Makland Constructions Pty Ltd v Page Steel Fabrications Pty Ltd (No 2)
[2023] VCC 706
•5 May 2023
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-19-05803
| Makland Constructions Pty Ltd & Ors | Plaintiffs |
| v | |
| Page Steel Fabrications Pty Ltd | Defendant |
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JUDGE: | Her Honour Judge Burchell | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 15-27 March 2023 | |
DATE OF JUDGMENT: | 5 May 2023 | |
CASE MAY BE CITED AS: | Makland Constructions Pty Ltd & Ors v Page Steel Fabrications Pty Ltd (No 2) | |
MEDIUM NEUTRAL CITATION: | [2023] VCC 706 | |
REASONS FOR JUDGMENT
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Subject:Supply contract – Building and Construction
Catchwords: Terms of agreement – who are the parties to the agreement – whether there was consideration to support supplementary agreements – did non-delivery and non-installation of some steel and purlins constitute a breach by the defendant – whether the defendant repudiated the agreement – whether the plaintiff specified the purlin manufacturer – did the defendant use reasonable endeavours to procure manufacture of the purlins – was the defendant obliged to supply the panel clips – whether there was a failure to supply – whether there was a breach of consent orders – the terms of the delivery of the structural steel – loss and damage caused by breach
Legislation Cited: Building and Construction Industry Security of Payment Act 2002 (Vic)
Cases Cited:Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; Jones v Dunkel (1959) 101 CLR 298; Terrell v Mabie Todd & Co Ltd (1952) 69 RPC 234; Wang v Kaymet Corporation Pty Ltd [2015] NSWSC 1459; Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | M Hoyne | Griffin Law Firm Pty Ltd |
| For the Defendant | P Noonan | Hughes Legal |
HER HONOUR:
Introduction
1The plaintiffs (collectively, “Makland”) allege that defendant (“Page Steel”) is in breach of the terms of an agreement for Page Steel to supply and install steel framework at a property owned by the second and third plaintiffs. Makland seeks the sum of $215,945.28.[1]
[1] See paragraph 13 of the further amended statement of claim dated 16 March 2023.
2Page Steel counterclaims for alleged loss in the amount of $33,748.10 caused by Makland’s refusal to take delivery of the steel and non-payment of the cost of variations arising from amended shop drawings.
3The property at 10 Fulton Road Derrimut (the “Development Site”) is owned by the second and third plaintiffs, Fulton Road Properties Pty Ltd and Fulton Road Over Pty Ltd, respectively. The three plaintiffs share a common sole director, Stefce Kutlesovski (also known as Steve Makland, “Steve”). Page Steel manufactures structural steel and its directors are Lynnette Piacentini (“Lynne”), her son Christopher Piacentini (“Chris”) and her daughter and son-in-law, Jacintha and Roderick Anders.
4ln 2018, the second and third plaintiffs engaged the first plaintiff to supply, fabricate, deliver and erect structural steel for two industrial factories with offices at the Development Site. The designs for the factories included a large steel canopy (i.e. a shelter abutting the factory for loading and unloading goods) for each factory. The plan shows the different stages of construction but not the sequence in which it was to occur.
5ln February 2019, Steve contacted Page Steel and asked for a quotation from them to manufacture, supply and construct the required steel. Steve had not dealt with Page Steel previously, but Makland needed steel to be supplied quickly and Page Steel’s factory was located next door to the Development Site.
6The disagreement between the parties started from a dispute by early June 2019 as to whether any particular scope of works was required to be done to trigger an entitlement to payment or if Page Steel was entitled to be paid in accordance with the payment schedule regardless of the amount of work it did. The relationship between the parties became difficult from that point on.
7In my judgment, there was no breach of the agreement made between the parties on 13 September 2019 (“September Agreement”) and there was no repudiation in November 2019 by Page Steel. However, there was a breach by Page Steel of the consent orders made by his Honour Judge Macnamara on 9 December 2019 (“December 2019 consent orders”). Further, Page Steel was entitled to payment of variation number 4 pursuant to invoice No 57258. My reasons are set out below.
8Accordingly, there will be judgment for:
(a) Makland in the sum of $73,711.53 (comprising $1,364.00 for the clips and $72,347.53 for the purlins) (including GST), plus interest as claimed by Makland.
(b) Page Steel in the sum of $33,748.10 (including GST), plus interest as claimed by Page Steel.
9I propose to order that each party bear their own costs of the proceeding (unless either party has a basis for a different order as to costs). I invite the parties to prepare draft orders to give effect to these reasons. I will determine any issue concerning costs on the papers.
Issues
10The issues for consideration in the present proceeding are as follows:
(a) In relation to the September Agreement:
(i)was there consideration to support the September Agreement (as defined by Makland in the Statement of Claim) as a binding agreement at law?
(ii)if so, did the terms of the September Agreement require Page Steel to deliver and install the steel the subject of the agreement by a particular date and, if so, what was/were that date(s)?
(iii)was there a breach of the terms by Page Steel as at 12 November 2019 on the basis of Page Steel’s requirement for a deed of release and/or a breach by Page Steel of the term to deliver and install the steel by a particular date?
(b) Did Makland validly terminate the contract on 12 November 2019 by accepting Page Steel’s purported repudiation of the March and/or September Agreement?
(c) If Page Steel did repudiate the parties’ agreement, what was the loss and damage suffered by Makland?
(d) Did Page Steel use reasonable endeavours to procure the manufacture of the purlins pursuant to the December 2019 consent orders?
(e) Was Page Steel entitled to charge for the amended shop drawings dated 13 April 2019 as a variation?
(f) If yes to (e), was the figure claimed by Page Steel a fair and reasonable sum for such variation?
11I deal with each issue in turn below.
Was there consideration to support the September Agreement (as defined by Makland in the Statement of Claim) as a binding agreement at law?
12On 27 March 2019, Makland and Page Steel entered into an agreement pursuant to which Page Steel was to supply and erect steel framework for two warehouses (including canopies) and two offices at 10 Fulton Road Derrimut (“the Property”). The contractual sum was initially just over $2.4 million. The warehouse development comprised the following stages:
Sequence of works
(a) 1 office block east
(b) 2 office block west
(c) 3 warehouse east
(d) 4 warehouse west
(e) 5 canopy east
(f) 6 canopy west
13The March Agreement is in writing, comprising a quote dated 26 March 2019 (112rev1) provided by Page Steel, which was accepted by Makland, as recorded in a purchase order dated 26 March 2019 and emailed to Page Steel on 24 April 2019.
14The March Agreement included the following terms:
(a) a price of $2,184,020.00 + GST;
(b) that it was based on the “Shop drawings issued for approval on 14/02/19”;
(c) an “Agreed Payment Schedule” with payments as follows:
(i)$900,000.00 on 15 April 2019;
(ii)$500,000.00 on 15 May 2019;
(iii)$500,000.00 on 15 June 2019; and
(iv)$502,422.00 on 15 July 2019;
(d) various inclusions and exclusions as stipulated in the quotation document; and
(e) “Programme - to be agreed”.
15It is common ground between the parties that the project got off to an inauspicious start and the parties fell into dispute. Each party blamed the other for the issues.
16Makland claimed that by mid-June 2019, it had paid Page Steel $1.4 million but no work had been done on site.
17On the other hand, Page Steel contended that the project did not go as planned:
(a) due to inclement weather, Makland did not erect the concrete panels for the warehouses until 16-17 May 2019 (“Warehouse 1”) and 25 May 2019 (“Warehouse 2”) respectively, about three months late;
(b) in the interim, the steel was manufactured and ready, but had to be stored by Page Steel;
(c) from late May to mid-June 2019, there were further delays in the context of:
(i)site conditions: in particular, Makland failed to lay crushed rock as required by Page Steel and the riggers (crane operators) to operate safely. The conditions were “quagmire”. Steve himself said on 31 May 2019 that it was too wet to put down crushed rock. To the extent that there was crushed rock supplied, it was not in all necessary areas and was “chopped up” by machinery on site and needed to be updated; and
(ii)delays in Makland’s engineer providing his approval for the steel erection procedure.
18Page Steel argued that the lack of site preparation by Makland and engineering approval prevented the steel erection work on site until at least 12 June 2019.
19On 13 June 2019, Steve notified Lynne by email that Makland would not pay the last payment in the payment schedule 15 July 2019 as set out in the March Agreement (or “before completion”, as Steve stated in his email dated 22 March 2019). When Page Steel did not agree to this change, Steve then also refused to pay the 15 June 2019 payment.
20Lynne sought compliance with the March Agreement and sent an email to Steve, which relevantly stated that the parties had an agreement in writing on when payments were due and Page Steel’s quote was based on receiving payments on these dates.
21While Makland refused to pay the 15 June 2019 instalment, Page Steel declined to deliver the steel.
22On 28 June 2019, Lynne and Steve had a conversation and resolved the dispute. The agreement they reached was set out in an email which Lynne sent to Steve at 1.15pm that day (“the June Agreement”). This agreement resolved the issues between the parties for a short period, by which Makland agreed to pay:
(a) $500,000.00 by 1 July 2019;
(b) $250,000.00 upon completion of the steel for Warehouse 1; and
(c) the balance when the Warehouse 2 steel was installed.
23Page Steel made delivery and installation of steel and, on 30 August 2019, issued invoice no 57249 for the sum of $250,000.00 due on completion of the steel for Warehouse 1.
24There is a dispute between the parties as to whether the steel for Warehouse 1 had been completed such that the invoice could be sent pursuant to the June Agreement. Makland relies on the following emails in support of its claim that Warehouse 1 was not complete until around 23 October 2019:
(a) email dated 3 September 2019 from Stephanie Cairncross (“Stephanie”) of VicRig Pty Ltd (“VicRig”) to Page Steel attaching an invoice and stating that “[t]his is a claim for completion of Warehouse 1, which will be 100% completed tomorrow”;
(b) an email chain dated 3 and 4 September 2019 between Lynne and Steve noting that VicRig was currently working on the masonry anchors to the ties in Warehouse 1 and, as at 2.30pm that day, was 50% complete. They anticipated that it would be complete on 3 September 2019, but the drill broke;
(c) an email dated 6 September 2019 from Steve to Lynne setting out the works that needed to be done on Warehouse 1 to enable erect panels for the canopy;
(d) an email dated 10 September 2019 from Steve to Lynne stating that wall bracing and knee bracing along the Warehouse 1 wall needed to be completed;
(e) an email chain dated 1 October 2019 between Stephanie to Jacintha in relation to completing flybraces on Warehouse 1;
(f) an email dated 9 October 2019 between Jacintha and Stephanie confirming Steve’s advice that Makland’s site foreman is available for completion of Warehouse 1 and seeking confirmation of when they would have Warehouse 1 completed as follows:
(i)bottom set of column knee braces can be installed along the west panels now that the props are removed;
(ii)angle bracing along the west panel wall can now be installed as the props are removed;
(iii)knee bracing can be installed on the east wall as the panels are up;
(iv)the small struts at the expansion joints can be installed as Makland ordered new struts from J & C Threading to overcome a drafting error. Struts are on site;
(g) email chain dated 9 to 14 October 2019 between Lynne and Joshua at Makreo Australia Pty Ltd (“Makreo”) in relation to the outstanding wall bracings to be assembled, the small struts to be put on, the column fly bracings to be completed (as the props had been removed) and the tightening of the bolts above the wall ties (as the panel clips had been done and welded). The portion of Warehouse 1 needed to be completed so that the roofers could start their work;
(h) email chain dated 18 October 2019 from Lynne to Stephanie about sourcing riggers to erect the four offsets of Warehouse 1 wall bracing on the West Wall the next day and for the boilermaker to continue with the installation of the Warehouse 1 flybraces; and
(i) an email chain dated 23 October 2019 between Jacintha and Stephanie advising that Makland’s engineer had competed inspection the previous afternoon on site and approved Warehouse 1.
25Page Steel, on the other hand, relies on the email between Lynne and Josh of Makreo dated 5 September 2019, in which she asks him to advise exactly what he claims has not been completed for the steel for Warehouse 1. It says that there is no evidence to suggest that Warehouse 1 was not relevantly complete for the purposes of issuing its invoice on 30 August 2019.
26As a result of the above matters, the parties were again in dispute about whether there was an obligation to pay and works were suspended on 9 September 2019.
27On 13 September 2019, Lynne and Mr Francke of Pointon Partners, for Makland, agreed on a basis on which payment would be made and work would continue, while the parties reserved their rights under the September Agreement. The terms of the September Agreement were:
(a) Makland would pay invoice 57249 in the sum of $246,908.18 on 13 September 2019;
(b) Page Steel would start work on Warehouse 2 immediately;
(c) Makland would pay Page Steel the balance of the contract (approx. $250,000.00), in approximately two weeks’ time, upon both of:
(i)completion of all works contemplated by the contract (subject to the exclusion in paragraph (d) below);
(ii)delivery of the remaining steel for the canopies and box frames to site [emphasis added].
(“clause 3”)
(d) The only exclusion in (c)(i) above is the installation of the canopies and box frames. The steel for these will be delivered to site and installation will occur within seven days of Makland’s request.
(“clause 4”)
(e) Both parties reserve their legal positions.
28Makland paid the full amount owing under the contract in the sum of $499,330.19 on 13 September 2019.
29Makland contends, in relation to the September Agreement, that:
(a) there was clearly an agreement entered into September 2019 to the effect that the works (with certain specified exceptions) would be completed within approximately two weeks;
(b) the agreement was clearly supported by consideration;
(c) the works were not completed within approximately two weeks;
(d) Page Steel, therefore, breached and/or repudiated the agreement;
(e) the repudiation was accepted; and
(f) Makland suffered loss and damage as a result of the breach and/or repudiation.
30Page Steel contends, in relation to the September Agreement, that:
(a) at the time of the September Agreement, Makland was already obliged to pay the contract price in full by 15 July 2019. An agreement to perform an existing duty is not consideration;[2]
(b) the parties in the present case did not compromise any claim, rather, they have expressly reserved their legal positions. Given the reservation of legal position, at best, Makland agreed on 13 September 2019 to a temporary forbearance;[3]
(c) accordingly, Makland gave no consideration.
[2] Wigan v Edwards (1973) 1 ALR 497 at 512 per Mason J.
[3] Wilson Pastoral International Pty Ltd (ACN 167 284 399) v George Streel Steel Pty Ltd (ACN 008 179 708) [2020] SASCFC 54.
31It was common ground between the parties that a compromise of a claim might sometimes constitute valid consideration if it is by way of a bona fide compromise of a disputed claim, in the sense that the plaintiff’s belief in the claim was reasonably and honestly held and the claim was not vexatious or frivolous.[4]
[4] Ibid at 512-513.
32Makland objected to Page Steel’s closing submission that the September Agreement was not a bona fide compromise of a disputed claim, on the basis that there was no allegation made in the pleading about a lack of bona fides and it was not put to Steve in evidence, which was a breach of procedural fairness.[5] Makland contended that Page Steel was effectively alleging that Steve had no honest belief in the points that he was seeking to raise with Page Steel and that he was simply seeking to gain some benefit without any genuine belief in what he was saying.
[5] SSZPAB v The Minister for Immigration and Citizenship (2011) FCA 1253 at [29]; Forest v ASIC (2012) 247 CLR 486 at [25]-[26]
33Page Steel asserted that Makland’s refusal to make payments due under the March Agreement was not asserted by reference to any bona fide right or claim, but rather, to put pressure on Page Steel to agree to the variations of those obligations. That does not constitute a bona fide claim and accordingly, there was no consideration for the September Agreement by which Makland agreed to make payments that were already overdue, and therefore, it was not enforceable at law.
34Counsel for Page Steel said that he did put to Steve that he had no basis for making the demand to Lynne that, unless she agreed to vary the payment schedule so that the last payment would be made on day of completion, he would not pay the June instalment. Steve denied this and said there was no performance on the job.
35In my view, I agree with Makland that Page Steel did not plead a lack of bona fides as the basis for its argument that there was no consideration for the September Agreement. On the facts and evidence outlined above, it was clear that there was a genuine dispute between the parties in relation to the obligation to pay and the right to issue the 30 August 2019 invoice.
36I accept Makland’s position that a significant dispute between the parties had arisen at this point in time. Page Steel had suspended works and was demanding payments, whereas Makland asserted that the time for payment had not arrived and there was no entitlement to suspend.
37In light of the authorities relied on by both parties, where a bona fide dispute between parties is settled (either in whole or in part), the consideration is the settlement of that dispute and the forbearance from immediately issuing proceedings or exercising any other rights the party may have such as immediately terminating the agreement. I accept that Makland agreed to make the payment immediately, which it denied it was otherwise obliged to make, given the dispute over whether Warehouse 1 had been completed. Makland also, in effect, agreed that it would not immediately seek to enforce the rights it claimed to have. As such, there was consideration for the September Agreement.
38Page Steel further relied on the fact that the parties reserved their rights. I agree with Makland that this is not to the point. The parties recognised that the September Agreement set out obligations on both sides going forward and there was no suggestion that there were no legal ramifications for breaching those obligations in the future. There was an agreement to not immediately terminate or commence legal proceedings. That is good consideration.
Did the terms of the September Agreement require Page Steel to deliver and install the steel the subject of the agreement by a particular date and, if so, what was/were that date(s)?
39Makland argues that:
(a) pursuant to the September Agreement, it was contemplated that, within approximately two weeks of 13 September 2019, all works under the contract (including the delivery, but excluding the installation, of the remaining steel for the canopies and the box frames) would be completed;
(b) the effect of the September Agreement – as to timing – was that the parties agreed to a more specific time frame, rather than leaving it to be determined by the less certain concept of a “reasonable time”.
40Makland claims that the agreement initially was that, until a time frame was agreed between the parties, there was an obligation on Page Steel to complete the works within a reasonable time. The September Agreement was simply the parties agreeing to provide a more specific time frame.
41Makland argues that the issue being dealt with in clause 3 was the time for completion of Page Steel’s work, and not the date for payment. It suggested that the parties can agree to fix a time for completion of work where no specific time was previously fixed. It does not give rise to a consideration issue because it is an agreement which assists both parties by making more precise that which was previously imprecise.
42Makland urged the construction of the words in clause 3 such that it meant that, subject to the couple of exceptions, the works were going to be completed within approximately two weeks and a payment was going to be made at that point in time. If the intention was simply that Makland would pay Page Steel when it got around to it and it has nothing to do with timing in terms of the works, there would be no need to have a reference to the words “approximately two weeks”.
43Makland further contended that, even if clause 3 only provided for an estimate of time, it was included within the agreement between the parties, and that even if it was the estimate, then that just leads into Makland’s argument that it was the estimate of what was supposed to be reasonable based upon the March Agreement. That is, the March agreement was an implied term that it would be done within a reasonable timeframe. Even if all that was provided was an estimate, it was fixing the parties’ estimate for what that reasonable timeframe was going to be.
44Page Steel contends that, on a proper construction of the terms of the September Agreement, it did not:
(a) impose an obligation to complete the steel work on a particular date and, even if that is wrong,
(b) vary or affect the parties’ rights and obligations contained in the March Agreement.
45Page Steel says that the words of the September Agreement do not state that it seeks to vary the terms of the March Agreement. It says that the rights were specifically defined and the works to be completed were set out in the email exchanges between Lynne and Mr Francke on 13 September 2019 as described in quotation 112rev1, dated 26 March 2019, and purchase order 00917643 (excluding the installation of the canopies and box frames). The September Agreement does not go on to provide that “a reasonable time for the purposes of the March Agreement is two weeks”.
46Page Steel cites Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd[6] as the correct approach to contractual construction. That is, to ascertain the objective meaning of the document by reference to the words in context and the commercial purpose and objects of the contract; and to favour the interpretation that makes the most commercial sense in that context.
[6] [2017] HCA 12 at [16]-[17] per Kiefel, Bell and Gordon JJ.
47Page Steel argues that, at the time of the September Agreement, Makland was refusing to pay for the steel and Page Steel was accordingly refusing to install the steel. It is clear that the commercial purpose of the September Agreement was the pragmatic objective of facilitating payment and “commenc(ing) work on site and complet(ing) the project”[7] despite the parties’ unresolved issues. The commercial purpose of the September Agreement was not to determine or resolve the legal rights and obligations of the parties under the March Agreement. The September Agreement provided for payment to be made and work to recommence, while also expressly stating that “[b]oth parties reserve their legal positions”.
[7] Email from Lynne to Mr Francke on 13 September 2019 at 2.05pm.
48Page Steel submits that, properly construing the September Agreement in accordance with the principles laid down by the High Court, Makland’s contentions cannot be sustained for the following reasons:
(a) the September Agreement does not say what is alleged by Makland, either as to a positive obligation to complete by a set time, or the variation of the March Agreement. It only refers to an approximate timeframe in parenthesis by reference to payment. It says Makland’s failure to make timely payment was a critical point of contention at the time but, nonetheless, not expressed as an obligation and no more than an estimate;
(b) it does not say that a time or date for the completion of the work is binding on Page Steel, or anything similar;
(c) it does not say that the March Agreement is amended. On the contrary, the parties expressly reserved their legal positions;
(d) it does not say that the parties considered that approximately two weeks was reasonable to be bound to complete the work, or the concomitant position that completion of the work in anything beyond “approximately two weeks” would be unreasonable;
(e) the evident purpose of the September Agreement, to facilitate payment and “commenc(ing) work on site and complet(ing) the project” despite the parties' unresolved disagreements, as evidenced by the express reservation of legal positions, militates against any construction that involved the parties amending the March Agreement and imposing such conclusive obligations;
(f) if it were considered that the agreement were ambiguous and it were necessary to have recourse to extraneous facts, it is commercially implausible to conclude that commercial parties would impose a strict, binding “approximately two weeks” time limit on the works (much less that they would agree, for the purposes of the March Agreement, that anything over two weeks was not “reasonably practicable”); and
(g) absent any express term to the effect alleged by Makland, a term to vary the March Agreement in particular could not be implied. Such a variation would be contrary to the parties' express reservation of legal positions.
49In my view, applying the relevant authorities, the September Agreement did not impose a positive obligation on Page Steel to complete the works by a set time of approximately two weeks. The proper construction of the September Agreement is that payment by Makland is conditional upon a contingency which lacks certainty, given the language of “approximately" which appears twice in clause 3. Further, clause 3 is subject to clause 4, which carves out the installation of canopies and box frames and provides "within 7 day of [Makland’s] request", which again, lacks certainty and is also contingent and has no time frame.
50I agree with Page Steel’s submission that clause 3 reads, “[Makland] will pay to [Page Steel] the balance in the contract… in approximately 2 weeks’ time, upon both…”, which deals with the approximate time frame for payment. It is an estimate of when payment will happen, contingent on two stipulated things happening. It does not provide a fixed time or date for the completion of work.
51Further, I also accept Page Steel’s argument that the September Agreement does not vary the March Agreement or clarify what “a reasonable period of time” is for completion of the works. There is nothing contained in the express terms of the September Agreement that there was to be a variation (or clarification) to the March Agreement such that the parties determined that the reasonable time for the remainder of the works to be completed would be a further two weeks.
52I further agree with Page Steel’s position that, to the extent that it is considered necessary to have regard to the broader commercial context (to ascertain the commercial context or purpose, or to resolve any ambiguity), the September Agreement took place in a commercial context in which both parties knew that:
(a) the completion of the project could be many months away;
(b) the rigger was about to move on to a very large project he had committed to, and was only available until 23 September 2019 before the other project commenced;
(c) it was likely that items such as the canopies and office frames would not be installed in any particular timeframe, hence, a retention amount may be required.
53In the circumstances set out above, it would be commercially implausible to conclude that commercial parties would impose a strict, binding “approximately two weeks” time limit on the works, especially where for one of those weeks, the rigger was known to be unavailable, given the delay in the programming of Makland’s project as set out above.
Was there a breach of the terms by Page Steel as at 12 November 2019 on the basis of Page Steel’s requirement for a deed of release and/or a breach by Page Steel of the term to deliver and install the steel by a particular date?
54Makland submitted that matters proceeded, slowly, to the end of September 2019. By late September 2019 and early October 2019, the riggers were often not on site because they had taken on another significant job. The fact that the riggers had taken on another job and would have availability issues going forward was known to the parties before the September Agreement was entered into.
55Correspondence passed between the parties about the lack of progress, with Makland complaining about the lack of work onsite and Page Steel seeking to chase up the riggers.[8]
[8] See, for example, the emails of 30 September 2019, 1 October 2019, 2 October 2019, 8 October 2019, 9 October 2019, 14 October 2019 CB 222-294.
56Makland relies on the email from VicRig dated Friday, 18 October 2019, advising Page Steel that they did not have anyone to allocate to the job on 19 October 2019, but would have riggers on the Sunday and that the balance of the contract could be awarded to another company so that the project could continue. Jacintha responded that an alternate rigging company did not suit Page Steel.
57Page Steel also observed that, in September and through October 2019, the limited availability of the riggers led to delays in completing Warehouse 2 and work dragged on until early November, by which stage the substantive work on Warehouse 2 was almost complete, but some items, namely the canopies, pump rooms and office frames, remained to be done.
58In an email dated 7 November 2019 at 12.39pm, Makland sought a date by which Warehouse 2 would be completed and a date by which the canopies for Warehouses 1 and 2 would be completed. This request was repeated at 2.55pm. Jacintha responded at 4.23pm as follows:
(a) they were awaiting confirmation from their riggers as to when the works might be done and completed, but they could not give a time by which Warehouse 2 would be completed;
(b) they would only deliver the canopies for Warehouses 1 and 2 after:
(i)the erection of the panels;
(ii)site welding of cleats;
(iii)VicRig was available; and
(iv)a deed of release or “final contract sum agreement” was entered into.
59On 8 November 2019, Jacintha wrote to Marjan Tasevski (“Marjan”), Makland’s site manager, setting out a site work schedule, itemising who would be on site and when, for the period from 8 November 2019 through to 13 November 2019. In the same email, she also asked:
“Please obtain a quote from your alternative Riggers, that you mentioned yesterday, to unload and erect each of the following:
WH1 - Canopy
WH2 - Canopy
WH1 - Pump room
WH2 - Pump room”.
60On the same day, there was a further email chain between Jacintha and Marjan (and copied to Steve) in which:
(a) Marjan demanded the delivery of the canopies “...this coming Wednesday as I have arranged a crane and riggers” (i.e. not VicRig);
(b) Jacintha replied seeking the pricing of the alternate riggers “so we can address this with VicRig and determine how to proceed beneficial to all” and reiterated the requirement of a Deed of Release or Final Contract Sum Agreement Release; and
(c) provided an update on ongoing work on Warehouse 2 through to the following Wednesday.
61By email dated 8 November 2019 at 2.40pm, Marjan noted that the canopies were required regardless if the panels were up or not and asked, “Are you saying that u won’t be delivering or erecting the canopy’s without the deed of release your talking about”. Jacintha, in an email dated 8 November 2019 at 2.40pm responded, “Correct”.
62By email dated 8 November 2019 at 5.13pm, Mr Francke, the solicitor for Makland, stated that there was no basis for requiring a deed of release and Makland has not agreed to provide such a release. He stated that “the refusal to complete the works unless and until such a release is provided is repudiatory in nature”. He asked Page Steel to confirm by return email that they would complete the works under the contract forthwith and without further delay.
63On Saturday, 9 November 2019, and again on Monday, 11 November 2019 at 9.22am, Jacintha sent an updated work schedule for boilermakers, riggers and labour to attend on site for the days through to 13 November 2019 to complete Warehouse 2, with a further update at 10.47am, in which she stated that the canopies were ready to be delivered and installed following the erection of panel and site welding.
64Page Steel sought that Makland allow its workers on site to continue the steel installation work through further emails at 11.10am, 11.29am 11.41am and 12.18pm, in which Jacintha said that the canopies should not be double handled as this was time consuming, costly and could cause damage to the galvanised finish. She also asked whether the boilermaker would be allowed back on site.
65By email dated 11 November 2019, Pointon Partners wrote to Page Steel to advise that the boilermaker had been asked to leave because the deed of release was demanded and, if the request for the deed of release was withdrawn, the boilermaker would be permitted back on site. He asked her to confirm what Page Steel’s position was in relation to “steel delivery, the requested release and the completion of the works under contract”.
66By email dated 11 November 2019 at 12.18pm, Jacintha advised that Page Steel was continuing with works, but said that the canopies were not required yet and that they had asked Makland to obtain a quote from alternative riggers for the loading and erection of canopies.
67By email to Page Steel dated 11 November 2019, Makland’s solicitors demanded that:
“Unless by 3:00pm Tuesday 12 November 2019 you:
a) confirm that you will complete the works in accordance with the contract and without requiring any deed of release or other document entered into; and
b) demonstrate your willingness and ability to proceed by completing Warehouse 2 within two days
we are instructed that our client will accept your repudiation and bring the contract to an end”.
68Makland turned Page Steel’s workers away from the site on 11 November 2019, and again on 12 November 2019.
69By letter dated 12 November 2019, the solicitors for Makland accepted the alleged repudiation, saying that Page Steel had not responded to the deed of release and they could only assume that it still sought the release. Pointon Partners, incorrectly, claimed that riggers arrived on site on 12 November 2019 without notice, but notice had been given to Makland by email on 8 November 2019, and again on 11 November 2019.
70Makland submits that, by stating that they would not deliver the steel for the canopies without a deed of release, Page Steel was plainly evincing an unwillingness to render substantial performance of the contract and thereby repudiated it. It did not matter that Page Steel was prepared to do, or was doing, other work under the agreement. The refusal to perform a substantial part of the contract – i.e. deliver the canopies – without a deed of release being supplied was plainly a serious breach of the obligations of Page Steel under the contract.
71Makland contends that Page Steel cannot assert that it impliedly revoked the demand for the release and unconditionally agreed to supply the steel. This is because of Page Steel’s failure, despite repeated invitations to do so, to expressly state that no deed of release was required in its email at 10.47am, 11.41am and 12.18pm on 11 November 2019. As such, Makland submits that Page Steel never unconditionally agreed to deliver the canopy steel.
72For the reasons set out below, in my view, Page Steel was prevented from performing the contract by Makland seeking performance other than in accordance with the contract by seeking to use its own riggers and ordering Page Steel’s employees and contractors off the site.
73Further, I accept, on the basis of the contemporaneous correspondence before the Court, that Page Steel was no longer pressing for a release as a condition of supplying the canopies. First, this request was made to Makland in circumstances where Makland was considering deploying its own riggers and not using VicRig. Second, the subject of a release was never communicated by Page Steel directly to Pointon Partners. It was only raised in emails between Jacintha and Marjan. Page Steel responded by email dated 11 November 2019 at 10.47am that the canopies were ready to be delivered following the erection of the panels and site welding of the cleats and was silent in relation to the question of releases.
74Steve said that he turned Page Steel’s workers away on 11 November 2019 on the advice of his solicitors that the contract was over. However, by email from Jacintha to Steve dated 11 November 2019 at 11.10am, she asked why the boilermaker was asked to leave site and advised that four riggers were attending the site at approximately 2.30pm to spread purlins. Steve responded that the site was shut at 3.00pm. He gave evidence that he controlled the site and, therefore, did not want the riggers on site at 2.30pm when he would shut the site at 3.00pm, and he also believed that the contract was over as at 11 November 2019. In fact, the contract was not purported to be terminated by Makland until 3.00pm on 12 November 2019 per the letter from Pointon Partners to Jacintha and Lynne.
75As at 12 November 2019, Page Steel:
(a) was continuing work and scheduled ongoing works in the coming days in that:
(i)it had repeatedly communicated a forward work schedule to Makland on 8 and 9 November 2019, and again on 11 November 2019, at least twice, at 9.22am and 10.47am; while also,
(ii)on 11 November 2019, asking for permission for workers to return to site at 11.10am, 11.29am, 11.41am, 12.18pm;
(b) was attempting to perform the contracted works, but was prevented from doing so by Makland, which:
(i)as of 8 November 2019, had already decided that “we’re going to move on”;
(ii)ordered Page Steel’s workers to leave the site; and
(iii)refused to agree to, or to respond to, request for permission for the riggers’ boilermaker to attend on site, forcing their cancellation.
76In the circumstances, I accept Page Steel’s submission that it was prevented from completing the works in accordance with the contract by Makland. Contrary to Pointon Partners’ letters dated 11 and 12 November 2019, Page Steel did give prior warning that the riggers would attend the site on 11 or 12 November 2019.
77The following emails are relevant:
(a) email from Jacintha to Marjan and copied to Steve and Lynne, dated Friday, 8 November 2019 at 12.17pm: advising that Page Steel aimed to have the riggers on site on Monday and/or Tuesday afternoon to continue with the spreading of any remaining purlins;
(b) email dated 11 November 2019 at 9.22am: VicRig had moved their installation to Sunday, and depending on progress, aimed to be on site on Monday and/or Tuesday afternoon to continue with spreading of any remaining purlins;
(c) email dated 11 November 2019 at 9.22am: further listed outstanding works completed, such as the welding of the connections to CIP on the end wall, installation of Trubolts to end wall rakers by the boilermaker, VicRig progress as set out above, labour on site on 11 November 2019 to install bridging to purlins, labour onsite on 12 November to install bridging and on 13 November 2019 as necessary.
78Therefore, I do not accept that Page Steel did not demonstrate a willingness and ability to proceed completing Warehouse 2 within two days.
79Steve conceded that safety was necessary for rigging work to be undertaken and crushed rock was a safety issue. Steve said he wanted to ascertain the specific areas that required crushed rock. He claimed that the crushed rock was supplied prior to mid-June 2019. He could not remember precisely the date that Makland provided the crushed rock requested by Page Steel. Steve said that there could have been a dispute between Page Steel and VicRig about the adequacy of the crushed rock on site. Steve did not accept that there was a dispute about crushed rock between Makland and Page Steel.
80Steve did not agree that the delay of the panel installation until 14 and 15 May 2019 resulted in a delay on the works to be completed by Page Steel. He claimed that Page Steel could have engaged in work on the office spaces instead of the warehouses.
81Makland hoped to have the panels installed by February and March 2019. Warehouse 1 was initially intended to be constructed during April and May 2019, with Warehouse 2 to be constructed after Warehouse 1. I accept Page Steel’s submission that, due to the 3-month delay in Makland’s project from March to mid-June 2019 as a result of bad weather and the delay in the installation of the panels on 14 and 15 May 2019, this resulted in programming issues with co-ordinating VicRig (who the parties were on notice had scheduling difficulties later in the year) to attend Makland’s site.
82Makland says that it asked for the delivery of the canopies and Page Steel was still delaying delivery based on completion of other works. It says Page Steel should have just delivered and not concerned itself about installation. Page Steel argues that they should not be stored and potentially double handled, as it was time consuming, costly and could cause damage to the galvanised finish.
83Steve said that he had discussions with alternate riggers, De Vries Engineering, about two weeks prior to the termination of the contract with Page Steel. He said that he needed to get the project back on track. However, Steve was unable to give evidence about the items set out in the De Vries Engineering invoices. He claimed that De Vries Engineering did less work than required under the contract with Page Steel, as they removed the requirement for installation of the canopies. I agree with Page Steel’s submission that Makland had already determined to end the contract at that point in time. I, therefore, accept Makland’s submission that its patience had expired by this time. Makland, two weeks prior to the alleged termination date, had already embarked on actions motivated by its impatience and not in accordance with its legal entitlement.
84In relation to the deed of release or final contract sum agreement release, I accept Page Steel’s submissions that this occurred in the context of:
(a) a request by Marjan for delivery of the canopies before the site was ready to receive them, to be installed by a rigger other than VicRig, an arrangement which would not be in accordance with the contract and would require further discussion with VicRig;
(b) by email dated 8 November 2019, Marjan said that he sought delivery of the canopies on Wednesday, 13 November 2019, not for installation by Page Steel and VicRig in accordance with the contract, but pursuant to an alternative proposal that other riggers be brought in to install the steel;
(c) Page Steel did not refuse to deliver the canopies, it repeatedly said that the canopies could be delivered once they were ready to be erected. It rejected the delivery of the steel canopies as proposed by Marjan, and not in rejection of its contractual obligations. The site was not ready to receive the canopies and delivery would cause double handling and risk damage to the galvanised finish. Given Marjan’s proposal to change the contractual arrangements in respect of the riggers, Page Steel needed to address this with VicRig to determine how to proceed.
85Steve said that Page Steel had been paid in full and the delivery of the steel was being refused. Makland arranged their own cranes to erect the steel. He recognised that Page Steel was otherwise trying to secure VicRig to unload the steel on site.
86By email dated 8 November 2019 at 12.52pm, Marjan asked Jacintha when Page Steel could deliver the steel for both warehouse canopies.
87Jacintha responded at 2.20pm that day that:
“Per our discussion earlier today the canopies for each Warehouse can be delivered once they are ready to be erected which is following the erection of the panels, site welding of the cleats by others and Vic Rig's availability to install. Also, a ‘Deed of Release’ or ‘Final Contract Sum Agreement’ will need to be prepared and signed by both parties”.
88Marjan relevantly replied at 2.40pm:
“Are you saying that u wont be delivering or erecting the canopy's without this deed of release your talking about??”
89However, by email dated 11 November 2019 at 11.10am and again at 11.41am, Jacintha informed Steve that the canopies should be offloaded from the trucks and spread in location ready to splice and erect.
90I agree with Page Steel’s submissions that, in seeking delivery of the steel canopies before the site was ready to receive them and thus risking double handling and damage, Makland was not seeking to erect them in accordance with the contract, but rather was aiming “to secure the steel that [Makland] had fully paid for”, as stated by Steve. Makland wanted to have it off-loaded and installed by a third party, which was not in accordance with the contract.
Did Makland validly terminate the contract on 12 November 2019 by accepting Page Steel’s purported repudiation of the March and/or September Agreement?
91The legal principles were not in dispute in this matter.
92A party repudiates an agreement where:
(a) the party evinces an unwillingness or inability to render substantial performance of the contract or to fulfill it in a manner substantially inconsistent with their obligations – the test is whether the conduct of the party is such as to convey to a reasonable person in the situation of the other party renunciation of the whole of the agreement or a fundamental obligation under it; or
(b) there is a breach of a term that justifies termination – such as breach of an essential term or breach of a sufficiently serious breach of a non-essential term.[9]
[9] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at [44]–[56].
93For the reasons set out above, Page Steel did not evince an intention not to be bound by the contract. In my view, it was communicating by email its plans to continue to comply with its obligations under the contract.
If Page Steel did repudiate the parties’ agreement, what was the loss and damage suffered by Makland?
94Not applicable.
95If I am wrong about my finding in relation to the repudiation of the contract, Makland says that its losses are set out in the invoices of third party suppliers, De Vries Engineering, JH Stephenson Steeline, Shisham Products and Fix and Fasten, in the total sum of $215,845.26.
96Makland says that the first plaintiff suffered loss and damage, as Steve said that the payments made by other entities in Makland’s group, such as Makreo, are treated as loans from Makreo to the first plaintiff when the companies’ financial statements are prepared.
97Makland claims that it brought in De Vries Engineering as alternative riggers to undertake work that Page Steel ought to have undertaken (through its own rigger, VicRig). At the same time, Page Steel reduced the amount it paid to VicRig and J & C Threading for the work that they did not complete.
98Steve said that he engaged De Vries Engineering to take over the work that Page Steel had been engaged to do. He also said that De Vries Engineering was instructed to complete all the outstanding work. Page Steel submits that this involved work that was not part of the contract and for which it was not responsible, as the quote included specific and express exclusions.
99Page Steel relied on the exclusions in the quote of “site welding of pre-cast panel plates, clips and cleats (panel connections)” and “site boilermaking/welding of all panel clips” and included only limited and specific site welding under the inclusions.
100I agree with Page Steel’s submission that, although Makland has claimed for “welding”, it was unable to identify what the welding was, so as to ascertain whether the welding was work that Page Steel would have done, or if it was welding that was excluded by the quote. Makland did not call Marjan, the site supervisor, to give evidence about the work completed. Steve conceded in evidence that he was not supervising the works full time. However, he said that the invoices and dockets were from those who had been engaged to take over the work that Page Steel had been engaged to do and complete the job.
101Steve gave evidence that De Vriers Engineering, in fact, did less work than required by Page Steel because there were changes to the scope of works, such as the deletion of the platform on the roof, the canopies, the architectural canopies of the main office blocks, which VicRig or Page Steel were paid to do.
102Similarly, for all work listed in the invoices tendered by Makland, Steve could not specifically identify the work, nor ascertain that it fell within Page Steel’s obligations under the quote.
103Makland submitted that it is expected and accepted that Steve could not say what work was being undertaken in respect of each individual entry in the invoices. However, that does not change the evidence of the invoices themselves and that they, on their face, come within the obligations of Page Steel under the contract.
104If Page Steel repudiated the contract, the loss and damage suffered by Makland would be the amount under the invoices minus the items for welding (because the contract expressly excluded specific welding referred to above), deducting the amount of bridging hooks which Makland concedes were not delivered and not allowing the first two items on De Vriers Engineering’s invoices dated 13 November 2019, as these were works that were left over on another job. Steve said that he could not specifically remember. Given the date of 1 November 2019, I accept that these were works completed on a different project.
105The losses set out in the invoices of the third party suppliers are as follows:
Description
Date
Amount
De Vries Engineering
13 November 2019
$15,529.25
De Vries Engineering
11 December 2019
$82.465.63
JH Stephenson Steeline
17 December 2019
$39,013.87
JH Stephenson Steeline
19 December 2019
$33,333.67
De Vries Engineering
2 January 2020
$27,483.50
Shisham Products
7 January 2020
$1,364.00
De Vries Engineering
6 August 2020
$13,009.15
Fix and Fasten
19 December 2019
$3,646.19
TOTAL
$215,911.59
106Makland concedes that, after deducting the bridging hooks, the total sum is $215,845.26.
107The claims for welding and the items for a prior and separate project are as follows:[10]
[10] CB p347.
Description
Amount
01.11.19 lucus welding angles x bracing
$665.00
pick up plate 1 hour supply x 2 500 x 500 plate
$250.00
14.11.19 spread strut and x brace welding 3 riggers/boiler maker
$2,707.50
15.11.19 install angles in roof lucus and jack welding
$1,140.00
16.11.19 x 2 riggers and x1 boiler maker welding
$2,470.00
26.11.19 Jack welding
$427.50
04.12.19 Jack welding
$760.00
05.12.19 Jack welding
$760.00
06.12.19 Jack welding/rigging
$760.00
09.12.19 Jack welding install knee bracing and 12mm dynamic bolts in wall [sic] for shed 2
$997.50
TOTAL
$10,938.00
108If I am wrong in relation to my anterior findings on liability, then the loss suffered by Makland is $204,907.26.
Did Page Steel use reasonable endeavours to procure the manufacture of the purlins pursuant to the minutes of consent?
109Pursuant to the December 2019 consent orders, Page Steel was required to use reasonable endeavours to procure the manufacture of the purlins by a reputable third party by 13 December 2019 for Warehouse 1 and, in any event, as early as practicably possible.
110The purlins were not delivered and installed by Page Steel because the proprietor of J & C Threading suffered a workplace injury at the relevant time. Page Steel contacted Metalform Structures, an alternate supplier, on 9 December 2019, who could have delivered the purlins by 13 December 2019. However, Page Steel decided to stay with the existing manufacturer, John Spiteri of J & C Threading, because his costing was included in the initial quote to make it $20,000.00 cheaper at a 2% profit margin.
111J & C Threading was only able to deliver the purlins on 8 January 2020, instead of 13 December 2019. Makland was able to engage an alternate purlin manufacturer who was able to deliver purlins in two tranches on 19 December 2019 and 8 January 2020.
112Lynne agreed that by 10 December 2019, Page Steel knew that it was not going to be able to supply the purlins by 13 December 2019. It knew by 12 December 2019 that, unless John Spiteri’s operation went well, they would not be able to supply the purlins by 17 and 19 December 2019 for Warehouses 2 and 1 respectively, and pursuant to their correspondence and certainly not by 13 and 18 December 2019, as required by the December 2019 consent orders. Lynne agreed that the only alternate supplier contacted by Page Steel was Metalform Structures. She said that Page Steel did not have a relationship with JH Stephenson Steeline, but agreed that it could have called them to ask about their capacity to manufacture and deliver. Lynne said that JH Stephenson Steeline did not want to price any of Page Steel’s work because it was not passing enough work onto them.
113By email dated 12 December 2019, Jacintha informed Steve that:
“The stage 12 and 13 purlins for the WH2 canopy would not be delivered tomorrow as John Spiteri of JC Threading required an operation on his hand yesterday due to an accident and was unable to work. We are waiting to hear back from JC Threading to confirm the earliest date these purlins will be ready and also to confirm the same for WH1 canopy purlins. John was anticipating he would only be off work for a day or two”.
114Makland was able to contact JH Stephenson Steeline following the December 2019 consent orders. JH Stephenson Steeline agreed to supply the purlins for Warehouse 1 on 19 December 2019 and Warehouse 2 on 8 January 2020.
115Makland submits that Page Steel was to procure the manufacture of the purlins as early as practicably possible with the intention of meeting the specified dates. Regardless of whether or not those dates had been met, Makland contends that Page Steel had to use reasonable endeavours to have the purlins manufactured as early as practicably possible.
116Makland says that the evidence discloses that:
(a) Metalform Structures could have met the relevant dates but, for reasons unexplained, Page Steel decided not to use them;
(b) by no later than 10 December 2019, Page Steel knew that J & C Threading was not going to meet the dates specified in the December 2019 consent orders and that there was a real risk of a more extended time blowout if they relied upon J & C Threading;
(c) Page Steel did not investigate the supply of purlins with any other manufacturer;
(d) upon being told on 17 December 2019 that Page Steel would not meet the relevant date, Makland was able to organise to have the purlins for Warehouse 1 manufactured within 2 days.
117Makland submitted that Page Steel failed to call Jacintha to give evidence and adverse inferences must be drawn that her evidence would not have assisted Page Steel.[11] The relevant email correspondence involved Jacintha. Lynne, who was called to give evidence, was unable to explain Page Steel’s position. At trial, counsel for Page Steel offered to call Jacintha to give evidence if Makland requested. This was objected to on the basis of case management principles and procedural fairness where witness statements had been ordered and Page Steel had not prepared a witness statement for Jacintha. In the circumstances, I agree with Makland that there is a negative inference to be drawn that Page Steel failed to call Jacintha because her evidence would not have assisted it.
[11] Jones v Dunkel (1959) 101 CLR 298.
118Page Steel submits that, the fact that J & C Threading was ultimately unable to supply the purlins is not to the point when considering what constitutes “reasonable endeavours”. As the majority of the High Court in Electricity Generation Corporation v Woodside Energy Ltd observed, “an obligation expressed thus is not an absolute or unconditional obligation”.[12]
[12] [2014] HCA 7 at [41]–[43].
119Page Steel says that the real question is whether the steps taken by Page Steel constituted “reasonable endeavours”, regardless of the outcome. In this context, Page Steel submits that it is relevant that:
(a) Page Steel’s contract, on a very tight margin, was expressly predicated on J & C Threading’s pricing;
(b) Page Steel had an existing order with J & C Threading and, accordingly, risked being obliged to pay twice if it ordered the same purlins from another supplier while J & C Threading remained willing and able to supply the purlins that Page Steel had ordered;
(c) as at 9 to 10 December 2019, in the later words of Mr Spiteri of J & C Threading:
“When I received your first email early last week I thought I would have enough time to roll the stages received...”
(d) the only other potential supplier, Metalform Structures, had very tight capacity, such that, as Ms Butera stated on 9 December 2019 (seemingly before the December 2019 consent orders were made), “I’d need to have confirmation pretty quickly as I have operators on standby to commence rolling this evening.”
120Page Steel contends that there were risks in pursuing either course. Whatever the benefits of hindsight regarding J & C Threading’s performance, it could not be said that the course would necessarily have gone smoothly if Page Steel had alternatively, at the last minute, sought to cancel the existing order and change to a new supplier, either at all, or without the confirmed agreement of J & C Threading.
121Page Steel relied on Terrell v Mabie Todd& Co Ltd[13] for the proposition that Page Steel clearly acted within the parameters of “reasonable endeavours” in pursuing the existing order with J & C Threading because:
“An obligor’s freedom to act in its own business interests, in matters to which the agreement relates, is not necessarily foreclosed, or to be sacrificed, by an obligation to use reasonable endeavours to achieve a contractual object”.
[13] (1952) 69 RPC 234.
122Page Steel contended that “reasonable endeavours” did not oblige Page Steel to disregard its own business interests and double order the purlins, or to risk a double order (particularly in the context of the tight margins on the contract), given the existing order with J & C Threading and Mr Spiteri’s belief at the time that he would have enough time to roll the printers.
123The authorities and principles regarding the meaning of “reasonable endeavours” were summarised by Justice Stevenson in Wang v Kaymet Corporation Pty Ltd.[14]
[14] [2015] NSWSC 1459 at [40]–[46].
124In Electricity Generation Corporation v Woodside Energy Ltd,[15] the majority of the High Court (French CJ, Hayne, Crennan & Kiefel JJ) said that:
“Three general observations can be made about obligations to use reasonable endeavours to achieve a contractual object. First, an obligation expressed thus is not an absolute or unconditional obligation. Secondly, the nature and extent of an obligation imposed in such terms is necessarily conditioned by what is reasonable in the circumstances, which can include circumstances that may affect an obligor's business. This was explained by Mason J in Hospital Products Ltd v United States Surgical Corporation [(1984) 156 CLR 41], which concerned a sole distributor's obligation to use ‘best efforts’ to promote the sale of a manufacturer’s products.
His Honour said:
‘The qualification [of reasonableness] itself is aimed at situations in which there would be a conflict between the obligation to use best efforts and the independent business interests of the distributor and has the object of resolving those conflicts by the standard of reasonableness... It therefore involves a recognition that the interests of [the manufacturer] could not be paramount in every case and that in some cases the interests of the distributor would prevail’.
As Sellers J observed of a corporate obligor in Terrell v Mabie Todd & Co Ltd [(1952) 69 RPC 234], an obligation to use reasonable endeavours would not oblige the achievement of a contractual object ‘to the certain ruin of the Company or to the utter disregard of the interests of the shareholders’. An obligor's freedom to act in its own business interests, in matters to which the agreement relates, is not necessarily foreclosed, or to be sacrificed, by an obligation to use reasonable endeavours to achieve a contractual object.
[15] [2014] HCA 7; 251 CLR 640 at [41]–[43].
Third, some contracts containing an obligation to use or make reasonable endeavours to achieve a contractual object contain their own internal standard of what is reasonable, by some express reference relevant to the business interests of an obligor”.
125I agree with Makland’s position that Page Steel did not have the purlins manufactured as early as practically possible. The references in the December 2019 consent orders are to use reasonable endeavours to have the purlins manufactured and supplied by 13 and 18 December 2019 (that is, only a few days after the December 2019 consent orders were made). After being told by Mr Spiteri of J & C Threading that he was (or may be) unable to deliver in the time frame required, Page Steel made no effort to have the purlins manufactured elsewhere, including by Metalform Structures. I accept, given the fact that Makland was able to secure the purlins from an alternate manufacturer, that had Page Steel made further enquiries of other manufacturers, it would have been able to have the purlins delivered within days, rather than suggesting that it would take until mid-January 2020 due to Mr Spiteri’s workplace injury. I do not accept that Page Steel was required to disregard its own business interests or risk a double order when Mr Spiteri was unable to meet the dates specified in the December 2019 consent orders and his ability to supply the purlins was contingent on the outcome of his operation.
126Page Steel was required to deliver the purlins as early as reasonably practicable on 13 December 2019 (i.e. an obligation going to the time of day that delivery was to occur on). Whether the purlins were manufactured by that time is not to the point and did not obviate the obligation on Page Steel to seek to have the purlins manufactured as early as practically possible.
127I do not accept that Makland obliged Page Steel to use J & C Threading. There is no evidence to support the proposition that J & C Threading was nominated by Makland. The email correspondence between the parties around 27 March 2019 indicates that Makland advised of a $20,000.00 saving on the purlins if Page Steel used J & C Threading to bring the overall quoted price down. It was not the case that J & C Threading was nominated by Makland as the purlin manufacturer. Further, such a view is contrary to the express words of the December 2019 consent orders.
128The losses flowing from the December 2019 consent orders relates only to the supply of purlins. By email dated 6 January 2020, Makreo informed Lynne that 310 panel clips had not been received from the galvanisers. Lynne responded that she had contacted the galvanisers and provided the details on the steel that Makreo could not locate. In evidence, Lynne agreed that it was Page Steel’s obligation to supply the clips and that the clips had not been provided to Makland.
129In that circumstance, the loss is measured by reference to the JH Stephenson Steeline invoices, the panel clips (i.e. the Shisham Products invoice) and the Fix and Fasten invoice (being for the bolts to fix the purlins to the steel and, thus, being part of the obligation to supply the purlins). The total amount of those invoices is $77,357.73.
Was Page Steel entitled to charge for the amended shop drawings dated 13 April 2019 as a variation?
130It is common ground between the parties that Makland was obliged to pay the reasonable cost of variations and that the shop drawings were changed between the quotation version (on which the contract was based and priced) and the later version issued for fabrication.
131There is an issue as to whether Mr Chuah (now deceased) prepared the variation notice by comparison between the shop drawings (on which the quote forming the contract, which was prepared by Mr Chuah, was expressly based and calculated), which did change; or the engineering drawings, which did not change; and whether the variations were agreed by Makland.
132Page Steel contends that the variation notice, prepared by the person who prepared the quote, records the changes to the documents (i.e. the shop drawings, which are admitted to have changed between the quotation version and the fabrication version). Whatever Lynne’s confusion in her evidence as set out below, Mr Chuah’s notice plainly lists itemised changes (and no listed item has been challenged); it clearly does not compare documents (i.e. the engineering drawings) that did not change.
133Page Steel further argues that the variations were agreed by Makland. The varied shop drawings were sent through “for fabrication”. Steve’s later subjective assertions cannot affect the contract. Makland’s conduct in sending the varied drawings through “for fabrication” can only entail a direction and agreement for the steel to be fabricated as detailed and varied in those drawings.
134Makland contends that Page Steel has not established that there was, in fact, any variation to the works it quoted and that Makland made it clear that any asserted variations should not be carried out without Steve’s express approval. No such approval was sought, let alone obtained.
135Makland submits that the only evidence in support of the variation relates to the stiffeners. However, the actual variation extends to other matters. There is no evidence about these other matters and whether the revised shop drawings were, in fact, different to the original shop drawings. Further, to the extent there is reference to the stiffeners, there is no evidence as to the value of those stiffeners.
136Makland was also critical of Lynne’s evidence in relation to how the variations were prepared.
137In her second witness statement dated 8 March 2023, Lynne asserts:
“As I stated in my previous witness statement, the Plaintiff issued revised shop drawings incorporating additional steel that was not in the drawings which the Plaintiffs had provided to Page Steel for the quotation. In the attached Document C, the shop drawing which includes the description ‘Issued for Approval’ is the document the Plaintiffs issued to Page Steel for the quotation, on which Page Steel’s quotation was based; the document which includes the description ‘Issued for Fabrication’ is the later, revised version which the Plaintiff issued to Page Steel for fabrication. The highlighting shows the additional steel that was in the later document the Plaintiffs issued to Page Steel for fabrication, but was not in the document the Plaintiffs issued to Page Steel for the quotation”.
138In cross-examination, Lynne gave the following evidence:[16]
“…you were just taken to this variation document. Now, you had discussions with Mr Chuah at the time that this was being prepared, correct? He advised me that he had prepared the quotation, yes.
And he told you that he compared then the updated – because you had updated shop drawings sent through? Correct.
And he told you that he compared them to the original 16 engineering drawings? No.
At paragraph 15 [of your first witness statement], you say there ‘that there were shop drawings sent through, and as part of Page Steel’s standard process these drawings were checked by Page Steel’s then estimator, Stanley Chuah who compared them with the engineering drawings? Yes.
So is that accurate or inaccurate? The process is accurate, the conversation never happened.
[16] Transcript 15 March 2023 p201 line 10 to p202 line 2.
The conversation that you had with Stanley Chuah? You asked me did he say to me that he compared the shop drawings with the engineering drawings. He did not say those words to me, but this is the standard process.
139Lynne also gave the following evidence:[17]
“…other than what Mr Chuah might have told you, you don’t know what he did to come up with that variation document, correct? The only way you can know that is by what he told you, correct? I know the standard procedure and how it works”.
[17] Transcript 15 March 2023 p202 lines 15-19.
140Lynne said that Page Steel’s usual processes were that they worked off the engineering drawings to do their quotes. The evidence also discloses that the engineering drawings contained the stiffeners. Makland contends that, if there is no change from the work which Page Steel quoted on and the work which they proposed to do, there has been no variation of what Makland is asking Page Steel to do.
141Makland relies on various emails between the parties that expressly advised Page Steel on four occasions that variations were not approved without Steve’s express approval. It says that no such approval was sought or obtained.
142I accept that the original shop drawings provided to Page Steel dated 6 February 2019 were amended by Makland dated 13 April 2019. Although the structural steel required was set out in engineering drawings in February 2019, these were not included or accounted for in the quote provided by Page Steel dated 26 March 2019.
143The quote clearly states that it is based on shop drawings issued for approval and no allowance has been made for any items detailed in structural and architectural drawings. The shop drawings issued for approval were received on 14 February 2019. The inclusions part of the quote stated that the steelwork was limited to “units 1 and 2: As per shop drawings issued for approval.”
144The exclusions specifically stated, “no structural and architectural drawings taken into account”.
145It is not in dispute between the parties that the shop drawings were amended by Makland on 13 April 2019. What is in dispute is whether Makland has an obligation to pay for the “variation” when it claims Page Steel did have the engineering drawings and the quote was based on those drawings.
146In my view, given the terms of the quote itself, it is clear that Page Steel only based the quote on the shop drawings, which were subsequently amended as provided to Page Steel by Makland and, therefore, it constitutes a variation for which Makland is liable to pay. Further, the varied shop drawings were sent through by Makland for fabrication and I find that this conduct was a direction or agreement for the steel to be fabricated by Page Steel.
Was the figure claimed by Page Steel a fair and reasonable sum for such variation?
147Makland contends that there is no evidence as to the fairness or reasonableness of the quantum for the variation.
148Makland says that the fact that it paid for other variations, where it had not sent a payment schedule under the Building and Construction Industry Security of Payment Act 2002 (Vic) and Page Steel was threatening to suspend works, is not evidence of either acceptance of the variation or the amount. The amounts set out in the attachment to the email to Page Steel’s estimator do not provide evidence of a fair and reasonable amount – they provide evidence only of the amount that Page Steel proposed to charge.
149Mr Chuah itemised the variations and listed the cost of each variation plus a margin of 15%. While Makland has not admitted that this is a reasonable cost, there is no specific or substantive challenge to the reasonableness of any item or cost in Mr Chuah’s variation notice.
150By email dated 29 July 2019, Page Steel’s estimator attached variation 4 showing the difference between the tender and the issued for construction costs. Those costs came to $30,680.00 (excl GST).
151In those circumstances, in my view, the fair and reasonable sum for the variation is $33,748.10 (inclusive of GST).
Conclusion
152For the foregoing reasons, there is judgment for Makland in the sum of $73,711.53 (GST inclusive) and for Page Steel in the sum of $33,748.10 (GST inclusive).
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Certificate
I certify that these 41 pages are a true copy of the judgment of Her Honour Judge Burchell delivered on 5 May 2023.
Dated: 5 May 2023
Andrea Ko
Associate to Her Honour Judge Burchell
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