Kane Constructions Pty Ltd v Sopov
[2005] VSC 237
•30 June 2005
IN THE SUPREME COURT OF VICTORIA Not Restricted AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
BUILDING CASES LIST
No. 6897 of 2001
KANE CONSTRUCTIONS PTY LTD
(ACN 007 354 396)Plaintiff v COLE SOPOV AND ORS Defendants ---
JUDGE:
WARREN, C.J.
WHERE HELD:
Melbourne
DATE OF HEARING:
21-22, 25, 27-29 August 2003; 2- 3, 9-12, 16-19, 23-26, 30 September 2003; 1-2, 7-10, 14-17, 20-21, 29-31 October 2003
DATE OF JUDGMENT:
30 June 2005
CASE MAY BE CITED AS:
Kane Constructions v Sopov
MEDIUM NEUTRAL CITATION:
[2005] VSC 237
1st revision 26 July 2005
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CONTRACT — Building contract — Construction — Progress certificates — Claims for payment — Evidence and information in support of progress claims — Whether material supporting claims condition precedent to issue of a payment certificate — Validity of late progress claims — Validity of late progress certificates — Assessment procedures — Estoppel — Delay and extension of time claims — Liquidated damages — Right of principal to deduct liquidated damages from progress payments — Role of the superintendent — Undue influence — Suspension of works under the contract — Right of principal to access retention moneys under the contract — Substantial breach — Repudiation — Termination — Alternative rights and remedies available to aggrieved party as a result of repudiation — Contractual damages — Quantum meruit — Whether contractual provision may exclude claim for quantum meruit following termination — Clause 44.10 of AS 2124-1992 — Whether ss.16 and 33 of the Domestic Building Contracts Act 1995 (Vic) apply — Whether s.51A of the Trade Practices Act 1974 (Cth) applies
RESTITUTION — Contract — Unjust enrichment — Claim for variations
DEFENCE AND COUNTERCLAIM — Costs to complete — Claim for defective work — Deduction variations — Whether plaintiff breached contract by serving notice to show cause and suspending works — Costs of completion certificate issued by the superintendent — Extent of completion at the time the plaintiff left building site
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APPEARANCES:
Counsel Solicitors For the Plaintiff Mr G.J. Digby Q.C. with
Mr M.J. StirlingDeacons For the Defendants Mr E.N. Magee Q.C. with
Mr K.C. OliverPilley & Associates TABLE OF CONTENTS
INTRODUCTION/OVERVIEW...................................................................................................... 2
PLEADINGS....................................................................................................................................... 3
TERMS OF CONTRACT (AND DOCUMENTS INCLUDED)................................................ 3
SUMMARIES OF WITNESSES’ EVIDENCE............................................................................... 3
PLAINTIFF’S EVIDENCE................................................................................................................ 3
(1) TIVENDALE....................................................................................................................... 3
(2) FORSTER............................................................................................................................ 3
(3) LUCAS................................................................................................................................. 3
(4) ISAACSON......................................................................................................................... 3
(5) SKARAJEW......................................................................................................................... 3
(6) WILLIAMSON.................................................................................................................... 3
(7) OMOND.............................................................................................................................. 3
(8) SWARBRICK....................................................................................................................... 3
(9) QI SHAO............................................................................................................................. 3
(10) DORDEVIC....................................................................................................................... 3
(11) THOMAS.......................................................................................................................... 3
(12) LYNAS............................................................................................................................... 3
(13) LEE..................................................................................................................................... 3
(14) GILFILLAN....................................................................................................................... 3
DEFENDANTS’ EVIDENCE........................................................................................................... 3
(1) SOPOV................................................................................................................................ 3
(2) JEFFERY.............................................................................................................................. 3
(3) BROWN............................................................................................................................... 3
(4) LONG................................................................................................................................... 3
(5) PANDOV............................................................................................................................ 3
(6) DEGENHARDT.................................................................................................................. 3
(7) GOODWIN......................................................................................................................... 3
(8) PERMEWAN...................................................................................................................... 3
SUBMISSIONS ON EXPERT EVIDENCE: LYNAS AND DEGENHARDT......................... 3
ROLE OF THE SUPERINTENDENT............................................................................................. 3
SET-OUT: STRUCTURAL STEEL AND EOT 4........................................................................... 3
EOTs 1 - 18........................................................................................................................................... 3
TERMINATION................................................................................................................................. 3
DEFECTS............................................................................................................................................. 3
COSTS TO COMPLETE................................................................................................................... 3
QUANTUM MERUIT....................................................................................................................... 3
OTHER RELIEF.................................................................................................................................. 3
MISLEADING AND DECEPTIVE CONDUCT.......................................................................... 3
DOMESTIC BUILDING CONTRACTS ACT.............................................................................. 3
SCOTT SCHEDULE.......................................................................................................................... 3
SUMMARY OF CONCLUSIONS................................................................................................... 3
HER HONOUR:
INTRODUCTION/OVERVIEW
1 The dispute arises from a building contract between the plaintiff as builder, and the defendants, as owners, in relation to a disused, former industrial building at 158‑172 Oxford Street, Collingwood in inner Melbourne. The works under the building contract concern the renovation and extension of a disused boilerhouse that was originally part of the Foy & Gibson empire, the founders of which were famous outfitters and haberdashery manufacturers and merchants in Melbourne during the 19th and 20th centuries. The works involved the internal construction and installation within an existing building of a gallery, office space, restaurant space, basement car park and entrance areas. They included, also, the construction of additional floor levels on the existing roof of the building by way of erection of a steel framework to provide for 14 new residential units including balconies. The design was described for marketing purposes as “industrial boheme” and the project was known as the “Boilerhouse”.
2 The plaintiff and the defendants executed a written contract on 20 August 1999. The agreement followed a tender process when the builder was invited, along with other selected builders, to submit a tender for the building works. The builder was advised by the owners, by letter dated 20 May 1999, that its tender was successful. On 31 May 1999, the builder was given possession of the site and commenced works, although the contractual terms at that time were not finalised. In the following 11-12 week period, up until 20 August 1999, the builder and the owners engaged in negotiations upon the terms of the contract.
3 The works were to be completed in 130 working days. However, a series of delays occurred such that, a year later, the works were incomplete. The builder complained of a long list of matters: insufficient detail in plans and drawings necessitating delays in shop drawings and works, the lack of a suitably qualified superintendent, the refusal or insufficient allowance of extensions of time by the superintendent, the failure to issue certain progress certificates and the failure to allow certain variations under the contract. These complaints culminated when the builder served a progress claim No. 14 on the owners on 23 August 2000 for the sum of $340,562. The defendants responded to the notice by deducting from the amount claimed liquidated damages and goods and services tax (“GST”), leaving a balance of $132,618.20, which amount the owners paid on 28 August 2000. The builder alleged that the owners breached the contract when progress certificate No. 14 was not paid, in full and on time, and that the liquidated damages were wrongfully deducted from the amount certified. As a consequence, on 8 September 2000, the builder served a show cause notice on the owners as to why the builder should not exercise its contractual rights under cl.44.9 of the contract. The defendants responded on 11 September 2000 and purported to show cause which the plaintiff rejected. On 14 September 2000, the superintendent certified progress certificate No. 15 in the sum of $220,800.
4 On 18 September 2000, the plaintiff suspended the works. The defendants responded with their own show cause notice asserting that the builder improperly suspended the work and claiming undue delays in the work. On 2 October 2000, the owners purported to serve a notice under cl.44.4 of the contract to call up the securities, namely the bank guarantees. The builder asserted that the owners were not entitled to do so and treated the action as repudiatory of the contract. On 6 October 2000, the builder accepted the alleged repudiation and terminated the agreement. From about 29 September 2000 and up until about 2 October 2000, without warning to the owners, the builder removed its plant and equipment and vacated the site.
5 Thereafter, the owners assumed control of the site and set about completion, largely through the engagement of the sub-contractors previously retained by the builder. The builder alleged that at the time of termination the works were completed to the level of 90 per cent. Conversely, the owners alleged that the works were completed to the level of 70 per cent. The owners also alleged that there were extensive rectification works they had to perform to the builder’s works.
6 Arising from these broadly described circumstances, the builder made a series of alternative claims in the proceeding. In summary, they were based on a quantum meruit, restitution for unjust enrichment, damages for misleading and deceptive conduct in breach of s.52 of the Trade Practices Act 1974 or s.11 of the Fair Trading Act 1999, a claim under s.3 3 of the Domestic Building Contracts Act 1995, and a claim of undue influence by the owners over the superintendent, Mr Jeffery. The builder also claimed variously for amounts under the contract or on account. The quantum of the amounts claimed under the various causes of action was $2,452,253.01, consisting of the works performed and a proportionate share in the value of the renovated building; alternatively, $1,034,728.64 said to be outstanding under progress certificates 14 and 15, if liquidated damages were not deducted or $440,800.00 if such damages were deducted; further, in the alternative, $968,790.95 being for works performed in the nature of variations and the sum of $763,908.00 being for extra costs incurred by certain delays for which the builder held the owners responsible. The builder also sought consequential relief, including declaratory orders.
7 Essentially, the owners denied and disputed the builder’s claims. The owners invoked various provisions of the Domestic Building Contracts Act as a foundation of their disputation of the builder’s claims. The owners rejected progress certificates 14 and 15 as invalid pursuant to certain terms of the agreement. They also relied on certain acts as constituting waiver, estoppel and acquiescence by the builder with respect to progress certificates 14 and 15. In addition, the owners counterclaimed against the builder for the costs of completing the works totalling $1,181,548 and for rectification of defective works performed by the builder totalling $ 325,529.44. The owners also counterclaimed for the deduction of a number of variation amounts and also an allowance with respect to GST obligations.
PLEADINGS
8 In its statement of claim,[1] the plaintiff relied upon the contract between it and the defendants, dated 20 August 1999, whereby there was agreement to construct the works for the sum of $3,474,000.00. The agreement was alleged to be in writing and constituted by the document AS 2124-1992.[2] In particular, the plaintiff relied upon cll.3.1, 5, 8.1, 23, 35.5, 36, 40, 42.1 and 42.9 of the general conditions of the agreement and the implied terms that the defendants were precluded from issuing a cl.44.2 notice under the agreement or having recourse to the security while in substantial breach of the agreement.
[1]Third further amended statement of claim filed 29 October 2003.
[2]Being the standard form building agreement at that time together with the documents annexed to it.
9 The defendants admitted the agreement, save to allege that it was varied by and subject to the provisions of the Domestic Building Contracts Act and, in particular, ss.15, 16(1) and 33 of that Act. The plaintiff relied upon the letter of 1 August 2000, submitting progress claim number 14 and alleged that the superintendent failed to issue a payment certificate within 14 days after receiving that claim. The plaintiff then relied upon a facsimile, dated 23 August 2000, whereby the superintendent issued certificate number 14 but reduced the amount certified to the sum of $340,562.00. The plaintiff further relied upon the fact that, under cover of letter dated 28 August 2000, the defendants made payment in respect of progress claim 14 in the sum of $132,618.00. As a consequence, the plaintiff alleged that the defendants breached the agreement by failing, pursuant to cl.42.1 of the agreement, to pay to the plaintiff the amount of progress claim 14; alternatively, by failing, pursuant to cl.42.1 of the agreement, to pay the amount certified by certificate number 14 within 14 days; and, in any event, deducting from the amount paid to the plaintiff, in respect of progress claim number 14, the amount of $220,000, purportedly in the nature of liquidated damages.
10 The defendants denied the breach. The defendants further denied that there was an obligation to pay on payment certificate number 14 as issued by the plaintiff or, alternatively, as certified by the superintendent. The defendants alleged that the agreement was varied by the arrangements and conduct under the agreement between the parties, in particular, between the superintendent from time to time and Le Hy Ta on behalf of the plaintiff as its contract administrator. The defendants further alleged in their defence that, by virtue of the conduct of the plaintiff with respect to progress claim number 14 being issued in breach of the agreement, that this amounted to a waiver by the plaintiff of the requirements of cl.42.1 of the agreement, and which waiver had been accepted. The defendants also alleged that an estoppel arose by virtue of the conduct of the plaintiff and the defendants, and also by virtue of s.33 of Domestic Building Contracts Act such that the plaintiff was estopped from alleging non-compliance with respect to payment certificate number 14. The defendants further alleged acquiescence on the part of the plaintiff by its conduct.
11 In addition to denying breach of the agreement as alleged by the plaintiff, the defendants alleged that if they were obliged to pay the amount of either $340,562.00 in respect of progress claim number 14, or obliged to pay the amount of $1,216,546.64 as originally claimed by the plaintiff in respect of progress claim number 14, then such amounts had been superseded and the obligation of the defendants thereto avoided by virtue of payment certificate number 15.
12 The plaintiff further alleged that the defendants, by their agent, the superintendent, failed to grant the plaintiff extensions of time under the agreement to which it was entitled. The defendants claimed liquidated damages arising from and relating to the extensions of time in the sum of $913,000.00. The defendants alleged that the superintendent granted the plaintiff extensions of time totalling 11 days and six hours and otherwise rejected all other claims for extensions of time. The defendants disputed three days of the extensions of time granted by the superintendent and otherwise conceded that the plaintiff was entitled to an extension of time in total of only six days and three hours. The extension of time entitlement conceded by the defendants was contained in a schedule to their defence. The defendants relied upon the provision in the agreement that the works were to be brought to practical completion[3] in consequence of the adjusted date for practical completion of 21 December 1999 and not the date of practical completion as events transpired, namely, 31 March 2002. In consequence, the defendants claimed they were entitled to liquidated damages in the amounts sought consisting of liquidated damages at the rate of $1,100 per day from 22 December 1999 until 31 March 2002, that is, a total of 830 days at $1,100 per day, thereby giving rise to a total sum of $913,000.00. The defendants alleged that the plaintiff wrongfully, and in breach of the agreement as varied by the Domestic Building Contracts Act, claimed and was paid sums over and above amounts to which it was entitled. The defendants alleged that they had overpaid the plaintiff and counterclaimed for the amounts of the over payments.
[3]The terms “Practical Completion” and “Date for Practical Completion” were both defined by cl.2 of the contract.
13 The plaintiff further claimed that the defendants wrongfully served a show cause response dated 11 September 2000 in response to the plaintiff’s show cause notice. The plaintiff alleged that the defendants, by letter 11 September 2000, failed to show reasonable cause because they failed to demonstrate any basis on which the defendants were entitled to deduct liquidated damages from progress claim number 14; they failed to demonstrate any basis on which the defendants were not obliged to pay progress claim number 14; and the letter of 11 September 2000 was not a valid and substantial response to the plaintiff, pursuant to cl.44.9 of the agreement. The plaintiff pleaded that, as a consequence, they were entitled by their notice dated 18 September 2000 to suspend the whole of the work under the agreement.
14 Subsequently, as the plaintiff pleaded its claim, the defendants delivered a show cause notice by a document dated 21 September 2000. The plaintiff pleaded that the defendants’ show cause notice was invalid and of no effect because the defendants were in substantial breach of the agreement at the time, and further, that the defendants’ show cause notice was contrary to the implied term of preclusion from resort to cl.44.2 or the security under the agreement while in substantial breach of the agreement. The plaintiff further relied upon the fact of the suspension of the work by it at the time of the service of the defendants’ show cause notice. It further alleged that it was not open to the defendants to allege failure to proceed with due expedition and without delay, as was alleged in the defendants’ show cause notice, when the plaintiff had made and was entitled to extensions of time to the date for practical completion which had been wrongfully refused or not responded to by the superintendent.
15 As a consequence, the plaintiff alleged that the defendants’ conduct, by the service on 2 October 2000 of the purported notice under cl.44.4 of the contract taking the work out of the hands of the contractor, constituted repudiation of the agreement. The plaintiff also alleged that, in further breach of the agreement, the defendants had recourse to the security provided by the plaintiff under the agreement and that the plaintiff was thereby entitled to accept the defendants’ repudiation and thereby terminate the agreement as it did through its solicitor’s letter dated 6 October 2000.
16 The defendants admitted service of the two show cause notices but denied that its show cause notice was invalid. It further alleged that the plaintiff’s show cause notice was invalid because it failed to state the date by which the defendants were to show cause and wrongfully alleged that the defendants were required to pay an amount of $1,216,546.64; did not raise any allegation against the defendants concerning the deduction of liquidated damages; was issued after the plaintiff agreed to and accepted the amount of payment certificate number 14 as certified by the superintendent, such agreement arising from the plaintiff issuing a tax invoice on 24 August 2000 inclusive of GST in the sum of $374,618.20; the plaintiff did not submit a tax invoice to the defendants for the sum of $1,216,546.64 as required by the GST legislation;[4] and, finally, the notice to show cause was based on claims made in breach of the agreement as varied by the Domestic Building Contracts Act.
[4]A New Tax System (Goods and Services Tax) Act 1999.
17 The defendants further alleged that they, in any event, showed cause pursuant to the terms of the agreement, by their letters to the plaintiff dated 11 September 2000 and 15 September 2000. The defendants relied, further, upon purported admissions by the plaintiff that the sum due to be paid under payment claim number 14 was the sum of $347,618.20 by virtue of the issuing of a tax invoice inclusive of GST on 24 August 2000. The defendants further alleged that they were not required to show cause, in any event, under the show cause notice, as to their entitlement to the deduction of liquidated damages. Further, the defendants alleged that the plaintiff wrongfully purported to suspend the whole of the work under the agreement. The defendants also alleged that the plaintiff, wrongfully, between about 29 September 2000 and 2 October 2000, removed from the works certain site sheds, materials, construction plant and equipment, and temporary works including unfixed materials. The defendants alleged that the removal of the equipment and other items from the site of the works constituted a substantial breach of the agreement.
18 The defendants also alleged that they were entitled to take the work to be completed out of the hands of the plaintiff and denied any wrongful conduct on their part. The defendants alleged that the plaintiff breached the agreement by removing from the site materials and other plant and equipment of which the defendants were the owners. The defendants alleged that, in the circumstances, the plaintiff had wrongfully failed and refused to deliver up such plant and equipment to the defendants and thereby converted such items to their own use.
19 The defendants also alleged, under cl.44.6 of the agreement, to the effect that the works were to be completed by a specified date but in fact were not completed until 31 March 2002. The defendants relied upon a certificate dated 30 August 2002, issued pursuant to cl.44.6 of the agreement, whereby the superintendent certified that the cost incurred by the defendants for the completion of works was $1,181,548.00. The defendants alleged, therefore, that there was a debt due to them from the plaintiff in the sum of $1,401,954.00. The amount was calculated as follows:
Contract Sum $3,474,00.00 Less liquidated damages $ 913,000.00 Amount the defendants claimed would have been paid to the plaintiff if the work had been completed by the plaintiff $2,561,00.00 Less the amount actually paid by the defendants $2,781,406.00 Less cost of completion of the works to the defendants $1,181,548.00 Total amount of debt alleged by the defendants against the plaintiff under clause 44.6 of the agreement $1,401.954.00
20 The defendants further relied upon the issuing by the superintendent of the final certificate, pursuant to cll.42.1 and 42.8 of the agreement, on 28 April 2003, in which the superintendent certified that the amount due by the plaintiff to the defendants was $1,515,199.00. The defendants alleged that the plaintiff had failed to pay the amount of the final payment under the agreement and was thereby indebted to the defendants in the amount claimed. The defendants acknowledged that they received a facsimile dated 5 October 2000 from plaintiff’s solicitor sent to the defendants’ solicitor, informing the plaintiff that the defendants’ conduct was repudiatory. Nevertheless, the defendants denied that their conduct was, in the events which occurred, repudiatory. The defendants alleged that they were entitled to have recourse to the agreement and admitted such recourse.
21 The defendants further alleged that if they in fact repudiated the agreement, then such agreement was affirmed by the plaintiff. Affirmation of the agreement by the plaintiff was said by the defendants to be constituted by the provision of details with respect to progress claim number 14, as provided by the plaintiff to the superintendent on request; the issuing of a tax invoice on 24 August 2000 by the plaintiff; the issuing of progress claim number 15 on about 1 September 2000; the issuing of a notice under cl.44.7 of the agreement by the plaintiff on about 8 September 2000; the purported suspension of the works by the plaintiff in accordance with cl.44.9 of the agreement by notice dated 18 September 2000; the response by the plaintiff to the defendants’ show cause notice thereby affirming the agreement; and the issue by the plaintiff of progress claim number 16 on about 28 September 2000.
22 The plaintiff relied, also, upon a claim based on quantum meruit. The claim was alleged to arise by reason of the termination of the agreement, or its discharge, and the entitlement of the plaintiff to be paid for the work it performed. The defendants denied any entitlement to a quantum meruit on the part of the plaintiff. They alleged that there was no entitlement under the Domestic Building Contracts Act to make such a claim and that it was invalid. The plaintiff further claimed restitution against the defendants. The restitution claim was based upon the plaintiff allegedly suffering a detriment in that it expended labour, materials and money in carrying out works at the instruction of the defendants and the superintendent and that thereby the defendants had been unjustly enriched by receiving the benefit of such works without paying the plaintiff for them. As a consequence, the plaintiff alleged it would be unconscientious for the defendants to receive the benefit of the works. Consequently, the plaintiff claimed that the defendants were obliged to pay it the sum of $2,452,253.01 being the fair and reasonable price for the work; alternatively, in relation to the items of extra work performed by it, the sum of $440,800.00.
23 The defendants denied any unconscionability and denied the claim based on restitution. It further alleged that the basis upon which the plaintiff sought restitution was prohibited by the Domestic Building Contracts Act. The plaintiff also alleged that the defendants breached the provisions of the Fair Trading Act and the Trade Practices Act by engaging in misleading and deceptive conduct. The conduct was said to be constituted by representations made by the defendants to the plaintiff that they would jointly and severally pay the plaintiff for the work performed by it, pursuant to the agreement and in accordance with the terms of the agreement relating to payment and the measure of value of work. The plaintiff relied upon the representations said to be constituted by the agreement, letters to the plaintiff, and oral statements by the superintendent and the defendants about the payment for extra work. The plaintiff alleged that it was induced by, and relied upon, the representations of the defendants, and that it performed the works pursuant to the agreement and upon the instruction of the defendants in the expectation that it would be paid for such works in accordance with the terms of the agreement. The plaintiff further alleged that the first and second defendants, namely, Sopov and Walker, aided, abetted, counselled or procured; alternatively, induced; or further and alternatively, were knowingly concerned in, or a party to, the contraventions under the provisions of the Trades Practices Act. In consequence, the plaintiff claimed damages for misleading and deceptive conduct against the defendants. The defendants denied the allegations of deceptive and misleading conduct.
24 The plaintiff further claimed that it was entitled to be paid upon a quantum meruit for the amount of works and variations, pursuant to the agreement and cll.40.1, 40.3 and 40.5, in the amount of $968,790.95, being on account of having performed the works and variations. It also claimed, pursuant to cl.36 of the agreement, an amount of $763,908.00 in the nature of delay costs. It also claimed, pursuant to cl.35.5 of the agreement, an extension of time to the date for practical completion of 180 days. The plaintiff claimed to be entitled to the amount of the works and variations. Alternatively, the plaintiff alleged that, in breach of cll.23(a), (b) and (c) of the agreement, the defendants had failed to fairly and reasonably determine and certify a reasonable value for the extra work performed by it. In consequence, the plaintiff claimed loss and damage in the sum of $968,790.95. It also alleged that, in the course of performing the works, the plaintiff incurred delay on account of latent conditions, industrial action, directions by the superintendent and inclement weather. As a consequence, the plaintiff claimed an entitlement to a period totalling 180 days in respect of these delays, thereby constituting extensions of time. The particulars of the request for extensions of time were appended to the plaintiff’s statement of claim. In consequence, the plaintiff claimed to be entitled to the sum of extra costs in the amount of $763,908.00. The plaintiff further alleged that the defendants had failed to fairly and reasonably determine and certify the time extension to which the plaintiff was entitled and was thereby entitled to the amount claimed.
25 Further and alternatively, the plaintiff claimed that it was entitled to be paid a sum pursuant to s.53 of the Domestic Building Contracts Act. Alternatively, the plaintiff claimed that, if it was affected by the operation of ss.16 and 33 of that Act, it was entitled to be paid the fair and reasonable price for the performance of the works which the defendants maintained it was not so entitled to be paid for by reason of the said ss.16 and 33 of the Act. Accordingly, the plaintiff sought a variation of the terms of the contract by way of the insertion of the prescribed warning under s.33 of the Act, or alternatively, an order of the court dispensing with the obligation of the plaintiff to comply with the requirements of s.33 of the Domestic Building Contracts Act. The plaintiff further alleged that there was a mutual mistake and thereby the agreement should be rectified to insert the requisite warning under s.33 of the Act. It relied upon correspondence between the parties in support of the allegation of mutual mistake.
26 The defendants denied the claims of the plaintiff with respect to variations, extensions of time and delay costs. If the plaintiff was entitled to extensions of time, the plaintiff applied for such extensions amounting only to 169 days and seven hours and failed to apply for extensions of time for a further 10 days and one hour. In the circumstances, the defendants alleged that the plaintiff was barred, by reason of cl.35.5 of the agreement, from claiming the further 10 days and one hour extension of time sought. The plaintiff also alleged that the defendants unduly influenced the superintendent in about January 2000 and thereafter, in relation to decisions and certification which the superintendent was required to make about the plaintiff’s claims for variations and extensions of time under the agreement. The plaintiff alleged that the superintendent, Jeffery, was unduly influenced by Degenhardt as to the determination of the extensions of time. The plaintiff claimed that it suffered loss and damage in the sum of the delay costs which the superintendent should have certified in respect of the extension of time claims 1-17 and as a result of liquidated damages claimed and deducted by the defendants. The defendants denied the allegations.
27 The defendants claimed entitlement to a set-off of the amount of their counterclaim in extinction of the plaintiff’s claims. They further claimed, by counterclaim, liquidated damages arising from the failure of the plaintiff to bring the works to practical completion by the extended date for practical completion of 21 December 1999. The defendants further claimed loss and damage arising from the failure of the plaintiff to bring the works to practical completion by the extended date.
28 The defendants also made claims by counterclaim for alleged defective work. They alleged that there were terms of the agreement whereby the plaintiff warranted that works would be carried out in a proper and workmanlike manner and in accordance with the plans and specifications set out in the agreement; and that all materials to be supplied by the plaintiff would be good and suitable for the purposes for which they were to be used. That is, the materials would be new; the works would be carried out in accordance with, and would apply with, all laws and legal requirements, including the Building Act 1993 and the regulations under that Act; the works would be carried out with reasonable care and skill; the works and any material used would be reasonably fit for that purpose or of such a nature or quality that might reasonably be expected to achieve that result; and any provisional sum included by the plaintiff in the agreement had been calculated with reasonable care and skill.
29 These allegations were described by the defendants as the “warranties”. The warranties were alleged to be included in the annexure part B of the agreement. The defendants also relied upon ss.8 and 20 of the Domestic Building Contracts Act. The defendants alleged that the plaintiff breached the agreement by breaching the various warranties. By reason of the alleged breaches, the defendants claimed loss and damage. The defendants also claimed deduction variations, thereby reducing the contract price by the amount of $1,024,077.00.
30 The plaintiff sought consequential declaratory relief and damages including, in the alternative, damages pursuant to statute.[5] It also sought rectification to effect compliance with s.33(2) of the Domestic Building Contracts Act and, further, pursuant to s.53 of that Act, provision for a fair price for the work including the extra work.
[5]Pursuant to s.82 of the Trade Practices Act 1974 and s.37 of the Fair Trading Act 1985.
31 In addition to the denials contained in their pleading, the defendants claimed loss and damage arising from alleged breaches of the agreement. The loss and damage claim was in the nature of loss of interest on the liquidated damages claimed, loss of income and opportunity, loss of interest on income and opportunity, loss of interest on the decreased value of the works and loss of interest on payment of GST. The defendants also claimed that the variations claimed by the plaintiff were based on a provision of the agreement as varied by the Domestic Building Contracts Act and were invalid and/or of no effect.
32 The defendants also alleged that there was a consequential liability to pay GST. As a consequence, the defendants claimed an amount of 10 per cent of any judgment sum in respect of GST liability. They also alleged that they had overpaid sums due under the agreement. In consequence of the denials and the matters alleged, the defendants claimed declaratory relief, damages, liquidated damages, damages for conversion, interest, indemnity, and orders that the plaintiff deliver up to the defendants specified items.[6] The defendants further sought a refund from the plaintiff of the sum of $102,241.00 and other relief in the nature of damages. They also claimed interest.
[6]For example: light switch samples, handle and door knob samples.
33 By way of reply and defence to the counterclaim, the plaintiff denied the allegations against it made by the defendants and the defendants’ claims. In particular, the plaintiff made the following allegations:
(1)That from the date of execution of the agreement until early October 2000, the defendants represented, promised or conducted themselves in such a way that the defendants would meet their obligations under the agreement;
(2)It would be unconscientious and, thereby, the defendants are estopped from resiling from the representations and promises made as to compliance by them with the agreement by way of reliance upon the effect of ss.15, 16(1) and 33 of the Domestic Building Contracts Act;
(3)If the defendants are entitled to relief under ss.15, 16(1) and 33 of the Domestic Building Contracts Act then the plaintiff is entitled to an order pursuant to s.87 of the Trade Practices Act or s.41 of the Fair Trading Act to vary the terms of the agreement so that it complies with the provisions of the Domestic Building Contracts Act and ss. 15, 16(1) and 33 of that Act;
(4)Relief under s.53(1), (2) (c) and (e) of the Domestic Building Contracts Act;
(5)Pursuant to s.15(2) of the Domestic Building Contracts Act, the provisions of the Act do not apply to the agreement;
(6)Relief in light of exceptional circumstances, significant or exceptional hardship by operation of ss.38 (6)(a) and (b) of the Domestic Building Contracts Act, thereby entitling the plaintiff to recover the price of the variations;
(7)The plaintiff submitted progress claim number 14 in the same form as progress claims 1 to 13 in reliance upon information provided by the superintendent;
(8)In consequence thereof, the defendants are estopped from relying upon the plaintiff’s alleged omission to include supporting material in respect of progress claim number 14;
(9)That the final certificate issued by the superintendent was invalid and ineffectual because the superintendent was functus officio and the certificate did not comply with the agreement;
(10)The agreement was in the form of a lump sum contract whereby the defendants were not entitled to adjust the contract sum by reason of an increase or decrease in the actual cost;
(11)The superintendent represented that the variations were authorised;
(12)As a consequence, the defendants are estopped from denying the variations claimed by the plaintiff;
(13)Further, the defendants are estopped from recovering from the plaintiff the sum of any costs saving to the plaintiff which may have arisen by reason of the superintendent requiring or requesting or authorising the variations.
34 In summary, the plaintiff denied the claims of the defendants.
TERMS OF CONTRACT (AND DOCUMENTS INCLUDED)
35 The agreement between the parties was primarily constituted by the written contract signed between the parties dated 20 August 1999 and executed by the plaintiff and the first and second defendants and Stacks Properties Pty Ltd, jointly and severally. The contract consisted of the Australian Standard General Conditions of Contract (AS 2124-1992) together with General Conditions of Tendering and Form of Tender (AS 2125-1992) and Form of Formal Instrument of Agreement (AS 2127-1992). The agreement consisted, further, of attached specifications for mechanical services, electrical services, hydraulic and fire services, and the specific specification for alterations and additions to the Boilerhouse generally referred to as “the specification”.
36 The contract also consisted of documents termed “other documents”, namely, a copy of the tender letter of the plaintiff dated 17 May 1999 and a copy of the defendants’ acceptance by letter dated 20 May 1999. It should be noted that the contract itself referred to the singular when referring to the defendants (“principal” as opposed to “principals”). It is clear however that the word “principal” in the contract referred to any and all of the defendants who were parties to the contract. The contract contained the standard conditions with respect to construction and interpretations and the documents said to constitute the “contract documents”.[7]
[7]Clause 8.
37 Clause 5 of the contract was concerned with security, retention moneys and performance undertakings (appendix A).[8] It made provision for security, retention monies and performance undertakings for the purpose of ensuring the due and proper performance of the contract.[9] The form of the security consisted of cash, bonds or inscribed stock.[10]
[8]The significant clauses of the contract are included at the end of the judgment as appendices. The relevant clause is set out in full in the particular appendix.
[9]Cl.5.1.
[10]Cl.5.3.
SECURITY
38 Clause 5.5 was of particular relevance because of the eventual recourse by the defendants to the securities. Clause 5.5 provided:
5.5 Recourse to Retention Moneys and Conversion of Security
A party may have recourse to retention moneys and/or cash security and/or may convert into money security that does not consist of money where –
(a) the party has become entitled to exercise a right under the contract in respect of the retention moneys and/or security; and
(b)the party has given the other party notice in writing for the period stated in the Annexure, or if no period is stated, five days of the party’s intention to have recourse to the retention moneys and/or cash security and/or to convert the security; and
(c)the period stated in the Annexure, or if no period is stated, five days has or have elapsed since the notice was given.
LATENT CONDITIONS
39 Clause 12 was concerned with latent conditions. It defined (cl.12.1) latent conditions as physical conditions on the site or its surroundings which differ materially from the physical conditions that should reasonably have been anticipated. It also provided (cl.12.2) that if, during the execution of the work, the contractor became aware of a latent condition then it was required to give written notice to the superintendent forthwith. There was also provision (cl.12.3) that where delay was caused by a latent condition it may justify an extension of time under cl.35.5 of the contract if it caused the contractor to carry out additional work, use additional constructional plant, or incur extra cost which the contractor could not reasonably have anticipated in which case a variation could be made under cl.40.5 of the contract. Clause 12 is set out in appendix B.
STATUTORY COMPLIANCE
40 Clause 14 of the standard contract provided that the contractor must comply with various specified statutes, including, the Acts of Victoria and other statutory provisions. It further provided[11] that, if a requirement was at variance with a provision of the contract, then the contractor was obliged to notify the superintendent in writing of the difference. If a requirement necessitated a change to the works or method of working as specified in the contract, the superintendent was bound to direct a variation under cl.40.1 of the contract. Specifically, the clause provided[12] that, except to the extent that the contract provided for reimbursement, then the contractor was obliged to bear the cost of compliance with such statutory requirement whether the requirement existed at the time of tendering or not.
[11]Cl.14.1.
[12]Cl.14.1.
41 Clause 14 of the contract is set out in appendix C to these reasons.
THE SUPERINTENDENT
42 The role and performance of the superintendent was a significant issue in the proceedings. Clause 23 of the contract set out the obligations of the superintendent. Clause 24, as amended, provided for a representative of the superintendent from time to time.
43 Clause 23 provided:
“23 SUPERINTENDENT
The principal shall ensure that at all times there is a Superintendent and that in the exercise of the functions of the Superintendent under the Contract, the Superintendent –
(a)Acts honestly and fairly;
(b) Acts within the time proscribed under the Contract or where no time is proscribed within a reasonable time;
(c)Arrives at a reasonable measure or value of work, quantities or time.
If, pursuant to a provision of the Contract enabling the Superintendent to give directions, the Superintendent gives a direction, the Contractor shall comply with the direction.
….”
44 Clause 24 provided:
“SUPERINTENDENTS’ REPRESENTATIVE
The Superintendent shall ensure that at all times there is appointed a registered architect as Superintendent’s Representative under the Contract to exercise the usual duties of a supervising architect but not more than one Superintendent’s Representative shall be delegated the same function at the same time.”
45 Clauses 23 and 24 of the contract are set out in appendix D to the reasons.
CONTRACTOR’S REPRESENTATIVE
46 Clause 25 of the contract provided that the contractor shall personally superintend the execution of the work and have a competent representative present on-site and, if required by the superintendent, at other places at which activities relating to the contract take place.
THE SITE
47 Clause 27 of the contract provided that the principal was to give the contractor possession of the site. It further provided that, if the contractor was in breach of cl.21.1, then the principal may refuse to give the contractor possession of the site or any part of the site until the contractor had complied with the requirements of cl.21. Clause 21 was concerned with insurance arrangements.
THE SET-OUT
48 Clause 28 of the contract provided for the setting out of the works. It required the superintendent to supply to the contractor the information and survey marks necessary to enable the contractor to set out the works and the survey marks specified in the contract. Clause 28.3 was concerned with errors in setting out. It provided that, if the contractor discovered an error in the position, level, dimensions or alignment of any work under the contract, then the contractor was required to immediately notify the superintendent and the contractor would rectify the error unless the superintendent otherwise directed. The sub-clause also provided that, if the error was caused by incorrect information, survey marks or data supplied by the superintendent, then, the cost incurred by the contractor in rectifying the error was to be valued under cl.40.5 as a variation.
MATERIALS AND WORK
49 Clauses 29 and 30 of the contract were concerned with the provision of materials, labour and constructional plant and also the quality of materials.
50 Clause 29.1 provided that the contractor was required to supply everything necessary for the proper performance of its obligations and discharge of its liabilities under the contract. Clause 29.2 provided that the superintendent may direct the contractor not to remove from the site constructional plant or materials. Clause 29.3 provided that the superintendent could direct the contractor to supply particulars of the mode and place of manufacture and the like.
51 Clause 30 required the contractor to use materials and standards of workmanship required by the contract and in the absence of any requirement to the contrary for the contractor to use suitable new materials.[13] Clause 30 also provided that, if the superintendent discovered material or work which was not in accordance with the contract, then the superintendent was entitled to direct the contractor to remove the material, demolish the work, reconstruct, replace or correct the material or work. Clause 30 further provided that, if the contractor failed to comply with such a direction, then provided seven days had elapsed, the principal may have the work performed and the performance of such work was a debt due from the contractor to the principal. Clause 30 further provided that the superintendent may direct a variation pursuant to cl.40 of the contract to be valued, and if the variation causes an increase or decrease in the value to the principal of the works, then regard should be had to that effect; and that if the variation results in the contractor incurring more or less cost than would reasonably have been incurred, then regard was to be had to that difference also.
[13]Cl.30.1.
52 Clauses 29 and 30 are set out in appendix E to these reasons.
PROGRESS AND PROGRAMMING OF THE WORKS
53 Clause 33 of the contract provided that the contractor was to proceed with the work with due expedition and without delay. The contractor was precluded from suspending the progress of the whole or any part of the work except for suspension as provided for under cl.44.9, or as directed or approved by the superintendent under cl.34. Clause 44 related to default or insolvency, and cl.34 related to suspension of the works with respect to insurance arrangements.
54 Clause 33 required the contractor to give the superintendent reasonable advance notice of when it required any information, materials, documents or instructions from the superintendent or the principal. Clause 33 further provided that the superintendent could direct the order and times at which various stages or parts of the work under the contract were to be performed. If the contractor was able to reasonably comply with the direction, then the contractor was obliged to do so. If the contractor could not reasonably comply with the direction, then the contractor was required to notify the superintendent in writing of that fact and provide reasons. Clause 33 also provided that if compliance with the direction caused the contractor to incur more or less cost than otherwise would have been incurred, then the difference would be valued under cl.40.5 as a variation.
55 Clause 33 also provided for a construction program to be constituted as a statement in writing showing the times by which the various stages or parts of the work under the contract were to be executed or completed. Clause 33 further provided that the contractor was precluded from departing from the construction program included in the contract or a construction program furnished to the superintendent. It also provided that the furnishing of a further construction program would not relieve the contractor of any obligations under the contract, including the obligation to not depart from an earlier construction program without reasonable cause.
56 Clause 33 of the contract is contained in appendix F to the reasons.
SUSPENSION OF THE WORKS
57 Clause 34 was concerned with suspension of the works by the superintendent or the contractor. It specifically provided[14] for the superintendent to be empowered to suspend the whole or part of the work if considered necessary because of an act or omission of the principal, the superintendent or an employee or the contractor; for safety reasons; or to comply with an order of the Court. It also provided[15] that the contractor may suspend the whole or part of the work under the contract with the written approval of the superintendent. Clause 34 also provided that any cost incurred by the contractor by reason of a suspension under cl.34 was to be borne by the contractor, but if the suspension was due to an act or omission of the principal, the superintendent, or an employee, then, if the suspension caused the contractor to incur more or less cost than would otherwise have been incurred, the difference was to be valued under cl.40.5 as a variation.
[14]Cl.34.1.
[15]Cl.34.2.
58 Clause 34 is set out in appendix G to the reasons.
TIMES FOR COMMENCEMENT AND PRACTICAL COMPLETION
59 Clause 35 of the contract set out the requirements with respect to the time for commencement of work on the site and, in particular, time for practical completion.[16] Specifically, the clause provided for the contractor to complete the work under the contract to “Practical Completion by the Date for Practical Completion”. The interpretation and definition provisions of the contract, clause 2, provided that the “Date for Practical Completion” meant:
(a) Where the Annexure provides a Date for Practical Completion, the date;
(b) Where the Annexure provides a period of time for Practical Completion, the last day of the period,
but if any extension of time for Practical Completion is granted by the Superintendent or allowed in any arbitration or litigation it means the date resulting therefrom”.
[16]Cl.35.2.
60 The date for practical completion provided in the contract was 10 December 1999.[17] Clause 2 of the contract further provided for the definition of “Date of Practical Completion” as meaning:
“(a) The date certified by the Superintendent in a Certificate of Practical Completion issued pursuant to clause 42.5, to be the date upon which Practical Completion was reached; or
(b) Where another date is determined in any arbitration or litigation as the date upon which Practical Completion was reached, that other date”.
[17]Provided is Part A of the annexure of the contract.
61 “Practical Completion” itself was defined by cl.2 as constituted by the following:
“Practical Completion” is that stage in the execution of the work under the Contract when -
(a)The Works are complete except for minor omissions and minor defects –
(i) Which do not prevent the Works from being reasonably capable of being used for their intended purposes; and
(ii) Which the Superintendent determines the Contractor has reasonable grounds for not promptly rectifying; and
(iii) Rectification of which will not prejudice the convenient use of the Works; and
(b)Those tests which are required by the Contract to be carried out and passed before the Works reach Practical Completion have been carried out and passed;
(c)Documents and other information required under the Contract which, in the opinion of the Superintendent are essential for the use, operation and maintenance of the Works have been supplied.”
62 Clause 35[18] provided for extensions of time for practical completion. It provided that, where it became evident to the contractor or the principal, then each was obliged to notify the superintendent in writing of details of the possible delay. If the contractor was to be delayed in reaching practical completion and within 28 days after the delay occurred notified the superintendent in writing for a claim for an extension of time for practical completion, then the contractor would be entitled to an extension of time for practical completion. The contractor was only so entitled if a specified cause arose. The causes set out in cl.35.5 were events occurring beyond the contractor’s reasonable control, including industrial conditions and inclement weather; delays caused by the principal, the superintendent or the principal’s employees; actual quantities of work being greater than the quantities specified in the annexure to the contract; latent conditions; variations directed under cl.40; repudiation or abandonment by a nominated sub-contractor; changes in the law; directions by appropriate authorities; delays by specified authorities not caused by the contractor; claims referred with respect to damage to persons and property other than the works;[19] any breach of the contract by the principal; and any other cause which is expressly stated in the contract to be a cause for extension of time for practical completion.
[18]Cl.35.5
[19]Under cl.17.1(v).
63 The date of practical completion certified by the superintendent was 13 January 2000.
64 Clause 35 further provided for liquidated damages for delay in reaching practical completion.[20] Provision was made that, if the contractor failed to reach practical completion by the date for practical completion, then the contractor was indebted to the principal for liquidated damages at the rate stated in the annexure for every day after the date for practical completion. The annexure to the contract provided for liquidated damages at the rate of $1,100.00 per day. The amount of liquidated damages was unlimited.[21]
[20]Cl.35.6.
[21]Cl.38.7 provided for a limit on liquidated damages under cl.35 as specified in the annexure to the contract. Part BA of the annexure to the contract provided “no limit” of liquidated damages under cl.35.7 of the contract.
65 Clause 35 is set out in appendix H to the reasons.
DELAY OR DISRUPTION COSTS
66 Clause 36 of the contract provided that, where the contractor was granted an extension of time under cl.35, the principal was obliged to pay to the contractor such extra costs as were necessarily incurred by reason of the delay. There was specific provision that nothing in cl.36 obliged the principal to pay extra costs for delay or disruption already included in the value of a variation or other payment under the contract, or limit the principal’s liability for damages for breach of contract.
67 Clause 36 is set out in appendix I to these reasons.
VARIATIONS
68 Clause 40 of the contract was concerned with variations. It provided that the superintendent may direct the contractor to increase, decrease or omit any part of the work under the contract, change it, execute additional work, or demolish or remove material or works that are no longer required by the principal. The contractor was precluded from varying the work, except as directed by the superintendent. Clause 40 provided, further, that the contractor was bound only to execute a variation which was within the general scope of the contract. Upon receipt of a notice from the superintendent advising the contractor of a proposed variation under cl.40, the contractor was required to advise the superintendent whether the proposed variation could be effected and, if so, to advise the superintendent of the effect on the construction program and the time for practical completion and an estimate of the cost, including delay costs of the proposed variation. There was provision that the principal would reimburse the contractor for the reasonable costs of complying with the requirements of cl.40.2. In the absence of agreement between the superintendent and the contractor, the variation was to be valued under cl.40.5 of the contract which specified the particular valuation methods to be used.
69 Clause 40 of the contract is reproduced in appendix J to the reasons.
CERTIFICATES AND PAYMENTS
70 Clause 42 set out the regime for payment claims, certificates, calculations and time for payment. It also provided for a certificate of practical completion and a final payment claim. Broadly, cl.42.1 provided a structure whereby the contractor was to deliver claims for payment referred to as “payment claims”. Within 14 days after receipt of a payment claim, the superintendent was obliged to issue to the principal and to the contractor a payment certificate stating the amount of the payment which, in the opinion of the superintendent, was to be made by the principal to the contractor. The superintendent was required to set out in the certificate the calculations employed to arrive at that amount.
71 Clause 42 further provided that, if the contractor failed to make a payment claim, then the superintendent could nevertheless issue a payment certificate. The clause further provided that if, within 28 days after receipt by the superintendent of a claim for payment, or within 14 days of issue by the superintendent of a payment certificate (whichever was the earlier), the principal was bound to pay to the contractor an amount not less than the amount shown in the certificate as due to the contractor. If no payment certificate had been issued, the principal was bound to pay the amount of the contractor’s claim. Clause 42 further provided that a payment made pursuant to cl.42.1 did not prejudice the right of either party to dispute the amount under cl.47, the dispute resolution clause of the contract.
72 Clause 42.5 also provided for the certificate of practical completion. It required the contractor to give the superintendent at least 14 days notice of the date on which the contractor anticipated that practical completion would be reached. It further provided that, within 28 days after the expiration of the defects liability period, the contractor was to lodge with the superintendent a final claim endorsed “Final Payment Claim”. Clause 42 made provision for interest on overdue payments. It provided[22] that if any moneys due remained unpaid after the expiration of the date for payment, then interest was to be paid at the rate of 5 per cent above the National Bank of Australia’s 90 day bill rate.[23] Clause 42.10 provided for set-offs by the principal, namely, the deduction of moneys due to the contractor where owed to the principal. Clause 42.10 also provided that the principals, subject to cl.5.5, may have recourse to retention moneys and, if they are insufficient, then to security under the contract.
[22]Cl.42.9.
[23]As provided in Part A of the annexure to the contract and cl.42.9.
73 Clause 42 is set out in appendix K to the reasons.
DEFAULT
74 Clause 44 set out the applicable provisions in the event of default. It provided that if the contractor committed a substantial breach of contract and damages was not an adequate remedy, then the principal may give the contractor a written notice to show cause. Substantial breaches were defined to include (but were not limited to) suspension of work, failing to proceed with due expedition and without delay, failing to lodge security, failing to use the materials or standards of workmanship required by the contract, failing to comply with a direction of the superintendent, failing to provide evidence of insurance, and other related matters.[24] Clause 44 entitled the principal to serve a show cause notice[25] and specifically provided that such notice must:
[24]Cl.44.2 of the contract.
[25]Cl.44.3.
(a) state that it was a notice under clause 44;
(b) specify the alleged substantial breach:
(c) require the contractor to show cause in writing;
(d) specify the time and date by which the contractor must show cause, but not less than seven days after the notice is provided; and
(e) specify the place at which cause must be shown.
If the contractor failed to show cause then the principal was entitled to give notice in writing to the contractor to take out of the hands of the contractor the whole or part of the work remaining to be completed, or to terminate the contract. Upon giving such notice, the principal may suspend payments to the contractor until the date on which the contractor showed reasonable cause, the principal took action under cl.44, or the date which is seven days after the last day for showing cause. If the principal exercised a right under cl.44, then the contractor was not entitled to any further payment in respect of the work taken out of its hands unless a payment became due to the contractor as otherwise provided under clause 44. Where the principal took the work out of the hands of the contractor pursuant to cl.44, then the principal was obliged to complete the work and, as reasonably required, facilitate completion of the works. If the principal took such possession, then it was obliged to maintain plant and other equipment on-site owned by the contractor, and on completion, return it to the contractor.
75 Clause 44 further provided that, where work was taken out of the hands of the contractor and completed, the superintendent was obliged to ascertain the cost incurred by the principal in completing that work and issue a certificate to the principal and the contractor specifying the amount of the cost. If the amount of the cost incurred by the principal was greater than the amount that would have been paid to the contractor if the work had been completed by it, then the difference became a debt due from the contractor to the principal. If the cost was, in fact, less than the amount that would have been paid to the contractor, then the difference became a debt due from the principal to the contractor.
76 Clause 44 also made provision with respect to a default of the principal. It provided[26] that, if the principal committed a substantial breach of contract and the contractor considered that damages was not an adequate remedy, then the contractor may give the principal a written notice to show cause. Substantial breaches were defined to include (but were not limited to) –
[26]Cl.44.7.
(a) failing to make a payment;
(b) failure by the superintendent to either issue a certificate of practical completion or give the contractor, in writing, reasons for not issuing the certificate;
(c) failing to produce evidence of insurance;
(d) failing to give the contractor possession of sufficient of the site;
(e) failing to lodge security in breach of clause 5.
Where the contractor served a show cause notice under cl.44.8, it was required to include in the notice:
(a) a statement that it was a notice under cl.44;
(b) specify the alleged substantial breach;
(c) require the principal to show cause;
(d) specify the time and date by which the principal must show cause;
(e) specify the place at which cause must be shown.
In the event of the contractor exercising its rights and the principal failing to show cause, the contractor, by notice in writing to the principal, was entitled to suspend the whole or any part of the work under the contract. The contractor was entitled to recover from the principal any damages incurred by it arising from the suspension. In the event of the contract being terminated pursuant to cl.44, then the rights of the parties were stipulated under the contract,[27] as they would have been at common law, had the defaulting party repudiated the contract and the other party elected to treat the contract as at an end and recover damages.
[27]Cl.44.10.
77 Clause 44 is set out in appendix L to these reasons.
WAIVER
78 Clause 48 of the contract provided that, except as provided at law or in equity or in the contract, none of the terms of the contract were to be varied, waived, discharged or released, except with the prior consent in writing of the principal in each instance.
SUMMARIES OF WITNESSES’ EVIDENCE
79 The evidence in the trial was substantial, complex and technical. A series of witnesses were called on both sides, mostly technical and expert. All witnesses provided witness statements, some of which ran to hundreds of pages. The witnesses were subject, in most instances, to extensive cross-examination and re-examination. Much of the viva voce evidence involved cross-referencing to multiple specifications, plans, shop drawings and drawings. The documentary evidence consisted of 72 court book volumes, over 100 volumes of lever arch folders and numerous sets of plans and specifications. The documents before the court and the transcript ran to thousands of pages. The trial ran for just over 10 weeks. Without the benefit of witnesses’ statements and the requirement of written submissions, both opening and closing, the duration of the trial would have been many many months. Given the magnitude of the evidence and submissions, and in light of the observations of the Court of Appeal in Fletcher Construction Australia Ltd v Lines MacFarlane & Marshall Pty Ltd (No. 2),[28] I have considered that evidence and the submissions in considerable and intensive detail. I have borne in mind all the evidence in reaching my findings. Where I do not specifically refer to or recite the evidence of an individual witness, or the detail of a particular document, I have not disregarded or overlooked that matter. Ultimately, in a substantial and technical matter of this type, being a long and hard fought building case, the summary of evidence and submissions and the analysis of the evidence must necessarily be limited.
[28](2002) 6 VR 1.
PLAINTIFF’S EVIDENCE
80 The main witnesses called for the plaintiff were:
(1) Tivendale
· the project manager: his evidence was principally concerned with extension of time claims, termination of contract, the role of the superintendent, the set-out and structural steel issues, defective works and rectification works and issues relating to Kane’s quantum meruit claim.
(2) Forster
· the chairman of directors of the plaintiff company: his evidence was concerned with the contract itself, termination, the role of the superintendent, extension of time claims and various other matters.
(3) Lucas
· the finance director of the plaintiff: his evidence was concerned with termination and other various matters.
(4) Isaacson
· the construction director of the plaintiff: his evidence was concerned with the contract, termination, and the role of the superintendent.
(5) Skarajew
· the site foreman of the plaintiff: his evidence was concerned with termination, the role of the superintendent, the set-out and structural steel issues, the extension of time claims, the variations and the deduction variations.
(6) Williamson
· another site foreman: his evidence was concerned with termination, the role of the superintendent, the set-out and structural steel, the extension of time claims, the variations and other various matters.
(7) Omond
· another site foreman of the plaintiff: he was concerned with termination, the role of the superintendent, the set-out and structural steel, extension of time claims, variations and other matters.
(8) Swarbrick
· the façade foreman: he was concerned with matters relating to the contract, the role of the superintendent, the variations and the deduction variations.
(9) Qi Shao
· the draftsperson employed by the plaintiff to prepare the shop drawings: her evidence was concerned with the shop drawings.
(10) Dordevic
· the steel engineer engaged by the plaintiff: his evidence was concerned with the shop drawings and set-out.
(11) Thomas
· the quantity surveyor engaged as an expert by the plaintiff to give evidence about the quantum meruit assessment: his evidence was principally concerned with the contract, termination, the role of the superintendent and the extension of time claims.
(12) Lynas
· an expert engaged by the plaintiff for the purposes of the trial: his evidence was concerned with the extension of time claims.
(13) Lee
· an expert engaged by the plaintiff concerned with variations.
(14) Gilfillan
· a further expert engaged by the plaintiff: his evidence was concerned with the variations, the deduction variations and aspects of the Domestic Building Contracts Act.
81 There were “pair” expert witnesses in most instances. The expert witness opposed to Lynas was Degenhardt; the expert witness opposed to Lee was Goodwin; and the expert witness called by the defendants to deal with the evidence of Gilfillan was Permewan.
DEFENDANTS’ EVIDENCE
82 The principal witnesses called by the defendants were:
(1) Sopov
· the owner of the site: his evidence was concerned with virtually all matters.
(2) Jeffery
· the superintendent of the site engaged by the defendants: his evidence was concerned with most aspects of the claim.
(3) Brown
· a mechanical consultant retained by the defendants in relation to the set-out and structural steel issues.
(4) Long
· a structural engineer retained by the defendants who gave evidence with respect to the set-out and structural steel.
(5) Pandov
· who made a video recording of the site which was relevant with respect to the topic of termination.
(6) Degenhardt
· an expert witness called by the defendants with respect to the superintendent’s role, extension of time claims and the set-out and structural claim issues.
(7) Goodwin
· an expert called by the defendants in relation to the deduction variations.
(8) Permewan
· an expert called by the defendants in relation to the variations.
83 In light of the breadth and technical nature of the much of the witnesses’ evidence, it is appropriate to set out in summary the evidence given by each of the main witnesses.
PLAINTIFF’S EVIDENCE
(1) TIVENDALE
Tivendale’s Role as Project Manager
In his original witness statement dated June 2003, Gary Charles Tivendale stated that he commenced working as a contractor with the plaintiff, Kane Constructions (“Kane”), in the capacity of contract administrator in 1994 and became a project manager in 1995. He is a graduate of the University of Melbourne, obtaining his Bachelor of Building degree in 1983.
84 In May 1999, when construction commenced on-site, Tivendale commenced work on the Boilerhouse project as Kane’s project manager. From that time until August 1999, he was involved in contract negotiations with Mr Jonathan Forster, the Executive Chairman of Kane.
85 Although project manager for the duration of the works, Tivendale’s presence on-site was not constant throughout the project. From May 1999 to February 2000, he was on-site approximately two or three times per week, for about an estimated two to four hours each time. After February 2000, when he commenced working on the Boilerhouse project full-time, Tivendale attended the site on a daily basis, spending approximately 15 to 20 hours per week on-site.
86 According to his original witness statement, Tivendale’s primary functions and responsibilities in the project were as follows. He assisted Kane personnel in communicating and handling daily communications with the principals, superintendent and sub-contractors; he prepared and submitted extension of time (“EOT”) claims to the superintendent; he supervised the letting of the sub-contracts; he assisted the contract administrators, first Mr Short with progress claim 1 and secondly, Le Hy Ta, with respect to progress claims 2- 15. He was responsible for project planning and wrote Boilerhouse programs 1 through to 11, which set out the sequence of the works to be done and anticipated the date of practical completion. Other tasks involved general project management.
87 In performing his duties, Tivendale was in regular communication with the superintendent; Le Hy Ta (Kane’s contract administrator for the majority of the project); the principal (Mr Cole Sopov); Williamson, Omond & Skarajew (Kane’s on-site managers); and Swarbrick (façade foreman).
88 For the period May 1999 through to December 1999, Tivendale said in evidence that he kept a paper diary recording site progress. Tivendale said that this diary has since been lost by him. For the period January 2000 through to December 2000, Tivendale used a palm pilot to record attendances at meetings and other details in relation to the project, which presumably he also used in the preparation of evidence. Tivendale also retained and used three files in relation to the Boilerhouse project, some or all of which were used in the preparation of his three witness statements. These included file number 75, documents and handwritten notes in relation to the sub-contractor’s works; file number 76, which contained information on-site meetings, general information and handwritten notes made at the site meetings; and file number 77, which included copies of requests for further information (“RFI”s), drawings and handwritten notes.
89 During cross-examination, Tivendale’s abilities as project manager, particularly with respect to the programming task, were called into question. For instance, counsel for the defendants, Mr Magee, suggested to Tivendale that he had consulted Williamson (the façade foreman) about drawing up programs for the project because he himself “hadn’t sufficient experience to draw the Boilerhouse Program 1 without consulting him”. Tivendale flatly rejected the suggestion that his programming was somehow “faulty”, however he said that he had requested Williamson’s involvement because he desired his input as the construction manager.
90 During re-examination, Tivendale outlined his extensive previous experience in performing similar tasks on other sites. He also pointed out that the lack of feedback on the time extensions made it extremely difficult to program the project as contemplated under the contract. In particular, he said that it put him in an uncertain position as to when the date for practical completion would be.
91 Tivendale’s relationship and behaviour with the superintendent and the principal during the project was also questioned. At trial, it was put to him that he demonstrated a distinct inability to follow clear instructions, with one example put forward being his failure to construct a beam in accordance with the plans. During cross-examination, counsel for the defendants also asserted that it was Tivendale’s practice to “go behind the superintendent and Mr Sopov’s back, to try and get calculations from the engineer to justify [his] conduct”. Whether or not one accepts the suggestions of the defendants in this respect, what is clear is that at some stage of the project, perhaps around the beginning of 2000, relations between the project manager and the superintendent, and between the project manager and the principals, had deteriorated to a point where there was apparently little effective communication between the parties.
The Superintendent
92 During Tivendale’s evidence, the work performed by the superintendent, Mr Trevor Jeffery, came under intense scrutiny. In essence, it was Kane’s position that it was the responsibility of the defendants to appoint a competent supervisor, which Kane claimed did not occur. Tivendale, during both cross-examination and re-examination, asserted numerous times that the delays to the project were not to be attributed to himself or to Kane; rather, they stemmed from two particular sources. First, the claimed deficiencies in the contract documents, and second, the alleged incompetency of the superintendent in that role. Moreover, Kane held the superintendent responsible for the claimed discrepancies in the contract drawings and documents since they were in fact issued by him.
965 Nothing in Clause 30 shall prejudice any other right which the Principal may have against the Contractor arising out of the failure of the Contractor to provide material or work in accordance with the Contract.
966 The Superintendent shall not be obliged to give a direction under Clause 30.4 or a notice under Clause 30.5 to assist the Contractor.
APPENDIX F
CLAUSE 33 PROGRESS AND PROGRAMMING OF THE WORKS
33 PROGRESS AND PROGRAMMING OF THE WORKS
33.1 Rate of Progress
967 The Contractor shall proceed with the work under the Contract with due expedition and without delay.
968 The Contractor shall not suspend the progress of the whole or any part of the work under the Contract except where the suspension is under Clause 44.9 or is directed or approved by the Superintendent under Clause 34.
969 The Contractor shall give the Superintendent reasonable advance notice of when the Contractor requires any information, materials, documents or instructions from the Superintendent or the Principal.
970 The Principal and the Superintendent shall not be obliged to furnish any information, materials, documents or instructions earlier than the Principal or the Superintendent, as the case may be, should reasonably have anticipated at the Date of Acceptance of Tender.
971 The Superintendent may direct in what order and at what time the various stages or parts of the work under the Contract shall be performed. If the Contractor can reasonably comply with the direction, the Contractor shall do so. If the Contractor cannot reasonably comply, the Contractor shall notify the Superintendent in writing, giving reasons.
972 If compliance with the direction causes the Contractor to incur more or less cost than so otherwise would have been incurred had the Contractor not been given the direction, the difference shall be valued under Clause 40.5.
33.2 Construction Program
973 For the purposes of Clause 33, a 'construction program' is a statement in writing showing the dates by which, or the times within which, the various stages or parts of the work under the Contract are to be executed or completed.
974 A construction program shall not affect rights or obligations in Clause 33.1. The Contractor may voluntarily furnish to the Superintendent a construction program.
975 The Superintendent may direct the Contractor to furnish to the Superintendent a construction program within the time and in the form directed by the Superintendent.
976 The Contractor shall not, without reasonable cause, depart from —
(a)a construction program included in the Contract; or to
(b)a construction program furnished to the Superintendent.
977 The furnishing of a construction program or of a further construction program shall not relieve the Contractor of any obligations under the Contract including the obligation to not, without reasonable cause, depart from an earlier construction program.
APPENDIX G
Claim 34 Suspension of the works
34 SUSPENSION OF THE WORKS
34.1 Suspension by Superintendent
978 If the Superintendent considers that the suspension of the whole or part of the work under the Contract is necessary —
(a)because of an act or omission of —
(i)the Principal, the Superintendent or an employee, consultant or agent of the Principal; or
(ii)the Contractor, a subcontractor or an employee or agent of either;
(b)for the protection or safety of any person or property; or
(c)to comply with an order of a court,
the Superintendent shall direct the Contractor to suspend the progress of the whole or part of the work under the Contract for such time as the Superintendent thinks fit.
34.2 Suspension by Contractor
979 If the Contractor wishes to suspend the whole or part of the work under the Contract, otherwise than under Clause 44.9, the Contractor shall obtain the prior written approval of the Superintendent. The Superintendent may approve of the suspension and may impose conditions of approval.
34.3 Recommencement of Work
980 As soon as the Superintendent becomes aware that the reason for any suspension no longer exists, the Superintendent shall direct the Contractor to recommence work on the whole or on the relevant part of the work under the Contract.
981 If work is suspended pursuant to Clause 34.2 or 44.9, the Contractor may recommence work at any time after reasonable advance notice to the Superintendent.
34.4 Cost of Suspension
982 Any cost incurred by the Contractor by reason of a suspension under Clause 34.1 or Clause 34.2 shall be borne by the Contractor but if the suspension is due to an act or 40 omission of the Principal, the Superintendent or an employee, consultant or agent of the Principal and the suspension causes the Contractor to incur more or less cost than otherwise would have been incurred but for the suspension, the difference shall be valued under Clause 40.5.
34.5 Effect of Suspension
983 Suspension shall not affect the Date for Practical Completion but the cause of suspension may be a ground for extension of time under Clause 35.5.
APPENDIX H
CLAUSE 35 TIMES FOR COMMENCEMENT AND PRACTICAL COMPLETION
35 TIMES FOR COMMENCEMENT AND PRACTICAL COMPLETION
35.1 Time for Commencement of Work on the Site
984 The Contractor shall give the Superintendent 7 days' notice of the date upon which the Contractor proposes to commence work on the Site.
985 The Superintendent may reduce the period of notice required.
986 The Contractor shall commence work on the Site within 14 days after the Principal-has given the Contractor possession of sufficient of the Site to enable the Contractor to commence work.
987 The Superintendent may extend the time for commencement of work on the Site.
35.2 Time for Practical Completion
988 The Contractor shall execute the work under the Contract to Practical Completion by the Date for Practical Completion.
Upon the Date of Practical Completion the Contractor shall give possession of the Site and the Works to the Principal.
35.3 Separable Portions
989 The interpretations of
(a)Date for Practical Completion;
(b)Date of Practical Completion;
(c)Practical Completion,
and Clauses 5.7, 16, 35, 37, 38, 42.3 and 42.5 shall apply separately to each Separable Portion and references therein to the Works and to work under the Contract shall mean so much of the Works and the work under the Contract as is comprised in the relevant Separable Portion.
990 If the Contract does not make provision for the amount of security, retention moneys, liquidated damages or bonus applicable to a Separable Portion, the respective amounts applicable shall be such proportion of the security, retention moneys, liquidated damages or bonus applicable to the whole of the work under the Contract as the value of the Separable Portion bears to the value of the whole of the work under the Contract.
35.4 Use of Partly Completed Works
991 If a part of the Works has reached a stage equivalent to that of Practical Completion but another part of the Works has not reached such a stage and the parties cannot agree upon the creation of Separable Portions, the Superintendent may determine that the respective parts shall be Separable Portions.
992 In using the Separable Portion that has reached Practical Completion, the Principal shall 30 not hinder the Contractor in the performance of the work under the Contract.
35.5 Extension of Time for Practical Completion
993 When it becomes evident to the Contractor that anything, including an act or omission of the Principal, the Superintendent or the Principal's employees, consultants, other contractors or agents, may delay the work under the Contract, the Contractor shall promptly notify the Superintendent in writing with details of the possible delay and the cause.
994 When it becomes evident to the Principal that anything which the Principal is obliged to do or provide under the Contract maybe delayed, the Principal shall give notice to the Superintendent who shall notify the Contractor in writing of the extent of the likely delay.
995 If the Contractor is or will be delayed in reaching Practical Completion by a cause described in the next paragraph and within 28 days after the delay occurs the Contractor gives the Superintendent a written claim for an extension of time for Practical Completion setting out the facts on which the claim is based, the Contractor shall be entitled to an extension of time for Practical Completion.
996 The causes are —
(a)events occurring on or before the Date for Practical Completion which are beyond the reasonable control of the Contractor including but not limited to —
(i)industrial conditions;
(ii)inclement weather;
(b)any of the following events whether occurring before, on or after the Date for Practical Completion —
(i)delays caused by‑
- the Principal;
- the Superintendent;
- the Principal’s employees, consultants, other contractors or agents;
(ii)actual quantities of work being greater than the quantities in the Bill of Quantities or the quantities determined by reference to the upper limit of accuracy stated in the Annexure (otherwise than by reason of a variation directed under Clause 40);
(iii)latent conditions;
(iv)variations directed under Clause 40;
(v)repudiation or abandonment by a Nominated Subcontractor;
(vi)changes in the law;
(vii)directions by municipal, public or statutory authorities but not where the direction arose from the failure of the Contractor to comply with a requirement to referred to in Clause 14.1;
(viii)delays by municipal, public or statutory authorities not caused by the Contractor;
(ix)claims referred to in Clause 17.1(v);
(x)any breach of the Contract by the Principal;
(xi)any other cause which is expressly stated in the Contract to be a cause for extension of time for Practical Completion.
997 Where more than one event causes concurrent delays and the cause of at least one of those events, but not all of them, is not a cause referred to in the preceding paragraph, then to the extent that the delays are concurrent, the Contractor shall not be entitled to an extension of time for Practical Completion.
998 In determining whether the Contractor is or will be delayed in reaching Practical Completion regard shall not be had to‑
- whether the Contractor can reach Practical Completion by the Date for Practical Completion without an extension of time;
- whether the Contractor can, by committing extra resources or inclining extra expenditure, make up the time lost.
999 With any claim for an. extension of time for Practical Completion, or as soon as practicable thereafter, the Contractor shall give the Superintendent written notice of the number of days extension claimed.
1000 If the Contractor is entitled to an extension of time for Practical Completion the Superintendent shall, within 28 days after receipt of the notice of the number of days extension claimed, grant a reasonable extension of time. If within the 28 days the Superintendent does not grant the full extension of time claimed, the Superintendent shall before the expiration of the 28 days give the Contractor notice in writing of the reason.
1001 In determining a reasonable extension of time for an event causing delay, the Superintendent shall have regard to whether the Contractor has taken all reasonable steps to preclude the occurrence of the cause and minimise the consequences of the delay.
1002 Notwithstanding that the Contractor is not entitled to an extension of time the Superintendent may at any time and from time to time before the issue of the Final Certificate by notice in writing to the Contractor extend the time for Practical Completion for any reason.
1003 A delay by the Principal or the failure of the Superintendent to grant a reasonable extension of time or to grant an extension of time within 28 days shall not cause the Date for Practical Completion to be set at large but nothing in this paragraph shall prejudice any right of the Contractor to damages.
35.6 Liquidated Damages for Delay in Reaching Practical Completion
1004 If the Contractor fails to reach Practical Completion by the Date for Practical Completion, the Contractor shall be indebted to the Principal for liquidated damages at the rate stated in the Annexure for every day after the Date for Practical Completion to and including the Date of Practical Completion or the date that the Contract is terminated under Clause 44, whichever first occurs.
1005 If after the Contractor has paid or the Principal has deducted liquidated damages, the time for Practical Completion is extended, the Principal shall forthwith repay to the Contractor any liquidated damages paid or deducted in respect of the period up to and including the new Date for Practical Completion.
35.7 Limit on Liquidated Damages
1006 The Contractor's liability under Clause 35.6 is limited to the amount stated in the Annexure.
35.8 Bonus for Early Practical Completion
1007 If the Date of Practical Completion is earlier than the Date for Practical Completion the Principal shall pay the Contractor the bonus stated in the Annexure for every day after the Date of Practical Completion to and including the Date for Practical Completion.
1008 The total of the bonus shall not exceed the limit stated in the Annexure.
APPENDIX I
CLAUSE 36 Delay or Disruption Costs
36 DELAY OR DISRUPTION COSTS
1009 Where the Contractor has been granted an extension of time under Clause 35.5 for any delay caused by any of the events referred to in Clause 35.5 (b)(i), the Principal shall pay to the Contractor such extra costs as are necessarily incurred by the Contractor by reason of the delay.
1010 Where the Contractor has been granted an extension of time under Clause 35.5 for any delay caused by any other event for which payment of extra costs for delay or disruption is provided for in the Annexure or elsewhere in the Contract, the Principal shall pay to the Contractor such extra costs as are necessarily incurred by the Contractor by reason of the delay.
1011 Nothing in Clause 36 shall -
(a) oblige the Principal to pay extra costs for delay or disruption which have already been included in the value of a variation or any other payment under the Contract; or
(b) limit the Principal's liability for damages for breach of contract.
APPENDIX J
Clause 40 Variations
40 VARIATIONS
40.1 Variations to the Work
1012 The Superintendent may direct the Contractor to
(a)increase, decrease or omit any part of the work under the Contract;
(b)change the character or quality of any material or work;
(c)change the levels, lines, positions or dimensions of any part of the work under the Contract;
(d)execute additional work; and/or
(e)demolish or remove material or work no longer required by the Principal.
1013 The Contractor shall not vary the work under the Contract except as directed by the Superintendent or approved in writing by the Superintendent under Clause 40.
1014 The Contractor is bound only to execute a variation which is within the general scope of the Contract.
1015 The Contractor shall not be bound to execute a variation directed after Practical Completion unless the variation is in respect of rectification work referred to in Clause 37.
40.2 Proposed Variations
1016 Upon receipt of a notice in writing from the Superintendent advising the Contractor of a proposed variation under Clause 40, the Contractor shall advise the Superintendent whether the proposed variation can be effected. If the variation can be effected, the Contractor shall —
(a)advise the Superintendent of the effect which the Contractor anticipates that the variation will have on the construction program and time for Practical Completion; and
(a)provide an estimate of the cost (including delay costs, if any) of the proposed variation.
1017 The Principal shall reimburse the Contractor for the reasonable costs of complying with the requirements of Clause 40.2.
40.3 Pricing the Variation
1018 Unless the Superintendent and the Contractor agree upon the price for a variation, the variation directed or approved by the Superintendent under Clause 40.1 shall be valued 45 under Clause 40.5.
1019 The Superintendent may direct the Contractor to provide a detailed quotation for the work of a variation supported by measurements or other evidence of cost.
40.4 Variations for the Convenience of the Contractor
1020 If the Contractor requests the Superintendent to approve a variation for the convenience of 50 the Contractor, the Superintendent may do so in writing. The approval may be conditional.
1021 Unless the Superintendent otherwise directs in the notice approving the variation, the Contractor shall not be entitled to —
(a)an extension of time for Practical Completion; or
(b)extra payment,
in respect of the variation or anything arising out of the variation which would not have arisen had the variation not been approved.
1022 The Superintendent shall not be obliged to approve a variation for the convenience of the Contractor.
40.5 Valuation
1023 Where the Contract provides that a valuation shall be made under Clause 40.5, the Principal shall pay or allow the Contractor or the Contractor shall pay or allow the Principal as the case may require, an amount. ascertained by the Superintendent as follows —
(a)if the Contract prescribes specific rates or prices to be applied in determining the is value, those rates or prices shall be used;
(b)if Clause 40.5(a) does not apply, the rates or prices in a Priced Bill of Quantities or Schedule of Rates shall be used to the extent that it is reasonable to use them;
(c)to the extent that neither Clause 40.5(a) or 40.5(b) apply, reasonable rates or prices shall be used in any valuation made by the Superintendent;
(d)in determining the deduction to be made for work which is taken out of the Contract, the deduction shall include a reasonable amount for profit and overheads;
(e)if the valuation is of an increase or decrease in a fee or charge or is a new fee or charge under Clause 143, the value shall be the actual increase or decrease or the actual amount of the new fee or charge without regard to overheads or profit;
(f)if the valuation relates to extra costs incurred by the Contractor for delay or disruption, the valuation shall include a reasonable amount for overheads but shall not include profit or loss of profit;
(g)if Clause 11(b) applies, the percentage referred to in Clause 11(b) shall be used for valuing the Contractor's profit and attendance; and
(h)daywork shall be valued in accordance with Clause 41.
1024 When under Clause 40.3 the Superintendent directs the Contractor to support a variation with measurements and other evidence of cost, the Superintendent shall allow the Contractor the reasonable cost of preparing the measurements or other evidence of cost that has been incurred over and above the reasonable overhead cost.
APPENDIX K
42 CERTIFICATES AND PAYMENTS
42.1 PAYMENT CLAIMS, CERTIFICATES, CALCULATIONS AND TIME FOR PAYMENT
1025 At the times for payment claims stated in the Annexure and upon issue of a Certificate of Practical Completion and within the time prescribed by Clause 42.7, the Contractor shall deliver to the Superintendent claims for payment supported by evidence of the amount due to the Contractor and such information as the Superintendent may reasonably require. Claims for payment shall include the value of work carried out by the Contractor in the performance of the Contract to that time together with all amounts then due to the Contractor arising out of or in connection with the Contract or for any alleged breach thereof.
1026 Within 14 days after receipt of a claim for payment, the Superintendent shall issue to the Principal and to the Contractor a payment certificate stating the amount of the payment which, in the opinion of the Superintendent, is to be made by the Principal to the Contractor or by the Contractor to the Principal. The Superintendent shall set out in the certificate the calculations employed to arrive at the amount and, if the amount is more or less than the amount claimed by the Contractor, the reasons for the difference. The Superintendent shall allow in any payment certificate issued pursuant to this Clause 42.1 or any Final Certificate issued pursuant to Clause 42.8 or a Certificate issued pursuant to Clause 44.6, amounts paid under the Contract and amounts otherwise due from the Principal to the Contractor and/or due from the Contractor to the Principal arising out of or in connection with the Contract including but not limited to any amount due or to be credited under any provision of the Contract.
1027 If the Contractor fails to make a claim for payment under Clause 42.1, the Superintendent may nevertheless issue a payment certificate.
1028 Subject to the provisions of the Contract, within 28 days after receipt by the Superintendent of a claim for payment or within 14 days of issue by the Superintendent of the Superintendent's payment certificate, whichever is the earlier, the Principal shall pay to the Contractor or the Contractor shall pay to the Principal, as the case may be, an amount not less than the amount shown in the Certificate as due to the Contractor or to the Principal as the case may be, or if no payment certificate has been issued, the Principal shall pay the amount of the Contractor's claim. A payment made pursuant to this Clause shall not prejudice the right of either party to dispute under Clause 47 whether the amount so paid is the amount properly due and payable and on determination (whether under Clause 47 or as otherwise agreed) of the amount so properly due and payable, the Principal or Contractor, as the case may be, shall be liable to pay the difference between the amount of such payment and the amount so properly due and payable.
1029 Payment of moneys shall not be evidence of the value of work or an admission of liability or evidence that work has been executed satisfactorily but shall be a payment on account only, except as provided by Clause 42.8.
1030 Notwithstanding Clause 42.4, the Principal shall be obliged to pay for any item of unfixed plant and materials where that item is—
(i)to be imported into Australia, provided the Contractor has given the Principal a clean on board bill of lading or its equivalent, drawn or endorsed to the order of the Principal and, where appropriate, a custom's invoice for the item; or
(ii)listed in the Annexure and which is not an item to be imported into Australia, provided the Contractor establishes to the satisfaction of the Superintendent that the Contractor has paid for the item, and the item is properly stored, labelled the property of the Principal and adequately protected.
1031 Upon payment to the Contractor of the amount which includes the value of the item, the item shall be the property of the Principal free of any lien or charge.
1032 Except as provided in the Contract, the Principal shall not be obliged to pay for any item of unfixed plant and materials which is not incorporated in the Works.
42.2 Correction of Payment Certificates
1033 At any time and from time to time, the Superintendent may by a further certificate correct any error which has been discovered in any previous certificate, other than a Certificate of Practical Completion or Final Certificate.
42.3 Retention Moneys
1034 The Principal may deduct from moneys otherwise due to the Contractor amounts up to the limit of the percentages, if any, stated in the Annexure of so much of the value of the to respective items stated in the Annexure as is included in the calculation of a payment.
42.4 Unfixed Plant and Materials
Alternative 1
1035 If the Contractor claims payment for plant or materials intended for incorporation in the Works but not incorporated, the Principal shall not be obliged to make payment for the plant or materials unless the Contractor provides additional security in one of the forms provided by Clause 5.3 in an amount equal to the payment claimed for the plant or materials.
Alternative 2
1036 If the Contractor claims payment for plant or materials intended for incorporation in the Works but not incorporated the Principal shall not be obliged to make payment for such plant or materials but the Principal may make payment, if the Contractor establishes to the satisfaction of the Superintendent that
(a) such plant or materials have reasonably but not prematurely been delivered to or adjacent to the Site;
(b) ownership of such plant and materials will pass to the Principal upon the making of the payment claimed; and
(c) such plant or materials are properly stored, labelled the property of the Principal and adequately protected.
1037 Upon payment to the Contractor of the amount claimed, the plant or materials the subject of the claim shall be the property of the Principal free of any lien or charge.
Alternative 3
1038 The Contractor shall not be entitled to payment for plant or materials not incorporated in the Works.
42.5 Certificate of Practical Completion
1039 The Contractor shall give the Superintendent at least 14 days notice of the date upon which the Contractor anticipates that Practical Completion will be reached.
1040 When the Contractor is of the opinion that Practical Completion has been reached, the Contractor shall in writing request the Superintendent to issue a Certificate of Practical Completion. Within 14 days of the receipt of the request, the Superintendent shall give to the Contractor and to the Principal a Certificate of Practical Completion certifying the Date of Practical Completion or give the Contractor in writing the reasons for not issuing the Certificate.
1041 When the Superintendent is of the opinion that Practical Completion has been reached, the Superintendent may issue a Certificate of Practical Completion whether or not the Contractor has made a request for its issue.
42.6 Effect of Certificates
1042 The issue of a payment certificate or a Certificate of Practical Completion shall not constitute approval of any work or other matter nor shall it prejudice any claim by the Principal or the Contractor.
42.7 Final Payment Claim
1043 Within 28 days after the expiration of the Defects Liability Period, or where there is more than one, -the last to expire, the Contractor shall lodge with the Superintendent a final payment claim and endorse it `Final Payment Claim'.
1044 The Contractor shall include in that claim all moneys which the Contractor considers to be due from the Principal under or arising out of the Contract or any alleged breach thereof.
1045 After the expiration of the period for lodging a Final Payment Claim, any claim which the Contractor could have made against the Principal and has not been made shall be barred.
42.8 Final Certificate
1046 Within 14 days after receipt of the Contractor's Final Payment Claim or, where the Contractor fails to lodge such claim, the expiration of the period specified in Clause 42.7 for the lodgement of the Final Payment Claim by the Contractor, the Superintendent shall issue to the Contractor and to the Principal a final payment certificate endorsed `Final to Certificate'. In the certificate the Superintendent shall certify the amount which in the Superintendent's opinion is finally due from the Principal to the Contractor or from the Contractor to the Principal under or arising out of the Contract or any alleged breach thereof.
1047 Unless either party, either before the Final Certificate has been issued or not later than 15 days after the issue thereof, serves a notice of dispute under Clause 47, the Final Certificate shall be evidence in any proceedings of whatsoever nature and whether under the Contract or otherwise between the parties arising out of the Contract, that the Works have been completed in accordance with the terms of the Contract and that any necessary effect has been given to all the terms of the Contract which require additions or deductions to be made to the Contract Sum, except in the case of —
(a) fraud, dishonesty or fraudulent concealment relating to the Works or any part thereof or to any matter dealt with in the said Certificate;
(b) any defect (including omission) in the Works or any part thereof which was not apparent at the end of the Defects Liability Period, or which would not have been 25 disclosed upon reasonable inspection at the time of the issue of the Final Certificate; or
(c) any accidental or erroneous inclusion or exclusion of any work, plant, materials or figures in any computation or any arithmetical error in any computation.
1048 Within 14 days after the issue of a Final Certificate which certifies a balance owing by the Principal to the Contractor, the Principal shall release to the Contractor any retention moneys or security then held by the Principal.
42.9 Interest on Overdue Payments
1049 If any moneys due to either party remain unpaid after the date upon which or the expiration of the period within which they should have been paid then interest shall be payable thereon from but excluding the date upon which or the expiration of the period within which they should have been paid to and including the date upon which the moneys are paid. The rate of interest shall be the rate stated in the Annexure and if no rate is stated the rate shall be 18 percent per annum. Interest shall be compounded at six monthly intervals.
42.10 Set Offs by the Principal
1050 The Principal may deduct from moneys due to the Contractor any money-due from the Contractor to the Principal otherwise than under the Contract and if those moneys are insufficient, the Principal may, subject to Clause 5.5, have recourse to retention moneys and, if they are insufficient, then to security under the Contract.
42.11 Recourse for Unpaid Moneys
1051 Where, within the time provided by the Contract, a party fails to pay the other party an amount due and payable under the Contract, the other party may, subject to Clause 5.5, have recourse to retention moneys, if any, and, if those moneys are insufficient, then to security, under the Contract and any deficiency remaining may be recovered by the other so party as a debt due and payable.
APPENDIX L
Clause 44 Default or Insolvency
44 DEFAULT OR INSOLVENCY
44.1 Preservation of Other Rights
1052 If a party breaches or repudiates the Contract, nothing in Clause 44 shall prejudice the right of the other party to recover damages or exercise any other right.
44.2 Default by the Contractor
1053 If the Contractor commits a substantial breach of contract and the Principal considers that damages may not be an adequate remedy, the Principal may give the Contractor a written notice to show cause.
1054 Substantial breaches include but are not limited to —
(i)suspension of work, in breach of Clause 33.1;
(ii)failing to proceed with due expedition and without delay, in breach of Clause 33.1;
(iii)failing to lodge security in breach of Clause 5;
(iv)failing to use the materials or standards of workmanship required by the Contract, in breach of Clause 30.1;
(v)failing to comply with a direction of the Superintendent under Clause 30.3, in breach of Clause 23;
(vi)failing to provide evidence of insurance, in breach of Clause 21.1; and/or
(vii)in respect of Clause 43, knowingly providing a statutory declaration or documentary evidence which contains a statement that is untrue.
44.3 Requirements of a Notice by the Principal to Show Cause
1055 A notice under Clause 44.2 shall —
(a)state that it is a notice under Clause 44 of the General Conditions of Contract;
(b) specify the alleged substantial breach;
(c)require the Contractor to show cause in writing why the Principal should not exercise a right referred to in Clause 44.4;
(d)specify the time and date by which the Contractor must show cause (which time shall not be less than 7 clear days after the notice is given to the Contractor); and
(e) specify the place at which cause must be shown.
44.4 Rights of the Principal
1056 If by the time specified in a notice under Clause 44.2 the Contractor fails to show reasonable cause why the Principal should not exercise a right referred to in Clause 44.4, the Principal may by notice in writing to the Contractor —
(a)take out of the hands of the Contractor the whole or part of the work remaining to be completed; or
(b) terminate the Contract.
1057 Upon giving a notice under Clause 44.2, the Principal may suspend payments to the Contractor until the earlier of —
(i) the date upon which the Contractor shows reasonable cause;
(ii)the date upon which the Principal takes action under Clause 44.4(a) or (b); or
(iii)the date which is 7 days after the last day for showing cause in the notice under Clause 44.2.
44.7 Default of the Principal
1058 If the Principal commits a substantial breach of contract and the Contractor considers that damages may not be an adequate remedy, the Contractor may give the Principal a written notice to show cause.
1059 Substantial breaches include but are not limited to —
(a) failing to make a payment, in breach of Clause 42.1;
(b)failure by the Superintendent to either issue a Certificate of Practical Completion or give the Contractor, in writing, the reasons for not issuing the Certificate within 14 days of receipt of a request by the Contractor to issue the Certificate, in breach of to Clause 42.5;
(c)failing to produce evidence of insurance, in breach of Clause 21.1;
(d)failing to give the Contractor possession of sufficient of the Site, in breach of Clause 27.1, but only if the failure continues for longer than the period stated in the Annexure; and/or
(e)failing to lodge security in breach of Clause 5.
44.8 Requirements of a Notice by the Contractor to Show Cause
1060 A notice under Clause 44.7 shall —
(a)state that f1 is a notice under Clause 44 of the General Conditions of Contract;
(b) specify the alleged substantial breach;
(c)require the Principal to show cause in writing why the Contractor should not exercise a right referred to in Clause 44.9;
(d)specify the time and date by which the Principal must show cause (which shall not be less than 7 clear days after the notice is given to the Principal); and
(e) specify the place at which cause must be shown.
44.9 Rights of the Contractor
1061 If by the time specified in a notice under Clause 44.7 the Principal fails to show reasonable cause why the Contractor should not exercise a right referred to in Clause 44.9, the Contractor may by notice in writing to the Principal suspend the whole or any part of the work under the Contract.
1062 The Contractor shall lift the suspension if the Principal remedies the breach but if within 28 days after the date of suspension under Clause 44.9, the Principal fails to remedy the breach or, if the breach is not capable of remedy, fails to make other arrangements to the reasonable satisfaction of the Contractor, the Contractor may by notice in writing to the Principal terminate the Contract.
1063 The Contractor shall be entitled to recover from the Principal any damages incurred by the Contractor by reason of the suspension.
44.10 Rights of the Parties on Termination
1064 If the Contract is terminated under Clause 44.4(b) or Clause 44.9 the rights and liabilities of the parties shall be the same as they would have been at common law had the defaulting party repudiated the Contract and the other party elected to treat the Contract as at an end and recover damages.
44.11 Insolvency
1065 If —
(a)a party informs the other party in writing or creditors generally that the party is insolvent;
(b) a party commits an act of bankruptcy;
(c) a bankruptcy petition is presented against a party;
(d) a party is made bankrupt;
(e)a meeting of creditors of a party is called with a view to—
(i) entering a scheme of arrangement or composition with creditors; or
(ii) placing the party under official management;
(f)a party enters a scheme of arrangement or composition with creditors;
(g)a resolution is passed at a meeting of creditors to place a party under official management;
(h) a party is placed under official management;
(i)a receiver of the property or part of the property of a party is appointed;
(j)an application is made to a court for the winding up of a party and not stayed within 14 days;
(k) a winding up order is made in respect of a party; and/or
(l)execution is levied against a party by creditors, debenture holders or trustees or under a floating charge—
(i)where the other party is the Principal, the Principal may, without giving a notice to show cause, exercise the right under Clause 44.4 (a);
(ii)where the other party is the Contractor, the Contractor may, without giving a notice to show cause, exercise the right under Clause 44.9.
1066 The rights given by Clause 44.11 are in addition to any other rights and may be exercised notwithstanding that there has been no breach of contract.
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