Kennett Pty Ltd v Janssen - [2014] SASC 164

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
KENNETT PTY LTD v JANSSEN & ANOR
[2014] SASC 164
Judgment of The Honourable Justice Blue
4 November 2014
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE - REPUDIATION - WHAT AMOUNTS TO REPUDIATION
The plaintiff builder, Kennett, entered into a subcontract with the defendant bricklayers, Janssen, to undertake for $423,080 the bricklaying for a new health care facility. Disputes arose concerning progress and variation claims and the scope and conditions of the works under the subcontract.
On 25 February 2013, Janssen wrote to Kennett requiring that Kennett agree to pay its most recent progress and variation claim in full and various other terms and matters, failing which Janssen would cease trading on 28 February. At the end of work on 26 February, Janssen suspended work and did not return to the site.
On 4 March 2013, Janssen wrote to Kennett a further letter alleging that Kennett was in breach of contract by not paying progress and variation claims and changing the scope of work and stating that Janssen had suspended work and would only resume after all invoices were paid and a revised scope of work and variations were agreed. Kennett responded later that day by issuing a notice terminating the subcontract for repudiation.
Kennett sues Janssen for damages for breach of contract. Janssen denies that it repudiated the contract and counterclaims alleging that Kennett repudiated the contract and that Janssen is entitled to payment in quantum meruit. Janssen concedes that objectively it was not entitled to suspend work and does not contend that objectively Kennett had been in breach of contract as at 4 March 2013. However, Janssen contends that it would have been apparent to an objective observer in Kennett’s position that Janssen had formed an erroneous view that it was entitled to suspend work and that in all the circumstances its conduct was not repudiatory.
Held by Blue J:
1.      Repudiatory conduct may be comprised of acts or omissions in breach of contract or of statements of intention as to future acts or omissions, provided that the conduct evinces an unwillingness or inability to render substantial performance of the contract (at [101]-[104]).
2.      The adoption by one party of an erroneous view as to the construction of a contract or another relevant matter apparent to a reasonable observer in the position of the other party is one factor to be taken into account in assessing whether a party’s conduct is repudiatory (at [107]-[108]).
3.      In assessing whether a party’s conduct is repudiatory, and in particular the effect of the adoption of an erroneous view, it will be highly relevant whether the party is in present breach of contract or merely stating an intention to engage in acts or omissions in the future which would be in breach of contract (at [116] and [158]-[159]).
4.      Considered objectively from the perspective of a reasonable observer in the position of Kennett, Janssen’s conduct was repudiatory (at [136]-[155]).
5.      If Janssen had been entitled to payment in quantum meruit, its entitlement would have been to payment of $85,482.64 together with GST and interest (at [257]).
6.      Kennett is entitled to judgment for damages assessed at $226,212.22 together with interest (at [259]).
Building and Construction Industry Security of Payment Act 2009 (SA) s 17-27, s 24(1)(b), s 28; Supreme Court Act 1935 (SA) s 30C, referred to.
Cardona and Brownscombe v Rod Brown and Wendy Brown [2012] 35 VR 538; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; Mayhaven Healthcare Ltd v David Bothma and Teresa Bothma trading as DAB Builders [2010] BLR 154; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Sopov v Kane Constructions Pty Ltd [2007] 20 VR 127; Sopov v Kane Constructions Pty Ltd (No 2) (2009) 24 VR 510; Telford Homes (Creekside) Ltd v Ampurius Nu Homes Holdings Ltd [2013] WLR(D) 202; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd & Ors (2004) 219 CLR 165; Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401, discussed.
Federal Commerce & Navigation Co Ltd v Molena Alpha Inc [1979] AC 757; Foran v Wight (1989) 168 CLR 385; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; Lamprell v The Guardians of the Poor of the Billericay Union, in the County of Essex (1849) 154 ER 850; Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126; Re Sanders Constructions Pty Ltd v Eric Newham (Wallerawang) Pty Ltd [1969] Qd R 29; Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1974) 144 CLR 596; Shevill v Builders Licensing Board (1982) 149 CLR 620, considered.

KENNETT PTY LTD v JANSSEN & ANOR
[2014] SASC 164
Civil
BLUE J:

The plaintiff sues the defendants for damages of $226,212.22 (inclusive of GST) for breach of contract claimed to have been terminated by the plaintiff after it was repudiated by the defendants.
The defendants counterclaim seeking a declaration that the plaintiff wrongfully repudiated the contract by its purported termination and payment of $189,278.89 (plus GST) in quantum meruit for materials supplied and work performed under the contract.
The principal issues arising are as follows:
1.Did the conduct of the defendants on 4 March 2013 amount to a repudiation of the contract?
2.If not, did the purported termination of the contract by the plaintiff amount to a repudiation of the contract?
3.If so, what amount should be assessed as payable by the plaintiff to the defendants in quantum meruit?
Background
The parties
The plaintiff Kennett Pty Ltd (Kennett) is a commercial builder. It is a family business, having been formed in 1914. It is owned and controlled by John Kennett, who is the sole director. Scott Kennett, who is John Kennett’s son, is the construction manager. Philip Hole is the contracts manager. Piotr Rzad was the project manager and Gilbert Simpson and Kim Collins were the site managers for the project in question.
The second defendant J & S Janssen Bricklayers Pty Ltd (Janssen Co) is a commercial bricklayer. It is a family business having been formed many years ago. It originally comprised a partnership of Jürgen Janssen and another person trading as J & H Janssen Bricklayers. In 1995, the first defendant Steven John Janssen (Mr Janssen) replaced his father’s partner and the partnership was renamed J & S Janssen Bricklayers (the partnership). In 2006, Jürgen Janssen and Mr Janssen registered the business name J & S Janssen Bricklayers. On 30 June 2010, Jürgen Janssen resigned from the partnership. At all material times, Mr Janssen held a builder’s licence.
Janssen Co was incorporated by Mr Janssen and his then partner Ina Thiel in June 2010. It became the trustee of the Janssen Thiel Family Trust. On 1 July 2010, Janssen Co commenced trading as J & S Janssen Bricklayers Pty Ltd in lieu of the partnership. However, the registered details of the business name were not changed. On 30 June 2012, registration of the business name expired. Janssen Co focussed on commercial projects, whereas the partnership had focussed on residential projects.
At all material times, Mr Janssen was the sole director and shareholder of Janssen Co. He was general manager. For ease of reference, I refer to Janssen Co and Mr Janssen collectively as “Janssen”. Luke Morton was site foreman for the project in question.
Padman Health Care Facility Lockleys
In the first half of 2012, Padman sought tenders for the construction of an 86 bedroom aged care facility on the corner of Henley Beach Road and Mellor Street, Lockleys. The building was to be of timber and steel frame construction with an external single brick leaf. It was to comprise two stories. Each accommodation room was to have a bay window. The building was to be in a reverse L shape. The foot of the L was designated the “western wing” (the west wing) and the upright of the L was designated variously as the eastern or northern wing (the east wing).
The entire perimeter of the building was to be constructed of face brick. There were to be three internal courtyards constructed of face brick. There was to be a lift in the western and eastern courtyards and a lift in the east wing to be constructed of concrete block work filled with reinforced concrete and faced by bricks where visible. There were to be plant rooms on both floors to be constructed of concrete block work filled with concrete. Three fences on the boundaries designated FT1, FT2, and FT5 were to be constructed of stone pillars 2.4 metres apart with face brick above a stone plinth and capped by stone capping. The total brickwork was approximately 2,400 square metres and the total concrete blockwork was approximately 240 square metres.
Kennett, amongst other builders, submitted a tender to construct the Lockleys aged care facility. In the first half of April 2012, Janssen submitted a subcontract tender to Kennett and perhaps other builders for construction of the block work and brickwork. Janssen’s tender was based on Mr Janssen’s estimate of total brickwork of 3,240 square metres and block work of 240 square metres and excluded supply or laying the stonework components of the fences. Janssen provided alternative quotes for different types of bricks and jointing. The quoted prices ranged from $375,620[1] using Austral standard bricks to $526,270 using PGH Santorini random bricks. Santorini random bricks are laid in a random pattern made up of multiple size bricks ranging from half a standard house brick to three times a standard house brick and are significantly more expensive to lay as reflected in Janssen’s quotes.
[1] Dollar figures are exclusive of GST and rounded to the nearest dollar unless otherwise shown or the context indicates otherwise.
In mid-May 2012, Kennett was informed by Padman in that its tender had been successful.
Pre-contract negotiations
On 23 May 2012, Mr Hole sent to bricklaying contractors including Janssen an email inviting a revised quote based on clarified brickwork quantities, PGH Santorini random bricks and rough parget jointing (except the FT5 fencing which was to be standard brick). Brickwork was shown as 2,333 square metres in the main building together with 88 square metres for the FT1 fencing and 21 square metres for the FT5 fencing. Block work was shown as 180 square metres reinforced concrete core-filled blocks for the lift shafts together with 58 square metres concrete core-filled blocks for the FT2 and FT5 fencing. Supply and installation of the stonework for the FT1, FT2 and FT5 fencing was included.
On 25 May 2012, Mr Janssen sent to Mr Hole a schedule of unit rate prices. He showed $99 per square metre for the random brickwork in the main building, $122 per square metre for the random brickwork in the FT1 fencing and $65 per square metre for the standard brickwork in the FT5 fencing. He showed $140 and $146 per square metre for the concrete block work. He showed an hourly rate of $55 for any extra work.
On 15 June 2012, Mr Janssen sent an email to John Kennett and a second email to Mr Hole, copied to John Kennett, requesting a meeting to discuss the project. He said:
I need to speak to you John because I am in trouble, its as simple as that. Without this job I may as well close the business and find employment elsewhere. It is very serious.
On 18 June 2012, Mr Janssen met with Mr Hole. Later that day, Mr Janssen sent an email to Mr Hole saying that he could do the job for $419,000.
On 26 July 2012, Mr Janssen sent an email to Mr Hole attaching revised pricing. It quoted a revised price of $423,080. The price was broken down into separate categories, which can in turn be grouped into three broad groups according to the construction material used:
1.concrete block work for the lifts and plant rooms;
2.face brickwork for the external walls, courtyards, lifts and fences; and
3.cast stonework for the fences.
The detailed breakdown of Mr Janssen’s revised price was as follows:[2]
[2]    Re-ordered into the three broad groups described above.
Block Supply             $ 10,000
Block Labour             $ 18,000
Sundries  $    1,500
Concrete core fill        $ 14,000
Rio  $    2,000
Brick Supply              $ 94,080
Brick Labour             $155,000
Sundries  $ 16,000
Lintels  $    5,000
Hoisting  $    6,500
Cast stone supply        $ 82,000
Cast stone fit              $ 19,000
Supply and fit             $423,080
GST     $ 42,308
Total  $465,388
On 27 July 2012, Mr Janssen met with Messrs Hole, Rzad, Simpson and Collins on site. Mr Hole took minutes which were later typed and incorporated into the contract. A construction program was agreed. The program showed an overall start date of 12 June 2012 and handover on 12 July 2013. It showed brickwork in the west wing between 26 October and 27 November 2012 and in the east wing between 21 November and 20 December 2012. It was agreed that block work on the lift shafts would commence in approximately 3 weeks (around 17 August 2012), brickwork to the main building would commence in mid October and proceed over 10 weeks (five weeks per wing) and the external fencing would commence in mid January and proceed over three weeks.
It was agreed that progress claims would be submitted monthly by the 24^th day of each month showing work completed on the basis of percentage completed for each item deducting amounts previously claimed or paid. Payment would be made by the 20^th day of the following month. There was to be a 5% retention of progress claim payments.
It was agreed that Janssen would supply its own scaffolding to lay bricks up to three metres above ground and Kennett would supply scaffolding for laying bricks above three metres. Mr Janssen said that he had made no allowance for bricking beneath scaffold and that the price was based on having clear access and being able to deliver bricks by mechanical means to the workface.
Under the heading of variations, the following was agreed:
4.5 Variations
It was acknowledged that any written instructions from KPL will be complied with. Any additional works must be priced in advance of being carried out on site.
Where variations occur through drawing and document issues they will be priced and confirmed to KPL within 7 days. A detailed breakdown must be given with the price, including units, rates and quantities.
Should any site daywork be instructed it must be agreed in advance with Piotr Rzad or Phil Hole including likely timescale etc...
Steve confirmed his all inclusive daywork rate for skilled labour was $65/hr and $40/hr for unskilled/apprentice. Materials and plant at cost plus 5%.
The contract
On 30 July 2012, Mr Rzad on behalf of Kennett executed a subcontract between Kennett and “J & S Janssen Bricklayers” (the Contract). The Contract comprised a six page document containing terms and conditions (the Terms and Conditions) executed by the parties together with a purchase order, the agreed scope of works, the Janssen quotation dated 26 July 2012, the minutes of meeting dated 27 July 2012, the construction program and various other documents.
It was a term of the Contract that Janssen commence the works on the start date nominated in the latest construction program (clause 5.1) and proceed with the works with due diligence and without delay (clause 5.3). It was a term of the Contract that Kennett reserved the right to amend the construction program and sequences of work (clause 5.2). It was a term of the Contract that Kennett may reprogram the works without penalty or cost in the event of delay due to force majeure type events (strikes, industrial action or delay by others) (clause 5.4).
On 27 August 2012 Mr Janssen signed the Contract for and on behalf of “J & S Janssen Bricklayers”. On 29 August 2012, Mr Janssen met with Messrs Hole, Rzad, Simpson and Collins on site and provided the signed Contract to Mr Hole.
Delay in project
The project fell behind the scheduled program due to inclement weather and other reasons. The program provided for practical completion by mid July 2013, but this was ultimately extended by approximately three months to October 2013. The brickwork in the west wing was due to start on 26 October but did not start until the week commencing 5 November 2012. The brickwork in the east wing was due to start in the second half of November 2012 but did not start until January 2013. These were general delays on the project and were not specific to the brickwork.
Lift shafts
Between 3 September and 17 October 2012, Janssen constructed the block work for the two lift shafts and filled it with steel reinforcing rods and concrete.
Between 20 September and 17 October, Janssen issued to Kennett four invoices comprising progress claims totalling $41,000 for construction of the two lift shafts (progress claims 1, 2 and 4) together with a variation claim for $1,150 for use of mobile scaffolding for the upper level of the lift shafts (variation claim 1). These progress claims and all subsequent progress claims were made by reference to the breakdown of the total contract price into the components shown in the Janssen quote dated 26 July 2012. Kennett paid progress claims 1, 2 and 4 and variation claim 1 in full (less 5% retention) in October and November.
Internal brickwork
On 4 October 2012, Mr Janssen constructed a sample panel comprising one square metre of Santorini random brickwork. The purpose of the sample panel was to show Kennett the quality of work it could expect from Janssen. One half square metre used rough parget jointing and the other half square metre used a shallow raked joint. The sample panel of rough parget jointing was approved by Padman’s architect.
Around 17 October 2012, PGH delivered the first pallets of Santorini random bricks to site. On 17 October 2012, Janssen issued to Kennett an invoice comprising a progress claim for $20,400 for brick supply being 510 square metres at $40 per square metre (progress claim 3). Progress claim 3 was paid in full (less 5% retention) by Kennett in November.
In the second half of October 2012, Janssen commenced laying Santorini random bricks on the external face of the block work for the lift shafts.
On 26 October 2012, Janssen issued to Kennett an invoice comprising a progress claim for $8,000 for supply and laying of bricks on the lift shafts (progress claim 5). Mr Janssen later provided a breakdown showing:
·75 square metres of bricks supplied (3% completed);
·62.5 square metres of bricks laid (3% completed); and
·$1,000 for sundries (6% completed).
Kennett paid the claim in full (less 5% retention) in December.
On 30 October 2012, Mr Janssen sent an email to Messrs Simpson, Collins and Rzad saying that working beneath scaffolding on the lift shaft was taking extra time and he would be charging a variation at the rate of one hour per man per day.
West wing brickwork
During the week commencing on 5 November 2012, Janssen commenced construction of brickwork for the external walls of the west wing.
On 8 November 2012, Mr Janssen was informed by Kennett that scaffolding was to be erected on some external walls of the west wing to allow the roof to be constructed. Mr Janssen sent an email to Messrs Simpson, Collins and Rzad stating that working beneath scaffolding would reduce productivity by an estimated one hour per man per day and suggested a surcharge of 25% for bricking up to 4 metres under scaffolding. Mr Collins responded saying that, on reviewing the position, Kennett would hold off on scaffolding until completion of the ground floor of the west wing, which should take two and a half weeks based on the program of five weeks for the west wing.

In mid-November 2012, Kennett started erecting scaffolding on the site. Some scaffolding was erected in front of work areas on the ground floor of the west wing where Janssen would be required to lay bricks. Some window frames had not been installed on the ground floor of the west wing. Janssen was instructed to work in the kitchen area on the first floor of the west wing, to continue with face brickwork to the lift shafts up to the first floor level and to work around the scaffold on the ground floor of the west wing while awaiting the arrival of window frames.
On 13 November 2012, Mr Janssen sent an email to Mr Rzad. He said that it appeared that Janssen would have to work beneath scaffolding near both stair areas and Janssen would incur extra costs due to manual cartage and restricted workspace. He inquired as to what scaffolding could be removed. He said that the bottom wall framing had not been completed where Janssen was being asked to work. He said that blocked access would result in extra costs being on charged to Kennett. He requested a meeting on site the following day to work out a written schedule for more than one day at a time. Mr Janssen requested Mr Morton to keep a record of the extra time taken because of scaffolding. Janssen worked under scaffolding for approximately 5% of the total external walls of the west wing.
In mid-November 2012, Mr Hole met with the architect to discuss the parget jointing. It was agreed that there would be a variation to the head contract to substitute flush jointing for parget jointing. Mr Hole, in company with Mr Rzad, Mr Simpson and Mr Collins, then met with Mr Janssen on site. Mr Hole said that the architect was not happy with the parget jointing and instructed Mr Janssen to change all future construction to flush jointing. There was a discussion whether the workmanship in constructing the parget jointing was deficient or whether the appearance was inherent in the use of parget jointing with Santorini random bricks. There was a discussion concerning a reduction in the contract price on account of the change to flush jointing. Mr Hole suggested a reduction of $10 to $15 per square metre. Mr Janssen argued that there should be no reduction. They compromised on a reduction of $5 per square metre. There was a discussion about Janssen putting back the parget jointing already done to a flush joint.
On 27 November 2012, Janssen issued an invoice to Kennett comprising a progress claim for $80,985 (progress claim 6). It reflected a cumulative claim for:
·1475 square metres of bricks supplied (61% completed);
·762.5 square metres of bricks laid (32% completed);
·10% of lintels completed; and
·15% of hoisting completed.
Kennett paid the claim in full (less 5% retention) in December 2012.
On 28 November 2012, Janssen issued to Kennett an invoice comprising a variation claim for $8,515 (variation claim 2). In December 2012, Kennett issued to Janssen a payment advice notice approving the claim to the extent of $2,955. Two claims were accepted in full, two were accepted in part and two were rejected.
On 29 November 2012, Mr Janssen sent an email to Mr Rzad acknowledging that progress claim 6, which was due on 24 November, was late but saying that, if Kennett did not process it in December, Janssen would not be able to order bricks and continue. Mr Rzad responded that it was not Kennett’s responsibility to cashflow Mr Janssen’s contract and liquidated damages would be claimed for delays due to failure to provide materials.
On 3 December 2012, Mr Janssen met on site with Scott Kennett, Mr Rzad, Mr Simpson and Mr Collins. Scott Kennett requested a schedule showing work to be performed by Janssen over the next two weeks. Scott Kennett said that he wanted his team and Mr Janssen to work together to forward plan at fortnightly intervals. The following day, Mr Rzad gave to Mr Janssen a two week schedule. It included work on the internal courtyard in the west wing to be followed by work on the southern face of the west wing as the windows arrived.
In December 2002, Janssen continued laying bricks on the external walls of the west wing.
On 20 December 2012, Janssen issued to Kennett an invoice comprising a progress claim for $59,340 (progress claim 7) and a variation claim for $2,095 (variation claim 3) (together the December invoice). Progress claim 7 reflected a cumulative claim for:
·2,185 square metres of bricks supplied (91% completed);
·1,062.5 square metres of bricks laid (44% completed);
·56.25% of sundries completed;
·60% of lintels completed; and
·45% of hoisting completed.
Variation claim 3 included a claim for $360 for nine hours manual cartage of bricks to the office area and $500 for 10 hours bricking beneath scaffolding in front of the office area.
January issues and agreements
On 7 January 2013, Janssen returned to site after the Christmas/New Year holiday. On the same date, Mr Rzad on behalf of Kennett issued to Janssen a payment advice schedule in respect of the December invoice. It assessed progress claim 7 on the cumulative basis of:
·1,080 square metres of bricks supplied (45% completed);
·1,080 square metres of bricks laid (45% completed);
·50% of sundries completed;
·50% of lintels completed; and
·45% of hoisting completed.
It assessed variation claim 3 allowing $610 due to scaffolding obstructions and rejecting the balance of the claim. Kennett offset a back charge for deletion of parget jointing at $5 per square metre being $5,400 based on 45% completion to date. Kennett also offset back charges for water feeds, cleaning brick rubble and lowering the scaffold totalling $2,519. The assessment resulted in a payment due (after retentions) by Janssen to Kennett of $6,880.
On 9 January 2013, Mr Janssen met with Mr Hole on site to discuss issues that had arisen concerning headers and caulking. Mr Janssen claimed that headers were not included in the Contract while Mr Hole claimed that they were. It was agreed that Janssen would lay the headers, reserving the right to claim the cost as a variation. Mr Janssen claimed that caulking was not included in the Contract while Mr Hole claimed that it was. The parties were unable to reach agreement and Mr Hole decided to engage separate contractors to undertake the caulking, with Kennett reserving the right to claim an offset as a variation. Later on 9 January 2014, Mr Hole sent an email to Mr Janssen confirming the interim agreement. Emails were also exchanged in which each party confirmed his position concerning the ultimate position, although Mr Hole indicated that he was prepared to reconsider the position down the track.
On 9 January 2013, Mr Janssen sent an email to Mr Hole confirming that Janssen would lay the headers over the windows reserving the right to charge for the work. He said that he would not commit to laying the headers on the tops of walls pending legal advice. He said that he was submitting a loss of work notice for five days due to inclement weather and 10 days for site conditions including working beneath scaffolding. Mr Hole responded saying that it had been agreed at the meeting that day that Janssen would lay the headers above the windows and top of the walls on the basis that the issue whether it comprised a variation could be resolved later. He said more information would be needed in relation to the loss of work notice.
On 9 January 2013, Mr Janssen sent an email to Mr Collins and Mr Simpson, copied to Mr Rzad and Mr Hole. He said that all directions to undertake work outside the Contract were required to be provided by Kennett in writing because Mr Rzad was refusing to pay for work completed without a written order.
On 10 January 2013, Mr Hole sent an email in response. He said that, with regard to a schedule, on completion of the current work at the rear, Janssen should work on the courtyard lifts and then the north-west area pending fitting of bay windows to the frontage. Mr Hole also raised various items of brickwork that Janssen needed to attend to. He requested that Janssen remove the remainder of unacceptable parget jointing and rectify it back to flush. He also requested that Janssen replace a section of brickwork on the eastern lift shaft which had been built using blocks rather than face brick. On 10 January 2013, Mr Janssen sent a responding email saying that he was well aware of the rework needed to the lift shaft and would discuss the parget jointing with John Kennett.
On 10 January 2013, Mr Janssen sent an email to John Kennett. He referred to costs and delays to the project and said that he was talking about figures touching $100,000. He said that his concerns included non-payment of verbally approved variations, lack of a schedule and loss of productivity due to poor site management.
On 11 January 2013, Mr Janssen sent an email to Mr Hole. He said that he required a written instruction to return to the internal courtyard and then to return to the front aspect and he would claim $2,400 as a variation cost for each as a result of the significant time losses incurred in relocating. He said that the bay windows were to have been installed without glass, but they had been installed with glass, and he would claim $400 extra per panel for additional setup and labour due to the presence of the glass. Mr Hole sent a responding email on 11 January 2013 confirming an agreement that Kennett would pay $640 for returning to the courtyard and instructing that in future Janssen was not to start in an area if it was not fully ready. He rejected the claim for a variation in relation to the glazed bay windows.
On 15 January 2013, Mr Janssen sent an email to Mr Rzad complaining about his assessment of the December invoice and the back charges applied by Kennett in the payment advice schedule dated 7 January 2013. He said that, as Kennett had ignored verbal agreements, he proposed to do the same, including his agreement to a credit of $5 per square metre for the change from parget to flush jointing. He said that, if the assessment of the December invoice was not altered as requested, he would remove his team from the site on Monday, 21 January and claim damages as Kennett was in breach of contract.
On 17 January 2013, Mr Janssen met with Mr Hole and John Kennett. There was a discussion about a four page list of issues which Mr Janssen brought to the meeting. Issues discussed included the following:
1.It was agreed that, while Kennett did not accept that the headers comprised a variation, Kennett would pay Janssen to remove existing work and install headers in the kitchen area at one rate and to install headers in new brickwork at a different rate. Mr Janssen sought rates of $180 and $90 per lineal metre respectively. Mr Hole agreed to those rates on the basis that Mr Janssen would monitor the time it took and, if it was less, he would reduce the rate.
2.Mr Hole agreed that, if in future Janssen were required to work under scaffold, it would be treated as a variation. Mr Janssen sought a surcharge of 40% on the labour rate per square metre for working beneath scaffold.
3.Mr Janssen sought a variation for bricking between panels between glazed windows at $400 per panel, which Mr Hole rejected.
4.Mr Janssen sought a variation for inadequate security resulting in theft of Janssen material at a net cost of approximately $9,000. Mr Hole rejected that claim.
5.Mr Janssen sought a variation to change the existing parget jointing to flush jointing at a cost of $6,000. Mr Hole did not agree and said that it had been previously agreed that Janssen would undertake that work without charge and would allow a credit of $5 per square metre for future work.
6.Mr Janssen requested an instruction that caulking was not included in Janssen’s scope of works. Mr Hole maintained that it was included, but agreed as a gesture of goodwill to meet the cost of caulking.
7.Mr Janssen complained about a lack of scheduling. Mr Hole disagreed.
On 18 January 2013, Mr Hole sent to Mr Janssen an email instructing Janssen to start laying the headers to the top of the wall over the kitchen on the basis that he agreed to pay Janssen for that work. In that area, existing bricks had to be removed before the headers could be laid. Mr Janssen sent an email in response saying that he would commence that work on 21 January and would charge $180 per lineal metre. Mr Janssen provided a price of $90 per lineal metre to remove existing bricks and $32 per lineal metre for replacement if it was undertaken in accordance with a drawing attached. Mr Hole sent an email in response instructing Mr Janssen to proceed on the basis of $180 per lineal metre with Mr Janssen monitoring the hours spent and if it came in under the quote then the rate would be reviewed.
On 23 January 2013, Mr Janssen and Mr Hole met on site to discuss the outstanding progress claim 7 and variation claims 2 and 3. They agreed that Kennett would pay on the basis of:
·1,632 square meters of bricks supplied (68% completed);
·1,080 square metres of bricks laid (45% completed);
·50% of sundries completed;
·50% of lintels completed;
·45% of hoisting completed;
·100% of blocks and reinforcing, 95% of block labour and 80% of concrete core-fill and sundries completed in respect of the two lift shafts;
·variation claim 2 dated 28 November 2012 being agreed by a mixture of approval and compromise at $6,775;
·variation claim 3 dated 20 December 2012 being agreed by a mixture of approval and compromise at $1,300 (including the full amount of $860 sought by Janssen for obstruction due to scaffolding);
·the back charge by Kennett for deletion of parget jointing at $5 per square metre being $5,400 based on 45% completion to date being accepted by Janssen;
·the back charges by Kennett for water feeds, cleaning brick rubble and lowering the scaffold being withdrawn by Kennett.
On 24 January 2013, Mr Hole sent an email to Mr Janssen confirming the agreement reached the day before and attaching a payment advice schedule setting out details of the assessment based on the agreement. On 25 January 2013, Kennett issued to Janssen a payment advice notice together with a cheque for $32,170 based on the agreement reached on 23 January 2013.
At the meeting on 23 January 2013, Mr Janssen and Mr Hole also discussed the following:
1.While maintaining its contractual position that headers were included in the scope of works, Mr Hole agreed as a show of good faith to treat the installation of headers as a variation and pay the cost of their installation. There was an agreement that new header work would provisionally be paid at $90 per lineal metre, but Mr Janssen would review the time spent to lay the headers to establish an average time and the rate would be reviewed in light of that time.
2. Mr Hole agreed to pay the cost of removal of bricks to make way for headers where they had already been installed. There was an initial agreement that removal and replacement with headers would provisionally be paid at $180 per lineal metre, but Mr Janssen would review the time spent and the rate would be reviewed in light of that time.
3. It was agreed that, when manual cartage of materials was blocked by scaffolding, it would be treated as a variation. Mr Hole instructed Mr Janssen to proceed with working in those circumstances on that basis. Mr Hole said that it was preferable for Janssen to keep a record of the time spent and agree it with Mr Collins or Mr Simpson. Alternatively Mr Hole and Mr Janssen could agree a percentage increase or a square metre rate each time it occurred but that would be cumbersome.
4.Mr Hole did not agree that the installation of glazed windows resulted in a variation but he would review it further and revert to Mr Janssen next week.
5.Mr Hole rejected the security claim made by Mr Janssen on 17 January 2013.
On 24 January 2013, Mr Hole confirmed the discussions summarised in the previous paragraph by emails sent to Mr Janssen at 10.24 am and 12.37 pm. Between those emails, Mr Janssen sent an email to Mr Hole attaching the list of issues discussed at the meeting on 17 January and requesting a response.
At the meeting on 23 January 2013 or at about the same time, Mr Hole and Mr Janssen agreed to delete from the Contract the supply and installation of the cast stone for the boundary fencing, except that Janssen would still lay the stone capping on the brickwork between the stone pillars. It was agreed that the contract price would be reduced by the value of the deleted work which was to be ascertained and agreed.
On 24 January 2013, Mr Janssen sent an email to Mr Hole confirming the agreement for removal from the Contract of the cast stonework. He attached a quotation which he had obtained from Cast Stone for $85,600 including GST showing $75,118 for supply and installation of the stone pillars and stone plinths, $2,700 supply only of stone capping and $7,782 GST. On 5 February 2013, Mr Hole sent an email to Mr Janssen confirming that the cast stoneworks had been deleted from the Contract and $85,600[3] had been deleted from the contract price. Mr Hole showed an adjusted contract price of $337,480. Mr Hole said that this retained a balance in the Contract for the supply and laying of external brick walls and the laying of the cast stone capping to the brick walls.
[3] Mr Hole erroneously deducted the figure inclusive of GST from the contract sum of $423,080 which was exclusive of GST. This error operated in favour of Janssen.
On 25 January 2013, Janssen issued to Kennett an invoice comprising a progress claim for $68,900 (progress claim 8) and a variation claim for $23,135 (variation claim 4) (together the January invoice). Progress claim 8 reflected a cumulative claim for:
1.2,032 square metres of bricks supplied (85% completed) ($16,000 being the incremental charge relating to progress claim 8);
2.1,580 square metres of bricks laid (66% completed) ($32,000 being the incremental charge relating to progress claim 8);
3.70% of sundries completed ($3,200 being the incremental charge relating to progress claim 8);
4.80% of lintels completed ($1,500 being the incremental charge relating to progress claim 8);
5.75% of hoisting completed ($1,950 being the incremental charge relating to progress claim 8);
6.75% of cast stone labour ($14,250 being the incremental charge relating to progress claim 8).
Variation claim 4 comprised claims for:
1.$6,400 for bricking 16 bays between glazed windows at $400 per bay;
2.$2,610 for installing 14.5 lineal metres of headers above kitchen areas at $180 per lineal metre;
3.$9,000 for installing 100 lineal metres of headers at $90 per lineal metre;
4.$6,080 for supply and laying of concrete filled blocks to the ground floor plant room;
5.$2,675 for three additional variations; and
6.a back charge of $3,630 for deletion of the communications room.
From 28 January 2013, Janssen worked on the first floor of the west wing, the first floor of the internal courtyard of the west wing and the north of the east wing.
February issues and communications
On 4 February 2013, Mr Rzad sent an updated schedule to Mr Janssen and other subcontractors showing brickwork on the first floor facing Henley Beach Road, continuing with the office on the west elevation, courtyard 6, the far north elevation and cleaning of the lift shaft.
On or before 5 February 2013, Mr Hole and another Kennett employee measured brickwork completed by Janssen. On 5 February 2013, Mr Hole sent an email to Mr Janssen saying that total brickwork completed was 1,116 square metres. He said that, in addition, there were approximately 15 full or partially full pallets of bricks on site yet to be installed. He said that the headers to the kitchen area totalled 16 lineal metres and the headers to other areas totalled 70 lineal metres.

On 12 February 2013, Mr Hole and Mr Janssen met on site to discuss the January invoice. They:
1.agreed that Kennett would pay Janssen on the basis that 1,521 square metres of bricks had been supplied;
2.agreed that Kennett would pay Janssen on the basis that 1,340 square metres of bricks had been laid;
3.discussed the variation claim for panels between glazed windows but did not reach agreement;
4.discussed the header variation and agreed on a rate of $74 per lineal metre for new header work and $164 per lineal metre for re-work but did not discuss the lineal metres completed;
5.discussed the claim for payment of $14,250 relating to 75% of cast stone labour. Mr Janssen explained that, when he had itemised his tender on 26 July 2012, he had included a general labour contingency of $19,000 described as “cast stone fit”. He said that he now needed the extra cash flow. Mr Hole said that he would see what he could do in relation to that claim;
6.did not discuss the other variation claims.
On 13 February 2013, Mr Hole sent an email to Mr Janssen and other subcontractors saying that Kennett was now at the end of the scheduled program for west wing externals and hence scaffold hire. He requested that all external works be completed on the west wing including brickwork. He said that scaffold removal would commence in two weeks’ time.
On 15 February 2013, Kennett issued to Janssen a payment advice schedule in respect of the December invoice. Kennett also issued a payment advice notice accompanying a cheque for $29,142.40 ($32,056.64 inclusive of GST). The schedule assessed progress claim 8 on a cumulative basis at a total of $22,420.40 (before retention) comprising:
1.1,521 square metres of bricks supplied (63% completed) (111 square metres fewer bricks than the 1,632 square metres approved by Kennett on 24 January in respect of progress claim 7, being a reduction of $4,729.60 incrementally);
2.1,340 square metres of bricks laid (56% completed) (260 square metres at an incremental cost of $17,050 relating to progress claim 8);
3.65% of brick sundries completed ($2,400 being the incremental cost relating to progress claim 8);
4.65% of lintels completed ($750 being the incremental cost relating to progress claim 8);
5.75% of hoisting completed ($1,950 being the incremental cost relating to progress claim 8);
6.cast stone margin $5,000 on account.
The schedule assessed variation claim 4 at a total of $7,843 comprising:
1.brickwork between bay windows claim rejected;
2.$2,378 for installing 14.5 lineal metres of headers above kitchen areas at $164 per lineal metre;
3.$5,180 for installing 70 lineal metres of headers at $74 per lineal metre;
4.$2,560 for the supply and laying of concrete filled blocks to the ground floor plant room;
5.$2,675 for three additional variations;
6.a chargeback of $3,630 for deletion of the communications room;
7.a credit of an additional $1,320 for the deletion of parget jointing at $5 per square metre.
On 21 February 2013, Mr Janssen received the cheque from Kennett for $32,056.64 for the December invoice. He sent an email to Mr Hole saying it was not as expected. He attached a revised invoice, deleting the claim for face brick supply, revising the incremental claim for face brick laying to 278 square metres being $17,792 and reiterating the claims for sundries, lintels, hoisting and cast stone. The invoice also reiterated all of the variation claims, except that it accepted the reduction of the claim for the plant room to $2,560. He said that he had compromised on the parget credit and the theft claim but would invoice it and dispute it through the courts if necessary in due course. He concluded by saying:
The 32k including Gst is a far cry from the 64k inc Gst claimed (see attachment). We will only be able to proceed until the end of the month on this sum its as simple as that.
This is purely business now Phil, im going to fight for what is owed and our survival and I will need support and payments in full to complete this project.
On 21 February 2013, Mr Hole replied by email. He said that, when they had met on site, they had agreed all individual items except the glazed windows and cast stone claim. He said Kennett had since paid $5,000 for the cast stone claim, which was more than fair. He said Kennett had sent an email saying only 70 lineal metres of headers had been completed and he had not heard that Mr Janssen had an issue with that. He concluded by saying:
I am happy to request a further payment from accounts for you for cash flow purposes, but I cannot process payment against a claim for more than what has been done at that time. Give me a call when you are available to discuss.
On 21 February 2013, Mr Janssen sent a responding email. He said:
Im not asking for extra for work not completed. All I want is what work I have done and extra costs incurred. My request for full payment of the attached invoice stands as does my intention to remove staff from site.
…
This is now a deal breaker Phil 30k doesn’t cover the wage bill let alone the other expenses. If its Kennett’s intention to send me broke then its looking very likely, the end of the month. I need to sign a ASIC document stating we are solvent, with 30k this can’t happen.
…
On 22 February 2013, Mr Hole sent an email to Mr Janssen. He said the last thing Kennett wanted was for Mr Janssen to lose his company. He asked Mr Janssen to confirm that, if Kennett paid Janssen a further $30,000 on 1 March, that would keep Janssen going until the next progress claim payment date being 20 March.
Last week of February
On Monday 25 February 2013, Janssen issued to Kennett an invoice comprising a progress claim for $54,050 (progress claim 9) and a variation claim for $30,600 (variation claim 5) (together the February invoice). Progress claim 9 reflected a cumulative claim for 1,921 square metres of bricks supplied ($16,000 being the incremental charge relating to progress claim 9) and 1,840 square metres of bricks laid ($32,000 being the incremental charge relating to progress claim 9). Variation claim 5:
1.reiterated the rejected claim for $6,400 for bricking between 16 bays of glazed windows;
2.reiterated the claim for $9,000 for 100 lineal metres of headers (which Kennett had assessed at $5,180 in progress claim 8);
3.claimed $3,000 for work performed by Janssen’s foreman for Kennett, $1,100 for hoist hire and $3,200 for a change to 190mm concrete blocks to the first floor plant rooms;
4.rejected the credit of $6,700 for parget jointing assessed by Kennett in progress claim 8;
5.rejected what was described as a back charge of $1,200 by Kennett for “dropping scaffold and hoisting scaffold/timber” which had not apparently been deducted by Kennett from previous progress claim payments.
On 25 February 2013, Mr Hole sent an email to Mr Janssen concerning proposed brickwork on the eastern and northern ends of the east wing. He said that there would be scaffolding present in those locations. He accepted that this represented a variation. He said that he was happy if Mr Janssen built up a price per square metre showing his calculations or alternatively for Mr Morton to keep a record of the additional time loading out and agree it with Mr Simpson and Kennett would pay that amount. He concluded by saying that they needed to move on to this area that week so as not fall behind the program on brickwork.
On 25 February 2013, Mr Janssen sent an email to Mr Hole attaching a letter outlining his situation and position and a proposal so that they could go forward (the 25 February letter). The letter included the following passages:
It is with immense sadness and disappointment that I have to inform you that, due to Kennett Builders not adhering to the agreed contract… J & S Janssen Bricklayers Pty Ltd will have to cease trading as of Thursday 28^th of February 2013.
We have incurred severe losses on the project that have crippled us and as of today we cannot meet our end of month obligations to suppliers, the ATO and other required institutions.
…
After receiving our cheque on the 21^st of January, that included some variations, I contacted Phil and said it was over $30,000 short and that I was extremely unhappy. I urgently booked a meeting with my accountant and again took legal advice. I’m fighting with all my heart and soul to ensure my company’s continuing existence. I expected this payment in full as the variations were valid and percentages claimed accurate. I have been upfront with Phil Hole the whole time he has been acting as our project manager, explaining that J & S Janssen Bricklayers Pty Ltd, as a small business could not sustain the losses incurred. I have continually stressed that conditions and payments had to be honoured otherwise we could not go on.
We are now at that point.
...
On the next pages I have outlined the only option available to J & S Janssen Bricklayers Pty Ltd and Kennett Builders Pty Ltd that would enable J & S Janssen Bricklayers Pty Ltd to trade after the 28^th of February 2013 to continue the masonry work on the Lockleys project.
Attached to the letter was a document which commenced as follows:
Below is listed the only way we can continue onsite, all the points will need to be agreed in writing and without all the points agreed J & S Janssen Bricklayers Pty Ltd will cease trading on the 28^th of February 2013.
This is in no way a threat, it is actual and this list represents our position accurately and all these concerns and payments will need to be made in full to simply ensure we can continue trading and finish the project as contracted.
…
·    The January account LHCF008 is to be paid in full.
·    The balance of the invoice must enter our account and be cleared by the 28^th of February 2013. Account details as follows: Janssen Thiel Family Trust [account number provided].
·    Acknowledgement and acceptance of all the variations listed on invoice LHCF008 revised and acknowledgement that these variations will continue to be accepted and paid by Kennett Builders on time as per invoices supplied.
·    Approval of VO for working beneath scaffold to ground floor areas still remaining, the sum of $600.00 + gst per m2 extra for working through the scaffold to 3m ( this includes manual cartage and labour) and a plan on how we are to reach 3m off the ground under the conditions as they are now onsite. Scaffold erection and costs by Kennett Builders.
·    No back charges for rubbish removal as verbally suggested by site team. As no suitable bin has been provided we will continue to place near designated bin and in rear room. (See attached picture B for site bin provided).
·    Any back charges will be non applicable unless we receive written notification that allows us to respond in good time to the direction before a notice is served.
·    The final account is to be paid in full, on time as per contract and as per invoice provided (As with all of our invoices, it will be accurate and put together with Phil Hole’s input).
·    Written notice that on the Practical Completion Date (date provided now by Kennett Builders) our 2.5% retention will be retuned on this date into our account in full.
·    Written notice that on the End of Defects Liability Period (date provided now by Kennett Builders) that our 2.5% retention will be retuned on this date into our account in full. Any and all defects will be rectified as per contract conditions.
·    Access to work on the front fencing areas to be agreed that the fence will be moved onto the footpath and access and egress will be provided and maintained at all times by Kennett Builders. No manual cartage of any brick products back and forth from this area will be accepted by J & S Janssen Bricklayers. All footpath protection and permits remain the responsibility of Kennett Builders at all times.
·    All areas beneath existing scaffold areas where we need to work is to be levelled and cleared by Kennett Builders, immediately.
·    We cannot work beneath the scaffold where it is multiple bays wide (front entry area). There is just no way we can get product to the area and work there as is. Even with some bays altered, the fee for this area would be $1200.00+ gst per m2.
·    Bricks for remaining ground floor works must be allowed to be delivered by mechanical means to within 2.5m of wall/work area. Scaffold stock piles and bins to be relocated.
·    Repairs to existing parget joint scrapped by architect to be repaired by us at $50.00 + gst per hr per man. Scaffold to reach above 3m by Kennett Builders. Other contractor can be used by Kennett’s.
·    Return in full of the credit offered by us on the change from parget to flush joint, all future work will be charged as per original m2 rate and the proposed VO for areas to 3m.
·    VOs in February’s Invoice to be paid in full and on time, these will include:
i.     Claim for my foreman’s time co-ordinating other trades instead of the Kennett staff.
ii.    Use of our materials hoist by Kennett’s and other trades.
iii.     Hoisting gear by crane truck as it was blocking access.
iv.     VO’s for extra core filled block work to plant rooms/ credit given for any reduction in scope.
v.    Plus any others that may arise – charged at agreed $50.00 per hr rate.
·    VO approval and payment for amount in excess above the 10k limit of our insurance for theft from container. Estimate $5000.00. Will provide all documents when they are available. To be paid upon this evidence supplied and when invoiced.
·    We have incurred a loss of $48,500.00 thus far. This is not off estimated profit but an actual loss due to extra labour costs paid and incurred and extra plant and equipment used. This will need to be paid by the end of the month as an offer of goodwill by Kennett Builders.
On Tuesday 26 February 2013 at 3.30 pm, the Janssen bricklayers left the site and Mr Janssen instructed them that they were not to return for the time being. They did not subsequently return to work at the site. That afternoon, Mr Janssen sent an email to Mr Hole, Mr Simpson and Mr Collins saying that the Janssen team was having two days off on Wednesday and Thursday, being 27 and 28 February. On Thursday afternoon, he sent an email to Mr Hole, Mr Simpson and Mr Collins saying that the team was having a further day off on the Friday, being 1 March.
As at the end of 26 February 2013, there remained at least two weeks’ work to be undertaken by Janssen that did not involve working on the external walls of the east wing under scaffold. That work comprised completion of the external walls of the west wing in respect of which Mr Hole had requested two weeks earlier that all works be completed by 1 March 2013 so that scaffolding could be removed, internal work to the courtyards, changing the parget jointing to flush jointing and changing the lift shaft face built in blocks to face bricks.
On 28 February 2013, Mr Hole sent an email to Mr Janssen attaching a letter responding to the 25 February letter. Mr Hole took issue with the points contained in the letter. Mr Hole did not refer to the additional document containing the 19 bullet points extracted above at [76]. Mr Hole concluded by stating that Mr Janssen’s letter was a repudiation of the Contract and reserved all of Kennett’s rights in relation to the repudiation.
First week of March
On Monday 4 March 2013 at 6.21 am, Mr Janssen sent an email to Mr Hole. He attached a letter addressed to the directors of Kennett (the 4 March letter). The letter stated:
RE:   NOTICE OF DISPUTE
We refer to the subcontract between our two companies for Padman Health Care signed on 30 July 2012
We put you on notice that Kennett Pty Ltd is in breach of its obligations under the subcontract.
The causes include but not limited to, the following:
1.     Unpaid progress claims
2.     Unanswered/unpaid variation claims
3.     Changes to the program which have caused delays
4.Changes to site conditions that are so significant that they have fundamentally changed the work method and scope of work which we originally contracted to perform.
Those breaches have occurred over a period of time since last year and continue today.
Because of those breaches, we have suffered substantial financial losses which have compromised our ability to perform our obligations under the subcontract.
Our intention is to complete the contract, but we regret that we have no choice but to suspend work until those breaches but not limited to, are resolved.
We will resume work immediately after all invoices are paid in full in cleared funds, a revised scope of work is agreed, and variation pricing agreed in writing.
We are willing to attempt to resolve the dispute in good faith by using an independent mediator agreed by both parties. We will pay half of the cost of mediation fees.
Please contact us as soon as possible to resolve this dispute.
Regards,
Steve Janssen
Director
On 4 March 2013, on Mr Janssen’s instructions, Mr Morton attended the site and collected Mr Janssen’s trailer and a cement mixer.
On 4 March 2013 at 3.47 pm, Kennett’s operations manager, Stuart Allen, sent an email to Mr Janssen. He attached a letter responding to Mr Janssen’s letter of that morning. The letter stated:
We refer to your letter received by email at 6.21 am this morning.
As you are aware, Kennett Pty Ltd does not accept that it is in breach of its obligations under the subcontract between us. On the contrary, we believe that we have gone to considerable lengths to support you on this project, including paying for variations and other costs beyond your legitimate entitlements.
Your letter informed us that you have suspended work and we note that you have no presence on site today and have removed all of your equipment. You have no legal basis to suspend work; there is no right of suspension under the subcontract, and there are no existing circumstances that would give you the right to suspend under the Security of Payment Legislation either.
As such, despite your statement that you intend to complete the contract, S & J Janssen Bricklayers Pty Ltd is in fact now in repudiatory breach of the subcontract. This letter is to inform you that Kennett Pty Ltd accepts your repudiation and that the subcontract between us is now terminated with immediate effect.
We reserve all our rights in relation to the loss and damage suffered by Kennett Pty Ltd as a result of your wrongful repudiation of the subcontract and will be in touch further in due course in this regard.
Yours faithfully,
KENNETT PTY LTD
STUART ALLEN
OPERATIONS MANAGER
On 5 March 2013, Kennett engaged Kleinschmidt to complete the brickwork for the project. Kleinschmidt commenced work on 6 March 2013 and spent the first two weeks addressing existing works, including changing parget jointing to flush, removal of bricks and installation of headers in the kitchen area and changing work constructed using block which should have been constructed in face brick. Kleinschmidt completed the residual work on the west wing and completed the east wing by mid-May 2013.
Subsequent events
On 15 March 2013, Kennett issued to Janssen a payment advice schedule in respect of the February invoice. The schedule assessed progress claim 9 on a cumulative basis at:
1.1,730 square metres of bricks supplied (72% completed);
2.1,491 square metres of bricks laid (62% completed) (151 square metres completed incrementally in relation to progress claim 9);
3.65% of brick sundries completed;
4.65% of lintels completed;
5.75% of hoisting completed.
In respect of variation claim 5, the schedule:
1.rejected the reiterated claim for $6,400 for bricking between glazed windows;
2.re-assessed the claim for $9,000 for 100 lineal metres of headers at $6,690.13 being 168.9 metres at $39.61 and reassessed the previous claim in variation claim 4 for headers above the kitchen at $2,024.35 in lieu of $2,378;
3.rejected the claims for $3,000 for work performed by Janssen’s foreman for Kennett, $1,100 for hoist hire and $3,200 for the first floor plant rooms;
4.increased the credit for parget jointing in favour of Kennett to $7,800;
5.rejected the claim for $1,200 in respect of dropping scaffold and hoisting scaffold/timber;
6.claimed a credit of $8,450 for replacing the block work on the face of the lift shaft with face brickwork;
7.claimed a credit of $15,700 for changing the balance of parget jointing to flush jointing.

On 13 March 2013, Mr Janssen collected the balance of his equipment from the site.
On 9 April 2013, Janssen Co applied to Adjudicate Today Pty Ltd for adjudication of progress claim 9 under the Building and Construction Industry Security of Payment Act 2009 (SA). On 7 May 2013, an adjudicator, Mr Ashman, made an adjudication which was backdated to 3 May 2013.
On 13 May 2013, Kennett instituted the action against Janssen Co and Mr Janssen. Kennett originally sought damages for breach of contract upon termination by Kennett for repudiation as well as certiorari quashing Mr Ashman’s adjudication. Orders were made quashing the adjudication on 30 July 2013 and the action proceeded as a claim only for damages for breach of contract.
On 3 June 2013, Janssen’s solicitors sent an email to Kennett’s solicitors saying that Janssen accepted the repudiation of the Contract by Kennett.
On 17 June 2013, Janssen filed a defence and on 18 July 2013 Janssen filed a cross action seeking a declaration that Kennett wrongfully repudiated the Contract and relief in quantum meruit.
The trial
Janssen was dux litus at trial.
Common ground
On the pleadings, there was a dispute as to the identity of the subcontractor. Kennett’s case was that the Contract was made with Mr Janssen personally. Janssen’s case was that the Contract was made with Janssen Co. At trial, this dispute was resolved by an agreement that both Janssen Co and Mr Janssen were parties to the Contract as the subcontractor. As a result, if Kennett were to succeed, judgment would be entered jointly against Janssen Co and Mr Janssen and, if Janssen were to succeed, judgment would be entered jointly in favour of Janssen Co and Mr Janssen.
It was agreed at trial that, if Kennett succeeds on liability, the quantum of its damages is $226,212.22. On the other hand, the quantum of Janssen’s claim in quantum meruit was not agreed and, if Janssen were to succeed on liability, that quantum would need to be assessed.
Janssen made several explicit concessions at and before trial. Janssen conceded that at all material times (including between 27 February and 4 March 2013) it did not have a lawful entitlement to suspend work under the Contract. Janssen conceded that, by suspending work, it acted in breach of the Contract and in particular in breach of clause 5.3 of the Terms and Conditions. Janssen conceded that Kennett was not in breach of the Contract by reason of not paying progress claims or variation claims in excess of the amounts paid by Kennett. These concessions relate to the objective rights and liabilities of the parties. Janssen’s case is that, considered from the perspective of a reasonable party in the position of Kennett, it was apparent that Janssen reasonably believed that, by its conduct, Kennett was in breach of the Contract and Janssen was not in breach of the Contract and that, so assessed, Janssen’s conduct was not repudiatory.
Evidence
Seven volumes of documents relevant to liability were tendered by consent.[4] Four volumes of documents relevant to the quantum of Janssen’s counterclaim were tendered by consent.[5] Each party also tendered several individual documents.
[4] Exhibits P1 to P6 and D5.
[5] Exhibits D1 to D4 (excluding tabs 29 to 86).
Mr Janssen was the main witness for Janssen. Mr Morton and Anthony Salvemini, who was engaged by Janssen as a subcontracted bricklayer for the project from early November 2012 to early January 2013, were also called by Janssen to give evidence.
Mr Hole was the main witness for Kennett. John Kennett, Scott Kennett and Mr Collins from Kennett also gave evidence. In addition, Hugh Kleinschmidt gave evidence and Christopher Short gave expert evidence.
The evidence in chief of all witnesses was given by affidavit supplemented by oral evidence.
There were several conflicts between the evidence of Mr Janssen and Mr Hole concerning discussions between them and, in some cases, concerning events at the jobsite. However, in general, cross examining counsel did not seek to put the contrary versions to the respective witnesses nor did they attempt to demonstrate through cross examination that their own witness’s version should be preferred. During the course of cross examination and during closing address, each party acknowledged that I am not in a position and am not called upon to make findings of fact preferring one witness’s version over that of the other witness. It is common ground that, at least for the purposes of liability, I am not called upon to make findings of fact based upon a credibility assessment of the witnesses. It is common ground that the result of this case does not turn upon the differences between the witnesses as to discussions or events at the jobsite.
As a result, the findings of fact which I make are based upon the contemporaneous documents and upon evidence by the witnesses which was not contradicted by evidence given by the opponent’s witnesses. When a witness gave evidence that an oral agreement was made which was contradicted by another witness, I have proceeded on the basis that no such agreement was made. When a witness gave evidence that a specific matter was discussed which was denied by another witness, I have proceeded on the basis that the matter was not discussed. When a witness gave evidence that something specific was said which was contradicted by another witness, I have proceeded on the basis that it was not said.
The law on repudiation
General principles
The legal definition of what conduct amounts to repudiation is not in dispute. It is:
conduct which evinces an unwillingness or an inability to render substantial performance of the contract.[6]
[6] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61, (2007) 233 CLR 115 at [44] per Gleeson CJ, Gummow, Heydon and Crennan JJ. See also Foran v Wight (1989) 168 CLR 385 at 441 per Dawson J.
More specifically, a contract is repudiated:
...if one party renounces his liabilities under it – if he evinces an intention no longer to be bound by the contract or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way.[7]
(Citations omitted)
[7] Shevill v Builders Licensing Board (1982) 149 CLR 620 at 625–626 per Gibbs CJ (Murphy and Brennan JJ agreeing); Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 634 per Mason CJ, 643 per Brennan J and 666 per Gaudron J; and Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at [44] per Gleeson CJ, Gummow, Heydon and Crennan JJ.
Originally, the only species of repudiation recognised was conduct comprising non-performance of an obligation under the contract, that is, an act or omission in breach of contract.[8] In the mid-nineteenth century, the doctrine of anticipatory breach was recognised.[9] Under the doctrine, mere words may comprise repudiation, even if the time for performance of a party’s obligation is not yet due under the contract. It must be shown that through words the party manifested an intention to act in future in a manner in fundamental breach of the contract because the action would breach an essential term or would otherwise go to the root of the contract.[10]
[8] Foran v Wight (1989) 168 CLR 385 at 400–401 per Mason CJ, 442-445 per Dawson J and 456 per Gaudron J.
[9] Ibid.
[10] DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 432–434 per Stephen, Mason and Jacobs JJ (Aickin J agreeing); Foran v Wight (1989) 168 CLR 385 at 441 per Dawson J.
In Universal Cargo Carriers Corporation v Citati,[11] Devlin J (later Lord Devlin) analysed the difference between repudiation by failure to perform the contract and repudiation by renunciation of future obligations and the rationale for the latter comprising repudiation. He said:
[11] [1957] 2 QB 401.
The law on the right to rescind is succinctly stated by Lord Porter in Heyman v Darwins Ltd as follows:
“The three sets of circumstances giving rise to a discharge of contract are tabulated by Anson as: (1) renunciation by a party of his liabilities under it; (2) impossibility created by his own act; and (3) total or partial failure of performance. In the case of the first two, the renunciation may occur or impossibility be created either before or at the time for performance. In the case of the third, it can occur only at the time or during the course of performance.”
The third of these is the ordinary case of actual breach, and the first two state the two modes of anticipatory breach. …
A renunciation can be made either by words or by conduct, provided it is clearly made. … The test of whether an intention is sufficiently evinced by conduct is whether the party renunciating has acted in such a way as to lead a reasonable person to the conclusion that he does not intend to fulfil his part of the contract. ...
…
I said that it was after Hochster v De la Tour that renunciation established itself as the favourite, because until then it was not certain that a man who said “I will not perform” would be held to his word. In Hochster v De la Tour, it was argued that he could change his mind, and that the fact that at one time he said he was not ready and willing did not necessarily mean that he would be unwilling when the time for performance came. Hochster v De la Tour established that a renunciation, when acted upon, became final. Thus, if a man proclaimed by words or conduct an inability to perform, the other party could safely act upon it without having to prove that when the time for performance came the inability was still effective.
…
The two forms of anticipatory breach have a common characteristic that is essential to the concept, namely, that the injured party is allowed to anticipate an inevitable breach. If a man renounces his right to perform and is held to his renunciation, the breach will be legally inevitable; if a man puts it out of his power to perform, the breach will be inevitable in fact – or practically inevitable, for the law never requires absolute certainty and does not take account of bare possibilities. So anticipatory breach means simply that a party is in breach from the moment that his actual breach becomes inevitable. Since the reason for the rule is that a party is allowed to anticipate an inevitable event and is not obliged to wait till it happens, it must follow that the breach which he anticipates is of just the same character as the breach which would actually have occurred if he had waited. ...[12]
(Footnotes omitted)
[12] Ibid at 436-438.
The objective test
It is not in dispute that the test as to the meaning of a party’s acts or words is objective:
...An issue of repudiation turns upon objective acts and omissions and not upon uncommunicated intention. The question is what effect the lessor’s conduct “would be reasonably calculated to have upon a reasonable person”. It suffices that, viewed objectively, the conduct of the relevant party has been such as to convey to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it.[13]
(Citations omitted)
[13] Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 658 per Deane and Dawson JJ (see also Brennan J at 647). The last sentence was quoted and approved in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at [44] per Gleeson CJ, Gummow, Heydon and Crennan JJ.
The test applied in determining whether conduct is repudiatory reflects the general objective approach adopted in the law of contract. In Pacific Carriers Ltd v BNP Paribas,[14] Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ said:
[14] (2004) 218 CLR 451 at [22].
...The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean. That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction.
(Citations omitted, emphasis added)
and in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd & Ors,[15] Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ said:
...In their consideration in Ermogenous v Greek Orthodox Community of SA Inc of the requisite intention to create contractual relations, Gaudron, McHugh, Hayne and Callinan JJ said:
“Although the word ‘intention’ is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties.”
…
This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe.
(Footnotes omitted)
[15] [2004] HCA 52, (2004) 219 CLR 165 at [38], [40].
An erroneous view
In DTR Nominees Pty Ltd v Mona Homes Pty Ltd,[16] the vendor was a developer seeking to subdivide land into 35 allotments. In November 1973, the vendor entered into a contract to sell nine allotments to the purchaser. It was a term of the contract that a plan of the subdivision had been lodged with the Council seeking approval, the vendors would proceed with all due dispatch to have the plan lodged with the Registrar–General and settlement of the purchase was due within fourteen days of the vendor giving notice to the purchaser that the plan had been registered by the Registrar-General. In reality, the vendor was proceeding to effect the subdivision in two separate stages. Stage 1 comprised the nine allotments the subject of the contract. Stage 2 comprised the balance of 26 allotments. At the time of contracting, the vendor had lodged separate applications in respect of stage 1 and stage 2 and the Council had approved stage 1. In February 1974, the vendor lodged the stage 1 plan with the Registrar-General and in June 1974 it was registered. In the meantime, on the trial judge’s findings, the Council had approved the stage 2 plan in April 1974. On 14 June 1974, the vendor wrote to the purchaser stating that the plan of division had now been registered and settlement was due within fourteen days. At that point, as the stage 2 plan had not been registered, settlement was not in fact due. However, it was evident to the purchaser that the vendor was proceeding on a construction of the contract (upheld by the trial judge but reversed on appeal) that the plan of division referred to in the contract was a plan for nine allotments only and the purchaser took no steps to disabuse the vendor of that erroneous belief. On 19 July 1974, the purchaser wrote to the vendor saying that it was terminating the contract for repudiation because the stage 1 plan that had been lodged and registered was not the plan of division showing 35 allotments annexed to the contract. On 25 July 1974, the vendor wrote to the purchaser saying that it terminated the contract for repudiation because the purchaser’s purported termination was itself a repudiation.
[16] (1978) 138 CLR 423 (DTR Nominees).
The High Court held that the vendor did not repudiate the contract. Stephen, Mason and Jacobs JJ (Aickin J agreeing) said:
...the respondents' case …was not one of rescission for actual breach of essential term, but one of rescission for repudiation and renunciation for so-called "anticipatory breach". Their case is accordingly to be considered on that footing. The relevant question therefore is whether the events which we have recounted evidence an intention on the part of the appellant to repudiate or renounce the contract or more precisely whether such an intention is to be inferred from those events.
For the respondents it was submitted that such an intention should be inferred from the appellant's continued adherence to an incorrect interpretation of the contract. It was urged that the appellant, because it was acting on an erroneous view, was not willing to perform the contract according to its terms. No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognize his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him. As Pearson L.J. observed in Sweet & Maxwell Ltd. v. Universal News Services Ltd:
"…A party should not too readily be found to have refused to perform the agreement by contentious observations in the course of discussions or arguments..."
In this case the appellant acted on its view of the contract without realizing that the respondents were insisting upon a different view until such time as they purported to rescind. It was not a case in which any attempt was made to persuade the appellant of the error of its ways or indeed to give it any opportunity to reconsider its position in the light of an assertion of the correct interpretation. There is therefore no basis on which one can infer that the appellant was persisting in its interpretation willy nilly in the face of a clear enunciation of the true agreement.
…it is a case of a bona fide dispute as to the true construction of a contract expressed in terms which are by no means clear (see Asprey J.A. in Satellite Estate Pty. Ltd. v. Jaquet). In these circumstances the Court is not justified in drawing an inference that the appellant intended not to perform the contract according to its terms or that it repudiated the contract. That being so, the respondents were not entitled to rescind the contract for "anticipatory breach" as they purported to do by their notice of 19th July 1974.[17]
(Footnotes omitted)
[17] Ibid at 431–433.
Suspension of work
The parties cite three cases which have addressed the question whether suspension of building work in the particular circumstances of the case constituted a repudiation. In Mayhaven Healthcare Ltd v David Bothma and Teresa Bothma trading as DAB Builders,[18] Mayhaven entered into a contract with DAB for DAB to undertake building work to Mayhaven’s nursing home. On 12 June 2006, an adjudicator made a determination requiring Mayhaven to pay a progress claim to DAB. On 20 July 2006, DAB suspended work on the ground that this amount had not been paid. On the same day, Mayhaven purported to terminate the contract for repudiation on the basis that DAB’s suspension constituted a breach of contract. DAB was legally entitled to suspend work if the amount had not been paid, as it believed. However, unbeknown to the DAB, Mayhaven had paid the amount as part of composite amounts paid in respect of subsequent progress claims. An arbitrator concluded that there was no repudiation.
[18] [2009] EWHC 2634 (TCC), [2010] BLR 154 (Mayhaven Healthcare).
Mayhaven appealed to the Queen’s Bench Division on a question of law, namely whether wrongful suspension of works under a construction contract amounts to repudiation. Ramsey J dismissed the appeal insofar as it related to this question of law. Ramsey J held that the question was not capable of a simple answer because it depended on the terms of the contract, the breach of contract and all of the facts and circumstances of the case.[19] Ramsey J concluded that, in circumstances in which DAB believed that the amount in question had not been paid, the actual payment by Mayhaven being submerged as part of components for subsequent progress claims and Mayhaven knew that DAB was labouring under that misapprehension, it could not be said that the arbitrator had necessarily erred as a matter of law in his approach to the question.
[19] Ibid at [23], [34].

In Cardona and Brownscombe v Rod Brown and Wendy Brown,[20] Mr Cardona and Ms Brownscombe entered into a building contract with the Browns for the construction of a new house on their land. Progress claims were payable at five separate stages under the terms of the contract and the Domestic Building Contracts Act 1995 (Vic). In December 2006, the builders issued a progress claim for the second – framing – stage. The owners paid this claim, although the building surveyor had not certified completion of that stage. The owners later claimed that the framing stage had not in fact been completed. In February 2007, the builders issued a progress claim for the third – lock-up – stage. The owners claimed that payment was not due for the lock-up stage because the framing stage had not in fact been completed – even though payment had been made for it – and the lock-up stage itself had not been completed. In April 2007, the builders suspended work and said that no further work would be carried out until the issue of payment of the third progress claim was resolved. The owners responded by asserting that the third progress claim was not due. They acknowledged that, if it had been due, the builders would have been entitled to suspend works if it were not paid within seven days after it became due. They called upon the builders to resume the works immediately. The builders maintained their position. In June 2007, the owners purported to terminate the contract for repudiation.
[20] [2012] VSCA 174, (2012) 35 VR 538.
The builders brought proceedings in the Victorian Civil and Administrative Tribunal. McNamara DP held that if the lock-up stage had been completed, it was not necessary that the framing stage had been completed for the builders to be entitled to payment for the lock-up stage and the Browns’ suspension of work was not repudiatory. That decision was upheld on appeal by Pagone J in the Supreme Court, but reversed by the Court of Appeal. The Court of Appeal held that, on the proper construction of the contract and the Domestic Building Contracts Act 1995 (Vic), a builder is not entitled to payment for the lock-up stage if the framing stage has not been completed and in any event the lock-up stage itself had not been completed. The suspension of work by the builders amounted to repudiation. Tate JA (Bongiorno and Osborn JJA agreeing) held:
It follows from what has been said that the builders had no entitlement to a progress payment in respect of lock-up stage. Their suspension of the works, in response to the owners’ refusal to pay for lock-up stage, was thus in breach of the contract. The owners were correct to accept the suspension of the works, in the circumstances, as a repudiation of the contract and were entitled at common law to bring the contract to an end.[21]
[21] Ibid at [87].
In Telford Homes (Creekside) Ltd v Ampurius Nu Homes Holdings Ltd,[22] Telford owned land on the bank of the River Thames at Greenwich on which it was developing four blocks designated A, B, C and D. The development was expected to cost £102 million in total. Each block was to contain commercial accommodation on the ground, first and second floors and residential accommodation on the upper floors, comprising a total of 371 flats. In October 2008, Telford entered into a contract with Ampurius to lease the ground and first floors together with associated underground car parking for 999 years for a purchase price of approximately £8.4 million. Telford agreed to use reasonable endeavours to complete construction of the ground and first floors together with the associated underground car parking by 21 July 2010 in respect of blocks C and D and 28 February 2011 in respect of blocks A and B. Telford embarked on a marketing program to sell the residential flats - and presumably the commercial units on the second floors – in advance of construction. Ampurius presumably did likewise in respect of the commercial units on the ground and first floors.
[22] [2013] EWCA Civ 577, [2013] WLR(D) 202 (Telford Homes).
The global financial crisis adversely affected advance sales and in June 2009 Telford’s bank deferred advancing the finance necessary for Telford to continue with construction of blocks A and B. Between July 2009 and September 2010, communications were exchanged and negotiations undertaken between the parties in relation to the deferral of construction of blocks A and B. Over that period, Ampurius expressed grave concern about the deferral but nevertheless expressed a willingness to accommodate it upon conditions. In July 2010, Telford told Ampurius that finance had been approved to resume work on blocks A and B in January 2011 with Telford seeking to persuade the bank to bring that date forward. In September 2010, Telford told Ampurius that the bank had agreed to release the funds and construction of blocks A and B would recommence on 4 October 2010. On 4 October 2010, work recommenced on blocks A and B. On 22 October 2010, Ampurius purported to terminate the contract for repudiation.
The trial judge held that Telford was in breach of the contract by suspending work on blocks A and B and had repudiated the contract by December 2009 or alternatively by July 2010. Ampurius argued, and the trial judge proceeded on the basis, that the question whether Telford’s conduct was repudiatory was to be assessed as at the date of breach and not as at the date of purported termination on 22 October 2010. The Court of Appeal allowed Telford’s appeal and held that the trial judge erred in failing to assess whether Telford’s conduct was repudiatory as at 22 October 2010, by which date Telford had resumed construction of blocks A and B.[23] The Court of Appeal observed that Ampurius had not demonstrated that it suffered any prejudice due to the overall delay in commencement of the 999 year lease or by the increase in the gap between completion of blocks C and D from seven months under the contract to prospectively thirteen months as at 22 October 2010.[24] It observed that, as at 22 October 2010, the target date for completion of blocks A and B being the end of February 2011 had not yet arrived.[25] It observed that Ampurius had not demonstrated that a delay of six or twelve months in the commencement of a 999 year lease was material.[26]
[23] Ibid at [64] per Lewison LJ and [76] per Tomlinson LJ (Longmore LJ agreeing with both).
[24] Ibid at [67]-[69] per Lewison LJ and [74] per Tomlinson LJ.
[25] Ibid at [29] per Lewison LJ.
[26] Ibid at [68]-[69] per Lewison LJ.
An erroneous view and the objective test
In Sopov v Kane Constructions Pty Ltd,[27] the Victorian Court of Appeal considered the application of the objective test to circumstances in which it was claimed by the party who allegedly repudiated the contract that it had a bona fide, albeit erroneous, belief in the construction of the contract asserted by it. Maxwell P and Kellam JA said:
[27] [2007] VSCA 257, (2007) 20 VR 127.
An issue which arose at trial, and again on the appeal, concerned the significance of the adoption by the alleged repudiator of an incorrect interpretation of the contract. Of what significance is it if the repudiatory party acts in accordance with a bona fide belief as to the correctness of its interpretation?
…
In our view, the objective test of repudiation, as stated by Brennan J in Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (“Laurinda”), leaves no room for consideration of whether the party in breach – the alleged repudiator – held the honest belief that its action was justified by the contract. Axiomatically, the repudiator’s state of mind is irrelevant. What matters is the character of the repudiator’s conduct.
…
...As Whelan AJA says:
Even if the Principal’s subjective view was, on the basis of legal advice perhaps, that it had some entitlement to call up the bank guarantees without notice, the issue is what message would that action have conveyed to Kane Constructions on 6 October 2000.
That the touchstone is conduct, not state of mind, emerges clearly from the authorities dealing with erroneous interpretation. …
The distinctions drawn in the cases may be summarised as follows:
1.For party A merely to assert, or argue for, a wrong interpretation of the contract will usually not be enough to justify party B drawing an inference of repudiation. The reason for this is that party A may be –
willing to perform the contract according to its tenor. He may be willing to recognise his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him.
Thus the inference of repudiation should not readily be drawn where, for example –
(a)party A makes “contentious observations in the course of discussions or         arguments”; or
(b)party A’s conduct amounts to engaging in “a bona fide dispute as to the true     construction of a contract expressed in terms which are by no means clear”.
2.The inference of repudiation can more readily be drawn when the interpretation relied on by party A is clearly or obviously untenable and party A –
(a)acts (or threatens to act) unilaterally on the basis of the interpretation; or
(b)     persists in the interpretation in the face of communications from party B pointing out the error.[28]
(Footnotes omitted)
[28] Ibid at [7], [9], [10]-[11], [17].
The construction of the 4 March letter
The parties advance competing constructions of the 4 March letter from Janssen. The material passages of the letter, which is reproduced in full at [80] above, are as follows:
We put you on notice that Kennett Pty Ltd is in breach of its obligations under the subcontract. The causes include but not limited to, the following:
1.     Unpaid progress claims
2.     Unanswered/unpaid variation claims
3.     Changes to the program which have caused delays
4.Changes to site conditions that are so significant that they have fundamentally changed the work method and scope of work which we originally contracted to perform.
…
Our intention is to complete the contract, but we regret that we have no choice but to suspend work until those breaches but not limited to, are resolved.
We will resume work immediately after all invoices are paid in full in cleared funds, a revised scope of work is agreed, and variation pricing agreed in writing.
Reading these passages together, it is clear that there is a correlation between the three conditions stipulated in the last sentence and the four categories of breaches alleged in the second sentence. Accordingly, the three conditions said to be required to be satisfied before Janssen resumed work were:
1.all invoices paid in full in cleared funds, being invoices for progress claims and variation claims which were unpaid and in some cases unanswered;
2.agreement on a revised scope of work resulting from changes to the work method and scope of work the subject of the Contract as a result of changes to site conditions; and
3.agreement in writing on variation pricing in respect of items previously claimed by Janssen to comprise variations which have future significance.
Janssen was directed to provide particulars of what Janssen contends comprised the unpaid progress and variation claims, unanswered variation claims, and changes to program causing delays and changes to site conditions changing the work method and scope of work referred to in the second sentence quoted at [117] above. The particulars of unpaid progress and variation claims provided are that Janssen had a genuine belief that Janssen would receive payment of an additional $23,647 after retention, being $16,271.60 before retention, on account of progress claim 8, being in summary:
·$742 extra for laying face bricks based on an additional 278 square metres (being the difference between 1340 square metres that was agreed and 1062 square metres which was the subject of previous payments) at $64 per square metre compared to Kennett’s calculation of 260 square metres (being the difference between 1340 square metres that was agreed and 1080 square metres which was approved previously) at $64.58 per square metre;
·$800 extra for brick sundries based on 70% completed compared to Kennett’s assessment of 65% completed;
·$750 extra for lintels based on 80% completed compared to Kennett’s assessment of 65% completed;
·$9,250 extra for cast stone labour based on the amount claimed of $14,250 less the amount allowed by Kennett of $5,000; and
·$4,729.60 for brick supply being the amount of the reduction assessed by Kennett identified at [67] above;[29]
and $8,620, before retention, on account of variation claim 4, being in summary:
·$6,400 for bricking between glazed windows; and
·$2,220 extra for laying headers for 100 metres at $74 compared to Kennett’s assessment of 70 metres at $74.
[29] This was not articulated in the particulars but is implicit because they make no reference to the reduction by Kennett on account of brick supply.
The particulars of unanswered variation claims are in summary:
·bricking between glazed windows for work carried out from and after 12 February 2013;
·recovery by Janssen of the credit of $5 per square metre for the change from parget to flush jointing previously agreed but which Janssen claimed was subject to Kennett assessing existing and future claims in a similar spirit to the compromise by Janssen in respect of the change in the jointing; and
·working under scaffolding on the west wing after 28 November 2012 and in future on the east wing.
The particulars of changes to program causing delays and changes to site conditions changing the work method and scope of work are in summary:
·in early October 2012, Kennett requested Janssen to complete the lift shaft in concrete blocks to full height;
·on 17 October 2012, Kennett requested Janssen to proceed with face brickwork to both lift shafts to the top of the ground floor;
·on about 13 November 2012, scaffolding was installed in part on the west wing and the windows and framing were not ready and Kennett requested Janssen to proceed with face brickwork to the lift shaft at first floor level and the kitchen area at first floor level and to work beneath the scaffold on the west wing;
·on 9 January 2013, Mr Janssen gave to Mr Hole notice of additional time and cost incurred as a result of changes;
·in early January 2013, Kennett requested Janssen to proceed with face brickwork on the first floor of the west wing, the courtyard of the east wing, both lift shafts and the front of the west wing;
·on 4 February 2013, Kennett gave to Janssen a schedule of activities for the following one or two weeks;
·on 13 February 2013, Kennett instructed all trades that the scaffold to the west wing would be removed in two weeks’ time;
·on 25 February 2013, Kennett requested Janssen to commence work on the east wing under scaffold, acknowledging that it amounted to a variation and requesting a proposed price and thereafter the perimeter of the east wing was blocked by scaffolding.
Payment of invoices
There is a contest as to the proper construction of the reference in the 4 March letter to “all invoices are paid in full in cleared funds”. Janssen contends that this was to be understood as a reference to payment of the January invoice and not to any earlier or later invoices rendered by Janssen to Kennett. Kennett contends that it was a reference to all invoices rendered by Janssen to Kennett from the inception of the project to the extent unpaid. It is common ground that the 4 March letter is to be construed objectively without reference to the uncommunicated intention of Mr Janssen or the uncommunicated understanding of Mr Hole. However, the letter is to be construed in the context and against the background of facts and circumstances known to both parties at the time of the letter.
The 4 March letter followed Kennett’s response of 28 February to the 25 February letter from Janssen. The 25 February letter included the following passages:
At the end of January Phil and I again met onsite to work through issues and our latest invoice for December. I once again compromised with Phil regarding the VO’s to ensure something would at least be paid…
After receiving our cheque on the 21^st of January, that included some variations, I contacted Phil and said it was over $30,000 short and that I was extremely unhappy. I urgently booked a meeting with my accountant and again took legal advice. I’m fighting with all my heart and soul to ensure my company’s continuing existence. I expected this payment in full as the variations were valid and percentages claimed accurate.… I have continually stressed that conditions and payments had to be honoured otherwise we could not go on.
We are now at that point.
...
On the next pages I have outlined the only option available to J & S Janssen Bricklayers Pty Ltd and Kennett Builders Pty Ltd that would enable J & S Janssen Bricklayers Pty Ltd to trade after the 28^th of February 2013 and continue the masonry work on the Lockleys project.
…
Below is listed the only way we can continue onsite, all the points will need to be agreed in writing and without all the points agreed J & S Janssen Bricklayers Pty Ltd will cease trading on the 28^th of February 2013.
…
·    The January account LHCF008 revised is to be paid in full.
·    The balance of the invoice must enter our account and be cleared by the 28^th of February 2013. Account details as follows: Janssen Thiel Family Trust [account number provided].
·    Acknowledgement and acceptance of all the variations listed on invoice LHCF008 revised...
...
·    Return in full of the credit offered by us on the change from parget to flush joint...
·    VOs in February’s Invoice to be paid in full and on time...
…
·    We have incurred a loss of $48,500.00 thus far. This is not off estimated profit but an actual loss due to extra labour costs paid and incurred and extra plant and equipment used. This will need to be paid by the end of the month as an offer of goodwill by Kennett Builders.
While the 25 February letter complained that the December invoice was short paid, it did not require as a condition for Janssen to continue working after 28 February 2013 that the balance of the December invoice be paid in contrast to the condition that the January invoice be paid in full. By comparison, the 4 March letter referred to the payment of “all invoices in full”.
On its proper construction, the 4 March letter did not include payment in full of the February invoice as a condition of resuming work. Under the terms of the Contract, payment of the February invoice was not due until 20 March and the 4 March letter did not suggest that Kennett was obliged to pay it early as a condition of Janssen resuming work. However, if Janssen had not returned to work by 20 March, on its proper construction, the letter stated that the February invoice would be required to be paid in full as a condition of a return to work.
On its proper construction, the 4 March letter did require payment in full of the December invoice as a condition of resuming work. It used the plural term “invoices” which is not apt to apply only to the single January invoice. It used the plural terms “unpaid progress claims” and “unpaid variation claims”. If it had been intended to refer only to the January invoice, it might have been expected to refer explicitly to that invoice in the same manner as the 25 February letter. While the 25 February letter did not demand payment of the December invoice, it did assert that it had been short paid by $30,000 and went on to say that Mr Janssen had expected payment in full and stressed that payments had to be honoured or otherwise Janssen could not go on.

In the present case, the contract price is not an appropriate measure of the fair and reasonable value of the work performed by Janssen. Even considered prospectively, Janssen’s quote of $423,080 given on 26 July 2012 was a very substantial underestimate of the true cost of the scope of work under the Contract. It failed to reflect the likely time that would be taken to lay the bricks in multiple short bays, to lay bricks at first floor level or to lay different shapes and sizes of bricks in a random pattern as required when laying Santorini random bricks. This is demonstrated by Mr Kleinschmidt’s evidence that his own quotation was in the order of $700,000. The quotation from Pascale Construction dated 11 April 2012 was for $634,000 for construction using Santorini random bricks in contrast to $425,700 for construction using standard bricks. The quotation from Darel Hart dated 30 May 2012 of $454,510 for standard bricks were comparable with the Pascale quotation for standard bricks.
While Heritage Stone Restorations provided a quote on 29 May 2012 for construction using Santorini random bricks of $463,600,[46] Heritage Stone Restorations had expertise in stonemasonry but not in bricklaying and intended to subcontract the entirety of the bricklaying to a bricklaying subcontractor. Heritage’s quotation represented a very substantial under-quotation in the same manner as Mr Janssen’s quotation.
[46] Heritage’s quotation made no allowance for scaffolding up to three metres or any hoisting, both of which were included in Mr Janssen’s quotation.
Considered retrospectively, the actual site conditions differed from those anticipated by Mr Janssen when he submitted his quotation. Kennett accepts that Mr Janssen did not anticipate working under any scaffolding, whereas it transpired that Janssen worked under scaffolding for approximately 5% of the work performed. In addition, rightly or wrongly, Mr Janssen did not anticipate that the bay windows would be glazed. Rightly or wrongly, Mr Janssen did not anticipate any of the variations which were ultimately accepted by Kennett to be variations, either absolutely or by way of compromise.
It is common ground that, as at 4 March 2013, Janssen had laid 62% of the total bricks subject of the Contract. It follows that Kleinschmidt laid 38% of the total bricks subject of the Contract. Kennett pleads, and it is common ground that if Kennett succeeds on liability it is entitled to judgment on the basis, that Kleinschmidt charged $261,126, which included work during the first two weeks that Kennett claims was on defects and for which Kleinschmidt charged $30,160, leaving a balance of $230,966. Assuming that amount was increased by 40% on account of working under scaffolding, this leaves $164,976 charged by Kleinschmidt for laying 38% of the bricks compared to the amount allowed by Janssen in the 26 July 2012 quote of $155,000 for laying 100% of the bricks. This is another confirmation that Mr Janssen grossly underestimated the cost of laying Santorini random bricks in the circumstances.
I conclude that it is appropriate to assess the fair and reasonable value of the work by reference to its cost. Nevertheless, I take into account the quotations by Pascale Construction of $634,000 and Kleinschmidt of approximately $700,000 as a check in assessing the fair and reasonable value of the work.
Cost of the work
The parties were directed to produce a Scott schedule setting out the amounts claimed by Janssen and Kennett’s response. Unfortunately, the Scott schedule does not always group items relating to the same supplier, contractor or employee together and contains inaccurate dates and other details. The formulation of Janssen’s claim summarised below is taken from the final form of the Scott Schedule as modified by certain concessions made by Janssen during its closing address.[47]
[47] During the closing address, Janssen abandoned the claim in the Scott Schedule for superannuation in respect of Mr Janssen’s wage ($3,906) and for Mr Janssen’s wages during March 2013 ($5,600). Janssen also conceded an offset for the residual value of plant and equipment ($2,362.37) and an offset for lift shaft re-work ($1,710).
Janssen formulates its quantum meruit claim as follows:

Item

Cost

GST

Total

Labour

$177,869.85

$11,315.88

$189,185.73

Materials

$95,826.70

$9,582.69

$105,409.39

Equipment

$24,786.19

$2,478.61

$27,264.80

Steve Janssen labour

$37,800.00

$37,800.00

Less lift shaft re-work

-$1,710.00

-$1,710.00

Subtotal

$334,572.74

$23,377.18

$357,949.92

20% overhead & profit

$66,914.55

$4,675.44

$71,589.99

Subtotal

$401,487.29

$28,052.62

$429,539.91

Less payments received

-$212,208.40

-$21,220.84

-$233,429.24

Total

$189,278.89

$6,831.78

$196,110.67

Labour

Janssen formulates its claim for the cost of labour as follows:

Item

Cost

GST

Total

Employees

$43,456.50

$43,456.50

Superannuation

$3,911.09

$3,911.09

WorkCover levy

$3,932.46

$3,932.46

Employees paid as casuals or contractors

$1,803.60

$1,803.60

Subcontractors

$74,648.79

$6,519.29

$81,168.08

MBA contracted apprentices

$47,865.91

$4,796.59

$52,662.50

Apprentice overtime

$2,251.50

$2,251.50

Total

$177,869.85

$11,315.88

$189,185.73

Employees

Janssen employees Jimmy Jones-Moody, Luke Dudley, Haydn Megins and James Sargeant worked on the project. Janssen claims $51,300.05 for those four employees comprising $43,456.50 for wages, $3,911.09 for superannuation and $3,932.46 for WorkCover levies together with $1,803.60 paid to Messrs Dudley and Sargent not subject to superannuation or WorkCover levies. In general terms, timesheets were tendered for the four employees showing the amount paid in wages to each on a weekly basis. In general terms, the timesheets showed the job as “Henley Beach Road” or “Kennett Lockleys Aged Care”. Sometimes the timesheet of one employee, for example Mr Jones-Moody, showed also the name of another employee, for example Mr Dudley, but Mr Janssen explained that this was due to using a template timesheet and the second name being erroneous. I accept that explanation because usually when this occurred there was a separate timesheet for the second employee showing different hours. Sometimes the timesheet showed a second address above the line for the job address as well as showing Henley Beach Road or Kennett as the job address. I accept that this was explicable by the fact that the employee worked on two different job addresses and in those cases Janssen has relied on the site attendance register to ascertain the days on which the employee worked at the Kennett site.
Kennett tendered the site register which generally shows the name of every person who attended the site each day. Kennett did not in general terms cross-examine Mr Janssen to suggest that the four employees for whom days were ultimately claimed[48] did not work on the days claimed, nor did Kennett suggest this in closing address. I allow the amounts shown in the Scott schedule for Messrs Moody, Dudley, Megins and Sargeant.
[48] Janssen did establish that the schedules to the versions of the cross claim and earlier iterations of the Scott schedule did make claims that were objectively justified.
The amount of $3,911.09 is claimed by Janssen on account of superannuation paid or payable for Janssen employees at 9% of their wages. The amount of $3,932.46 is claimed by Janssen on account of WorkCover levies paid or payable for Janssen employees at 8.302% of their remuneration (wage plus superannuation). I am satisfied that these calculations are correct and that, if Janssen has not paid those amounts, they are nevertheless payable and should be included in the quantum meruit calculation.
Janssen first formulated the quantum meruit claim in July 2013 in a schedule to its cross action. Janssen later amended that schedule. Janssen then provided various versions of a Scott schedule. In Janssen’s earlier formulations, Janssen included additional items of labour (employees, apprentices and subcontractors) which upon examination by Kennett related to other projects and were ultimately withdrawn. Kennett contends that this destroys the credibility of Janssen’s final formulation for employees, apprentices and contractors. I reject that contention insofar as it applies to employees and apprentices.[49] Janssen tendered business records which prove that the amounts claimed were incurred by Janssen and that they related to the project. Kennett tendered the site attendance register and in general terms did not suggest in cross-examination or closing address that amounts still claimed for employees or apprentices are for work by personnel not shown as attending on the relevant day.
[49] The position is different in respect of subcontractors, as appears below.
I allow the amount claimed for employees totalling $53,103.65.
Subcontractors
Janssen engaged three subcontractors to undertake bricklaying on the project, Mr Morton, Mr Salvemini and Ben Vidgeon. Janssen claims a total of $74,648.79 for these three subcontractors.
Mr Morton was the foreman for the project. He submitted 24 invoices to Janssen from the weeks ending 13 September 2012 to 28 February 2013. With five exceptions, the amounts claimed by Janssen are supported by invoices and proof of payment. In the case of four of those exceptions, secondary records were tendered proving payment. In one case, Janssen claims $874.80 said to be paid to Mr Morton but there is no proof in respect of this item and I do not allow it.
The 19 invoices tendered – as well as earlier invoices from August 2012 for which Janssen makes no claim – show separate amounts for Mr Morton and for “Gary”. It appears that “Gary” was used by Mr Morton in the invoices indiscriminately to refer to his apprentices, Gary Bradley and Jarrad Bradley. The invoices also show separate amounts for materials supplied but give no itemisation. The invoices do not show the days or hours worked or how the amount invoiced for Mr Morton or “Gary” was calculated. Mr Janssen gave evidence that he agreed a daily rate with Mr Morton to reflect his foreman duties, but could not recall the exact rate. He thought it may have been $320 per day. Mr Morton was not asked his hourly or daily rate or for his calculations of the amounts charged for himself or “Gary”. No evidence was adduced of Gary or Jarrad Bradley’s hourly rate.[50]
[50] I assume that Gary and Jarrad are two different persons – possibly brothers – but no evidence was adduced by Janssen concerning this.
In the month of September 2012, the site register shows Mr Morton and Jarrad Bradley working on 3, 6 and 7 September. There are no other entries for Janssen personnel (excluding Mr Janssen) other than Mr Jones-Moody on 7 and 10 September. Janssen claims amounts for Mr Morton and “Gary” for each of the weeks ending 13, 20 and 27 September 2012.
In the month of October 2012, the site register shows Mr Morton and Jarrad Bradley working on 2, 3 and 4 October; Mr Morton and Jarrad Bradley working on 17 to 19 October; and Mr Morton working on 22 to 26 October 2012. Janssen claims amounts for Mr Morton and “Gary” for each of the weeks ending 5, 11, 18 and 25 October 2012.
In the month of November 2012, the site register shows Mr Morton working on 31 October to 2 November; Mr Morton and Jarrad Bradley working on 7 and 8 November (with other Janssen personnel working on all five days); Mr Morton and Jarrad Bradley working on 14 and 16 November (with other Janssen personnel working on all five days that week); Mr Morton and Jarrad Bradley working on 19, 20 and 22 November (with other Janssen personnel working on all five days that week); and Mr Morton and Gary or Jarrad Bradley working on 26 to 29 November 2012 and Mr Morton only on 30 November 2012. Janssen claims amounts for Mr Morton and “Gary” for each of the weeks ending 2, 9, 16, 23 and 30 November 2012.
In the month of December 2012, the site register shows Mr Morton and Jarrad Bradley working on 3 to 7 December and Gary Bradley on 4 December and Mr Morton only on 8 December;[51] Mr Morton and Gary or Jarrad Bradley working on 10 to 14 December; and Mr Morton and Gary or Jarrad Bradley working on 17, 19 and 20 December (with other Janssen personnel working on all five days) and Jarrad Bradley only working on 21 December. Janssen claims amounts for Mr Morton and “Gary” for each of the weeks ending 7, 14 and 21 December 2012.
[51] Saturdays were worked as half days.
In the month of January 2013, the site register shows Mr Morton and Jarrad Bradley working on 7 to 10 January, Jarrad Bradley working on 11 January and Mr Morton working on 12 January (with other Janssen personnel working on all six days); Mr Morton and Gary or Jarrad Bradley working on working on 14, 15 and 17 to 19 January and Jarrad Bradley working on 16 January (with other Janssen personnel working on six days); and Mr Morton and Gary or Jarrad Bradley (and in one case all three) working on 21 to 24 January (with other Janssen personnel working on all five days). Janssen claims amounts for Mr Morton and “Gary” for each of the weeks ending 11, 18, and 25 January 2013.
In the month of February 2013, the site register shows Mr Morton and Gary or Jarrad Bradley working on 29 to 31 January, Mr Morton working on 28 January and Jarrad Bradley working on 1 February (with other Janssen personnel working on all six days to 2 February); Mr Morton and Gary or Jarrad Bradley working on 5 to 7 and 9 February and Jarrad Bradley working on 8 February (with other Janssen personnel working on six days); Mr Morton and Gary Bradley working on 11, 13, 14 and 16 February; Mr Morton and Gary and Jarrad Bradley working on 12, 15 and 18 February; Mr Morton working on 21 February and Mr Morton and Jarrad Bradley working on 19, 20, 22 and 23 February; and Mr Morton working on 25 and 26 February 2013. Janssen claims amounts for Mr Morton and “Gary” for each of the weeks ending 1, 8, 15, 22 February and 1 March 2013.
Mr Morton gave evidence that he did not necessarily fill out the site register every time he was on site but, whenever Janssen personnel were on site, he was also on site. I do not accept that evidence because the site register shows all personnel (including Mr Janssen and Kennett personnel) signing the register and Mr Morton signed the register on many, many occasions as appears above.
Mr Morton included on his invoices varying amounts for materials supplied but no itemisation was given and no detailed evidence was adduced to explain the materials. No explanation was given for the failure of Janssen to tender invoices for five of the 24 weeks the subject of Janssen’s claim.
Given that Mr Morton’s invoices do not show the job address, it is plain that he worked at other sites, Janssen has claimed for amounts when Mr Morton and Mr Bradley were not on site according to the site register and the absence of five invoices, I am not satisfied that Janssen has proved the claim in respect of Mr Morton as formulated.
The Master Builders Association (MBA) charged $25.86 per hour for fourth year apprentices. I allow that rate for Gary and Jarrad Bradley. I allow a rate for Mr Morton of $40 per hour, taking into account Mr Janssen’s evidence that he thought the daily rate may have been $320. I allow 76 days for Mr Morton giving $24,320 and 72 days for Gary and Jarrad Bradley giving $14,895.40 based on the site register. This gives a total of $39,215.40.
Mr Salvemini submitted seven invoices to Janssen covering the week ending 9 November 2012 to 19 January 2013. The amounts claimed by Janssen are supported by invoices and proof of payment. The invoices show separate amounts for Mr Salvemini and his apprentice Nathan Cox. They also show separate amounts for materials supplied but give no itemisation. The invoices do not show the days or hours worked or how the amounts invoiced for Mr Salvemini or Mr Cox are calculated. The invoices do not show the job but Mr Salvemini gave evidence and there was no suggestion that he worked on any other job for Janssen over the relevant period.
Mr Salvemini gave evidence that he agreed an hourly rate with Mr Janssen, but could not recall the exact amount of the rate. He thought it may have been $32 per hour. No evidence was adduced of Mr Cox’s hourly rate, but I assume it was approximately $25. The site register shows Mr Salvemini and Mr Cox generally working four, five or six days per week during the seven weeks the subject of the Salvemini invoices. I allow the amount claimed for the time of Mr Salvemini and Mr Cox which totals $14,935.95.
The amounts invoiced by Mr Salvemini for materials were often for round figures such as $100, $120 and $200. Mr Salvemini gave evidence that he needed to supply some materials to be treated as a subcontractor rather than an employee. While he gave generic evidence that he supplied cement and fixtures on occasion, there is no obvious reason why these would have not been supplied by Janssen. No detail was given in evidence of what Mr Salvemini supplied. I do not allow the amounts for materials invoiced by Mr Salvemini to Janssen.
Mr Vidgeon submitted three invoices to Janssen, two dated 22 November referring to work in October 2012 and one dated 24 January referring to work in January 2013. The amounts claimed by Janssen are supported by invoices and proof of payment. The site register shows Mr Vidgeon working on some days in the weeks ending 19 and 26 October 2012 and the weeks ending 11 January and 25 January 2013. The invoices show separate amounts for materials supplied but give no itemisation. I allow the amount claimed for Mr Vidgeon which totals $6,100. I disallow the amounts for materials for similar reasons as for Mr Morton and Mr Salvemini.
I allow $60,251.35 for subcontract labour.
Apprentices
Janssen engaged apprentices to work on the project by contracting with the MBA to supply apprentice labour. Invoices from the MBA were tendered proving the incurring of the expenses shown in the Scott schedule totalling $47,865.91. Kennett accepts that apprentices worked on the project as claimed by Janssen with two exceptions - being Shane Greengrass for two days in the week ending 9 November 2012 and four days in the week ending 22 February 2013 - because Kennett says reference is made to “airport” in the site name section on Mr Greengrass’ timesheet. None of the invoices from the MBA show the job address, including the invoices for those two weeks. Mr Janssen gave evidence in cross-examination that the Kennett project was near Airport Road[52] and he had no other project near the airport or Airport Road. Upon examination of the MBA timesheets tendered, it is clear that the timesheets were filled out by individual apprentices themselves. Accordingly there is variation in the way each apprentice describes the site name, with some referring to it as “Lockleys”, “Kennetts” or “Henley Beach Rd”. Mr Greengrass on at least one occasion refers to the project as “Airport Henley Beach Rd”. The site register shows that Mr Greengrass worked on two days in the week ending 9 November 2012 and four days in the week ending 22 February. There is no reason to distinguish that claim from the other claims for MBA apprentices.
[52] It is very close to the intersection of Airport Road and Henley Beach Road.
Janssen has not paid anything to the MBA. However, I am satisfied that Janssen is liable to the MBA for that amount and the non-payment is no reason not to include that amount in the quantum meruit.
Janssen also engaged some of the apprentices directly to work on Saturdays or public holidays. Janssen claims $2,251.50 paid directly to Jake Farrow, Shane Greengrass, Dylan Harvey-Chaplin, Liam Hulme, Ben Kyle, Kym Speckert and Adam Spencer. Janssen tendered invoices from Mr Kyle. Janssen tendered bank documents showing payment of the amounts claimed to all apprentices. While the documents do not show the project on which they were working, I accept that this work was incidental to normal weekday work performed by the apprentices which Kennett accepts are related to the project.

Kennett contends that Janssen deployed a high proportion of apprentices to qualified bricklayers resulting in inefficiencies and extra costs. Mr Kleinschmidt gave evidence of the ratio of apprentice to qualified labour deployed by him. Mr Janssen gave evidence that he regarded fourth year apprentices the same as qualified bricklayers for the purposes of such a ratio and if that were accepted, Janssen’s ratio was no higher than Kleinschidt’s. Kennett’s case is that fourth year apprentices should be treated as apprentices for the purposes of the ratio but did not adduce evidence giving a basis to make such a finding. In any event, an analysis undertaken by Janssen demonstrated that Janssen and Kleinschmidt each completed approximately 2.2 square metres of bricks per man per day. Because lower rates are charged for apprentices than qualified labour, it might be expected that the unit cost charged by Janssen would be less than the cost charged by Kleinschmidt. The two sets of costs are not directly comparable because virtually all of Kleinschmidt’s work was performed under scaffolding and Kleinschmidt was charging a higher rate than Janssen. Nevertheless, a further analysis undertaken by Janssen demonstrates that the average cost charged by Janssen of $187 per square metre for the purpose of the quantum meruit was substantially less than the average cost charged by Kleinschmidt of $262 per square metre. I reject Kennett’s contention.
I allow $50,217.41 for apprentice labour.
I allow $163,527.41 for all labour.
Materials
Janssen formulates its claim for the cost of materials as follows:

Item

Cost

GST

Total

Bricks PGH

$68,649.28

$6,864.94

$75,514.22

Blocks Boral

$8,696.58

$869.67

$9,566.25

Concrete Boral & Hi Mix

$3,004.71

$300.47

$3,305.18

Sand and cement Adami

$5,278.12

$527.81

$5,805.93

Materials Bianco

$10,198.01

$1,019.80

$11,217.81

Total

$95,826.70

$9,582.69

$105,409.39

Bricks

Janssen tendered invoices rendered by PGH for bricks totalling $68,649.28. Kennett accepts that this amount was incurred and relates to the project. Janssen has not paid PGH in respect of some of the invoices. For the same reasons as in respect of labour, this is not a reason not to include those invoices in the quantum meruit calculation because Janssen is liable to pay them to PGH.
Blocks
Janssen tendered invoices rendered by Boral for blocks totalling $8,696.58. Kennett accepts that this amount was incurred and relates to the project. Janssen has not paid Boral in respect of some of the invoices. For the same reasons as in respect of PGH bricks, this is not a reason not to include those invoices in the quantum meruit calculation because Janssen is liable to pay them to Boral.
Concrete
Janssen tendered one invoice rendered by Boral for concrete for $1,140.09. Kennett accepts that this amount was incurred and relates to the project. Janssen has not paid Boral. For the same reasons as in respect of Boral blocks, this is not a reason not to include this invoice in the quantum meruit calculation because Janssen is liable to pay it to Boral.
Janssen claims $1,864.62 for concrete supplied by Hi Mix Concrete. Janssen tendered four invoices rendered by Hi Mix Concrete for concrete totalling $1,864.62 showing the delivery address as 342 Henley Beach Road. Contrary to Kennett’s contention in the Scott schedule, the Hi Mix Concrete invoices do show the delivery address. It is apparent that concrete was required for the project and I allow the amount of $1,864.62.
Adami sand & cement
Janssen tendered invoices rendered by Adami for sand and cement totalling $5,278.12. Kennett accepts that this amount was incurred and relates to the project. Janssen has not paid Adami in respect of some of the invoices. For the same reasons as in respect of PGH bricks, this is not a reason not to include those invoices in the quantum meruit calculation because Janssen is liable to pay them to Adami.
Bianco materials
Janssen tendered invoices rendered by Bianco for cement and other materials totalling $10,198.01. Kennett accepts that this amount was incurred and in those cases where a delivery address is shown that it relates to the project. Where no delivery address is shown, Kennett contends in the Scott schedule that Janssen has not proved that it relates to the project. However, Mr Janssen gave evidence that these invoices related to the Kennett job and his evidence was not challenged in cross-examination or contradicted by Kennett.
Janssen has not paid Bianco in respect of some of the invoices. For the same reasons as in respect of PGH bricks, this is not a reason not to include those invoices in the quantum meruit calculation because Janssen is liable to pay them to Bianco.
I allow $95,826.70 for all materials.
Equipment
Hire of equipment
Janssen claims $8,269.29 for hire of equipment comprising Kennard Hire totalling $450, Kinetic Concrete Pumping hire totalling $3,200 and TLT hire totalling $4,619.29.
Janssen tendered an invoice from Kennard for $228 inclusive of GST for one day’s hire of mobile scaffold on 10 September 2012. Mr Janssen gave evidence that he only used Kennard early in the project. I allow $228 out of the amount claimed of $450.
Janssen tendered five invoices from Kinetic Concrete Pumping for a total of $3,200 for hire of a concrete pump between 6 September and 5 November 2012 showing in all but one case[53] the job address as Henley Beach Road. I allow $3,200.
[53] The first invoice shows only Janssen’s business address at 14 Kenton Street Adelaide.
Janssen tendered five invoices from TLT Hire for a total of $4,619.29 for hire of a brick elevator and hoist showing in each case the job address as Henley Beach Road Lockleys. None of the invoices from TLT Hire have been paid. For the same reasons as in respect of the labour invoices, this is not a reason not to include those invoices in the quantum meruit calculation. I allow $4,619.29.
I allow $8,047.29 for all hire of equipment.
Plant and equipment
Janssen tendered invoices from Bianco for the purchase of tools, plant and equipment totalling $16,516.90. Kennett contends that nothing should be allowed for this item because it represents capital expenditure. Janssen concedes that $9,354.08 represents capital expenditure but claims that 75% should be allowed because the residual value is only 25% for all such items except items costing $31.80 in respect of which it concedes that had a full residual value. The total concession of residual value is $2,362.37. Janssen contends that the balance of $7,162.82 had an effective life only for the Kennett job.
Mr Janssen gave evidence by reference to each invoice which items had a life only for the Kennett job and which had a residual life. His evidence was not challenged in cross-examination or contradicted. In general terms, the items that Mr Janssen said had a life only for the Kennett job were either consumables (eg nails for nail guns) or tools that cost less than $100 and would be likely to be used up quickly. I accept that items which cost in total $7,162.82 had an effective life only for the Kennett job and should be treated as an expense. Mr Janssen’s evidence that they were used for the Kennett job was not challenged or contradicted.
The items which cost in total $9,322.28, being $9,354.08 less $31.80, were substantial tools or plant such as electric cement mixers, pallet hand trucks, electric drills, angle grinders, mortar chasers, wheelbarrows and spirit levels. They were bought over the course of the project and many were not bought until January 2013. I reject Janssen’s case that they had only a 25% residual value at the end of the project. On the other hand, Kennett does not concede any amount for wear and tear. Mr Janssen’s evidence that they were used for the Kennett job was not challenged or contradicted. I use a broad axe and allow 20% of the capital cost for depreciation. I allow $1,864.
I allow $9,026.82 for all plant and equipment purchased.
Steven Janssen wages
Janssen paid Mr Janssen wages of $1,400 per week. Janssen claims wages for the weeks ending 6 September 2012 to 28 February 2013 totalling $37,800. Kennett contends that Mr Janssen’s time is part of the overhead costs of Janssen.
Mr Janssen did not give evidence that he performed any bricklaying or foreman work. Janssen employed Luke Morton as the foreman on site. The Kennett site register shows that Mr Janssen spent only a small proportion of his time at the site, attending on 40 days over the six month period of the project and for no more than three hours on those occasions when he signed out. Janssen claims the same amount for each week including when there was little to do at the outset of the project and over the Christmas/New Year break. Janssen does not allocate any portion of Mr Janssen’s wage to any other projects that Mr Janssen said in cross-examination were being undertaken by Janssen.
I accept Kennett’s contention that Mr Janssen’s time is not a direct cost of the project and should be treated as part of overheads.
Overhead and profit
Janssen claims 20% of the total costs incurred by way of contribution to overhead and profit. Kennett concedes that 8% would be appropriate.
Mr Janssen gave evidence that he generally sought to achieve a margin on direct costs of 20%. However, he did not identify any specific commercial contracts in which the contract price represented a margin of 20% nor the value of those contracts. If there were any such projects, they may have been substantially less than the Kennett contract price of over $400,000. Mr Janssen told Kennett at the time of quoting that his margin was $35,000, which is approximately 8% of the contract price of $423,080.
Mr Hole gave evidence that, at the height of the building boom, bricklaying margins were 15 to 20% and in mid-2012 margins were in the order of 5%.
I assess the margin at 10% being slightly in excess of the margin on the Kennett job according to Mr Janssen.
Defective work
Liability
Janssen acknowledges that it constructed one of the walls to the lift shaft in blocks when it should have been constructed in face brick. As at 4 March 2013, Janssen had already rectified some of this work. Kleinschmidt completed the rectification works. Janssen concedes that the reasonable cost of rectification should be deducted from its claim. The parties disagree about the quantum of the reasonable cost of that work.
In addition, Kennett claims that all of the parget jointing constructed by Janssen was defective. As at 4 March 2013, Janssen had reworked some of the jointing so as to produce a flush joint. Kleinschmidt completed the conversion of parget to flush jointing. Kennett contends that the reasonable cost of that conversion should be deducted from Janssen’s claim because the original parget jointing was defective. Janssen denies this.
Mr Janssen gave evidence that neither the sample panel nor the walls were attractive due to the nature of the Santorini random bricks with a parget joint as opposed to the Janssen workmanship. Mr Hole expressed the opinion that the Janssen jointing workmanship was substandard.
Mr Short expressed the opinion that the Janssen jointing workmanship was substandard based on viewing photographs but acknowledged that he did not see the sample panel and it may have matched the workmanship he saw in the photographs of the walls. In these circumstances, Mr Short’s opinion is of no real assistance.
Janssen constructed many square metres of brickwork with parget jointing over the course of more than a week. The Kennett supervisors and managers did not at any point over that period communicate to Janssen that the workmanship was unsatisfactory.
The onus of proving that the parget jointing was defective lies on Kennett. Given the construction by Janssen bricklayers of many square metres over the course of more than a week without being told by Kennett that the workmanship was unsatisfactory and the conflict on the evidence between Mr Janssen and Mr Hole, I am not satisfied that the jointing workmanship was defective compared to the sample panel.[54]
Quantum
[54] If the onus of proof had laid with Janssen, I would not have been satisfied that the workmanship was satisfactory.
Kennett quantifies the cost of rectifying the lift shaft wall in conjunction with the cost of converting parget jointing to flush on the basis that it took Kleinschmidt the first two weeks to attend to rectification works. This approach is not apposite given that Kennett has failed to prove that the parget jointing was defective.
Kennett relies in the alternative on a formulation prepared by Mr Hole on or before 15 March 2013 for the purpose of assessing the February 2013 progress claim. Mr Hole estimated prospectively that the work to replace the block work on the lift shaft with face brick would take three men three days at $440 per day costing $3,960 together with the cost of scaffold of $3,500, materials of $750 and a skip of $240.
It was put to Mr Hole in cross-examination that the area in question had already had the incorrect blocks removed by Janssen and approximately 7 square metres remained to be bricked. Mr Hole accepted that the incorrect blocks had been removed and the area as approximately correct. It was put to Mr Hole that his estimate of 72 man hours to undertake that work involved about 10 man hours per square metre and this was excessive. Mr Hole disagreed. Mr Hole pointed to the need to work on scaffold and access issues.
Janssen contends that the average time spent by Janssen and Kleinschmidt on the project as a whole was approximately 2.2 man hours per square metre.
Using a broad axe, I assess the cost of labour at $2,000. Mr Hole said that the scaffold costs of $3,500 estimated by him in March 2013 mainly comprised a charge for delivery, erection, dismantling and collection as well as a daily hire fee. I allow $3,500 for scaffold costs. Mr Hole did not explain how he calculated the cost of materials at $750. I allow $300. I do not allow the cost of a skip on the basis that Mr Hole accepted that the old blocks had already been removed. Overall, I allow $5,800 for the rectification of the east lift shaft block work.
Damages for loss of use of monies
Janssen claims damages for loss of use of monies. Janssen had an overdraft facility with its bank with a limit of $20,000. Mr Janssen had a MasterCard issued by its bank with a limit of $30,000. The overdraft facility was drawn to $14,149 by 10 March and the MasterCard facility was drawn to $28,653 by 12 March 2013. Mr Janssen gave evidence that those limits have been virtually fully drawn since 31 March 2013. The interest rate on the overdraft facility as at March 2013 was 13.68% per annum and Mr Janssen gave evidence that the rate has been about the same since then. The interest rate on the MasterCard facility as at March 2013 was 20.74% per annum and Mr Janssen gave evidence that the rate has been about the same since then.
Janssen claims $3,269 for interest accrued on the overdraft facility and $8,432 for interest accrued on the MasterCard facility. Janssen does not identify how it calculates these amounts. These amounts represent interest at the March 2013 rates over approximately 14 and 16 months respectively. Janssen claims these amounts as damages for loss of use of monies and claims interest on the balance of its claim in excess of $50,000 under section 30C of the Supreme Court Act 1935 (SA).
If a party claims damages for loss of use of monies, at least in respect of an indivisible claim, the entire claim must be calculated by reference to the actual loss. In the absence of proof of borrowings incurring interest, any balance over the amount of the plaintiff’s borrowings should be assessed by reference to the interest which would have been earned on monies deposited at the bank or any other investment that would have been made. Janssen adduced no evidence as to the investment of the balance of the monies. It is likely that the interest earned on deposit at a bank would have been at such a low rate that it would more than offset the excess interest incurred on the overdraft and MasterCard facilities over the interest that would be awarded under section 30C of the Supreme Court Act 1935 (SA).
I reject the claim for damages for loss of use of monies.
Interest
Janssen would be entitled to interest under section 30C of the Supreme Court Act 1935 (SA) on the amount of the quantum meruit calculated from an appropriate date to the date of judgment. I would allow interest at 6.9% per annum for the period to 30 June 2013 and 6.5% thereafter.
GST
Insofar as Janssen incurred a liability to suppliers and contractors for GST, it will have recovered the GST paid through submitting BAS statements to the Australian Taxation Office. Janssen’s claim is for money payable in quantum meruit. It is likely that, if judgment were granted in favour of Janssen against Kennett, Janssen would be liable to pay GST on the amount of the judgment representing the quantum meruit but not on interest. If Janssen had succeeded, I would have directed that Janssen seek a private ruling from the Australian Taxation Office and Kennett pay GST if the Australian Taxation Office ruled that it is payable by Janssen on the quantum meruit amount.
Summary
If Janssen had been entitled to recover on a quantum meruit, I would have assessed the value of the work performed by Janssen in total (net of payments by Kennett) at $85,482.64. The calculation is shown in the following table.

Item

Claim

Assessed

Total

Labour

Employees

$53,103.65

$53,103.65

Subcontractors

$74,648.79

$60,251.35

Apprentices

$50,117.41

$50,217.41

Subtotal labour

$177,869.85

$163,527.41

Materials

Bricks PGH

$68,649.28

$68,649.28

Blocks Boral

$8,696.58

$8,696.58

Concrete Boral & Hi Mix

$3,004.71

$3,004.71

Sand and cement Adami

$5,278.12

$5,278.12

Materials Bianco

$10,198.01

$10,198.01

Subtotal materials

$95,826.70

$95,826.70

Equipment

Hire equipment

$8,269.29

$8,047.29

Capital equipment

$16,516.90

$9,026.82

Subtotal equipment

$24,786.19

$17,074.11

Other

Steve Janssen labour

$37,800

Nil

Less lift shaft re-work

-$1,710

-$5,800

-$5,800

Subtotal

$334,572.74

$270,628.22

20% overhead & profit (assessed at 10%)

$66,914.55

$27,062.82

Subtotal

$401,487.29

$297,691.04

Less payments received

-$212,208.40

-$212,208.40

Total

$189,278.89

$85,482.64

Janssen would have been entitled to interest under section 30C of the Supreme Court Act 1935 (SA) on that amount.
Conclusion
Janssen repudiated the Contract. Kennett lawfully terminated the Contract. Kennett is entitled to judgment against Janssen Co and Mr Janssen for damages of $226,212.22. Janssen’s counterclaim is dismissed. I will hear the parties as to interest, costs and any consequential orders.

Item	Cost	GST	Total
Labour	$177,869.85	$11,315.88	$189,185.73
Materials	$95,826.70	$9,582.69	$105,409.39
Equipment	$24,786.19	$2,478.61	$27,264.80
Steve Janssen labour	$37,800.00	$37,800.00
Less lift shaft re-work	-$1,710.00	-$1,710.00
Subtotal	$334,572.74	$23,377.18	$357,949.92
20% overhead & profit	$66,914.55	$4,675.44	$71,589.99
Subtotal	$401,487.29	$28,052.62	$429,539.91
Less payments received	-$212,208.40	-$21,220.84	-$233,429.24
Total	$189,278.89	$6,831.78	$196,110.67

Item	Claim	Assessed	Total
Labour
Employees	$53,103.65	$53,103.65
Subcontractors	$74,648.79	$60,251.35
Apprentices	$50,117.41	$50,217.41
Subtotal labour	$177,869.85	$163,527.41
Materials
Bricks PGH	$68,649.28	$68,649.28
Blocks Boral	$8,696.58	$8,696.58
Concrete Boral & Hi Mix	$3,004.71	$3,004.71
Sand and cement Adami	$5,278.12	$5,278.12
Materials Bianco	$10,198.01	$10,198.01
Subtotal materials	$95,826.70	$95,826.70
Equipment
Hire equipment	$8,269.29	$8,047.29
Capital equipment	$16,516.90	$9,026.82
Subtotal equipment	$24,786.19	$17,074.11
Other
Steve Janssen labour	$37,800	Nil
Less lift shaft re-work	-$1,710	-$5,800	-$5,800
Subtotal	$334,572.74	$270,628.22
20% overhead & profit (assessed at 10%)	$66,914.55	$27,062.82
Subtotal	$401,487.29	$297,691.04
Less payments received	-$212,208.40	-$212,208.40
Total	$189,278.89	$85,482.64