Kyle Road Developments Pty Ltd v Impact Demolition - [2011] VCC 853

IN THE COUNTY COURT OF VICTORIA	Revised Not Restricted
AT MELBOURNE CIVIL DIVISION COMMERCIAL LIST - BUILDING CASES DIVISION

Case No. CI-09-01333

KYLE ROAD DEVELOPMENTS PTY LTD	Plaintiff
v
IMPACT DEMOLITION (VICT) PTY LTD	Defendant Case No. CI-09-05760
IMPACT DEMOLITION (VICT) PTY LTD	Plaintiff
v
SWIFT AUSTRALIA (SOUTHERN) PTY LTD	Defendant
JUDGE:	HIS HONOUR JUDGE ANDERSON
WHERE HELD:	Melbourne
DATE OF HEARING:	8, 10, 13-17 September and 14 October 2010
DATE OF JUDGMENT:	30 June 2011
CASE MAY BE CITED AS:	Kyle Road Developments Pty Ltd v Impact Demolition (Vict) Pty Ltd
MEDIUM NEUTRAL CITATION:	[2011] VCC 853

REASONS FOR JUDGMENT

Catchwords:

Building contract – Removal of asbestos and demolition works – Scope
of works – Whether written memorandum of agreement required to be
rectified – Termination of agreement – Failure to diligently progress the
works – Assignment of cause of action – Entitlement of assignee to claim
damages – Renold Australia Pty Ltd v. Fletcher Insulation (Vic) Pty Ltd
[2007] VSCA 294 followed.

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J Gleeson SC with	Holding Redlich
(Kyle Road Developments)	Mr T Cogley
For the Defendant	Mr J Gottschall	Henty Stamfords
(Impact Demolition)
HIS HONOUR:

1 Gilbertsons Meatworks in Altona ceased operating a number of years ago. The meatworks occupied a 38 hectare site and together with surrounding properties was targeted for residential development. Tasman Group Services Pty Ltd (Tasman), now Swift Australia (Southern) Pty Ltd (Swift), became the owner of the meatworks and stripped the site of equipment for use in the company’s other abattoirs and then proceeded with plans to obtain the necessary planning permits to develop the site for residential purposes.
2 In late 2004, Tasman sought tenders for the removal of asbestos from the buildings on the site and the demolition of most of the structures. Impact Demolition (Vict) Pty Ltd (Impact) submitted a tender on 18 January 2005 and an amended tender on 17 February 2005, estimating the time to complete the works as 60 weeks. After

negotiations, a letter of offer from Tasman dated 16 March 2005 was accepted and
countersigned by Impact. The countersigned letter dated 16 March 2005 was the first
agreement between the parties. Impact was to remove asbestos from the site for a
price of $1,650,000 and was to demolish structures (to be specified) on the site for a
price of $1,210,000. Generally, the salvageable materials on site were to be retained
for Tasman’s benefit although there was later a dispute about which particular
categories of materials were included in that arrangement.
3
14 June 2005. The planning permit excluded certain “heritage” buildings on the site
Impact mobilised on site in early June 2005. A planning permit was issued on 6 December 2005 limiting demolition to the scope of works in the planning permit.
4           Between June and December 2005, Impact proceeded with the removal of asbestos from the buildings on the site. Asbestos had been used in the construction of roofing, walls and for concrete formwork. Initially, most of the asbestos removed was located in rooves and walls. This had the effect of stripping buildings of much of their outer
and inner structure, although no demolition permit had been obtained at that time.
5           When the building permit was issued in December 2005, Impact commenced the demolition of buildings. The method employed involved proceeding in a logical sequence through the site, initially starting at the cattle yards and moving westwards on the northern side of the central roadway. The buildings were demolished, leaving the concrete flooring and tarmac surrounds intact. The work was undertaken carefully to ensure that valuable materials including steel, timber and bricks were salvaged and stockpiled for later realisation.
6           In late 2005, Tasman forwarded a written contract to Impact. The contract had been drawn up by Tasman’s solicitors and was a substantial document comprising over 300 pages. The document was never executed or returned by Impact. In the proceeding, Tasman relied upon the document as the second version of the agreement between the parties pursuant to which Impact carried out works on the site. This argument was not pressed by Kyle Road in its final submissions.
7           A dispute arose in May 2006 when Tasman suspected Impact of illegally removing timber from the site. A confrontation took place and the issue was resolved by Impact paying $6,000 to Tasman. Following this dispute, the parties reached an agreement which was documented in a memorandum of agreement drawn up by Tasman’s solicitors and executed by both parties on 3 July 2006. This third version of the agreement was acknowledged in the proceeding by both parties as the document which formed the basis of their relationship thereafter, although Tasman claimed that the contractual relationship was also governed by the terms of the original tender documents and a number of conversations on site between representatives of the parties.
8           The memorandum of agreement contained provisions on three issues which are critical to the disputes which later developed:

a.

The agreement recognised that Tasman needed to obtain a further planning permit “to authorise the demolition and removal of all buildings and structures on the property” and that Impact was to complete its work within five months of the permit being obtained.

b.

The scope of works included the demolition of all the buildings excluding “the office building and butcher shop”. There is a claim in the proceeding that the agreement should be rectified to also include the “skin stores” (also referred to
as the “skin sheds”) as buildings to be excluded from the demolition works
Impact was to perform.

c. The financial relationship was significantly changed. Certain payments were to be made by Tasman into a trust account up to a total of $495,000 pending completion of the works. Otherwise, the balance of the original contract price was to be set off, by the “purchase” by Impact of the “salvageable property” on the site for $800,000. As Tasman’s managing director, Mr Joe Catalfamo, apparently said at the time, Impact would in the future need to “live off the scrap”.
9           The principal disputes which followed related to:

a. the time taken by Impact to complete the removal of asbestos and the demolition works;
b. the obtaining of a further planning permit by Tasman and the extent of that permit;
c. whether the skin sheds were excluded from the demolition works or whether Tasman was obliged to obtain a planning permit allowing the demolition of the skin sheds.
10         The later critical events were as follows:

a.

in February 2007, Tasman locked Impact out of the site, although in March 2007 Impact returned and continued with its works;

b.

in June 2007, Impact obtained a planning permit for the demolition of the buildings and structures on site except the administration building and a significant part of the skin sheds;

c.

on 12 March 2008, following service of a notice of default on 15 February 2008, Tasman purported to terminate Impact’s contract by service of a notice relying upon Impact’s failure “to complete the works as required under the Memorandum” of agreement dated 3 July 2006;

d.

in 2007 or 2008, Tasman (then Swift) sold the site to Kyle Road Developments Pty Ltd (Kyle) and, by deed, assigned any rights it had in respect of its contractual arrangements with Impact;

e.

in late 2008, Kyle engaged a further contractor, Alex Fraser Demolitions Pty Ltd (Alex Fraser Demolitions), to complete the asbestos removal and demolition works at the site;

f.

on about 18 June 2010, Kyle obtained a planning permit allowing it to demolish all buildings and structures on the site, including the whole of the skin sheds.
11         In proceeding CI-09-01333, Kyle claimed from Impact damages arising from the termination of the arrangement between Tasman and Impact. The damages are essentially the additional costs of completing the asbestos removal and demolition
works.
12         In proceeding CI-09-05760, Impact claimed from Swift damages for wrongful termination of agreement including:

a. the profit it would have earned if it had been permitted to complete the works;

b.

the salvageable materials left on site to which Impact claimed entitlement under the agreement;
c. the progress payments held in trust.
13         The determination of both proceedings involves consideration of the following issues:

a. the nature and extent of the contract between the parties;
b. whether the memorandum of agreement should be rectified to refer to the “skin sheds” as buildings to be excluded from the demolition works;
c. the extent of Tasman’s obligations to obtain a planning permit pursuant to the memorandum of agreement and whether a permit for the demolition of the skin sheds was required;
d. the validity of Tasman’s notice of determination including whether, at the time the notice was served:
i.           demolition of the skin sheds was part of Impact’s scope of works;
ii.          the provision as to the time for completion had been triggered by the issue of a planning permit on 5 June 2007 or whether a permit to demolish the whole of the skin sheds was required;
iii.          whether Impact had breached an obligation upon it to “progress the works regularly and diligently”.

e. the financial consequences which follow, including:

i.
whether Kyle, as assignee of Tasman’s cause of action, was entitled to work;
ii. any award of damages;
iii. what should happen to the progress payments paid into a trust account by Tasman.

Tender process
14         In September 2004, the plant and equipment at the abattoir site in Altona was auctioned. Later that year, tenders were sought for the removal of asbestos from the site and demolition of the buildings and other structures. The site was in an industrial 1 zone but was subject to a heritage overlay, which meant that a planning permit was required for demolition of any buildings on the site. A pre-tender inspection of the site was offered in December 2004 for prospective tenderers. The tenderers, including Impact, were given information about the site and permitted to inspect the buildings and other structures.
15         On 18 January 2005, Impact submitted a tender to complete the removal of nominated asbestos material for $1.65 million and the demolition of all nominated buildings for $1.32 million. In a document accompanying the tender, it was noted that Impact’s price allowed for “complete demolition of site”. Following receipt of the tenders, Tasman negotiated with the tenderers including Impact. This resulted in the submission of an amended tender by Impact on 17 February 2005. The price for demolition of buildings was reduced to $1.21 million with work to be completed within 60 weeks approximately. The amended price allowed for “complete demolition of site per your scope of works”. The document also noted, “all work and effort to obtain maximum return to you for scrap steel non-ferrous and crushed product” and gave specific detail as to how steel, non-ferrous metals and concrete would be dealt with.
16         Further negotiation took place concerning the sharing of the returns from salvageable material. On about 17 March 2005, the parties reached agreement, with Impact countersigning acceptance of the terms and conditions contained in a letter of offer from Tasman dated 16 March 2005. The features of the letter were:

a.

the prices referred to in the amended tender dated 17 February 2005 remained unchanged;

b.

the agreed work was “to remove all asbestos and demolish all structures (to be specified in a contract), on our site”;
c. concrete was to be “crushed and stockpiled on site”;

d.

the first $1 million from recovered steel was to be recouped by Tasman, thereafter the sale price of further steel recovered from the demolition was to be “a split of 90 per cent (Tasman Group)/10 per cent (Impact Demolition)” although Tasman might, if it wished, sell some of the recovered steel to Impact, “at a mutually agreed price”.

e.

It was anticipated that once the letter was signed and returned, Tasman “would prepare contractual documentation for your perusal and acceptance”.

First planning and building permits
17         Tasman did not apply for a planning permit for the demolition of buildings until 6 April 2005. Attached to the permit application was a demolition plan which marked, as the only buildings to remain, the head office and the most northern strip of covered cattle yards. The permit application was handled on behalf of Tasman by Urbis JHD Pty Ltd (Urbis), an urban planner. In a letter dated 6 April 2005 to the Hobsons Bay City
Council, Urbis noted that Tasman’s proposal was for “the demolition of all buildings
on the site except for the head office (a three storey building) and the covered and
open cattle yards and rail siding to the north of the northern most stock lane”.
18         The letter discussed a heritage assessment report dated 1 April 2005 prepared by heritage architect, Mr Bryce Raworth. The letter dated 6 April noted that, “While the
skin sheds have previously been identified as comprising one of the more distinctive features of the site, demolition can be justified for the following reasons: the integrity and unusual appearance has reduced by the removal by external cladding. The
sheds are not amenable to re-use. The sheds constitute a danger in terms of
unauthorised use”.
19         The heritage assessment report dated 1 April 2005 comprised a letter to Urbis from Mr Raworth. In the letter, Mr Raworth referred to a conservation management plan “prepared by my office in consultation with Council in 2003 and 2004”. In Mr

Raworth’s letter dated 1 April 2005, he noted that many of the surviving structures
“are adversely affected by the presence of asbestos which will need to be removed.
Some such as the raised covered yards (sheep yards) and the skin sheds, are of a built form character that is incompatible with adaptive re-use and that would be dangerous in the context of retention and adjoining re-development particularly in

terms of their capacity to attract illegal entry and dangerous climbing activity”. He
recommended that “the extent of demolition that is currently being sought be
supported, but that steps are taken to ensure an appropriate degree of interpretation
of the site”.
20         This contrasted with views expressed by Mr Raworth in an earlier heritage assessment report dated March 2005 commissioned on behalf of “the owners of the site”. The report noted in relation to the skin sheds that, “The skin sheds were the

most visually interesting element of the site when it was in its heyday. Their interest
has been somewhat undermined as a result of the removal of much of the timber
battening to their exteriors. Nonetheless it would be of benefit if they could be
retained in part or full and possibly restored with regard to some key elevations”.
21         The report “recommended that a limited listing of individually significant elements be considered as opposed to the current heritage overlay to the entire site”. The report included a site plan “showing the levels of significance for buildings and other
elements”. The whole of the skin sheds were designated as “significant”.
22         Mr Raworth’s letter to Urbis dated 6 April 2005 referred to the identification of “three
levels of significance within the site – significant fabric, fabric of low significance, and
fabric of no significance”. The letter noted that the significant fabric included “the head
office building, the covered and uncovered yards, the neighbouring rail siding, and the
skin sheds” and that generally for “significant” items, it “would be preferable for this
fabric to be retained and adaptively re-used into the future if such a course is
possible”.
23         The letter noted that, “Under the present proposal the administration block, a
representative sample of covered and uncovered yards, and the rail siding are to be
retained for interpretative purposes”. The report noted that, “the skin sheds, which

once comprised one of the more distinctive features of the site, have lost much of unauthorised access by minors. Demolition of these buildings is essential to any
their integrity and unusual appearance through the removal of their external cladding.
future consideration of re-development of the site for uses other than an abattoir”.

24
assist with the application to re-zone the site, and some surrounding industrial land,
from industrial to residential. On 6 May 2005, Mr McGauran on behalf of Tasman
requested Tract Consultants to submit a fee proposal for “town planning and
In about April 2005, Mr Rob McGauran, an architect, was engaged by Tasman to “There are a number of heritage properties on the site of a generally twentieth century
nature and these have been assessed by Bryce Raworth Heritage Consulting. One or
more may require retention for possibly community related uses”.
25         On 30 May 2005, the Hobsons Bay City Council wrote to Tasman advising that “the
Council’s Planning Department are not prepared to permit demolition of the buildings
identified as ‘significant’ as shown on [the plan in Mr Raworth’s March 2005 report]
unless it is proven that these buildings pose safety concerns that cannot be

reasonably eliminated”. The letter suggested that Tasman’s application be amended
“to include only for demolition of buildings identified as having no significance and low
significance, apart from the former retail outlet facing Kyle Road”. The letter
concluded that, “Consideration of future planned uses should not be used to justify
demolition at this stage without more concrete development plans that show adaption
is not possible and/or appropriate”.
26         On 15 June 2005, a planning permit issued with Mr Raworth’s plan attached endorsed with the note, “Demolition Plan - Buildings to be demolished are those of
low significance and no significance except for building 7 (former retail outlet) which

will be retained”. All of the ‘skin store’ buildings were marked as ‘significant’ and were
therefore excluded from the demolition permit.
27         Whilst there is some dispute on the evidence as to when the planning permit was supplied to Impact in order for Impact to obtain a building permit for demolition, it is likely in my view that this was not until shortly before 5 October 2005 when an application for a building permit was submitted by Impact. The relevant permit was granted by Mr Trevor Miles, a building surveyor, on 6 December 2005. The building permit authorised “demolition of buildings approved by town planning only” and referred to the planning permit dated 14 June 2005 with the attached demolition plan, excluding from demolition a number of buildings including the skin store buildings.
28         Prior to the grant of this building permit, Impact was not permitted to demolish any building on site. Impact had, however, on 1 July, 1 August, 1 October and 30 November 2005 submitted four progress claims for amounts totalling $1.1 million, apparently for asbestos removal, which had all been paid by Tasman by about 19 December 2005.
29         An aerial photo in evidence dated 21 November 2005 shows that, by that date, a substantial part of the skin store buildings had the roofing material, and probably the side and interior cladding material, removed. The skin store buildings are T-shaped. In the centre, the T of the stem, was what was described as the “bale store” running roughly north/south with a pitched roof. To the east were skin sheds which, in the second planning permit issued on 4 June 2007, were excluded from the buildings to be retained. To the west of the stem was the most significant part of the skin store buildings. This consisted of a central structure running east/west with a roof approximately five to 10 metres higher than the portions of the building immediately on either side to the north and south. The central part of this building was the highest building on the site, at approximately 70 feet, and for this reason was of considerable significance.

30
cladding had been removed from substantial parts of the skin store buildings,
including as part of the demolition work undertaken by Impact. It may be that this
work was performed in part at an earlier time because of the references to the
building and the building’s state of incompleteness in the Bryce Raworth report dated
At some stage prior to November 2005, the roofing and exterior and interior wall sheds. The report noted that “generally most of the sheds are open sided” and that “the horizontal timber slats that skins were hung from have been substantially removed”. From the photographs, the roofing of the sheds appeared to still be in place.

The memorandum of agreement
31 The memorandum of agreement was executed by the parties on 3 July 2006. The memorandum recited that the total price payable by Tasman for the performance of the works was $2,600,000 and that Impact had rendered seven invoices and had been paid $1,485,000. The final invoice for $100,000 (excluding GST) remained unpaid. The parties agreed that the unpaid balance of the contract sum of $2,600,000 would be paid as follows:

a. By Impact purchasing the “salvageable property” for the sum of $800,000. That sum plus GST would be deducted from the contract sum ($2,860,000 less $880,000 equals $1,980,000).
b. The balance of $495,000 ($1,980,000 less $1,485,000) was to be paid into a trust account. Impact was to be entitled to receive that sum, and accrued interest, upon completing the works under the agreement.
32 The memorandum also provided that, “In addition to the agreement price, Tasman will pay to Impact the sum of $250,000 (excluding GST) for all works amounting to variations, whether those works have been or are yet to be performed”. The amount
of $250,000 included the unpaid invoice for $100,000 which was to be paid upon the execution of the agreement and the balance of $150,000 which was to be paid when all asbestos had been removed from the property.

35
“skin stores”. A further section of the memorandum is headed “Planning, Demolition
33 “Salvageable property” was defined in the memorandum as “the property of which
buildings and structures on the property are comprised and includes, without

limitation, bricks, concrete, timber and steel whether in existing or dismantled form”.
The memorandum provided that, “Upon execution of this memorandum of agreement
Impact will become the owner of all salvageable property excluding:

a.

the items of property listed in the schedule to this memorandum of agreement which Tasman will retain, and
b. any asbestos or other rubbish interred or placed in the quarry or in
surrounding areas of the property”.

34
recitals noted that the “agreement for the demolition and removal of buildings and
structures on the property” was “evidenced among other things” by eight listed
documents, which included the letter from Tasman to Impact dated 16 March 2005
and the copy of the letter counter-signed by Impact. The “other things” were not
defined in the memorandum. A section of the provisions in the memorandum was
headed “Limitations on Scope of Work under the Agreement”. One of the clauses in
The scope of works to be performed was not specifically set out in memorandum. The “16. Impact is not required under the agreement to demolish and/or
remove─

a. rubbish, dirt, rubble, bricks, timber, steel, concrete and like materials which were delivered to the property prior to the commencement of works under the agreement by Impact, and since, by parties other than Impact;
b. the office building and butcher shop located on the property;
c. any underground fuel tank or like structure buried or located
underground”.

Tasman said that clause 16(b) should be rectified to also include reference to the “25. Tasman will procure all planning permits required by law to authorise
the demolition and removal of all buildings and structures on the property by Impact on or before Friday 1 September 2006, unless Impact’s express consent to an extension of time is obtained which consent it will not unreasonably withhold.
26. For the purpose of clause 25 above, Tasman shall act promptly using its best endeavours at all times.

27. Impact will complete all works it is required to perform under the
agreement on or before Wednesday 31 January 2007, save that:

a. any extension of time under clause 25 above, will automatically extend commensurately the time available to Impact under this clause 27;
b. Tasman will not unreasonably withhold its consent to any
request by Impact for an extension of time under this clause 27”.

36         The memorandum also provided that “a dispute about any matter relating to the agreement including this memorandum of agreement” was to be resolved by referring the dispute to “an independent third party with relevant expertise in the subject matter of the dispute”.
37         The memorandum of agreement is a critical document. It postdates both the documents which led to Impact counter-signing the letter of offer dated 16 March 2005 (which was alleged by the parties to be the first agreement reached by them) and the extensive draft contract prepared by Tasman’s solicitors in late 2005 (which Tasman alleged was the second agreement entered into by the parties).
38         The disputes which later arose between the parties and which require resolution in this proceeding will essentially be determined by a consideration of the events which occurred and how those events affected the rights and obligations of the parties and particularly the rights and obligations set out in the memorandum, as follows:

a.

whether the skin sheds were included in the scope of works Impact was to perform and whether the memorandum should be rectified to reflect that;

b.

the extent of planning permits Tasman was required to procure and whether the planning permits were required to authorise the demolition and removal of the skin sheds;

c.

any consequence of the failure by Tasman to obtain planning permits for the demolition and removal of the skin sheds.
d. Impact’s entitlement to salvageable property and when that entitlement arose;
e. when Impact became entitled to be paid the monies held in trust;
39         On 5 July 2006, Tasman’s solicitors forwarded to Impact’s solicitors a copy of the memorandum, which a covering letter said was “duly executed by our clients”. The letter continued: “We confirm that the memorandum has been entered into by our
client on the basis that the parties will enter into a more detailed agreement regarding

the matter within the next month”. The parties did not allege that any further
agreement was or should have been entered into.

Further revised agreement
40 The Statement of Claim had, by amendment made on 10 July 2009, substituted references to the “memorandum” in certain paragraphs, with the phrase “Further Revised Agreement”. This phrase is defined in paragraph 22 of the latest version of
the pleading dated 10 June 2010.
41 The pleading of the “Further Revised Agreement” is an important issue. The matters alleged in the pleading to constitute the agreement include:

a. the memorandum of agreement dated 3 July 2006;

b.

Impact’s original tender and the acceptance by Impact on 17 March 2005 of Tasman’s letter of offer dated 16 March 2005;
c. the modified PC-1 contract prepared by Holding Redlich;

d.

general and particularised conversations on site between Mr Ellis with Mr Matheson and Mr Opray “in the period between March 2005 and June 2005 including in or about late May 2005 and on or about 8, 9 and 15 June 2005”;
e. conversations between the same participants “in the period between June
2005 and June 2006 and prior to 3 July 2006. The substance of the
conversations was to the effect that the skin stores were excluded from the
scope of works”;

f. any necessary implications from “the need to give business efficacy” to the agreement;
g. any necessary implications from the fact that the agreement “was concluded
after the first planning permit was issued by the Hobsons Bay City Council and
that the first planning permit did not include a permit to demolish the skin
stores on the basis that they were structures of heritage significance”.

Conversations alleged to be part of the Further Revised Agreement
42         Tasman alleges that in regular conversations between Opray, Matheson and Ellis in about late 2005, Tasman told Ellis that the skin stores were being retained by Tasman due to the “height precedent” that they provided. Evidence was given by both Opray and Matheson of the relevant conversations.
43         The most extensive evidence given by Mr Opray of these matters was at transcript
pages 69 to 71 as follows:

“Did you have any conversations with Mr Ellis in relation to the skin stores, in
particular?---Yes, well the skin stores, the conversations would have been in relation
to the demolition of those buildings, that they were not being demolished. The admin
building and the skin stores were two areas that we looked at for future development.
The admin building could be reused and refurbished for apartment residential use.
The skin store building itself, apart from having a heritage classification on it, was one
of the tallest, if not the tallest buildings in Altona and it afforded us the ability to put
probably a five-storey building on that site on that location if it remained defining the
height.
You referred in plural to conversations, is it your evidence that there was more than
one conversation with Mr Ellis to this effect?---Any others would have been in
passing, yes.
Are you able to tell His Honour whether you can put a date on the conversation, or
conversations or a band of dates?---There were discussions, I remember, around the
skin sheds because of the asbestos on the roof and the height of it and the difficulties
that Impact were going to have in being able to remove it, which they did eventually
do.
So they had to take the asbestos off the skin sheds?---Yes, the roof on the skin sheds
was asbestos. That had to be removed and that needed to be done prior to anything
else being demolished and that was completed and that was done in the initial stages
that took that first period before the building permit was issued for the demolition.
But as to dates, please say if you can't, it is a long time ago, if you can give
His Honour an indication of dates, say so. If you can't, then you can't?---It would
have been in that period probably up to December in that early part. If it was going to
be, it would have been discussed at that stage when they were looking at taking the
asbestos off the roof”.
44         The most detailed relevant evidence given by Mr Matheson was at transcript pages
138 to 140 as follows:
We had made Mr Ellis aware all along that there were certain buildings that may be and I'm insisting on demolishing”?---No”.

“
required; at that point they were undetermined, but certainly following our meeting
and discussions with Mr McGauran and subsequent discussions with the council, it
was palpably clear to us and we made it very clear to Mr Ellis that the skin sheds
would be required to remain in place.
Are you able to place that conversation or conversations with Mr Ellis in relation to
this letter of 30 May? Was it within a matter of days, weeks or months after receiving
that letter?---It would have been within a matter of days, if not weeks. Certainly days,
I'd say.
Where were the discussions?---Primarily most of the discussions occurred on site.
HIS HONOUR: I think if this is important to you for your case, you probably need
something better than that.
MR GLEESON: Thanks, Your Honour. (To witness) You say primarily at site.
Discussions at site - where did they take place - - -?---In the board - - -
Where was your office building?---The office building was on site. There was an old
boardroom in the office building. Often they would be - the meetings we held would
be in the old in the old boardroom. Many of the discussions we had were out in the
open, but certainly they would have occurred in the old boardroom in the building.
You're using a turn of phrase that many of us use, which is “would have”. They
“would have” occurred. Just to be clear about this, if you have no actual recollection
of a discussion happening, but you're assuming it happened, then say so. If on the
other hand, you do have a recollection of the conversation happening, then also say
that. Do you understand the distinction?---I do, I do. I do recollect the discussion
taking place and I do believe it to have been in the boardroom.
Can you recall who else was there apart from yourself and Mr Ellis?---No.
Mr Opray may have been there, but I can't categorically say that's the case.
Can you recall any response from Mr Ellis to being told that the skin sheds were
staying up?---Mr Ellis was keen to obviously work with us to ensure that it was a
successful project outcome and certainly he - look, at this point, I must say that I can't
go into this level of detail.
Can you recall objecting to the proposition?---Not at that meeting, no.
45         Further relevant evidence was given by Mr Matheson at transcript pages 142 to 143

“Do you recall whether you had any discussions with Mr Ellis in late 05 or early 06 in
relation to the skin stores and whether they were to be demolished?---We had regular
meetings on site and it was raised in the context of the overall future use of the site
and - - -
Raised by who?---By myself.
How did you raise it? Can you remember - if you can't remember the exact words,
the substance of the words you used?---The substance of the words would be that we
required the buildings to remain in place as part of our strategy to move forward.
On how many occasions do you say that these discussions happened, after the
receipt of the demolition plan in December 05?---Would have been regularly. We met
regularly on site. I couldn't give you a number of occasions, but it would have been
quite frequent.
Did you have a fixed date for meetings with Mr Ellis? Was it every Monday or was it
more random than that?---We attempted to have fixed dates, but, given Mr Ellis'
schedule, often that would be revised. It was intended that we meet weekly.
In fact how frequently would you say you were meeting in late 05?---Would have
been weekly, if not fortnightly.
as follows: sons were present, and it was much easier to be able to discuss issues with them, or certainly to catch up with them, as you walked around the site”.
46         During cross-examination, Mr Matheson was questioned about the conversations and
a facsimile Ellis sent to Matheson on 1 November 2006, at transcript pages 184 to
185 and from 185 to 186 as follows:

“Could I ask you to turn to p.2966. Before you do that, you've said that you had
frequent meetings with Impact Demolition?---Yes.
Was it on a fortnightly basis?---Weekly, fortnightly, wherever we could, depending on
Mr Ellis' schedule and our schedule. But certainly no later than fortnightly.
You had discussions with Mr Ellis?---Yes.
In fact, as I understand it, it's Tasman's allegation that in those discussions you told
Mr Ellis that the skin sheds were not to be included. Is that right?---Not be included in
the demolition?
That's right?---Yes, that's correct.
So if you look at that document I've asked you to turn to, it states, “Could you, by
return fax, tell us an expected date when you'll have the planning permit to enable us
to plan the demolition. Also, would you let us know your intentions with regard to the
skin sheds, an estimate as to how long you will require them to be left up.” Now,
Mr Matheson, if you're having weekly or fortnightly discussions with Mr Ellis, there
was plenty of opportunity for you to discuss this matter orally. Mr Ellis has chosen to
write you a letter about it. Does that not suggest to you that he wants something in
writing?---We often received faxes from Impact Demolition as well as having verbal
discussions with the various representatives of the company on site. We saw it as no
more than the normal course of communication we would include - that we would
have with them at the time.
Well, the letter I've taken you to specifically requests for a written response, doesn't
it?---It does.
I'd suggest to you that that written response was never provided?---In writing,
possibly not”.
………
“Mr Matheson, you'll accept that the letter in front of you suggests that it's Mr Ellis'
understanding that the skin sheds are to come down?---No, I don't accept that.
Well, he's asking how long you want them to stay up?---Absolutely. He was aware
from much earlier that we wished to retain the skin sheds, and there was always the
view that at some later point, with the planning controls in place, if we required to
have them brought down - or any other structure, for that matter - he would be happy
to do the work for us. He was really chasing work, which - we understood that to be
the case. Our view was obviously we were pursuing - and we relayed to him verbally
that we were pursuing the planning permit through our planners as quickly as we
could, that here were third parties involved, being the council - - -
Well, he has already got the work, hasn't he?---He has got the demolition as per the
specification, but certainly not the skin sheds or any other building that may be
required, or may not be required by the council in the second and subsequent
planning permit to be demolished or to be left up. As I said, we often had verbal
discussions on site where the approach to us was, “We're happy to do further work
for you” if and when that became available, and my understanding is that that was the
situation with the skin sheds”.

Scope of works
47         In its final submissions, Kyle Road raised the issue of “whether on a proper
construction of the contract, alternatively by way of an oral term, alternatively by way

of an implied term, Tasman was required to demolish the western skin stores
”. Kyle stores” and not simply to the “skin stores”. The pleading reflected the fact that from time to time different parts of the skin store buildings were referred to by the parties and the skin stores was not regarded as an indivisible whole.
48         In its submissions, Kyle Road relied upon “a proper construction of the contract”. Reliance was placed in the alternative upon oral or implied terms. It is difficult to understand this aspect of the submissions. Kyle Road submitted that in construing

(presumably the written part of the contract), the court should have regard not only to
“the text of the documents, but also the surrounding circumstances known to [the
parties] and the purpose and object of the transaction” (Specific Carries Ltd v BNP
Paribas (2004) 218 CLR 451 at 462).
49         The written part of the alleged “further revised agreement” was the memorandum of agreement dated July 2006. Unless that document were rectified, or modified by reference to discussions between the parties or as a result of other relevant facts and circumstances, it is difficult to see how the skin sheds were to be excluded from the buildings and structures to be demolished when they were not specifically mentioned along with the office building and butcher shop. I will discuss the question of rectification in due course.
50         I reject the submissions by Kyle Road that there is any particular significance in the words used in clause 27 requiring that Impact is to complete “all works it is required to perform under the agreement” or that the words were intended to be limited to

works for which Tasman had obtained a planning permit rather than simply referring
to works within Impact’s scope of works.
51
So far as there is reliance upon discussions between the parties, reference was made Matheson on behalf of Tasman and Mr Peter Ellis on behalf of Impact. At the time of the trial, Mr Opray and Mr Matheson had no connection with the Kyle Road or Swift interests. They were both credible witnesses. However, I would be reluctant to accept their evidence of what occurred at meetings on unspecified dates without context and in most general terms unless there was some independent corroborating evidence. Generally, it appears that Mr Opray and Mr Matheson administered the contract in a surprisingly casual manner. The contract sum was almost $3 million. There were apparently regularly meetings on-site although it seems more likely that, rather than formal meetings held in a site office with an agenda and minutes, they were weekly or fortnightly “walk throughs” on-site by Mr Opray and Mr Matheson during which they might engage Mr Ellis in conversation.
52         There is a paucity of documentary evidence recording the day to day activities on- site. Mr Ellis’ site diary is the most comprehensive record. It is, in my view, inconsistent and sparse in detail and with an idiosyncratic recording of information in the same manner as Mr Ellis gave his oral evidence. I would not describe the diary, as Kyle Road’s counsel did in final submissions, as “notable for the consistent and detailed recording of important matters”.
53         Substantial sums by way of progress payments were paid to Impact by Tasman – over 50 per cent of the contract sum by the time work was stopped in May or June 2006. In view of the later disputes which arose about the progress of works, this

suggests that there was very little concern at that time about the precise stage
reached by Impact with the demolition and asbestos removal works.
54         Significant disputes did arise which resulted, on at least three occasions, in the suspension of the works. On each occasion, the works were stopped at the direction of Tasman’s managing director, Mr Joe Catalfamo. The occasions and causes were as follows:

a. in May/June 2006 the submission of a claim for what was alleged by Impact to be for additional asbestos removal. This dispute was not resolved until the memorandum of agreement was signed in early July 2006;
b.
removing timber from the site without permission and Impact was denied
entry to the site. Tasman alleged that it had security photographs showing
Impact trucks leaving the site with loads of timber. Impact disputed that
Tasman was entitled to the timber as part of the agreed salvageable
At about the same time as the dispute over variations, Impact was accused of Tasman. Whilst Kyle Road relied on this payment as an admission of wrongdoing and Mr Ellis’s denial that this was so as evasive evidence, I was more persuaded by Mr Ellis’s evidence that Tasman’s preparedness to accept that its loss was only $6,000 was indicative of Tasman’s approach to the administration of a multi-million dollar contract. Work stopped for some weeks until the memorandum of agreement was entered into;

c.

in early February 2007, vehicles were parked over the entrance to the site preventing Impact from accessing the site. Tasman said this action was necessary because Impact had shut down the site from mid-December to the end of January. Mr Opray said that Tasman was concerned about Impact’s lack of progress. Disputes were articulated in correspondence between the parties’ solicitors. At a meeting on site on 9 March 2007, agreement was reached for Impact to resume work and to maintain adequate progress by “the
development of a monthly work plan for the remainder of the demolition
project”;

d. in February 2008 notice of default was served, and in mid-March 2008 Impact’s contract was terminated and it was excluded from the site.
55         Mr Catalfamo did not give evidence at the trial. Mr Opray’s employment with Tasman and his involvement with the project did not continue after mid 2007. Mr Matheson gave his evidence without the benefit of refreshing his memory apart from the very few contemporaneous documents that were available. Mr Matheson had no recollection of a very important discussion involving the skin shed wings about which Mr Peter Ellis, Mr Chris Ellis and Mr Adrian Lingford gave evidence. Mr Matheson’s evidence about matters he could recall lacked detail and precision.
56         Although the evidence of Mr Opray and Mr Matheson was reasonably cogent and consistent. I do not accept that their evidence of the skin shed discussions can amount to part of the agreement reached in July 2006 or can affect the construction of the memorandum of agreement. Kyle Road, in fact, relies upon the evidence of Mr Peter Ellis about the “wings meeting” and particularly the reference to “the height precedent thing”. Mr Ellis said, “I told Brad [Matheson] I was aware that they were
thinking of trying to do that [remove the wings]. The idea was, I guess at the time, to limit what was left on site, to take every building except for what they needed for the height precedent thing. That’s been getting talked about though, you know, a fair bit
of the job”.
57         Clearly, there was discussion about the significance of the taller skin shed buildings as setting a precedent for the height (and therefore the density) of any future residential development. I am not, however, satisfied that Tasman ever communicated a clear statement of its intentions to Impact in relation to the skin sheds. I will separately analyse the facts and circumstances relied upon by Kyle Road as the basis for rectifying the memorandum of agreement. There is not, in my view, sufficient grounds for concluding that “it goes without saying” that the skin sheds, or at least the significant western part, would not be demolished, or would not be demolished until their usefulness as setting a height precedent for the proposed residential development had been established. Accordingly, there is no basis to imply the terms as contended for by Kyle Road.
58         Kyle Road submits that Impact was required by the memorandum of agreement to complete its works by 31 January 2007, by 5 December 2007 or within a reasonable time. It was submitted that clause 27 read literally required Impact to complete all its works by 31 January 2007. This submission ignores clause 25; the requirement upon Tasman to obtain the necessary planning permits, and the extension of time procedure set out in clauses 25-27.
59         In Impact’s solicitor’s response to Tasman’s notice of default dated 15 February 2008 and in other earlier correspondence, Impact had queried the absence of the necessary permits and had submitted that, as a result, Tasman was unable to rely upon the completion date of 31 January 2007 set out in the memorandum.

60
on 4 June 2007 to support the contention that Impact was required to have
completed its works by 5 December 2007, “being the date six months from the
provision of the second planning permit from Tasman to Impact”. The period of six
months is calculated by adding to the five months from the date (1 September 2006)
in clause 25 of the memorandum for Tasman to obtain the permit to the completion
date in clause 27 of 31 January 2007, a further period of one month which Tasman
said was allowed “by agreement between the parties due to the February 2007
lockout”. This analysis ignores the fact that the permit dated 4 June 2007 did not
An alternative submission by Kyle Road, took account of the planning permit obtained taller structures. Accordingly, Impact would not have been able to complete its works.
61 Mr Matheson gave evidence that on 8 June 2007, he wrote a letter to Impact in the following terms: “In reference to the demolition of the above site, we note that

progress has slowed substantially in recent weeks. As previously discussed, we wish
to ensure that the demolition of all specified structures is completed on time as
contracted and as such believe that progress over the coming weeks will be crucial to
the success of the project. I would like to meet with you early next week to discuss
progress generally and how you intend to complete the project given that all permits
and endorsed plans have now been issued in accordance with the demolition
agreement”.

62
Mr Ellis denied that Impact had received the original of the letter. Whilst it is difficult to about Impact’s progress in similar terms as the correspondence from Tasman’s solicitors in February 2007 and the matters discussed at the meeting on 9 March 2007. The statement that “all permits and endorsed plans have now been issued” was relied upon by Kyle Road as confirming that, by that stage, the parties had agreed that the western part of the skin sheds was to remain and was excluded from the structures to be demolished. It is surprising that the only written record of this matter is a document, the receipt of which is disputed.

Later developments in relation to permits and the skin sheds
63         On 1 November 2006, Mr Ellis on behalf of Impact had sent a facsimile to Mr Matheson on behalf of Tasman which read as follows: “Could you by return fax tell us

an expected date when you will have the planning permit to enable us to plan the
demolition? Also would you let us know your intentions with regard to skin sheds, an
estimate of how long you will require them to be left up?” Mr Matheson agreed that
“possibly” no written response was given to Impact’s facsimile.
64         On 15 November 2006, Mr Matheson sent an email to Ms Elini Roussos at Tract which noted that following a meeting with Tasman representatives and Mr Raworth with the council, the council “were receptive to our view that we should remove all

buildings on the site other than the large skin shed at the rear of the property, a
section of the railway siding in the north-west corner of the site and the admin
building on Kyle Road. Would you please contact Bryce Raworth and confirm details
and lodge a demolition application with council accordingly”.
65         On 18 December 2006, Tract lodged a planning permit application with the council. A letter dated 18 December 2006 with the application noted that the proposal was for the “demolition of the remainder of the structures on the land with the exception of the
office/amenities building facing Kyle Road and the main skin shed. Whilst these
structures are noted as being ‘significant’, some of them have been modified to
remove asbestos. Unfortunately this process has reduced their significance; the
attached heritage assessment outlines this issue in detail”. The letter also stated that “the office/amenities building and the main skin shed are proposed to be retained as
they may be adaptively re-used. (This will be confirmed in due course once further

development plans are prepared)heritage assessment and adapted to a new use, although this is still under investigation
memorandum” comprised of a letter dated 1 December 2006 from Mr Raworth to
”. The letter included a “”.
66         On 5 February 2007, Tasman referred a dispute to a third party pursuant to the procedure in the memorandum of agreement. Tasman alleged that Impact had failed “to comply with the terms of the agreement” dated 3 July 2006 and to “complete the works no later than 31 January 2007”. Impact responded with a “cross dispute” on 9 February 2007 alleging that Tasman had failed to obtain the planning permit required by the memorandum of agreement and as a consequence “the time for Impact to
complete the works had commensurably been extended beyond 31 January 2007
[and] the time for Impact to complete the demolition works had not yet arriveddenied Impact unhindered access to the site” and had “denied access to the salvageable property on site”.

”. memorandum of agreement, to pay the $100,000 due upon the execution of the memorandum of agreement and had wrongfully “
67         On 19 February 2007, Mr Matheson, on behalf of Tasman, wrote to Ms Roussos of Tract in relation to the application to council for a planning permit. Mr Matheson noted that “to undertake any form of restoration/reconstruction of the sheds would remove
any semblance or remnants of any heritage value that they may have. We need to urgently progress the planning application for the demo permit. We are negotiating
our arrangement with a demolition contractor and one of the requirements is an
urgent resolution of the remaining demo permit” (emphasis added).
68         On 21 February 2007, Tract wrote to the council responding to an earlier request by the council for further information. The letter attached a number of documents including an “architect statement prepared by MGS Architects outlining the extent of consideration of heritage interpretation in the redevelopment master plan”. The document was prepared by Mr Robert McGauran and is dated February 2007. The document notes that any provision for redevelopment of the site should include in the development principles, “the retention of iconic elements that connect future
development to the history of the site, notably potentially the skin drying sheds that
are visible from the freeway”.

Rectification of the memorandum of agreement
69 Tasman contends that the memorandum should be rectified on either of two bases:

a. mutual mistake of Tasman and Impact where it was the common understanding of both of them from late 2005 that the skin stores were going to be retained at least until Impact had completed its works on the site;
b. the unilateral mistake of Tasman in circumstances where Impact was aware of Tasman’s mistake and it would be unconscionable to allow Impact to insist upon performance of the agreement.
70 If clause 16(b) is not rectified to include the skin sheds as structures on the site that Impact was “not required under the agreement to demolish and/or remove”, then a number of consequences may follow:

a.

the “salvageable property”, which Impact purchased for $800,000 and which Impact would become the owner of upon execution of the agreement, would appear to include the property of which the skin sheds were comprised
including “without limitation bricks, concrete, timber and steel, whether in
existing or dismantled form”;

b.

the skin sheds would be part of the “buildings and structures on the property” in respect of which:

i. Impact was required to demolish and remove, and
ii. Tasman was required, on or before 1 September 2006, to “procure all
planning permits required by law to authorise the demolition and
removal” thereof, failing which the time available to Impact to complete
all works it was required to perform under the agreement would
“automatically extend commensurably”.

71 Tasman relies in support of the claim for rectification upon the following matters:

a. the evidence by Mr Matheson and Mr Opray of the execution of the document and their perusal of the document beforehand;
b. their evidence that the memorandum of agreement was not intended to change the previously agreed scope of Impact’s work.
72
The memorandum of agreement was executed on behalf of Tasman by Mr Matheson. were not included in clause 16(b). Mr Matheson said he had not looked at the document before signing it. He said it was Opray’s responsibility. Mr Opray said he had only looked at the document to see that it provided for the “salvageable property” which was the “purpose of the agreement”. Mr Opray said he did not go through the rest of the document to check it, as he was only concerned with matters which the memorandum would change. Both said that the omission of the skin sheds from clause 16(b) was “an error and a mistake”. Mr Matheson gave evidence that Tasman would not have executed the document if he had been aware that clause 16(b) did not include the skin sheds.
73 In cross-examination, Mr Matheson said that the memorandum did not reflect the instructions given to Tasman’s lawyers. An attempt to test this evidence was met with an objection on the basis that such matters were privileged and the privilege would not be waived unless Impact agreed to do the same. Both parties’ solicitors had been involved in the preparation of the memorandum. There was no agreement reached and the matter was not pursued. In the circumstances, I do not consider I should give any weight to the evidence of Mr Matheson as to what instructions he gave to Tasman’s lawyers.

74 evidenced,
among other things” the agreement between the parties “for the demolition and
removal of buildings and structures on the property”. These included the letter of offer
The memorandum recited a number of documents which it was said “the following day. The Tasman letter dated 16 March 2005 referred to the fact that the buildings to be demolished were “to be specified in a contract”. No document had been agreed as a “contract” prior to the memorandum.

75
The draft contract prepared by Tasman’s solicitors, later in 2005, defined the works to although the proposed Annexure 3B described the “project” as including “demolition
and removal of all structures on site … but excluding the following:

(f) all heritage buildings as defined in the planning permit;
(g) all heritage structures, including but not limited to the railway siding; and
(h) such other exclusions as the Contract Administrator may from time to time
direct”.

76
The planning permit dated 15 June 2005 excluded all buildings marked as difficult, however, to point to a document by which it can clearly be concluded the parties agreed that the skin sheds would or would not be demolished. The matter was not settled when the parties first reached agreement on 17 March 2005. There is dispute as to whether clause 16(b) of the memorandum of agreement in early July 2006 accurately records the agreement of the parties. In these circumstances, Tasman submitted that the “context” in which the memorandum was prepared demonstrated the “common understanding” of the parties that the skin sheds were to be retained, “at least until Impact had completed its works on the site”.

stores were not being demolished. The administration building would be converted to
a residential use and the skin stores, as the tallest building in Altona, would be
retained as it would define the developmental height of the project. Mr Opray said
there were discussions with Mr Ellis about these matters around the skin shed site.
77 To make out this submission, Tasman relied upon a careful analysis of Tasman’s decision making and the communications between the parties in relation to the skin sheds. Tasman’s case was that in early 2005, although the skin sheds were excluded from the planning permit as a “significant” building, efforts were being made to obtain council permission to demolish the skin sheds. It was suggested that the position changed in May 2005 when Mr McGauran was engaged. He recognised the importance of retaining the skin sheds, at least until the parameters of the residential development to be permitted on the site had been defined. The retention of the tallest building on the site would assist in setting the height limit for any redevelopment.
78 Both Mr Opray and Mr Matheson gave evidence that Impact, through Mr Peter Ellis, was aware of these matters and the importance of retaining the skin sheds when the memorandum of agreement was entered into in July 2006. Mr Opray said in his
evidence that he had told Peter Ellis that the administration building and the skin were never to be demolished as there were limitations on the scope of works and the skin sheds were to remain.

82
2004, the heritage overlay was mentioned, although at that stage Tasman was not
aware of what buildings were to remain. In the initial permit application, Tasman had
an open mind and it was only following discussions with Mr McGauran that
McGauran had confirmed that the height of the skin sheds would assist Tasman in
obtaining permission for a medium density development. Mr Matheson said that
Tasman had made Peter Ellis aware of the fact that certain buildings were required to
remain and that these included the skin sheds. He said that this would have been
79 Mr Opray said that timber had been removed from the skin sheds because it was a fire hazard. However, it was never intended to demolish the skin sheds as part of Impact’s contract. The removal of timber and asbestos was not detrimental to the heritage retention of the building. The principal element of the building was its height and the building would have been restored.

80
permission to demolish the skin sheds. This was not permitted by the council, and a
letter to Tract dated 1 December 2006, the heritage architect Mr Bryce Raworth
stated that the demolition of the skin sheds was still “under investigation”. A letter to
council dated 18 December 2006 referred to the fact that the main skin shed was
Mr Opray had signed a planning permit application on 6 April 2005 seeking council Mr Opray said that Mr Matheson was responsible for the permit applications, it was his, Opray’s, understanding that the skin sheds would be retained because their height would define the upper height limit for any development.
81         After the first planning permit was obtained by Tasman in December 2005, there was no approval to demolish the “significant buildings” until the second planning permit dated 4 June 2007. This permit allowed the demolition of the skin store to the east but still showed the retention of the taller part of the main skin shed.
Mr Matheson said in evidence that in discussions on site with tenderers in December heritage overlay and the fact that council would determine which buildings were required to be kept.
83         In July 2006, Mr Matheson prepared a report for Tasman’s Board on the preposed rezoning which included the possibility of reusing the skin sheds as apartments. On 1 November 2006, Mr Ellis sent a facsimile to Mr Matheson asking Tasman “when you will have the planning permit” and to “let us know your intentions with regard to skin sheds”. Mr Matheson said that after receiving the fax, he would have spoken to Mr Ellis and told him Tasman was working to get permits in place. He said that the comment by Mr Raworth on Tasman’s permit application that the retention of the skin sheds was “possible” and “still under investigation” was speculative. Tasman’s position at that time was that the skin sheds should be maintained in accordance with the advice previously received from Mr McGauran.
84         When Peter Ellis sent the fax on 1 November 2006, querying the position of the skin sheds, Mr Matheson said that he was aware from much earlier that Tasman wanted the skin sheds retained. He said that it was a matter for decision by the council. On 1
December, Raworth’s view was that the skin sheds should be removed, although it was possible that all or part might be retained. Tract told the council on 18 December 2006 that the main skin shed should be retained. The subsequent planning permit allowed for the demolition of part of the skin sheds.
85         Mr Matheson denied that he had told Mr Ellis that the “idiots from Tract” had left the skin sheds out of the permit. Mr Matheson said he could not recall a discussion with Lingford about taking the wings off the skin shed or that Mr Ellis had said it would

cost at least $200,000 to take the wings off and leave the highest part of the building
standing. Mr Matheson denied he later gave Alex Fraser Demolitions permission to
demolish the skin sheds. He said he did not give Alex Fraser Demolitions permission
to demolish the bale hanging shed but only to remove exposed asbestos.
86         Mr Peter Wallace had been the project manager for Kyle since March 2009. He said that the present intention of the company was to retain the skin sheds until town planning approval was obtained for the site to be rezoned residential. He said Mr McGauran’s advice was critical in relation to “identity insurance” and that there still may be some potential to incorporate the skin store’s structure into the final design.

89
had proposed to Mr Matheson and Mr Opray a three to five level higher density
development which would require a trade-off for community infrastructure.
Mr McGauran had suggested retention of the administration building and the
butcher’s shop. Although Mr Raworth’s views that some or part of the skin sheds may

87
council suggestion to Tract that the skin sheds and administrative buildings should be
A permit for demolition of all the skin sheds was obtained in June 2010 because of a The latest planning permit allows demolition of the skin store and the office block. The previous permit in June 2007 had specifically excluded the western part of the skin stores.

88
the rezoning of the site from industrial. He went to the site for the first time in May
2005 with Mr Matheson and Mr Opray. He understood that the council would require
“community infrastructure” and in his view the two obvious elements of the site to
retain were the administration building and the central portion of the skin sheds. On
Mr McGauran said that he was engaged by Tasman in 2005 to become involved in retention”. At that stage, he was not aware of Mr Raworth’s report dated 1 April 2005 stating, “demolition of skin sheds essential”. The skin sheds had been largely stripped down to their steel beams and roof structure which was mainly steel trusses. He had not been told by Mr Matheson or Mr Opray that Tasman proposed to demolish the skin sheds. He had prepared suggested preliminary layouts for the site, including the incorporation of two of the heritage buildings.
In May 2005, it was unclear whether any building was to be retained. Mr McGauran Mr McGauran’s approach related to maintaining expectations of scale and remnants of history and his later reports referred to how the new building structures might reflect heritage features. In his view, it was important to retain the skin sheds with their height.
90         Mr Peter Ellis said that whilst Impact’s first tender was for “complete demolition of site”, he was told later by Mr Opray that “we might have to hang on to a couple of buildings”. During 2005, the interior of the skin sheds was demolished removing

the skin sheds by another contractor. Mr Ellis said Matheson had told him that
asbestos material and leaving the steel work and floors. The timber was stripped from mentioned that the butcher’s shop may be retained as a day care centre. Apart from the head office, these were the only buildings Ellis understood were to be excluded from demolition.
91         Mr Ellis said that in late 2006 there had been some talk about leaving the high skin sheds till last. He had sent the 1 November 2006 facsimile to Mr Matheson to clarify this matter. Mr Ellis said that it was not until after termination that Impact was told the skin sheds “did not belong” to Impact. He said there was no conversation between Tasman and Impact in which Impact was told to exclude the skin sheds. Mr Ellis denied any discussion in early 2005 that the permit excluded the skin sheds and they must remain or that Tasman’s overall strategy was to keep the skin sheds.
92         When the demolition permit was issued on 6 December 2005, Mr Ellis said he told Tasman that the permit did not allow him to demolish three-quarters of the site. Mr Ellis said that the first time he heard about the skin sheds being a “height precedent
thingsheds?” and Mr Matheson had said, “Impact absolutely”. Mr Ellis said he had no idea, at the time of executing the memorandum of agreement, that Tasman believed the skin sheds were excluded from the works.

” was in late 2006 from Adrian Lingford. This was the reason he sent the fax to
93         Mr Ellis said he believed in 2007 that another permit was necessary. A letter was received from Tasman’s solicitors on 26 July 2007 containing complaints. Impact’s solicitors responded on 15 August 2007 stating that a “further permit [was] required”. Mr Ellis said, that in later conversation with Mr Matheson, Mr Matheson had told him that Tasman were going to demolish the skin sheds and Mr Ellis was still the owner. A permit would be needed for the skin sheds, although Mr Matheson said he would like to leave the central skin shed up temporarily.
94         Mr Adrian Lingford was a consultant occupational hygienist engaged by Tasman to manage compliance with the asbestos removal by Impact, and later by Alex Fraser Demolitions. Mr Lingford said that in early 2007, there was a conversation in relation

their height. Mr Ellis said the buildings were his and he talked about recompense. Mr
to the skin sheds. Mr Matheson had said the buildings were to remain because of Matheson had asked whether it was possible to pull down the northern and southern parts of the skin sheds and keep the higher central part. Both Mr Lingford and Mr Ellis had indicated that there would be problems with stability. Mr Lingford said he did not recall the need for a planning permit being raised in the conversation.
95         Mr Lingford said that in April 2009, a council officer had raised with the site manager the fact that the southern part of the skin sheds had been demolished without permission. Mr Lingford said that after the asbestos roof and walls had been taken down, the steel skeleton structure of the skin sheds remained until it was removed in March 2009 upon the instructions of Mr Matheson.
96         Mr Chris Ellis said that in mid 2006, there was a conversation about the skin sheds involving Peter Ellis, Brad Matheson and Adrian Lingford. Mr Matheson had said that it was a “muck up” that the bale skin shed had been left out of the second permit and that the bale skin shed and skin stores would be in the final permit. Mr Matheson had asked whether it was possible to leave up the skin shed. Peter Ellis had asked, “Who owns them?” Mr Matheson had replied, “Impact”. Mr Chris Ellis thought that the conversation included discussion about planning permits.
97         Mr Chris Ellis believed that the discussion about the skin shed related to who owned the building and it must have taken place after the memorandum of agreement. The memorandum had changed who owned the materials on site. The conversation in

relation to the skin sheds involved talk of leaving the centre part up and removing the
wings. Mr Matheson was told that it would not be stable to do that and it would cost
“mega dollars”. Chris Ellis said that he recalled that Mr Lingford was concerned that
the roof was off the skin shed.
98         My conclusions in relation to the evidence relevant to the issue of rectification of the memorandum of agreement are as follows:

a.

When the parties reached agreement on 17 March 2005 the structures to be demolished were “to be specified in a contract”.

b.

The tenderers for the demolition contract, including Impact, were informed that some buildings or other structures may be excluded from the scope of works.

c.

At the time that Impact was engaged, it was Tasman’s intention that the skin sheds should be demolished.

d.

Prior to Impact commencing on site, substantial quantities of timber had been removed from the skin sheds and continued to be removed whilst Impact was on site.

e.

Although a demolition permit was not obtained until December 2005, Impact proceeded with the removal of asbestos from the skin sheds prior to that date, which involved the removal of substantially all the building other than the steel structure of the walls and rooves.

f.

At some stage after Mr McGauran was engaged in May 2005, he communicated to Tasman his opinion that the skin sheds were significant because they may help define the height limit and therefore the scope of residential development permitted on the site.

g.

In the absence of contemporaneous written evidence, it is difficult to accept statements by Mr Opray or Mr Matheson that prior to July 2006, and in particular before the end of 2005, Mr Peter Ellis had been specifically informed at site meetings that the skin sheds would remain.

h.

It is likely that a conversation took place involving Peter Ellis, Chris Ellis, Brad Matheson and Adrian Lingford in relation to the maintenance of the highest part of the skin sheds and the stability of the structure if the lower portions on the northern and southern sides were removed. I consider it more likely that the conversation occurred after the memorandum of agreement had been executed in July 2006, because of the context of the discussion which I accept included reference to the ownership of the salvage from the skin sheds.

i.

From the history of the correspondence with the municipality in relation to demolition permits, and from other contemporaneous documents, it is difficult to isolate a time at which Tasman determined that the skin sheds should remain or should be demolished.

j.

The skin sheds themselves had no intrinsic value as part of any residential development except for setting the height limit and thereby permitting a higher density residential development. The incorporation of the existing structure of the skin sheds in any future development would be a significant and unnecessary expense. It is likely therefore that at some stage the skin sheds would have been demolished.
k.
The skin sheds comprised a number of associated buildings. They were never were demolished. Mr Matheson, in his conversation with the Ellises and Mr Lingford, contemplated the possibility of simply retaining the highest part of the structure.

99 In the circumstances, it is impossible to be satisfied that any basis exists for the making of order for rectification of the agreement or, if such an order were to be made, to what parts of the skin shed buildings it would relate. In these circumstances,
that part of Kyle Road’s claim must be dismissed.

Termination of the parties’ agreement in March 2008
100 On 12 February 2008, Impact’s solicitors forwarded to Tasman’s solicitors four invoices dated 4 and 5 February 2008 totalling $69,740.69 (inclusive of GST) purporting to be for variations to the works. On 15 February 2008, Tasman’s solicitors responded setting out a chronology of events which it was asserted led to the conclusion that: “The works were required to be completed by Impact no later than 5 December 2007 (the Date for Completion)”.
101 The letter stated that Impact’s failure “to complete the works by the Date for
Completion as required under the Memorandum, together with your client’s conduct in the progress of the works, constitute substantial breaches of:

a. the term of the memorandum requiring that the works be completed by the time and date required in the memorandum; and/or
b. an implied term of the agreement and/or memorandum that the works would be progressed regularly and diligently; and/or
c. an implied term of the agreement and/or memorandum to do all things necessary to carry out the contractual aims”.

102 The letter required Impact: “to remedy the breach being the failure to bring the works

to completion by the Date for Completion, by completing the works within 14 working
days of the date of this letter. We put your client on notice that should it fail to
complete the works within 14 working days of the date of this letter, our client may
exercise its right to terminate. All of the above is without prejudice to any other rights
out client may have in relation to your client’s failure, in breach of the agreement
and/or the memorandum, to progress the works diligently and regularly. All such
rights are specifically reserved”.
103 In a letter dated 22 February 2008, Impact’s solicitors contested the basis for Tasman’s solicitor’s assertions stating:
“In summary:

(a)

Tasman has no right to terminate the agreement. Any attempt to do so will be treated by Impact as a repudiation of the agreement;
(b) Tasman is itself in breach of the agreement by:

(i)

failing to apply for a demolition permit in respect of the skin store;
(ii) failing to pay Impact’s tax invoice of 15 January 2008;

(c)

Impact requires Tasman to remedy the above breaches within 14 days hereof”.

104
On 12 March 2008, Tasman served a Notice of Termination on Impact and required complete the works as required under the memorandum” and the failure by Impact “to show cause why the principal should not terminate the agreement and the memorandum as foreshadowed in the Notice of Default” dated 15 February 2008. Impact was given notice that, “The principal hereby terminates the agreement and memorandum effective immediately on and from the date of this notice”.
105       Tasman’s letter to Impact enclosing the Notice of Termination concluded as follows: “We will keep a record of all costs incurred by Tasman Group Services Pty Ltd in

arranging for a replacement contractor to complete the works. We will provide our
calculations to you once the work is complete. If the costs are less than the amount
that would have been paid to you as at the date of this termination under the
agreement and/or memorandum and including for works undertaken by Impact
outside the scope of the agreement/memorandum, we will assess whether there is
any basis upon which a reimbursement may be payable to you and notify you
accordingly”.
106       By its Further Amended Statement of Claim dated 10 June 2010, Kyle Road relied in paragraphs 41-44 upon service of the Notice of Default on 15 February 2008, the failure by Impact “to remedy its default and/or to show cause why Impact’s employment should not be terminated” and the subsequent issue of the Notice of Termination on 12 March 2010, by which the pleading stated, Tasman had “validly terminated” the agreement between Tasman and Impact.
107       In paragraph 38 of the pleading, Kyle Road asserted “as at 12 March 2008” –

a.

“The asbestos removal and demolition works remain substantially incomplete”;
b. “Tasman had made payments totalling $1.815m (inclusive of GST) of Impact’s
total entitlements to payment [of] $2.255m comprising $1.980m under clause
4, $495,000 under clause 8 and $275,000 under clause 10 of the
memorandum”;

c. “The payment made by Tasman comprised $1.595m paid prior to the
execution of the memorandum and payments totalling $220,000 into the trust
account”;

d. Kyle Road estimated “that Impact had completed approximately 25-40 per cent of the asbestos and demolition works as at 12 March 2008”.
108 By paragraphs 39 and 40 of the pleading, Kyle Road asserted that:
“Impact failed to adequately resource and/or perform and progress the asbestos removal and demolition works such that it failed to complete those works:

(a) within 60 weeks of commencing; or
(b) alternatively, following execution of the memorandum, by 31 January 2007; or
(c) further in the alternative, within a reasonable time”.

109 Further, it was alleged that after execution of the memorandum of agreement in July 2006, “Impact failed to progress the asbestos removal and demolition works diligently

but instead concentrated significant and its available resources upon the recovery
and removal of salvageable property such that by February 2008, some 13 months
after 31 January 2007, being the date for completion of all works set out in the further
revised agreement, and a period of some three years after initial commencement of
the asbestos removal and demolition works; those works remain no more than 25 per
cent to 40 per cent complete”.

property…”.

144 On 13 July 2006, Tasman paid the sum of $110,000 (including GST) to Impact. Subsequent to the execution of the memorandum of agreement Impact submitted the following invoices:

Claim no. Invoice date Payment into trust Amount Cumulative

8 21 February 2007 20 April 2007 $110,000 $110,000
9 20 September 2007 5 October 2007 $110,000 $220,000

10 10 January 2008 Not paid Nil $220,000

145 Clause 11 of the memorandum provided that, apart from the $250,000 allowed by Clause 10 “for all works amounting to variations, whether those works have been, or are yet to be performed”, Impact shall “have no entitlement to submit any claim for works in the form of variations under the agreement”.
146 In February 2008, Impact submitted a series of invoices for the cost of variations:

Invoice no. Date Description Amount
Removal of asbestos sheeting

8024 4 February 2008 and debris amongst stockpiled $15,812.50
concrete and rubbish at rear
of site as directed.
Removal of 90,000 litre diesel
80241 4 February 2008 tank including all preparation $7,854.69
80242 4 February 2008 Removal of tallow tank $1,897.50
Supply and loading steel. Hire
8025 5 February 2008 of EX300 excavator. Supply $44,176.00
and loading galvanised racks
Supply and loading of
2017 8 February 2008 galvanised racks $28,050.00
Reinstate and supply power
80211 11 February 2008 on site $4,080.14
$101,870.83

147 These figures would suggest that, by July 2006, Impact was asserting by its progress claims that it had completed a significant proportion of the contract works. $1,485,000 out of a total of $2,860,000 is more than 50 per cent. Mr Peter Ellis said in evidence

that the progress claims were not submitted until Impact had completed the relevant
work.

Evidence of Mr Phillip Blunden about Impact’s progress on site
148 Mr Phillip Blunden, a consultant engineer engaged by Tasman, expressed the view, based upon his examination of site diaries and other Impact documents, that “at the
time of entering into the MOA [memorandum of agreement], Impact had completed

less than 50% of their works
inference from the progress payments made by Impact or the payments made by
”. In these circumstances it is difficult to draw any content that the claims and payments representing approximately 50 per cent of the total contract sum, reflected the value of the work performed on site to that date.
149 In respect of other aspects of Mr Blunden’s expert report and his evidence, I would make the following comments:

a. Mr Blunden relied upon the detailed work carried out by Mr Richardson on site;
b. the opinions Mr Blunden expressed were based upon Mr Richardson’s work and Mr Blunden’s view as to the appropriateness of Impact having tendered to complete the works in 60 weeks and its failure to have done so; and
c. Mr Blunden mistated the position in relation to the planning and building permits and the time at which they were obtained and the effect this may have had upon the performance of the works.
150
upon supposition. Initially, the primary work carried out by Impact was the removal of
asbestos. Until a building permit was obtained in December 2005, no demolition work
In my view, his analysis of the sequencing of work carried out by Impact is based May, Impact had commenced demolition and had stockpiled materials. In fact it is obvious from the study of photographs, including aerial photographs taken at this time, that the removal of asbestos from buildings (including the skin sheds) involved a considerable degree of demolition of the buildings and, necessarily, the stockpiling of materials.
151 After the memorandum of agreement was signed in July 2006, it appears from the transport records that salvageable materials were removed from site in increasing quantities, Impact also continued to remove asbestos from the site and commenced
the removal of general rubbish. It does not follow, in my view, that Impact necessarily neglected its contractual obligations by the removal of the salvageable materials. As Mr Joe Catalfamo, Tasman’s Managing Director had said, after the memorandum of agreement was signed, Impact would thereafter have to “live off the scrap”. Apart

from the payment of $100,000 as part of the agreed figure for variations, no other
sum would be payable until the completion of all the works. It does not follow, in my
view, that Impact’s concentration on the removal of the salvageable material during
the time it remained on site necessarily indicated that it was neglecting to carry out
other work or to progress the works at a reasonable rate.

Financial return from sale of materials by Impact
152 The claims submitted by Impact after the July 2006 agreement totalled:

a. $330,000 (inclusive of GST) for progress claims out of the adjusted contracted balance of $495,000 which was to be paid into trust pending completion of the works;
b. $101,870.83 (excluding GST) for variations additional to the unpaid invoice for $100,000 (excluding GST) submitted on 1 May 2006.
153
paid “for all works amounting to variations”. Pursuant to the offer made by Tasman on
Pursuant to the memorandum of agreement, $250,000 (excluding GST) was to be the first million dollars from all recovered steel”. Thereafter, “of all further steel recovered from the demolition”, there was to “be a split of 90% (Tasman Group)/10% (Impact Demolition) on the sale price”. The memorandum of agreement provided that the salvageable property on the site was to be purchased by Impact for $880,000 (including GST). This sum was thereby removed from the contract sum payable by Tasman to Impact and upon execution of the memorandum of agreement, Impact became the owner of “all salvageable property”, although certain specific matters were excluded.
154       The documents in evidence disclose that the value of the salvageable material was substantial:

a. invoices show that Impact received –
i.           $1.6 million for the sale of steel taken from the site;
ii.          $50,000-$100,000 for timber removed from the site;

b.

Mr Blunden calculated from a study of the truck movements from the site recorded by Impact, the work patterns of Impact and the concentration on the removal of salvageable materials following the memorandum of agreement was to the detriment of asbestos removal work which appeared to decline significantly;

c.

an assessment of materials remaining on site at the time Impact’s agreement was terminated was made by the parties’ experts, Mr Alsop for Impact and Mr Richardson for Kyle Road;

d.

in the proceeding instituted by Impact against Swift for damages for wrongful termination, Impact claimed a total of $3.55 million being $550,000 for the value of materials on the site in a dismantled form and $3,028,750 for materials in situ waiting to be dismantled;

e.

Impact’s Statement of Claim in the proceeding against Swift referred to the removal after July 2006 of the following material from the site –

i. 176 loads of steel;
ii. 45 loads of non-ferrous material;
iii. 12 loads of bricks;
iv. 20 loads of timber;
v. 4 loads of timber purlins;
vi. 20 loads of concrete/brick.

Impact’s failure to diligently progress the works entitled Tasman to terminate
155       The evidence of Mr Peter Ellis was generally credible. However, an exception was his evidence about the progress of the works. Mr Ellis’s responses when asked about Impact’s resources on site, the concentration on salvaging materials which might be easily removed and sold and the rate of progress that should have been reflected in the progress payments received by Impact, were all unconvincing.
156       In my view, Impact’s progress on site was unsatisfactory. Mr Opray described the
position as follows:

Myself and Brad had discussions with Peter on a number of occasions in within the buildings that again was to be expected to be there and that was justification for a number of delays in progress happening
relation to progress, where things were going, why things weren’t necessarily
showing any signs of evidence of progress and the responses that we got
were, you know, ‘You have to do it in a particular way; you can't just come in
an knock everything down for it to be’ – I think the main one was for it to be of
any benefit or for them to make any money out of the job because of the
circumstances that they needed to do it in a particular fashion and they said,
‘Don’t worry, in due course it will all disappear in no time once they got it out’.
“”.
157       The evidence supports the conclusion that Impact did not progress the works “regularly and diligently”. I refer to the following matters:

a.

For Impact to have completed its works within 60 weeks from the agreement on 17 March 2005, completion would have been in about May 2006. By that stage, less than 50 per cent of the work was complete. Impact did not
commence on site until early June 2005. The building permit to allow whatever reason was considerably less than expected.
demolition was not available until December 2005 although asbestos removal
proceeded in the meantime and substantial progress payments were made for
this work. It is not suggested that the works should have been completed by

b.

From May 2006 to February 2008, was a further period of about 90 weeks. There were times during this period when Impact was not able to work. When contractors tendered to complete Impact’s work after the contract was terminated, Alex Fraser Demolitions was successful with a projected completion time of 46 weeks.

c.

Mr Ellis’s site diary records the number of workers and the equipment on site day by day. The workforce seems fairly minimal and the evidence suggested that the equipment was under utilised. Impact always had the capacity to
increase its workforce, as it did from time to time. Although the works were
required to be performed in a sequenced manner, the site was extensive and
Impact’s progress was not constrained by the physical layout of the site.

d.

There was no specification as to how Impact should carry out its work, and it was probably inevitable, following the execution of the memorandum of agreement, that Impact was indeed to “feed off the scrap” by concentrating on deriving a financial return by performing work which was focussed on that end. Nevertheless, it is apparent that Impact failed to give any priority to (or even make a start on) the more difficult work of concrete pavement removal which had significant costs and limited financial returns. It is not credible that the work of removing and processing concrete paving had not commenced on the site after almost three years.

e.

Prior to the memorandum of agreement, Impact were paid substantial progress payments, although it is apparent that it had not completed sufficient work to fully justify those payments. After the memorandum of agreement, Impact concentrated on extracting salvageable materials. As a consequence of this approach, Impact did not maintain a satisfactory rate of progress on site.

f.

The skin sheds were not excluded from the works required to be demolished pursuant to the memorandum of agreement. Impact’s work could not be completed until the skin sheds were demolished, or that work was excluded, and presumably some allowance made to Impact for the salvage it would have been denied. However, these matters have only marginal relevance to the issue of Impact’s progress on site. The western skin sheds were only a minor part of the buildings on site. Part of the skin shed buildings had been wholly removed and those structures which remained had been largely stripped of all but the bare steel outline of the frame for the walls and roof. In those circumstances, whilst the skin sheds may have affected final completion of Impact’s works, it was only minimally affecting the progress of the works on site.

Kyle Road’s assigned cause of action
158 Impact has asserted that Kyle Road should not be able to claim damages from Impact because:

a. Kyle Road is claiming as damages its own costs of completing the works;

b.

at the time the assignment was executed between Swift and Kyle, Swift had not suffered any loss;

c.

the assignment was “bare of quantum” and there was no legal nexus between Kyle Road’s loss, being the cost of engaging Alex Fraser Demolitions to complete the works , and any loss suffered by Swift (or Tasman).
159 The relevant facts are as follows:

a. on 3 July 2007, Tasman sold the Altona site to Kyle Road;

b.

on 12 March 2008, Tasman terminated the contract with Impact as a result of its failure to complete the works;

c.

in May 2008, Tasman was purchased by the Swift Group and the company was renamed Swift Australia (Southern) Pty Ltd;

d.

in late 2008, Kyle Road engaged Alex Fraser Demolitions to carry out the demolition and asbestos removal works left incomplete by Impact;

e.

by a deed of assignment dated September 2008, Swift assigned to Kyle Road “all of its right title and interest of whatever description to all or any of its rights
and benefits including all or any choses in action howsoever described and
howsoever arising which Swift had, has or may have arising under or in
connection with the agreements” between Tasman and Impact to perform
demolition works on the site and the dispute between Impact and
Tasman/Swift.

160       Impact asserts that Kyle Road is only able to claim as damages loss that has been incurred by Swift (Tasman); the assignor. Kyle Road is precluded from claiming the expense it incurred by engaging Alex Fraser Demolitions, as Kyle Road was not privy

to the agreement for the demolition and asbestos removal works and cannot
therefore claim its own independent, or private, losses and expenses.
161       The appropriate law in this area has recently been enunciated by the Court of Appeal in the decision of Renold Australia Pty Ltd v Fletcher Insulation (Vic) Pty Ltd [2007] VSCA 294. The decision followed English Court of Appeal cases of Darlington Borough Council v Wiltshire Northern Ltd [1995] 1 WLR 68 and Offer-Hoar v Larkstore Ltd [2006] EWCA Civ 1079.
162       Each case has facts analogous to the present matter. In Renold, the relevant facts were as follows:

a. Laminex was a manufacturer of fibreglass insulation products;

b.

at the end of 2001, Renold installed chains being part of the conveyor belt assembly in Laminex’s manufacturing process;

c.

on 1 July 2002, Laminex sold its assets relating to the fibreglass manufacturing business to an associated company, Fletcher;

d.

in about February 2003, it was discovered that the installation by Renold at the Laminex factory was defective. Rectification work was carried out by Fletcher;

e.

by deed of assignment dated 31 December 2003, Laminex assigned to Fletcher its “right, title and interest in all claims arising out of or in connection
with the supply agreement or in connection with the design, manufacture and
supply of the [Renold] chains…”.

f. Renold asserted that Fletcher could not recover damages because the relevant contracting party was Laminex. On behalf of Renold, it was submitted that, “The assignment entitled Fletcher to sue only for the losses, if any,
suffered by Laminex. But since no loss was suffered by Laminex by reason of the fact that it had disposed of the chains (at market value without reduction in

the price by reason of the defect) Fletcher had no right to claim damages”
(paragraph 21);
g. further, as the assignment to Fletcher had taken place after the date on which Laminex first incurred a loss, “On a proper construction of the deed, what was
assigned to Fletcher was Laminex’s interest in all ‘claims’ it had against

[Renold] as at 1 January 2004 and at that stage that right had no value”
(paragraph 23).

163       Chernov JA delivered a judgment with which the other appeal judges agreed. At paragraph 24, he said, “In my view, none of these arguments has any merit. They are
based on a misunderstanding of what are the rights that were vested in Fletcher as a legal assignee of a chose in action…The cause of action for the breach of the supply agreement was complete upon the occurrence of the breach, namely, in December

2001 when the defective chains were supplied to Laminex. Thus, at that point, breach irrespective of when the loss manifested itself – here, after the breach. And, so far as it relevant, it was that right to damages that Laminex assigned at common law to Fletcher [and] the assignment had the effect of immediately transferring that right to Fletcher which thereby effectively replaced Laminex as the contracting party
to the supply agreement”.
164       At paragraph 26, Chernov JA continued, “As a matter of principle, an assignee in the

position of Fletcher is entitled to recover damages for breach of contract that are of
the same kind as those that the assignor could have claimed had there been no
transfer of the business, even if the assignor had not suffered substantial damages
by reason of the breach. The essential rationale of the law relating to the assignment
of choses in action is that it recognises that the assignee steps into the shoes of the
assignor for the very purpose of pursuing or continuing to pursue the right which was
vested in the assignor before the assignment, and it is irrelevant that at the point of
assignment the assignor had suffered no substantial damages” (citations and
footnotes removed).
165       Chernov JA set out in some detail at paragraph 32, statements by Mummery LJ in Larkstore at pages 2946-7. Mummery LJ said, “In principle, the assignee is seeking

to recover no more than loss which the assignor would have suffered and being
entitled to recover if he had not transferred the development. The rule in Dawson
[Dawson v Great Northern & City Railway Co [1905] 1 KB 260 relied upon by Impact
in its submissions] is not designed to allow a defendant to escape liability for his
breach but to ensure that he does not have to meet a bigger liability than he would
have been under to the assignor. In other words, the assignee cannot bring to his
claim losses which do not follow from the original breach but which he has separately

damages because it had ceased to own the site. And Larkstore was also not entitled against Technotrade in contract because it had ceased to own the site before the
to recover damages from Technotrade for breach of contract because it had no
contract with Technotrade and, at that point in time, had no assignment from
Starglade of the benefit of the contract, rights of action and remedies for breach of it.
It was claimed in that case, as I have said, that Starglade could not assign to
introduced”.
166       The relevant facts in Larkstore were as follows:

a. Starglade owned a building site and in December 1998 received a report from an engineer, Technotrade, which stated that the site was suitable for a proposed development;
b. in June 1999, Starglade sold the site to Larkstore;
c. during the course of the subsequent development works, a landslip occurred in October 2001 causing damage to neighbouring properties resulting in legal proceedings against Larkstore and the builder;
d. in February 2004, Starglade assigned by deed to Larkstore, Technotrade’s soil investigation report and its rights under it. Larkstore commenced proceedings for damages for breach of contract against Technotrade relying on the assignment.

167       Chernov JA summarised the issues in the Larkstore case at paragraph 28 as follows, “Thus at the time of the breach of contract, Starglade was the owner of the site but at
the time of the landslip, in October 2001, Larkstore was the owner of the site and suffered substantial damage. Starglade, although entitled to the chose in action at that point, was not entitled to recover substantial (as distinct from possibly nominal)
assignment and before the landslip”.
168       As Mummery LJ said at page 2934, “The remedy and damages for breach of contract
is not limited to the loss that could have been proved at the time when the breach occurred and the cause of action first arose. Subject to factual and legal issues of causation, remoteness, quantum and limitation of actions, there is a remedy in

damages against the contract breaker for loss which occurs after the cause of action
has accrued. A cause of action may arise years before any substantial damage
occurs, as for example in the case of negligent advice on title. There is no legal
principle which protects the contract breaker by excluding his liability for substantial
damage that occurs after the initial breach of contract”.
169       Mummery LJ further said at page 2936, “What was assigned by Starglade to
Larkstore was a cause of action for breach of contract against Technotrade and the legal remedies for it. It was not an assignment of ‘a loss’… The assignment included the remedy and damages for the cause of action. The remedy and damages for
breach of contract is not in principle limited to the loss suffered as at the date of the
accrual of the cause of action or as at any particular point of time thereafter”.
170       In the present matter, Impact has noted that the sale of the Altona site was not adversely affected (by the reduction of the purchase price or otherwise) by the incomplete demolition or asbestos removal works and therefore Swift (Tasman) had

not suffered loss. Therefore Impact could not be liable for the “extra over cost of
engaging Alex Fraser”.
171       In Laminex at paragraph 5, Chernov JA noted that, “The defect in the Renold chains
was first discovered in February 2003 – after the sale of the business to Fletcher – so
that no loss was suffered by Laminex by reason of the defect in the Renold chainsplanning and building control consents, including all soil investigations, to Larkstore”. There is no suggestion in Renold that the fact that the defective chains had not been discovered when Fletcher purchased the assets of Laminex’s business, had any particular relevance. The discussion of legal principle by Chernov JA makes it clear that this fact has little significance and that the important factor (for an assignee seeking its own damages) is that the sale of the business (or in the present case, the sale of the Altona site) occurred after a breach of contract and that a deed of assignment was then executed in favour of the assignee.

”.
172       Accordingly, in the present case, even although there was no financial loss suffered by Swift (Tasman) as assignor, Kyle Road as assignee stepped into the shoes of Swift (Tasman) and can claim loss and damage “of a kind and nature” that Swift (Tasman) would have incurred and been entitled to claim, had the sale and assignment not proceeded. A wrongdoer in those circumstances cannot escape liability for the appropriate losses consequential upon any breach of agreement by Impact.

Calculation of Kyle Road’s loss and damage
173 Having found that Tasman was entitled to terminate the contract with Impact in March 2008, I must calculate any loss and damage suffered by Kyle Road as a result of Impact’s breach of contract and the termination of the arrangement.
174 I accept the figures contained in paragraph 107 of Kyle Road’s written submissions that the net cost to Kyle Road of completing Impact’s asbestos removal and demolition scope of works was $480,470 (inclusive of GST). My understanding is that these figures were admitted by Impact’s counsel as the appropriate quantum if Kyle Road should otherwise succeed. The relevant figures (all inclusive of GST) are:

Original contract sum $2,860,000

Less deduction for purchase of salvageable material $880,000

$1,980,000

Plus one-off payment for variations $275,000

Revised contract sum (memorandum of agreement) $2,255,000
Less payments made to Impact (not including payments into trust) $1,595,000

Balance of contract sum $660,000

Less agreed figure paid to Alex Fraser Demolitions to complete $1,140,470
Impact’s works

Net cost to complete $480,470
175 In addition, Kyle Road claims the amount paid to Indoor Environmental beyond what it would otherwise have been required to pay to the occupational hygienist. In my view, this sum should be limited to the additional costs following termination of the Impact contract. There is nothing in the evidence which would otherwise allow me to calculate the additional cost which might be referrable to the conduct of Impact. My calculation of the total of the relevant invoices is $106,315.
176 In the calculation of Kyle Road’s loss and damage, the deduction for payments made to Impact has not included payments into trust made by Tasman after the parties entered into the memorandum of agreement. In the circumstances, it would be appropriate that these monies, together with any accrued interest, should be released and paid to Kyle Road.

Impact’s claim for the value of salvageable materials
177       Impact asserts that, even if Tasman were entitled to terminate its contract, Impact is entitled to the value of the salvageable materials that became its property as a result of the parties entering into the memorandum of agreement. The memorandum
provided that, “upon execution of this memorandum of agreement Impact will become the owner of all salvageable property” excluding certain defined and limited materials. Kyle Road submits that the proper construction of the memorandum “entitles Impact
to ownership of the salvageable property incrementally in proportion to the works it
has completed”. Kyle Road says that the reduction of the previously agreed contract sum by $880,000 (including GST) was the consideration for the transfer of property in the salvageable material.
178       Just as no payment would have been made to Impact under the original contract until work to at least that value had been completed, similarly, it was submitted, the parties must have intended that Impact would not have been entitled to the transfer of

property in the salvageable material at least until work of that value was preferred. owner of the salvageable property (until such time as Impact had paid for that salvageable property by the progressive completion of the works).
179       The salvageable material is in three parts – material removed from the site and sold, materials dismantled during the demolition of buildings and structures and not removed from the site by February 2008, and material remaining in situ as part of the buildings and structures yet to be demolished.
180       Following the execution of the memorandum of agreement in July 2006, Impact realised more than $1.6 million from the sale of salvageable material – principally steel and non-ferrous metals. Evidence of sales was derived from invoices discovered by Impact in the proceeding. Impact asserts (in its claim against Swift) that it took loads of timber and concrete/brick from the site although there was no evidence of what Impact received for the disposal of these materials, apart from a statement from Mr Ellis in cross-examination that Impact received $50,000 to $100,000 for timber it sold.
181       There is considerable dispute as to the value of the remaining salvageable material including the material not dismantled from the buildings and structures. As part of Impact’s claim against Swift, Impact asserts in its Statement of Claim that it must be allowed the value of the salvageable material on site at the date of termination. Impact claimed that $3.58 million worth of salvageable material remained on site, being $550,000 for material in dismantled form and $3,028,750 for materials in existing form.
182       Impact’s expert witness, Mr Rodney Alsop, gave evidence that the value of the salvageable materials remaining on site was $1.48 million. There was considerable dispute about this evidence and conflicting evidence from the Kyle Road/Swift expert, Mr Richardson, as to the value of the stockpiled dismantled materials. Mr Richardson’s opinion in relation to the materials forming part of undemolished buildings and structures was that, “With reference to the quantum of material that can

be salvaged from these remaining buildings, until such time as the building is
demolished, it is impossible to assess accurately how much could be salvaged and
sold on, as much depends on what the condition of the demolished/stripped out items
is upon removal”.
183       Generally, I prefer the evidence of Mr Richardson. The evidence of Mr Alsop lacked credibility for a number of reasons:

a.

there were inconsistencies between Mr Alsop’s earlier reports and the final report dated 20 August 2010 which suggested that he was prepared to compromise the process he would ordinarily have followed in order to express an opinion on, for example, the quantities and value of recoverable materials in existing form on site;

b.

the explanation for the range of prices he used in his reports for the value of bricks, and whether he had been influenced by information provided by Impact, was most unconvincing;

c.

the apparent reliance upon information obtained by other persons working with him to investigate the matter, without Mr Alsop being able to provide any details of the actual source of the information;

d.

notwithstanding the fact that Mr Alsop’s figure of $350,000 for the cost of establishing and operating a concrete crushing plant was the same as the estimate in a letter briefed to him, written by Trevor Main, Mr Alsop denied that he relied upon Mr Main’s figure although he was not able to provide a satisfactory explanation as to an alternative source of the information;

e.

Mr Alsop generally conceded that he had not had sufficient “time and information” to have completed his task as he would have wished;

f.

Mr Alsop’s price for salvageable steel (particularly for concrete reinforcing) seemed inflated when compared with the figures actually obtained by Impact during the project;

g.

Mr Alsop did not include in his calculations of the cost of Impact to complete, significant expenditure Impact would have incurred for breaking up and removing the concrete paving and completing the asbestos removal.
184       In the circumstances, I cannot accept Mr Alsop’s estimates of between $750,000 and $800,000 as the cost of completion of the works at the time Impact’s contract was terminated.
185       Similarly, Mr Alsop’s estimate of $1.48 million as the value of salvageable materials remaining on the site, although substantially less than Impact’s claimed total amount of $3.58 million, cannot be accepted as reliable evidence of the value of the materials.

186
simply transferring the salvageable material to Impact upon execution of the
memorandum. It is difficult, however, to deny the plain meaning of the words used in
Kyle Road disputed that the memorandum of agreement could be read literally as property” upon execution of the memorandum, but also that the agreed purchase price of $880,000 (including GST) was to be deducted from the total contract price “upon execution of the memorandum of agreement”.
187 Notwithstanding the clear words used in the document, it is difficult to apply the provisions in the circumstances which have occurred, namely, as I have found, that Impact failed to regularly and diligently proceed with the asbestos removal and demolition works. The salvageable materials were generally part of or attached to structures and buildings. Until those buildings and structures were dismantled, the salvageable materials had no separate existence or value. For example, a not insignificant value was attributed to steel reinforcing enclosed in the concrete paving. The concrete paving also contained asbestos reinforcing. As part of its works, Impact was required to dig up and process huge quantities of concrete paving to remove the asbestos and dispose of it off-site, to extract the steel reinforcing if this material was to be sold as salvage, and to crush, or otherwise treat, the concrete so that it could be removed off-site.

191
considering how to treat the issue of bringing into account the value of salvageable
materials is to use the figure agreed by the parties in the memorandum of agreement,
namely, $880,000 (including GST), which was deducted from the contract price of
$2.86 million. The use of this figure does not take account, on the one hand, that
Impact had, by February 2008, derived significantly more than this sum from,
principally, the sale of salvageable steel and other metals from the site and, on the
other hand, that it was likely the remaining salvageable materials, particularly those in
“dismantled” form at March 2008 may have realised a further significant sum.
188       In the circumstances, it is difficult to attribute any value to the salvageable items whether steel reinforcing or crushed concrete without an accurate estimate of the cost of carrying out the works necessary for any materials to be salvaged. At the date when its contract was terminated, Impact had not started with the work of digging up the concrete paving.
189       The evidence of the cost of carrying out this work is unclear. Accordingly, it is impossible to obtain even an approximate estimate of the value of the salvageable materials on-site in March 2008 in “existing” form. The task of valuing the materials in “dismantled” form is somewhat easier. The values given in evidence ranged from $732,500 by Mr Alsop and between $28,000 and $280,000 by Mr Richardson.
190       The evidence of the materials removed by Impact prior to February 2008 suggests that the steel and other metals returned about $1.6 million to Impact and that a further sum of approximately $50,000 to $100,000 was realised for timber. In order to generate this return, it was necessary for Impact to have carried out the work of demolition of the appropriate buildings and structures, separation of the salvageable materials and transporting them off-site.
With the state of the evidence as presented, I consider that the only practical option in “existing” form, further expense would have been necessary on the part of Impact.
192       Allowance of $880,000 (including GST) for the salvageable materials as a matter of deduction in the calculation of Kyle Road’s damages simply reflects the approach of the parties when they executed their memorandum of agreement. It is appropriate, when determining the quantification of Kyle Road’s loss and damage consequential upon the termination of the contract and any necessary allowances to Impact, to

have regard to the terms of the agreement reached by the parties themselves. There
is a lack of clear evidence in the present case which would allow me to follow any
other course.

Proposed orders
193       In action CI-09-01333, upon my calculation, there should be judgment for the plaintiff against the defendant for $586,785 and interest pursuant to statute from 2 April 2009 to today of $135,965.32; total judgment $722,750.32. There will also be an

appropriate order in relation to the monies paid into trust by Tasman during the
course of the works.
194       In action CI-09-05760, there will be judgment for the defendant that the plaintiff’s claim be dismissed.
195       I will hear submissions from the parties in relation to the form of Kyle Road’s judgment and the issue of costs.

- - -

Certificate

I certify that these 68 pages are a true copy of the reasons for decision of His Honour Judge
Anderson delivered on 30 June 2011.
Dated: 30 June 2011.
Caroline Dawes

Associate to His Honour Judge Anderson

a.	rubbish, dirt, rubble, bricks, timber, steel, concrete and like materials which were delivered to the property prior to the commencement of works under the agreement by Impact, and since, by parties other than Impact;
b.	the office building and butcher shop located on the property;
c.	any underground fuel tank or like structure buried or located

a.	any extension of time under clause 25 above, will automatically extend commensurately the time available to Impact under this clause 27;
b.	Tasman will not unreasonably withhold its consent to any

f.	any necessary implications from “the need to give business efficacy” to the agreement;
g.	any necessary implications from the fact that the agreement “was concluded
after the first planning permit was issued by the Hobsons Bay City Council and that the first planning permit did not include a permit to demolish the skin

a.	the term of the memorandum requiring that the works be completed by the time and date required in the memorandum; and/or
b.	an implied term of the agreement and/or memorandum that the works would be progressed regularly and diligently; and/or
c.	an implied term of the agreement and/or memorandum to do all things necessary to carry out the contractual aims”.

(a)	within 60 weeks of commencing; or
(b)	alternatively, following execution of the memorandum, by 31 January 2007; or
(c)	further in the alternative, within a reasonable time”.

8	21 February 2007	20 April 2007	$110,000	$110,000
9	20 September 2007	5 October 2007	$110,000	$220,000
10	10 January 2008	Not paid	Nil	$220,000

8024	4 February 2008	and debris amongst stockpiled	$15,812.50
concrete and rubbish at rear of site as directed.
Removal of 90,000 litre diesel
80241	4 February 2008	tank including all preparation	$7,854.69
80242	4 February 2008	Removal of tallow tank	$1,897.50
Supply and loading steel. Hire
8025	5 February 2008	of EX300 excavator. Supply	$44,176.00
and loading galvanised racks Supply and loading of
2017	8 February 2008	galvanised racks	$28,050.00
Reinstate and supply power
80211	11 February 2008	on site	$4,080.14
$101,870.83

b.	From May 2006 to February 2008, was a further period of about 90 weeks. There were times during this period when Impact was not able to work. When contractors tendered to complete Impact’s work after the contract was terminated, Alex Fraser Demolitions was successful with a projected completion time of 46 weeks.
c.	Mr Ellis’s site diary records the number of workers and the equipment on site day by day. The workforce seems fairly minimal and the evidence suggested that the equipment was under utilised. Impact always had the capacity to
increase its workforce, as it did from time to time. Although the works were required to be performed in a sequenced manner, the site was extensive and Impact’s progress was not constrained by the physical layout of the site.
d.	There was no specification as to how Impact should carry out its work, and it was probably inevitable, following the execution of the memorandum of agreement, that Impact was indeed to “feed off the scrap” by concentrating on deriving a financial return by performing work which was focussed on that end. Nevertheless, it is apparent that Impact failed to give any priority to (or even make a start on) the more difficult work of concrete pavement removal which had significant costs and limited financial returns. It is not credible that the work of removing and processing concrete paving had not commenced on the site after almost three years.
e.	Prior to the memorandum of agreement, Impact were paid substantial progress payments, although it is apparent that it had not completed sufficient work to fully justify those payments. After the memorandum of agreement, Impact concentrated on extracting salvageable materials. As a consequence of this approach, Impact did not maintain a satisfactory rate of progress on site.
f.	The skin sheds were not excluded from the works required to be demolished pursuant to the memorandum of agreement. Impact’s work could not be completed until the skin sheds were demolished, or that work was excluded, and presumably some allowance made to Impact for the salvage it would have been denied. However, these matters have only marginal relevance to the issue of Impact’s progress on site. The western skin sheds were only a minor part of the buildings on site. Part of the skin shed buildings had been wholly removed and those structures which remained had been largely stripped of all but the bare steel outline of the frame for the walls and roof. In those circumstances, whilst the skin sheds may have affected final completion of Impact’s works, it was only minimally affecting the progress of the works on site.

the price by reason of the defect) Fletcher had no right to claim damages” (paragraph 21);
g.	further, as the assignment to Fletcher had taken place after the date on which Laminex first incurred a loss, “On a proper construction of the deed, what was

Plus one-off payment for variations	$275,000
Revised contract sum (memorandum of agreement)	$2,255,000
Less payments made to Impact (not including payments into trust)	$1,595,000
Balance of contract sum	$660,000
Less agreed figure paid to Alex Fraser Demolitions to complete	$1,140,470
Impact’s works
Net cost to complete	$480,470