| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : MORAGO NOMINEES PTY LTD -v- TAMERRA NOMINEES PTY LTD [2013] WADC 51 CORAM : KEEN DCJ HEARD : 5, 6 & 7 FEBRUARY 2013 DELIVERED : 23 APRIL 2013 FILE NO/S : CIV 3543 of 2010 BETWEEN : MORAGO NOMINEES PTY LTD Plaintiff
AND
TAMERRA NOMINEES PTY LTD
Defendant
Catchwords: Contract: construction and interpretation of building contract
Equity: estoppel by convention - Principles and application Legislation: Nil Result: Judgment for plaintiff
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Representation: Counsel:
Plaintiff : Mr R D Shaw
Defendant : Mr L E James
Solicitors:
Plaintiff : Lavan Legal
Defendant : Kott Gunning
Case(s) referred to in judgment(s):
Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Co Ltd [2008] WASCA 119
Amalgamated Investment & Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1982] QB 84
Anfrank Nominees Pty Ltd v Connell (1989) 1 ACSR 365
Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253
Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337
Commonwealth of Australia v Verwayen (1990) 170 CLR 394
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226
Foran v Wight (1989) 168 CLR 385
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50
Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641
Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216
John v George [1996] 1 EGLR 7
K Lokumal & Sons (London) Ltd v Lotte Shipping Co Pte Ltd (The 'August Leonhardt') [1985] 2 Lloyd's Rep 28
McCourt v Cranston [2012] WASCA 60
National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548
Norwegian American Cruises A/S v Paul Mundy Ltd (The Vistafjord) [1988] 2 Lloyd's Rep 343
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40
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Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323
Republic of India v Indian Steamship Co Ltd (No 2) (The Indian Grace) (The Indian Endurance) [1998] AC 878
Thompson v Palmer (1933) 49 CLR 507
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Troop v Gibson (1986) 277 EG 1134
Whitehouse v BHP Steel Ltd [2004] NSWCA 428
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1 KEEN DCJ: This action arises out of the construction of two commercial buildings in East Perth at lot 828 - corner of Lord and Parry Streets and lot 829 – corner of Lord and Newcastle Streets.
2 The plaintiff is the builder and the defendant its subcontractor in respect of the in situ concrete for the ground and floor slabs at each level. 3 Disputes have arisen between the parties as to the quality of work to be performed and as performed by the defendant under its subcontract. 4 The plaintiff contends that the work should have been carried out to a Class A finish. The defendant contends that the work should be carried out to a Class B finish. There is no dispute that the work, as performed, does not reach the level of Class A. The defendant argues that it falls within Class B. The plaintiff disputes that the quality of work reached the level required under Class B. 5 The legal issues that arise for consideration are; firstly, whether the contractual documents provide for a Class A or Class B finish and, secondly, in any event whether there was a common assumption as to the meaning and effect of the contract between the parties and if that be the case whether an estoppel by convention arises to prevent the plaintiff from departing from that common assumption to the detriment of the defendant.
The contract 6 The subcontract between the plaintiff and the defendant was not, of itself, tendered into evidence. Both parties agreed it was not necessary. However there was no dispute between the parties that the contract called up as part of the contract documents the engineering details and architectural specifications. There were separate engineering details in respect of each lot but a composite specification for the two lots. 7 In calling up those documents there was no dispute between the parties that those documents were incorporated into and form part of the contract between the parties. 8 The engineering detail for lots 828 and 829 became exhibits 1.1 and 1.2 respectively. Each contained, relevantly, identical wording in relation to the concrete works. They provided 'minimum concrete finish shall be smooth steel trowel for top of ground and suspended slabs …'. (Page 5)
9 The architectural specification (exhibit 1.3) under the heading 'Concrete Finishes' provided under cl 3.3: 3.3 UNFORMED SURFACES Screeding Strike off, consolidate and level slab surfaces to finished levels, to tolerance class C. Finishing methods Scored or scratch finish: After screeding, give the surface a coarse scored texture using a stiff brush or rake drawn across the surface before final set. Machine floated finish: After screeding consolidate the surface using a machine float. Hand float in locations inaccessible to the machine float. Cut and fill to tolerance class B and refloat immediately to a uniform, smooth, granular texture. Steel trowelled finish: After machine floating, use power trowels to produce a smooth surface relatively free from defects. Then, when the surface has hardened sufficiently, use steel hand trowels to produce the final consolidated finish free of trowel marks and uniform in texture and appearance, to tolerance class A. Where floor coverings are to be installed, remove defects that would show through them. Wood float finish: Produce the final finish using a wood float. Broom finish: After floating draw a broom or hessian belt across the surface to produce a coarse even-textured slip-resistant transverse-scored surface. 10 The reference to the class of finish is expanded and explained in cl 3.1 as follows: 3.1 TOLERANCES Tolerance classes Determine tolerance classes using a straight edge placed anywhere on the surface in any direction. Tolerances class table Class Measurement Maximum deviation (mm)
A 3 m straight edge 3
B 3 m straight edge 6
C 600 mm straight edge 6 (Page 6)
11 The plaintiff, in support of its claim that the finish should be to Class A, also relied upon other sections of the specification which demonstrated that, in office areas, carpet was to be laid over the finished concrete surface of the various floors. In the specification provision was made for the laying of carpets and that the substrate should comply with Australian/New Zealand Standard (AS/NZS) 2455.1 or AS/NZS 2455.2 as appropriate. 12 The Australian/New Zealand Standard referred to is one relating to textile floor coverings and installation practice. Under cl 2.4.2 AS/NZS 2455.1 it was relevantly provided that: 13 Standard AS/NZS 2455.2 relates to carpet tiles and their installation. That Standard relevantly provides at A2: In addition, for concrete subfloors, the contractor shall request the purchaser to supply the following information where appropriate: (c) whether the surface is plane, smooth and true to grade; Note: Where a subfloor is so rough or uneven that it is unsuitable for the direct application of the floor covering, corrective action should be taken (e.g. steel trowel finishing). 14 In the first of those standards the definition for 'plane surface' is 'of a condition such that when a straight edge 3 m long is placed on the surface at any position, no part is more than 5 mm above or below the straight edge'. It is also provided that the definition for 'smooth surface' is 'of a condition such that, when a straight edge 150 mm long is placed on the surface at any position no part of it is more than 1 mm below the straight edge'. 15 The plaintiff also relied upon a publication from the Cement and Concrete Association of Australia and Standards Australia. Relevantly, at cl 6.5 it was provided: (Page 7)
16 At cl 6.5.3 provision is made for trowelling said to be used to provide a flat, dense and hard wearing surface to the concrete with textures that can vary from fine grained to very smooth. Relevantly, the clause goes on to note: Depending on the final texture required, timber or steel trowels can be used, with steel providing the smoothest finishes. Like floating, manual or mechanical methods may be used for trowelling. Mechanical methods are most frequently used now, particularly on large areas. However, hand trowelling is still required in corners, around edges and between surface projections, where the power trowel cannot reach. 17 Each of the standards became an exhibit, respectively 1.6, 1.7 and 1.8.
The proceedings 18 Separate actions were brought and pleaded in respect of each lot but were consolidated and heard together. 19 The following analysis of the pleadings is taken from those referrable to lot 829 as there is no appreciable or material difference between the two lots. 20 Relevantly the re-amended statement of claim provides in relation to the contract: 6 The terms of the Sub-Contract included terms to the effect that: 6.1 The defendant would carry out the Works in a proper and workmanlike manner (implied at law); 6.2 The defendant would carry out the Works in accordance with the drawings and specification (Purchase Order 8625) including the Concrete in Situ and Concrete Finishes sections of the specification; 6.3 All concrete is manufactured and placed in accordance with the minimum standards prescribed by AS3600-2001 – Concrete Structures (Structerre Structural Drawing (Specification) 1 – 73369); 6.3A The minimum concrete finish shall be a smooth steel trowel finish for top of ground slab and suspended slabs (Structerre Structural Drawing (Specification) 1 – 73369), being a finish which is the smoothest finish option available for a concrete floor finish (Page 8)
PARTICULARS (Page 9)
floor surfaces would be reasonably fit to be covered with the Specified Floor Coverings (implied at law alternatively implied in fact). 6A. To comply with its obligations set out in paragraph 6 above, the defendant was required to 6AA.1 use a steel trowel in achieving a flat and smooth steel trowel finish to the ground floor and suspended slabs; 6A.1 have regard to the Specified Floor Coverings; and 6A.2 achieve a surface finish which was suitable for covering in Specified Floor Coverings, being a surface which (in the case of surfaces to receive carpet) met the criteria set down in clause 2.4.2 of AS2455:2007 (being the Australian Standard applicable to carpet floor laying at all material times), namely that the surface should be: 21 The defence met those allegations in its amended defence as follows: 5. As to paragraph 6: 5.1 Paragraph 6.1 of the Statement of Claim is admitted. 5.2 Paragraph 6.2 of the Statement of Claim is admitted, save that the Concrete in Situ section of the specification applying in regard to footings, floors and slabs and the Concrete Finishes section of the architectural specification applying to stairs and landings, car park areas and ramps. 5.3 Paragraph 6.3 of the Statement of Claim is admitted. 5.3A Paragraphs 6.3A and 6.3B of the Statement of Claim are denied and the Defendant says that read in combination with the architectural specification and in the light of contemporary trade practice, Structural Drawing S1 did not call for a steel trowel finish for the suspended slabs since: (Page 10)
(a) For the finish on large slabs to a be a steel trowel finish, such slabs have to be broken up into sections using construction joints, so as to enable them to be poured section by section and finished off with a steel trowel finish after each section of the floor slab was poured. No construction joint was shown in the Structural Drawings, the floor slabs were not built with construction joints and the time taken to pour the slabs in sections would have been prohibitive, compared with pouring as a single slab. 5.4 As to paragraph 6.4 of the Statement of Claim, the Defendant says that some of the internal floor surfaces the subject of the Works were to be covered by others with floor coverings to the extent set out in the Schedule of Finishes section of the specification (Specified Floor Coverings), to which the Plaintiff was to have regard although none of those works were to be carried out by the Defendant. 5.5 Paragraph 6.5 is denied and the Defendant says that the required tolerance for the Class B finish required by the Architectural Specification for In Situ Concrete permitted deviations of a maximum of 6mm measured with a 3 metre straight edge placed anywhere on the surface. 5.6 Paragraph 6.6 is denied and the Defendant says that it was only obliged to comply with the tolerance referred to in paragraph 5.5 above. 6 Paragraph 6A of the Statement of Claim is denied and the Defendant further says that neither the Concrete in Situ nor the Concrete Finishes of the sections of the specification nor indeed any other document contained in the sub-contract calls up the requirements of AS2455:2007. 22 Relevantly, in reply the plaintiff alleged: 2 As to paragraph 5.3A of the Defence, the plaintiff: 2.1 does not admit that there is a contemporary trade practice of the kind alleged in paragraph 5.3A of the Defence; 2.2 in any event: 2.2.1 says that the defendant never raised the purported inconsistency between the terms of the Sub-Contract (including Structerre Structural Drawing S1 – 73369) with the plaintiff; (Page 11)
3 As to paragraph 5.4 of the Defence: 23 Whilst the case has been run and argued on the issues raised in those pleadings, it is necessary to note that in earlier statements of claim dated 14 January 2001 (exhibits 2.1 and 2.2) the plaintiff asserted: 6 The terms of the Sub-Contract included: 6.1 The defendant would carry out the Works in a proper and workmanlike manner (implied at law); 6.2 The defendant would carry out the Works in accordance with the drawings and specification (Purchase Order 8625); and 6.3 All concrete is to be manufactured and placed in accordance with AS3600-2001 – Concrete Structures (Structural Drawing S1); and 6.4 All concrete would be finished with a tolerance using a straight edge placed anywhere no the surface of 6mm on a 3m straight edge. (Clause 3 of the Concrete Finishes section of the Architectural Specification). 24 The breaches of contract alleged in the re-amended statement of claim are set out in par 7: (Page 12)
7.2 in such a manner that the finish of the internal floor surfaces would be reasonably fit to be covered with the Specified Floor Coverings; 7.2A in accordance with the 'steel trowelled finish' part of clause 3.3 of the Concrete Finishes section of the Architectural Specification; or 7.3 to a Class A finish.
Particulars of Floor Defects
7.4 The floors were laid with deviations in slab heights by up to 50mm or more; 7.5 The deviations in the floor surfaces exceeded a tolerance of 3mm measured with a 3 metre straight edge; 7.6 The deviations in the floor surfaces exceeded a tolerance of 6mm measured with a 3 metre straight edge; 7.7 The finish of the floor surfaces were not plane and smooth within the meaning of AS2455:2007; 7.8 The finish of the floor surfaces was such that the floor surfaces were not suitable for the laying of carpet without rectification works being undertaken. 25 This was met with a pleading in the following terms: 7 The Defendant denies paragraph 7 of the Statement of Claim except that the floors were not laid with a Class A finish. The Defendant further says that it constructed the first, second and third floors in a proper and workmanlike manner, in compliance with the drawings and specifications and with a tolerance of within 6mm over a 3m straight edge. 26 In contrast the earlier statement of claim (exhibits 2.1 and 2.2) alleged: (Page 13)
27 The plaintiff alleges loss and damage arising from the defendant's breach of the subcontract in the re-amended statement of claim particularised as: 8.1 Cost to carry out rectification work to concrete floors including: 8.1.1 floor levelling costs of $301,676.10; and 8.2.2 survey costs. 28 The cost of rectification work has been agreed between the parties at $492,487.60. 29 It is agreed between the parties that; firstly, if the contract provides for Class A finish the plaintiff is entitled to recover this agreed amount and, secondly, if the standard required under the contract is Class B and the defendant did not meet that standard then the plaintiff will be entitled to recover the agreed amount. If the standard to be met is Class B and the defendant has met that standard then it is agreed the plaintiff is not entitled to recover any sum.
The evidence 30 The evidence comprised documents tendered by consent, witness statements and oral evidence.
Sean Gavin 31 Mr Gavin is the principal of the plaintiff company. 32 It appears from his evidence both oral and by way of his statement that he had little involvement in the works the subject of the action. In his evidence he said he attended the site on six to eight occasions and only on one or two occasions of which the defendant was working. 33 The building achieved practical completion in December 2009 and in 2010 he became aware of the carpet installer having identified defects in the concrete suspended slabs and that they were unable to install carpets. 34 As a result Mr Gavin met the client, architect and carpet installers on site. 35 He said that on close inspection there were undulations in the concrete around columns and the finish to the slab was imperfect in that it was rough and undulating. (Page 14)
36 He said that Damian McKenna, who was the project manager, employed a surveyor to identify the scope of the defects. 37 Remedial works were carried out to both lots. 38 Mr Gavin produced a number of exhibits (exhibits 1.1 to 1.8) comprising engineering drawings, architectural specifications, email from Palassis Architects regarding defective work, his own statement of evidence, concrete standards and the Australian Standards to which I have already referred. 39 The email referred to in exhibit 1.4 included an email from Mr Standish, who I will come to, to the effect that the majority of the subfloor did not conform to the Australian Standards. It needed to be 'plane, smooth and true to grade' and he said there were areas on all floors around support columns that needed to be screeded back to meet the standards, that is to say there being no gaps greater than 3 – 5 mm when a 3 m straight edge is placed over the floor. The email also referred to other areas of defects and concluded that the subfloor needed to be rectified to receive carpet tiles. 40 In cross-examination Mr Gavin agreed that the concrete handbook, being exhibit 1.6, was not called up in the contract documentation. He was not aware of any reference to the Australian Standards, being exhibit 1.7, being referred to in the concrete specifications. 41 Mr Gavin gave evidence that Mr Ron Roy was the site manager. It appears that he has left the employ of the plaintiff and his current whereabouts are not known. He agreed with counsel that Mr Roy would have had responsibility for quality control and if he was aware of a defect he would expect him to identify that defect with the subcontractor. Mr McKenna, who was the project manager, had no role in quality control. 42 Mr Gavin was taken to exhibits 2.1 and 2.2, being the earlier pleading and in particular cl 6.4 to the effect that all concrete would be finished with a tolerance using a straight edge placed anywhere on the surface of 6 mm on a 3 m straight edge. He said he was not aware of that tolerance being asserted on behalf of the plaintiff. He said that Mr McKenna was instructing the lawyers at that time. He said that if had read the document he would have considered that allegation to be incorrect. (Page 15)
43 He agreed that there were time pressures on the job but that was common. He agreed that work would be done in the early hours of the morning and at times in not particularly pleasant weather. 44 Finally, Mr Gavin said he was not aware of any difficulties with the concrete slabs until it was brought to his attention in April 2010. He disagreed with the evidence of Mr Airey, which I will come to, that deflections in the slab created problems of undulation in the floor slabs.
Peter Standish 45 Mr Standish is a floor covering consultant who has been in the floor covering industry for 20 years. 46 In his written statement he said that Joondalup Carpet Choices was engaged to install commercial carpet tiles at the two lots. 47 He was consulted in about March 2010 because of concerns with the floor surfaces and whether they were suitable to take carpet. 48 He confirmed that the applicable standard for the surface finish required for carpet is set out in AS2455 which requires a plane and smooth surface finish requiring an unevenness not exceeding 3 – 5 mm when measured across a straight edge 3 m long. 49 His evidence was that apart from the Standard it was important for carpets to be laid on smooth, even surfaces particularly in an office environment where there are desks and chairs that might pick up any unevenness in the floor. 50 It was his experience that a carpet layer's responsibility did not extend to making good defects in the surface. In any event he felt, on this job that the floor levelling and preparation was far too large for the carpet company to handle and it ought to be done by a specialised contractor. 51 He carried out an inspection of the floors at the premises in April 2010. A laser measuring device and a straight edge were used for judging evenness. 52 His inspection of lot 829 revealed a number of matters but including that the finish on the floors was poor in numerous areas in that it was wavy and lumpy. In a number of areas there were undulations visible across the surface of the floor. They were particularly visible under 'critical light'. In his examination-in-chief he said that those undulations were not acceptable. (Page 16)
53 He went on to say that using a straight edge some of the gaps were 20 or 30 mm under the straight edge. 54 He also referred to the surface being broken and powdery. 55 In his statement he referred to high points around the columns throughout the building which struck him as being 'unusually high' and he commented that some appeared to have already been screeded to make the gradient less visible. 56 In his statement he referred to the worst areas as having a surface level change of 10 to 30 mm over the 2 m straight edge he used. The floor surface was not plane or smooth as required by the Australian Standard. 57 He noted that whilst some areas the finish was fine, in general the quality was 'shocking' and he had only seen one worse in recent history. 58 With regard to lot 828, his inspection revealed similar problems to those in lot 829, namely the surface was wavy and lumpy in a number of areas. There were sections where the floor would drop away so sharply there was a ridge in the concrete. 59 In respect of both lots he also referred to the shiny nature of the surface suggesting it had been overworked. 60 He noted also that the floor appeared to drop from the outer walls to the lift core. From the perspective of carpet laying, a gradual fall is not really an issue but it might be a concern in an office environment. In cross-examination he expressed the drop from the core to the walls as about 70 mm. It was impossible to create a level floor. He went on to say that all the floors had the same problem to varying degrees – the floor at the perimeter walls was higher than at the lift core. 61 In his evidence-in-chief in relation to the defects, he said that on the ground floor to the left and right of the lift lobby corridor there were lumps. Using the measure there were differences of 30 or 40 mm and the surface was rough and broken. On the second and third floors the flooring was undulated in parts.
Albert Farrah 62 Mr Farrah has been involved in the construction industry for 20 years, five of which have been in floor preparation. He was involved in the floor rectification works that took place at the two lots. (Page 17)
63 In his evidence by way of statement he sought to distinguish between level, smoothness and flatness of a floor. So far as a floor that is to be carpeted is concerned there needs to be a smooth surface which is more important than any level deviations. If there is too much unevenness the carpet tiles cannot be placed properly. 64 In his written statement he dealt with matters of deflection which feature prominently in the evidence of Mr David Airey, the engineer called for the defendant. Mr Farrah's view was that most concrete suspended floors have deflections where the concrete slab sags across the surface but the deflection is usually smooth and uniform between one point and another. The deflection is a in general a gentle fall or slope to the point where the slab is furthest from supporting walls and columns. Generally so long as the deflection is not extreme, this will not pose a problem for carpet laying because the carpet tiles can still be laid flush alongside each other. 65 In relation to the surface he said that there should not be any undulations or divots or humps, penetrations or sinkholes for the purposes of laying carpet. 66 He went on to note that every metre or so there was a considerable amount of deviation and the surveys that had been carried out showed that there were differences in heights. 67 However the problems that Mr Farrah saw on the floor were not deflections or slope problems but undulations and unevenness across the surface of the slab which in his view reflected poor quality workmanship. In his view deflections would occur at the weakest point of the slab which he suggested was at the centre of the slab away from the columns, but here there were high points close to the columns which they had to scarify. Fifteen millimetres had to be removed close to the column. 68 In general terms he took the view that on both lots there was an unacceptable floor finish to the concrete floors. There were areas of unevenness which were not uniformly distributed and the unevenness of the floors was noticeable. He said deviations using a 3 m straight edge were between 15 and 20 mm. 69 Specifically, Mr Farrah noted that lot 829 showed some of the worst concrete finishing work that he had ever seen, particularly on levels 2 and 3. (Page 18)
70 In further examination as to this he added the condition of the carpark as well. He likened the floors to the concrete having being pumped out and moved around carelessly by hand. He referred to gaps of 40 mm which could not be corrected by the application of levellers in one go as that would involve cracking. 71 In his statement Mr Farrah referred to observing the carpet layers laying carpet tiles which were not sitting smoothly on the floor. The edges were sticking up and the edge to edge of the tiles was uneven. By the use of string lines Mr Farrah could notice undulations across the surface. 72 In his evidence-in-chief he said that in places they were going to need about 30 mm of self-levelling to get the floor to a smooth enough level for the client to accept it. He said that that volume of leveller would have been of such a weight that it would have caused further deflection of the floor. 73 In relation to lot 829 he said the floor was 'so deflective' which he explained by saying the floor was undulated. You could feel it when walking on it. It was not flat or smooth. 74 In relation to lot 828 he noted that levels 2 and 3 were bad with particularly bad spots to the right side of the lifts where a lot of scarifying had to be carried out. 75 He noted in particular the lobbies which were constructed with metal frames made with straight edge material and it was quite obvious that the concrete surface underneath such frames was uneven. He referred to one area having a difference of about 60 mm. As a result those frames were taken out as were some tiles that had been laid in the lobbies so that the surface could be re-screeded. 76 Under cross-examination he confirmed that the high points were next to the columns in both buildings and next to the walls. He agreed that deflection would be a slope away from the column. He said that the deviations that he noted were along the wall and not towards the centre. There were also deviations around the columns. Those deviations were between 5 and 10 mm. 77 He was asked about the rectification work in some detail and he said that when scarifying they had to take 15 or 20 mm off the high parts. They were removing material in high parts and adding filling in low parts. (Page 19)
78 With regard to the undulations he said that not only could you feel those when walking on the floor but you could see them with the naked eye in natural light; made more visible by the placement of skirtings or something similar. However the problems could be seen even without that aid.
Kamal Fozdar 79 Mr Fozdar is a structural engineer who worked on these two projects. 80 He was involved in the rectification works and inspected the concrete floor on each building. 81 In his written statement he noted problems with levels and evenness of the slabs which he said were not explained by deflection. 82 With regard to lot 828 he said that the unevenness was principally located around the columns on each floor. He hypothesised that this was due to the placement of the reinforcing bars and 'chairs' that sit between the two levels of reinforcing bars in order to separate them. During the course of his evidence he drew a diagram to illustrate the hypothesis. The diagram itself was reproduced at exhibit 6. He said that the chairs had pushed the bars closer to the top of the slab. He was unable to offer any other explanation as to what caused the lumps in the concrete in that area. 83 In his statement and his evidence-in-chief he dealt with matters of deflection. He said that deflection is a feature of any suspended floor and, except in severe cases, it does not pose a problem and will often not even be detectable to the naked eye. He said the deflection is a gradual and uniform deflection towards the midpoint of the slab. It was his evidence that deflections do not cause undulations or waves in the slab surface. 84 Whilst he did not take any measurements in respect of lot 828, his opinion was that the high points at the columns were not explained as a deflection and reflected a problem in the construction of the concrete slab. Additional concrete may have been poured over the reinforcing bars to give sufficient cover at that point. 85 In his statement he then moved to lot 829, being the Newcastle Street premises, where he recalled that there was a more pronounced deflection than at lot 828 but it was not an area of concern. It was to be expected because of the different type of construction of those premises. (Page 20)
86 His evidence was that apart from the deflection there were noticeable undulations and unevenness in the slab surfaces. The high points in the slab were spread at various places on each floor of this premises and were visible to the naked eye but he was unable to recall specifics of the location of the unevenness and he did not take any measurements. 87 In his evidence he said that the deflections were such as was expected. However as to the slab itself he said there were two things he remembered seeing – one was the roughness in certain areas and, the second, there were 'slight waves' in the top surface. He did not think that that would be the result of deflection because 'it didn't run in accordance with what – how we would expect the slab to deflect, which is in a very logical way which works according to gravity'. 88 He was taken to his report (exhibit 7) in which he dealt with his definitions of roughness, undulation and deflection by reference to diagrams. He said the undulations that he saw was not what was expected from gravity which causes deflection. 89 Under cross-examination he was asked about Mr Airey's comments in a report of 10 October 2011 in answer to his own opinion that 'deflections do not cause undulations or waves in the slab surface'. Mr Airey's response had been that 'deflections occur in both the beams and the concrete slabs which they support and the result accumulates to maximum deflections in an entirely logical fashion'. Mr Fozdar thought that it was a question of definition and that is why he produced the sketches that he did which became exhibit 6. 90 He said that he was unaware of deflections as seen by others to the extent of 60, 70 or 80 mm from the walls to the lift shaft. 91 When questioned about technical calculations of deflection he said that the slab was behaving exactly as it was designed to behave but if there was a deflection in the order of 75 mm then it would be in excess of the code. 92 He was not aware of extra filling material being put on the slab but if it had that would increase the deflection. He also agreed with counsel that a possible alternative is not that the columns were too high but the slab was deflecting away from the fixed point of the columns. However his most likely explanation was that the reinforcement was too high at that point. (Page 21)
Perryman James Leach 93 Mr Leach was a civil engineer called on behalf of the plaintiff. 94 Whilst Mr Leach was genuinely attempting to assist, despite my attempting on many occasions to try to bring some clarity to his evidence, the attempt was to a very large degree an abject failure and much of his evidence was incomprehensible and impossible to reconcile with the real issues in the case. 95 However Mr Leach's evidence also comprised written reports as well as his oral evidence. He produced two reports on these two lots which became exhibits 8.1 and 8.2 respectively. The reports appear to be driven from reports obtained by the defence from Mr Airey. 96 Mr Leach set out the specific questions he was asked as: The surface level deviations are consistent only with deflections of the kind referred to in Mr Airy's [sic] report. 97 And: If the answer is negative, my opinion as to whether the surface level deviations are consistent with poor workmanship on the part of the concrete contractor. 98 Having summarised the Airey reports of 24 November 2010 and 14 December 2010 (exhibits 10.1 and 10.2); he gave his opinion in respect of both lots. In respect of lot 828 he said: I agree with the following statement in Mr Airy's (sic) report: 'Deflections present are well within Code indicated limitations and will remain so.' based on the survey data as presented in this report. The contract documents require that the concrete floor deviation meet the following: 1. AS3600-2009 page 34 Table 2.3.2 and in this case is 1/250. 2. The specification clause 3E execution – 3.1 Tolerance 6 mm over a 3 m straight edge. The Airy (sic) report makes no mention of this requirement of the specification. (Page 22)
99 In respect of lot 829 his opinion was in terms: I agree in general with the statements made in Mr Airy's [sic] report with the following qualifications. I do not consider my qualifications or experience sufficient to comment on whether or not the design of the structure meets the requirements of the various codes applicable. The contract documents require that the steel and concrete floor meet the following; 1. AS4100. 2. AS3600-2009, in particular page 34 Table 2.3.2 and in this case is 1/250. 3. Specification clause 3E execution – 3.1 Tolerance 6 mm over a 3 m straight edge. The Airy [sic] report makes no mention to item 3. 100 Having referred, in his additional comments on lot 828, to surveys called Vekta Surveys, he said: It is also my opinion the most likely cause of the significant irregularity of the slabs surfaces can only be the result of poor control of concrete slabs screeding process. This is the task of the concrete contractor in the majority of subcontract arrangements. 101 In respect of lot 829 he said: I have examined a section of the Second floor slab as detailed in 'Total Survey Solutions of all floors: done, date unknown, for the Developer (Superline)'. I found sufficient evidence that leads me to believe that the slab surface deviations are in a significant number of locations do not comply with '6 mm deviation over 3 m straight edge' requirement. To accurately undertake a complete evaluation of all data for all slabs would involve a significant amount of work as the survey information by Vekta and Total Survey Solutions are logged at different locations using different benchmarks. It is also my opinion the most likely cause of the significant irregularity of the slab surfaces can only be the result of poor control of the concrete slab screeding process. This is the task of the concrete contractor in the majority of subcontract arrangements. (Page 23)
102 I do not propose to canvass in detail his oral evidence because of the comments I have made previously. It is sufficient to note that at the time of preparing the reports he did go to the site but the surfaces were not able to be seen by himself other than the carpark concrete surfaces. The other surfaces had carpet over them. 103 He agreed with Mr Airey that there was deflection of the slabs but it was within the code. 104 He said in his evidence that he relied on reports that he had read from other parties which commented on the finished surfaces without carpet on them. He did not see them without carpet. 105 He was asked to clarify his opinion that the irregularities in the slabs could only be the result of poor control of the concrete slab screeding process. He said that in his mind the deflections were reasonable but, as I understand his evidence, even with the deflection the slab surface usually is, depending on the system used to make the surface, either smooth, rough or very lumpy. 106 Exhibit 8.3 was a further report prepared by him commenting upon statements made by Messrs Melia and Marciano. It was his opinion that it was practical to achieve an acceptable 'steel trowelled' surface finish to the floors of both lots for the acceptable receipt of carpet tiles. In examination-in-chief he said it was not an unusual finish but it was not the cheapest. In cross-examination he said that he had seen it done but he would not necessarily do it that way. He said that if that was being asked for it would be asking for the unusual and would have to be priced accordingly. 107 Under cross-examination he said that it was his opinion that the requirement of the specification for the job was, as he noted in his report, a tolerance of 6 mm over a 3 m straight edge. 108 He was also taken to exhibit 8.3, being his report on the statements of Messrs Melia and Marciano, in which he commented: My previously expressed opinion and subsequent comments for both buildings that the concrete floors comply with 'Specification clause 3E execution – 3.1 Tolerance 6 mm over a 3 m straight edge' had been accepted and reported on by Peter Airey and Mr Marciano and to a lesser extent Mr Melia. 109 He confirmed in cross-examination that that was his considered opinion. (Page 24)
Damian McKenna 110 Mr McKenna was employed by the plaintiff as contracts manager. He has a degree in building engineering and management from the University of Ulster and extensive experience in the building industry particularly with large-scale in situ concrete structures. 111 In his statement of evidence (exhibit 9.1) he said that initially he did not pick up any problems with the finish of the concrete floors except for isolated finishing issues. He became aware of issues when the time came for the installation of carpets at lot 829. 112 He received some marked up survey documents (exhibit 9.2) which he said he sent to the defendant. 113 In respect to lot 829 he made some spot checks of his own and he said there appeared to be areas where there were relatively severe rises and falls of levels over short distances. He believed it was poor workmanship. If it was a deflection issue the difference in levels would be consistent. 114 With regard to lot 828, there were not the same time pressures for rectification works and he engaged Vekta Surveys to effect a survey check to verify the client's own surveys. He required spot checks at 2.4 m centres and he was in attendance when the surveys were undertaken. 115 Having obtained the report he then converted the information into colour-coded diagrams on the computer. His diagrams became exhibit 9.6. 116 In relation to that exhibit Mr McKenna noted that in respect of lot 828 level 2, slab survey, the levels were plotted from a benchmark. On that particular level, by way of example, he said that the difference in level from the benchmark ran from -20 mm to +40 mm. 117 Under cross-examination, Mr McKenna confirmed that he observed the concreters working on site from time to time and using a machine float procedure. He did not see them use steel hand trowels and he agreed that they had used a machine float without steel hand trowels. He said that they would have to use hand trowels in tight situations. 118 He agreed that they did not use steel hand trowels over the whole surface. He agreed that the concrete in situ work was mostly finished to machine float standard with hand trowel around the difficult spots. He expected the defendant to use power floats. (Page 25)
119 He was also asked about the former statement of claim calling up a specification of tolerance of 6 mm over a 3 m straight edge. He said that as far as he was aware that would have come from the documentation of the project. He did not tell the solicitors that that was the tolerance.
Peter Grant Airey 120 Mr Airey is an engineer who was engaged by the defendants. 121 He produced a number of reports which form part of his evidence. Those reports became exhibits 10.1 to 10.6. 122 His first two reports (exhibits 10.1 and 10.2) related respectively to lots 828 and 829. 123 In respect of the former, having carried out a 'recognisance inspection', he concluded that the floor structure of the building was giving satisfactory in service performance. These inspections were carried out on 25 October 2010 and on 29 October 2010 floor level surveys were performed. 124 He noted the differences in type of structure of the two buildings and that in respect of lot 829 there were cracks parallel to the main beams. 125 The deflections which were found in the floor in lot 828 were well within code indicated limitations. 126 In relation to lot 828, Mr Airey gave his opinion as to the contribution of the concrete placement (by the defendants) to overall delivery. He took the view that the concrete had been placed appropriately and vibrated into position to achieve adequate compaction. He said that the deflection of the slab relative to the columns was within acceptable norms and that the concrete contractor would not have control over the erection of formwork or settlement and movement of it. 127 In relation to lot 829, he found that the deflection was excessive. He also noted cracking on the upper surfaces of the first floor with crack widths varying up to 3 mm. 128 His report contained various calculations of the extent of the deflection and his ultimate conclusion was that, on those calculations, the deflection was excessive and did not satisfy the limitation of 1:250 which appears to be the calculated vertical deflections of beams and slabs as provided for in the relevant Australian Standard. (Page 26)
129 Mr Airey concluded that the beam and slab system as designed was not appropriately designed and would be expected to give a deflection in excess of 1: 250. 130 In his report of 19 December 2011 (exhibit 10.3) he was asked to comment on the report of Mr Leach and in particular to the specifications for these works and the tolerances to which I have already referred. Leaving aside such responses as may be considered as part of the ultimate issue in this case, he noted that class B tolerance was a normal requirement. 131 Mr Airey noted that the tolerances were for the finishing of the concrete of a suspended slab whilst still fully propped, i.e. supported by formwork which can be either permanent or temporary. With regard to lot 828, he was of the view that the formwork was removed upon elapse of sufficient time for the concrete to acquire an appropriate level of strength. However as to lot 829, being of a different structural form, he took the view that the deflection discovered was consistent with neither the beams nor the 'Bondek' being propped during the concrete placement process and this was a construction deficiency. He went on to say: Mathematical modelling revealed that the deflection present in this structure is almost exactly in line with that to be expected with no contribution whatsoever from the composite action of the floor slab with the beams. This is not a slab finishing tolerance issue at all. 132 As to whether or not the work carried out complied with the specification requirements, Mr Airey took the view that the deflections in lot 829 were so large they exceeded the requirement of 6 mm in 3,000 mm for the beam B2 'carefully studied'. He went on to say the deflections amount to 15.4 mm in 3,000 mm considered in relationship to one column and 7.7 mm in 3,000 mm considered in relation to the other. He added: In short, the deflection of the primary structural members is so great it drowns the tolerances to be expected from finishing of unformed surfaces. (emphasis added) 133 Mr Airey concluded this report with his opinion that the departure from acceptable levels of the floor at lot 829 was most likely due to a failure by the builder to arrange for the main steel and permanent formwork to be propped until the concrete had reached sufficient strength that the interactive connection of slab and steel beam could be mobilised and this was not something which the subcontractor placing the concrete would control. (Page 27)
134 In his report of 21 August 2012 (exhibit 10.4) he commented that having checked the levels produced by Vekta there was broad agreement between their levels and those found by his firm. 135 Exhibit 10.6, being the report of 10 October 2011, contained his iteration that the slab deflections for the steel-framed building (lot 829) were in excess of those indicated as acceptable by the Australian Standard. 136 He then went on to deal with the evidence of Mr Fozdar on behalf of the plaintiff. It will be remembered that Mr Fozdar's view was that to the expert eye there were clearly problems with the level and evenness of the slabs in both buildings not explained by deflection. Mr Fozdar dealt with deflection as being a feature of any suspended floor, with a greater degree of deflection in steel-framed construction, and that the deflection results in a difference between the level of the slab at the point of the column (the high point) and the level of the slab at its midpoint (the low point). Mr Airey commented that he did not support the assertion that a steel-framed building necessarily deflects to a greater degree. That was the extent of his comment to that passage of Mr Fozdar's evidence. 137 Mr Fozdar had gone on to say that deflections do not cause undulations or waves in the slab surface and again Mr Airey was unable to support that. He went on to say in his report: Deflections occur in both the beams and the concrete slabs which they support and the result accumulates to maximum deflections in an entirely logical fashion. This pattern is certainly present in the building at lot 829 with the high points of the slab at the columns and the low points at mid-span within slabs spanning between secondary beams which in turn are supported on primary beams. 138 In his report Mr Airey went on to discuss other aspects of Mr Fozdar's report which in my view I need not canvass further, save that Mr Fozdar did not remember anything unusual about the degree of deflection at Newcastle Street (lot 829) and Mr Airey commented, 'It would seem everybody else did'. However, moving on, Mr Fozdar said: Aside from the deflection, there were noticeable undulations and unevenness in the slab surfaces in Newcastle Street. 139 Mr Airey's response was: We comment that, the structure in Newcastle Street is sufficiently different that there was the opportunity for deflection between the secondary beams (Page 28)
to occur, for deflection of the secondary beams to occur and for deflection of the primary beams to occur. All of this is predictable and to be expected. 140 I will address this further shortly, but it seems to me that that comment by Mr Airey does not address the issue raised by Mr Fozdar as to undulations and unevenness. 141 Further, when Mr Fozdar says that there were high points in the slab spread at various places rather than being at the columns and which were visible to the naked eye, Mr Airey said that that was in error. He went on to say the variations in level which occur are all deflections and the deflections vary essentially as would be expected. He went on to say: No evidence that 'there were high points in the slab spread at various places on each floor of Newcastle Street' was found. 142 Mr Airey's report in summary was one that was directed to deflection of the slabs rather than the state of the surface of the relevant slab. 143 In his final report of 4 February 2013 (part exhibit 10.6) Mr Airey referred to a letter from Mr Fozdar in which, within a section on undulation, he had made the comment that 'a deviation of 3 mm under 3 m straight edge would be required'. Mr Airey's response was: This is not the case. What is required is 6 mm relative to a 3,000 mm straight edge for carparking floors and 3 mm in 3,000 for floors with more sensitive finishes. 144 In addition, Mr Airey dealt further with deflection in relation to lot 829 and how that may be increased by superimposed dead loads or live loads on the floor. He then went on to relate those tolerances, whether it be 3 mm or 6 mm in 3,000, to the distance from column to centre point of a span in large spans diagonally. Again, he related this to deflection of the slab and again said that it drowns out any minor finishing discrepancy and that serious filling to achieve floor levels would be required to deal with the design generated distortion. He went on to say: The large departure of floor from level over a measured distance of 3 m is, in my opinion, clearly due to accumulated steel beam deflection. This is a design generated problem … 145 Again for reasons which I will come to shortly this does not appear to be a live issue in the case, that is to say whether or not the filling or remedial work was required to overcome a deflection in the slab as (Page 29)
opposed to remedial work to provide a flat or smooth finish within the tolerances required by the contract. 146 In cross-examination Mr Airey agreed that his reports focused on two things; whether the slabs as laid were providing satisfactory in service performance and whether the deflections in the concrete slabs was the responsibility of the subcontractor. 147 In cross-examination he was taken to his report of 10 October 2011 and the opinion of Mr Fozdar, that deflections do not cause undulations or waves in the slab surface. He adhered to his view that that was unable to be supported, but went on to discuss once again deflections in the slab. He agreed with counsel that one can predict where the deflection is going to occur and it can be modelled mathematically. When brought back to the standard of finishing of the concrete surfaces he said they seemed unremarkable to him. There was some issue as to whether or not when he inspected there had already been remedial work carried out and carpet laid to lot 829. I think a fair assessment of his evidence is that he was unsure of this, but the evidence of Mr Melia will reveal that these works were being carried out in about the August of 2010. However Mr Airey did not recall seeing anything carpeted. He then went on to say that he did not recall it very well but 'they' were busy doing works prior to putting carpet down. 148 He was asked specifically whether his report focused on whether the surface was rough and he said no, it focused on deflection. He was also asked whether his report focused at all as to whether the surface had undulations that were inconsistent with deflection and again he said no. There was cross-examination at length as to the mathematical calculations carried out to establish the extent of the deflection. Save to note that Mr Airey believed his calculations to be correct, I do not think, for reasons which will become apparent later, that it is necessary for me to canvass this further. 149 He was taken to that section of his report of 4 February 2013 in which he refers to the tolerance requirements and whether that was the standard of finish that would be required for these premises. He said that that was out of the specification. He said that his earlier reports were on the assumption that the tolerance was to be 6 mm over 3 m and whether or not what he saw complied with that tolerance. 150 When questioned about floor coverings and sensitive finishes he did not believe that carpet squares would 'possibly discern it' but agreed that (Page 30)
he had not considered whether the finish met the standard of 3 mm in 3 m as he did not measure it, 'we measured the deflection'.
Joseph Paul Melia 151 Mr Melia is one of the directors of the defendant company. 152 He received a request for tender which became exhibit 11.2 and sent his quotations for both lots which became exhibits 11.3 and 11.4. It is appropriate to note at this stage that the request for quotation included schedules of finishes which in turn provided for office areas to be carpeted. In addition, the specifications (included with the request for quotation) included the section on tolerances for in situ concrete and finishes to which I have already referred. 153 It was Mr Melia's evidence in his statement that he did not read those documents as requiring an overall finish by hand trowel to Class A and said that is not commonly done as Codes require 6 mm over a 3 m straight edge. He said it would not be practicable to use that sort of finish on large floor slabs. These slabs were too large to make it feasible to do by hand using steel trowels which are used to provide very fine finishes. For those finishes the floor slab needs to be broken up into sections using construction joints so it can be poured a slab at a time. 154 His understanding was that it was to be finished to a Class B finish, only trimming it with steel trowels. The structural drawings did not show construction joints to make it possible to pour the slab in sections. He said that had that been required it would have been very expensive and his quotation did not allow for that cost. 155 He went on to describe the method of working which was to make sure the heights of the formwork and steel were correct, pour the concrete, use mechanical vibrators to compact it, screed off the surface by using long aluminium screeds between 3 m and 3.6 m lengths and then bull float, use machine trowels to produce a 'thin' smooth finish surface to the concrete and use steel trowels to finish around the columns and along the edges of slabs near walls where machines could not reach. 156 He said that at all times it was apparent that the work was to Class B and that was approved by the site supervisors and there was never a suggestion that a Class A finish was required. No-one suggested there was anything wrong with their method of working. Under cross-examination he confirmed that his earlier suggestion that (Page 31)
their work was approved was because there had never been any objection and the accounts were paid, so therefore they must have been approved. 157 He also referred to being kept working to 3.00 am and coming back again at 5.00 am because of the pressure of work and they were also instructed to pour in the rain. 158 He said in his evidence, by way of statement, that a straight edge was used to check the levels and he did not recall seeing any areas not within the 6 mm tolerance. He took and produced some photographs of the work they carried out. Those photographs show cracks which he said were not there when they completed their work and he described them as not being superficial but serious structural cracks. 159 He confirmed that he knew or assumed that carpet tiles would be laid, but they were not told what tolerances there were for carpet tiles. 160 Referring to the evidence of Mr Farrah in which he refers to deviations up to 15 to 20 mm; he said there was nothing like that when they left the job and had there been they would have had complaints at the time. 161 With regard to the evidence of Mr Standish and his reference to discrepancies of 10 to 30 mm on lot 829, he again said that was not the situation when they left the job. He said that the floor slabs at 829 did not appear to have been adequately supported either structurally or because the propping was inadequate. 162 He did not have any documented system to check the finishes of the floor; there were just spot checks. 163 He confirmed that they did not use steel trowels over the whole of the areas, just around the columns. Otherwise it was a machine finish. 164 In order to put Mr Airey's evidence in context as to whether or not remedial work had been carried out or carpeting was in place at the time of Mr Airey's inspection, Mr Melia was taken to correspondence in August 2010 regarding complaints that had then been made. He agreed that when he inspected on 11 August 2010 remedial works on Lot 829 had started.
Dominic Glen Marciano 165 Mr Marciano is also a director of the defendant company. He said in his evidence by way of statement that he was unaware of the contents of (Page 32)
the specification and did not notice the requirement for a smooth steel trowel finish. To have finished the whole floor slabs by hand in such a fashion would require a Class A finish to the whole job. He said the architectural specification only required this to the carparks, ramps and stairs. He said the job was priced on the basis of a Class B finish. 166 He again went through the method of working, that is to say to pour the concrete; screed off by hand; smooth with a bull float and once the concrete had hardened machine trowel until an overall finish had been achieved and finally use steel hand trowels to deal with obvious imperfections and trim edges where machines could not go. 167 He said that that method of work would produce a Class B finish which was usual in the trade for slabs of this magnitude. He also said that Mr Gavin, Mr Roy and Mr Gallagher saw this method used from time to time throughout the project. 168 He also said that a 3 m straight edge was used on site to check various spots and nowhere was the 6 mm tolerance exceeded. Under cross-examination he also agreed that there was no documented system in place to check the finish of the floors and it was just spot checks from time to time that were done. He also produced photographs of lot 829 showing cracks which he said were not present when they left the lot in July 2009. 169 He said that during the course of the works on these lots they noticed that some of the props underneath the slabs could not be unwound and had to be cut out which showed that the slabs were deflecting possibly due to the number of props being inadequate or the spaces between the props at points being too far.
Defence case 170 The defence case is that the contract is susceptible to more than one meaning and therefore extrinsic evidence can be referred to. In that regard the defence relied upon extrinsic evidence said to be as to trade, custom and usage to explain what the terms of the contract mean. Having made this proposition, the defence relied upon the evidence of a number of witnesses who gave evidence that they considered that the finish was to be a Class B finish and not Class A. Further, the defence relied upon evidence of the difficulties of complying with Class A when the structural drawings did not permit the construction of the slabs in sections which would be required for such a finish. (Page 33)
171 If the contract in fact provided for Class A, the defence relied upon estoppel by convention to override the interpretation of the contract which might follow from a literal reading. It is said by defence that both parties adopted an interpretation of the contract calling up a Class B finish. 172 The defence relied upon the evidence of a number of witnesses to demonstrate that this was the case, including witnesses called on behalf of the plaintiff. In addition, the defence relied upon the finish that was being provided, namely to Class B, and that that was known to relevant personnel at the time. 173 Further it is the defence case that the works complied with a Class B finish. It is acknowledged by the defence that if, ultimately, the finish should be Class A then the defendant had not complied with this and the plaintiff would be entitled to recover. 174 It is said that at the time the defendant finished its works there were no problems with the job. Problems only became apparent later on when it appeared that the slab had become seriously stressed causing cracking. The defence case is that there were significant problems which developed after the defendant had left the site and relied upon the evidence of Mr Airey as to the deflections that were found to exist in the slab which exceeded those which had been calculated. 175 The defence explanation for these events is that the deflection caused the problems and that is the only conceivable explanation for the fact that Messrs Melia, Marciano and McKenna and, presumably, also Mr Roy and Mr Gallaher did not notice anything wrong with the job in 2008/2009. 176 As to the deviations from level in and around the columns, the defence relies upon evidence that suggests that that might have been caused by the incorrect placing of reinforcing steel which was not the responsibility of the defendants. 177 It is the defence case that the onus lies upon the plaintiff to show either that the specification required a Class A finish or that the defendant did not comply with a Class B finish and that the evidence does not support either.
The plaintiff's case 178 The plaintiff's case is that the contract is clear in its terms by reference to the engineering drawing (exhibits 1.1 and 1.2) and the (Page 34)
specifications for concrete finishes at cl 3 (exhibit 1.3). It is said that that clearly provides for a steel-trowelled finish to tolerance Class A. 179 The plaintiff argued that subjective intentions or interpretations were irrelevant: see McCourt below. 180 The plaintiff also relied upon that portion of the specification (exhibit 1.3) which calls up in cl 3.3 that 'where floor coverings are to be installed remove defects that would show through them'. Allied to this is the schedule of interior finishes which shows that carpet was to be laid in office areas and that that carpet was to be laid to the relevant Australian Standard. 181 The plaintiff argues that the surfaces were not formed to the appropriate standard but were undulating and rough and not finished with a steel hand trowel. It is the plaintiff's case that such matters could not be put down or attributed to deflection. Amongst other things, this is because such defects also appeared at the columns where deflection would not be occurring. 182 The plaintiff's case is that the remedial work that was done and which is agreed in its quantum, was because the floors were undulating and rough. It was not remedial work that was carried out to correct any deflection in the floor but to bring it to the appropriate standard to enable carpeting to take place. The plaintiff refers to the issue of deflection as being a red herring. 183 Proceeding from the position that the contract called up and provided for a Class A finish, the plaintiff says that there is no estoppel by convention to prevent the plaintiff relying upon that contractual standard. 184 The plaintiff noted that the defendant in its defence said: At all material times the plaintiff was reliant on the skill and expertise of the defendant as a specialist concrete contractor. 185 It was the defendant who decided how to do the finish to the floors based upon its reading of the specification. The plaintiff says there has been no mutuality of assumption that some other standard was in fact being called for by the contract and performed. Nothing on the part of the plaintiff could be said to have contributed to this. (Page 35)
Legal principles
Construction of the contract 186 In McCourt v Cranston [2012] WASCA 60 Pullin JA examined the various authorities dealing with the admissibility of the surrounding circumstances relevant to the construction of a contract from and including Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337. 187 In McCourt, having reviewed the various authorities, his Honour said: 23. In view of the pronouncements in Jireh (Western Export Services Inc) v Jireh International Pty Ltd [2011] HCA 45), when an issue arises about the proper construction of a contract and there is evidence of surrounding circumstances known to the parties or evidence of the purpose or object of the transaction, that evidence will not be admissible unless the court determines that the contract is: 24. Usually the meaning of 'ambiguous' is taken to include 'open to various interpretations': see Macquarie Dictionary, but by using the phrase 'ambiguous or susceptible to more than one meaning' perhaps Mason J wished to emphasise that not only a contract open to more than one meaning would allow in evidence of surrounding circumstances but also one where the contract is merely 'difficult to understand'. Once evidence of surrounding circumstances is allowed in, the restrictions on such evidence are clear. Evidence of subjective opinions are not admissible, nor is evidence of negotiations; the surrounding circumstances have to be objective facts and they have to be known to both parties. (emphasis added) 188 Beech J in Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323 set out the principles regarding the construction of instruments and the primary duty of the court to endeavour to discover the intention of the parties as embodied in the words they have used in the instrument: [106]. 189 At [107] his Honour stated the law as being that '[i]t is the objectively ascertained intention of the parties, as it is expressed in the instrument, that matters not the parties' subjective intentions. The meaning of the terms of a contractual document is to be determined (Page 36)
by what a reasonable person would have understood the terms to mean: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40]; Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 [98]. 190 In Alphapharm at [40] the High Court added to the quote to which his Honour referred that that (the meaning of the terms) normally requires a consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction. 191 There did not appear to be much by way of an issue between the parties as to those legal principles. Mr James on behalf of the defendant referred to the judgment of Redhill. However Mr James also referred to Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216 [78], where McLure P, in the context of considering the principles as to the admission or use of extrinsic material in relation to the construction of the contract there under review, said: Moreover, the context to which admissible evidence of surrounding circumstances can influence the interpretation of a contract depends, in the final analysis, on how far the language of the contract is legitimately capable of stretching. Generally, the language can never be construed as having a meaning it cannot reasonably bear. There are exceptions, absurdity or special meaning as a result of trade, custom or usage (that are of no relevance in this context). 192 Mr James argued that extrinsic evidence would be necessary to understand the terms used in a construction contract such as that under review. 193 However the first step is still to construe the language of the agreement itself to ascertain whether the language used is ambiguous or susceptible of more than one meaning. As was noted in Anfrank Nominees Pty Ltd v Connell (1989) 1 ACSR 365, 379, 'it is impermissible to refer to the surrounding circumstances in an endeavour to create an ambiguity in the language'.
Estoppel by convention 194 The learned authors of Spencer Bower Estoppel by Representation (4th ed) p.180 defined this form of estoppel as: … an estoppel by representation of fact, a promissory estoppel or a proprietary estoppel, in which the relevant proposition is established, not (Page 37)
by representation or promise by one party to another, but by mutual, express or implicit, assent. This form of estoppel is founded, not on a representation made by a representor and believed by a representee, but on an agreed statement of facts or law, the truth of which has been assumed, by convention of the parties, as the basis of their relationship. (VIII.2.1) It is further postulated that: A critical element of an estoppel by convention...is the requirement that the assumption of the relevant fact or proposition as to the parties' rights must be expressly or impliedly communicated between them. Without such communication one party could not be responsible to the other for his acting on the relevant assumption so as to render it unfair for the former to depart from it. It is only, therefore, detrimental reliance on the relevant assumption after such communication that will constitute the necessary unfairness to estop the parties from resiling from the assumption. (VIII.3.1) 195 The learned authors further note, citing Lord Steyn in Republic of India v Indian Steamship Co Ltd (No 2) (The Indian Grace) (The Indian Endurance) [1998] AC 878, 913F, that: It is not enough that each of the two parties acts on an assumption not communicated to the other. 196 That dictum is preceded by the statement: It is settled that an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared by them both or made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption. 197 The learned authors go on to express the view that it is not necessary for the assumption to be created or encouraged by the party to be estopped; however, if not, it must 'be shared in the sense that each is aware of the assumption of the other' for otherwise there may be nothing which crosses the line as explained by Kerr LJ in 'The August Leonhardt': and see John v George [1996] 1 EGLR 7, 11D. 198 In Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Co Ltd [2008] WASCA 119 Pullin JA referred to the summary of the elements of a defence of estoppel by convention as set out in National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548, 550, and noted that that summary of the law had been accepted as accurate by Finn J in GEC Marconi Systems Pty Ltd v BHP (Page 38)
Information Technology Pty Ltd [2003] FCA 50. Buss JA (Steytler P) appears to have gone one step further and at [164] agreed (subject to one qualification) with Finn J's statement that the elements of the doctrine of estoppel by convention are as summarised in National Westminster Finance NZ Ltd. I will come to his summary thereof shortly. 199 In coming to that position Buss JA reviewed a number of authorities as to the relevant principles which I will touch on as being relevant to the matters herein. 200 His Honour referred to Thompson v Palmer (1933) 49 CLR 507 and the judgment of Dixon J who noted (547): He [the person sought to be estopped] may be required to abide by the assumption because it formed the conventional basis upon which the parties entered into contractual or other mutual relations … Or because he has exercised against the other party rights which would exist only if the assumption were correct…or because knowing the mistake the other laboured under, he refrained from correcting him when it was his duty to do so… (emphasis added) 201 In Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226, 244, the court observed, in relation to this form of estoppel, that: Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts which both will be estopped from denying. 202 Having commented on Amalgamated Investment & Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1982] QB 84, the High Court went on to note why the doctrine had no application in the case before it in that: |