the defect, or non-conformity (with the contract or proper workmanship standards), was not sufficiently ‘substantial’ to justify exercise of the right to termination, either under the express right in cl 9 or generally, in common law.

  3. Mr Tiliakos submitted that the Court should not accept Mr Grieve’s estimate but should prefer Mr Xue’s evidence. Mr Grieve’s methodology was not scientific or capable of being supported in any objective fashion, such as an Australian Standard or industry standard. Further, he emphasised that Mr Saha had not measured the extent of the bowing; and nor had Ms Hussein-Smith. Mr Saha’s reference to a measurement of 50mm in his email of 21 February 2018 was not directed to the extent of any bowing.

  4. It followed that Versatile was not entitled to terminate the subcontract on the basis of cl 9.1(c) either because Invictus had not performed defective work or, alternatively, such defective work was rectified within a reasonable time of being notified of it by Versatile.

Consideration

Credit of lay witnesses

  1. I formed the impression that Mr Maroun was wedded to beliefs which to some extent did not align with the facts and was self-conscious of the effect of his evidence on Invictus’ position. This was demonstrated partly by evidence about matters which, by reason of the later expert report, became otherwise immaterial. He refused to accept, what I regarded as patently obvious, that there was a dip in the concrete ramp for the Stage 1B works. Some of the answers he gave when confronted with the Non-Conformance reports were implausible: if accepted, they suggested that he had turned a blind eye to problems in the belief that someone else (such a SAC) would raise any concerns. I regarded his evidence as being inconsistent on one prominent occasion where he appeared to accept virtually all of Ms Hussein-Smith’s criticisms of the Stage 4 work only to turn around and say that he had only accepted that she had made criticisms; denying that he should be taken to have accepted those criticisms. In that instance, he was conscious that the cross-examiner was pointing out the inconsistency between his admissions of the problems in his evidence and his denials in his second affidavit. These matters strained credulity and I am cautious about accepting his evidence unless that is corroborated, consistent with objective facts and the general probabilities.

  2. I formed a favourable impression of Mr Saha. Subject to a couple of exceptions, in which he strained to provide explanations, his answers were crisp even if they were sometimes not favourable to Versatile’s position (whose employ he had left prior to the hearing). He did not seek to embellish.

  3. Ms Hussein-Smith’s position was curious. She appeared confident at times, but struck me as not quite having the grasp of detailed recollection consistent with that presentation, and her position at the time; which indicated a want of preparation to give evidence. I make allowance for the passage of time since the subject events, but she was in no different position to the other lay witnesses in that respect. Senior Counsel complained at one point that she appeared to go along with propositions raised of her during cross-examination, and, as I understood him to submit, there was a difference between making an admission and agreeing to accept an assumption. I felt that Ms Hussein-Smith was more than capable of drawing the distinction where it applied. But it struck me as surprising that she was only willing to accept matters as assumptions rather than confirming the veracity of them.

  4. All of the lay witnesses were giving evidence about events occurring well over 4 years ago. With one qualification – what was said on 21 February 2019 - not much turned upon disputed versions of oral conversations; given the substantial documentary base of evidence. It is that base which supplies the surest foundation for my findings; along with my assessment of the logic and inherent probabilities following the events, or circumstances, as proven by those documents.

Views on the experts

  1. The experts were all well qualified, but on what turned out to be a critical question – the extent of the bowing that all experts agreed was apparent – I was inclined to prefer the view of Mr Grieve to Mr Xue. In concluding so, I accept that there was force in Mr Xue’s view about a lack of what might be thought to be objective, and perhaps scientific rigour, in the measurement that Mr Grieve performed, with reference to standards. Nevertheless, I accept Mr Grieve’s evidence, borne of his immense experience, in terms of longevity and his expertise and training as an engineer about the extent of the bowing and what was appropriate for its rectification. I was not convinced that, given the risks of damage identified by Mr Xue’s evidence, there was any better method. Coincidentally, Mr Grieve’s evidence coincided with the measurement that Mr Saha and others in the Versatile team had performed.

Findings

  1. I find that there was a bow in the stair in stage 4. That was accepted by all the experts and, if perhaps grudgingly, also Mr Maroun.

  2. I also find, on the probabilities, that it was in the order of 50mm. In this respect, I rely heavily upon the evidence of Mr Saha, who, I thought was unshaken in his evidence of having been privy to seeing that measurement. I accept that, from his study as an engineer, Mr Saha was capable of appreciating the measurement performed by the person at the site. I prefer his evidence to Mr Maroun.

  3. That aspect of the dimension was also the subject of some evidence from Ms Hussein-Smith. She obviously thought that it was of a dimension of 50mm, given her reference to it at paragraph 39 of her affidavit, and I infer that Mr Saha was the source of that information. I accept further that this was not a case of mistaken identification of the stairs in which the bow was observed: there was no lack of conviction in Mr Saha (or Ms Hussein-Smith) as to the site where the bowing was seen.

  4. I also place some weight upon the view of Mr Grieve. Whether or not the somewhat rough and ready measure he had deployed had featured in textbooks, I accept his evidence that it conformed with what he had been taught. I prefer his view to Mr Xue. Mr Xue appeared to alter his original view that he could not be satisfied that there was any bowing at all. Both Mr Grieve and, for that matter (although to a far lesser extent), Mr Saha, had engineering knowledge that qualified them to opine upon the dimensions. In forming these views, I also take into account Mr O’Donnell’s opinion about Mr Grieve’s methodology. I took Mr O’Donnell to be really saying that although Mr Grieve’s methodology may provide guidance, it could not be conclusive. I accept that reservation.

  5. I further find that the existence and extent of the bowing was defective. To my mind, it did not matter whether proof was furnished about a particular Australian Standard or provision of the Concrete Code, or that there was a relative absence of documented complaints to third parties. I accept Mr Saha’s evidence that it was conspicuous, so much so that it featured in his email of 21February, and carried practical risk to the structural integrity of the stair unless rectified. The extent of the bowing prompted Ms Hussein-Smith to discuss it with Mr Maroun at the meeting after the 21 February 2018 email had been sent to Mr Maroun. That discussion relevantly included how the problem might be rectified. None of the experts suggested that it could pass without rectification. I also accept Versatile’s’ submission that it was not compliant with the requirement of the subcontract.

  6. As to the rectification of this defect, I prefer Mr Grieve’s view that the appropriate rectification was the packing out of the stair, which he consistently espoused. Mr Xue appeared to fluctuate in his view as to whether an alternative method might have been to cut back the bowing with a saw. In view of the structural risks to the integrity of the stairs, this is an instance whereby Mr Grieve’s engineering training inclines to place greater weight upon his opinion.

Was there a failure to comply with directions?

The pleading of the alleged breach

  1. In its Amended Cross-Claim, Versatile alleged that Invictus failed to comply with directions as follows:

  1. a direction that it follow the recommendations of the ARUP site inspection report, on 8 February 2018 (the ‘8 February 2018 direction’);

  2. a direction that it follow the recommendations of the ARUP site inspection report, on 21 February 2018 (the ‘21 February 2018 direction’);

  3. a direction to rectify the Stage 4 works and delay on 23 February 2018 (the ‘23 February 2018 direction’).

  1. However, in the circumstances that I explained when identifying Versatile’s case, as finally argued, all that Versatile ultimately relied upon, to justify its decision to terminate, was the 23 February 2018 direction, to the extent that it concerned the bowing. That said, Versatile submitted that the 21 February 2018 direction was a relevant contextual circumstance.

Lay evidence

Ms Hussein-Smith’s evidence

  1. On 23 February 2018 (at 4:27am), Ms Hussein-Smith sent an email to Mr Maroun. It was as follows:

“Pierre

It was discussed on Wednesday this methodology to be undertaken for the rectification of the stairs and we even marked out the stairs for you, this was discussed with Robbie and myself and you even advised of what product you would use.

You cannot cut the stairs back nor will we accept that methodology – NO EXPOSED RIO IS ACCEPTABLE.

We are delayed it should have been an easy process and the fact that there was a no show is not good enough.

You have till tonight to fix these stairs if there not done it will be fixed on your behalf and unfortunately payments will be held.

Please confirm that these works will be completed today…

Once again we have had to cancel our works ..”

  1. Ms Hussein-Smith was cross-examined on this email. She agreed it was the first time that there was written request to fix issues associated with bowing, exposed reo and heights. Asked whether she considered that it was reasonable to expect the issues to be fixed within a night, Ms Hussein-Smith said she believed that had to be seen in the context of issues raised in Mr Saha’s email of 21 February.

  2. After sending her email to Mr Maroun on 23 February 2018, she said she tried to contact him, but there was no answer. She accepted that there was no phone record to substantiate that assertion. She deposed in her affidavit to receiving no reply by, or on behalf of, Invictus, to this email, or Mr Saha’s email of 21 February.

  3. In her cross-examination, in the course of being referred to Mr Saha’s email of 21 February 2018, it was put to Ms Hussein-Smith that it was no big issue even if there was a problem with the stairs. Ms Hussein-Smith maintained that it was.

  4. Ms Hussein-Smith deposed that by about 23 February, she was concerned that Invictus would not return to the project. She believed that Mr Maroun was not following directions and meeting deadlines. She explained that as it was not possible to hand over the stairs for Stage 4, Versatile needed to erect hoarding around the stairs; and that this had impeded Border Force personnel.

  5. She decided to instruct Mr Saha to inform Invictus that Versatile was terminating the subcontract. She indicated in her evidence at the hearing that she had conferred with Mr Saha about the content of the termination notice.

The content of the termination notice was as follows:

“Hi Pierre,

Following on from Rhonda's email below. No works were done by Invictus Developments Pty Ltd for the rectification of the stairs within the timeframe stated below.

This has resulted in significant project delays and cost to Versatile Fitout Pty Ltd.

Therefore, under the following clauses in Subcontract Agreement No# S000498;

1. 3.5 (b)(d) - "Determination of payments". We have determined due to the delays caused to other trades and our programme in general, no further payments will be made to Invictus Developments Pty Ltd from Versatile Fitout Pty Ltd

2. 5.1 - "Failure to meet the construction programme". In this case, completing the concreting of the stairs to a suitable standard for tiling to continue. This has caused significant delays.

3.9.1 (c) - "Fails to use the materials or standard of workmanship required by this subcontract". In this case poor workmanship.

Versatile Fitout Pty Ltd has, on the aforementioned grounds of the subcontract, determined the subcontract is hereby terminated.

Works completed are still subject to defects liability (12 months from the date of project practical completion) and warranty periods (12 months from the end of defects liability period).

Please consider this your termination notification in writing.”

  1. She accepted that the reasons for termination, as set out in this email were the only reasons for the decision to terminate. This email stated that following Ms Hussein-Smith’s email (23 February) no works were done by Invictus for the rectification of the stairs within the timeframe stated.

Mr Saha’s evidence

  1. Mr Saha said that he was copied into Ms Hussein-Smith’s email to Mr Maroun on 23 February 2018, but confirmed he was not at the meeting that she had referred to, which had occurred on 21 February. He acknowledged that this was the first time Versatile had made written requirement for Invictus to fix the stairs. He agreed that about 5 days were given to Invictus to fix the issues. He also agreed that SAC had not been notified of the email (so far as he was aware).

  2. Mr Saha had deposed in his affidavit (paragraph 30) that after he had sent his email on 21 February, and Mr Maroun’s omission to return to the site or contact him again after sending that email, he formed the view that Versatile could not trust Invictus as a subcontractor to comply with the subcontract, and deposed to recommending to Ms Hussein-Smith that the subcontract be terminated. He further deposed (paragraph 31) to the latter instructing him to terminate by email.

  3. After sending the termination notice, Mr Saha and Mr Maroun exchanged correspondence with each other on 2 and 3 March 2018. In the first of the emails, Mr Maroun’s email of 2 March 2018 (at 8:23am) remonstrated with the act of termination and finished off his message by asking Mr Saha why the stairs had not been checked before the tiling had commenced. In his email (6:16pm), Mr Saha referred to conversations about what could be done to fix the issues after the ‘rectification notice’. He alluded to Mr Maroun having proposed a solution involving ‘cut(ting) back where it was bowed’ but for Versatile, that was “not an option” as it would have led to exposed reo. He indicated that Versatile could not wait for an “unsolicited” time for Invictus to return to rectify its “poor workmanship”, generally characterised the results on the stairs as being “poor” and indicated that these matters justified the decision to terminate the subcontract. In Mr Maroun’s email (6:34pm) in return, Mr Maroun complained. The gist of his message was that he should have been informed of rectification work that needed to be done.

Mr Maroun’s evidence

  1. Mr Maroun deposed in his affidavit to receiving Ms Hussein-Smith’s email of 23 February, but (as he had explained at paragraph 28) he was away on another job in regional NSW and deposed to not having access to his emails.

  2. Mr Maroun accepted that he understood that at the time Invictus was requested to perform the work for Stage 4, Versatile was already behind the stage schedule and wanted Invictus to perform that stage as quickly as possible. He also accepted that completion of the stairway for Stage 4 was important itself to enable that Stage to be completed and therefore he treated it as being very important. He was conscious that Versatile was pressing him to complete the job.

  3. On the implications of the defects in the construction of the stairs, Mr Maroun accepted that the stairs were important. He said he was unsure if the need to rectify any defects would result in delay.

  4. Mr Maroun was referred to the email he received from Mr Saha on 21 February 2018 in which complaint was made about defective work regarding the stairs. Following his receipt of the email, Mr Maroun said that he spoke to Ms Hussein-Smith. He accepted that she had told him that she was unhappy with the quality of the work, but doubted whether she had asserted that the work had not complied with the design or code. He confirmed that she had raised concern about the 50mm bow in the stairs and that this could lead to incorrect heights and reinforcement. He also confirmed that she had told him to “fix this” tonight.

  5. Mr Maroun said that he understood that he had received an instruction to assist the tiler (but not the stairs), but recalled explaining or indicating to Ms Hussein-Smith that he would try to ‘assist’ Versatile. He believed that any issues that there were with the stairs could have been fixed by him and he said he did not agree with Ms Hussein-Smith’s proposed method. He complained that Versatile did not give him the opportunity. Whilst he accepted that she issued an instruction under the contract he believed he had 10 days to implement it.

INVICTUS’ CLAIM UNDER THE SECURITY OF PAYMENT LEGISLATION

25. N Dennys and R Clay (eds) Hudson’s Building and Engineering Contracts (14th ed, Sweet and Maxwell) (2020), [s – 069] p g83

The parties’ submissions

  1. Invictus submitted that its claim in debt may be viewed as being sourced in contract, by reason of the provisions of the SOP Act. In particular, by ss 8 and 9 of the SOP Act, Invictus was entitled to receive a progress payment, calculated in accordance with the contract for the work it carried out under the subcontract. Thereafter, Invictus served a payment claim on 26 March 2018, being the next calendar month after it had completed the Stage 4 work, which had occurred by at least 13 February 2018. Although Versatile purported to serve a payment schedule on 10 April 2018, that was invalid, in two respects. First, it did not indicate why the scheduled sum was less and it did not indicate reasons for withholding payment. Secondly, it was not provided within the 10-day period from service of the invoice. In the absence of a valid payment schedule, Versatile became liable to pay the payment claim on the due date. That date has long passed. By s 15(2)(i) of the SOP Act, Invictus is entitled to recover the debt in Court and, further, s 15(4)(b)(ii) precludes Versatile raising a cross-claim or defence in relation to matters arising under the subcontract.

  2. Versatile submitted that the statutory regime dealt with the making of interim payments, whilst preserving the rights of parties to a construction contract in a final determination by the Court. It was antithetical to the statutory regime for the Court to make what is in substance an interim order when, at the same time, the Court is pressed to make a final determination of the parties’ rights.

Consideration

  1. In circumstances where I have determined that Invictus had a good claim for payment of its unpaid invoice, it was not obvious to me what the further utility was of a claim under the SOP Act where the subject invoice was treated as a ‘payment claim’ under the Act. Even if the Court was to make an award to reflect the statutory debt, under s 32 of the SOP Act, that would not affect Versatile’s rights under the subcontract or in law. In a de-facto sense, at least, under the statute only an interim order will be made[26] , before the parties rights are finally determined, and if appropriately adjusted, at a final hearing.

    26. See Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1 at [39] – [40].

  2. If I am wrong in finding such implication, the only difference that would be made would be a sort of provisional or contingent finding of the action for the statutory debt to be then adjusted to meet allowance being made for Versatile’s Cross-Claim.

INVICTUS’ CLAIM IN RESTITUTION

Parties’ submissions

  1. In the alternative to its claim in contract, Invictus relies on a quantum meruit for work performed (and/or a quantum valebat). It submitted that it did the Stage 4 work, Versatile received the benefit of it and has been unjustly enriched at Invictus’ expense.

  2. Versatile submitted that there was no basis for such a claim. At best, the invoice itself evidenced only the cost of the work. It did not prove the value of the work rendered. That had to be determined from the perspective of the contracting party who had validly terminated. Versatile, of course, submitted that it had validly terminated, but if that was wrong, it could not be found that Invictus had terminated the subcontract, as it had not accepted any repudiation found against Versatile.

Consideration

  1. There is an inadequacy in the evidence to establish what the proper value was of the work performed, in a way that might indicate that Invictus was entitled to anything more than its unpaid invoice. To repeat, Invoice 2324 reflected the price of the Stage 4 work, with additional expense. Even if Invictus did accept Versatile’s repudiation and terminated the contract, and even if restitutionary relief was available as a concurrent remedy for any award of damages for work performed prior to termination, the quantum of any available restitutionary relief would not exceed the amount recoverable for the work performed for stage 4 that was charged for in accordance with the contract price[27] .

    27. Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560 at [172]-[176]

summary & orders

  1. To summarise my findings, they are:

  1. Invictus did not comply with a valid direction made under the contract;

  2. Versatile was not, however entitled to terminate the subcontract in accordance with the terms of the subcontract, nor was entitled to terminate the subcontract for repudiation by Invictus;

  3. Versatile’s termination was unlawful and amounted to a repudiation of the subcontract;

  4. Invictus did elect to terminate the subcontract, but did not establish that substantial loss or damage was caused to it following Versatile’s repudiation, so therefore does not succeed on its claim for substantial damages;

  5. Invictus succeeds on its claim in debt, arising under the contract, for the unpaid invoice, for the sum of $17,116;

  6. Versatile’s rectification costs for Invictus’ non-compliance with the direction concerning the bowing may offset its liability on the unpaid invoice;

  7. It is unnecessary to determine Invictus’ claims in restitution or under the Security for Payment legislation, as such claims, as quantified, do not confer upon Invictus’ rights to any additional monetary claims beyond its entitlement under the invoice giving rise to Invictus’ successful action on the debt sourced in contract.

  1. The parties are to prepare short minutes of order to reflect these reasons; including consideration of the issue of costs. I direct them to confer within 7 days and, if agreement can be reached, the plaintiff can supply my Associate with short minutes, which can be ordered in chambers.

  2. If the parties disagree on orders to dispose of the proceeding, my Associate should be notified and directions will be made for the parties to make further short submissions with a view of final orders being made on the papers.

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Endnotes

Decision last updated: 17 October 2022

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Cases Citing This Decision

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Invictus Development Group Pty Ltd v Versatile Fitout Pty Ltd (No.2) [2022] NSWDC 521