P Ward v Civil and Civic
Case
•
[1999] NSWSC 727
•3 August 1999
No judgment structure available for this case.
CITATION: P Ward v Civil and Civic [1999] NSWSC 727 CURRENT JURISDICTION: Equity Division, Construction List FILE NUMBER(S): 55062/97 HEARING DATE(S): 22,23,24,25,28,29,30 June 1999, 1 July 1999 JUDGMENT DATE:
3 August 1999PARTIES :
P. Ward Civil Engineering Pty Limited (Plaintiff)
Lend Lease Property Services Pty Limited (formerly known as Civil and Civic Pty Limited) (Defendant)JUDGMENT OF: Einstein J
COUNSEL : B.W. Walker SC and S.A. Kerr (for Plaintiff)
S.G. Finch SC and M.R. Gracie (Defendant)SOLICITORS: Tress Cocks & Maddox (Plaintiff)
Freehill Hollingdale & Page (Defendant)CATCHWORDS: CONTRACT - Subcontract to perform earthworks for the construction of water filtration plant - Plaintiff tenderer invited to prepare a Target Guaranteed Maximum Price (TGMP) proposal and to participate in design development process - TGMP if acceptable to be confirmed as a lump sum Guaranteed Maximum Price (GMP) - Plaintiff accepts TGMP of $16.7M on 17 November 1993 - GMP contract for $16.7M executed 18 May 1994 - Whether plaintiff to bear risk of design development up to and/or after finalisation of GMP - Whether agreement entered into as at 17 November 1993 or as at 18 May 1994; CONTRACT - Construction - 'Variations' clause - 'Design Development' clause - Whether clause dealing with risk of design development to be read as relating to design development variations 'within' or 'without' scope of works.; TRADE PRACTICES - Misleading or deceptive conduct - Whether duty to disclose terms of contract where they differ from the pro forma contract included with invitation to tender - Silence as misleading or deceptive conduct; TRADE PRACTICES - Remedies - Variation - Rescission - Rectification; NEGLIGENCE - Partnering agreement - Relationship of trust and confidence - Whether defendant negligent in circumstances giving rise to execution of Subcontract - whether defendant required to draw plaintiff's attention to terms of Subcontract proferred for exeuction including scope of works to be included in Subcontract - Importance of treating a formal contract particularly in a commercial context as the final and full expression of agreement between the parties ; CONTRACT - Rescission - Rectification - Unilateral mistake - Whether mistaken belief of plaintiff that scope of works fixed at November 1993 agreement - Whether mistaken belief of plaintiff as to duration of period when it was exposed to risk of design development - Whether defendant aware of the plaintiff's mistake - Whether unconscionable for the defendant to insist on the terms of the contract - Carelessness of the plaintiff in failing to read the contract - Whether negligent misstatement; ESTOPPEL - Whether the defendant estopped from insisting on the terms of the contract. ACTS CITED: Trade Practices Act 1974 (Cth) ss52, 87(1), 87(2)(b) CASES CITED: Agip S.p.A. v Navigazione Alta Italia S.p.A. [1984] 1 Lloyd’s Rep 353
Asea Brown Boveri Pty Ltd v Burns Philp Trustee Co Ltd (Unreported, Supreme Court of NSW, 23 April 1990, Giles J)
United Dominions Corporation Ltd v Brian Pty Ltd (1984-85) 157 CLR 1
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981) 149 CLR 337
Commission for the New Towns v Cooper (Great Britain) Ltd [1995] Ch 259
Demagogue Pty Ltd v Ramensky & Anor (1993) ATPR 41-203
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Frederick E Rose (London) Ltd v William Hernani Pim Junior & Co Ltd [1953] 2 QB 450
Jones v Dunkel (1959) 101 CLR 298
Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) 46-054
L’Estrange v F Graucob Ltd [1934] 2 KB 394
Lief Investments Pty Ltd v ConAgra International Fertiliser Co (Unreported, Supreme Court of NSW CA, 16 July 1998)
Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60
Mackenzie v Coulson (1869) LR 8 Eq 369
Maybury v Atlantic Union Oil Co Ltd (1953) 89 CLR 507
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1981-82) 149 CLR 191
Parker v South Eastern Railway Co (1877) 2 CPD 416
Prenn v Simmonds [1971] 1 WLR 1381
Pukallus v Cameron (1982) 43 ALR 243
Riverlate Properties Ltd v Paul [1975] Ch 133
A Roberts & Co Ltd v Leicestershire County Council [1961] Ch 555
Smith v Hughes (1871) LR 6 QB 597
Solle v Butcher [1950] 1 KB 671
Taylor v Johnson (1983) 151 CLR 422
The Olympic Pride [1980] 2 Lloyd’s Rep 67
Thomas Bates & Son Ltd v Wyndham's (Lingerie) Ltd [1981] 1 WLR 505
Torrance v Bolton (1872) LR 8 Ch App 118
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387DECISION: Short Minutes of Order to be brought in.
JUDGMENT
THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION - COMMERCIAL LISTEINSTEIN J
Sydney 3 August 1999
55062 of 1997 - P. Ward Civil Engineering Pty Limited v Civil and Civic Pty Limited
The Dispute
1 These proceedings relate to a dispute concerning the earthworks component for the construction of the Prospect Water Filtration Plant (‘the project’) from 1993 to 1996. The defendant, Civil and Civic Pty Limited [now known as Lend Lease Property Services Pty Limited] (‘Civil and Civic’), was the design and construct contractor for that plant. The plaintiff, P. Ward Civil Engineering Pty Limited [‘Wards’], was Civil and Civic’s earthworks subcontractor. 2 Wards claim is detailed in the further amended summons (‘the summons’) filed on 21 June 1999. That claim includes claims for variations, delay and disruption costs. Those matters are to be the subject of a reference before Mr Kenneth Hinds at a date yet to be determined. 3 The matters to be determined in the present hearing are contained in the document entitled ‘Questions for Separate Determination’, these being attached to the order for reference made pursuant to Part 72 of the Rules. Eleven identified questions are before the Court and these are set out below. It is, however, first appropriate to set out the background to the proceedings. 4 On 18 May 1994, a formal Subcontract (‘the Subcontract’), was executed between Civil and Civic as head contractor and Wards as subcontractor. The Subcontract was executed following communications both oral and in writing passing between the parties from early 1992. 5 In essence, the case brought by Civil and Civic is that in late 1993, some six months earlier, the parties had become bound to an enforceable agreement providing:
6 Civil and Civic denies this allegation and asserts that the 18 May 1994 Subcontract constituted the agreement between the parties for the carrying out of the relevant works. Civil and Civic accepts that an earlier contract described by Civil and Civic as a contract ‘for early works’ of 7 February 1994 had been entered into between the parties, which contract is said to have fallen away when the May 1994 Subcontract was entered into. 7 The issues presently before the Court largely relate to Ward’s allegations that as a result of the conduct of Civil and Civic in relation to the execution of the Subcontract, it has avoided the Subcontract or is entitled to other relief under the Trade Practices Act or by way of rectification or as otherwise described below. 8 It is common ground that the Prospect Water Filtration Plant was one of four water filtration plants tendered by the New south Wales Government in 1993/94 on a build, own, operate and transfer [‘BOOT’] basis. It is common ground that a partnership comprising Lend Lease Corporation, P &O and Lyonnaise Des Eaux (‘the partnership’) was awarded the BOOT Contract for the Prospect Plant. 9 Also common ground is the fact that Civil and Civic was involved with the partnership during the Government tender period in developing designs and providing pricing information to the partnership which was used in formulating the partnership’s bid to Sydney Water. The partnership, on about 20 September 1993 [T443], entered into a contract with Civil and Civic for the design and construction of the plant. 10 It is common ground that Civil and Civic decided to divide the project into four main Subcontractor areas of works. These included Wards for the majority of the earthworks package and John Holland Civil Engineering Pty Limited (‘John Hollands’) for the structures package. 11 The summons identifies alleged outstanding claims for payment for works purportedly performed under the Subcontract in an amount of $6,029,586. Paragraph 3 of section A of the summons asserts that Wards’ claims have been rejected partly for reasons that Wards’ claim for payment for variations were included in the scope of works within the Subcontract. Wards here asserts that ‘the plaintiff’s claims for variations are excluded as “design development” within the meaning of that expression in the Subcontract’. Although not the only issue, this issue recurs as a matter of obviously critical moment to both parties. 12 The summons, inter alia, alleges that ‘the defendant made misleading misrepresentations regarding the process of ‘design development’ [paragraph 5 of section A].
(a) that the plaintiff would carry out certain excavation, construction and associated work at the plant for a lump sum price of $16.7million;
(b) that the works would be carried out upon the terms and conditions provided with Civil and Civic’s letter to Wards of 3 August 1993;
(c) that the agreement would be recorded in a formal written Subcontract incorporating the terms of the agreement and any additional or alternative terms agreed upon between the parties.
[I note that notwithstanding the terms of the summons which pleaded the date of the agreement as in or about December 1993, Wards Senior Counsel opened the case by identifying the date on which the alleged agreement was entered into as 17 November 1993, on which basis the hearing proceeded]
13 Wards claim in the summons the following relief:
The Pleadings and the Questions for Separate Determination
14 Wards’ contentions set out in section C of the amended summons, put the plaintiff’s case under a number of heads. The range of relief sought was slightly expanded in final submissions later referred to. The section C contentions are as follows:
‘1. A declaration that the agreement between the plaintiff and the defendant for the carrying out of excavation, construction and associated works at the site known as the Prospect Water Filtration Plant (‘the Agreement’) is:
(a) for the completion of the works referred to in the plaintiff’s priced bill of quantities dated 19 November 1993 as further described in the defendant’s document entitled ‘scope of works’ dated 12 July 1993 and the drawings referred to in the enclosures to the letter to the plaintiff dated 3 August 1993 for a lump sum price of $16.7million; and
(b) upon the terms and conditions provided with the defendant’s . . . letter of 3 August 1993.
2. An order rectifying the Subcontract executed by the plaintiff on 17 May 1994 (‘the Subcontract’) so as to properly record the Agreement.
3. Alternatively, an order pursuant to section 87 of the Trade Practices Act 1974 (Commonwealth) varying the Subcontract so as to properly record the Agreement.
4. Alternatively, damages, equitable damages or compensation pursuant to section 82 of the Trade Practices Act.
5. Further, judgment for an amount of $6,029,586 in respect of moneys outstanding pursuant to the Agreement or, alternatively, the Subcontract or, alternatively, as a quantum meruit.
6. Interest.
7. Costs . . .’
15 Question 11 of the questions for separate determination reads:
Alleged Agreement of December 1993
‘2. In or about December 1993 the Plaintiff and Defendant agreed:
(a) that the Plaintiff would carry out certain excavation, construction and associated work described in the Plaintiff’s priced bill of quantities dated 19 November 1993 (‘the Works’) which works were further described in the Defendant’s document entitled ‘Scope of Works’ dated 12 July 1993 and the drawings referred to in the enclosures to the Defendant’s letter to the Plaintiff dated 3 August 1993, at the site known as the Prospect Water Filtration Plant (‘the site’) for a lump sum price of $16.7m (‘the Agreement’);
(b) that the Works would be carried out upon the terms and conditions provided with the Defendant’s said letter of 3 August 1993; and
(c) that the Agreement would be recorded in a formal written Subcontract incorporating the terms of the Agreement and any additional or alternative terms agreed upon between the parties.
Particulars
The agreement arises from the following communications and circumstances:
(a) Letter from the Defendant to the Plaintiff dated 3 August 1993.
(b) Letter from the Plaintiff to the Defendant dated 23 August 1993.
(c) Letter from the Plaintiff to the Defendant dated 20 September 1993.
(d) Letter from the Plain6iff to the Defendant dated 26 September 1993.
(e) Letter from the Plaintiff to the Defendant dated 11 November 1993.
(f) Letter from the Plaintiff to the Defendant dated 17 November 1993.
(g) The meetings between representatives of the Plaintiff and representatives of the Defendant on 3 September, 6 September, 10 September, 20 September, 23 September, 27 September and 5 October 1993 minuted by the Defendant as Construction Engineering Meetings Numbers 1, 2, 3, 4, 5, 6 and 7 respectively.
(h) the request by the Defendant on about 1 December 1993 that the Plaintiff commence work on the project immediately;
(hh) Requests by the Defendant between 1 December 1993 and 16 May 1994 that the Plaintiff commence work on the project additional to the works the subject of;
(i) the Defendant’s letter of Intent for early works dated 6 December 1993;
(ii) the Defendant’s Purchase Order 21033; and
(iii) the contract between the Plaintiff and the Defendant dated 7 February 1994.
(i) The commencement by the Plaintiff of the Works on about 9 December 1993.’
16 Paragraphs 3 to 5 inclusive of the contentions are in the following terms:
’11. Is the plaintiff entitled to a declaration as claimed in paragraph 1 of the amended summons?’
May 1994 Subcontract
Hence, question 11 treats with the principal claim and first matter raised by the plaintiff’s further amended summons in relation to the alleged November 1993 agreement.
17 Paragraphs 6 and 7 of the contentions are in the following terms:
‘3. In or about May 1994, the Defendant informed the Plaintiff that it would not pay the Plaintiff’s outstanding progress claims until it signed a formal contract for the Works, which contract was in the process of being prepared. On or about 16 May 1994, the Defendant informed the Plaintiff that the contract was available for execution.
4. On 17 May 1994, David Knight on behalf of the Defendant presented to Glenn Cherrie on behalf of the Plaintiff a written Subcontract, (‘the Subcontract’) and informed Mr Cherrie that proposed changes to the Subcontract were not to be proceeded with. Mr Cherrie executed the Subcontract on behalf of the Plaintiff in the presence of Mr Knight.
5. The scope of works and terms and conditions in the Subcontract were materially different to those agreed in November 1993.’
Unilateral Mistake - Taylor v Johnson (1983) 151 CLR 422
18 Both questions 1 and 5 of the questions for determination are relevant to the plaintiff’s mistake case. Question 1 reads:
‘6. At the time of its execution of the Subcontract, the Plaintiff mistakenly believed that the scope of works and terms and conditions incorporated in the Subcontract were identical with or, alternatively, not inconsistent with, the scope of works and terms and conditions incorporated in the Agreement.
7. At the time of the Plaintiff’s execution of the Subcontract, the Defendant was aware or, alternatively, ought reasonably to have been aware, of the Plaintiff’s mistaken belief referred to in paragraph 6.
Particulars
The Defendant was aware that the price for the Works was the same as that provided in the Agreement and that all agreed variations to the scope of the work since November 1993 had been the subject of variation claims by the Plaintiff (which had been agreed to by the Defendant). The Defendant was aware that no other variations to the Agreement had been agreed and that no one on behalf of the Defendant had informed the Plaintiff that the scope of works or terms and conditions of the Subcontract were different to those incorporated in the Agreement.’
19 Question 5 reads:
‘Was the Subcontract between the Plaintiff and the Defendant dated 17 May 1994 affected by mistake?’
20 Paragraphs 8 and 9 of the contentions are in the following terms:
‘Is the Plaintiff entitled to an order rectifying the Subcontract so that:
(a) the scope of works to be undertaken under the Subcontract is as described in the documents referred to in paragraph 2(a) of the Contentions and
(b) the terms and conditions of the Subcontract correspond with those referred to in sub-paragraph 2(b) of the Contentions?’
Avoidance of Subcontract
21 Question 3 of the questions for separate determination deals with the question of avoidance and is in the following terms:
‘8. In or about February 1995, the Plaintiff first learned of the mistake referred to in paragraph 6 and thereafter communicated to the Defendant its refusal to be bound by the terms of the Subcontract insofar as they were inconsistent with the Agreement.
9. By reason of the matters alleged in paragraphs 2 to 8, the Subcontract has been avoided.’
22 Paragraph 10 of the contentions is in the following terms:
‘3. Has the Subcontract been avoided by the Plaintiff and if so when?’
Rectification
23 Question 5 of the questions for separate determination dealing with rectification has already been set out.
‘Alternatively, by reason of the matters alleged in paragraphs 2 to 5, the Subcontract does not record the Agreement and the Plaintiff is entitled to an order rectifying or alternatively avoiding the Subcontract.’
24 Paragraphs 11 to 13 inclusive of the contentions are in the following terms:
First Trade Practices Act Count (‘The Representation’)
25 Paragraphs 14 to 19 of the contentions are in the following terms:
‘Further, or in the alternative, by presenting the Subcontract to the Plaintiff for its execution in the circumstances particularised in paragraphs 2,3,4,5 and/or 7 above, and by its failure to inform the Plaintiff that the scope of works and the terms and conditions incorporated in the Subcontract were different to those incorporated in the Agreement, the Defendant:
(a) represented that the scope of works and terms and conditions incorporated in the Subcontract were not materially different to or, alternatively, not inconsistent with the scope of works and terms and conditions incorporated in the Agreement (‘the Representation’); and
(b) engaged in conduct that was misleading or deceptive in contravention of s.52 of the Trade Practices Act.
12. In reliance upon the Representation and/or the misleading conduct referred to in paragraph 11, the Plaintiff executed the Subcontract.
13. Further or in the alternative, if the Plaintiff is bound by the terms of the Subcontract, then by reason of the Plaintiff’s execution of the Subcontract, it has suffered loss and damage.
Particulars
The scope of works incorporated in the Subcontract was greater than the scope of works incorporated in the Agreement and the Defendant has refused the Plaintiff’s variation claims insofar as the claims seek additional payment for work not incorporated in the Agreement but incorporated in the Subcontract.’
Second Trade Practices Act Count (‘The Further Representations’)
26 Question 2 of the questions for separate determination asks:
’14. Further or in the alternative, in the period between July 1993 and May 1994 the Defendant represented to the Plaintiff:
(a) that the relationship between the Plaintiff and Defendant in connection with the construction of the Works would be in the nature of a partnership and that they would co-operate to ensure that the project was a financial success for both the Plaintiff and the Defendant;
(b) that the Plaintiff would be given the opportunity to participate in the development of the design of the Works and that its participation would result in cost savings and increased profit to the Plaintiff;
(c) that the Defendant would control the design consultants engaged in the project and could and would ensure the design development process reduced the cost to the Plaintiff of completing the Works;
(d) that the reduced cost of the works and increased profit to the Plaintiff as a result of design development would be in the order of $1m; and
(e) that if the Plaintiff reduced its price for the works by $600,000.00 the Defendant would ensure that the Plaintiff’s Subcontractors reduced their prices by about $410,000.00.
Particulars
The representations referred to in sub-paragraphs (a) to (d) were made in the course of a number of discussions between Terry Delahunty and Greg Robinson on behalf of the Defendant and Peter Ward and Mr Cherrie on behalf of the Plaintiff, including discussions in July 1993 and on 15 November 1993 and 19 February 1994.
The representation referred to in sub-paragraph (e) was made in the course of discussions between Mr Robinson and Mr Cherrie on or about 15 November 1993.
15. The representations referred to in paragraph 14 (‘the Further Representations’) were representations with respect to future matters within the meaning of s.51A of the Trade Practices Act, whereby the Further Representations are deemed to be misleading unless the Defendant proves it has reasonable grounds for making them.
16. Each of the Further Representations was false.
17. By making the Further Representations, the Defendant engaged in misleading or deceptive conduct in contravention of s.52 of the Trade Practices Act.
18. In reliance upon the Further Representations, the Plaintiff accepted the Defendant’s offer to enter into a Subcontract to complete the Works for a lump sum price of $16.7m.
19. By reason of the matters alleged in paragraphs 14 to 18 the Plaintiff has suffered loss and damage.
Particulars
(a) The Plaintiff suffered substantial losses in connection with the project.
(b) Alternatively, but for the Further Representations, the Plaintiff would not have reduced its tender price from $17.3m to $16.7m.’
27 Question 7 of the questions for separate determination asks:
‘Did the Defendant make the representations alleged in paragraph 11(a) of the Plaintiff’s Summary of Contentions . . . and, if so, were they misrepresentations which induced the Plaintiff to execute the Subcontract.’
28 Questions 8 and 9 of the questions for separate determination ask:
‘7. Has the defendant engaged in misleading and deceptive conduct in contravention of the Trade Practices Act in the manner alleged in paragraphs 11 and 17 of the contentions?’
29 Plainly questions 2, 7 and 9 are all relevant to the misleading and deceptive conduct cases. Question 8 may also have a relevance to these cases.
‘8. Did the Defendant owe the Plaintiff the duty of care alleged in paragraph 19B of the Contentions and if so, did the Defendant breach the duty in the manner alleged in paragraph 19C of the Contentions.
9. Is the Plaintiff entitled to an order pursuant to s. 87 of the Trade Practices Act varying the Subcontract in the manner described in paragraph 5 above?’
30 Paragraph 13A of the contentions is in the following terms:
Estoppel
31 Question 6 of the questions for separate determination asks:
‘Further or in the alternative, by reason of the matters alleged in paragraphs 11 to 13, the Defendant is estopped from asserting that the scope of works and terms and conditions incorporated in the Subcontract were materially different to or inconsistent with the scope of works and terms and conditions incorporated in the Agreement.’
32 Paragraphs 19A to 19C of the contentions are in the following terms:
‘6. Is the Defendant estopped from denying that the scope of works and terms and conditions of the Subcontract are as described in sub-paragraphs 5(a) and 5(b) above?’
Duty to exercise reasonable care in making representations
33 Question 8 of the questions for separate determination already set out is plainly also relevant to the breach of duty and negligent misstatement case.:
‘19A. Further or in the alternative, at the time that the Defendant made each of the Representation and the Further Representations, the Defendant was aware, or ought to have been aware:
(a) that the Plaintiff was relying on the Defendant to provide reasonable and accurate information concerning the subject matter of each of the Representation and the Further Representations; and
(b) in the event that the Defendant failed to exercise reasonable care to ensure that each of the Representation and the Further Representations was accurate, the Plaintiff might suffer loss or damage.
19B. In the premises, the Defendant owed to the Plaintiff a duty to exercise reasonable care in making the Representation and the Further Representations.
19C. By making the Representation and the Further Representations the Defendant breached the duty referred to in paragraph 19B.’
34 Question 10 of the questions for separate determination deals with the alleged entitlement to damages in negligence or pursuant to s. 82 of the Trade Practices Act. It reads as follows:
Damages
35 Question 4 of the questions for separate determination deals with quantum meruit. The question asks:
’10. Is the Plaintiff entitled to damages in negligence or pursuant to s.82 of the Trade Practices Act representing :
(a) The Plaintiff’s losses in connection with the building project referred to in the Contentions;
(b) The difference between its entitlement to payment under the terms of the Subcontract as executed and as varied in the manner described in paragraph 5 above; and/or
(c) The adjustment of its tender price referred to in paragraph 19(b) to the Contentions.’
Quantum Meruit
36 Paragraphs 20 through to 22 of the contentions to be referred to a Referee, are in the following terms:
‘4. Is the Plaintiff entitled to recover remuneration for work carried out by it on a quantum meruit basis?’
Terms as to Variation
37 Paragraphs 23 through to 26 of the contentions also to be referred to a Referee, are in the following terms:
’20. Further or in the alternative, it was a term or condition of the Agreement or, alternatively, the Subcontract that the Defendant could instruct the Plaintiff to vary the works at any time prior to practical completion.
Particulars
Clause 6.10 of the terms and conditions incorporated in the Agreement.
21. In the period between December 1993 and February 1997, the Defendant directed the Plaintiff to vary the works and in compliance with such directions, the Plaintiff carried out works outside the scope of works incorporated in the Agreement, or alternatively, the Subcontract.
Particulars
Written particulars of each variation have been supplied to the Defendant, a summary of which claims was forwarded to the Defendant under cover of a letter dated 14 March 1997.
22. In breach of the Agreement or, alternatively, the Subcontract, the Defendant has failed to pay amounts payable to the Plaintiff in respect of variations.’
Implied term case
38 It is particularly difficult in a case such as the present, to give any sensible overview of the two parties’ contentions without first reciting the detailed material facts. It is, however, useful to immediately set out the terms of a letter of 3 August 1993 from Civil and Civic to Wards which makes plain, particularly in paragraphs 5 and 6, the case put by Civil and Civic as to the contractual regime at all material times suggested by Civil and Civic as having been intended by it and asserted by Civil and Civic, but denied by Wards, to have been included in due course, in the May 1994 Subcontract as signed by the parties. That regime deals with the concepts of reaching a ‘Target Guaranteed Maximum Price’ and later a ‘Guaranteed Maximum Price’ separated by what is referred to in some of the documents as a ‘Price Validation Period’. These expressions will from time to time be referred to in the Judgment as ‘TGMP, ‘GMP’ and ‘PVP’. The letter, particular phrases of which were closely examined in cross-examination of witnesses, is in the following terms:
’23. Further or in the alternative, it was an implied term of the Agreement or, alternatively, the Subcontract that;
(a) the Defendant would provide the Plaintiff with sufficient access to the site as the Plaintiff reasonably required to enable it to complete the works within the construction time contemplated in the programme submitted by the Plaintiff to the Defendant under cover of its letter dated 27 August 1993 or otherwise within a reasonable time following commencement of the works;
(b) the Defendant would produce for the Plaintiff any further plans or specifications and otherwise give all necessary instructions and directions so as to permit the Plaintiff to proceed with and complete the works in accordance with the construction time contemplated by the programme submitted on 27 August 1993 or, alternatively, within a reasonable time following commencement of the works.
24. In breach of the implied term referred to in paragraph 23, the Defendant failed to provide access to areas of the site to enable the Plaintiff to commence and complete the works in the time referred to in paragraph 23.
25. By reason of the matters alleged in paragraph 24, the Plaintiff suffered loss and damage.
Particulars
Full particulars of the Plaintiff’s claim have been supplied to the Defendant as variation 190.
26. Further and in the alternative, by reason of the Defendant’s failure to pay to the Plaintiff monies payable pursuant to the Agreement or, alternatively, the Subcontract, the Plaintiff lost the use of the funds payable to it and incurred substantial costs in preparing submissions to the Defendant to support its claims and suffered loss and damage as a consequence.
Particulars
Full particulars of the Plaintiff’s claim have been supplied as variation 200.’
Overview of the respective cases
39 The letter following earlier correspondence inviting Wards to submit a tender, included a draft contract and a scope of works, on which Wards asserts that its later offer was based.
‘[1] As part of the preferred Subcontractor relationship established between Civil & Civic and P Ward Civil Engineering during the Bid phase, you are hereby invited to prepare a Target Guaranteed Maximum Price (TGMP) proposal consistent with the attached Table of Contents for the attached scope of works. The final break-up of the works may vary from this current scope. We draw to your attention that some elements of this scope are optional and may not ultimately be included.
[2] Your TGMP proposal should reflect the current design intent as well as anticipated savings or other initiatives that you believe can be achieved through your participation in the design development process. Your proposal should outline the nature of any design issues that you may wish to explore during design development.
[3] We believe that given the opportunity to participate in design development, particularly in the areas of construction technique and buildability, you should be able to influence the design so that time and cost savings are achieved without compromising the quality of the end product or its compliance with the contract specification.
[4] Considerations in assessing your TGMP proposal will also include your ability to meet, or better, the current construction programme, your Workplace Reform initiatives, standards of Quality, Safety and Environmental Management, and Commercial competitiveness.
[5] If your TGMP proposal is acceptable you will be asked to continue the relationship with us and participate in the design development process. During this process you will be required to examine your TGMP and confirm it as a Guaranteed Maximum Price (GMP) over a several month period. Any benefit added by Wards Engineering in this period would remain to their advantage. Any benefit added by Civil & Civic would be deducted from the TGMP at an agreed value. Pursuant to a result at this stage which is to the satisfaction of Civil & Civic, your GMP will form the basis of a Partnership agreement for the relevant works and services.
[6] If we contract with you, any risk(s) associated with further design development are to be borne by you within the GMP unless major changes to scope are required by the client for which additional funds are made available to Civil & Civic under the head Contract .
[7] It is agreed between our two parties that should your proposal(s) at any time up to acceptance of TGMP, be considered unsatisfactory to Civil & Civic either in terms of price or content, we reserve the right, at our sole discretion, to source either part or all of the works from other subcontractors.
[8] The documents included with this invitation are listed overleaf. Should you require any assistance in preparing your proposal, please contact the Team Leader for this Work Area, Mr Greg Robinson. Thank you for your assistance to date.
[9] We look forward to your favourable response.’ [Emphasis added]
[Although the paragraphs were not numbered in the letter as admitted into evidence, it is convenient to refer to the paragraphs as if so enumerated.]
40 Wards asserts that over several months the extent of the scope of works and the consequent price of those works was the subject of discussion, negotiation and agreement between the parties. Wards asserts that during that time, the scope of the works to be undertaken by Wards and the contract price for each element of the works were the subject of extensive and detailed discussions. Wards asserts that each proposed scope was the subject of a detailed price schedule which identified with particularity, the extent of work to be undertaken and its costing. Wards assert that this process culminated in Civil and Civic offering a target contract price of $16.7m. 41 Wards then asserts that by letter of 17 November 1993, it accepted the target price (said by Wards to have been ‘formally’ known as the TGMP) and attached a bill of quantities which is said to have reflected the agreed value for the scope of works. The bill of quantities was entitled ‘TGMP/D’ and will be so described in the Judgment. 42 Wards asserts that it was contemplated that a period of discussion would then take place over a number of weeks during which the TGMP was to be converted to a GMP (or contract price). Wards asserts that it was its understanding that during this period of time, the proposals of Wards and other parties for amendments to the design would be discussed and either approved or rejected by the designers. Wards asserts that it was also anticipated that the design of the works would be substantially completed. Wards asserts that although some discussion of design issues occurred, the contemplated process for conversion from TGMP to GMP was not brought to any conclusion and did not progress meaningfully. 43 Wards then asserts that in December 1993 at the request of Civil and Civic, it commenced work. The 7 February 1994 interim contract (with a value of approximately $1.5m), was signed. Wards asserts that this interim contract was signed ‘so that the defendant’s administrative requirements of a contract being in place before payments could be made were satisfied’ and that it assumed that the interim contract was in the same terms as the August draft contract. 44 Wards then refer to the execution on 18 May 1994 of the formal contract for the lump sum of $16.7m. Ward asserts that at that time, as a result of Civil and Civic’s administrative requirements, payments had ceased for work that had been performed in excess of the interim contract work. Wards asserts that no Wards officer or employee read the contract as it was assumed that it was in the same terms as the August draft contract and contained the scope of works the subject of the November 1993 acceptance. Ward asserts that the administrative requirements, having been fulfilled by the contract being signed, a further payment was made to it on the following day. 45 Wards asserts that at no time did Civil and Civic advise Wards that it was altering the terms and conditions contained in the August draft contract (other than to include a term referring to the partnering agreement) or that it was drafting a new scope of works document which changed the work to be performed by Wards for the sum of $16.7m. 46 Wards relies on a number of documents which passed between the parties during the negotiations and in the course of which it is common ground that Civil and Civic made statements representing an intent to achieve some form of partnering agreement in relation to aspects of the works. 47 Hence, Wards asserts that prior to the execution of the final contract, the parties were the subject of a partnering charter under which Wards understood the works were to be managed. In consequence, so Wards asserts, the differences in the contract were not apparent to Wards until February 1995, after there had been disagreement about the entitlement of Wards to money for variation claims. 48 Wards then asserts that the contract executed on 18 May 1994 was materially different from the August draft contract in the following two respects:
Wards’ Contentions
49 Wards asserts that it immediately notified Civil and Civic of the mistake and communicated its refusal to be bound by the terms of the contract insofar as they were inconsistent with the agreement reached on 17 November 1993 (which is said to have taken into account the August draft document, the negotiations which occurred and the documents which the parties sent to each other between then and 17 November 1993). 50 Wards assert that the effect of those changes is largely that under the executed contract Wards would be required to undertake significant work in excess of that which it valued at $16.7m for no reward. 51 In overview submissions, Wards outlined the appropriate principles of law on which its case is centrally grounded in the following terms:
(a) There are said to have been significant changes to the general terms and conditions.
(b) The scope of works referred to in the contract is said to have been in excess of that which the parties had agreed upon.
52 Civil and Civic submit that Wards is not entitled to a declaration as claimed in paragraph 1 of the summons because as at November and December 1993, the only agreement reached between Wards and Civil and Civic was in respect of a price of a TGMP and the commencement of a design development process by which that TGMP would be converted into a lump sum GMP contract in the sum of $16.7m. Civil and Civic then asserts that this process was not concluded until the acceptance of the GMP sum of $16.7m and the formal execution of the Subcontract on 18 May 1994. 53 Central to Civil and Civic’s case is a very close analysis of the documents which passed between the parties and a close examination of what is suggested to have been the agreement whereby Wards would participate in the process of design development. Design development is said by Civil and Civic to have been an integral and essential part of the process occurring between the invitation to Wards to submit a TGMP on 3 August 1993 and the submission of Wards’ revised TGMP of $16.7m on 17 November 1993. 54 Civil and Civic assert that the process of design development was clear from its letter of 3 August 1993, was also ongoing after a TGMP was accepted until the point at which a GMP was agreed and reduced to a formal lump sum contract price. Civil and Civic assert that at the point at which a GMP contract was executed, the risk on design development as well as the benefits of design development then became the responsibility of Wards. 55 Civil and Civic thus contend that as at 17 November 1993, the parties had agreed on a price of a TGMP and a further process of design development. 56 Civil and Civic assert that the process of design development was also part of the conversion of Wards’ TGMP of $16.7million into a GMP in that sum. Civil and Civic assert that the culmination of that process was the signing of a lump sum GMP contract for $16.7million which occurred on 18 May 1994. 57 Civil and Civic take the Court through many documents which it is suggested by way of contemporaneous record of the communications between the parties, makes quite plain that Wards’ case is totally misconceived. The essential question from Civil and Civic’s perspective involves identifying what were the terms of any agreement entered into between the parties as at either 17 November 1993 or December 1993 and, of course, as at 18 May 1994. 58 Civil and Civic submitted that the answer to question 11 dealing with the alleged agreement is in the negative. 59 In relation to mistake, Civil and Civic submit that any mistake by the Plaintiff was unilateral. The mistake as characterised by Wards, is said by Civil and Civic to have been occasioned solely by the carelessness of each of the two directors of Wards who signed the Subcontract documents of 7 February 1994 and 18 May 1994. Civil and Civic make the point that the carelessness of Wards’ directors (if accepted) is sought to be excused by an alleged failure on the part of Civil and Civic to inform Wards that the scope of works and the terms and conditions of the Subcontract of 18 May 1994 were different to those which are said to constitute the agreement of November or December 1993. 60 Civil and Civic assert that the plaintiff’s characterisation of the evidence ignores the following:
‘ Unilateral Mistake13. A party who has entered into a written contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of its mistake or misapprehension (Taylor v. Johnson (1982) 151 CLR 422).
14. In those circumstances, the contract should be rescinded by virtue of the Defendants silence in circumstances where it knew, or ought to have known that the Plaintiff was entering into it on the basis of a fundamental misapprehension of its terms and effect (Taylor v. Johnson) and the Plaintiff should be entitled to a quantum meruit (Pavey & Matthews Proprietary Limited v. Paul (1986) 162 CLR 221).
15. Alternatively, as the mistake in the document was known to the Defendant, who kept silent about it in circumstances where the mistake was to its advantage, the contract should be rectified so as to properly record the Agreement (Johnston v. Arnaboldi [1990] 2 Qd R. 138).
Trade Practices Act
16. If circumstances are such that a person is entitled to believe that a relevant matter affecting him or her would, if it existed, be communicated, then the failure to communicate it may constitute conduct which is misleading or deceptive because the person who ultimately may act to his or her detriment is entitled to infer from the silence that no danger or detriment existed (Winterton Constructions Pty Limited v. Hambros Australia Limited (1992) 39 FCR 97; Henjo Investments Pty Limited v. Collins Marrickville Pty Limited (1986) 12 FCR 477)
17. By failing to inform the Plaintiff of the changes in the terms and conditions of the contract and the revisions to the scope of works document, the Defendant has engaged in conduct that was misleading or deceptive in contravention of s.52.
18. The Plaintiff is entitled to recover the amount of the actual loss and damage pursuant to s.82.
19. Additionally, s.87 provides for an order to be made, consequent upon the breach of s.52, varying the contract in such terms that it properly records the terms of the Agreement. In the circumstance where the Plaintiff informed the Defendant of the mistake immediately upon it coming to its attention, the Plaintiff is entitled to such an order (Marks v. GIO Australia Holdings Limited (1998) 73 ALJR 12).
Negligent Misstatement
20. The Defendant was under a duty of care to prevent economic loss from its statements when it knew or ought to have known that its words were such as to engender reasonable reliance on the part of the Plaintiff (San Sebastian Pty Limited v. The Minister (1986) 162 CLR 340).
21. A Defendant may be liable not only for what it says, but also for a failure to provide information or advice when it ought to have realized that the Plaintiff was relying on it to provide accurate information (Shaddock (L) v. Parramatta City Council (1981) 156 CLR 225).
22. In the circumstances, The Defendant was obliged to inform the Plaintiff of any alteration to the August draft contract or the scope of works.
23. By failing to inform the Plaintiff in relation to the changes to the terms and conditions of the contract and the revisions to the scope of works document, the Defendant breached the duty of care that it owed the Plaintiff. It was reasonable, in circumstances where the Defendant had not informed the Plaintiff of any alteration to the August draft contract or the scope of works, to assume that the Plaintiff would rely on the Defendant’s silence as to such matters when executing the contract.
24. The Defendant breached its duty in the circumstances set out in the factual summary.
Estoppel
25. Where a Plaintiff assumes that a particular legal relationship exists between it and the Defendant and the Defendant induced the Plaintiff, by its conduct, to adopt that assumption or expectation, and the Plaintiff acted in reliance on that assumption or expectation, with the Defendant’s knowledge and intention that the Plaintiff should do so in such circumstances as will cause detriment to the Plaintiff if the Plaintiff’s assumption is not fulfilled, the Defendant will be estopped from denying that that particular legal relationship in fact exists (Waltons Stores (Interstate) Ltd v. Maher (1988) 164 CLR 387 at 428-429).’
Civil and Civic’s Contentions
61 In short, for these and a number of other reasons, Civil and Civic assert that the answer to question 1 is in the negative, namely that the Subcontract of 18 May 1994 was not affected by mistake. It follows that Civil and Civic also submit that the answer to question 5 in relation to whether the plaintiff is entitled to an order rectifying the Subcontract, is in the negative. 62 As to question 3, Civil and Civic generally denies any mistake and denies that Wards first learned of any mistake as alleged in or about February 1995. 63 Civil and Civic also denies that Wards ever communicated to it its refusal to be bound by the terms of the Subcontract insofar as they were inconsistent with the alleged agreement. 64 Civil and Civic point out that many of the questions for separate determination overlap. 65 Civil and Civic contend that by its conduct, Wards affirmed the terms of the Subcontract and represented to it that it would not avoid or otherwise impugn the terms of the Subcontract on the basis of any alleged differences between the terms of the Subcontract and the terms of the alleged 1993 agreement. That conduct, said to constitute that affirmation, is said to have included:
(i) the suggested patently different nature of the material which is said to constitute the alleged agreement of November or December 1993, namely correspondence and minutes of meetings, compared to the form and nature of the Subcontract document of 18 May 1994;
(ii) the fact that the only agreement reached in November or December 1993 related, so it is said, to the acceptance of a TGMP of $16.7million and not a contract or agreement to perform works;
(iii) the legal arrangements upon which the plaintiff performed its works after November and December 1993 which comprised the letter of intent of 6 December 1993, the Purchase Order of December 1993 and the 7 February 1994 early works subcontract (as amended by three Order Amendments).
66 Civil and Civic assert that Wards cannot now seek to retrospectively avoid the Subcontract. 67 As to the alleged misrepresentations, Civil and Civic assert that Wards has not, on the evidence, established that Civil and Civic was aware of circumstances by which it knew Wards was entering the Subcontract of 18 May 1994 under ‘some serious mistake or misapprehension’, or that Civil and Civic ‘deliberately set out to ensure that the plaintiff did not become aware of its mistake or misapprehension’. 68 In asserting a negative to question 3, which asks whether the Subcontract had been avoided by Wards, Civil and Civic submit that Wards affirmed and remained bound by the terms of the Subcontract by its failure to immediately seek to be relieved of the Subcontract upon first becoming aware of any alleged mistake as to its terms. 69 As to the misleading and deceptive conduct cases raised by questions 2, 7 and 9, Civil and Civic repeats its case on the issue of rectification. It submits that the pleaded allegations of misleading and deceptive conduct each suffer from the same fundamental defect in that Wards at no time relied upon any of the alleged representations or further representations, even if it is found by the Court on the evidence that Civil and Civic made those representations. 70 As to the representation that the scope of works and terms and conditions in the Subcontract of 18 May 1994 were different to those in the November or December 1993 agreement, Civil and Civic repeats its submissions that there was no agreement as at November or December 1993 whereby Wards was to perform works other than pursuant to the terms of the Letter of Intent and Purchase Order of December 1993. 71 Here again, Civil and Civic assert that the scope of works and general terms and conditions provided to Wards under cover of Civil and Civic’s letter of 3 August 1993, were merely part of an invitation to Wards to submit a TGMP and embark upon a process by which that TGMP would be agreed. Civil and Civic assert that the general terms and conditions of the alleged agreement of November or December 1993 were specifically expressed to be ‘draft’ and were incomplete in relation to the names of the parties, the price and all other matters which one would normally expect to be completed in the appendix and other schedules of a document where one party alleges that document constitutes the binding terms and conditions of a lump sum contract of $16.7million. Further, Civil and Civic submit that the correspondence and circumstances during the period 3 August 1993 until at least December 1993 and even thereafter, establishes the fact that Wards itself could not have reasonably assumed the documents particularised in paragraph 2 of the summons could meaningfully occupy the basis upon which Wards and Civil and Civic would agree to be bound for the performance of the excavation, construction and associated works in relation to the project. 72 Generally, Civil and Civic take issue with the representational case on a number of bases, including Civil and Civic’s assertion that the representations could not have reasonably been relied upon by Wards. 73 Civil and Civic denies that it engaged in any misleading or deceptive conduct in contravention of the Trade Practices Act. Civil and Civic contends that the answer to questions 2, 7 and 9 are all in the negative. 74 As to the estoppel case, Civil and Civic denies that it acted unconscionably or in breach of any equitable obligation which it may have owed to Wards, sufficient to found an estoppel based on the principles discussed in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. Civil and Civic in negating question 6, submit that Wards cannot establish any factual or legal basis to claim an estoppel as pleaded in circumstances where :
(i) signing the early works Subcontract on 7 February 1994;
(ii) signing the Subcontract on 18 May 1994;
(iii) failing and refusing to express any intention not to be bound by the terms of the Subcontract;
(iv) continuing to perform works after becoming aware on or about February 1995 (at the latest) that the terms of the Subcontract were the terms upon which Civil and Civic required Wards to perform its works.
75 As to the alleged breach of duty of care case, Civil and Civic have a number of contentions. Civil and Civic denies making the representations. 76 Civil and Civic further says that in the event that it is found to have made the representations and/or further representations, then such representations were made in circumstances where they were both reasonable and accurate at the time they were made and that they were made within the context of Wards’ knowledge of the nature of the works to be performed and the works then being performed by Wards. Civil and Civic assert that Wards was fully aware of the rights, obligations and liabilities which Wards was accepting by participating in the process of design development after the acceptance of the TGMP in November 1993 and upon executing the Subcontract of 18 May 1994. 77 Generally, in relation to each of the matters the subject of paragraphs 19A, 19B and 19C of the summons and the related matters raised by question 8 of the questions for separate determination, Civil and Civic repeats its earlier submissions in relation to Wards’ claim for false or misleading conduct. That is, that Wards at no time relied on any of the alleged representations, even if found to have been made. In any event, Civil and Civic deny owing Wards any duty of care as alleged in paragraph 19B of the summons and further denies any breach of any such duty in any event contrary to the matters alleged in paragraph 19C of the summons. 78 Accordingly, Civil and Civic contend that question 8 should be answered in the negative. 79 As to question 10 of the questions for separate determination, which contemplates whether the plaintiff is ‘entitled to damages in negligence or pursuant to section 82 of the Trade Practices Act’, Civil and Civil denies any such entitlement. 80 Accordingly, Civil and Civic contends that the answer to question 10 is no. 81 As to the question 4 alternative claim of quantum meruit, Civil and Civic seek to negate question 4, submitting that the summons does not satisfactorily plead a case setting out the factual or legal bases upon which the alternative claim for a quantum meruit is sought. It submits that the Court could not be satisfied that the only basis upon which Wards would be entitled to remuneration for the work performed by it is on a quantum meruit basis, particularly in circumstances where Wards continued to perform work and is said to have represented to Civil and Civic by its conduct that it would not seek to impugn the terms of the 18 May 1994 Subcontract, after first allegedly learning of any mistake or discrepancies in the Subcontract compared to the alleged agreement of December 1993. 82 Civil and Civic submit that the circumstances which could give rise to a quantum meruit are not satisfied particularly where :
(i) the actions of Wards leading to the execution of the Subcontract of 18 May 1994 were, if mistaken, not due to any conduct on the part of Civil and Civic;
(ii) if there was false and misleading conduct by Civil and Civic, then such conduct was not relied upon by Wards;
(iii) there was no knowledge or unconscionable conduct on the part of Civil and Civic sufficient to lead to a finding that Civil and Civic knew of Wards’ mistake;
(iv) there was no agreement as at November/December 1993 by which Wards performed its works other than the letter of intent of 6 December 1993 and related Purchase Order. That agreement is said by Civil and Civic to have been only in relation to a TGMP of $16.7million and a process by which that TGMP would be converted into a GMP contract at a future point.
83 Civil and Civic then submit that it would be unjust to permit Wards to now seek remuneration on the basis of a quantum meruit in circumstances where it unreasonably relied upon the alleged representation, if found to have been made, at the time of signing the 18 May 1994 Subcontract, because Civil and Civic assert that Wards must have known as at 18 May 1994 that those representations were false. 84 Civil and Civic further submit that further, Wards continued to perform work after first becoming allegedly aware of its purported mistake in relation to the content and effect of the 18 May 1994 Subcontract. Civil and Civic submit that Wards nevertheless continued to perform its works knowing that Civil and Civic only recognised that Subcontract as the basis upon which Wards could perform those works. 85 Paragraphs 20 through to 26 of Wards’ contentions earlier set out and to be referred to a referee do not relate to any of the questions for separate determination now before the Court.
(i) Wards is said to have engaged in a fully informed process leading to the agreement of a TGMP.
(ii) Wards is said to have participated in design development over 5½ months after the TGMP was agreed.
(iii) Wards is said to have agreed to contractual regimes during that period of design development whereby Wards is said to have been obliged to and in fact to have purported to perform its works in accordance with the Letter of Intent of 6 December 1996 and the 7 February 1997 early works Subcontract.
(iv) Wards is said to have been fully informed about the accuracy or otherwise of the alleged representations prior to the signing of the Subcontract of 18 May 1995.
(v) Wards is said to have accepted payments by way of progress claims up to and after the time it alleges it first became aware of any alleged differences in the terms of the Subcontract and alleged agreement.
86 It is convenient to initially identify the actors generally referred to from time to time in relevant documents and communications by name and position and at the same time to indicate which of these persons gave evidence before the Court.
Dramatis Personae
87 I turn to examine the facts. Plainly of special significance are the formal communications between the parties leading to the execution on 18 May 1994 of the Subcontract. 88 The vast bulk of the documentary tender went into evidence as Exhibit PX, comprising a number of folders. It is generally convenient where referring to specific documents to use the PX references. During the course of the hearing, a number of central documents were referred to repeatedly. Without being exhaustive, it was convenient to give these documents a separate reference and they are the documents which became ‘J1’ and following. In the course of preparation for writing the judgment, further J numbers have been allocated. When these documents are referred to in the course of the Judgment, the ‘J’ reference will often be the most convenient mode of reference. 89 Extracts from the documentary tender comprising the record of these communications between the parties are initially set out below. In a case of this type, it is not practicable to avoid a relatively detailed examination of the evidence given by the witnesses as to the genealogy of certain of the documents and as to their contemporaneous beliefs as to what the documents stated. Where emphasis is sought to be given to particular excerpts of oral evidence the material is underlined.
Wards’ Civil Engineering Pty LtdMr Glenn Cherrie Wards’ Managing Director. Mr Cherrie was involved in approximately 60-70 contracts between Wards and Civil and Civic in the period prior to 1994.
Mr David Keetley Director of Wards.
Mr Adrian Levido Wards’ Estimating Manager.
Mr Michael Manion Former Wards’ Project Manager. Mr Manion worked on site as Project Manager from March 1992 to March 1994.
Mr Tony Niederberger Wards Project Engineer.
Mr Maxam Pittolo Wards’ Associate Director, Construction. Mr Pittolo was Contract Manager on the project.
Mr Peter Ward Chairman of Directors of Wards.
Civil and Civic Pty Ltd
Mr Jack Crangle Civil and Civic Project Manager.
Mr Roger Dias Civil and Civic’s Contracts’ Manager.
Mr Jeffery Everett Civil and Civic Cost Planner
Mr Philip Garling Civil and Civic
Mr Ray Gedge Civil and Civic Cost Planner
Mr Kip Hayes Civil and Civic Project Engineer from early November 1993.
Mr Chris Heap Civil and Civic Project Construction Manager until 6 February 1994.
Mr David Knight Civil and Civic’s Contracts Officer.
Mr Brian McCloy Civil and Civic Cost Planner.
Mr Seamus O’Connell Civil and Civic Project Engineer. He left the project in February 1995.
Mr Gregory Robinson Civil and Civic Project Manager until March 1994.
Mr Charles Savage Civil and Civic Community Business Unit manager.
Mr David Woodcock Civil and Civic Administrator with responsibility for contract administration.
The Facts
90 By letter dated 23 June 1992 Civil and Civic wrote to Wards inviting Wards to tender for the works which would form part of the Prospect Water Treatment Works project. The letter advised that Wards’ tender ‘should be submitted in accordance with the conditions of tendering’. The letter enclosed a package of relevant documents for Wards’ attention. 91 The documents enclosed under cover of this letter included a document entitled ‘Conditions of Tendering for Subcontract’. This stated, inter alia:
23 June 1992 invitation to tender [J1]
92 Appendix ‘A’ to the Conditions of Tendering for Subcontract stated inter alia:
(a) That the Subcontract would be as stated in Appendix ‘A’.
(b) That the tender documents were those documents listed in Appendix ‘A’.
(c) ‘ Tenderer to inform itself
The tenderer must and is deemed to have . . .
8.1 Examined the Tender Documents, the Site and its surroundings including any existing buildings or other structures, and any other information made available in writing by Civil and Civic to the tenderer for the purpose of tendering.
8.2 Examined all information relevant to the risk, contingencies and other circumstances having an effect on its tender and which is obtainable by making reasonable enquiries and
8.3 Satisfied itself as to the correctness and sufficiency of its Tender and that its price covers the cost of complying with all the requirements of the Tender Documents and of all matters and things necessary for the due and proper performance and completion of the work described in the Tender Documents.’
93 Appendix ‘A’ further stated that ‘the Contract price is not subject to adjustment for rise and fall in costs’. 94 Appendix ‘B’ to the Conditions of tendering for Subcontract, being the form of tender read, inter alia:
‘Clause 1 : The Subcontract is a Lump sum . . .
Clause 3 : The Tender documents are :
. The Conditions of Tendering for Subcontract;
. The Form of Tender . . .
. The Specification
. Scope of works . . .’
95 The Subcontract enclosed with the invitation for tender materials commenced with three pages which include a large number of blanks. Those pages which are to be found at Exhibit PX pages 47 to 49 inclusive` are appended as Appendix ‘A’ to this Judgment. The only reference to this project appears on the first page where the project is referred to as ‘Prospect : Water Treatment Plant’ and the location is referred to as ‘Prospect NSW’. Otherwise the draft is not adapted with any particularity to this site or to these Subcontract works. 96 This form of Subcontract included in the definitions clause, a definition of ‘variation’ as meaning any of the following:
‘To Civil and Civic Pty Limited
. . . of . . .
(‘the Tenderer’) do hereby tender to comply with all the obligations of the Tender Documents and to do all matters and things necessary for the due and proper performance and completion of the Works described in the Tender Documents.
1. For the Lump Sum of: $……….
And/or alternatively
2. For the Lump Sum, subject to adjustment for rise and
fall as stated in the Conditions of Tendering of $……….
And/or alternatively
3. At the rates in accordance with the attached
Schedule of Rates. The total of amounts shown in the
Schedule of Rates is $……….’97 Clause 6.10 of the form of Subcontract was in the following terms:
‘(a) an increase or decrease in or omissions from the Works.
(b) a change in the character or quality of material or work.
(c) a change in the levels, lines, positions or dimensions of a part of the Works.
(d) execution of additional work.
(e) a change to the nature or scope of the Works which results from a direction or instruction issued to C&C under the Head Contract.’
[Clause 1.1 - Definitions]
98 A number of further blanks appear in annexures to the Subcontract including the Schedule of Additional Subcontract terms which was not completed, the Schedule of Drawings which was not completed and the Appendix which was not completed. The Appendix is appended to this judgment as Appendix ‘B’ and is to be found at Exhibit PX volume 3 pages 113 to 117 inclusive. 99 Also part of the materials enclosed with the invitation to tender was a document entitled ‘Prospect Water Treatment Works’
‘6.10 Variations by C&C
6.10.1. C&C, by written notice, may instruct a variation at any time prior to the Date of Practical Completion of the Head Contract and the Subcontractor must comply promptly with that instruction within the time specified by C&C. The Subcontractor will not be entitled to payment for a variation unless the Subcontractor first provides C&C with a copy of a written instruction from C&C to execute the variation.
6.10.2. If the Subcontractor considers that a drawing, instruction or direction issued by C&C, although not stated to involve a variation, in fact involves a variation then the Subcontractor must give written notice to C&C before commencing work in relation to the drawing, instruction or direction. Compliance with this Clause will be a condition precedent to any claim the Subcontractor may have for an extension of time or for a variation.’
Scope of Works
100 This document is appended to this Judgment as Appendix ‘C’. It is the document which was added to Exhibit PX as MFI - ADD1. 101 Particularly important is the paragraph appearing on page 5 of the Scope of Works document which reads:
W. Ward Civil Engineering
Bulk earthworks, detailed excavation and drainage.’
102 By letter dated 25 June 1992, Wards wrote to Civil and Civic enclosing its preliminary final assessment for earthworks, drainage, roads and selected concrete structures. This letter advised inter alia:
‘ General
P Wards Civil Engineering are responsible for the bulk earthworks and associated works as detailed above.
After the bid phase Wards will be responsible for the participation in design development to ensure that document intent as priced and detailed remains within the fixed price provided by Wards for submission. Risk on design development is therefore borne by Wards unless major changes to scope are required by the client, New South Wales Water Services or the Water Board.
In the case of major changes a new price would be required and Wards will need to show that rates and commercial viability are in line with the original document.’ [Emphasis added]
25 June 1992 - submission by Wards to Civil and Civic of preliminary final assessment for earthworks, drainage, roads and selected concrete structures. [J2]
103 The sentence ‘risk assessment particularly with respect to design’ is of special significance.
‘This proposals [sic] summarises ongoing discussions over three months and documents savings in excess of $15million compared to initial budgets.
Summary of Offer:
Major earthworks $4,477,942
Structures : R.W. Pump South $8,461,813
Inlet: Contact Channel, C.W. Tank and Bridge
Minor Earthworks: roads, landscaping, etc. $2,923,658
Design contingency $1,130,000
TOTAL LUMP SUM $16,993,413
Attached please find the following supporting information for your consideration:
Priced bill of quantities
List of drawings . . .
Preliminary programme
We anticipate discussions over the next few days will provide the opportunity to finalise our agreement. These discussions should include:
Finalisation of scope and price
Risk assessment particularly with respect to design
Design improvement
Terms and conditions of contract including payment
Programme . . .’104 By facsimile forwarded by Wards to Civil and Civic on 1 July 1992 (the sender being Mr Glasglow, a senior estimator with Wards), Civil and Civic advised inter alia:
Facsimile from Wards to Civil and Civic of 1 July 1992 [Part of J2]
105 This facsimile makes plain an early focus by Wards on the need to differentiate between ‘variations’ and ‘design development’.
‘To finalise our submission we need some additional information:
. . .
7. Scope of work/variations
Given that the project is still in the stages of design development and the detail of scope of work is unable to be closely defined - what constitutes a variation? How will it be differentiated from a ‘design development encompassed in the original scope?’
106 By letter dated 7 July 1992 from Wards to Civil and Civic, Wards submitted its tender for the project. The letter advised inter alia that the tender:
7 July 1992 - Wards submit their tender for the project [J3]
107 The letter also advised that ‘in addition, discussions have led to the following agreements and clarifications’. This sentence was followed by references to a number of matters including matters concerning scope of work. 108 Following the specific references to particular matters dealing with scope of work, the letter includes the following paragraph :
‘forms the establishment of a “network agreement” between ourselves the basis of which can be summarised by the following:
Invitation to tender dated 23 June 1992.
Agreement of confidentiality
Drawings, refer attachment number 1 . . .
Specification No. 27, concrete
Contractor’s programme dated 1 July 1992.’109 By letter dated 16 July 1992, Civil and Civic wrote to Wards advising that in confirmation of their recent discussions, they were writing to clarify current arrangements regarding the project. 110 The letter continued inter alia:
‘We have allowed specific contingencies against sections of the work which are not detailed sufficiently, or where there is adequate [sic] geological information to properly assess costs. Elsewhere we have allowed a small global risk contingency to cover the costs of details not available on the “preliminary” drawings. We understand that changes in quantities or scope resulting from design changes will be paid as variations to the contract at the rates set out in the accompanying schedule.’
16 July 1992 letter from Civil and Civic to Wards [J4]
111 On 29 July 1993, Civil and Civic wrote to Wards inviting it to prepare a TGMP proposal. A letter in identical terms was resubmitted to Wards on 3 August 1993. Mr Levido to whose attention the letters were addressed, accepted that he had received the earlier draft. 112 The letter has already been set out in full. 113 The enclosures to the letter sent on 3 August 1993 included inter alia, the following:
‘As you are aware, we are at present preparing our submission bid based on pricing that has been provided by you. You have been competitive in most areas of your scope of works with some minor areas yet to be finalised. Given the current time restraints, we would intend to address these matters when we are awarded preferred tenderer status.
In the post-bid phase, we would look forward to working toward establishing a contract with you based on our exclusive arrangement and the pricing that has been provided to date. The basis of the contract would be the following documents which you have received throughout the bid period.: . . .
1. Conditions of tendering
2. Subcontract document . . .
8. Scope of work . . .’
Letter of 29 July 1993/3 August 1993 from Civil and Civic to Wards [J5 and J6]
114 The enclosures also include a document entitled ‘Drawing Numbers . . .’ [PX volume 3 page 153] 115 The further enclosures to the 3 August 1993 letter included the form of subcontract which is again generally in blank save for identifying the project and the location. It is to be found at PX volume 3 pages 155 through to 226. The Appendix at PX volume 3 pages 222 through to 226, is likewise in blank. 116 The same letter also enclosed a specification to be found at PX volume 3 page 227 and following. The specification begins with a preamble reading inter alia:
‘(a) A document entitled ‘Procurement Programme “WAT Broc” [Exhibit PX volume 3 page 140]
(b) The document entitled ‘Scope of Works “WAT BSOW” [Exhibit PX volume 3 page 141. I interpolate that this document appears to be a short version of the scope of works].
(c) A further document entitled ‘Scope of Works’ [Exhibit PX volume 3 at page 142. This document appears to be a longer version of the Scope of Works. The document begins: “The following civil and structural components will form the works for pricing of a . . . ( TGMP ) by [Wards]”. The document includes at PX volume 3 at page 148 the following paragraph:
“ General
P Ward Civil Engineering are responsible for the bulk earthworks and associated works as detailed above.
After the TGMP Phase Wards will be responsible for participation in design development to ensure that document intent as priced and detailed remains within the fixed price provided by Wards for submissions. Risk on design development is therefore borne by Wards unless major changes to scope are required by the client, NSW Water Services or the Water Board.’
‘Additional information to be supplied:
. Conditions for Primary Contractor pricing
. Programme times
. Access and site facilities plan
. Standard Civil & Civic Pty Limited Subcontract document
. Schedule of drawings.’
[Emphasis added]
117 By letter of 23 August 1993, Wards wrote to Civil and Civic in the following terms:
‘This specification comprises preliminary specification notes identifying the general intent of the design.
This specification will be developed into detailed technical specifications for the purpose of Subcontract tendering and construction.’
Letter from Wards to Civil and Civic of 23 August 1993 [J7]
118 That letter was signed by Mr Levido as Wards’ estimating manager. 119 The letter enclosed a number of documents. These included a document entitled ‘Prospect Water Filtration Plant TGMP August 1993’ which traced changes. The document had six columns entitled as follows:
‘Re Prospect Water Filtration Plant
Civic&Clear Water Tank Package
Target Guaranteed Maximum Price Proposal
We refer to your letter dated 3 August 1993 wherein you sought from us our detailed proposal for the construction of earthworks, clear water tank and various other structures which form a part of the Prospect Water Filtration Project.
This proposal is to be in line with the relationship established and maintained between our respective companies for the purpose of both preparing a successful tender bid for the project and operating a successful project.
Since the time of the original tender there have been a series of departures from the tendered scope. These have been priced and submitted to yourselves as variations.
In order that our offer may be consolidated we have prepared our quotation for the current scopes. In addition to this we have prepared a list of potential areas where we consider savings may be made during the design development phase. These have been left as options to be developed over this period prior to the development of a Guaranteed Maximum Price.
We also attach a summary of contract conditions upon which this offer is based.
We trust that this information satisfies your requirements and look forward to continuing our partnership arrangement on this project. Should you require any additional information please contact either Mike Manion or myself.’
120 The document enclosed a page entitled ‘Contract conditions’. This read inter alia:
Description; July 1992 Submission; Additional Works; June 1993 Update; August TGMP; Changes 6/93 to 8/93
121 The document also enclosed three pages entitled ‘Risk profile’. These included the following:
‘In addition to the general conditions of contract we require the following conditions to be incorporated in the final contract agreement. Where these are in conflict with the general conditions these shall take precedence . . .
Variations
Our price is based on our receiving design information in sufficient time as to minimise the effect of cost increases brought about by design development. We also require the full benefit of cost reductions caused by design improvement regardless of who initiated the improvement. This would also to all savings in excess of those nominated in this submission which have been offered on a shared savings basis of fifty percent.
Where variations arise from either Client or Water Board directed works we expect full reimbursement.’
122 The document continued inter alia, as follows:
‘During the bid phase we were requested to include for various areas of risk ie those which it was most economical for us to control in order that the overall risk profile of the project could be reduced. This was done by way of various contingent items wherein we made allowance for risks of which we were aware.
Our assessment of the risks to which we would be exposed were as follows:’
. . .
Design Risk raw water pumping station Training Walls
clear water tank structure grilles
filter block sub-grade
generally throughout project as original scope lacked detail which may increase construction costs .’
[Emphasis added]
‘These risks were assessed in four ways subject to the nature of the risk and its potential affect to our involvement on the project. These were as follows:
Acknowledge risk but aim to be able to manage it such that no cost increase would be necessary.
Identify and value the most economical solution.
Include for risk in general pricing such that offer covered a reasonable average of the conditions which may be encountered.
Where risks were known to occur but it was not possible to quantify them we included a non-specific contingency to our pricing for that area of work.
It is also confirmed that the risks accepted by us are to the same level as accepted between Civil and Civic and its client. Therefore should any event exceed that limit we require the same protection and reimbursement and [sic] Civil & Civic receive.
123 The final three paragraphs in the ‘risk profile’ enclosure read as follows:
During the original tender phase we were advised that we would have access to the design team throughout the project and that savings generated through design change would remain to our account. Similarly the reverse would stand that we were expected to bear the consequences of additional costs arising during the design development phase as long as the design remained within the original concept. We made allowance for this as part of our tender.
By this access we envisaged that we would be able to manage our various risks at times having our costs increased by design detailing and at other times having them reduced.’
124 A further enclosure was entitled ‘Potential savings’. This enclosure commenced:
‘ Design system
It has been our experience that construction costs on projects where the design has not been finalised before construction starts can be significantly higher than on those where the design has been completed.
Additional costs arise through delays, reworking and performing small areas of work inefficiently.
We have tendered the works on the basis that as it is Civil & Civic managing the design process such problems will not occur. However prior to final confirmation of our price we need to agree the design management system which will assure this.’
125 By letter dated 26 September 1993, Wards wrote to Civil and Civic as follows:
‘We have identified the following as potential savings to our scope of works which would be brought about by design development. It is anticipated that our Guaranteed Maximum Price will be reduced by 50% of the actual savings achieved when each opportunity is realised. . .’
26 September 1993 Letter from Wards to Civil and Civic [J8]
126 This letter was again signed by Mr Manion describing himself in the letter as ‘Project Manager’. 127 The letter enclosed a number of documents. These included a document entitled ‘Risk Profile’ which read inter alia:
‘We refer to our letter dated 23 August 1993 and subsequent discussions with your staff regarding the construction of the civil works and clear water tanks on this project.
Arising form [sic] these discussions we seek now to resubmit our priced bill of quantities for these works. This takes into account an adjustment brought about by an error in our concrete suppliers quotation as well as adjustments to ensure that the price matches our current understanding of scope.
We also attach a table showing our current understanding of the risks associated with the project together with potential opportunities we see for design development. It is our intention to work with your team over the Price Validation Period prior to the confirmation of the Guaranteed Maximum Price to both prove that the design savings are achievable and to minimise the outstanding risks. It is confirmed that these issues must be considered concurrently in order to offset the potentially large windfall wins and losses.
We attach our proposals for the management of the risks for the concrete structures and earthworks . . .’
128 On the second page of the risk profile, the following matters are inter alia set out:
‘As requested we detail herewith our proposal relating to Risk Profile.
A. Concrete Structures
As you are aware the concrete structures have been measured and valued by our QS and estimators. A comprehensive breakdown of our price has been submitted to you in the form of a bill of quantities resulting in our Target Guaranteed Maximum Price.
This format will remain until finally a Guaranteed Maximum Price is agreed.
The contingencies we have allowed for in our price relating to the concrete structures have been separated from our TGMP at this stage and are detailed separately.
These contingencies are to accommodate changes in design which resulted in an increase in cost.
Our rates indicated in our bill of quantities do not allow for any contingencies required as a result of design changes.
In order to resolve the issue of this risk and its associated value we propose the following:
. . . 5. Any saving resulting from the contingencies not being expended will be distributed as follows:
(a) Design consultants responsible for that are of work 10%
(b) Civil & Civic 45%
(c) WCE 45%129 Part of the risk profile document dealing with ‘earthworks’ included the following paragraph:
‘There are other matters relating to the risk profile which have not been mentioned above:
. . . 3. Delayed or inadequate design - We have been constantly assured that the design procedure will be such that construction will not be carried out on a basis of design today, construct tomorrow, literally.
In the past, we have had several problems with projects which have had a lack of adequate design/drawing at and near the time of actual construction.
The design process which has been discussed is expected to eliminate such problems and hence our price does not include for any delays resulting from insufficient or inadequate design.
Should delays of this nature eventuate it is understood that this risk is a responsibility of Civil & Civic.
We note that WCE will cooperate in the design phase to try and avoid an undesirable situation eventuating.’
130 The table attached to the 26 September 1993 letter and referred to in the body of the letter, has five columns. These columns and the first of the items in the table are as follows:
‘For other areas, specialist geo-technical advice was sought to provide detail for specific details. Specifically the coffer dam construction method, filter block subgrade, rock batter stability criteria. Against these areas we adopted the recommendations of the Geotechnical Consultant with no allowance for additional costs. Thus if the information provided previously was insufficient to carry out the work effectively then we will have to increase our price for these items. These issues have been identified as risks to be resolved during the Price Validation Period prior to the agreement of the Guaranteed Maximum Price.’
131 The total that the end of the table of the column ‘Possible overruns to WCE’ is ‘$1,925,000’.
‘Description Details Possible savings
to WCEPossible overruns
to WCEContingency from TGMP
. . .Program Prior to agreeing a final GMP. WCE needs to review and accept the project program . . . $200,000 . . . 132 On 22 October 1993, a meeting took place attended by Mr Robinson and Mr Hayes of Civil and Civic and by Mr Levido, Mr Niederberger and Mr Manion from Wards. An issue arises as to whether Mr Cherrie, also noted as in attendance in Mr Levido’s contemporaneously kept day book (later recreated as PX volume 9 tab 36(b)), was in attendance. 133 The minutes of this meeting include the following:
22 October 1993 - High level meeting [J8A]
134 A handwritten note at the end of the document signed by Mr Levido reads:
- final document
‘2 contracts - summary of commitments to date for GMP
Design development to remain with us:
- if margins are being cribbed and design calls for unexpected works, there will be some latitude for additional dollars - final payment . . .’ [Emphasis added]135 Mr Niederberger’s notes of the same meeting do not record Mr Cherrie as being present. Those handwritten and contemporaneous notes record the meeting as having been a design meeting and held on 22 October 1993. The notes include the following:
‘These are the record of lost handwritten notes.
A.F. Levido 26 March 1993’136 Also admitted into evidence was a file note which Mr Levido believed was in Mr Glasgow’s handwriting. [J8C] The file note bears a date ‘21 October’. The defendants assert the probabilities that it is a record of the same meeting of 22 October 1994, particularly because at the foot of the first page it reads:
‘WCE to take on Design Development
[Therefore] no variations unless C&C get a variation (i.e. need to use the pot of money made at the start).’
137 By letter dated 17 November 1993, Wards wrote again to Civil and Civic. Whereas previous letters had been headed:
‘[Wards] will be responsible for Design Development Risk unless Prospect Water can get variation from client.’
Letter from Wards to Civil and Civic of 17 November 1993 [J9]
138 This letter was signed by Mr Manion describing himself as ‘administration manager’. 139 The letter included a document entitled ‘urgent works’ which identified six items of work totalling $595,162.70. 140 The letter also included a document entitled ‘Target Guaranteed Maximum Price Summary Revision ‘B’’ which summarised a 28 page document entitled ‘TGMP/D’. For the purposes of this Judgment it should suffice to append as Appendix ‘D’ only pages 1, 27 and 28 of the document. The general nature of the document is clear enough by reference to those pages but the full document of course requires to be read. 141 The TGMP/D document concluded with a price total of $16,700,000.
‘Re: PROSPECT WATER FILTRATION PLANT CIVIL AND CLEAR WATER TANK PACKAGE TARGET GUARANTEED MAXIMUM PRICE PROPOSAL’
This letter dropped the word ‘Proposal’ from the heading. The letter was in the following terms:
‘We refer to our previous correspondence and discussions regarding our target guaranteed maximum price for the construction of the civil works and clear water tank package at this project.
We wish to confirm our acceptance of your offer of Sixteen Million Seven Hundred Thousand Dollars ($16,700,000) as being the Target Guaranteed Maximum Price for this work. We attach a copy of our most recent bill of quantities to reflect this.
We confirm that this price is deemed to include for the costs of design development and site allowance within the defined scope .
It is agreed that both parties shall now make all endeavours necessary until 21 January 1994 to develop the design to a stage whereby the [sic] this target price can be converted into a lump sum contract of equal value.
In the intervening period urgent works may proceed under separate minor works orders as attached. The value of these have been calculated from the current price bill of quantities.
Please confirm your agreement of this to us.’ [Emphasis added]
142 By letter dated 6 December 1993, Civil and Civic wrote to Wards in the following terms:
6 December 1993 - Early works package letter of intent [J10]
143 Civil and Civic forwarded a purchase order to Wards in December 1993 dealing with silt curtains in the sum of $48,500. The reverse side of the purchase order included a number of terms and conditions.
‘Re Prospect Water Filtration Plant
Civil Works Early Works Package
Letter of Intent
We have pleasure in confirming our intention to enter into a contract with yourselves for the early works in the Lump Sum Tender Price of $250,000 . . .. Reference our Invitation to provide a TGMP of 29 July 1993 . . .[Clearly a reference to Document J5 earlier referred to.]
We attach a copy of our Subcontract Checklist which summarises our discussions and agreements as per our meetings to date, and ask you to note and action the outstanding points in accordance with the timeframe as required by the tender documents.
Please ensure that you provide all necessary information, material, plant and equipment, manpower and any other resources deemed necessary to comply with the Construction Programme to achieve the scheduled completion dates.
A formal Subcontract Agreement is being prepared and we will contact you when this has been finalised to arrange a convenient time for signing of the documents.
This Letter of Intent is subject to the execution by both parties of the said Agreement.
The breakdown of the expenditure covered by this Letter of Intent is as follows:
[A breakdown of items was then set out totalling $250,000]
We look forward to a successful project and trust that we will have a pleasant and mutually rewarding association.’
December 1993 Purchase order [J11]
144 On a number of occasions, Wards prepared what was generally referred to in the evidence and in a number of contemporaneous documents as ‘Plus/Minus’ or ‘±’ registers. The documents were entitled ‘Prospect Water Filtration Project Design Improvement Opportunities’. They generally assigned a positive value to something which would save Wards money and a negative value to something which may cost Wards money. In this first Plus/Minus Register, there were four columns reading from left to right: ‘Description’; ‘Value’; ‘Current Value’; and ‘Action’. The document is appended as Appendix E to this Judgment. It will be seen that, under the ‘description’ column, towards the end of the document relating to ‘Hornicks’, the heading reads: ‘General reduction in price to fit TGMP’. 145 The ‘Value’ column stated the potential exposure which Wards perceived at the point in time when the register was printed out. The ‘Current Value’ column set out the currently valued extent of the exposure. 146 Later the Plus/Minus registers altered in the position in which the columns were placed but otherwise, the content of the registers remained essentially the same. 147 It will be noticed that the fourth item in this first Plus/Minus register dealing with ‘Subgrade improvement beneath lime saturater’s states in the ‘Description’ column: ‘Currently this does not appear to be required but this has not yet been finalised’. It includes a negative item in parenthesis in both ‘Value’ and ‘Current Value’ columns and in the ‘Action’ column, includes the statement: ‘Potential for additional works not in current scope’. 148 The total ‘Value’ column in this first Plus/Minus Register was expressed in positive terms in the amount $1,930,000. This was effectively Wards asserting in the document that if its TGMP was $16.7million, then to use the defendant’s expression, it was ‘currently in front of the game $1.93million’.
The First of the ‘Design Improvement Opportunities’ or ‘Plus/Minus’ Register documents - January 1994 [J11A]
149 On 7 February 1994, Civil and Civic and Wards entered into a formal contract, the first two paragraphs of which read as follows:
7 February 1994 Early Works Subcontract [J12]
150 This document, which clearly followed the 6 December 1993 letter of intent dealing with the early works package, includes relevantly in the definitions clause, the following definitions
‘THE PARTIES AGREE :
A. The Contractor must execute and complete the whole of the works namely the procurement, supply, installation and commissioning of all works associated with bulk earthworks, detailed earthworks, drainage and stormwater management, including two permanent and one temporary bridge, environmental controls, temporary access roads, hard stands and site maintenance (including variations under the Contract) (‘Works’) in every respect to the satisfaction of C&C and in accordance with the contract.
B. C&C must pay the contractor the lump sum of $1,494,533.66;
or such other sum as may become payable under the contract (‘contract sum’) at the time and in the manner specified in the contract terms.’151 The contract also includes clause 6.10, reading as follows:
‘”Design Development Variation” has the meaning ascribed to it in Clause 6.30.
“Variation” means any of the following:
(a) an increase or decrease in or omissions from the Works.
(b) a change in the character or quality of material or work.
(c) a change in the levels, lines, positions or dimensions of a part of the Works.
(d) execution of additional work.
(e) a change to the nature or scope of the Works which results from a direction or instruction issued to C&C under the Head Contract.’
152 Clause 6.30 of the contract was in the following terms:
‘ 6.10 Variations by C&C
6.10.1 C&C, by written notice, may instruct a variation at any time prior to the Date of Substantial Completion of the Contract and the Contractor must comply promptly with that instruction within the time specified by C&C. The Contractor will not be entitled to payment for a variation unless the Contractor first provides C&C with a copy of a written instruction from C&C to execute the variation.
6.10.2 If the Contractor considers that a drawing, instruction or direction issued by C&C, although not stated to involve a variation, in fact involves a variation then the Contractor must give written notice to C&C before commencing work in relation to the drawing, instruction or direction. Compliance with this Clause will be a condition precedent to any claim the Contractor may have for a variation.
6.10.3 The Contractor will not be entitled to a payment for a variation under this clause 6.10 in repsect [sic] of a Design Development Variation.’
153 Mr Keetley of Wards signed the contract on Wards’ behalf and initialled at the foot of each page. His evidence was that in about February 1994, he became aware of the fact that Wards was awaiting a payment of about $200,000 from Civil and Civic in relation to work carried out at Prospect. Wards was anxious to receive this payment because it had incurred substantial expenses on the Prospect project by the time and it had the usual cash flow problems which it had in February following upon the construction industry Christmas shut down. Mr Keetley was aware that payment would not be made to Wards by Civil and Civic until such time as it had signed the contract with Civil and Civic. 154 Mr Cherrie was the person who was responsible for signing the contract with Civil and Civic. However, on 7 February 1994, Mr Cherrie was away from the office. Although Mr Keetley did not know anything about the matter, Mr Cherrie requested that he attend the offices of Civil and Civic in Sydney in order to sign a contract which would enable Wards to receive payment of moneys due to it from Civil and Civic. Mr Cherrie told Mr Keetley that Mr Keetley had to meet with Mr O’Connell and that the contract which he was to sign was for a value of around $1.5million. 155 Mr Keetley attended the office of Civil and Civic during the morning of 7 February and met with Mr David Knight who told Mr Keetley that the contract was not ready for him when he arrived and Mr Keetley, in consequence, had to wait for several minutes before the contract was ready. 156 In due course, Mr Knight handed to Mr Keetley the contract and asked him to sign it. As Mr Keetley had been simply asked to sign the document by Mr Cherrie, Mr Keetley understood that the document had been agreed upon between Wards and Civil and Civic and so he did not ask Mr Knight for any explanation about the terms of the contract. Mr Knight did not draw his attention to any clauses in the contract or say anything to him about its terms. Mr Keetley then signed the contract. When Mr Keetley attended Civil and Civic’s offices, he understood that he would be handed a cheque. He was unable to recall whether he had received a cheque on that day but understood that Wards’ accounts department did bank a cheque from Civil and Civic on 7 February 1994 and in consequence believes that he must have received a cheque from Civil and Civic and taken it back to Wards’ office.
‘6.30 Design Development
6.30.1 The Contractor acknowledges that :
(a) the design of the works is not finalised and further development of the design will be undertaken by C&C; and
9b) the development of the design may result in changes to the Works (‘Design Development Variations’) including matters which would otherwise constitute variations.
6.30.2 Notwithstanding any other term of this Contract C&C will not be liable for any losses suffered by the Contractor in connection with and no adjustment will be made to the Contract Sum in respect of any Design Development Variation except to the extent that C&C receives payment for the Design Development Variation under the Head Contract.
6.30.3 If an amount is payable to the Contractor under Clause 6.30.2, the amount shall be determined under Clause 10.4 but shall in no circumstances exceed the amount payable to C&C under the Head Contract in respect of the Design Development Variation.’
157 Under cross-examination, Mr Pittolo gave evidence that sometime after the 7 February 1994 early works contract, Mr Manion, prior to his leaving the site, prepared a document for Mr Pittolo which brought to Mr Pittolo’s attention some of the contract conditions. That document was tendered as Exhibit D6. To use Mr Pittolo’s words:
Sometime after the 7th February Early Works Contract Mr Manion prepares and gives to Mr Pittolo a document entitled ‘Contract Conditions’
158 Mr Pittolo’s cross-examination then included the following:
‘Mike Manion prepared a report, for want of a better word, I can’t remember the exact title of it, which tracked the changes in contract conditions from about - I think it is from the first letter here in July of 1992 up to November 1993 and it set out certain things which had not - which had been discussed but had not been resolved.’ [T276]
159 Exhibit D6 is headed ‘Contract conditions’ as the cover page and includes a miscellaneous set of documents including a document entitled ‘Payment Schedules’. That document includes the following:
‘Q. So that the document told you as at January or February that there was still matters which had not been resolved?
A. Yes.
Q. Do you remember which matters they were?
A. I believe they were included but I am not one hundred percent certain. Rise and fall, there was a reduction that we were offered in overheads because we had work taken out of our contract and there were another couple of matters . . .’ [T277]160 The document includes certain summaries of the dealings between the parties. It is divided by a series of dividers, being the green pages within it. Those dividers include the headings ‘Civil and Civic Invitation to Quote including Conditions of Contract’; ‘Wards Civil Engineering Tender Offer’; ‘Civil and Civic “Response” to our Tender’; ‘Target Guaranteed Price Submission 23 August 1993’; ‘Extracts from Civil and Civic Contract Document’ and ‘Final Target Guaranteed Maximum Price Submission 17 November 1993’. 161 Where the page headed ‘Payment Schedules’ had referred to ‘the draft contract offered to us’, Mr Manion was clearly referring to the 7 February early works contract. Hence the statement that ‘clause 10.5 still exists, however, previously it referred to 10.3 for the valuation of the month’s work’. There is, of course, a clause 10.5 in the early works contract. 162 On the same page, Mr Manion was stating that clause 10.3 had been noted as ‘not used’ in that early works contract. 163 I accept the defendant’s submission that Mr Manion in this document which was handed to Mr Pittolo, had been looking at what the early works contract had said, as a draft of what the future would hold for the final contract. This was, as Mr Finch of senior counsel for the defendant submitted, for the purposes of giving Mr Pittolo ‘a cheat sheet about what to do in the process of leading up to the final contract’. Mr Manion had gone back to the 3 August 1993 letter and in particular to the enclosed blank subcontract which had for example, included a clause entitled ’10.3 Valuation of the Works’. Mr Manion had stated in the cheat sheet document, Exhibit D7, the words ‘however clause 10.3 has been noted as ‘not used’ in this contract’. What he was saying here was that he had been comparing the draft form of subcontract enclosed under cover of the 3rd August 1993 letter from Civil and Civic with the 7 February early works contract. I infer that the reason why Mr Manion had put together Exhibit D7, as Mr Pittolo had stated, was to inform Mr Pittolo as to what was occurring about negotiations for a final contract. Nothing in Exhibit D6 for example deals with the topic of ‘rubbish’.
‘4. In the draft contract offered to us Civil and Civic are unclear as to the means of payment. Clause 10.5 still exists, however, previously it referred to clause 10.3 for the valuation of the months work.
However clause 10.3 has been noted as ‘NOT USED’ in this contract. Further, this notes the date for progress claims as being 45 days.’
164 Exhibit PX volume 10A Tab 48b comprises an agenda for and detail in relation to a ‘Partnering Meeting’ held on 10 February 1994 and attended by a number of representatives from Wards and from Civil and Civic. The representatives attending from Wards included Mr Ward, Mr Keetley, Mr Cherrie, Mr Pittolo, Mr Manion and Mr Niederberger. The representatives attending representing Civil and Civic included Mr Robinson, Mr O’Connell and Mr Hayes. 165 The materials prepared by Mr Manion as to the ‘Introduction to Work Session’, treat with the topic of the partnering arrangement which is likened to a marriage. This page includes, inter alia:
10 February 1994 Partnering Meeting
166 The same material under the head ‘design development’ deal with the topic of a suggested additional costs issue, inter alia, in the following terms:
‘At the moment we are pretty much engaged to each other. However before we go to the altar we need to test this relationship to find how we each will act: . . .
We now propose to apply our intentions as partners to construction situations which may arise on the project . . . We also wish to note that to date such issues have been recorded on a balance sheet. This measures our wins and losses, the swings and roundabouts (see example).
As on [sic] of these issues which affect the project cost is identified we value it and record it and hopefully track the value of the contract. At the end of the current phase we will know what its value is in relation to the figure offered to us as a [TGMP]. At present the ledger is reasonably evenly balanced.
We would recommend in all these issues that when considering a point that you look at the issues try and also view it from the other partners’ position and hopefully find a resolution which is mutually beneficial - A-WIN-WIN solution if you listen to the jargon’.
167 Mr Pittolo was shown a note from his notebook which was added to Exhibit PX at volume 11A Tab 77 [ADD 12]. This note includes the words ‘new scope of works’. 168 Mr Pittolo, under cross-examination, accepted that these notes were notes of the 10th February meeting. He was asked in relation to this note:
‘At tender stage the bridge abutments were shown as being simple sill abutments with head walls.
During design development it was shown by Prospect Water Group that the abutments required wingwalls to retain the road embankments.
This has caused WCE to incur additional costs in the order of $17,000.
This is not a change requested by Australian Water Services or the Water Board.
In essence we priced to build four abutments and we are still constructing four abutments.
How is this issue resolved?
Do we spend a great deal of time with the designers trying to delete the additional work?
Is this a variation which is reimbursable to WCE?
One speaker from each company two minutes each.’ [Emphasis added]
169 In March 1994 signatories representing both parties signed a document, reading as follows:
‘Q. And halfway down the left hand page we see a reference to new scope of works?
A. Yes.
Q. What is that a reference to?
A. I have no idea.
Q. One thing it is plainly a reference to a new scope of works?
A. Yes .
Q. Can I suggest that to you?
A. Yes .
Q. Do you now recall, casting your mind back, looking at your diary note, that there was provided to you at or about this time, or that it was suggested to you at or about this time, that there would be a new scope of works?
A. No.
Q. Can I suggest to you that the only possible explanation for your diary note unless there was an alternative that you wanted a new scope of works?
A. No.
Q. Can you suggest any explanation?
A. I can’t suggest any explanation at all. I was well aware that the note was there. I was trying to recall why I wrote that note in my diary and I cannot recall.’ [T298-299]
March 1994 - Partnering Charter
170 The first of the monthly project review meetings between Wards and Civil and Civic was held on 15 March 1994 on site. Representatives attending the meeting on behalf of Wards were Messrs Ward, Cherrie, Pittolo and Niederberger. Representatives of Civil and Civic were Messrs Crangle, Malone, Hayes, Robinson and O’Connell. 171 Item 5 of the minutes reads as follows:
‘ PARTNERING CHARTER
MISSION
The WAT “B” Project Team agrees to work together to achieve our mutually developed goals via the collective utilisation of our joint skills in an environment of open and honest communication.
GOALS
1. Complete project on time (including handovers) and within GMP Price (excluding client variations if applicable).
2. Maintain and enhance our relationship via the fostering of mutual trust and the commitment to the partnership concept from all levels of the organisations.
3. No Class 1 actuals and minimise Class II potentials.
4. Strive for an innovative approach to design and construction to produce an efficient product to the satisfaction of the client.
5. Provide ongoing training for employees to provide long term benefits to the people and the companies.
6. Continuous improvement of our operational systems to make them more efficient and effective.’
Monthly Project Review Meeting number 1 between Wards and Civil and Civic held on 15 March 1994 [J13]
‘ 5.0 Contract Update
Business Action Date 5.1 Contract to be resolved for the end of the months PWCE/C&C 31 March 1994 5.2 Progress Claim for March to be completed 17 March 1994. Post meeting note, this has been now adjusted to the 25th March 1994 PWCE/C&C 25 March 1994 5.3 Variations Recorded.
Substantial costs of Coffer DamPWCE/C&C 29 April 1994 Implementation of Measures to ensure JHCE commence 3 May 1994 C&C 28 April 1994 Sod turning ceremony PWCE 28 April 1994 5.4 Plus/Minus register
A detailed analysis of the plus/minus register was reviewed describing Paclin, Hornick and other job historiesNote’ 21 March 1994
172 An extract from the note book of Mr O’Connell dated 21 March 1994 dealt with matters discussed between himself and Mr Cherrie. The note is taken from Mr O’Connell’s diary or note book. It includes, inter alia, the following:
173 Under cross-examination on the note, Mr Cherrie gave the following evidence:
‘Matters noted include:
“$16.7 + $36K and + Sod + Subst costs Coffer Dam”.
“Contract Programme delays - critical 10% - not critical 20%”.
“+$390K best case possibility plus $460K (using PWCE figure) bill potential $1M”
RWPS tells us “net cost” $923,675 … thickeners is a vary … no rise and fall
no allow for loss of overhead and profit on structures
JHCE/PWCE co-ordination at no cost to C&C
Project manage - design wins
“Liquidated damages”
Site allow. Potential win (c $¼M).’
174 On 11 April 1994, an internal Wards site meeting took place attended, inter alia, by Mr Cherrie and Mr Pittolo. The minutes include the following:
‘Q. In any event, it is clear to you that somebody from Wards with responsibility in this area met with someone at Civil and Civic, with someone with responsibility in that area about these matters?
A. Yes, I agree with that
Q. Was it usual practice for Mr Pittolo to inform you what was important from this meeting?
A. Yes.
Q. And we can take it, can’t we, that such matters as are discussed here which have importance in the contractual negotiations which were always going on in the background and by that I mean only the to-ing and fro-ing between the parties about what was to happen, would have been drawn to your attention?
A. I would expect so.
Q. I don’t need to take your time in going through each item in the circumstances. Without going through all of them, you will see things like ‘no rise and fall’ referred to in Mr O’Connell’s note?
A. Yes.
Q. That is plainly a reference to something which was being talked about in connection with what the contract was going to say?
A. Yes. . . . ‘ [T204 and 205]
11 April 1994 Site meeting [J13A]
175 Mr O’Connell, in his first statement, gave evidence that between 12 April 1994 and 28 April 1994 he reviewed and finalised ‘the final draft of the scope of works document prepared by Mr Kip Hayes’. Mr O’Connell’s further evidence was that on 28 April 1994 he attended a Quality Meeting with Mr Fitzgerald at the Wards’ site office and that immediately prior to attending that meeting, he went into Mr Pittolo’s office and said to Mr Pittolo, inter alia:
‘ Staff
1.2 We will now be employing a “Design Development Manager” to look at the design opportunities . . .
Between 12 April 1994 and 28 April 1994 final Draft Scope of Works is reviewed
12.5 TN to complete an overall construction programme.’ [Action by ‘TN’]
176 Mr O’Connell further said in paragraph 17 of his statement that Mr Pittolo took the scope of work document from him without saying anything further. Approximately an hour later, so Mr O’Connell recalled, after he had finished the Quality Meeting and before he left the Ward site office, he again saw Mr Pittolo who returned the scope of works document to him and said words to the effect: ‘Tony Niederberger and I made some notes on it.’ 177 Mr O’Connell’s evidence was that he later included the scope of works document in the contract but did not incorporate the written notes which Mr Pittolo referred to into the scope of work before he included the document in the contract. 178 Mr O’Connell’s evidence was that his present recollection was that those notes did not relate to any matters of substance but were in the form of general comments. Importantly, he recalled that there were no deletions or amendments to the scope as set out in the scope of works document. After that discussion with Mr Pittolo, Mr O’Connell had not spoken again to Mr Pittolo or to any other representative of Wards about the form or content of the Scope of Works until 1995 or later when this dispute arose. 179 Mr Pittolo accepted that prior to 18 May, he was handed a document entitled ‘Scope of Works’ by Mr O’Connell. He could not recall precisely when he had received the document although as already pointed out, at least one of his diary entries prior to that time had read ‘New Scope of Works’. [T313] 180 Mr Pittolo gave the following further evidence under cross-examination:
‘This is the scope of works for inclusion in the contract. Glenn [Cherrie] told me to speak to you about it.’
181 A further project review meeting was held on 18 April 1994. This was attended by representatives of Wards and Civil and Civic. Relevantly the minutes include the following:
‘Q. And as you say in your statement you don’t know whether that was the same document which was incorporated into the 18 May contract?
A. That’s correct.
Q. Even a moments glance at the 18 May contract scope of works shows you that it’s different to, for instance, the preliminary version of the scope of works one saw back in 1992 and in 1993?
A. Yes.
Q. And it was very obvious because of the amount of design change and the like, which had been discussed between the parties since November, that the scope of works, which would be incorporated into a final contract, would have to have differed from that which was still current as at 17 November 1993?
A. Depends on the value of the contract you’re talking about.
Q. Yes. Assuming for the moment . . . that the ongoing discussions between the parties was meant to be reflective of and definitive of the works that were to be done. It was obvious that the scope of works had to be amended from that which was still current as at 17 November 1993, though?
A. The scope of works had to be agreed. The only scope of works which I agreed to was the 17 November scope of works. I didn’t agree to change that.
Q. And can I suggest to you that it would have been rather obvious that the reason why Mr O’Connell handed you a scope of works prior to 18 May was for you to look at it and . . .
A. I’ve got no recollection of what he said to me when he gave me that document.
Q. I understand that you say that, but what you understand is that you were given a scope of works prior to 18 May?
A. As I said yes.
Q. And we take it that you didn’t look at it at all before 18 May?
A. No. . . . No I didn’t look at it . . .
Q. Can I suggest to you that it was obvious at the time, whatever Mr O’Connell said to you or didn’t say to you, that one thing was possible for you to do was to look at the scope of works to see what was in it?
A. I had no reason to believe the scope of works had changed from 17 November, the scope of works that we were going to be asked to do under our contract.
Q. All I’m suggesting to you is that you could have looked at it?
A. I could have.
Q. And whatever be the precise date on which you were given the document, you had plenty of time to look at it before 18 May?
A. I don’t recall when I got it so I don’t know how much time I had.
Q. You know what the scope of works in the 18 May contract looks like, don’t you?
A. Yes.
Q. And you’d agree that it only takes ten minutes to look at it?
A. It - if you look at it, it looks different, but you have to read it carefully to see the consequences of it.
Q. It’s not a difficult document to understand though, is it?
A. Some parts of it take some thinking.
Q. Can I suggest to you that this is a document - that is, the one you were given by Mr O’Connell - that it was important for you to look at at the time?
A. Only if I was aware that the scope of works was going to be changed.
Q. If one thing was clear in this project it was clear that the detail of the project and the design of the project was not constant ?
A. Yes .
Q. And if anything was clear about this project it was clear that change was a feature of it?
A. Yes .
Q. Can I suggest to you in that context that it was absolutely essential that you take whatever steps you thought sufficient to acquaint yourself with the scope of works handed to you prior to final contract time?
A. I didn’t believe so . . .’ [T314 and following]
18 April 1994 Monthly Project Review meeting number 2 [J14]
182 Appended to the 18 April 1994 site minutes was a document entitled ‘Variation Summary’ which generally referred to amounts which had been submitted and approved.
Item Business Action Date
‘ Monthly Programme Report
4.1 Mid Range Programme
Marked up programme attached Note -
Overall target programme to be signed off PWCE 28-4-94
Draft copy to be available 21/4/94
A new Mid Range Programme to be issued
every 6-8 weeks Note -‘
5.0 CONTRACT UPDATE
5.1 Contract to be resolved for the end
of the month PWCE/C&C 29.4.94
5.2 Progress Claim for April to be
completed 22.4.94 PWCE/C&C 22.4.94
5.3 Variations Recorded
Substantiated Costs of Coffer Dam PWCE/C&C 21.4.99
Implementation of Measures to ensure
JHCE commence 3/5/94 C&C 28.4.94
Sod turning ceremony. PWCE 28.4.94
5.4 Plus/Minus Register
An analysis of the plus/minus register was
undertaken Note -
6.0 DESIGN PERFORMANCE
This was reviewed as part of the plus/minus
register Note -
7.0 PARTNERING UPDATE
7.1 A draft charter was reviewed and is to be
formalised/signed prior to the next meeting PWCE 16.5.94
7.2 PWCE and C&C agreed that the partnering
concept is working in a satisfactory manner Note -
8.0 OTHER MATTERS
8.1 Signing of Paclin & Hopnicks [sic] to be undertaken
after C&C/PWCE sign contract. Note -‘183 Two copy documents admitted into evidence are entitled ‘Schedule of Substantial Completion’. The documents are self explanatory and are appended as Appendices ‘F’ and ‘G’. The second of these documents has a handwritten addition reading ‘These dates were agreed with Seamus [O’Connell] on 17 May 1994 to be included in the contract’. This was written in Mr Niederberger’s handwriting. 184 The May 1994 Subcontract imported the dates shown on the second of these documents.
4 May 1994 / 17 May 1994 Schedule of Substantial Completion [J15]
185 A version of the plus/minus register was admitted into evidence dated 14 May 1994 (2 days before the Contract was signed. This is appended and marked ‘Appendix H’
14 May 1994 Design Improvement Status [J15A]
16 May 1994 Monthly Project Review Meeting number 3 [J16]
186 On 16 May 1994, the third monthly project review meeting was held. Paragraphs 5.0, 6.0 and 7.0 were in the following terms:
‘5.0 Monthly Programme Report Item Business Action Date 5.1 Mid Range Programme C&C expressed concerns at initial handover dates not being met. Note C&C/PWCE to resolve a solution whereby handover dates are met. C&C/PWCE Marked up programme - kept in WAT B/3 File Note Overall target programme to be signed off - Draft copy is available. Note A new Mid Range Programme to be issued every 6-8 weeks. Note 5.2 Report of any Areas behind Programme JHCE handover dates have not been met, PWCE to implement actions to ensure this doesn’t occur again. PWCE Ongoing 5.3 List of Current/Potential Delays PWCE nominated inlet structure as an area which may fall behind programme. PWCE to identify handover date. PWCE 18/5/94 5.4 Action Implemented to catch up Delays Increased working hours, the working of RDO’s and double handling of excavated materials have been agreed as the method to catch up on delays. PWCE Ongoing 5.5 EOT Register Update - n/a 6.0 CONTRACT UPDATE 6.1 Contract to be resolved for signing by PWCE 18/5/94 PWCE/C&C 6.2 Progress Claim for May to be completed 24/5/94 PWCE/C&C 6.3 Variations Recorded Substantiated Costs of Coffer Dam. (R1) PWCE/C&C Implementation of Measures to ensure JHCE commence 3/5/94. (R1) C&C Sod turning ceremony. (R1) PWCE Topsoil to C&C office C&C 30/5/94 6.4 Plus/Minus Register A detailed analysis of the plus/minus register was undertaken. This is now to be reviewed only on an as needs basis, PWCE & C&C expressed a desire for all the focus to be reduced in this area and directed towards procurement management. Mutual satisfaction of the ± register was expressed. Note - 7.0 DESIGN PERFORMANCE 7.1 PWG performance was reviewed and it was noted that perhaps future incentive should be given to Designers in relation to the ± register. Note 8.0 PARTNERING UPDATE 8.1 The charter is to be formalised/signed prior to the end of the month. PWCE’ 16 May 1994 Wards’ Site Meeting [J17]
187 On 16 May 1994, a Wards site meeting was held at 2.30pm. The minutes of this site meeting include the following:
188 The formal subcontract was executed on 18 May 1994. 189 The subcontract was signed by Mr Cherrie on behalf of Wards. Between January and May 1994, Mr Cherrie had said to Mr O’Connell on a number of occasions, ‘Where is our contract’, to be told ‘The contract is with Roger Dias, who is writing some fancy words in relation to partnering’. 190 In late April or early May 1994, Mr Cherrie had a conversation with Mr Crangle of Civil and Civic. Mr Crangle said to Mr Cherrie words to the effect, ‘Glenn, I’ve managed to pull a few strings to get you paid above the value of your contract for early works, but no more payments can be made until the contract is signed’. 191 On 16 May 1994, Mr Cherrie had attended a partnering meeting with representatives of Civil and Civic and had been advised that the contract would be ready for signing on 18 May 1994. 192 On 18 May 1994, Mr Cherrie attended the offices of Civil and Civic to sign the contract and was handed the contract by Mr Knight of Civil and Civic. Mr Cherrie took the document and said to Mr Knight words to the effect ‘Where are the fancy words that Roger Dias was going to add about partnering?’ 193 Mr Knight said ‘There is nothing in there. We didn’t put them in’. 194 Importantly, Mr Cherrie then signed the contract without examining its contents. His recollection was that he believed that the delays in producing the contract had been completely unnecessary, given that no clauses relating to ‘partnering’ had been added. 195 Although Mr Cherrie in his first statement, had given evidence that when he signed the contract, he believed that it contained the same terms and conditions, specifications and scope of works as had been supplied to Wards for the purpose of tendering and on which, on his understanding, had formed the basis of Wards’ acceptance of the offer of $16.7million, this evidence must yield to the concessions which he made under cross-examination. 196 The definitions clause in the Subcontract included the following:
‘2.1 Overall Construction Programme to be finalised with C&C . . . [Action TN; By 17/5]
12.4 GC reports that the [plus/minus] register shows us being in front at this stage.’
18 May 1994 - Formal Subcontract executed [J18]
197 Clause 6.10 was in the following terms:
‘Client’ means the three parties with C&C to the Head Contract, namely
(a) Lend Lease Water Services Pty Limited;
(b) Lyonnaise (Prospect) Pty Limited; and
(c) P&O (Prospect) Pty Limited
trading as the Prospect Water Partnership
‘Substantial Works Completion’ means when:
(a) the Works or a Stage are complete except for minor omissions and minor defects:
(1) which do not prevent the Works or the Stage from being reasonably capable of being used for its intended purpose;
(2) in relation to which C&C determines that the Contractor has reasonable grounds for not promptly correcting them;
(3) the making good of which will not prejudice the convenient use of the Works or the Stage; and
(4) which do not cause a legal impediment to the use of the Works or the Stage.
(b) those tests which are required by the Contract to be carried out and passed before the Works or the Stage are handed over to C&C have been carried out and passed;
(c) materials, documents and other information required under the contract which are reasonably necessary for the use, operation and maintenance of the Works or the Stage, have been supplied to C&C;
(d) warranties which the Contractor is required to provide under this Contract for the Works or the Stage have been supplied; and
(e) the matters referred to in the Appendix have been completed . . .
‘”Variation” means any of the following:
(a) an increase or decrease in or omissions from the Works;
(b) a change in the character or quality of material or work;
(c) a change in the levels, lines, positions or dimensions of a part of the Works;
(d) execution of additional work;
(e) a change to the nature or scope of the Works which results from a direction or instruction issued to C&C under the Head Contract . . .’
198 Clause 6.30 was headed ‘Design Development’ and was in the following terms:
‘6.10. Variations by C&C
6.10.1 C&C, by written notice, may instruct a variation at any time prior to the Date of Substantial Completion of the Contract and the Contractor must comply promptly with that instruction within the time specified by C&C. The Contractor will not be entitled to payment for a variation unless the Contractor first provides C&C with a copy of a written instruction from C&C to execute the variation.
6.10.2 If the Contractor considers that a drawing, instruction or direction issued by C&C, although not stated to involve a variation, in fact involves a variation then the Contractor must give written notice to C&C before commencing work in relation to the drawing, instruction or direction. Compliance with this Clause will be a condition precedent to any claim the Contractor may have for a variation.
6.10.3 The Contractor will not be entitled to a payment for a variation under this Clause 6.10 in repsect [sic] of a Design Development Variation.’
199 The Scope of Works to the Subcontract is dated 12 April 1994, covers a number of pages and is followed by a number of schedules including a ‘Schedule of Contract Programme’, a ‘Schedule of Substantial Completion’ and a ‘Schedule of Drawings’. These are together appended as Appendix J. 200 By clause 16 of the Subcontract the early works contract was expressed to be ‘included in this Contract and . . . thereby cancelled’.
‘6.30.1 The Contractor acknowledges that:
(a) the design of the Works is not finalised and further development of the design will be undertaken by C&C; and
(b) the development of the design may result in changes to the Works (‘Design Development Variations’) including matters which would otherwise constitute variations;
6.30.2 Notwithstanding any other term of this Contract C&C will not be liable for any loses suffered by the Contractor in connection with and no adjustment will be made to the Contract Sum in respect of any Design Development Variation except to the extent that C&C receives payment for the Design Development Variation under the Head Contract.
6.30.3 If an amount is payable to the Contractor under Clause 6.30.2, the amount shall be determined under Clause 10.4 but shall in no circumstances exceed the amount payable to C&C under the Head Contract in respect of the Design Development Variation.’
201 On 17 June 1994, a formal Subcontract was entered into between Wards and Hornick Constructions. The contract terms make quite plain that the draftsman of this contract drew heavily on the 18th May 1994 contract. This is clear from a comparison of the two contracts which are generally in very much the same terms save for some important minute changes to reflect that this was not the main contract. Hence, for example, close care was taken to alter the words which had been used in the May 1994 contract as appropriate. A drafting of this 17 June 1994 contract could not have been undertaken without a close examination of the May 1994 contract. This is for example, particularly apparent by comparing clauses 6.30.1 and 6.30.2 of the 17 June 1994 Hornicks contract with the same clauses in the May 1994 contract - see in particular the alterations from use in the May 1994 contract of the words ‘C&C’, to use of the words in the June 1994 Hornicks Subcontract, of the words ‘Client’ and ‘WCE’. 202 Relevantly, the 17 June 1994 Hornicks Subcontract included the following definitions:
17 June 1994 Subcontract entered into between Wards and Hornick Constructions Pty Limited [J21]
203 Clause 6.10 is entitled ‘Variations by WCE’ and reads:
‘”Client” means Civil & Civic Pty Limited . . . and the three parties with C&C to the head contract namely:
(a) Lend Lease Water Services Pty Limited
(b) Lyonnaise (Prospect) Pty Limited, and
(c) P&O (Prospect) Pty Limited
trading as Prospect Water Partnership . . .
“Main contract” means the contract between P Ward Civil Engineering Pty Limited (“WCE”) and C&C.
“Substantial completion” means when :
(a) the Works or a Stage are complete except for minor omissions and minor defects:
1. which do not prevent the Works or the Stage from being reasonably capable of being used for its intended purpose,
2. in relation to which WCE determines that the Subcontractor has reasonable grounds for not promptly correcting them,
3. the making good of which will not prejudice the convenient use of the Works or the Stage; and
4. which do not cause a legal impediment to the use of the Works or the Stage.
(b) those tests which are required by the Subcontract to be carried out and passed before the Works or the Stage are handed over to WCE and have been carried out and passed.
(c) materials, documents and other information required under the Subcontract which are reasonably necessary for the use, operation and maintenance of the works or the stage, had been supplied to WCE.
(d) warranties which the Subcontractor is required to provide under this Subcontract for the works or the stage have been supplied; and
(e) the matters referred to in the Appendix have been completed. . .
“variation” means any of the following:
(a) an increase or decrease in or omissions from the Works.
(b) a change in the character or quality of material or work.
(c) a change in the levels, lines, positions or dimensions of a part of the Works.
(d) execution of additional work.
(e) a change to the nature or scope of the Works which results from a direction or instruction issued to WCE under the Main Contract.’
204 Clause 6.30 was entitled ‘Design Development’ and read as follows:
’6.10.1 WCE, by written notice may instruct a variation at any time prior to the Date of Substantial Completion of the Subcontract and the Subcontractor must comply promptly with that instruction within the time specified by WCE. The Subcontractor will not be entitled to payment for a variation unless the Subcontractor first provides WCE with a copy of a written instruction from WCE to execute the variation.
6.10.2 If the Subcontractor considers that a drawing, instruction or direction issued by WCE, although not stated to involve a variation, in fact involves a variation then the Subcontractor must give written notice to WCE before commencing work in relation to the drawing, instruction or direction. Compliance with this clause will be a condition precedent to any claim the Subcontractor may have for a variation.
6.10.3 The Subcontractor will not be entitled to a payment for a variation under this clause 6.10 in respect of a Design Development Variation.’205 On 20 June 1994, Mr Aldis wrote to Mr Pittolo advising inter alia:
‘6.30.1 The Subcontractor acknowledges that :
(a) the design of the Works is not finalised and further development of the design will be undertaken by the Client; and
(b) the development of the design may result in changes to the Works (‘Design Development Variations’) including matters which would otherwise constitute variations.
6.30.2 Notwithstanding any other term of this Subcontract WCE will not be liable for any losses suffered by the Subcontractor in connection with and no adjustment will be made to the Subcontract sum in respect of any Design Development Variation except to the extent that WCE receives payment for the Design Development Variation under the Main Contract.
6.30.3 If an amount is payable to the Subcontractor under clause 6.30.2, the amount shall be determined under clause 10.4 but shall in no circumstances exceed the amount payable to WCE under the Main Contract in respect of the Design Development Variation.’
20 June 1994 Letter from Mr Aldis to Mr Pittolo [J18A]
206 The letter was copied to Mr Cherrie.
‘Re Prospect Water Filtration Plant Design Programme
I have been attending your design meetings with C&C and their designers PWG since 15 April 1994 and believe it appropriate to make the following comments with respect to design information and also some general comments . . .
I have not reviewed your contract in detail, but from conversations with yourself have assumed that there is little contractual protection for Wards for delay costs other than those awarded to Civil & Civic by their clients. I further understand that there is a long standing relationship with Civil & Civic which has resulted in a satisfactory outcome for Wards and as such the preservation of this relationship is most important . . ..’
207 On 21 June 1994, the fourth monthly project review meeting was held on site and attended by a number of representatives of Wards and Civil and Civic. The minutes record that the previous minutes were reviewed and found to be a true and accurate record of the meeting. The minutes also include the following item:
21 June 1994 Monthly Project Review Meeting number 4 [J19]
208 By letter dated 5 July 1994, Mr Aldis wrote to Mr Cherrie advising inter alia:
‘6.4 Plus/Minus Register
This is now to be reviewed only on an as needs basis, PWCE and C&C expressed a desire for all the focus to be reduced in this area and directed towards procurement management. Mutual satisfaction of the [plus/minus register] was expressed.’
5 July 1994 Letter from Mr Aldis to Mr Cherrie [J20]
209 By letter dated 21 June 1995, Tress Cocks and Maddox, on the instructions of Wards, wrote to Civil and Civic. The letter covered alleged complaints of Wards in relation to the project. The letter is appended to the Judgment as Appendix K. It dealt with a number of issues. 210 In so far as the letter dealt with the early works contract, it read inter alia:
‘On 22 June 1994 I communicated some observations to Max and yourself re the progress of design information and programme on your contract for the Prospect Water Filtration Plant, in particular:
- The provision of design information was slipping behind.
Whereas you do not have the responsibility for design, you carry the risk of the cost of design development, and also the cost of delay other than that recovered by Civil and Civic . . .’
Letter from Tress Cocks and Maddox to Civil and Civic of 21 June 1995
211 The same letter stated in relation to the May 1994 contract inter alia, as follows:
‘However, the contract document which was executed on our client’s behalf on 7 February 1994 was substantially different from the document our client had been provided with in August 1993. In particular there were the following differences:
1. Clauses 6.10.3 and 6.30 provided that our client acknowledged that the design of the works was unfinished and that our client was not entitled to claim payment for a variation in respect of Design Development Variations. This was contrary to information previously provided to our client and in this regard we refer you to our client’s letter to Civil and Civic dated 17 November 1993 which reflects our client’s understanding that the design would be virtually complete by 21 January 1994.
2. Clause 10.1 was amended so that our client was no longer entitled to adjustments in price in accordance with rates specified by our client in its bill of quantities.
3. Clause 10.12 had been amended so that our client was said to be liable for liquidated damages, as opposed to unliquidated damages in the August 1993 document.
Clearly our client should have been advised that these changes were proposed so that it could appropriately adjust its contract price.’ [Emphasis added]
212 It is next appropriate to turn to the evidence given by the witnesses before the Court. It is not necessary to set out all of that evidence. Essentially, much of the cross-examination was carefully structured. Mr Finch, Senior Counsel for Civil and Civic took each of the plaintiff’s witnesses through the same core materials and then put precisely the same propositions or propositions to the same purport, to each of those witnesses. To my mind, a reasonably detailed summary of the evidence of Messrs Ward and Cherrie should suffice to enable a reader of the Judgment to follow the pattern. The evidence of later witnesses may be referred to as such evidence impacts on particular issues. The subjective state of mind of those involved up to the execution of the May 1994 subcontract was clearly relevant to a number of the causes of action pleaded. A clear pattern of acceptance by the plaintiff’s witnesses of key propositions put to them in cross-examination as to their understanding of the arrangements, was clearly established. This is not to say that each of the plaintiff’s witnesses gave precisely the same evidence, clearly there were differences. But in the main, the central propositions for which Civil and Civic contends, as matters of fact, were accepted by these witnesses. Naturally, not all of the plaintiff’s witnesses were relevant actors at the same points in time in relation to the events dealt with each of the documents put to the witnesses as will become apparent. 213 To my mind, this is a case in which the facts may essentially be gleaned from the contemporaneous records tendered in evidence. Neither party submitted that any witness called by the other gave evidence which was knowingly false or incorrect. Both parties accepted that each witness had carried out their best endeavours to recall the events in question. Each party submitted that where evidence given by the other parties witnesses was suggested to be incorrect, this should simply be accepted as being a situation in which the events in question having taken place many years ago, recollections were incorrect or faulty as often occurs. Hence at the end of the day, although questions of reliability of evidence were raised, it became and is unnecessary for the Court to decide whether to believe any particular witness in terms of ‘credit’ seen as a challenge to ‘honesty’ in giving evidence. Where reliability issues are raised, the Court’s findings on those matters will appear from what follows. 214 Following discussions between Counsel in relation to initial objections proposed to be taken to sections of statements, a measure of agreement was reached which avoided the objections being pressed. The agreement related to objections which had been proposed to be pressed on the basis that parts of relevant paragraphs in witnesses’ statements constituted conclusions of law. The agreement which was reached at the Bar table as to these objections not being pressed, orders that the Court would regard such statements which comprised conclusions of law where appearing, as the expression of the relevant deponents’ view and as not proving any other matter. [See transcript of 22 June 1999 page 12]
‘In May 1994 our client once again was asked to execute a contract document so as to enable payment of a further progress claim. As Civil and Civic was aware, settlement of the World Square litigation was still not complete and our client needed the progress payment urgently. Once again a director of our client attended Civil and Civic’s offices and executed a contract document. The actual body of the contract document was similar to the document executed by our client in February 1994 but once again material changes had been made to the document without our client’s attention being drawn to those changes. These were:
1. Clause 9.8.4 had been amended so as to prevent our client from receiving any extensions of time as a result of any Design Development Variations; and
2. A new scope of works was attached to the contract document. This included works which had been specifically deleted from our client’s scope of works between August 1993 and November 1993 and did not take into account detailed agreements reached during the same period.
Clearly these changes should have been brought to our client’s attention so that it could appropriately amend its contract price.
Our client did not review the documents executed in May 1994 until some time in or about November 1994 when it was first brought to our client’s attention by Civil and Civic that the May 1994 documents contained provisions which were not included in the material on which our client based its TGMP proposal . . .
. . . Further, Civil and Civic’s interpretation of what is constituted by a Design Development Variation contradicts specific representations made to our client about this matter by Greg Robinson . . .’
Witnesses and ‘Credit’
215 Mr Ward did not recall seeing document J1 in June 1992. He was, however, aware that in 1992 Civil and Civic had invited a tender from Wards in respect of earthworks for the project and accepted that from his elevated role in the company, documents such as the appendices, conditions and a blank subcontract would not necessarily be copied to him in the first instance. [T14] 216 As to the form of the subcontract, part of document J1, Mr Ward had no recollection of going through the document but accepted that it appeared to be a subcontract in blank, that is full of blank items, none of which had been filled in to adapt the draft subcontract to the particular proposed Contract. 217 Mr Ward also accepted that the Appendix was in blank and essentially that there was nothing to distinguish the draft subcontract from any other standard form of Civil and Civic draft subcontract so far as he could recall. He had become reasonably familiar with Civil and Civic’s draft subcontracts during his long experience in the industry. It was not in recent years part of Mr Ward’s job description to spend too much time going through, page by page, subcontracts which were exchanged for the purpose of Wards’ performing work. His involvement was usually at a much higher level of generality. He might be involved in such things as the discussion of the total contract sum involved and other important conditions but he accepted that he would certainly not have been involved with matters of what one might call ‘contract administration’. This was true in the case of the subcontract in 1992 in which year he did not discuss any of these documents including the subcontract with anyone either within Wards or at Civil and Civic. [T15] 218 As to document J2, the submission of Wards’ preliminary final assessment to Civil and Civic, giving a total lump sum of $16.9million, Mr Ward was not personally involved in any way with the actual production or reading of the document and did not become involved at all in relation to the actual fixing of the lump sum. [T16] 219 Mr Ward did, however, in paragraph 7 of his first statement of 18 August 1998, give evidence that he had telephoned Mr Garling of Civil and Civic on about 25 June 1992 when a conversation to the following effect had taken place:
Evidence given by Mr Peter Ward
220 Mr Ward’s evidence was that Mr Garling had said words to the effect: ‘Thanks for the call but whatever you do don’t bury contingencies in your rates, spell them out separately. We don’t want both parties allowing for contingencies and as a result, we would price ourselves out of a job. We will make allowance for those contingencies’. [Para 7 First Statement 18 August 1998] 221 Mr Ward was not involved in the matters referred to on page 2 of document J2. [T17] 222 Mr Ward was not involved with the production of document J3. Given the level of his involvement in the company, he was not consulted about the content of J3 as this was left to others in the company. [T18] 223 Mr Ward had read document J6, the 3 August 1993 letter to Wards. He gave evidence that his understanding having read paragraphs 2 and 3 of document J6, was ‘that our participation in design development was to originate from us and we had to outline our proposals in our tender and that our input was to be particular in buildability and construction technique. I noted that we would get any savings from our input and felt that Civil and Civic were really trying to help us. However, I was aware that any proposals would have to be approved by the consulting engineers. As I understood it, the design development proposals were to come from us or from Civil and Civic and that the purpose of the proposals was to achieve savings in the cost of carrying out our work.’ [First statement para 9] 224 Mr Ward accepted that he understood the terms of document J6 when it was received and had no difficulty in understanding those terms. He did not think there was anything in it which confused him or caused him to query anything in the document with anyone. As to the fifth paragraph of document J6, Mr Ward was asked and answered as follows:
‘Mr Ward: Phil, my company is going through a very difficult project of a similar nature but smaller than Prospect. We are working for CBI on a $16million water treatment plant called Cascade in the Blue Mountains near Katoomba. In this plant we are carrying out all the concrete and earthworks.
There are substantial blow outs in cost and time. One of the major problems was that as work progressed the working drawings contained substantially more work. Bigger concrete tanks, more reinforcing steel and concrete, valves and pits added to pipelines, more concrete structures.
CBI seemed to have no control over the consulting engineers either as to quality or timeliness.
I note we are pricing the works [referring to the Prospect Water Treatment Works] based on preliminary drawings and I recommend that substantial contingencies be allowed and furthermore, it is essential that Civil and Civic control the design engineers.’
225 Mr Ward had not mentioned the paragraph numbered 6 in document J6 in his statement. In this regard, he was asked and answered as follows under cross-examination:
‘Q. Stopping there for a moment, your familiarity with the standard terms of subcontract which [sic] forwarded by Civil and Civic was such that you would have been aware as at 3 August that it did not include any term to the effect of paragraph 5 of this letter, did it?
A. I wouldn’t have thought so at the time.
Q. This, so far as you were concerned, was something novel from Civil and Civic in terms of this standard subcontract?
A. The words are novel.
Q. You are not able, can I suggest to you, to point to any term in the draft subcontract which has the effect of what’s set out in paragraph 5 of this letter?
A. No not to my knowledge . . .’ [T19]226 At transcript page 22, Mr Ward gave evidence that what he was trying to say was that Wards were not responsible for design completion but were responsible for ‘design development’. He then accepted at transcript page 23, that there was nothing in the letter J6 that he understood at the time to modify or in any way affect what was set out in paragraph 6 and that his understanding of the proposed contractual relationship insofar as variations were concerned, at the time he read J6, was as follows:
‘Q. Can I suggest to you when you read it, it was clear to you that that paragraph was expressing what would happen in the event that you contracted with Civil and Civic?
A. That’s correct.
Q. That was clear at the time you read it?
A. Yes.
Q. And secondly, what was clear was that in the event that Civil and Civic contracted with you, any risk associated with further Design Development after the time of contracting, was to be borne by Wards unless a certain circumstance prevailed?
A. Yes.
Q. You understood that?
A. Yes.’ [T20]227 He was then asked and answered as follows:
‘. . . that where the design was not complete, any additional work to the completion of design would be paid for as a variation.’ [T23]
228 Mr Ward also answered questions as follows in relation to paragraph 6 of J6:
‘Q. Do I take it from that answer that it was, at this time - and indeed was at all times - your understanding of the proposed contractual relationship between the parties that there would be a variation claimable in Wards?
A. Yes I believe that we had the ability to claim for variation.
Q. When you read this letter it would have been very clear to you . . . and was clear to you that such as a term necessary to reflect what is in paragraph 6 would need to be added to the draft Subcontract?
A. No.
Q. It was not your understanding, I suggest, as at 3 August, that Civil and Civic’s standard form contract said anything about what is expressed in paragraph 6?
A. That’s correct.
Q. So that it was clear to you that there would be another or extra or different term added to complete the contractual relationship between the parties on the subject matter dealt with within paragraph 6?
A. I didn’t see that was necessary.
Q. Why not?
A. Because I was of the view that you could incorporate the letter in the contract.’ [T23]229 Mr Ward accepted that Wards, as far as he knew, at no stage had written any letter to Civil and Civic saying that it did not accept paragraph 6 of the letter of 3 August. He was asked and answered as follows:
‘Q. You see paragraph 6 is prefaced by the words ‘If we contract with you . . .’?
A. Yes.
Q. It’s plainly, I suggest to you, looking forward to what will be the contractual relationship between the parties at some time in the future if it lapses?
A. Yes.
Q. It was plain to you, was it not, that it was necessary for the proper regulation of affairs between Ward and C&C that any such term such as that set out in paragraph 6, should be part of that contract expressly?
A. I didn’t have any consideration to that at the time.
Q. You just didn’t turn your mind to it?
A. That’s correct.
Q. You would agree, would you not, looking back on it now, that as a matter of elementary contractual administration, that terms such as this where they appear in prefatory correspondence, should be incorporated into an agreed contractual term . . .
A. Yes. ’
[T23-24]230 Mr Ward accepted that it was important in his view to make sure that there were processes whereby subcontractors in the position of Wards should be able to keep track of the design development as they occurred by keeping a record. [T25] 231 Mr Ward accepted that the design meetings were held to inform Wards and for Wards to inform Civil and Civic of proposed design changes. [T25] 232 Mr Ward had left the function of being involved in the detail of the design meetings to others. 233 Mr Ward had difficulty recalling precisely what he knew at the time in relation to meetings between the parties because it was difficult he found, to distinguish between what he knew at the time he was giving evidence and what he knew previously. He did, however, accept that he knew that there were meetings whereby Wards put forward its proposals for design development. He also knew that there were meetings whereby the designers were answering queries on various drawings. [T26] 234 Apart from events at the project meeting of 15 March 1994, Mr Ward accepted that it was a fair reflection of what he recalled that by the time the Subcontract was signed on 18 May 1994, it had not come to his attention that there had been any significant level of design change. [T27] 235 Mr Ward was asked and answered as follows:
‘Q. Wards accepted, didn’t it, that paragraph 6 was a term which either did or was to govern the contractual relationship between the parties?
A. I accepted that.’ [T25]236 Throughout the period August to May, Mr Ward accepted that ‘there was, as one of the terms of the relationship between the parties - whether it arose by exchange of correspondence or whether it arose by way of contract - a term such as that in paragraph 6 of [J6] . . ., and that continued to be [his] understanding throughout that time.’ [T27] Mr Ward had not himself been concerned with the detail in relation to the documents enclosed with document J6 and his evidence was that it was Mr Levido’s task at Wards to concern himself with that level of detail. [T28] 237 Mr Ward had not looked at the blank subcontract forming part of the enclosures to J6, for example to see whether it had been amended to put in something to reflect paragraph 6 of the 3 August letter. [T28] 238 The candidates whose task it may have been to look into this matter were probably Mr Levido but could have included Mr Niederberger, Mr Pittolo or Mr Cherrie. [T29] 239 As to document J7, Mr Ward had not seen and was not consulted in relation to this document. He accepted, however, that the word ‘variation’ was used in the third paragraph of document J6 in a somewhat loose fashion. [T30] He accepted that the document at PX 3 page 366 summarised the pricing of different kinds of work at differing times. 240 Mr Ward was not consulted in relation to the contract conditions enclosed with J7. He had not read the contract conditions enclosed with J7 either at the time nor at any time up to and including 18 May 1994. He was not in a position to know whether or not Civil and Civic accepted those proposed conditions as at 18 May 1994. He was unable to point to any document where Civil and Civic did accept those terms. He did not know whether or not the terms were reflected in the 18 May 1994 Contract at the time. He was asked and answered as follows:
‘Q. . . . You personally . . . you weren’t in a position to make any decision as at 18 May 1994 about the exposure that Wards may have had pursuant to the term which is foreshadowed in paragraph 6 of the letter of 3 August . . . You personally were not in a position as at 18 May to be able to consider and assess the level of risk, if any, to which Wards was exposed as a result of that proposed term?
A. Yes I think you are correct. ’ [T27]241 Mr Ward was asked and answered as follows:
‘Q. And presumably those who wrote this document would have to take some further steps to see whether or not these suggested terms were accepted and were incorporated . . .
A. I accept I would have, yes.’ [T31]242 Mr Ward was then asked to look halfway down the contract conditions page enclosed with J7. This was the section headed ‘Variations’. It was pointed out to Mr Ward that Wards had there suggested that Wards should get the benefit of any change, no matter who suggested it. He was asked:
‘Q. As a matter of prudent contractual practice, you would have expected your officers to take whatever steps were necessary to ascertain that C&C had agreed, and to ascertain the terms found their way as to terms what is described as the final contract?
A. I believe so.
Q. Who was responsible for doing that at Wards?
A. . . . It would be . . . Adrian Levido, but then it would be taken over by the construction team. Sometimes contracts are agreed by the estimating department. Sometimes the construction people come in and get involved prior to the contract’s being formalised.
Q. Are the names of the relevant candidates in no particular order of precedent Mr Levido?
A. He was in charge of preparing the tender.
Q. What would he have a role, in your view, in considering and assessing whether or not suggested additional terms by Wards had been agreed and incorporated?
A. Yes he would have a role yes.
Q. Mr Cherrie?
A. Yes, in probably less detail.
Q. Mr Niederberger
A. In this case yes.
Q. Mr Pittolo?
A. In this case, yes.
Q. Mr Manion?
A. . . . I’m not one hundred percent sure.
Q. He may have had a role, but you are not sure?
A. I know he had a role in the preparation of the tender. From a technical point of view he wasn’t one of the company’s estimators. Adrian Levido was the chief estimator. Dick Glasgow was another estimator involved who was a full time estimator. Mike Manion was on secondment on leave with a view of going onto the site. This job was slightly different in that in most cases we do not start work until the contract is signed, so in most cases people like Max Pittolo would probably not be involved. It would be between Adrian Levido and then Glen Cherrie. This is complicated by the fact that in this particular case we have the contract before the contract was signed.
Q. Mr Glasgow’s name was the last name I was going to suggest to you as a possible candidate for membership of the team who might have been responsible to ascertain there might have been an agreement to and incorporate the suggested terms of page 375?
A. Not to the same extent as Adrian Levido.
Q. But nevertheless a possible member?
A. A possible member, yes, but I doubt it.’ [T32]243 It was suggested to Mr Ward that while he was giving evidence on 20 June, this was the first time he had had pointed out to him the differences between the Wards’ proposals and the Civil and Civic proposals and he accepted that no one had pointed them out to him. He had never heard of the differences being discussed by anyone before. [T35] 244 In relation to the Risk Profile document, part of J7, and the section of it dealing with the sub-head ‘Design Risk’, Mr Ward at T38, accepted that it was now apparent to him that at least at that time, Wards’ staff apprehended that the design risk was appropriately described as set out on this page. 245 Again at transcript 39, Mr Ward accepted that his understanding at his level in the company was that paragraph 6 of the 3 August letter then expressed and tended to express Ward’s appreciation of the design and development risk. 246 Mr Ward was taken to the 17 November 1993 Wards’ letter, J9. He was reminded that it is now suggested on behalf of Wards that that document formed the end of a chain of correspondence which constituted a contract between Civil and Civic and Wards for the work that Wards did. [T40] 247 Mr Ward had, in paragraphs 10 and 13 of his first statement, deposed as follows:
‘Q. And no doubt an admirable suggestion, but you will concede, will you not, that that’s different to what is contained in the 3 August letter?
A. It’s different to any knowledge I have. I believe the actual case for this was the August letter.
Q. This comes as somewhat of a surprise to you?
A. Yes.
Q. How do we resolve the tension between what is in the 3 August letter and what is here?
A. I have no idea.
Q. Before a final contract was entered into between the parties, that tension would have to be resolved, wouldn’t it?
A. Yes.
Q. It would have been, I suggest to you, readily apparent to whoever drafted this, that this was different to the 3 August letter?
A. I can’t say I can comment on that.
Q. It was immediately apparent to you, wasn’t it?
A. It’s apparent to me now that it is different from the August letter and I have read this obviously, but I have only read this recently and I really can’t make any comment on it.
Q. I think you have already said - and I haven’t challenged you - that you didn’t read this at the time, and what I am suggesting to you though, is that it’s clear, from even a cursory reading of what appears under that heading, that it differs from what is in the 3 August letter?
A. Yes, that’s correct.
Q. It differs in a number of respects. I will point them out to you. Firstly there is a difference to the suggestion about who gets the benefit in the event that Civil and Civic suggests a change?
A. Yes, that’s correct.
Q. There is also an additional element which had not previously been in any proposal, that in respect of certain names saving which we see later on in this document, Civil and Civic and Wards would share the benefit 50/50?
A. Yes, I see it says that.
Q. That wasn’t in the 3 August letter, was it?
A. No.
Q. And it’s saying, perhaps it’s different, perhaps it’s not, depending on the degree of shorthand which is being used, “where variations arise from either client or Water Board directed works we expect full reimbursement”, but it doesn’t say so long as Civil and Civic gets paid, does it?
A. No, it doesn’t.
Q. So that’s another difference on the face of it isn’t it?
A. Yes.
Q. On the face of the document, there are three major differences aren’t there?
A. Yes.
Q. How were those differences resolved?
A. I don’t know.
Q. You know in this case it is suggested that by 17 November there is concluded a contract between the parties which is subject only to a small number of things to be done?
A. Yes.
Q. How, by 17 November, were these divergences between the parties resolved?
A. I don’t know.
Q. You would accept, would you not, that they weren’t resolved on the face of the document upon which your company relies?
A. I don’t know that either.
Q. Are you able to point me to any company [sic] or agreement or any other thing which resolves any of these three problems?
A. No I can’t.
Q. So far as you are aware, the matter simply wasn’t resolved by 17 November?
A. No I can’t point you to a document. I don’t know that.
Q. You weren’t consulted about it?
A. I wasn’t consulted about this document, no. . . . [T34]248 At transcript page 40, Mr Ward stated that the extent of his involvement in discussions about J7 prior to the time it was sent, were those set out in paragraphs 10 and 13 of his statement. He was then taken through the way that the document J7 appears to work. 249 Mr Ward accepted at transcript page 44, that a number of things were clear upon the writing of the J7 letter of 17 November 1993. His evidence was as follows:
’10. In early November 1993 Glen Cherrie as Managing Director was taking over the leading role in the negotiations with Greg Robinson. On or about 15 November, Glenn was having a meeting in our office with Greg Robinson and he came to see me and we had a conversation to the following effect:
“It looks like all the structures are out and there will be about $17.4million worth of work. However, Civils want us to throw in rise and fall and knock off $600,000 from our price. Greg reckons we should be able to get $222,000 off Pacific Linings price, $189,000 off Hornicks and a couple of hundred thousand off our price with Civils to supply a first aider. He says he will help us with Pacific Lining Pty Limited and if we can’t get Hornicks down he will . . . “
13. Glen Cherrie and I met with Greg Robinson, I think on the same day (i.e. 15 November) and had a conversation to the following effect:
“I said ‘Greg, our design development proposals have not yet been formally agreed to and I still don’t trust that you have control of the designers. I am worried that it is a big ask to take $600,000 off our price and ask us to include for rise and fall.
Greg: ‘Don’t worry about design development, we have the designers under control, you should be able to make at least $1million on top of what you already have.’
Greg . . . also said: ‘I will be forming a partnering process with the designers, yourselves and Civil and Civic and I will pay bonuses to the designers out of Civil and Civic’s pocket for design savings.’
I said: ‘What happens if we come up with proposals but the designers want them gold plated with belt and braces?’
Greg said: ‘We will be the arbitrators. Civil and Civic run the consultants and we will sort them out. Don’t worry, Civil and Civic are experts in design development and in managing consultants.’
I said: ‘Glen tells me you want a couple of hundred thousand off both the nominated liner’ sub-contract and Hornicks.’
Greg said: ‘The liner’ subcontractor has plenty of fat in this price. I will help you there and if you can’t get Hornicks down to the right price, I will.’
250 Mr Ward in being asked questions in relation to document J8 and in particular questions relating to the sentence in that letter from Wards in paragraph 3, reading:
‘Q. . . . It was clear to you upon the writing of this letter that there was to be a final contract in addition to the correspondence up to that time?
A. Yes.
Q. It was also clear that there was to be a period of an exchange of views about design development leading up to that contract?
A. Yes.
Q. It was also agreed that C&C may or may not enter into a Contract with Wards at the end of that period?
A. Yes.
Q. Nothing was promised to Wards by this time about C&C entering into any arrangement for the construction of anything?
A. Not that I had seen at the time. . . .’ [T44]251 It was then put to Mr Ward that document J8 is one of the documents relied upon by Wards on the pleadings said to constitute the contract between Wards and C&C. The following questions were put:
‘It is confirmed that these issues must be considered concurrently in order to offset the potentially large windfall wins and losses.’
He was asked as follows:
‘Q. Windfall wins and losses means, does it not, the potential exposure of Wards to a plus situation or a minus situation in respect of its exposure to the lump sum contract?
A. That’s what the letter appears to say.’ [T47]252 At transcript page 49, Mr Ward was asked to accept that it is plain from the whole of document J8 that Mr Manion who signed the letter, had made plain in the letter that design was a risk. Mr Ward accepted that this was the case. 253 At transcript 49, Mr Ward was taken to the sections of the document J8 entitled ‘Risk Profile’ and in particular to the section A sub-paragraph 3 under the sub-title ‘Delayed or Inadequate Design’. He was asked and answered as follows:
‘Q. . . . You are alleging that this [J8] is one of the documents that constitutes the end of the process?
A. If you are asking me that is part of the documents which culminated in an agreement in November I say yes, it is part.
Q. Now the document clearly, does it not, sets out that Wards, through its officers, appreciated that there were potentially large windfall wins and losses?
A. Again I am not sure if you mean windfall wins or losses or windfall wins and losses.
Q. That does not perhaps matter so much, they are Wards’ wins and losses, aren’t they?
A. Yes that’s what it says.
Q. And they are wins and losses as measured against the lump sum contract exposure?
A. Yes.
Q. Otherwise it doesn’t mean anything, does it?
A. No.
Q. So that the understanding of Wards, so far as you now know, looking at the documents executed by your officers, was that Wards would have a potentially large windfall win or loss measured against the lump sum contract which was to be entered into?
A. That’s what the document says.
Q. And you don’t disagree with the document do you?
A. I don’t disagree that the document forms part of the procedure in the contract.’ [T47-48]254 Mr Ward was taken to the document being the facsimile from Wards to Civil and Civic of 1 July 1992 [part of J2]. He was shown the paragraph numbered 7, earlier set out in this Judgment. He accepted that it was plain to him, looking at this document, that there was a tension between the two concepts, namely what constituted design development and what constituted a variation, a tension which relevant members of Wards’ staff appreciated. [T52] 255 Mr Ward was aware at the time he was being cross-examined, that there is in the 18 May 1994 contract, a specific link between variation and design development. [T52] 256 At transcript page 53, Mr Ward accepted that any degree of familiarities between the 3 August 1993 and 17 November 1993 letters ‘would have shown [him] that they forecast another document being exchanged by way of formal contract between the parties in due course’. 257 Mr Ward had not been aware of the document J10 until recently. Under cross-examination, however, he gave the following evidence:
. . .
‘Q. Have a look at the previous page in item 3, do you see it is headed “There are other matters related to risk which have not been mentioned above, including item 3, including design? You will see at the bottom of the page “Should delays of this nature, that is insufficient or adequate design, eventuate” it is understood this risk is a responsibility of Civil and Civic?
A. Yes.
Q. Again, we are only talking in terms of the development of the contract here?
A. Yes.
Q. Do you agree that that is not something which is referred to in the 3 August letter?
A. No it’s not.
Q. How is that tension resolved, that is the tension of the 3 August letter and what is set out in this letter?
A. I don’t know.
Q. Was it resolved before 17 November?
A. I don’t know.
Q. Can you point us to any document in what are said to be the contractual documents by Wards which resolves that tension?
A. No.
Q. It was something outstanding as at 17 November, wasn’t it?
A. So far as these documents are concerned it would appear to be.
Q. It is not in the draft subcontract which was exchanged between the parties, is it?
A. No.
Q. So that this is another indicator, can I suggest to you, that the parties were looking forward to the preparation of a final contract?
A. Yes.
Q. And that none of them thought or could have reasonable thought that the 17th November was the end of that process?
A. That’s correct.’ [T49-50]258 As to the 7 February and ‘early works’ subcontract, Mr Ward’s evidence was that he knew it was going on at the time but did not believe that he had any discussions with anyone about execution of that subcontract. His evidence was that his view at the time was that the ‘early works’ subcontract was not an important document. [T59] His view was that it was a means to a payment. [T59] 259 Mr Ward, however, accepted at transcript 60, that it was not the practice of Wards to sign contracts whatever they say, to get payments. He accepted that Mr Keetley could have read the early works subcontract, had he wanted to. Indeed, any officer of Wards, he accepted, could have read the early works subcontract had they wanted to. [T60] 260 Mr Ward was asked what assumption was made by Wards at the time of the signing of the early works subcontract as to what had happened to their suggested conditions in the 23 August letter. His answer was that he did not know. He was asked:
‘Q. Now, by this time, you are aware from the documents that I have already taken you to that there have been a number of expressions by Wards of a desire to have incorporated into any final contract certain terms different to those in 3 August?
A. Yes.
Q. What steps were taken by Wards to see whether or not that had happened by the time this formal Subcontract referred to here was executed?
A. I don’t know.’ [T58]261 At transcript 62, in being taken to the use of the words “further development” in clause 6.30.1(a) of the early works subcontract, Mr Ward was asked and answered as follows:
‘Q. At the very least, those concerned with the development of the contractual terms at Wards had to have known that there was something to be resolved, do you not agree?
A. I am not sure that David Keetley would know but, yes, you are right in the first statement, first part statement.
Q. As you have already agreed, one couldn’t simply assume that C&C would simply agree with the things that Wards put in the letter?
A. Correct, yes.
Q. Anyone who had the smallest look at the letters, including those who wrote them, would have to assume there was something to be done by way of agreement or before any such terms were incorporated?
A. The people that wrote the letters, yes.
Q. And the people who wrote the letters and referred to the letters later on included such people as Mr Levido?
A. Yes.
Q. And the letters which were written incorporating those documents were copied to Mr Cherrie?
A. I don’t know.
Q. Anyone who reviewed on more than an absolutely cursory basis the chain of letters from 3 August to 17 November would have been alerted to the necessity to look at the formal contract to see how those matters were resolved?
A. I would say so.
Q. And the people who had suggested the things which need resolution were Wards people?
A. Yes.
Q. They weren’t things that had been slipped in by C&C were they?
A. No. . . .’ T60-61]262 At transcript 63, Mr Ward gave the following evidence under cross-examination:
‘Q. Can I suggest to you that there is not a great deal of difference between the expression “design development” and “further development of the design”?
A. About seven million dollars difference.
Q. Can I suggest to you there is no difference between those two expressions?
A. Well, my understanding of English is that they are different but it is just my perception. You may be right.’ [T62-63]263 At transcript 69, Mr Ward accepted that the plus/minus register was a designs improvement opportunity, having as its original purpose a creation and maintenance by Wards for the purpose of tracking its exposure to the lump sum. Mr Ward was asked and answered as follows:
‘Q. . . . What I am suggesting to you, though, is that you would accept the proposition that there are references that I have taken you to in the documents from June 1992 all the way up to the time of this Contract which are consistent with the existence of clauses 6.10 and 6.30 as they appear in this contract?
A. They are consistent from what your argument has been that there should be a clause there relating to design of development variations.
Q. It is just that you personally haven’t been involved in a level of detail sufficient to acquaint you with that correspondence leading up to that contract, is that right?
A. I was involved in sufficient detail as to the points that are made in my statement and those points in my statement the staff of Wards Engineering were aware of at the time.
Q. But what you hadn’t been informed about was the particular matters that I’ve taken you through today?
A. No I wasn’t informed of the various letters, that’s correct . . . ‘ [T63]264 At transcript page 70, the following was put to Mr Ward:
‘Q. And it [the plus/minus register] tracked that exposure as it changed from time to time because of, amongst other things, design development?
A. Yes, it recorded design development on it, amongst other things . . .’265 At transcript 73, Mr Ward accepted that he participated to a limited degree in what was described as the detailed analysis of the plus/minus register. It was referred to as a tracking exercise. At transcript 75, Mr Ward’s evidence was :
‘Q. What I am suggesting to you is that there were variations which were variations simpliciter, that is they weren’t anything else but variations?
A. Yes, that is the case.
Q. And they were tracked on a variations register from April . . .
A. Yes, I wasn’t involved at the time but I am aware of that now.
Q. And I am suggesting to you that there are other things which, although they might be thought to be variations, were also the subject of the design development tracking exercise in the plus/minus sheet?
A. Yes that’s true.
Q. And can I suggest to you that that process is entirely consistent with Wards’ understanding of the competition which existed between variations and design development matters . . .?
A. Yes, it is not consistent with my views of the competition. I have never seen them, as I’ve said before, I’ve never seen it as a competition between the two things.
Q. It is consistent though, you would accept, with the view which is apparent from the correspondence I have taken you through today?
A. The way you have explained it to me, yes.
Q. Can I suggest your lack of appreciation with this competition . . . is simply the product of not having been involved in the negotiation of or the finalisation of the contract between Wards and C&C?
A. Except in the extent as set out in my statement.
Q. Otherwise than that, you agree with me?
A. That I wasn’t involved in the detail and negotiations, yes I agree with that . . .
Q. What I am suggesting to you is the reason why you do not appreciate that this process is reflective of a competition between design development and variation is because you had a lack of involvement in the production of the contractual negotiations?
A. Yes that may be the case. ’ [T71]266 Mr Ward was taken to item 6.4 of the Monthly Project Review Meeting No. 3 of 16 May, two days before the contract, [J16], which in relation to the plus/minus register had read, inter alia:
‘Q. It is quite clear though that you weren’t involved in the purpose or project of tracking Wards’ exposure to the lump sum by looking at these things in detail as they came out?
A. That’s correct.
Q. Somebody else at Wards was doing that?
A. That’s correct.
Q. And who was it at Wards who was doing that for the most part do you know?
A. I would think it would be Max Pittolo.
Q. Mr Cherrie was a person with the role in looking at these as well can I suggest to you?
A. Yes.
Q. And it needed to be someone of sufficient seniority at Wards doing this because the exposure of Wards to the lump sum was a matter of some importance to Wards?
A. Yes.
Q. Now, this tracking exercise continued right up to the time of the contract on 18 May didn’t it?
A. This was the only meeting that I was at but having read the document since then yes.
Q. And you understand now that that tracking exercise continued right up to the time of the May meeting?
A. Yes.’ [T 75]267 He was asked and answered as follows:
‘This is now to be reviewed only on an as needs basis.’
268 At transcript page 81, Mr Ward was asked and answered as follows:
‘Can I suggest to you that there is a very obvious reason why there was to be a change turning on about 18 May to the dealings of the plus/minus register and that was from the time of contract onwards, design development risk was Wards except in the circumstances that we all know about where the head contractor makes a change and that is the reason why this change in approach was foreshadowed.
A. It is quite possible.’ [T79]
269 Mr Ward gave evidence that he believed that Mr Aldis worked for Mr Max Pittolo. Mr Ward had never read the document J18A. Mr Ward accepted that it was clear from the first paragraph of J18A that Mr Aldis started in his duties on or about 15 April. Mr Ward accepted that when Mr Aldis, halfway down page 1 of document J18A, had said: ‘There are still many areas of your contract where design details are still required . . .’,. that was reflective of the fact that Mr Ward was aware that as at 18 May the design in many areas was still not finalised. [T85-86] 270 Mr Ward was asked in relation to the documents J18A and J20, the following questions:
‘Q. So that by 18 May, you would concede would you not, that Wards staff were aware of the various design alterations, if I can use a neutral word, that had been discussed and, in many cases, agreed up to that point . . .
Q. I am simply asking you to concede that Wards’ staff, by virtue of their attendance at those meetings, must have become aware of the design development alteration?
A. Yes . . .
Q. The reason why it is important for Wards to be at these meetings and to appreciate the changes was, of course, that the project had to be constructed in accordance with the design as it evolved, not with the design as it was, for instance, back in June 1992?
A. Yes that’s correct.
Q. And it was important for Wards as a matter of its own contract administration, to keep track of these design alterations so that it could properly address, for instance, the variations which it wanted to claim?
A. Yes.
Q. And also properly keep track, as it did in the plus/minus register, of how these matters might affect the lump sum exposure?
A. Yes, to the extent that the plus/minus - details of the plus/minus register were proposals . . .
Q. And the whole purpose - at least partly the purpose of the plus/minus register - involved Wards looking into the future and making an estimate of how these things which might happen might affect them.
A. Yes. . . .
Q. Leading up to the signing of the contract, can I suggest to you that Wards increased its attention to the bottom line of the plus/minus register?
A. I don’t know.’ [T81]271 Mr Ward was also taken to the letter from Tress Cocks and Maddox, solicitors for Wards, to Mr Crangle at Civil and Civic of 21 June 1995 wherein on page 4 Wards’ solicitors had said:
‘Q. Can I suggest to you that what is recorded in those two letters is exactly the same as the risk exposure that Wards had been informed of by correspondence commencing in June 1992?
A. As far as design development is concerned, yes.
Q. And it carries the same implications for the risk of delay, doesn’t it?
A. Well, that doesn’t go back to July 1992, that’s his observations of that date and the previous date.
Q. It may well be that a design development may result in a delay?
A. That’s possible.
Q. And as plainly as can be, the correspondence since June 1992 said the risk on design development was Wards after contract?
A. Yes.
Q. And the risk includes costs associated with the ramifications of design development?
A. Yes.
Q. Design development itself does not cause any cost to Wards until it is effected?
A. Other than the costs of the work in carrying out the design, the time spent and so on.
Q. . . . There may be some cost to Wards in actually moving lines around on a drawing - I don’t mean to be dismissive about the process of actually designing things but there may be cost to Wards in that?
A. Yes.
Q. And there may be cost to Wards in revisiting what the ramifications of that development is for other parts of the project?
A. Yes, yes.
Q. Which may be depending, for instance, on that work?
A. Yes, yes, that is possible yes.
Q. There may be ramifications for things like hand over dates?
A. There shouldn’t be.
Q. It may be though that if one party, for instance, one work area party, is waiting for completion of a particular part of the work?
A. I am sorry, we are talking about design development. We would not propose a design development or a design change that was going to hold us up.
Q. I’m not suggesting here that we are concerned only with proposals by Wards?
A. I am sorry, I thought you were talking about ourselves.
Q. I am suggesting where you were at risk for design development, no matter where the development change originated. Now, with that clarification, you would agree, would you not, that design development might affect such things as hand over?
A. With that clarification, yes.
Q. And you agreed yesterday - and no doubt you still agree - that there is nothing in the 3 August letter, or indeed, any other letter, that you could point to which restricts Wards’ risk on design development to development suggested by Wards?
A. Yes, you have drawn my attention to that, yes.
Q. And you agree that that is true, don’t you?
A. It would appear to be the case, yes.’ [T90-92]272 Mr Ward accepted that it was he who gave Tress Cocks and Maddox the instructions set out in their letter. In so far as the letter had stated that Wards did not review the documents executed in May until some time in November 1994, Mr Ward’s evidence was that the letter was incorrect and that he had in fact not become aware until the following year that there was any problems with the contract. In fact he had not reviewed the contract in November but had discovered that something was wrong in November. Civil and Civic had not brought the matter to his attention until early 1995, which followed two meetings which he had with Mr Crangle in November. [T92-94] 273 It was suggested to Mr Ward that his solicitor had accurately transcribed the instructions he had been given but Mr Ward did not accept this to have been the case. This is a situation in which, to my mind, the contemporaneous record is to be accepted as comprising the instructions given to Mr Ward’s solicitors. I accept, however, that to Mr Ward’s present belief, the evidence he gave in the witness box was his present best recollection. It is simply not consistent with the contemporaneous letter. 274 Mr Ward accepted that the whole point of the design meetings was amongst other things, to look at the drawings which were extant from time to time and consider changes to them and that one would know from time to time what the revisions were which issued of those drawings. He could not argue the point put to him that ‘even a cursory review of the design meetings shows you that every single document in the May drawing list had been sent to Wards in 1994’. [T98] 275 His evidence was :
‘Our client, that is Wards, did not review the documents executed in May 1994 until some time in or about November 1994 when it was first brought to our client’s attention by Civil and Civic that the May 1994 documents contained provisions which were not included in the material on which our client based its TGMP proposal.’
276 Mr Ward had not had any role at all in the process where on 18 May the Subcontract was signed by Mr Cherrie on every page. He seemed to recall that he knew that Mr Cherrie was going to sign the document but he could not recall discussing anything about that with any person [T103]. 277 Mr Ward accepted at transcript 103 that it was understood by everyone at Wards that the process of agreeing a GMP was just about to be finalised by the signature of the contract [T103].
‘Q. You would agree . . . that no one at Wards who had any connection with the administration of the contract and the construction, there was no possibility that any such person, as at May 1994, could have thought that the August 1993 list [of drawing] was of any continuing application?
A. It could have application.
Q. In what way?
A. To the extent that it was used to formulate our price.
Q. But that price was, as at November 1993, a target guaranteed maximum price?
A. Correct.
Q. Not a guaranteed maximum price on a final basis for inclusion in the contract?
A. Correct. . . .
Q. Could you seriously suggest that Wards thought, as at May 1994, that what they were agreeing to construct was the project as defined by the list on page 153?
A. No, I agree with that.
Q. Every single one of those documents was replaced before May?
A. Yes.
Q. Wards knew that what they had to build was what was on the drawings as at May?
A. Yes.’ [T98-99]278 Mr Cherrie had first been advised of the proposed construction of the Water Filtration Plant at Prospect in February 1992. He had attended a meeting at the offices of Civil and Civic on 11 March 1992 at which representatives of Civil and Civic explained the project and there was a discussion in relation to the tendering process. 279 Mr Cherrie deposed in paragraph 3 of his statement that in late May 1993 he inspected the site together with representatives of Civil and Civic and had a conversation with Mr Robinson of Civil and Civic to the following effect:
Evidence of Mr G.F. Cherrie
280 Mr Cherrie was shown the paragraph under the heading ‘General’ in the Scope of Work part of Exhibit J1. It was suggested to him that this explained accurately what he understood of Wards’ risk in respect of design development in May 1993. His answer was that he believed that this interpretation of the words written was different to his understanding as explained by Mr Robinson in May 1993, although this document predated that conversation by almost a year. 281 Mr Cherrie’s evidence was that as at 23 June 1992, the date of document J1, Mr Levido was an estimating manager - T127. 282 It was suggested to Mr Cherrie that it was always clear as far as he knew, to Wards, that this was going to be a lump sum contract - and at the time this suggestion was put to him, the annexures to document J1 was shown to him. He disagreed with this. His evidence was that as at June 1992 this may have been the intent but subsequent to this he had discussions with representatives of Civil and Civic ‘that changed the intent of the June 1992 document’. [T127] 283 Mr Cherrie had not seen document J1 in 1992. 284 In 1992 and by 1993 when Mr Cherrie had his first involvement with the project he accepted that he was by then, reasonably familiar with Civil and Civic’s standard form blank contract. 285 His familiarity with that standard term Subcontract extended, he accepted, to a knowledge that it provided in clause 6.10 for the submissions of variation claims. [T128] 286 In relation to document J2, Mr Cherrie accepted that he had not been involved in the formulation of what was to be incorporated next to the heading ‘Design Contingency’ towards the end of page 1 of the letter. Nor was he involved with the discussions referred to on the second page of document J2. [T129] 287 Mr Cherrie was asked a question in relation to the words ‘risk assessment particularly with respect to design’ on page 2 of document J2, as compared to the Scope of Work forming part of J1 and answered as follows:
‘Mr Robinson: Civil and Civic will give Wards a target guaranteed maximum price or “TGMP”. Over a period of a couple of months, this TGMP would be firmed into a GMP and Wards would have the right to accept the TGMP or have it revised or walk away from the agreement. Prior to confirming the GMP we would work together over a period and you would be involved in assisting us in improving the design. Any savings resulting from improvements will be to your account. If there are any minor increases in the scope, these will also be to your account. If the designers have forgotten to include for something or have simply failed to design an element you will be paid a variation for any extra work. You will make a million dollars out of design development . . . If any of the contractors do not agree with the GMP then the work will be put out to tender for interested parties. The process of finalising a GMP is to be agreed before any work commences on the site.’ [Paragraph 3 statement of 13 August 1998]
288 Mr Cherrie, in relation to document J3, had not, he said seen it during 1992. He accepted that the ‘Scope of Work’ referred to on the second page of document J2 of 7 July 1992 was in different terms to the Scope of Work forming part of document J1. He was then asked in relation to the Scope of Work on page 2 of document J3:
‘Q. Can I suggest to you though that it is quite plain, when one looks at the scope of work which I took you to and this document together, that the risk assessment particularly with respect to design, is referring to what was under the heading “General” in the scope of works . . .
A. Yes. . . .’ [T129]
‘Q. It is clear, is it not, from the form of this document and the content of it that this is not meant as a replacement scope of work, it is meant as a clarification of what has been discussed and agreed about the formal scope of work I showed you earlier?
A. I believe so . . .
Q. And you will see at the end of the document, page 126, a list of the drawings upon which the lump sum price is based?
A. Yes, I can see that.
Q. Even though you were not involved in 1992, by 1993 when you did become involved it was clear that that list of drawings had already been superseded?
A. I believe so.
Q. And it continued to be developed and changed right up until the Contract was signed?
A. Yes.
Q. So that when one comes to look at the list of documents constituting the drawings in the contract of 18 May, it is not this list of course?
A. It is certainly not that list.’ [T130-131.
289 In relation to page 3 of document J3, namely the paragraph which commences ‘we have allowed specific contingencies . . .’. Mr Cherrie was asked:
‘Q. There is no doubt though, is there, looking at the document that the concept of design development was one which the parties were talking of at the time?
A. Referring to the document, I believe so.’ [This document being the 7 July 1992 letter]. [T131]
290 Mr Cherrie accepted at transcript 132, that by the time he became involved in the contract, the concept of design development was still one which was being discussed between the parties and that this was ‘in the context of who was to bear the risk of that’. [T132] 291 Mr Cherrie was asked and answered as follows:292 Mr Cherrie’s evidence was that he had a very limited involvement in the project by August 1993 which did not extend to involving himself in changes of the detail of the proposed contractual terms or anything like that at that stage.’ [T132-133] 293 Mr Cherrie had no recollection of the letter document J6, being copied to him. 294 Mr Cherrie had not ever had any involvement with the concept of target guaranteed maximum prices moving to guaranteed maximum prices before it was mentioned to him in connection with this contract and as far as he was concerned, this was then a novel contractual development. [T133] 295 Mr Cherrie was asked:
‘Q. And can I suggest to you that from the earliest days of your involvement in this contract, it was always quite clear that there was going to be room for argument between the parties about whether particular change was one which should result in a variation claim or whether it was one covered by the concept of design and development risk ?
A. Yes I agree with that .
Q. And that, at the end of the day, was a considerable source of tension between the parties?
A. Yes, it was.
Q. But there was no doubt that there was those two competing concepts?
A. Yes, there was . . .’ . [T132]296 Mr Cherrie could not recall when it was that he first saw the letter of 3 August 1996, document J6. 297 Mr Cherrie was asked in relation to the first page of document J6:
‘Q. And I take it in those circumstances, that you were careful to make sure you understood the mechanics of what was involved in that process?
A. Given that it was the first time it had been explained to me, yes.
Q. Is it your recollection that the first you’d heard of this was in a conversation rather than a document?
A. The first I heard of it was definitely in a conversation . . .’. [T133]298 It was quite clear to Mr Cherrie from the third and fourth sentences of paragraph 1 of document J6, that the final works might vary from the scope of works referred to in the annexures. It was also, Mr Cherrie accepted, completely clear that the final works might not include some of the things in the scope of works. [T135] 299 Mr Cherrie accepted that he certainly knew that over time there were considerable elements of the project which were in fact deleted from the scope, particularly concerning some structures. 300 Mr Cherrie was asked in relation to paragraph 2 of document J6:
‘Q. So it was clear, was it not, to the officer who was dealing with this, that what was being asked was not for the finalisation of a lump sum with which Wards would be happy but the finalisation of the preliminary matters, the target guaranteed maximum price?
A. Yes, it was.
Q. And again from your observation, although it might have been a bit elevated at this point, given your role in the company and lack of detailed involvement, it was quite clear, was it not, that this process was leading up only and no more than to the agreement with the TGMP ?
A. That is correct.
Q. Once the TGMP was agreed between the parties, there was no guarantee that Wards would end up with the Contract?
A. That is correct.
Q. And Wards did not think that the agreement of a TGMP constituted a contract for the construction of anything ?
A. In my capacity, in my role, yes I agree with that. Other people may have had different views . . .’. [T134]
‘Q. Do you agree with me, what Wards was asked to do when formulating its TGMP proposal was, amongst other things, to include anticipated savings that Wards believed could be achieved through its participation in Design Development?
A. I understand that it what we were being asked to do . . .
Q. You personally were not involved in the detailed formulation of the TGMP?
A. No I was not.
Q. Who was?
A. Adrian Levido and Mike Manion.
Q. You see, in the last sentence of paragraph 2 [of J6] that the TGMP proposal was to outline the nature of any design issues that Wards might wish to explore during design development?
A. I can see that.
Q. It was quite clear from the start, was it not, that there were a number of phases of design development that were going to be relevant to this project. Can I suggest to you before you answer that, that those phases were the phases which led up to the submission of a TGMP and the phase between TGMP and GMP and indeed, at the end of the day, there was also design development which was going to happen after contract. Do you agree with that?
A. No I don’t agree with that.
Q. And in what way do you not agree with this?
A. I can only disagree with it on the basis that I had always been told that design development after agreement of GMP would be minimal on the basis that the design would be virtually complete from the time we agree on GMP.
301 In relation to paragraph 5 of the letter J6, Mr Cherrie was asked as follows:
Q. Your disagreement was as to size of design development, rather than concept?
A. I apologise, yes you are right.
Q. So it is quite clear to you, even using hindsight and looking at the documents, that there was going to be three phases where design development might impact. The first is up to TGMP, the second is to TGMP and the third is contract onwards. You’re only point, I take it, is it was your apprehension and you say because of what you had been told it was certainly your understanding that that third phase would be minor?
A. Yes. ’ [T136]302 Mr Cherrie accepted that it was always clear, right up to the time when the contract was signed, that there may or may not be a contract ultimately entered into. Mr Cherrie was asked in relation to paragraph 6 of document J6:
‘Q. The next thing that is said by the document is this is a suggestion from Civil and Civic, you see that the part of the arrangement between the parties was going to be that if Wards added a benefit by way of design development, Wards would get the advantage?
A. I can see that.
Q. But if C&C added the benefit, it would get the advantage?
A. Yes, I can see that.
Q. By the time you became involved in the project to the extent you did in May 1993, did you understand that as part of the proposed arrangement between the parties?
A. At no time did I ever understand any form of arrangement that C&C were getting the benefit.
Q. Did this not get discussed with you at the time?
A. This 3 August letter did not get discussed with me at the time.
Q. You would agree, wouldn’t you, that it is absolutely plain from the terms of that document that that is what C&C was proposing?
A. Yes, I agree . . .’. [T137]303 Mr Cherrie, of course, accepted that the letter J6 post-dated the conversation which he stated had occurred with Mr Robinson. 304 Mr Cherrie was asked and answered as follows, in relation to the terms of the letter J6:
‘Q. And what is made clear by this paragraph is, if there is a contract entered into, that this will speak from the time of contract, any risk associated with further design development is to be borne by Wards unless there is a major change to scope required by the client where additional funds are made available to C&C?
A. I can see what that letter says. The only thing I can add, referring to my discussion with Greg Robinson in May 1993, I was always told that if the designers had simply forgotten to design something or had left something out, we would be paid a variation.’305 Mr Cherrie further agreed as follows:
‘Q. And you would agree with me that a number of things are very clear from the terms of this letter. Firstly, that there may or may not be a contract?
A. Yes.
Q. Secondly, that if there was going to be a contract, it was subject to a condition that further design development after contract time was a risk borne by Wards?
A. Yes.
Q. With an exception that if there was a major change to scope required by the client for which C&C got money, then there might be an ability in Wards to be paid?
A. Yes, I can see.
Q. You would agree that that is a very clear stipulation by Civil and Civic?
A. Yes.
Q. The exception is usually understood, isn’t it. The reference to ‘client’ is not a reference to Civil and Civic, it is a reference to the Head Client, if we can call it that?
A. Most certainly.
Q. And if the Head Client does not suggest a claim which results in money going to Civil and Civic, Wards are stuck with a design development risk.
A. That may well be the case.
Q. Was that made clear to you by the persons who were in control of the day to day contractual negotiations on behalf of Wards?
A. Between the period of 3 August and . . .
Q. For instance, November that year?
A. I certainly developed more of a role between August and November. At what point in time I became aware of anything to do with this letter, I don’t know.
Q. It does not take any great wit, does it . . . to understand what I am putting to you about that paragraph, from this letter.
A. I agree with you.
Q. It is not expressed in any way obscurely?
A. No.
Q. You know that one of the issues in this case is whether or not there is, as part of a contractual relationship between C&C and Wards, the ability on behalf of C&C to make Wards responsible for the cost of design development. I am expressing it in general terms?
A. Yes, I believe so.
Q. And that issue is characterised by a dispute as to whether Wards were aware of the terms in clause 6.30 in the contract you eventually signed?
A. Yes . . ..
Q. . . . . You know enough about that contract of 18 May 1994, don’t you, to know that in clauses 6.10 and 6.30 it establishes the rules by which the competition between variations and design development will be played?
A. I now understand that to be the case.
Q. Can I suggest to you that a central feature of those rules is that if something is design and development, Wards is responsible.
A. Within the defined scope, yes.
Q. Now, whatever that means, the risk that Wards had in respect of further design development is quite plain from the terms of this letter, isn’t it?
A. Design development, unless major changes to scope, so design development for the scope is what I understand that to be.
Q. Can I make it quite clear to you, this is a contractual provision which is meant to speak from the time when the contract is signed isn’t it?
A. . . . Yes.
Q. And it is plainly in those circumstances, something which is referable to whatever the scope is at that time, otherwise it wouldn’t make mention?
A. Yes I can understand that.
Q You agree with me, do you not?
A. Yes I agree.
His Honour: When you say “this”, you are referring to paragraph 6, are you ;Mr Finch?
A. Yes. . . . ’ [T139-140]306 Mr Cherrie was asked in relation to the document J6 and the section under the heading ‘General’ appearing at PX volume 3 page 149, the following:
‘Q. So that reading paragraph 6 according to the tenor of its own words, it makes Wards responsible for further design risk after contract, unless there is a major change to the scope which is relevant as at 18 May 1994?
A. Yes, I agree. Subject, as I’ve earlier said, to the magnitude.
Q. Now, the magnitude point that you have does not appear in this letter?
A. No it does not.
Q. And can I suggest to you that you are not able to point to any document or record of any sort which introduces that qualification to this term in paragraph 6?
A. Yes, that is probably the case . . . ‘ [T140]307 Mr Cherrie’s day to day involvement with the project covered liaising with Wards’ senior people, being Mike Manion and Adrian Levido to some degree and Peter Low when he was appointed to take over in January 1994. Mr Cherrie certainly discussed matters to do with the project with those persons and had various discussions with representatives of Civil and Civic and attended meetings. [T145] 308 Mr Cherrie accepted that he was involved between August 1993 and May 1994 in the working out of the contractual detail contained in the correspondence between the parties. [T145] He had attended nine meetings to the best of his recollection. 309 Mr Cherrie accepted that the work ‘variations’ as used in the third paragraph of the 23 August 1993 letter, J7, was a somewhat inaccurate use of the word. He accepted that what Mr Levido meant was that there had been changes which were summarised at PX volume 3 page 366 and that the changes were the subject of a pricing change in the TGMP as set out in that Table. 310 Mr Cherrie accepted that what was happening at this time was that there were design developments and some other changes happening which were being reflected from time to time in changes in what Wards thought might be its TGMP. [T147] Mr Cherrie accepted that what Wards did was to prepare its TGMPs, there having been a number of them as one moved on in time, according to what the scope looked like at the relevant time. [T147] Mr Cherrie accepted that the scope changed as the months went on. Both design and scope were changing. He was asked:
‘Q. Turning back to page 148, I want to draw your attention to the fact that the same risk on design development sentence that appears first in June 1992 and again in the letter of 3 August 1993 appeared in the scope of work itself at page 148. There are some wording changes but it is essentially the same, isn’t it?
A. Yes, I can see that.
Q. You will see that the jargon ‘TGMP’ has been introduced into this but apart from that, it appears to be the same?
A. It appears to be the same, yes.
Q. So again, anyone looking at this on behalf of Wards could be in no doubt that the risk design development after contract would be Wards. I always leave out the exception which we can take as read from now on?
A. As at that point in time, yes.
Q. You will see, if it wasn’t already clear, that the additional information to be supplied included in the fourth dot point on that same standard, Civil and Civic Pty Limited subcontract?
A. Yes.
Q. And you will see before I get to that, turning through the document at page 153, the updated version of the relevant drawing numbers?
A. Yes, I can see that.
Q. At page 153 you will see a list of drawing numbers and I don’t want to drag you through it?
A. I can see that.
Q. You will see it has ‘updated until now all the drawings except where stated’, a revision there at the top of the page?
A. Yes, I can see that.
Q. The importance of that, I suggest, was it was part of the process between the parties as reflected in this document, that the drawings were not a static concept, they were changing all the time, they were being updated and revised?
A. As at this point in time, yes.
Q. That process continued to happen throughout 1993?
A. I believe so.
Q. And it continued to happen all the way up to and indeed in some cases past 18 May 1994 ?
A. To a great deal past 1994 .
Q. You are agreeing with me?
A. I agree with you.
Q. Nobody at Wards thought that what they were agreeing to construct was something described by a list of documents as at November 1993?
A. November or July.
Q. We have only reached August so far but I put to you there was a continuing development of drawings to May?
A. Right.
Q. No one at Wards thought what they were agreeing to construct was a project defined by a set of drawings in August 1993 or November 1993?
A. There was certainly understanding that the design was being developed.
Q. And Wards’ obligation was to construct whatever the drawings said at the relevant time?
A. That is certainly not my understanding.
Q. Well, can I put it to you this way, perhaps the question was inadequately lengthy. Wards had to build what the drawings said and Wards had the ability to either say, this change in a drawing gives us a right to claim a variation or it might be subject to an agreement from Civil and Civic that it was a design development covered by Wards’ risk. Whichever way that argument turned out affected the dollars but the activities on site had to be those that were on the drawings.
A. Yes. Given that, I agree with you. . . ‘ [T142-143]311 Mr Cherrie accepted that Wards by the letter of 23 August 1993, document J3, prepared in addition to the consolidation, a list of potential areas where they considered savings might be made during the design development phase. 312 Mr Cherrie accepted that what Wards were saying in the second sentence of the fourth paragraph of document J7, was that these were matters which Wards thought could be saved by way of design development. 313 In relation to the proposed contract conditions, part of document J7, Mr Cherrie’s evidence was that the persons who are involved in the formulation of those conditions were Mr Levido and Mr Manion and that they had authority to bind Wards to contract conditions but only for the items as detailed on page 375 of PX volume 3. [T148] 314 Mr Cherrie’s evidence was that the five items which appear on page 375 of PX volume 3, part of J7, might not have been specifically discussed with him at that point in time but were five standard conditions which Wards put in all of their contracts or tried to put in all of their contracts. He did, however, accept on being tested, that the proposed condition under the heading ‘Variations’ could not be a standard condition and was not something he had seen before and was not the product of the understanding of Mr Levido and Mr Manion of a policy of Mr Ward which applied to all contracts. [T148] 315 Mr Cherrie’s evidence was that the proposed contract condition headed ‘Variations’ was not ‘run by [him] at the time’. [T149] 316 Mr Cherrie accepted that it was quite clear that what Wards was asking for in this document was for contractual terms to go into the contract to speak from the time of that Contract. He gave evidence that he was not aware of Civil and Civic ever agreeing to the Wards’ suggested terms. [T150-151] 317 Mr Cherrie’s attention was directed to the sentence in the Wards’ proposed Contract Conditions reading: ‘This would apply to all savings in excess of those nominated in this submission which have been offered on a shared savings basis of fifty percent’.
‘Q. That scope changed as the month went on?
A. The scope changed yes .
Q. Reflective in some cases of the scope changing , the designs which underlay that scope were changing over time?
A. Yes, the design and the scope were changing .
Q. In some, but not all cases, the specification was changing?
A. I’m not aware of that, but can only assume that that would only be the case.
Q. Would you agree that that is not quite so relevant because it is speaking at a level of generality which isn’t as important for pricing as the drawings and the scope?
A. Yes, I agree with that. ’ [T147]318 At transcript 154, it was suggested in cross-examination to Mr Cherrie that:
‘Q. Do you see that?
A. I can see that.
Q. That is also different to the 3 August suggestion?
A. It is.
Q. And significantly different, isn’t it?
A. Yes.
Q. Because if one looks at the document at page 381, one sees the start of quite a long list of suggested potential savings with some quite large dollars appended to them?
A. Yes I can see that.
Q. Depending on who suggested these changes, this could involve C&C giving away reasonably large amounts of money?
A. Correct.
Q. How was this tension between 23 August and 3 August resolved?
A. I was not involved in any discussions of any 50/50 80% sharing or whatever, so I cannot comment.
Q. It would have had to have been resolved of course, wouldn’t it?
A. Yes, I believe so .
Q. If anything was clear, this was clear; that those at Wards who were doing the ground work on these contractual conditions, would have to expect something more to happen after this letter by way of resolution of this tension?
A. I don’t agree that there was a tension at this point in time.
Q. The writer of the letter couldn’t have gone home and watched the footy secure in the knowledge that C&C had agreed to this could he?
A. I’m not aware what discussions took place regarding this.
Q. You will see that what the writer does is require these as conditions?
A. Correct.
Q. You see that they are different to what C&C had said?
A. Correct.
Q. Until he was satisfied that there had been some resolution of that difference, he couldn’t be satisfied that what he had required had been agreed?
A. All I can say is Civil and Civic may have accepted those without further discussion.
Q. Or they may not?
A. They may not have, I agree.
Q. One has to look forward to the formal contract to see, doesn’t one ?
A. Possibly, yes .
Q. The subcontract which is in blank still at this stage, wasn’t ever changed from August to November to put any of these in, was it?
A. No, it was not.
Q. Why not?
A. I can’t answer that. I do not know.
Q. Can I suggest to you that the reason is that on 17 November both parties were well aware that there was to come into existence a formal contract which would be the document which pulled all these strands together?
A. I believe so yes.’ [T152-153]319 Evidence was also adduced from a number of other witnesses being principally Messrs Levido, Pittolo and Niederberger of Wards and Messrs Robinson and O’Connell of Civil and Civic all of whom were cross examined. As earlier indicated, evidence may be conveniently referred to fairly shortly and in relation to particular topics.
‘Q. Whatever the Contract conditions say at page 375, paragraph 6 on page 131, which is the second paragraph on that page, continued to represent your understanding up to and including May 1994 of the exposure of Wards to design development risk?
A. Yes, I believe that to be the case.’ [T154]
Evidence of other witnesses
320 As at June 1992, Mr Levido was the ‘estimating manager’ at Wards and his duties in relation to this, as other projects, was to review and prepare tenders for Wards. He also had responsibility to suggest and consider alterations to the terms of the contractual relationship between the parties. 321 The letter J1, had of course, been addressed to him and it was his letter of 25 June 1992 which responded, J2. J3 was also his letter of 7 July 1992 and Civil and Civic’s letter of 16 July 1992, J4, was marked to his attention. J5 was marked to his attention and he wrote J5A. The critical letter of 3 August 1993, J6, was marked to his attention and it was his letter of 23 August 1993, J7, which responded, suggesting contract conditions. Mr Levido also wrote the letter of 20 September 1993, J7A, and he attended the 22 October 1993 meeting already referred to. 322 Mr Levido had attended a number of meetings and discussions of a technical nature between mid-July1992 and May 1993. His recollection was of a conversation at a site inspection on 5 May 1993 meeting, where Mr Robinson had indicated a general intention to seek from those parties who had worked successfully with Civil and Civic through the confidentiality period, contracts generally in accordance with works they had priced. During the relevant period, Civil and Civic would work with those parties and a ‘full design team’ with the intention of minimising and if possible, eliminating any concerns contractors might have with signing a contract for the nominated sum. 323 At some stage in around mid-August 1993, Mr Levido asked Mr Robinson whether Mr Robinson would be running the works at Prospect and Mr Robinson had answered in the affirmative. 324 Mr Levido, as appears below in the Judgment, was closely cross-examined on many of the J documents. By August 1993, he was aware of the possible tension between the concepts of what would constitute a variation and what would constitute a design development. Mr Levido left the project in November 1993. 325 Mr Levido was asked:
Mr Levido
326 Mr Pittolo commenced work on the site in January 1994, having had no significant involvement with the site or any documents touching the project before that. In about December, Mr Cherrie informed him that he was to be the contract manager, however, he did not then look at correspondence between the parties. 327 Through conversations with Mr Cherrie and Mr Manion, he became aware that the process of negotiating with the TGMP had been settled. 328 As to the 32 design meetings held between 5 November 1993 and 18 May 1994, as far as he could recall, they were all attended by either himself or someone else from Wards. 329 He accepted that it was fair to say that he was concerned more with how to build the project than the contractual relationship between the parties [T265]. 330 As has already been mentioned, Mr Manion prior to his leaving the site, prepared a document for Mr Pittolo which brought to Mr Pittolo’s attention, a number of the contract conditions. 331 In Mr Pittolo’s opinion, a GMP was in a sense synonymous with signing the lump sum contract [T282]. 332 Mr Pittolo’s evidence was that it was not considered necessary to look at the 7 February Early Works Contract although, at 7 February, he believed there were issues still unresolved apropos the fate of the various contractual exchanges that had occurred between August to November. [T283] He was asked:
‘Q. Was there somebody who, as it were, stepped into your shoes when you moved on to do other things in November?
A. Because of the structure we had put together for this estimate, no.
Q. So who was it, so far as you were concerned, the day you left, who was going to be looking at the contractual conditions in the upcoming contract?
A. Mike Manion and Glenn Cherrie. . . .’ [T237]
Mr Pittolo
333 In being asked who reviewed the documentation of the 7 February contract to make certain that Wards understood what it was agreeing to be paid for what works, Mr Pittolo’s answer was ‘to my knowledge nobody’; adding that this was because ‘we just saw that contract as a method to be paid for what we were doing at the time’. [T284] 334 The curious approach by Wards is clearly reflected in Mr Pittolo’s answers at page 284 of the transcript:
‘Q. In the document that you have referred to today which was prepared by Mr Manion and shown to you, do you recall where in time that document came to your notice, that’s before or after the 7th February contract?
A. After the 7 February contract.
Q. So that it was plain to you after 7 February that there were still matters yet to be resolved to be incorporated into the final Subcontract ?
A. In the final contract yes.
Q. Did not that spur you into looking at what the 7 February contract said about those matters ?
A. No .
Q. Why not?
A. At this stage I can’t honestly say . I was concentrating with getting works done on site. I was concentrating on getting the site construction works done.’ [T283]335 Mr Pittolo had difficulty in answering a number of questions. He was asked and answered as follows:
‘Q. . . . The works covered by the 7 February contract are not precisely the same as the works that are set out in the 6 December letter or the purchase order. That’s right isn’t it?
A. That’s right.
Q. That means that one has to look at the works described in the 7 February contract to see what the 7 February contract covers?
A. Yes.
Q. One cannot tell that from looking anywhere else?
A. Yes.
Q. Wasn’t it important that Wards do that exercise?
A. No, we did not believe it was.
Q. How did Wards know what was covered by the 7 February contract?
A. We believed that the 7 February contract was just a mechanism for getting paid for the works we were doing and all the works that were in the 7 February contract were part of the TGMP-D Schedule.
Q. How would you know that without looking at it?
A. I don’t know . . .
Q. Who was doing the work of looking at the intention of the 7 February contract ?
A. Nobody .
Q. That could have been done, of course, couldn’t it?
A. Yes, it could have been.
Q. Anybody from Wards could at any time have looked at the 7 February contract as long as they liked?
A. Yes.
Q. Whose job within Wards was it to look at contracts and see what they said?
A. The project managers.
Q. Who were they at the time of 7 February?
A. That was me .
Q. Did anyone else have that responsibility?
A. A couple of other people could have, but at the end, I had the responsibility.
Q. You were content to leave any consideration of what was in the contract to the final contract on the understanding, true as it turned out, that the work in the 7 February contract was covered by the final contract?
A. Yes.
Q. And as it turned out, the work covered by the 7 February contract was covered by the final contract?
A. Yes.
Q. Nevertheless it was important when that final Subcontract came around to look at what was comprehended in it ?
A. Yes .
Q. And who did that ?
A. The 18 May contract ?
Q. Yes .
A. Nobody looked at it before it was signed .
Q. This time there was no comfort area, was there, of some contract in the future that might be looked at one day?
A. No .
Q. One thing though did not need to be looked at for the purposes of understanding what was happening, and that was whatever clause said Wards bears design risk for design development up to contract because you knew that perfectly well for a month before?
A. We knew that and we accepted that we bore that risk, yes.
Q. Mr Manion left the project in early March 1994 I think?
A. Yes .
Q. Who at Wards in effect stepped into his shoes?
A. Nobody stepped directly into his shoes, his duties were resigned and the project was restructured.
Q. You recall that he was the one who wrote the letters back in August and September which had suggested certain changes?
A. Yes.
Q. And you will recall he was the one who had supplied you with the document in February or so which set out certain matters which were yet to be agreed finally?
A. Yes.
Q. Who was it who stepped into the shoes of administering those matters of outstanding agreement?
A. I took on those duties .
Q. When he left, what steps did you take to familiarise yourself as to the state of agreement between the parties that Mr Manion identified?
A. That was the reason I believe that Mike Manion prepared that document for me .
Q. I’m asking what steps you took to make sure the matters were resolved?
A. I took no direct steps . I presumed they would be resolved in due course.
Q. By whom?
A. With discussions between Wards and Civil and Civic.
Q. Those were discussions that had to happen after that time?
A. Yes.
Q. And those are discussions which continued from February all the way up to May?
A. There were some discussions between February and May, yes, very limited.
Q. You were happy that by 18 May there were no remaining matters to be discussed?
A. No, I wasn’t
Q. Wasn’t it important then to let Mr Cherrie know that he shouldn’t sign the contract because you were not happy that certain matters had been agreed ?
A. It should have been I guess, yes .
Q. You didn’t tell anyone before or after 18 May you had a belief that some matters had not been agreed?
A. I didn’t until after May until February or March of 1995 . . .’ [T285-287]336 Mr Pittolo accepted that he had a recollection of the event in 1994 when Mr O’Connell had given him a scope of works [T326]. He could not recall what Mr O’Connell said to him at the time the further scope of works was handed over [T326]. 337 Mr Pittolo was asked to look at the 12 April 1994 scope of works incorporated into the 18 May contract and whether he denied that this was the document that Mr O’Connell had given him. His answer was: ‘I’ve got no recollection. I can’t say whether it is or it didn’t [sic].’ [T327]. 338 Mr Pittolo was asked:
‘Q. I’m asking you whether you told anyone that as of 18 May you thought that there were matters yet to be agreed?
A. It did not occur to me on 18 May that there were matters unagreed.
Q. It follows from that, that matters to which you refer, must have been relatively unimportant?
A. No, it does not necessarily follow.
Q. Can you give an explanation as to why it is that there might have been an important matter not agreed to your knowledge that was not the subject to any warning by you to anyone when the subcontract was signed? . . .If there was an important matter that you knew had not been agreed why did you not warn anyone at 18 May that it had not been agreed?
A. Because at 18 May it was not of my - it wasn’t brought to my attention that certain matters were not agreed.
Q. But you are the person who is administering that at Wards are you not?
A. Yes.
Q. Who was going to bring it to your attention given that you were the person administering that?
A. I expected Civil and Civic to bring to my attention matters that were unrecovered. [sic]
Q. How would they know if you did not tell them, what you had not agreed to, if you did not tell them?
A. It was not only what I agreed to. It was what had not agreed to.
Q. You already told us that Mr Manion prepared for you a document, things that were yet to be agreed?
A. Yes.
Q. I assume that what had not been agreed by 18 May was one of those population of matters in that document or more of them?
A. No, there were other matters outside that which had not been agreed as well.
Q. And you knew that?
A. I am aware of it now, I was not aware of it at the time.
Q. Can I suggest to you that the whole purpose of Mr Manion supplying you with this document was to inform you of the matters which at that time had not been agreed ?
A. Yes .
Q. Are you saying that you did not pass that on to anyone else ?
A. No, I didn’t .
Q. Wasn’t it important to let someone else know that there were matters not agreed?
A. There were matters - the majority of those matters in there I believed other people knew about.
Q. Who?
A. Glenn Cherrie and Tony.
Q. How would they find out?
A. They know prior to Mike Manion preparing that document that matters were unresolved.
Q. How did they know that?
A. Because of discussions with Mike Manion.
Q. If they do not give evidence of matters being unresolved before 18 May can you explain that?
A. No I can’t
Q. What did you do with the document prepared by Mr Manion listing the matters not yet agreed ?
A. I put it in my filing cabinet I had at work . . .’ [T288-289]339 Mr Pittolo was asked and answered as follows:
‘Q. It was something headed “Scope of Works”?
A. It had a title on it ‘Scope of Works”, yes.
Q. So that when you got it you knew that it was a scope of works?
A. Yes.
Q. Can I suggest to you that as soon as you got it, it was immediately apparent that it was different to the thing which is TGMP/D ?
A. It was a different document, yes .
Q. And the only prudent thing that you could have done, can I suggest to you, was to read it?
A. I’ve got no recollection of reading that document that . . . O’Connell gave me.’ [T327]340 It was put to Mr Pittolo at transcript 329 that the scope of works document which he had seen prior to Mr O’Connell handing him a scope of works in 1994 was the 3 August scope and he accepted this. He accepted also that he had seen no other scope of any sort between those two occasions which covered the whole of the works and he further accepted that between those dates, substantial changes had happened to the project by way of deletion of significant items of construction and by way of design change [T329]. 341 Mr Pittolo was asked:
‘Q. Whenever Mr O’Connell gave you his scope of works it was clear that much water had passed under the bridge since 3 August, wasn’t it?
A. There had been a lot of discussion since then.
Q. For instance, some major areas of the scope had been deleted , had they not?
A. Yes. . . . [T328]342 Mr Pittolo at transcript 332 was asked:
‘Q. It was obvious, was it not, that by the time Mr O’Connell handed you a scope of works, that it had to be different to the 3 August scope of works ?
A. Yes, to the 3 August one .’ [T329]343 At transcript 333, Mr Pittolo was asked:
‘Q. And assuming that what you were given in 1994 was an update of that document, it was obvious wasn’t it, that it was going to be different to August?
A. You’re assuming that it was going to be an update of this document, yes.
Q. And you’re not suggesting are you that what Mr O’Connell gave you in 1994 was another copy of these scopes of work, are you?
A. I don’t know what he gave me in 1994.
Q. Well just recalling your evidence that by 1994 significant parts of the work had disappeared, such as the structures . . . There would have been no point at all in Mr O’Connell giving you another one of these August documents, would there?
A. No.
Q. By 1994, these three scopes of work - and you will see there are three - had been superseded ?
A. Yes .
Q. It was obvious when you got the document in 1994, that whatever else it contained, it had to contain those changes to the project which had occurred up to that point . . .?
A. You would assume that it would contain those changes, yes.’ [T332]344 Mr Pittolo at transcript 335, accepted that it was obvious that the scope of works which had been part of the original tender documents on 3 August, were something that would need to change as time went on. 345 In relation to the concept of design development risk, Mr Pittolo was asked what he expected the document given to him by Mr O’Connell to say about that in 1994 and his answer was ‘I didn’t know what to expect at that time in that document . . .’. [T335] 346 On the same page, Mr Pittolo gave evidence that he was having trouble answering questions relating to the document which Mr O’Connell gave him because it was so long ago and ‘I don’t recall what I expected to be in that document. I don’t recall how I reacted to the document as as I’ve said, I don’t know what I’ve done with the document. I’m having a lot of trouble answering questions relating to that document . . .
‘Q. The reason you didn’t look at the scope of works given to you by Mr O’Connell was that as a person concerned with day to day construction, that new scope of works was unlikely to tell you anything you needed to know?
A. I’ve got no idea why I didn’t look at that document .
Q. Did you give it to anybody?
A. I’ve got no recollection of giving it to anybody.’347 Mr Pittolo also at transcript 336, gave the following evidence:
‘Q. . . . Is not the difficulty that you are having in dealing with this document given to you by Mr O’Connell, that as you sit in the box and cast your mind back over your conduct, you now realise that you should have appreciated as soon as you got it, that it was important to look at it ?
A. That is the problem I’m having. And I can’t tell you why I didn’t look at it and I can’t tell you what I did with it .’ [T335-336]348 Mr Niederberger first became involved in the project in about September 1993 at an engineering meeting held on that date. Prior to attending that meeting, Mr Niederberger had not reviewed any documents at all to familiarise himself with the project. Thereafter, he read the invitation to tender, the contract document which was included with that and briefly reviewed some of the estimate files that had been put together. [T368] However, it was not Mr Niederberger’s job to track through the correspondence from 3 August and following. [T390] 349 To his recollection, after Mr Manion left, the person at Wards who was in control of the estimate and whose job it was at Wards to make sure that the right drawings were incorporated in the final contract was Mr Max Pittolo. [T381] 350 Mr Niederberger was asked and answered as follows:
‘Q. . . . Can I suggest to you, what was clear to you when you eventually did come to look at the scope of works - which is incorporated into the 18 May contract - and that is, that there were no surprises to you at least in the description of design development risk, and the allocation of that risk to Wards, given the previous documentation which we’ve taken you through?
A. If you refer to those first two paragraphs, depending on your definition of design development, yes.
Q. And you appreciate what I’m putting that to you, I’m not trying to bind you to any particular definition of what design development is, but in a nutshell, this is the same story you had been familiar with since the first time you came onto the project and looked at the documents in different words?
A. Yes.
Q. It still, as far as you knew, allowed you to argue that in a particular instance a design change was something you ought to get paid for as a variation, for instance?
A. If it wasn’t under the definition of design development, yes, we would have been entitled to a variation . . .’ [T336-337]
Mr Niederberger
351 Mr Niederberger was not, he said, involved very deeply with discussion of the risk profile documents or their ramifications and in his view, the persons doing that work were Mr Levido and Mr Manion mostly at the time. [T402] 352 Mr Niederberger’s job description did not involve consideration of the detail for example, in the 7 February contract because by that stage Wards were working and his responsibility was the works on site. [T409] 353 Mr Niederberger’s responsibilities from about early December on, were works oriented in the sense that he was mostly on site concerned with construction matters and was not therefore concerned with continuing discussions between the parties about what might be in the contract. [T409] 354 Mr Niederberger had no involvement in the drafting or review of any Subcontract offered to Hornicks although he had attended design meetings up until near the end of March. [T409]
‘Q. How was Wards keeping track of what the scope of works looked like, from time to time?
A. We kept copies of the minutes of meetings and we didn’t change any documents.
Q. It must have been then very clear to Wards that at some stage a scope of works was going to issue which updated all of these items like item 2.1 ?
A. Yes I’d expect so .
Q. And I suggest to you that you understood that?
A. Yes, yes.
Q. And you understood that at some stage Civil and Civic would hand to you a document bringing up to date the scope of works with all of these items?
A. I guess it would have done, yes.
Q. And it would be important when they happen to look at it and see what was on it?
A. Yes.
Q. Because notwithstanding the fact that you were interested in the bill of quantities from the point of view of the number, the scope of works was an important document?
A. Yes.’ [T394]355 During 1993, Mr Robinson was responsible as the person in charge of negotiations with Wards and he accepted that he took the primary responsibility. There were, however, a number of persons who he reported to. To Mr Robinson’s recollection, there was no occasion or aspect of the negotiations in 1993 where any of those persons to whom he reported expressed disagreement with his recommendation or decision. He accepted that, to the best of his knowledge and belief, records of his decision making in 1993 in relation to the negotiations were the Civil and Civic position. [T417] 356 Mr Robinson gave evidence that during 1993, he did not at any time set out to conceal from Wards, the Civil and Civic intention as to the terms upon which a subcontract might be entered with them. There was no aspect of the risk allocation or commercial terms which was intended during 1993 to be entered with Wards which he sought to misrepresent or in any way misstate. 357 Mr Robinson was asked when it was in 1993 that there was, what he described as ‘the final risk allocation’. His answer was ‘I believe that we had the majority of them on the table in August of 93 and I believe that they were covered through various meetings that then took place up until the agreement of a target guaranteed maximum price on 17 November’. [T418] 358 Mr Ward’s recollection was that as at 17 November 1993, the basis upon which Wards and Civil and Civic were going to proceed forward to a GMP is to be found in the record of their dealings culminating on 17 November 1993 [T420] 359 Mr Robinson accepted that on 17 November 1993, reading Wards’ document as the culmination of a process which yielded final risk allocation, he knew and believed that Wards regarded design development as something which might cost money and as something which would be carried out within the defined scope of works. [T421] 360 At transcript 421, Mr Robinson was asked and answered as follows:
Mr Robinson
361 Mr Robinson was closely examined on what document or documents as at 17 November 1993, one required to look at, to find the defined scope. 362 Mr Robinson’s answer to the following questions was as follows:
‘Q. As at that date, in what document or documents, if any, did you believe the defined scope to be found?
A. I believed that the defined scope was outlined in the letter of offer that was sent to Wards which responded in this acceptance.
Q. Do you mean the 3 August 1993 letter?
A. Yes. . . .
Q. Could you just reflect on that answer and tell the Court whether or not you regard that as accurate?
A. No, it was not accurate.
Q. You yourself, today, have told his Honour, haven’t you, that between the 3 August offer and the final allocation of risk culmination of negotiations on 17 November, there had been some changes carried out by dealings between the parties which are on record?
A. That’s correct, yes.’363 Mr Robinson accepted that the TGMP-D reflected the current scope of works as at 17 November and in that regard it did something which the 3 August scope document no longer did. [T427] 364 At transcript 431, Mr Robinson gave the following evidence:
‘Q. What documents, if any, have you decided, apart from Wards’ TGMP-D which contained the defined scope as at 17 November 1993?
A. The defined scope would be the original letter of offer which was sent by Civil and Civic.
Q. That was 3 November?
A. Yes. There were a series of meetings which were held between that date and the TGMP, the acceptable TGMP, of 17 November. There were regular Wards/Civils meetings, a couple that I have come across were number 4 and number 5, 5 being on 23 September 1993. There were also exchanges with the previous TGMP by Wards of their risk profile . . .
Q. You referred to drawings being done during the August/November period didn’t you?
A. Yes.
Q. Is this a correct description? Drawings which were done during that period did not themselves define scope but gave concrete form to design within scope, is that right?
A. . . . No I don’t believe so.
Q. What is wrong with it?
A. It’s what the definition of concrete scope is, concrete form. Are you referring to constructions which were concrete structures which were defined?
Q. Drawing is a two-dimensional depiction of something to be built, is that right?
A. Yes.
Q. Concept is an idea, is that right?
A. Yes.
Q. The scope of works, so-called as at 3 August 1993 described in various ways using words something to be built, is that right?
A. Yes.
Q. Drawings have later been done including during the period of August and November to depict what is to be built, is that right?
A. That’s correct.
Q. And his Honour will have come across the expression AFC drawings, meaning “approved for construction”, is that right?
A. Yes.
Q. And his Honour will have come across cross-designations of drawing which refer to revisions. They refer to amendments and modifications to drawings, don’t they?
A. Yes.
Q. As the number gets bigger so the number of modifications or amendments increase, is that correct?
A. Yes.
Q. As at 17 November 1993 some drawings existed which had not existed on 3 August 1993, is that right?
A. Yes.
Q. But the coming into existence of those drawings did not of itself alter the scope of the works, did it?
A. No.
Q. They were drawings to give two-dimensional form, material plans, to the work which had been described in the scope documents, is that right?
A. Yes.
Q. The drawings were to give the plans for construction within the scope, is that right?
A. Yes.
Q. Of course in theory at least, a drawing might depict work which falls outside the defined scope, is that right?
A. Yes.
Q. But according to the evidence you’ve given his Honour is it the case that during the period up to 17 November 1993 you don’t rely upon any drawings passing between you and Wards to define the scope?
A. That’s correct.
Q. The 3 August scope document was not the last word on the definition of scope up to 17 November was it?
A. No.
Q. You’ve referred to some meetings, including numbers 4 and 5 as containing material which show evolution beyond 3 August in the definition of scope haven’t you?
A. Not in the definition of scope, but in clarification of scope.
Q. Should his Honour suppose there is a material difference in your mind between clarification and definition of scope?
A. Definition of scope, I was using as a description of what the works were that were contained in the TGMP. Clarification of work is actually taking drawings and doing more work to them so that they are clearer in terms of the design that is required to be completed or constructed.
Q. When you say clearer, you are talking about the addition of more levels of detail so as to bring drawings closer to AFC [Approved For Construction] scope, is that right?
A. That is correct.
Q. The TGMP is a monetary sum isn’t it?
A. Yes.
Q. And at all times during August to November 1993, culminating on 17 November, it was a sum dealt with between Civil and Civic and Wards as an aggregate of component sums is that right?
A. Yes.
Q. And the TGMP-D document coming from Wards is a list of work items, quantities, and extended prices to produce an aggregate price, is that right?
A. Yes . . .
Q. Of course, for a lump sum contract, the allocation of sums within individual components doesn’t directly affect the decision whether to award the contract, is that right?
A. That’s right.
A. Again, variations depend on how the scope and the risks have been allocated.’ [T426]
365 At transcript 437, Mr Robinson was asked and answered as follows:
‘Q. As at 17 November when the final allocation of risk took place, to your belief Wards were proceeding on the basis that their TGMP document defined the scope of works, that’s right, isn’t it?
A. In terms of the work package breakdown, yes.
Q. In terms of the work to be done, is that right?
A. Yes.
Q. The process which led up to the TGMP was something which was called between Wards and Civil and Civic as a result of a network agreement, is that right?
A. Yes.
Q. What does “network” mean in that saying?
A. It meant people who were gathered together because of like objectives.
Q. There was a group put together by earlier negotiations back in 1992 of what might be called Civil and Civic as head contractor hopefully and a number of other companies, including Wards, as hopeful subcontractors, to produce a competitive bid for the work, is that right?
A Yes. . . .
Q. So there was very explicitly from the middle of 1992 an atmosphere, which you helped to create, of cooperation towards a common end between Civil and Civic and Wards for this project, is that right?
A. Yes.
Q. That came to be described that atmosphere as one of the hallmarks and benefits of so-called partnering between these parties, didn’t it?
A. Yes.
Q. And the notion of partnering, the language of partnering, which you used in your dealings with Wards between 1992 and the end of 1993 was language designed to create and maintain trust between the parties, is that right?
A. That’s correct.’ [T431]366 Also at transcript 437, Mr Robinson was asked and answered as follows:
‘Q. You never intended as at 17 November 1993 that Wards was on risk for so-called design development beyond the scope of what was defined by that date in the TGMP-D and drawings, did you ?
A. It was intended that design development would be the risk borne by Wards after a GMP contract was executed . . . [The question was then read again and answered:]
A. No .’ [T437]367 To the best of his recollection, Mr Robinson left the project around about 28 March 1994. [T438] 368 At transcript 440, Mr Robinson accepted that the notion of ‘partnering’ had as key principles, the concept and covenant of good faith and fair dealing, people working together to solve problems and coming to a common understanding of where they were going and how they were going to do it. 369 At transcript 443-444/445, Mr Robinson was shown paragraphs 5 and 6 of the 3 August letter and answered, inter alia, as follows:
‘Q. During the phase which ended with the GMP can you point now with all the access you need to any document which altered the definition of the scope of works?
A. Between TGMP and GMP?
Q. Yes . . .
A. Yes, there were some minor variations which had come about as part of the subcontract work which was occurring on site that those elements would have changed the scope if that subcontract was rolled up into the GMP, which was the intention.
Q. You are now talking, by your reference to that subcontract, to what became known as the 7 February 1994 subcontract, is that right?
A. Yes that’s right.
Q. Do you mean that there is a definition of work in relation to 7 February 1994 subcontract which in some respects, which you have called minor, altered the scope found in the TGMP-D and the drawings existing at its date?
A. No, I was referring to variations that had occurred to the scope during that contract.
Q. Are there three in number?
A. At the moment I recall one . . .
Q. Variations to scope, they were really treated as variations under the contract, isn’t that right?
A. That’s correct.
Q. Not so much by changing scope, as by way of rewarding work outside scope?
A. That’s correct, with altered moments.
Q. Understood in that fashion those variations didn’t change the definition of scope at all, did they?
A. If they were variations they were allowed to the TGMP sum of 16.7.
Q. If they were rewarded over and above what we will call 16.7, then they weren’t changing the definition of scope at all?
A. No.
Q. What they were doing, in fact, were showing that the defined scope provided the limit within which the parties could observe by saying, this is within and this other is outside is that right?
A. Yes.’ [T438]370 At transcript 453, Mr Robinson gave evidence that his recollection was that so far as the so-called subcontract development privately within Civil and Civic was concerned, between August and November 1993 he did not intend there to be anything in altered terms of the subcontract which differed materially from the combination in the 3 August package. That continued to be his intent until he left the job at the end of March 1994 unless during that time, during TGMP, there had been an agreement between the parties to alter things which had not occurred until the time he left. 371 Mr Robinson’s evidence at transcript 453, was as follows:
‘Q. You intended Wards to regard the draft form of subcontract terms supplied under cover of the 3 August letter as the terms on the basis of which, together with the other material then supplied, they were to price to Wards the TGMP and ultimately were to go further towards the GMP, didn’t you?
A. Yes, the whole package of documents was intended for that.
Q. The package of documents, of course, also included the covering letter with its paragraph 5 and 6 that I’ve asked you about?
A. Yes.
Q. Didn’t it?
A. Yes.
Q. But paragraph 5 is not reflected, obviously in the intended subcontract because it talks about the process leading up to but not beyond that subcontract. Do you agree?
A. Yes.
Q. Paragraph 6 fairly plainly looks to the post subcontract phase. It describes the subcontract itself, doesn’t it?
A. Yes.
Q. And paragraph 6 was in a letter which supplied the form of subcontract upon which you intended Wards to base their price, wasn’t it?
A. Yes.
Q. And the two need to be read together somehow in order to find out what you intended Wards to believe would be the basis of the eventual deal, don’t they?
A. Yes.
Q. The form of subcontract which you supplied for that purpose included a provision for variations, didn’t it?
A. Yes.
Q. And variations as a concept require the parties to know the limit within which, or outside which, matters required by the contract, or matters which were variations, could be determined, is that right?
A. Yes.
Q. And at all times you intended Wards to believe that it was the 17th November definition of scope which would provide that limit, is that right?
A. Yes.’372 In final address, Mr Finch emphasised, inter alia, the following answers by Mr Robinson:
‘Q. Did you give instructions to your subordinates up until when you left to proceed on the basis of the 3 August package providing the meaning intended for subcontract terms?
A. I did a hand over to my subordinates which included advising them on where I believed the status of the agreement was, which was the 3 August 1993 document.
Q. So all your dealings with your subordinates until you left was, to the best of your ability, to produce an eventual subcontract entirely consistent with and no more onerous than the 3 August package, is that right?
A. With the clarification that the 3 August package had scope which was deleted by agreement between the parties up to the letter back from Wards of 17 November and so, therefore, with those changes made, yes.’ [T453]373 Mr O’Connell was asked at transcript 495, whether Mr Robinson had asked him before he left the project, to set out preparing the documentation to be included or to constitute the GMP subcontract. The answer was ‘No he didn’t. I would say I inherited that because it was not complete at the time of his departure.’ 374 Mr O’Connell’s evidence was that as work area team leader, he assumed the task of preparing the documentation to be included although he had not spoken to Mr Robinson about what Mr Robinson had in mind for that task. He worked it out for himself. He had not looked at the 3 August 1993 letter and enclosures between late March 1994 and the time when he asked Mr Hayes to begin documenting the Subcontract. 375 By the time Mr Robinson left, probably in late March, certainly by 12 April, Mr O’Connell had asked Mr Kip Hayes to set about preparing part of the Subcontract documentation [T496 and see 493]. Mr O’Connell accepted that his instructions to Mr Hayes were in accordance with what he understood from his previous dealings. [T497] 376 At transcript 499, Mr O’Connell gave the following evidence:
‘Q. Whatever you told Mr Hayes, whatever passed between you openly in front of Wards or privately in Civil and Civic, may his Honour take it that you never asked him to change the description of scope from its definition on 17 November . . . May his Honour take that to be true?
A. No, I don’t believe so, because my recollection is that we were continuing to have discussions - we had a target guarantee of maximum price which was a base document. We were continuing to have meetings and discussions about scope, about some of the fine tuning problems that hadn’t been identified in the scope between Wards and ourselves and I would have expected Kip Hayes, as part of his role, to be talking to Tony Niederberger and Mike Manion about fine tuning that into that scope.
Q. When you say fine tuning, do you mean something different from the greater detail process and the economic improvement process or do you mean simply that?
A. No, I would have expected there could be, quite realistically, quantum changes that would need to go on, that would implicate a change in the price on the project that we would be expecting Wards to have taken into account in reaching what would be their GMP figure.’ [T473]
Mr O’Connell
377 Sufficient of the detail of the material documents and evidence has now been set out to permit the issues to be treated with. As appropriate segments of the evidence relevant to discrete issues will be referred to. It is, however, as well to first revisit the respective cases. Curiously each party ultimately sought to rely upon concessions said to have been elicited under cross-examination of the other parties’ witnesses.
‘Q. Did you, when you reviewed Mr Kip Hayes’ work sometime in April/May 1994, being his work to produce the scope of works document for the GMP subcontract, deliberately set out to make that scope of works document different in content from the scope of works as you understood it to be as at 17 November 1993?
A. No I did not deliberately set out to change the scope of works as I understood it to be.
Q. Would it be fair to say that had you intended to be introducing a change to the scope of works from that you understood it to be on 17 November 1993, you would certainly have told someone at Wards that you were doing so?
A. I am - I may answer that question by saying I gave a copy of the scope of works to Wards to review before it went in the contract . . .
Q. I have asked you what you would have done if you set out to change the scope from the 17 November, and you have responded by talking about something you actually did, have you not?
A. I have responded.
Q. But you have also told his Honour three answers ago that you never set out deliberately to change the scope, haven’t you?
A. I did not deliberately - I did not set out to deliberately change the scope.
Q. So you certainly didn’t hand over any document actually in order to notify of a change of scope, did you, according to your present evidence?
A. Mr Walker, the scope as I understood it, the 17 November, was reviewed at a meeting at Wards’ offices between ourselves, and I think it was Dick Glasgow and Mike Manion from Wards, and a number of things on the drawings and in the documents were substantially catered for on more than a couple of issues. So the understanding - or my understanding of the scope was that it also covered for a lot of issues not described by the bil l, and covered for the intent of the project being completed fully by Wards as far as Civil and earthworks was concerned. Does that answer your question? . . .
Q. According to what you’ve told us and please, if you want to change this evidence, say so, you never intended to change the scope of works from that which you understood it to be as at 17 November. Now is that true or not?
A. That is true.
Q. Second, let me ask this, had you intended to change it, would you have told Wards you were doing so?
A. Yes.
Q. One reason why you would have told Wards you were doing so would be because of the partnering and cooperative relationship talked of between Wards and Civil and Civic meant that you would be up front in your dealings; isn’t that right?
A. That was - yes yes.
Q. And during the process, or towards the end of the process of converting a TGMP to a GMP for the same sum, it would obviously be important to one of the companies in this partnership arrangement to be told that the scope was changing, wouldn’t it?
A. I don’t believe the scope was changing . . . If there had been a change of scope proposed by Civil and Civic, it was obviously important for Wards towards the end of the process of converting a TGMP to a TGMP for the same price to be told so; isn’t that right?
A. Yes.
Q. According to your present evidence today, you never told Wards any such thing because you say you never did change the scope from 17 November, is that right?
A. My understanding of the scope -
Q. Are you able to agree with my question or not; do you need it again?
A. I’ve heard your question, but it all relates to my understanding of the scope. [question repeated - according to your present evidence today, you never told Wards any such thing because you say you never did change the scope from 17 November, is that right?]
A. I did not change my understanding of the scope.
Q. Does that mean that is why you did not tell Wards about what you were doing with the scope of works document?
A. I did give a copy of the scope of works document to Wards, so I did tell them what I was doing with the scope of works document.
Q. You have said at least three times you thought you were not changing it?
A. I thought I was not changing the scope of works.
Q. You are not for a moment wanting his Honour to believe that handing a document over was a warning of change - you’re not asking his Honour to believe that, are you?
A. No, I am not.
Q. You never said anything in any conversation with Wards to suggest to them that the document, scope of works, would be different from what was available as at 17 November, did you?
A. I did not say that, to them, but I also participated in design meetings where it was discussed .
Q. Where what was discussed?
A. About issues such as vertical cuts in rock faces, about development of design. Scope as such did not change, but development of design did so.
Q. Between the engineers, it was as plain as a pikestaff, that design development was an activity which would be carried on between TGMP and the TMG stage and also beyond, isn’t that right?
A. Yes.
Q. A lot of work was done in that direction, wasn’t there?
A. A lot of design development continued.
Q. And it had nothing to do with scope because, as I think you’ve been trying to point out, that was development of design within the scope, isn’t that right?
A. That is correct.
Q. Are you able to tell us whether during April/May 1994 you understood the 17 November scope to be open ended without limits?
A. No, there were no boundaries of the 17 November scope.
Q. A scope without boundaries would be a contradiction in terms, wouldn’t it?
A. It would.
Q. And if one party thought there were boundaries and the other party secretly intended there not to be boundaries, then those parties would not be acting in a partnership way, would they?
A. No, they would not.
Q. Did you, for Civil and Civic, ever intend to trick Wards into signing a scope of works document which did not impose boundaries on the work to be done?
A. No, I did not deliberately intend to trick them.
Q. And that, in your opinion, in the circumstances of 1994 would be an outrageous violation of the partnership cooperation between them at that time, had it been so?
A. Yes.
Q. You never intended the GMP subcontract to have a scope of works document without boundaries of the work to be done did you?
A. No.’ [T501-502]
Dealing with the respective cases
378 Wards’ written outline of final submissions was as follows:
Wards’ case
379 Stripped of refinement, Civil and Civic identified what appear to be Wards’ principal or underlying contentions from which the eleven separate questions for determination derived, as capable of being reduced to the following propositions:
‘1. The evidence supports the grant of statutory relief (by way of variation of the contract) under sub-sec. 87(1) and para. 87(2)(b) of the Trade Practices Act 1974. Alternatively, were the Court's discretion to be exercised against the grant of that form of statutory rectification, so to speak, then a finding should be made of the defendant’s liability under sec. 52 of the Trade Practices Act, with damages under sec. 82 to be assessed later. (Statutory damages are in the alternative, rather than additional, to statutory variation of the contract only because the variation sought will eliminate the potential for the contract to cause monetary loss. Were the Court to exercise its statutory discretion so as to vary the contract to a lesser extent than the plaintiff seeks, damages would be additional to such relief.)
2. The evidence also supports the grant of equitable relief viz. rectification of the document executed on 18th May 1994 ("the GMP sub-contract"). The plaintiff seeks rectification, properly so-called, in the alternative to its preferred remedy of statutory variation under sec. 87.
3. If the Court were to find that the circumstances enlivened the judicial discretions to grant statutory variation or rectification, but the Court regarded those forms of relief as inappropriate for discretionary reasons, then a further alternative of rescission (by an avoidance under para. 87(2)(a) on the statutory count, and in equity on the general law count) would remain available and would then be sought by the plaintiff.
4. In summary, in order of preference, the plaintiff seeks (a) statutory variation, (b) (equitable) rectification, (c) rescission, (d) statutory damages.
5. The statutory variation of the GMP sub-contract should be made so as to produce the GMP sub-contract in the following terms:-The terms of the draft sub-contract attached to the letter from Civil & Civic to the Contractor dated 3 August 1993 (‘the Invitation to Tender’), the terms of the Invitation to Tender itself and all other documents enclosed with the Invitation to Tender together with
The terms of the draft sub-contract attached to the letter from Civil & Civic to the Contractor dated 3 August 1993 (‘the Invitation to Tender’), the terms of the Invitation to Tender itself and all other documents enclosed with the Invitation to Tender together with and read subject to:
(a) the program enclosed with the Contractor’s letter of 23 August 1993 to Civil & Civic;
(b) the scope of works enclosed with the Invitation to Tender refined by the documents enclosed with the Contractor’s letter of 17 November 1993; and
(c) the revised Schedule of Drawings which is annexure ‘A’
[I interpolate that in final address, Mr Walker submitted that the term referred to in paragraph 6(a) immediately hereunder should also be included as part of these paragraph 5 terms.]
6. If the GMP sub-contract were to be rectified, it should be rectified in the following way:-
(a) Include in clause 1
“Design Development” means the development (from and after the date of Contract) of the design of the Works by way of details or by way of improvement so as to enhance buildability or so as to produce savings for the Contractor, but not in any case so as to enlarge the scope of works in any material way.
(b) Replace clause 6.30 with:
“Risk associated with further Design Development is to be borne by the Contractor within the Contract Sum unless major changes are required to the Scope of Works by the Client.”
(c) Replace clauses 3.4.1, 6.3.1, 6.4.2, 6.21.2, 6.22.2, 6.24.2, 6.26.3, 6.29.1, 8.3.2, 9.4.1, 9.4.2, 9.10.1, 10.110.7.1, 10.12 and 11.1.1 with the versions as they appear in the draft sub-contract document attached to the Invitation to Tender
(d) Delete clause 9.8.4.
(e) Replace clause 6.10.3 with:
“ The Contractor will not be entitled to a payment for a Variation resulting from Design Development”.
(f) Replace the “Scope of Works” document attached to the contract dated 18 May 1994 with the document entitled “Scope of Works” dated 12 July 1993 attached to the Invitation to Tender as modified by agreements between the Contractor and C&C up to 17 November 1993 (as set out in the priced Bill of Quantities dated 19 November 1993 (TGMP:D))
(g) Replace the Schedule of Drawings with annexure ‘A’ to these submissions
(h) Replace the reference to “Contractor’s program PWFP Revision 1” in the Schedule of Contract Programme with “Contract Program enclosed with the Contractor’s letter of 23 August 1993 to C&C”
(i) Delete the reference to an amount of $20,000 per day for liquidated damages in the Appendix
(j) Delete the reference to 3 days and the words (“If nothing stated - 10 days)” in the Appendix where it references clause 9.4.2(1)
(k) Delete the various rates in the Appendix where it references clause 10.4.2(1)
(l) Delete the reference to the figure nil and the words “(if nothing stated - nil)” where it references to clause 10.4.2(3)
7. The evidentiary contest eventually resolved when both of the defendant's witnesses repudiated any intention on their part, effectively, to seek to take advantage of unannounced, undisclosed or non-negotiated terms in the GMP sub-contract. Wherever those terms differed materially from the terms to be gathered from the combination of documents between 3rd August 1993 and 17th November 1993, Messrs. Robinson and O'Connell gave up any notion that the differences were intended differences on the part of Civil & Civic, let alone intended by Civil & Civic to bind Wards. As Mr. Robinson said, the final allocation of risk was carried out by the 17th November 1993 acceptance of a TGMP.
T418.50
T422.14
T452.28
T453.09
T453.31
T459.48
T460.16
T511.17
8. This is particularly so in relation to the scope of works. Mr. Robinson was clear that its definition had culminated in the expression of it on 17th November 1993, viz. by reference to Ward's Bill of Quantities, the extant drawings and so much of the Scope of Works document from the 3rd August 1993 package as had survived the dealings from that date until 17th November 1993. Mr. O'Connell, in effect, disavowed any intent on his part to have altered the defined scope of work as it was on 17th November 1993.
T431.08
T499.21
T500.16
T501.10
9. Messrs. Savage and Crangle are officers senior to Messrs. Robinson and O'Connell in the Civil & Civic executive hierarchy for this project, available to be called as witnesses but not called. In accordance with an ordinary application of Jones v. Dunkel (1959) 101 CLR 298, the Court should make findings against the defendant as to its corporate intention, and thus its corporate conscience, in relation to the form of the GMP sub-contract, with the added confidence given by an assumption that the evidence of Messrs. Savage and Crangle would not have assisted Civil & Civic in these regards. This approach is particularly strong in this case, given the obviously deliberate forensic choices made not to call those officers
T417-13
10. As to some of the unexplained aspects of the way in which the GMP sub-contract form was produced by the defendant, the failure to call Messrs. Dias and Hayes - being a deliberate forensic tactic - also supports a robust use of the Jones v. Dunkel inference.
T459.16
11. The combination of these approaches to the evidence called in light of the witnesses kept away from court supports the following findings:
(a) First, in accordance with Mr. Robinson's evidence, it was not the intention of Civil & Civic, whose relevant mentality on this point must be taken to have been his, that terms be changed in producing the GMP sub-contract from those made known to Wards between 3rd August and 17th November 1993.
T443.34
(b) Second, the 12th April 1994 Scope of Works document, produced by Mr. Hayes under Mr. O'Connell's rather passive supervision after Mr. Robinson left the site at the end of March 1994, was not intended by Civil & Civic to abolish the boundaries which are essential for the scope of works, nor to change the scope of works from that defined by 17th November 1993.
T500.15
T502.13
T502.44
(c) Third, if the eventual form of the GMP sub-contract is in fact contrary to those declared intentions on the part of Civil & Civic, as it clearly is, then this was a mishap due to a kind of mistake on the part of the Civil & Civic officers, in the context of the trusting lack of checking on behalf of Wards.
T462.55
T502.06
T507.09
T511.10
T511.17
(d) Fourth, alternatively to the third proposition, some kind of covert and unmeritorious exercise was afoot within Civil & Civic, not explained in the evidence called by Civil & Civic, which produced a form of the GMP sub-contract which belied the declared intentions of its responsible officers viz. Messrs. Robinson and O'Connell.
T507.15
T507.37
T509.18
12. The importance of the partnering approach, with its emphasis on co-operation, good faith and transparency, is that it provides a very solid foundation for a reasonable expectation on the part of Wards that Civil & Civic would be up front in disclosing, discussing and negotiating changes from the terms (including scope) known to Wards as at 17th November 1993. The defendant's evidence puts the reasonableness of that expectation beyond doubt. The same evidence concedes that silence in those circumstances would be misleading. See e.g. Demagogue v. Ramensky (1992) 39 F.C.R. 31 esp. at 32, 40-41.
T323.07
T423.06
T423.23
T510.50
13. There is no doubt that the form of the GMP sub-contract was the responsibility of the defendant, in the sense that it was produced wholly by the defendant without any participation by the plaintiff. If the defendant's attitude to the plaintiff's unwitting execution of the GMP sub-contract in a form different from what was expected remains in accordance with Mr. Hayes' reported jibe, then in the eyes of equity it is unconscionable for the defendant to seek to retain the advantage of that execution. "Well, you can read, can't you?" is unexplained by any evidence from the defendant, although Mr. Hayes was manifestly available to give evidence. It is at least consistent with, and probably indicates, a Civil Civic position that Wards should be bound and held bound to terms produced in the unilateral (i.e. secret) and somewhat muddled way described by Mr. O'Connell - who did not even refer to the 3rd August 1993 package or the 17th November 1993 scope to check Mr. Hayes' work.
Ward 1/24
T497.06
T509.59
T511.17
T511.10
14. If the defendant now rejects the unpalatable attitude evinced by Mr. Hayes, then in effect it concedes that both parties were mistaken as to the form of document executed as the GMP sub-contract. Whatever deliberateness Mr. Hayes or some other Civil & Civic officer displayed in preparing those documents, the relevant guiding minds (viz. those of Messrs. Robinson and O'Connell) did not detect and certainly did not intend material departure from the 3rd August - 17th November 1993 amalgam. A finding which characterizes the executed document as merely the result of this miscued intention on the part of Messrs. Robinson and O'Connell (themselves on behalf of the defendant) provides the basis for the statutory variation or the rectification of the GMP sub-contract.
T452.28
T453.09
T510.50
15. The statutory variation of the GMP sub-contract will, by its very nature, prevent the plaintiff from suffering the threatened loss constituted by the defendant's continued reliance on a form of the GMP sub-contract which was different from that intended to be executed by the parties or else was different from that which the defendant appreciated the plaintiff expected to be executing. For the same reason, rectification would be available in the alternative according to established principle, as would rescission in equity as a further alternative. See Taylor v. Johnson (1982) 151 C.L.R. 422 at 431-433, Johnston v. Arnaboldi [1990] 2 Qd. R. 138 at 144-145 and Thomas Bates and Son v. Wyndham's (Lingerie) [1981] 1 W.L.R. 405 at 514-516.’
380 To my mind, the above propositions do represent the essential propositions for which Wards contends. However, hidden within proposition (viii) is an important matter. I refer here to the distinction between a contract which imposes upon the subcontractor, the risk for further design development which is within the scope of the contract and a contract which imposes upon the subcontractor, the risk for further design development, whether within or without the scope of the contract. 381 In closing submissions, it became apparent that the defendant did not contend [and asserted that it had never contended] that clause 6.30.1(b) was to be read as imposing upon Wards, the risk for further design development beyond the scope of works identified in the Subcontract. 382 The matter is referred to below but needs to be steadfastly kept in mind. 383 I accept Civil and Civic’s submission that the gravamen of Wards case is that it signed a subcontract for the works on 18 May 1994 for a lump sum price of $16.7million and thereby unknowingly accepted obligations in respect of future design development and the cost and risk thereof because Civil and Civic inserted clause 6.30 and clause 6.10.3 into the subcontract standard terms and conditions and Wards, so it asserts, was not made aware of the Civil and Civic actions. I further accept that this simple proposition has been expressed in several different ways to seek various entitlements to relief, namely:
‘(i) the Plaintiff and the Defendant had an agreement as at November or December 1993 whereby the Plaintiff would perform certain excavation, construction and associated works at the Prospect Water Filtration Plant for a lump sum price of $16.7 million pursuant to a scope of works document dated 12 July 1993, drawings received under cover of a letter dated 3 August 1993 and a priced bill of quantities dated 19 November 1993 (the “Works”);
(ii) the agreement was constituted by a series of communications and circumstances, including correspondence from the Plaintiff to the Defendant during the period 3 August 1993 to 17 November 1993 and meetings between the parties during the period 3 September 1993 and 5 October 1993;
(iii) such agreement was subject to the signing of a formal written subcontract which would incorporate the terms of the aforesaid communications and correspondence as well as “any additional or alternative terms agreed upon between the parties”;
(iv) the Plaintiff commenced work on site on or about 9 December 1993;
(v) the Plaintiff’s work commenced pursuant to a letter of intent dated 6 December 1993, a purchase order of December 1993 and thereafter pursuant to an executed early works Subcontract dated 7 February 1994 for a lump sum price of $1,494,533.66 which were each entered into merely as part of a bureaucratic requirement by the Defendant to enable the Plaintiff to receive progress payments for the works it was then performing;
(vi) the Plaintiff continued to perform works and participated in a process known as “design development” after the December 1993 agreement was reached and during its performance of the early works at the site from 9 December 1993;
(vii) the Plaintiff continued to participate in the design development process up until it signed a formal written Subcontract with the Defendant on 18 May 1994;
(viii) the 18 May 1994 Subcontract was executed by the Plaintiff in circumstances where the Defendant had imposed upon the Plaintiff by the terms of that Subcontract the risk for further design development and did not advise the Plaintiff of such fact;
(ix) the Plaintiff trusted the Defendant by virtue of previous business dealings to such a degree that the Plaintiff did not read the terms and conditions of the Subcontract prior to its execution on 18 May 1994 and that such trust by the Plaintiff in the Defendant was misplaced by reason of the above circumstances.’
‘(i) whether the Plaintiff is entitled to rectification of the 18 May 1994 Subcontract at common law on the basis of unilateral mistake;
(ii) whether the Plaintiff is entitled to rectification of the 18 May 1994 Subcontract pursuant to section 87 of the Trade Practices Act 1974 by reason that the Defendant’s conduct amounted to misleading and deceptive conduct in contravention of the Trade Practices Act 1974;
(iii) whether the Defendant was negligent in the circumstances giving rise to the execution of the Subcontract;
(iv) whether the Subcontract has been avoided;
(v) whether the Defendant is estopped from denying that the agreement between the Plaintiff and the Defendant is the agreement as at December 1993;
(vi) instead of the 18 May 1994 Subcontract, whether there was an agreement as at December 1993 for the Plaintiff to construct the works in the manner as alleged by the Plaintiff;
527 I accept that there can be no doubt on the plaintiff’s own evidence that the relevant personnel of the plaintiff company knew the concept and fact of risk for further ‘within scope’ design development embodied by clause 6.30, that having been a matter which was discussed between the parties prior to 18 May 1994 and anticipated by the plaintiff to be embodied in a formal subcontract document. What was not anticipated was the concept or fact of risk for further ‘without scope’ design development, if that risk be, as a matter of construction, embodied within clause 6.30. 528 It is inappropriate to repeat yet again large segments of the evidence given by the plaintiff’s witnesses on the topic of whether Wards knowingly accepted the risk of further ‘within scope’ design development after 18 May 1994. Shortly, however, the totality of Mr Ward’s evidence is to the effect that the design development clause at 6.30 of the 7 February and 18 May 1994 subcontracts were consistent with the obligations of Wards and the exposure of Wards for design development matters which was the subject of correspondence starting back in June 1992 and later expressed in the letter dated 3 August 1993. [See for example T63.36-.44; T39.41-.57; T20.52-.58; T20.33-.34; T56.18-.23]. Mr Ward, inter alia, expressed no doubt that the risk for further design development as a concept was a matter which was to be part of the contractual relationship between the plaintiff and the defendant, whether expressed in the terms of clause 6.30 or in the terms of paragraph 6 of the letter of 3 August. 529 Mr Cherrie’s evidence was generally to the same effect. He was, for example, taken to clause 6.10.3 and clause 6.30 of the 7 February and 18 May 1994 subcontracts and was asked and answered as follows:
‘. . . nothing my learned friend will be able to persuade your Honour of will be able to show 6.30 in the dealings between the parties. He will not in our respectful submission be able to say that someone using requisite care for their own interest would have described between the lines of the documents up to 17 November 1993 everything that 6.30 is now intended by Civil and Civic to work to the detriment of my client.’ [T34.3-34.4]
530 Mr Cherrie acknowledged that ‘to properly reflect the terms of the arrangement between the parties, such a term would have to be put in in [sic] some future development of this document [the letter of 3 August 1993]’ - T143. 531 Mr Levido’s evidence was not materially different. He stated, inter alia, that he would have ensured that the effect of ‘paragraphs 5 and 6 of the letter of 3 August got translated into some more acceptable contractual language in the document, the subcontract itself’. [T236.33-.38] 532 Mr Pittolo’s evidence was also not materially different. It was, however, slightly confused at times. He ‘understood that when Wards signed the contract they would bear the risk for design development’. [T263] He shortly thereafter gave the following evidence:
‘Q. Can I suggest to you that these two clauses, without going into all the legalism, expressed in formal words the same concept that we are talking about before the break, the competition that there was between design development and variation?
A. Yes.
Q. And that that is a competition which was well known to exist to Wards back in 1993 and all the way through to the process of design development that we talked about this morning?
A. Yes I agree.
Q. And that all this contract did was put into formal words that concept, that competition?
A. I believe so.’ [T192.39-.55; T198.45-T199.3]533 This change in Mr Pittolo’s evidence is inexplicable. He did appear to give inconsistent answers. 534 Mr Pittolo gave evidence initially to the following effect:
‘Q. You understood that one of the risks that Wards took in signing up to a lump sum contract was the risk of whatever it might cost unexpected by them, to complete the project according to whatever design development was necessary to finalise the design?
A. No, that is not what I understood.’ [T267.38]535 On being shown the design procurement programme, accompanying the minutes of design meeting number 20 on 6 April 1994, Mr Pittolo agreed that the representation of the process of design development extended beyond the anticipated time for signature of the GMP contract. [T310] 536 Yet Mr Pittolo found it necessary to later contend that the GMP process was not actually finalised as at 18 May 1994 when the subcontract was signed. [T323] And as at 18 May 1994 ‘Wards had not agreed to a GMP’. [T320] 537 Mr Pittolo sought to introduce a limitation on that area for which he had admitted Wards were responsible for design development. Mr Pittolo said: ‘We were only responsible for design development, I believe, of our works’ [T268.40]. 538 Mr Pittolo then acknowledged that his ‘understanding was derived from conversations with Wards’. [T269.20] He identified the source of his belief as conversations with Mr Manion and Mr Cherrie [T268.48]. 539 No document has ever been identified nor was the plaintiff’s evidence ever to the effect, that Civil and Civic led any Wards representative to have that belief or understanding. 540 In fact, Mr Pittolo also gave the following evidence:
‘Q. And as you have said earlier, in your view GMP is in a sense synonymous with signing the lump sum contract?
A. Yes.
Q. that’s what the process of agreeing the GMP is, that’s the outcome agreeing the GMP?
A. Yes.’ [T282]541 In case there was any mistake, the evidence quoted above confirmed other evidence of Mr Pittolo that ‘Wards understood that Civil and Civic required that Wards undertake the risk of design development’ [T273.36]. 542 Evidence of the same effect was repeated at T290.19:
‘Q. One thing though did not need to be looked at for the purposes of understanding what was happening, and that was whatever clause said Wards bears design risk for design development up to contract, because he knew that perfectly well for months before?
A. We knew that, and we accepted that we bore that risk, yes.’ [T285.57-T286.5]543 And again:
‘Q. One thing you had understood although there might be disagreements about what was included in this term was that you knew after the contract [Wards] was going to be at risk for design development?
A. Yes.’544 Mr Pittolo then retracted the evidence referred to at 282 of the transcript, commencing at line 5:
‘Q. You understood before contract and after the contract that design development risk, whatever each side would argue design development, remained with Wards?
A. Yes.
Q,. That we can discount as part of any confusion arising out of the contract?
A. Yes.’ T292.57-293.7]545 Notwithstanding Mr Pittolo’s confused evidence at times, several things remain clear:
‘A. That was never put to us that when we signed the contract we agreed the GMP.
Q. The whole basis of Wards’ involvement in this process was one which commenced in a letter which talked about a process of moving from a TGMP to a GMP, wasn’t it?
A. Yes.
Q. You understood very well that if and when the TGMP was agreed, a contract might be signed?
A. Yes.
Q. And you understood that until a GMP was agreed, there could be no possibility of a contract?
A. Yes.
Q. That’s what C&C told you?
A. Well sorry - well no, C&C didn’t tell me that. What you were saying is common sense.
Q. And you understood that common sense?
A. The way its now put to me now, yes.’ [T324-325]546 Mr Niederberger consistently with the evidence given of each of the other witnesses called by the plaintiff, gave evidence that the effect of paragraph 6 of the 3 August 1993 letter, was consistent with his understanding. [See T377.46-T378.10]:
‘(i) He understood that risk for design development after contract was with Wards;
(ii) The source of his apparent understanding that Wards’ exposure to the risk for design development was limited to design improvements initiated by Wards, was based solely on discussions with Mr Cherrie and Mr Manion and could not be identified from any document nor any statement made to him by Civil and Civic.547 The evidence of certain of the plaintiff’s witnesses who were not called but which can be ascertained from objective documentary evidence also, it seems to me, confirms an understanding by several key Wards’ key personnel to the effect that Wards accepted and understood the risk of further ‘within scope’ design development after execution of a GMP lump sum contract. I refer in this regard to Mr Glasgow and to the 1 July 1992 document, questioning how design development would be differentiated from variations. I refer also to Mr Manion who had signed a letter to Hornicks of 23 November 1993 which had stated in part:
‘A. I didn’t realise that that [paragraph 6 of the 3 August letter] would be incorporated as a term, but it would be an understanding, yes.
Q. It reflected your understanding?
A. Yes.
Q. At all times the nature of the risk borne by Wards?
A. Yes.
Q. And it was clear then to you, that once Wards signed a contract for a lump sum with Civil and Civic, Wards bear the risk of further design development?
A. Yes.
Q. And I’ll take you back to a question and answer I asked you about a little earlier. It was quite plain from reading this that it was expected that there might be design development after the time of contract?
A. Yes.
Q. And that if there was Wards would bear the risk in respect of the design development?
A. Yes.’ [T377.46-378.10]548 Mr Ward accepted, under cross-examination, that Mr Manion ‘perceived that design development might involve what would otherwise be variation’. [T56] 549 Mr Aldis’ letters have also been referred to. They confirm in the clearest terms Mr Aldis’ understanding that whereas Wards did not have responsibility for design, it carried the risk of the cost of design development. After being referred to the correspondence of Mr Aldis, Mr Ward was asked:
‘The works priced by yourselves [i.e. Hornicks] has been included in our work area scope. This procurement strategy also involves the establishment of target guaranteed maximum prices. These are lump sum amounts set on the basis of Civil and Civic’s budget and agreed with the respective contractors prior to the commencement of the design development process. Once set the parties shall then engage in the design development so that after a period of eight weeks the target price can subject to the contractors agreement be converted into a lump sum contract of equal value. This lump sum is to be inclusive of all costs associated with variations arising from design development, rise and fall, site allowance. A contract will be established between us based on our contract with Civil and Civic and will transmit its benefits and obligations . . .’.
550 In my view, again upon the assumption that clause 6.30 limits Wards disentitlement to receive payments to that category of design development variations as involves ‘within scope’ variations, the evidence does not support Wards’ assertion that it was of a mistaken belief or under any misapprehension in terms of its obligations and risks at the time that the 18 May 1994 subcontract was executed. Upon the assumption referred to, the evidence does not support Wards’ assertion that clause 6.30 was incorporated by Civil and Civic without the knowledge or acceptance of the purport of that clause by Civil and Civic.
‘Q. And as plainly as can be, the correspondence since June 1992 said the risk on design development was Wards after contract?
A. Yes.
Q. And the risk includes costs associated with ramifications of design development?
A. Yes.’ [T91]551 It will be clear from what is stated above, that the proper construction of clause 6.30 requires determination. 552 I turn to that matter.
The proper construction of clause 6.30
553 During final submissions, the proper construction of clause 6.30.1(b) [and of clauses 6.30.1(a) and 6.10.3] in the May 1994 Subcontract received close attention.
The Respective Submissions
554 Mr Walker submitted that clause 6.30.1(b) was a provision which recognised that matters which would otherwise constitute variations falling outside the scope of works might be directed to be completed by the subcontractor without remuneration by dint of claim that the same constituted ‘design development variations’. The submission (following some earlier submissions made by Mr Walker on day 9 at transcript 83.2 which were later in part retracted or clarified), accepted as correct the proposition that a variation may in common practice be directed within the confine of a scope of works. 555 [See for example the AS2124-1992 form of General Conditions of Contract, which provides in clause 40.1 - ‘Variations to the work’ - the contractor is bound only to execute a variation which is within the general scope of the Contract . . . ‘; and see also clause 6.10 of the JCC form of contract - ‘Variations’ which provides:
Wards Submissions
556 Mr Walker’s contention was, however, that the wording of clause 6.30.1(b), and in particular the use of the words ‘including matters which would otherwise constitute variations’, seen together with clause 6.10.3 showed that the clause meant that variations brought about by design development outside the scope of works, were to be at the risk of Wards, save to the extent that Civil and Civic received payment for such ‘design development variations’ under the Head Contract. 557 This construction of clause 6.30.1(b) was submitted as falling well outside the matters the subject of paragraph 6 in the 3 August 1993 invitation to tender. 558 The use of the word ‘Works’ in clause 6.30.1(b) requires close attention. Civil and Civic rely upon the wording of paragraph A of the Subcontract which reads:
‘Unless otherwise agreed all variations shall be within the general scope of this Agreement so as to be of a character and extent contemplated by and capable of being executed under the applicable conditions of this Agreement’.]
559 Civil and Civic contend that “by virtue of this ‘definition’ of ‘Works’ and the wording of clause 6.30.1(b), design development must only be able to occur within the ambit of the scope of works which constitute the ‘Works’ as defined”. 560 I interpolate that a clear function of the agreement expressed in clause A was to oblige Wards to carry out the Works ‘in every respect to the satisfaction of [Civil and Civic] and in accordance with the Contract’. Hence the definitional aspect of the agreement is part only of a clause dealing with another subject matter. Whilst this does not affect the fact that the clause includes a definition, it may well explain why it is that the words in parenthesis were used. To my mind, clause A ought not be read as an agreement that the Scope of Works may be expanded by the direction of a variation. 561 Rather, clause A is included in order to oblige the contractor to carry out ‘within scope’ variations as directed - for which work the contractors entitlement to payment is usually covered by well understood and usually similar contractual provisions dealing with variations.
‘THE PARTIES AGREE
A. The Contractor must execute and complete the whole of the works namely all site preparation, earthworks, civil works, road works, landscaping and other works and as more particularly disclosed in the Scope of Works (including variations under the Contract) (‘Works’) in every respect to the satisfaction of C&C in accordance with the Contract.’
Civil and Civic’s Submissions
562 The defendant, as I understood the case put by Mr Finch SC, put the following seven contentions:
Civil and Civic’s Seven Contentions
563 What then is the proper construction of the clauses? 564 The word ‘works’ appears in :
Contention I - The proper construction of Clause 6.30.1 was to read the clause as if the words ‘within scope’ had been included into subclause (a).
[Such a reading would result in clauses 6.30.1 and 6.30.2 providing as follows:
‘6.30.1 The Contractor acknowledges that:
(a) the design of the Works is not finalised and further development of the design within scope will be undertaken by C&C; and
(b) the development of the design may result in changes to the Works (“Design Development Variations”) including matters which would otherwise constitute variations.
6.30.2 Notwithstanding any other term of this Contract C&C will not be liable for any losses suffered by the Contractor in connection with and no adjustment will be made to the Contract sum in respect of any Design Development Variation except to the extent that C&C receives payment for the Design Development Variation under the Head Contract.’]
Contention II - The defendant did not and had never read clause 6.30 in any other way, nor made [although the word ‘made’ was used, I understood the concession to be that no such claim would be made in the future] any claim in the proceedings on the basis that the clause should be read in any other way.
Contention III - This reading of clause 6.30 was entirely consistent with the understanding of Messrs Robinson and O’Connell elicited under cross-examination.
Contention IV - This reading of clause 6.30 expressed precisely the intent exposed in paragraph 6 of the 3 August 1993 Civil and Civic letter.
Contention V - The only substantive extant dispute between the parties was one which could not be solved by a reading of the clauses alone, namely, where is the line to be drawn between a design development and a variation. That question could only be answered in the context of a particular item in dispute - here to be the subject of the reference out.
Contention VI - The critical underlying pleaded issue dividing the parties, was as to what was the Scope of Works which had been contractually agreed to inter se; the defendant’s contention being that the 12 April scope to be found within the May Subcontract document was the scope agreed to and the plaintiff’s contention being that the Scope of Works agreed upon was frozen as at 17 November 1993.
Contention VII - The answer to the plaintiff’s contention was that the Scope of Works material provided up to 17 November 1993 was ex facie provided as forming ‘the works for [the purpose of] pricing of a TGMP’ [see PX volume 3 page 142 - part of the J6 3 August 1993 materials].
Holding as to the proper construction
565 In so far as paragraph A of the agreement purports to define ‘Works’ as the Scope of Works (including variations under the contract), it is plain that the word ‘Works’ is not always meant to be read as including the words in parenthesis. Subparagraph (a) of the definition of variations would be circular were this not so. It would read:
(a) The clause 1.1 definition of variation:
(i) under subparagraph (a) and
(ii) under subparagraph (e)
(b) Clause 6.30.1(a)
(c) Clause 6.30.1(b)
566 Importantly, however, subparagraph (e) of the definition of variations brings into play the concept of a change to the Scope of Works - which in my view is a reference to a direction dealing with matters which are beyond scope. 567 To my mind, the words in clause 6.30.1(b) ‘including matters which would otherwise constitute variations’, read in context, refer to the ‘without scope’ variations of the type described in subparagraph (e) of the definition of ‘variations’. On this construction:
‘Variation’ means . . .
(a) an increase or decrease in or omissions from the scope of works (including variations . . .).’
568 Returning to Civil and Civic’s above described seven contentions:
(i) Clause 6.30.1 involves an acknowledgment by Wards that further development of the design to be undertaken by Civil and Civic may result in changes to the works, including changes which would be beyond scope.
(ii) Clause 6.30.2 then limits Wards’ entitlement to payments for design development variations, whether within or without scope, to situations where Civil and Civic receives payment for the design development variation under the Head Contract.
Conclusion in relation to Civil and Civic’s Contentions I to V
569 Turning then to the scope of works issues and to question 5(a) of the questions for separate determination, that question attempts to have the scope of works which were to be performed under the subcontract, redefined by reference to the priced bill of quantities dated 19 November 1993 (accompanying the TGMP acceptance letter of 17 November 1993, together with the scope of works document dated 12 July 1993 and the drawings referred to in the defendant’s TGMP letter of invitation dated 3 August 1993). The final approach to the issue is reflected in paragraphs 5 and 6 of Wards written submissions of 1 July 1999. These formulations plainly enough ignore the other documents relied upon by Wards as constituting the alleged 1993 agreement which clearly state the intention to amend the 12 July 1993 scope of works document. (See, for example, the minutes of each of the meetings referred to in paragraph (g) to the particulars to paragraph 2 of the summons which reads ‘The base scope of works issued with the TGMP documents is to be enhanced by the following notes’). 570 It will be apparent from what follows that I accept as correct, a number of Civil and Civic’s written submissions on this issue. 571 The only witnesses on behalf of Wards to give evidence in support of that part of Wards’ case were Mr Pittolo and Mr Niederberger. Wards witnesses generally conveyed an understanding in their witness statements to the effect that it was their belief that as at 17 November 1993 or about December 1993, Wards and Civil and Civic had an agreement for the performance by Wards of the Works as defined in the Summons. The evidence under cross-examination of each of Wards’ witnesses establish the falsity of that proposition and suggests against any objective or subjective foundation for that contention. On the evidence, there was no agreement for the construction of the works as at November or December 1993 and therefore no construction work thereafter could be based on a scope as of that date. Nonetheless, Messrs Pittolo and Niederberger have asserted that the scope of works identified in the bill of quantities accompanying the letter of 17 November 1993 defines the scope of works which the parties had agreed upon as at that date. This evidence is inconsistent with the relief sought by Wards as it ignores the other documents referred to above namely the Scope of Works document dated 12 July 1993 and the drawings referred to in Civil and Civic TGMP letter of invitation dated 3 August 1993. 572 I accept that in one sense, the bill of quantities does achieve a purpose. Its purpose as at November 1993 is solely for pricing the TGMP. 573 However, the bill of quantities document does not, on its own, define the scope of works agreed as at November 1993 or thereabouts. The Summons and Question 5(a) of the Questions for Separate Determination and the Plaintiff’s 1 July 1999 written submissions make it clear what comprises the scope of works now contended by Wards. 574 The evidence of Messrs Pittolo and Niederberger is not, I accept, to that effect.
Contention I is rejected. The proper construction of the clause is as set out above.
As to Contention II - there is no evidence to enable the Court to accept or reject the contention insofar as it deals with the defendant’s past conduct. Civil and Civic’s concession as to the position presently and into the future was clear as announced in final submissions.
As to Contention III - it is correct to say that the construction which Civil and Civic seek to attribute to clause 6.30 was indeed the understanding of Messrs Robinson and O’Connell elicited under cross-examination. That construction is not however, as a matter of law, the correct construction to be given to the words in clause 6.30.
As to Contention IV - the contention is accepted.
As to Contention V - the contention is accepted.
As to Contentions (VI) and (VII), it is necessary to return to the evidence in some detail.
Was there an agreed scope of works as at 17 November 1993 pursuant to which the parties had agreed for Wards to perform the works?
575 Mr Pittolo referred to “the scope” as “only one document setting up the scope of works which was [the 17 November TGMP schedule]” (TP266 L38-L45). 576 Similarly, Mr Niederberger gave evidence that “... it was the bill of quantities that had the scope that had been agreed prior to my being involved in the job. That was my understanding” (TP374 L12-L14). 577 He further stated:
The Evidence of Mr Pittolo and Mr Niederberger
578 Mr Niederberger readily conceded that a scope of works document is a very different document to a bill of quantities (for example TP374 L16-L18; L55-L57). 579 Mr Pittolo also conceded that a scope of works document is “a very different sort of document to a bill of quantities” (TP331 L49 to L52). As Mr Pittolo acknowledged:
“The bill of quantities merely described the scope that Wards priced.” (TP388 L54-L55).
580 It may well be that the TGMP agreed sum of $16.7 million can be referenced to the bill of quantities of 19 November 1993. I accept, however, that that bill of quantities is nothing more than a document prepared by Wards which provides its allocation of prices against items of work which are derived from other critical documents, namely the specification, drawings and Scope of Works document itself. The arbitrary nature of the bill of quantities for the purposes of agreeing the TGMP price is, I accept, illustrated by reference to items 28.1 and 28.2 of the bill of quantities (at page 28) and the evidence of Mr Cherrie that the mechanism for reducing the TGMP sum of $17.34 million to $16.7 million was simply a matter of deducting $640,000 and to allocate that sum to “two items ... tacked on at the end to achieve the deduction” (TP166 L21-L23). 581 I further accept Civil and Civic’s submission that the flaw in Ward’s case seeking rectification of the Subcontract to include the Scope of Works of 12 July 1993, the drawings accompanying the letter of 3 August 1993 and the bill of quantities of 19 November 1993, is that Wards’ witnesses on this aspect of its case emphasised the bill of quantities as being the document defining the scope as at 17 November 1993. But as at 18 May 1994, when the Subcontract was executed, the specification and the drawings identified in the letter of 3 August 1993 and the Scope of Works of 12 July 1993 had all been revised and it is those documents which Wards, on the evidence, were to use, for the purpose of performing its works. 582 Mr Pittolo agreed that from the nature of his involvement in the project, he needed a “general idea of actual terms of the subcontract”. (TP265 L52 to L53). Mr Pittolo acknowledged that “changes ... might be needed to the scope of works as a result of what was being described in these drawings”. (TP266 L5 to L8). 583 Mr Niederberger admitted that “pursuant to the process of design development, a number of things happened ... can I suggest to you that amongst the things that happened were, firstly, drawings changed from time to time?
“Q. One thing you knew must go in though, inevitably, was an updated list of drawings.
A. If the contract required for it, yes.
...
Q. But in any event, one thing you did know was that drawings had been revised and issued as revised drawings since November 1993.
A. Yes.
Q. And it was quite clear to everybody that what had to be constructed is what was described in the revised documents.
A. Yes.” (TP318 L11 to L23)584 Mr Niederberger also gave the following evidence:
A. Yes
Q. And that would mean that any list of drawings which had previously been used between the parties in the exchange of this sort of correspondence were relevant and needed to be updated when the contract was actually signed.
A. They were to be incorporated in the contract.
Yes
Q. Whose job was it at Wards to make sure that the right drawings were incorporated.
A. At which date.
Q. At the time the contract was signed in May.
A. It would be Max Pittolo’s.” (TP381 L30 to L48).585 Mr Niederberger conceded:
“Q. Another thing which would happen from time to time in design meetings and the like, was that it might be changes which were necessary to the specification.
A. Yes.Q. And they were discussed at design meetings from time to time.
Q. In any event, it was important for somebody at Wards to make sure that by the time the contract came to be signed, somebody had updated the specification to make sure that it was the current version which was being incorporated in the contract.
A. Not in particular reference to specifications, but issues that had come up in some of the meetings would relate to specifications.
...
A. Well, I would have expected to be that somebody from C&C would give us a document which showed the latest understanding of what would be in the specification or drawings” (TP381 L56 to TP382 L22).586 Mr Niederberger stated:
“Q. A bill of quantities is a list of prices.
A. Yes it is.
Q. A scope of works is a description of what is to be done in general terms.
A. Yes.
Q. A description is enlivened by the drawings which issue from time to time.
A. Yes, that’s generally the case.
Q. And those drawings are revised from time to time.
A. Yes.” (TP375 L1 to L14)587 Further, Mr Niederberger admitted that “the starting point can’t be a bill of quantities can it?
“Q. How do you find out how to bill the thing which is described in the bill of quantities?
A. I’d refer to the drawings and the specifications.
Q. How would you know which drawing [or] specification to refer to.
A. They were titled with the areas of work that was required.
...
Q. Yes, but how would you know which one to use? There were revisions coming out all the time, weren’t there?
A. We had a QA system which recorded the latest documents that would refer to our register which would say which drawing was the latest document .” (TP383 L40 to L55)588 Mr Ward gave the following evidence:
A. No ...”
A. ... The bill of quantities merely described the scope that Wards priced.” (TP388 L41 to L43; L54 to L55)
Evidence of Mr Ward
589 Mr Cherrie was shown the drawing schedule in the letter from the plaintiff to the defendant dated 7 July 1992 (document J4; Levido’s Statement 13 August 1998 Exhibit P7 at p 126). He was then asked the following questions:
“Q. There was a list of drawings in the May contract, wasn’t there.
A. Yes.
Q. It was simply not possible that that list would be same as this list [i.e. 3 August 1993 list].
A. It’s possible but it is unlikely.
Q. And the reason it is unlikely is that the parties had from August to May, been discussing changes to these drawings.
A. Yes they had been discussing changes, yes.
Q. And they had been sending and receiving respectively new documents, new revisions, in some cases entirely different drawings.
A. Yes.
Q. Can I suggest to you that even a cursory review of the design meetings shows you that every single document in the May drawing list has been sent to Wards in 1994.
A. I couldn’t argue that point with you.
...
Q. Could you seriously suggest that Wards thought, as at May 1994, that what they were agreeing to construct was the project as defined by the list on page 153 (of the 3 August 1993 attachments at page 153 to Exhibit P7 )?
A. No, I agree with that.
Q. Every single one of those documents was replaced before May.
A. Yes.
Q. Wards knew that what they had to build was what was on the drawings as at May.
A. Yes’.
The Evidence of Mr Cherrie
590 In reference to questions as at 7 February 1994, Mr Cherrie was asked:
“Q. And you will see at the end of the document, page 126, a list of the drawings upon which the lump sum price is based.
A. Yes I can see that.
Q. Even though you were not involved in 1992 by 1993 when you did become involved it was clear that that list of drawings had already been superseded.
A. I believe so.
Q. And it continued to be developed and changed right up until the contract was signed.
A. Yes.
Q. So that when one comes to look at the list of documents constituting the drawings and the contract of 18 May is not this list of course.
A. It is certainly not that list.” (TP130 L58 to TP131 L16)591 Further in his evidence, Mr Cherrie said the following:
“Q. Certainly the various list of drawings and the specifications which we saw back in August 1993 and back in June 1992 had been well and truly superseded by now.
A. Yes.
Q. And even to the limited extent that this contract involved some works, there would inevitably have been changes to the drawings involving the works between June 1992, August 1993 and February 1994.
A. Yes.” (TP189 L5 to L14)592 Mr Levido said that it was “quite clear that it was always appreciated that drawings schedules ... would need to be and were in fact amended from time to time to take up the extent of exchange (sic) between the parties that there had been about alterations in the design” (TP230 L9 to L14)
“Q. ... can I suggest that there were a number of other matters which you did appreciate at the time, as at 18 May? The first is, and I list these in no particular order of importance, you either did or did not appreciate the list of the documents in this contract had to be the list of documents as updated as at 18 May.
A. I believe so.
Q. It would have been no point in annexing a list current in June ‘92 or August ‘92 or any other particular time other than 18 May .
A. I agree with you .” (TP200 L29 to L40)
The evidence of Mr Levido
593 He gave further evidence:594 Appendix L already referred to, is a schedule of drawings and specifications based on the documents in Folder 11A Tab 59. It identifies every one of the drawings identified in the Schedule of Drawings in the 18 May 1994 Subcontract and the specifications also identified in the Subcontract Schedules as well as the date upon which they were provided to Wards before their formal inclusion in the Subcontract document. 595 As to differentiating between the 19 November 1993 bill of quantities and a scope of works document, as Mr Niederberger readily acknowledged, a scope of works document is “a different thing” and “a very different document” to a bill of quantities (TP374 L16 to L18; L55 to L57). 596 The Scope of Works document of 12 July 1993 enclosed under cover of document J6, includes references to drawings every one of which was (and I accept, was understood by Wards to be) obsolete and revised as at May 1994. I accept that such change was obvious. The Scope of Works document refers for instance to the provision for “additional details (sic) drawings and scope to follow ...” (Levido page 146). Further, each package of work within the Scope of Works document identifies specific drawings relevant to those works. All except for five of the seventy-five drawings were stamped with the notation “Preliminary: Subject to Design Development” or similar notation (folder 9 tabs 1(a) and 1(b)). Section 0.1.0 Preamble of the Specification provided with the 3 August 1993 letter provides (Levido page 229) “this specification will be developed into detailed technical specifications for the purposes of subcontract tendering and construction”. 597 Wards’ case is that the bill of quantities, scope of works and drawings as at August to November 1993 defined the scope of the works which it had agreed to perform. I accept, however, that those documents merely constitute the basis from which a TGMP was agreed. That TGMP, through a process of design development was, I accept, to be converted to a GMP. The conversion process, I accept, involved the revision and updating of specifications and drawings by way of the thirty two design meetings at which Wards participated between 5 November 1993 (folder 9 tab 46(a) and 18 May 1994 inclusive (folder 11A tab 48(a)). 598 I further accept that if, as is acknowledged by the Wards’ witnesses, Wards were obliged to construct the works in accordance with the drawings and specifications as at 18 May 1994, and if those documents were regarded by Wards as being a variation to the November 1993 scope, then Wards would have been obliged to issue variation notices under the draft terms of the 3 August 1993 blank subcontract. There is no evidence before the Court to suggest that Wards provided such notification. I accept that the absence of any such notification permits an inference, which I draw, that Wards did not regard those drawings and specifications as variations to its scope. The only variations are those four identified in the variation summary documents attached to the 18 April 1994 and 15 May 1994 Monthly Project Review Meeting minutes (J14 and J16 respectively). 599 The 19 November 1993 bill of quantities identified a price for quantities for items of work upon which Wards based its TGMP. Given Wards’ concessions that the drawings, specifications and design itself changed after 17 November 1993, I accept that it cannot follow that Wards believed the scope of works as at 17 November 1993 to remain static and unaffected by that development process. The fact that drawings and specifications were updated and issued progressively to Wards as identified in the document, Appendix L to this Judgment, to my mind evidences the fact that Wards could not have viewed its bill of quantities in isolation from those critical documents which defined Ward’s Works. It will be recalled that the Scope of Works document accompanying the 3 August 1993 letter advises that “additional information to be supplied” would include a “schedule of drawings”. 600 The Scope of Works document incorporated into the 18 May 1994 subcontract makes it clear that the document “... describes the extent of the Works and is not meant to be complete in every detail. In particular, detailed drawings, specifications and data sheets (the design documents) relating to the Works will be issued by C and C as the design development process proceeds.” 601 That process was, I accept, ongoing after 17 November 1993. 602 I further accept as correct, the defendant’s submission that Wards cannot reasonably assert that Civil and Civic either misled Wards or concealed from Wards the fact that the Scope of Works document which was ultimately included in the 18 May 1994 Subcontract was not in the same form as any preceding Scope of Works document provided to Wards. 603 Mr Pittolo acknowledged that some time before 18 May 1994 he was handed a document entitled “Scope of Works” (TP313 L25 to L27). His oral evidence at TP313 line 25 to TP336 L20 confirmed Mr Pittolo’s evidence contained in his witness statement of 23 November 1998 (exhibit P10) at paragraph 6, that he received a document entitled “Scope of Works” from Mr O’Connell, but that “it did not occur to me that the provisions of the document may have been amended and I paid little regard to it”. (paragraph 6) Mr Pittolo knew that the first Scope of Works document of 12 July 1993 was no longer accurate because the concrete structures components had been deleted by November 1993. 604 I accept that Mr Pittolo’s carelessness cannot be relied upon by the Wards as a basis for asserting that Civil and Civic deliberately sought to impose wider obligations on Wards by including an amended Scope of Works document in the 18 May 1994 Subcontract. 605 Mr O’Connell’s evidence is clear. It is that on 28 April 1994 he attended a meeting at Wards’ site office and said to Mr Pittolo words to the effect:
“I am not sure what happened after that [i.e. after he left the project in early November 1993] but it should have been tracked. That was the intention that the changes in the scope brought about by several amendments to the design were to be monitored. ...” (TP249 L27 to L30)
Dealing with Wards’ claim that the Scope of Works includes the bill of quantities dated 19 November 1993
606 Mr O’Connell, in paragraph 17 of his statement, stated that Mr Pittolo returned the document to him with some written notations on it in the “form of general comments” which “did not relate to any matters of substance”. In the circumstances, Mr O’Connell’s evidence on this issue is accepted. The only explanation Mr Pittolo provided for Mr O’Connell to have handed him the Scope of Works document prior to 18 May 1994 was “for a review” (TP341 L5). 607 Mr Pittolo acknowledged the following:
“This is the scope of works for inclusion in the contract. Glenn told me to speak to you about it.” (Statement dated 9 October 1998, exhibit D10, paragraph 17).
608 Mr Pittolo also acknowledged that it “should have been, but it wasn’t obvious” at the time that Mr O’Connell handed him the Scope of Works document that resolving a Scope of Works document was something which was required to enable the contract to be formally concluded. (TP340 L15 to L22). 609 I accept that such a concession from Mr Pittolo is even more significant in the context that he acknowledged that “the scope of works had to be agreed” because “it was obvious that the scope of works had to be amended from that which was still current as at 17 November 1993 ...” (TP314 L25 to L28). Moreover, Mr Pittolo conceded that “it was clear that the detail of the project and the design of the project was not constant” and “if anything was clear about this project it was clear that change was a feature of it” (TP315 L30 to L37). 610 I accept that the actions of Mr Pittolo and their significance must be construed in the context of that state of awareness. There was no reason for Mr O’Connell to doubt Wards’ acceptance of and agreement to the content of the Scope of Works document which he provided for Wards’ review prior to its inclusion in the 18 May 1994 Subcontract. The date of 12 April 1994 which is at the top of the Scope of Works document in the May 1994 subcontract is, I accept, consistent with Mr O’Connell providing that document to Mr Pittolo on or about the date which he suggests in his witness statement and on which he was not challenged, namely 28 April 1994. 611 Mr O’Connell’s evidence is, I accept, entirely consistent with other aspects of Mr O’Connell’s conduct in discussing and resolving outstanding contractual issues prior to 18 May 1994 as in the case of matters such as those noted on his notebook entry of 21 March (and updated on 6 April, 7 April and 21 April as indicated by that notebook entry at folder 11 tab 2) and in accepting with Mr Niederberger, each of the dates which Wards requested for completion of those stages of the works identified in the two draft schedules of substantial completion at folder 11 tab 36(a) and tab 36(b). I further accept that the fact that Mr O’Connell included Mr Niederberger’s requested dates as indicated on the amended second draft (folder 11 tab 36(b)) in the final version in the Subcontract, suggests against any attempt on the part of Mr O’Connell at any time to act with deceit or an intention to mislead Wards in respect of their future contractual obligations. 612 In those circumstances and in the context of that conduct, Wards fails in its contention that on the evidence, there was some mistake about the nature and content of the scope of works which it was obliged to perform upon signing the Subcontract on 18 May 1994. 613 In any event, the evidence is insufficient to establish that there was a material difference between the 12 April 1994 Scope of works and the ‘Scope of Works’ for which Wards contends such differences as appear may or may not be material. The Court cannot determine the issue outside of evidence as to materiality. 614 Civil and Civic, in final submissions, prepared a document which dealt with the chronology of the creation, discussion and agreement to the principal earthworks drawings and specifications in the May Subcontract. The document is appended to the Judgment as Appendix M. It clearly records the developments over time and exemplifies Civil and Civic’s central contention that changes in design from time to time, as evidenced in the progressive drawings, became, to Wards’ knowledge and with Wards’ active participation, part of the evolving further definition of the Scope of Works. 615 The bill of quantities is, as is admitted, not a scope of works. It is admitted that the drawings and specifications are necessary to define a scope of works. The evidence establishes that those drawings and specifications which were included in the 18 May 1994 Subcontract were all provided to Wards before 18 May 1994. It is admitted that the Scope of Works document would need to be updated for inclusion in a final contract. It is admitted that a Scope of Works document was provided to Wards prior to 18 May 1994. 616 The scope of works as defined in paragraph 2(a) of the contentions in the Summons cannot be accepted when Wards’ own witnesses admit that the bill of quantities is not a scope of works but an itemisation of quantities and cost. That is particularly the case where the drawings and specifications necessary to perform Wards works were under constant change and redefinition and that those drawings and specifications which predated 17 November 1993 were entirely irrelevant as at 18 May 1994 and known by Wards to be irrelevant. 617 The unsoundness of Wards’ reliance on the bill of quantities of 19 November 1993 as the basis for defining its then understood scope of works is, I accept, also evident from the role of the bill of quantities in a lump sum contract. Clause 10.1 of the draft standard subcontract terms and conditions forwarded with the 3 August 1993 letter (J6) has, I accept, no place in elevating a bill of quantities to a document which defines the Works as opposed to merely providing a mechanism for measuring works. (Clause 10.1) 618 Furthermore, as Civil and Civic submitted, a priced bill of quantities is for that reason, the basis upon which variations in a lump sum contract such as the present Subcontract may be valued or progress claims are assessed for payment. 619 I accept that the limited application of a bill of quantities beyond the purpose of measuring for price estimation is apparent. 620 I accept that on the evidence, Wards priced a bill of quantities for the purpose of agreeing a TGMP which would then undergo change and refinement through a process of design participation and drawing and specification revisions until a GMP was agreed upon. To assume or assert that the 19 November 1993 bill of quantities constitutes the scope of works which would relate to the later GMP contract then ignores the evidence that a GMP could have been struck at a higher or lower figure than $16.7m. The evidence, I accept, was that the process of design development was an attempt to establish a GMP of equal value to the TGMP, but the basis upon which that GMP was determined must have differed by design development. I accept that that fact is the only way of explaining the design development process after TGMP. If the scope as at 17 November 1993 when the TGMP was established was to remain unchanged, it would be necessary for the parties to have formally agreed as at 17 November 1993 on the then current drawings and specifications. On the evidence, those drawings and specifications were already obsolete and Wards’ own evidence was that the only matter agreed as at 17 November 1993 was a TGMP upon which the parties would then embark in a process of design development. That would, I accept, lead to a situation whereby a GMP would be agreed based on drawings and specifications which were then applicable to that sum and not the TGMP which, on the evidence, was the culmination of the August 1993 to November 1993 process in respect of entirely different drawings and specifications.
“Q. ... You now realise that you should have appreciated as soon as you got it, that it was important to look at it [the scope of works document]?
A. “That is the problem I’m having. And I can’t tell you why I didn’t look at it, and I can’t tell you what I did with it.” (TP336 L16 to L20)621 In my view on the evidence, there is clearly also no basis upon which Wards is entitled to a declaration in the terms sought in paragraph 1 of the summons which relates to question 11 of the questions for separate determination. The evidence of Wards’ own witnesses confirmed the position adopted by the defendant, namely that as at 17 November 1993 the parties had agreed on a sum of $16.7million as a TGMP from which date the parties would engage in a process of design development for the conversion of the TGMP to a GMP of equal value, so that the parties could sign a $16.7million lump sum contract. In the light of evidence adduced and in particular the cross-examination of the plaintiff’s witnesses, there can be no doubt about the parties’ intentions and understandings. 622 In the interim, however, the evidence is clear that works proceeded not on the basis of any of the documents particularised in paragraph 2 of the summons which are now relied upon up to 17 November 1993, but rather proceeded on the basis of entirely separate documents of clear legal effect, namely the letter of intent of 6 December 1993, the purchase order and the early works subcontract. 623 It is unnecessary to repeat the evidence already referred to, given by the plaintiff’s witnesses. It included, of course, Mr Ward’s evidence that:
Conclusion in relation to Civil and Civic’s contentions VI and VII - Scope of Works
As to Contention VI - In my judgment, the evidence establishes that the 12 April 1994 Scope of Works document, forming part of the May subcontract:
(i) was that agreed upon by the parties; and
(ii) was that which bound the parties, upon the execution of the May subcontract.
The evidence satisfies me that the parties at all material times:
(I) saw the bills of quantities as allocating prices against items which, although reflective of the scope of works, were not themselves the scope of works and might from time to time also reflect drawings and/or specifications.
(II) understood that design changes occurred over time, such changes being reflected in drawings and specifications which gave form to the scope of works.
Contention VII is accepted as correct . Wards’ claims to rectification of the Subcontract scope of works as sought in question 5(a) for the above reasons and those which follow, is rejected.
The only agreement reached at December 1993 was an agreement for a TGMP in the sum of $16.7million and the start of a process of design development
624 It included the evidence given by Mr Cherrie as follows:
‘Q. Nobody thought that there was already a contract at the end of 17 November [1993]?
A. Correct.
Q. Everybody thought that there was going to be a contract and it was coming up?
A. Yes.’ [T66-67]625 It included the evidence of Mr Levido, including inter alia, that contractual matters remained unresolved up until the time he ceased his involvement in the TGM process:
‘Q. Once the TGMP was agreed between the parties, there was no guarantee that Wards would end up with the contract?
A. That is correct.
Q. And Wards did not think that the agreement of a TGMP constituted a contract for the construction of anything?
A. In my capacity, in my role, yes I agree with that . . .’ [T134]626 Mr Pittolo’s evidence was to like effect at T277.53-278.29. 627 Mr Niederberger’s evidence at T408 was to like effect in relation to the letter of 17 November 1993:
‘A. . . . Those discussion at the time of TGMP had not been completed when I left. As I say there were a number of proposals about sharing savings, risks and opportunities, nothing had been finalised.
Q. That was plain then as a matter of observation of what had happened as at November, that is that these issues were to be resolved by the final contract?
A By the time of the final contract yes. . . .
Q. And you have already agreed that the draft subcontract which you had seen in the August letters did not make any provision for these sorts of matters?
A. Yes, it may not have, yes. ’ [T250-251]628 In Thomas Bates Ltd v Wyndham’s Ltd (1981) 1 WLR 505, Buckley LJ said at 516:
‘Q. In any event, one way or another, either by reading this letter or by discussions amongst Wards, you knew that Wards had by this time, 17 November, agreed on $16.8million as the TGMP?
A. Yes that’s right.
Q. You were aware thought that nothing was certain about whether or not there would be a contract at the end of the next process that was looked forward to?
A. Yes, that’s correct.A. Yes.’ [T408]
Q. And that what had to happen next was that there had to be further design development before the target price could be converted into a lump sum contract?
629 I accept as correct Mr Finch’s submission that understood correctly, Wards’ case is of the first kind. However, in testing whether Wards falls into that category, one immediately sees from its witnesses concessions under cross-examination, that those witnesses never believed that the August to November 1993 correspondence and enclosures could constitute the final contract - all accepted the need to add significantly to formulate the final contract. Hence, the rectification case fails at the very first hurdle. 630 Nor did Wards establish on the evidence, that Civil and Civic believed that Wards had made a mistake of any type. On the evidence, Civil and Civic is not shown to have been aware that Wards entered the May Subcontract ‘under a serious mistake or misapprehension about the content or subject matter and deliberately set out to ensure that [Wards] did not become aware of its mistake or misapprehension’. [See Taylor v Johnson (1983) 151 CLR 422].
‘For: . . - the doctrine of A Roberts & Co Ltd v Leicestershire County Council [1961] Ch 555 - to apply I think it must be shown: first, that one party A erroneously believed that the document sought to be rectified contained a particular term or provision, or possibly did not contain a particular term or provision which, mistakenly, it did contain; secondly, that the other party B was aware of the omission or the inclusion and that it was due to a mistake on the part of A . . .’
631 It will be recalled, that Wards has sought to propound its own preferred definition of design development to be included in the Subcontract for which it contends. This version includes the limiting words ‘[development] by way of details or by way of improvement so as to enhance buildability”. 632 Plainly, the Court does not redraw an executed contract outside a cause of action such as rectification or statutory variation being made out. And even then there are grave difficulties in selecting the precise content of the new or varied wording. 633 As to rectification, it is trite that ‘common intention as to what an instrument shall say’ is not to be equated with ‘common belief or understanding as to what effect an instrument shall produce’. 634 Both parties addressed brief submissions on the Wards’ preferred definition. 635 It is unnecessary, in the light of the above reasons, to travel into the possible problems with Wards’ proposed redrafting of the definition of ‘Design Development’. The whole exercise does, however, suggest that Wards now seeks to engage in the very exercise which by its own carelessness, it ought to have engaged in prior to execution of the May 1996 Subcontract. And it further points up that even in this draft, Wards appears to accept that design development may enlarge the scope of works to an extent, although, however this may be construed, not in any ‘material way’.
Wards’ proposed definition of ‘Design Development’ as part of Wards’ claims to relief by way of statutory variation or rectification
636 The proper construction of clause 6.30.1 and 6.30.2 has earlier been set out, as has the finding, that a term to this effect was not, on the evidence, the intent or understanding of the parties. The antecedent inter partes communications and in particular the 3 August 1993 letter did not, in my judgment, propose that Wards be exposed to the risk, post contract, of further design development, save such development as would be within scope. As already indicated, this is accepted by Civil and Civic. 637 This is not, however, to say that Wards’ first Trade Practices Act count is made out. It will be recalled that that case is that, by presenting the Subcontract to Wards for its execution in the circumstances set out in paragraphs 2, 3, 4, 5 and/or 7 of the Contentions, and by its alleged failure to inform Wards that the scope of works and the terms and conditions incorporated in the Subcontract were different to those incorporated in the alleged November/December 1993 agreement, Civil and Civic:
The ‘within/without scope’ construction of clause 6.30 of the Subcontract - Relevance to Wards’ causes of action
638 In so far as the first Trade Practices Act count is grounded upon the alleged failure of Civil and Civic to inform Wards of the terms of the design development clauses, it is important to recall, as Black CJ pointed out in Demagogue Pty Ltd v Ramensky & Anor (1993) ATPR 41-203 at page 40844, that:
(a) represented that the scope of works and terms and conditions incorporated in the Subcontract were not materially different to or, alternatively, not inconsistent with the scope of works and terms and conditions incorporated in the agreement; and
(b) engaged in conduct that was misleading or deceptive in contravention of section 52 of the Trade Practices Act.
639 Gummow J in Demagogue, expressed generally the same opinion; ‘But in any case where a failure to speak is relied upon the question must be whether in the particular circumstances the silence constitutes or is part of misleading or deceptive conduct’ (1993) ATPR 41-203 at page 40,851. 640 French J in Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) 46-054 at 53195, in a passage cited by Gummow J in Demagogue at 40,852, said:
‘Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of “mere silence” or of a duty of disclosure can divert attention from that primary question. Although “mere silence” is a convenient way of describing some fact situations, there is in truth no such thing as “mere silence” because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed’.
641 The mere fact that following negotiations between A and B, A draws up and hands to B a form of contract for execution which, when properly construed, is seen to include a term which goes beyond what was agreed upon during the negotiations, does not, without more, prove that A has engaged in misleading and deceptive conduct within the meaning of section 52 of the Act. After all, A may have never intended that the term be so construed. A may have been mistaken as to the proper construction of the term. Had B, immediately following execution of the contract, drawn A’s attention to the term and suggested that its correct construction did not reflect their earlier discussions or agreement, A may have readily accepted that suggestion and agreed to the term being read in a different way, or to the term being relevantly altered in the written instrument. 642 Of course, the facts on close examination, may show that A’s conduct at the time of drawing up the contract and proffering the same for execution, or thereafter, was indeed misleading and deceptive or likely to mislead or deceive, within the meaning of section 52. If, for example, A, knowing that the term on its proper construction, did not reflect the antecedent discussions or agreement, and was silent in relation to the matter; or ensured that B did not take the time to read the term; or misrepresented, by silence or by a misleading statement what the term said or the meaning of the term, or the advice which A had received as to the meaning of the term, A may, again always depending on the particular circumstances, be held to have engaged in conduct which was misleading or deceptive or likely to mislead or deceive. Cf Asea Brown Boveri Pty Ltd v Burns Philp Trustee Co Ltd (Unreported, Supreme Court of NSW, 23 April 1990, Giles J, BC 9002518 at 20). 643 Likewise, A may have engaged in misleading or deceptive conduct depending on the circumstances if A, having initially believed that the term upon its proper construction reflected the parties’ earlier negotiations and agreement, but on later learning that the proper construction did not so reflect those negotiations or agreement, seeks to take advantage of the true construction of the term. Here again, everything will depend upon the particular circumstances of each case. It is an every day occurrence to find parties arguing strenuously in vigorously contested cases, what the proper construction as a matter of law of a particular term in a written agreement is. It is plainly difficult in those circumstances for a collateral attack based upon the parties’ antecedent negotiations to succeed, but this is not impossible. Section 52 provides one vehicle for such a collateral attack. The law of estoppel and the doctrine of rectification provide yet additional vehicles for such collateral attack. 644 In the present case, the evidence does not establish that Civil and Civic engaged in misleading or deceptive conduct in relation to the wording of so much of the Subcontract as deals with design development variations. All that is established is that Civil and Civic during argument before the Court in these proceedings, has clearly stated that ‘[it has] never read, [has] never made any claim on the basis of [and does] not read clause 6.30 in any other way than as if it said “within scope” after “development of the design” in 6.30.1 subclause (a)’; [final day’s transcript page 38]. 645 Wards relies upon the minutes of procurement meeting number 12 held on 6 October 1993, being an internal Civil and Civic meeting. Those minutes include under the subheading ‘Subcontract development’ the words:
‘If in a particular case silence would, as a matter of fact, constitute misleading or deceptive conduct, section 52 by virtue of its prohibition of such conduct imposes its own statutory duty to make disclosure.
The cases in which silence may be so characterised are no doubt many and various and it would be dangerous to essay any principle by which they might be exhaustively defined. However, unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist.’
646 Notwithstanding the cross-examination of Mr Robinson at transcript 455-460 in relation to those minutes, I do not accept that Civil and Civic is shown to have set out to, nor at any time sought to draw or rely upon a clause which would impose upon Wards the risk of design development ‘outside scope’ to take place following contract. Mr Robinson in fact, at transcript page 458 when tested with the above quoted words forming part of the procurement meeting, said:
‘TGMP - DW researching the ‘right words’ to formalise our approach in the subcontract document.
“i.e. - you don’t get any more money if the design changes”
. CH to get similar clause from RD by 15 October 1993
. RD also to consider need for our contractual ability to review subcontractors’ subcontracts’. [PX volume 9, tab 28 (J8AA)]
647 I reject Wards’ contention that the evidence adduced before the Court seen alone or seen in combination with the failure of Civil and Civic to adduce evidence from a number of the witnesses who had filed statements, treated with in terms of the Jones v Dunkel [(1959) 101 CLR 298] principle, establishes or permits an inference of misleading or deceptive conduct on the part of Civil and Civic in relation to the inclusion of the design development clauses in the Subcontract. Clauses in precisely the same form had of course appeared in the early works contract but Wards had not taken the trouble to read those clauses. The clauses, as they had appeared in the Subcontract, were in fact examined in detail by Wards within a month of 18 May 1994, for the purpose of preparing and proffering to Hornicks for execution, a Subcontract almost word perfect to the May Subcontract. Clause 6.30 was at this time closely examined for this purpose. 648 Wards faces another difficulty on its Trade Practices Act case. I refer here to reliance. Wards must prove a relevant nexus between the conduct complained of and its loss. Any loss, damage or difficulty which may have been suffered by Wards, was so suffered by its failing to check the contract, as opposed, it seems to me, by reason of any misleading or deceptive conduct of Civil and Civic. There was no reasonable reliance by Wards on the alleged misleading and deceptive conduct of Civil and Civic. See Asea Brown Boveri (supra, BC 9002518 at 21). As Gibbs CJ said in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1981-82) 149 CLR at 199; ‘The heavy burdens which s.52 creates cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests’. [Emphasis added]
‘The effect of the design development clause I still believe was consistent with the 3 August documentation, which was the invitation to submit a TGMP. What I am grappling with is whether or not those words reflect in how that clause was achieved, how that clause actually operates. I believe the clause that was finally drafted that was put into that document is consistent with 3 August. Whether or not that is consistent with that comment in those minutes, I don’t believe necessarily that it is.
Q. You believe it is inconsistent with it?
A. Yes.
Q. An exercise on foot secretly before a TGMP in Civil and Civic was to come up with words that would mean Wards would not get any more money if the design changed, is that right?
A. No, that is not right.’ [T458]649 In DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, Stephen Jacobs JJ and Mason J, following Prenn v Simmonds [1971] 1 WLR 1381, in a joint judgment, said:
Do the circumstances permit a construction of the design development clauses otherwise than the attribution of a strict legal meaning?
650 As Mason J said in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981) 149 CLR 337 at 352:
‘A court may admit evidence of surrounding circumstances in the form of “mutually known facts” to identify the meaning of a descriptive term and it may admit evidence of the “genesis” and objectively the “aim” of a transaction to show that the attribution of a strict legal meaning would “make the transaction futile . . .”.’
651 To my mind, the language of the Subcontract in terms of the design development clauses here has a plain meaning and is not ambiguous nor susceptible of more than one meaning. The question is a close one and minds may differ on this issue. However, as I see the case, it is not possible by reference to evidence restricted to the factual background known to the parties at or before the Subcontract, including evidence of the ‘genesis’ and objectively of the ‘aim’ of the transaction, to reach a conclusion that, there having been an ambiguity in the design development clauses, those clauses as a matter of construction, should be read in the manner contended for by Civil and Civic.
‘The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed. ’ [at 352]
652 Wards used the evidence of the ‘partnering’ aspect of the negotiations, as a vehicle ‘to describe an instance of the trust and mutual confidence as perceived by Wards already existing between Civil and Civic . . . and . . . as a form of conduct by Civil and Civic objectively calculated to engender trust, and in particular to engender an expectation of frankness and transparency of dealing against which . . . [the Court] will be invited . . . to assess the cogency of [Wards] case about section 52 for section 87 relief’. [T482] 653 In being tested as to whether or not and if so in what fashion, Wards sought to rely upon the concept ‘of a joint venture to enter into a joint venture, or a partnership to enter into a partnership’; [CfUnited Dominions Corporation Ltd v Brian Pty Ltd (1984-85) 157 CLR 1 at 12 per Mason, Brennan and Deane JJ], Mr Walker said, inter alia:
‘Partnering’
654 Notwithstanding the evidence of the ‘partnering’ discussions between the parties, to my mind the section 52 misleading and deceptive conduct case is not made out. The reasons have already been set out. And in the way, Mr Walker outlined Wards’ case on partnering, with its emphasis on cooperation, good faith and transparency, to my mind notwithstanding those discussions, the whole of the circumstances do not make good the proposition that the silence of Wards in relation to what precisely was included in the Subcontract by way of the design development clauses, was misleading and deceptive. Nor has Civil and Civic been shown to have acted unconscionably in relation to the Subcontract.
‘So that the word ‘partnership’ is very explicitly not used by us in our case to suggest the imposition of fiduciary obligations. . . . It is our submission that the generalisation fiduciary obligation is apt to mislead. Specifically we do not call in aid for example equities abhorrence of a conflict between interest and duty. Not least because even if it be assumed this was a true partnership, whether a joint venture or not does not matter at the moment, if a true partnership in the full sense of the word, what the present quarrel is about is about the terms between the partners of the same kind as one would see in a partnership suit where of course the parties to the dispute were at arms length in negotiating the terms, and are at arms length in fighting about their application.
So there is no conflict of interest [and] duty. There is no admonition against preferring your own interest, there is no resort to arguments which might impose constructive trusts in relation to the fruits of the endeavour to be held on trust for both granting and the legal entitling party remaining with the other. None of that applies.’ [T483]
655 Wards has relied upon what it submitted to have been unannounced, unexplained and non-negotiated textual changes as between on the one hand, the terms included in the form of Subcontract enclosed with the 3 August 1993 letter and on the other hand, the 18 May 1994 subcontract. Those textual changes are to be found in the document marked for identification 1. 656 Civil and Civic’s response is that it is insufficient for Wards to simply point to differences in the two documents and to contend that this establishes Wards’ case in rectification, rescission or the other causes of action pursued. Civil and Civic’s submission is that Wards required to prove that it did not agree to the particular clauses which now appear in the May 1994 contract but believed that the earlier Subcontract included those clauses. I accept Civil and Civic’s submission in this regard as correct. I further accept as correct, Civil and Civic’s submission that the Court would not simply infer from the generalised statement by Wards’ witnesses, that they thought they were agreeing to something which looked like the collation of documents from 3 August to 17 November 1993 that the May 1994 contract included specific terms which were not agreed to by Wards. 657 Nor do I accept Mr Walker’s submission that in fact Wards has shown that it did not agree with the differences which were pointed up as between the two documents. Much attention was addressed in cross-examination to the question of what was the scope of work and virtually no attention was addressed to the topic of the other clauses, the subject of MFI 1. Paragraphs 83 and 84 of Mr Pittolo’s statement of 13 August 1998 again seek essentially to treat with suggested material differences in the scope of works materials.
Wards’ onus of proof in relation to the alleged differences between conditions to be found in the May 1994 Subcontract and the conditions to be found in the material which passed inter se up to 17 November 1993
658 It follows that for the reasons given above, Wards has not made out:
Rejection of Wards’ Case
(1) Its case in relation to the alleged Agreement of 17 November 1993 [See Judgment para 5; Wards’ written outline of final submissions para 5; Separate Question 11]
(2) Its mistake and rectification cases [See Contentions paras 6, 7; Separate Questions 1, 5(a), 5(b)]
(3) Its avoidance of Subcontract case. Whether or not it purported to avoid the Subcontract, it had no entitlement to do so and the Subcontract remains on foot [Separate Question 3, Contentions paras 8, 9]
(4) Its First Trade Practices Act Count -
[I interpolate that Wards did not appear to press its second Trade Practices Count - no submissions being directed to this case. In any event, there is no evidence of reliance by Wards on the ‘future representations’ in the signing of the May Subcontract]. [Separate Questions 2, 7, 9]
(5) Its estoppel case as presented. In this regard I note the terms of paragraph 13A of the contentions.
I did not understand Wards’ case to pursue an estoppel cause of action seeking to prevent Civil and Civic from hereafter asserting or claiming relief on the basis that Clause 6.30 should be read otherwise than as if the words ‘within scope’ had been added into Clause 6.30.1(a) after the word ‘design’ where secondly appearing. Wards has leave to address this matter in final submissions.
(6) Its case relying upon an alleged duty to take reasonable care in making representations [Separate Question 8 and Question 10]
The misrepresentations were not made. Further, Wards’ abrogation of the usual common sense commercial obligation to look at contractual materials prior to executing a contract, cannot in the circumstances here proven, even accepting the ‘partnering’ parameter, sustain this cause of action.
(7) Its rescission cases (both statutory and equity based) [Wards’ outline of final submissions paragraph 3].
(8) Its quantum meruit case [Separate Question 4]. The parties are bound in Contract.
(9) Its damages cases [Separate Question 10]
Short Minutes of Order.
The parties are to bring in Short Minutes of Order at which time submissions may be addressed on any claim said not to have been dealt with, on the matter relating to estoppel in respect of which Wards have been given leave to address and on costs.
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Last Modified: 01/07/2002
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Warburton v County Construction (NSW) Pty Ltd [2022] NSWSC 941
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