Payce Communities Pty Ltd v Canterbury-Bankstown Council - [2021] NSWSC 331

Supreme Court

New South Wales

Medium Neutral Citation: Payce Communities Pty Ltd v Canterbury-Bankstown Council [2021] NSWSC 331
Hearing dates: 1 to 4 March and 8 to 10 March 2021; further written submissions 11, 12, 16, 18, 19 March 2021
Date of orders: 06 April 2021
Decision date: 06 April 2021
Jurisdiction: Equity - Technology and Construction List
Before: Stevenson J
Decision:
Plaintiff entitled to damages for variations

Catchwords:
BUILDING AND CONSTRUCTION – contract – damages – variation – where parties agreed that the Fit Out Agreement (FOA) Contract Price was $2.171 million – dispute as to the scope of work to be done for the FOA Contract Price – whether variations claimed by developer were in respect of work to be done for the FOA Contract Price

Legislation Cited:
Building and Construction Industry Security of Payment Act 1999
Competition and Consumer Act 2010 (Cth)

Cases Cited:
BP Exploration Operating Co Ltd v Chevron Shipping Co (Scotland) [2001] UKHL 50; [2003] 1AC 197
Canterbury-Bankstown Council v Payce Communities Pty Ltd [2019] NSWSC 1419
Canterbury-Bankstown Council v Payce Communities Pty Ltd [2019] NSWSC 1803
Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21
Gould v Vaggelas (1985) 157 CLR 215; [1985] HCA 75
Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd & Anor [2001] NSWCA 313

Category: Principal judgment
Parties: Payce Communities Pty Ltd (Plaintiff)
Canterbury-Bankstown Council (Defendant)
Representation:
Counsel:
Mr D T Miller SC with Mr M Sheldon (Plaintiff)
Mr B DeBuse with Mr J E F Brown (Defendant)
Solicitors:
Vincent Young Lawyers (Plaintiff)
Marsdens Law Group (Defendant)

File Number(s): 2019/133490

The issues

The contractual context

The Project Delivery Agreement
The Voluntary Planning Agreement
The Umbrella Agreement
The Fit Out Agreement

The 2012 Design

The determination of the FOA Contract Price at $2.171 million

The events leading to 24 February 2017

The pleading point

The 24 February 2017 Agreement

Directions to vary the work

Payce’s damages case

The Superintendent point

The Independent Certifier point

Council’s misleading or deceptive conduct case

The final payment claim point

The wrong entity submission

The “BCA” point

Quantum

Mr Daubney’s references to Mr Rigby’s affidavit
The integers in Payce’s damages calculation
Actual costs as best evidence of reasonable costs
The amount to be attributed to the FOA Contract Price
The Base Build Costs
The Builder’s margin
Escalation of the 2012 Design prices
The claims where the parties have agreed to a “split the difference”
Variation 1 – internal walls - $12,078
Variation 3 – modification to operable wall track in function room - $6,086.02
Variation 5 – CO2 monitoring - $15,290
Variation 7 – skylight - $7,194.15
Variation 8 – security door - $6,147
Variation 9 – walls and windows - $28,719.64
Variation 12 – boxing out of column to concierge - $10,459
Variation 14 – library – comms room wall - $7,500
Variation 15 – library – comms room air conditioning - $1,170
Variation 16 – library – young adults glazed balustrade - $37,094
Variation 17 – automatic fire detection and warning system
Variation 18 – mechanical system - $192,010.51
Variation 19 – supply of lighting - $276,070.33
Variation 20 – power and data point
Variation 21 – electrical – miscellaneous - $30,226
Variation 22 – wifi
Variation 23 – ceiling finishes - $372,598.48
Variation 24 – hearing loop - $142,279.50
Variation 25 – security system - $40,233.38
Variation 26 – internal glazing - $30,071.60
Variation 27 – blinds - $11,860
Variation 29 – acoustic screen - $23,430
Variation 30 – acoustic insulation - $77,754.60
Variation 31 – picture rail and hangers - $10,128
Variations 33 and 33A – other consultant fees $88,250 – CKD’s fees $38,700
Variation 41 – plasterboard and painting to staff room - $7,098.42
Variation 42 – section 96 application fees - $10,480
Variation 43 – section 96 planner fees - $6,500
Variation 52 – additional works - $86,020

Conclusion

Judgment

The plaintiff, Payce Communities Pty Ltd (“Payce”), is a property development and investment company.
In 2010, the defendant, Canterbury-Bankstown Council (“the Council”), then Canterbury City Council, owned land at Riverwood. That land was occupied by a senior citizens’ centre.
In 2010, the New South Wales Land and Housing Corporation (“the Corporation”) owned adjacent land.
Between 2010 and 2015, Payce, the Council and the Corporation entered into a number of agreements which I summarise below. Pursuant to those agreements, to oversimplify matters somewhat, in exchange for the Council’s agreement to transfer its land to Payce, Payce agreed to cause a building to be constructed on that land in which:

in the basement there would be a car park;

on the ground and first floors there would be a library and senior citizens centre, to be dedicated for public use; and

on the floors above there would be social and public housing to be dedicated for public use and private apartments that Payce could develop at its own profit.

The dispute before me concerns the library and, in particular, the fit out of the library. There is no dispute about the car park or the public housing and private units built on the floors above.
In substance, and again to oversimplify matters somewhat, Payce agreed to construct the shell of the library at its own cost and pay the first $1.52 million of the library fit out cost.
The works were effected by Dasco Australia Pty Limited (“the Builder”), pursuant to a Design and Construct Contract (“the Building Contract”) it entered with Payce Communities No 4 Pty Limited (“Payce No 4”) on 1 September 2016. Payce No 4, I infer, is a company related to Payce. The Builder carried out the works in August 2017 and August 2018. I return to the significance of Payce No 4, rather than Payce itself, being the counterparty to the Building Contract below. [1]
1. See [167] to [173] below.
Payce’s claim is for some $1.4 million which it contends is due to it from the Council for variations to the works.
There is no dispute that the works, including those works the subject of the asserted variations, were completed in a good and workmanlike manner. This is not a “defects” case.
There is also no dispute that on 24 February 2017, some six months before work commenced, the parties agreed that the “FOA Contract Price” [2] for the proposed library was $2.171 million. I describe how that agreement was reached below. [3]
2. The parties used the initialism “FOA” to refer to the Fit Out Agreement: to which I return at [38]-[44].
3. See [38] – [44].
The central issue is whether the work that Payce contends to be a series of variations was in truth part of the work that Payce agreed to perform for the FOA Contract Price or as part of the “Base Build”.
Payce has already recovered from the Council the bulk of the amount it claims for variations by reason of an adjudication in its favour under the Building and Construction Industry Security of Payment Act 1999 (“the SOP Act”). The Council sought, unsuccessfully, to challenge that adjudication. [4] In these proceedings the Council seeks to recover the whole of the amount that it has paid Payce and Payce seeks to retain the money received and to recover a further amount of some $228,000 from the Council.
4. Canterbury-Bankstown Council v Payce Communities Pty Ltd [2019] NSWSC 1419 (Henry J) and Canterbury-Bankstown Council v Payce Communities Pty Ltd [2019] NSWSC 1803 (Ball J).
In effect, these proceedings are those contemplated by s 32 of the SOP Act as resolving, finally, the issues provisionally determined by the adjudication under the SOP Act.
It is common ground that Payce must make out its entitlement to claim for the variations and that determination of that issue will determine what the parties must do in relation to the amount paid under the SOP Act.

The issues

There are three issues to be determined in the proceedings.
The first is the scope of works covered by the agreed FOA Contract Price.
The second is whether it is necessary for Payce to point to written directions to vary the works in order that it be entitled to claim for variations.
The third is the amount of Payce’s entitlement for any of the variations for which it contends.

The contractual context

The Project Delivery Agreement

On 20 August 2010, Payce and the Corporation entered into a “Project Delivery Agreement”. The dispute before me does not arise under this agreement, although it provides a background to the matters that are in dispute.
The Project Delivery Agreement recited that its objectives included the creation of an “integrated residential and community precinct” incorporating social housing units and private housing. Social housing units and private housing were ultimately incorporated in the upper levels of the building in which the library and senior citizens’ centre, with which these proceedings are concerned, was built. They are not relevant to the issues before me.

The Voluntary Planning Agreement

On 1 May 2013, Payce, the Council and the Corporation entered a “Voluntary Planning Agreement”.
Pursuant to cl 4.3(a) of that agreement, Payce agreed to construct the library and senior citizens’ centre “to a warm shell finish” in accordance with:

a “Warm Shell Specification”; and

any applicable Australian standards.

The Warm Shell Specification provided for “General warm shell building materials, finishes and services” including:

“Ceilings to be suspended grid ceilings with troffer lighting however the stores, delivery and garbage rooms will have an exposed concrete finish.
Hydraulic services to meet BCA (Building Code of Australia) requirements with the use of water efficient plumbing fixtures, including dual flush toilets and AAA rating taps.
Electrical services to meet BCA requirements and the use of energy efficient light fittings. An allowance for one switchboard including metering will be provided.
Air conditioning and mechanical ventilation to meet BCA requirements.”

The Warm Shell Specification also provided for “General Design Requirements”:

“Building to comply with the BCA requirements and Australian standards.
…
Warm shell to all areas shall include floors, ceilings, walls finishes and essential services however exclude walls and ceilings for the fitout, furniture, fixtures and equipment.”

The Umbrella Agreement

On 12 September 2014, Payce and the Council entered into an “Umbrella Agreement”.
There was included in that agreement, as a schedule, the form of a proposed “Fit Out Agreement”. This was ultimately executed by Payce and the Council on 4 December 2015. I refer to it below.
By cl 9.6(a) of the Umbrella Agreement, Payce agreed to procure the “development and completion of the design of the Fit Out” of the library including:

the items in the Warm Shell Specification that I have set out at [23] and [24] above; and

the specifications in the proposed Fit Out Agreement.

The library, including its fit out, was to be designed by the Council’s architect, CK Design.
In that regard:

by cl 9.5(a), the Council agreed to bear the risk of the work undertaken by the architect; and

by cl 9.6(d), Payce agreed to cause the architect to amend the draft design documentation “in accordance with the review and comment of Council from time to time”.

The Umbrella Agreement provided for a provisional FOA Contract Price of $1.52 million.
Clause 9.10 identified Mr Richard Rigby of Rider Levett Bucknall (Quantity Surveyors) as the Independent Certifier under the agreement. The clause provided that the Independent Certifier was to be appointed “on terms determined by Payce” which terms were to be substantially the same as those of the Independent Certifier under the Project Delivery Agreement. There is no suggestion that Mr Rigby was not appointed in accordance with this provision.
Clause 9.7 provided for the determination of the FOA Contract Price.
Thus:

by Clause 9.7(a), Payce and the Council agreed that the provisional FOA Contract Price was $1.52 million but that this was “subject to change having regard to the final design documentation”;

by clause 9.7(b), Payce agreed to submit to the Independent Certifier its final “design documentation”; and

by clause 9.7(c), the parties agreed to accept the Independent Certifier’s determination of the final FOA Contract Price based on that final design documentation as being “final and binding on the parties”.

Clause 9.7(c) went on to provide that the “FOA Contract Price will be the amount determined by the Independent Certifier … except that”:

the cost of the architect would be paid by Payce as to the first $70,000 “and thereafter as part of the FOA Contract Price”; and

the cost of “other consultants” would be paid by Payce as to the first $25,000 “and thereafter as part of the FOA Contract Price”. [5]
5. There is a dispute about the proper construction of this clause that I deal with at [338] to [345] below.

Clause 9.8 provided that if the Independent Certifier determined, pursuant to cl 9.7(c), that the FOA Contract Price exceeded $1.52 million, the Council, within 15 business days, must either elect to:

accept the FOA Contract Price so determined; or

amend the design documentation so as to reduce the FOA Contract Price.

Clause 10.4(b) of the agreement provided that if the FOA Contract Price exceeded the provisional sum of $1.52 million, then:

the first $1.52 million would be set off against the amount payable by Payce to the Council for the transfer to Payce of Council’s land; and

amounts in excess of $1.52 million would be paid by the Council to Payce progressively in order with the progress claims’ provisions set out in the Fit Out Agreement.

The practical effect of this provision was, as set out at [4] and [6] above, that Payce agreed to pay the first $1.52 million of the library fit out cost in consideration for the Council transferring its land to Payce.

The Fit Out Agreement

On 4 December 2015, Payce and the Council entered into the Fit Out Agreement contemplated by the Umbrella Agreement.
By this agreement, Payce agreed to carry out the Fit Out works for the FOA Contract Price.
Clause 36 of the attached “General Conditions” provided for variations.
Clause 36.1 provided:

“Directing Variations
[Payce] shall not vary [Work Under Contract] except as directed in writing.
The [Council], before the date of practical completion, may direct [Payce] to vary [Work Under Contract] by any one or more of the following …
(a) increase, decrease or omit any part;
(b) change the character or quality;
(c) change the levels, lines, positions or dimensions;
(d) carry out additional work…”

“Direction” was defined to include:

“… agreement, approval, assessment, authorisation, certificate, decision, demand, determination, explanation, instruction, notice, order, permission, rejection, request or requirement”.

Clause 36.3 provided:

“Variations for convenience of [Payce]
If [Payce] requests the [Council] to direct a variation for the convenience of [Payce], the [Council] may do so. The directions shall be written …”

Clause 37.2 provided for the Superintendent to provide a certificate of the amount due to Payce from the Council, pursuant to any progress claim.

The 2012 Design

On 13 April 2012, Rider Levett Bucknall delivered to the Council an “Indicative Budget” for the Base Build and the “Fit Out” of the proposed library.
The parties referred to this as the “2012 Design”.
The 2012 Design included as elements in the Base Build some items that Payce accepts must be taken into account when calculating its claim for variations, as they represent work that Payce was obliged to effect as part of the Base Build. I will return to these matters when considering the individual variations.

The determination of the FOA Contract Price at $2.171 million

As I have set out, cl 9.7 of the Umbrella Agreement provided how the FOA Contract Price was to be determined.
It is common ground that the FOA Contract Price was determined to be $2.171 million and that this agreement was recorded in a letter from the Council to Payce on 24 February 2017.
However, the parties are divided about the scope of the work the subject of that agreement.
Payce’s case is that:

the scope of the work the subject of the FOA Contract Price is to be determined by the proper construction of the agreement that, it is common ground, the parties made on 24 February 2017; and

the work that is the subject of its variation claims was not within that scope and is to be paid for by the Council in accordance with the variation provisions in the Fit Out Agreement.

For the reasons set out below, I accept this case.
However, I record here that Mr DeBuse, who appeared with Mr Brown for the Council, contended throughout the hearing that Payce had not pleaded this case.
I do not agree. But to understand the context of Mr DeBuse’s contention, it is necessary to set out the events that led to the Council’s letter to Payce of 24 February 2017. This is particularly so because, as set out below, by its letter the Council accepted Payce’s earlier offer, in which a compromise was suggested between the competing views of Payce’s and the Council’s quantity surveyors.

The events leading to 24 February 2017

On 21 October 2015, Mr Michael Malak from Payce sent the Independent Certifier, Mr Richard Rigby, a letter in which he stated:

“Canterbury Council have asked that we get you to assess the cost of the library works as it stands at the moment to understand what the cost differences are.
The design has progressed to a point and has been halted by council until we establish costs, so can you please download the drawings below … and let me know when you can undertake this.”

The letter referred to a dropbox that contained some 20 identified drawings prepared by CK Design.
In its List Statement, Payce referred to the design depicted in these drawings as “the 2015 design”.
A short time later, on 4 December 2015, Payce and the Council executed the Fit Out Agreement.
On 8 December 2015, Mr Rigby sent the Superintendent what he described as:

“an estimate of the fit out costs for the above project based on the documentation provided in October 2015 in the sum of $3,000,000 excluding GST.”

Within that figure, Mr Rigby gave a detailed estimate for the fit out of the “Library/Café” on Level 1 of the proposed building, and the “Library & Community Centre” on Level 2.
In each case, Mr Rigby stated that his estimate was “as per attached elemental”.
Those “elements” were set out in an eight page attachment in which Mr Rigby specified each of the “location elements” he costed. Those elements included such things as internal walls and doors, light and power, ceiling finishes and hydraulic and mechanical elements.
Mr Rigby specified the total of the fit out cost of those elements for Level 1 at $510,426 and for Level 2 at $1,508,378: a total of $2,018,804; to which was added design and consultant fees, DA fees and other like matters.
Mr Rigby stated:

“We particularly draw your attention to the detail of the estimate to identify the scope of fit out works allowed. For example, we understand the public toilets to the library area a base build provision (although not indicated on the base building drawings). Further, we also understand the library lobby has one sliding door as the base building requirement and one for fit-out (although the base building drawings show a double set of doors). It is recommended that the scope of the fit-out estimate be carefully reviewed prior to finalising the costs.” (My emphasis.)

I will call this document the “2015 RLB Estimate”.
The Council retained its quantity surveyor, Mr David Gallagher from Hollis Partners, to provide his “estimate for the fit out works over & above base build with warm shell” of the proposed library and community centre.
Mr Gallagher provided that estimate in a letter sent to the Council on 5 May 2016.

Mr Gallagher said that his estimate was:

“[P]repared in a similar format to the Rider Levett Bucknall (RLB) estimate of 8 December 2015 to allow for simple comparison between the estimates. Both estimates are based on the same documents noted above. Where RLB rates and allowances are reasonable, we have generally adopted these within our estimate. A comparison between our estimate and RLB estimate is attached with the more significant differences being between the estimates identified.” (My emphasis)

The documents that Mr Gallagher said his and Mr Rigby’s estimates were based on were set out earlier in his covering letter as follows:

“The cost estimate is based on the following documentation:
• Turner drawings [which were identified]
• CK Design drawings [Mr Gallagher identified the drawings referred to at Mr Malek’s 21 October 2015 email]
• Mechanical drawings [Mr Gallagher identified two ‘P3’ preliminary drawings]
• Schedule of Internal Finishes
• Warm Shell Specification.”[6]
6. See [23] and [24] above.

Like Mr Rigby, Mr Gallagher set out in an attachment to his letter details of the building elements on which he based his estimate. Those elements corresponded to those which Mr Rigby referred to the 2015 RLB Estimate.
Mr Gallagher included in his letter a comparison of his and Mr Rigby’s estimates that showed that, including DA fees, legal costs and amounts for contingency, the two estimates totalled:

Mr Rigby $2,344,446

Mr Gallagher $1,998,021

These figures represented the two quantity surveyors’ estimates of the cost of the fit-out for the library and senior citizens’ centre, over and above the base build cost.
The difference between the two was $346,425.
I will call Mr Gallagher’s letter “the 2016 Hollis Estimate”.
On 24 November 2016, Payce wrote to the Council suggesting, in effect, that Payce and the Council split the difference between the 2015 RLB Estimate and the 2016 Hollis Estimate.
Thus, Payce wrote to the Council:

“We refer to the Umbrella Agreement dated 12 September 2014 between Payce Communities Pty Limited (the Contractor) and The City of Canterbury (the Principal) and in particular clause 9.8(b) in which Council must elect to do either of the following:
1. accept the FOA Contract Price as determined by the Independent Certifier; or
2. amend the design documentation so as to reduce the FOA Contract Price, in which case the design process in Clause 9.6 will recommence.

As a result of lengthy ongoing discussions and the report prepared by Hollis Partners dated 5 May 2016 (attached) identifying a difference of approx. $350,000 between their cost estimate and the RLB 2015 cost estimate, we propose that the parties resolve the issue by agreeing to the split of the cost difference on a 50/50 basis. If this offer is not accepted by Council the Contractor reserves its rights to rely on the terms of the Umbrella Agreement.
We believe that this proposal represents the fairest and most expeditious way to reach a resolution, and is also in the best interest of progressing the project in a timely manner. A timely agreement is required in order for our project team to finalise the detailed design immediately and not occur[sic] any more unnecessary delays to the project, keeping in mind that the project is now under construction.”

On 24 February 2017, the Council replied, accepting Payce’s offer.
The Council wrote:

“Council confirms the following:
1.    Under clause 9.8(a) and (b) of the Umbrella Agreement, where the Independent Certifier determines that the Contract Price under the Fit Out Agreement will exceed $1,520,000.00, then within fifteen (15) Business Days of that determination Council must elect to either:
(a)    accept the Contract Price; or
(b)    amend the design documentation so as to reduce the Contract Price, in which case the design process in clause 9.6 of the Umbrella Agreement will recommence.

2.    The parties have held ongoing discussions in relation to that issue in order to attempt to reach an agreement on the cost of the fit out works.
3.    Payce has now made an offer to Council as follows:
(a)    The Contract Price under the Fit Out Agreement will be $2,171,000 (Agreed Contract Price).
(b)    In accordance with clause 10.4(b)(ii) of the Umbrella Agreement, Council will pay Payce the amount of $651,000.00 (being the difference between the original estimate referred to in paragraph (1) above and the Agreed Contract Price) on a progressive basis in accordance with clause 37 of the Fit Out Agreement.

Acceptance
With effect from the date of this agreement, Council accepts the Offer.”

Payce and the Council thereby agreed that the FOA Contract Price was to be $2.171 million and that the Council would pay Payce the difference between that figure and the provisional figure of $1.52 million specified in the Umbrella Agreement[7] ($651,000) progressively in accordance with cl 37 of the Fit Out Agreement.
7. See [30] above.
At the heart of Payce’s case is the contention that the parties thereby agreed not only to the FOA Contract Price, but also to the scope of work Payce was required to perform for that FOA Contract Price; such that work over and above that scope was to constitute a variation to be dealt with under cl 36 of the Fit Out Agreement.
For the reasons that follow, I accept that case.

The pleading point

In its List Statement Payce pleaded, [8] after reciting the terms of 9.6 and 9.7 of the Umbrella Agreement;

“C12. On 21 October 2015 [Payce] submitted the design documentation [on which the FOA Contract Price would be based] (being the 2015 Design) to [Rider Level Bucknall] for determination. [9]
C13. On 24 February 2017, the parties agreed that the FOA Contract Price (as based on the 2005 Design) was to be $2,171,000.”[10]
8. Technically, allegations in a List Statement are not pleadings, as proceedings in the Technology and Construction List are commenced by Summons, not Statement of Claim. However, the contentions in a List Statement are taken to define a party’s case, just as pleadings do. I shall refer to “pleadings”.
9. Particularised by reference to Payce’s 21 October 2015 email referred to at [55] above.
10. Particularised by reference to Council’s letter to Payce referred to at [78] above.

Payce then pleaded the variation provisions in the Fit Out Agreement [11] and continued:

“C17 Between (approximately) February and November 2017, the [Council] directed [Payce] to vary the 2015 design …
C18 In accordance with [Payce’s] obligations under clause 2.1 of the Fit Out Agreement [Payce] carried out and competed the [Work Under Contract) (including as varied) and achieved practical completion on 24 August 2018 …
C19 On 9 July 2018 [Payce] submitted its claim for payment in respect of variations to the Superintendent …”
11. At C14 to C16 of the List Statement.

The variations referred to in C17 were particularised by reference to a three page annexure to the List Statement that set out, in relation to each claimed variation, the “original” work, the corresponding “variation” alleged and the “claimed amount”. On behalf of Payce, Mr Miller SC and Mr Sheldon submitted, and I have no reason to doubt, that the “original work” in Annexure A corresponded to the “scope” of work Payce contends to be subject to the agreement as to the FOA Contract Price, and that the “variation” corresponds to the work Payce contends was performed beyond that “scope” of work.
Mr DeBuse submitted that the pleading at C13 was no more than a pleading that the FOA Contract Price had been amended from the provisional sum of $1.52 million and not a pleading about the scope of work to be undertaken for the FOA Contract Price.
But, seen in the context of the pleading at C17 to C18, it is more than this.
It is an allegation that there was an agreement as to the FOA Contract price and that the price was agreed to be based on the 2015 Design. [12]
12. As defined in C12 as the design forwarded by Payce on 21 October 2015.
It is true that neither the Council’s letter of 24 February 2017 nor the List Statement refers to the communications between the parties leading up to 24 February 2017 (save for Payce’s 21 October 2015 email). Nor does the pleading refer, in terms, to the scope of works to be done for the FOA Contract Price.
But it must have been clear to the Council that Payce was contending that the scope of the work, the subject of the agreed FOA Contract Price of $2.171 million, was to be found within the 24 February 2017 agreement and, in particular, in the reasoning of the quantity surveyors whose competing views led to the compromise recorded in that agreement.
Thus, Payce went on in C17 of the List Statement to plead that the Council had given directions to “vary the 2015 design”, [13] in C18 to plead that it carried out that work, and in C19 that it had made a claim for payment for that work.
13. On which it pleaded the FOA Contract Price was based: C12.
It is clear from these assertions that Payce was contending for an entitlement to be paid, over and above the FOA Contract Price, for variations to the 2015 Design.
That was also made clear by the annexure to the List Statement, to which I referred at [84] above.
The manner in which the Council responded to the allegations in the List Statement shows that the Council did understand that this was how Payce was putting its case.
In its List Response, the Council engaged with the question of the ambit of the work to be done by Payce for the agreed FOA Contract Price of $2.171 million.
Thus, in its List Response, the Council responded to the pleading set out at [82] above as follows:

“As to paragraph 13 of [Payce’s] Contentions, the [Council]:
(1)    Admits that on or around 24 February 2017, the parties agreed that the [Council] would pay a sum of money over and above the indicative Fit Out Costs of $1,520,000.00; but
(2)    Say that it is a fact that each of the parties obtained expert assessments as to the costs of the design based on incomplete documentation, but on the basis of express and implied assumptions as to the undocumented portions of the Fit Out Works:
(a)    The assessment as to costs obtained by [Payce] dated 6 December 2015, was from [Rider Levett Bucknall] and valued the cost of construction for the Fit Out Works at $4,752,287.00 (excluding GST).
(b)    The [Rider Levett Bucknall] Report was not from the independent certifier.
Particulars
(i)    The design documentation was not submitted to [Rider Levett Bucknall] by the Plaintiff in accordance with the contract, or in the circumstances contemplated by it.
(ii)    [Rider Levett Bucknall] was unaware it was an independent certifier under the Umbrella Agreement.
(iii)    [Rider Levett Bucknall] was engaged by the Plaintiff or its related company as the cost consultant to it for the Project.

(c) The [Council] obtained a report from Hollis Partners that valued the construction of the Library Fit Out Works at $1,998,025.00.

(3)    Does not admit that there was an agreement that the FOA Contract Price based on the 2015 Design was to be $2,171,000.00, but agrees that the FOA contract price was to be that amount but for delivery of the Fit Out Works as identified in paragraph C13(4) below.
(4)    Says that to the extent there was an agreement reached on or about 24 February 2017, such an agreement was on the basis of the design as at that time which consisted of the 2015 Design, as amended by the CK Design documentation, submitted to that date and the assumptions made in the Hollis & [Rider Levett Bucknall] reports, and the discussions and agreements reached as to the construction of the Fit Out Works contained in the site meetings and emails exchanged between the parties to that time; and
Particulars
(i)   The [Council] has previously, in connection with the proceedings 2019/362319, served a statutory declaration of Mathew Tran where between paragraphs 75 and 81, the [Council] has identified the plans and reports of which it was aware and which constituted the known part of design at the time of the agreement as to the FOA Contract Price.” (My emphasis.)

Thus the Council’s contention was that although it accepted that it had agreed that the FOA Contract Price be $2.171 million, it did not agree that that price was based on only the 2015 Design which formed the basis of the 2015 RLB Estimate and the 2016 Hollis estimate. Rather, the Council contended that the agreed FOA Contract Price of $2.171 million was on the basis of the 2015 Design “as amended” by:

unidentified CK Design documentation admitted to the date of the agreement, 24 February 2017;

unidentified assumptions made in the 2015 RLB Estimate and 2016 Hollis Estimate; and

unidentified “discussions and agreements” as to the construction of the Fit Out Works.

I will deal below with the adequacy of the manner in which that allegation was particularised by the Council. The point for present purposes is that the Council accepted in its List Response that the FOA Contract Price was in part based on the 2015 Design, which design was the subject of the opinions expressed by both Mr Rigby and Mr Gallagher in the 2015 RLB Estimate and the 2016 Hollis Estimate. That makes clear that the Council understood that Payce’s contention was that the scope of the work the subject of the FOA Contract Price was the 2015 Design; albeit that the Council disputed that the scope could be determined only by reference to the 2015 Design.
Further, the Council’s building experts, Mr Berson and Mr Brewster, dealt in terms with each of the variations for which Payce contends. To a very large extent I rejected their evidence as inadmissible. But the attention the experts purported to give to each variation makes clear to me that the Council understood the nature of the case Payce was seeking to make out.
In those circumstances, I do not accept Mr DeBuse’s submission that the case Payce seeks to make out before me was not pleaded, nor that the Council did not understand this to be the case it was facing.

The 24 February 2017 Agreement

Payce’s case is that the contract between Payce and the Council is to be found in:

Payce’s letter of 24 November 2016 (the offer), and the Council’s letter of 24 February 2017 (the acceptance of that offer); and

the documents incorporated by reference into the agreement formed by that offer and acceptance; namely, the 2015 RLB Estimate and the 2016 Hollis Estimate.

In the 2015 RLB Estimate and the 2016 Hollis Estimate, Mr Rigby and Mr Gallagher expressed their estimates by reference to the building elements to which each referred.
Mr Rigby said, in terms, that the scope of the fit out works the subject of his estimate were contained in the “detail of the estimate”. [14] Mr Gallagher said that his estimate was “based” on the drawings identified and was prepared in a similar format to Mr Rigby’s estimate. [15]
14. See [68] above.
15. See [66] above.
The agreed FOA Contract Price of $2.171 million was based on those two estimates and represented a “split of the cost difference” compromise between them.
There is no dispute that the parties’ agreement is recorded in the Council’s letter of 24 February 2017. [16]
16. See [77] and [78] above.
As:

the Council’s letter of 24 February 2017 accepted the offer in Payce’s letter of 24 November 2016;

Payce’s offer proposed that the parties take a “split of the cost difference” between the opinions expressed in the 2015 RLB Estimate and the 2016 Hollis Estimate as to the reasonable costs of the fit out works; and

both Mr Rigby and Mr Gallagher based their opinions on the same identified elements making up the 2015 Design;

those elements were, in my opinion, incorporated by reference to the 24 February 2017 agreement and define the scope of work to be done for the FOA Contract Price.

In those circumstances, Mr Miller and Mr Sheldon were in my opinion correct to submit that:

it was the elemental trade items described in the competing estimates by Mr Rigby and Mr Gallagher that comprised the scope or subject of the FOA Contract Price;

those elemental trade items are drawn from, or “based on”, the materials to which each quantity surveyor referred;

if an element was not shown in the elemental breakdown pages prepared by both quantity surveyors, that meant it was not priced and was not part of the later compromised FOA Contract Price; and

if what was ultimately supplied differed in number to what was listed in those elemental build-ups, or was of a different quality to that allowed in those elemental build-ups, or if what was supplied was a different arrangement all together, then those elements would not be covered by the FOA Contract Price and would constitute variations to be governed by cl 36 of the Fit Out Agreement.

That is, my conclusion is that the scope of what was priced and was the subject of the “split of the cost difference” agreement made between the Council and Payce in those documents, is to be found in elemental build-ups attached to the 2015 RLB Estimate and the 2016 Hollis Estimate; both of which are referred to in Payce’s offer of 24 November 2016 and both of which are incorporated by reference to the agreement thereby resulting.
As I have set out above,[17] in its List Response, the Council contended that the FOA Contract Price was based on the 2015 Design as varied by unidentified architectural drawings, “assumptions” in the 2015 RLB Estimate and 2016 Hollis Estimate and “discussions and agreements”.
17. At [95].
The particulars given in the List Response concerning Mr Tran’s statutory declaration[18] took the matter no further.
18. Referred to in the particulars at the foot of the passage set out at [95] above.
Prior to the hearing, Payce sought particulars of these matters and was met by Council’s response to the effect that these were matters of evidence.
During the hearing, I directed the Council to specify what CK Design documentation, assumptions, discussions and agreements the Council relied on.
Mr DeBuse produced a document, which I marked MFI-6, which specified CK Design drawings, identified assumptions said to have arisen from the 2015 RLB Estimate and 2016 Hollis Estimate and discussions and arrangements recorded in identified documents.
However, Mr DeBuse did not develop any argument to explain how the Council’s pleaded case so particularised could be accommodated within the agreement constituted by the Council’s 24 February 2017 acceptance of Payce’s 24 November 2016 offer.

Directions to vary the work

As I have set out, [19] although cl 36.3 of the Fit Out Agreement required there to be a direction in writing if Payce initiated a variation, there was no requirement that a variation directed by the Council to Payce be in writing. Clause 36.1 merely provided that if the Council required a variation it “may direct” Payce accordingly.
19. At [41] to [43].
“Direction” has the very broad definition that I have set out. [20]
20. At [42].
In my opinion, Mr Miller and Mr Sheldon were correct to submit that, on the proper construction of cl 36, if there is a document that contains information that fits within the definition of “direction”, that suffices to constitute a direction for the purpose of cl 36.1.
Mr DeBuse did not engage with Mr Miller’s and Mr Sheldon’s submissions on this question, save to assert that the contentions were not pleaded.
However, Payce did plead that the Council had directed it to effect the variations. [21]
21. At C17 of its List Statement referred to at [82] above.

Payce’s damages case

Payce’s primary case is that it has, at the Council’s direction, by the Builder effected variations to works over and above the scope of the work the subject of the FOA Contract price, but has not been paid for those works and is entitled to damages.
Mr DeBuse submitted that Payce had not pleaded a case in damages.
I do not agree.
Payce’s claim for damages is set out in paragraphs 28, 28A, 31 and 32 of its List Statement as follows:

“28. Further, it was an express term of the Fit Out Agreement that the [Council] shall pay [Payce] for work for which the [Council] accepted [or] adjusted by any additions or deductions made pursuant to the Fit Out Agreement.
28A. In breach of its obligations, the [Council] failed to pay [Payce] its proper entitlement under the Contract.
…
31. By the [Council] failing to pay the balance of the amount properly payable to [Payce] the [Council] is in breach of its obligation under the [Fit Out Agreement].
32. By reason of the [Council]’s breach [Payce] has suffered loss or damage.”

Paragraph 31 of the List Statement was particularised by reference to, amongst other documents, the Fit Out Agreement at cl 2.1, which provided that:

“[Payce] shall carry out and complete [work under contract] in accordance with the Contract and directions authorised by the Contract.
The [Council] shall pay [Payce]:
a) for work for which the [Council] accepted a lump sum, the lump sum; and
b) for work for which the [Council] accepted rates, the sum of the products ascertained by multiplying the measured quantity of each section or item of work actually carried out under the Contract by the rate accepted by the [Council] for the section or item,
adjusted by any additions or deductions made pursuant to the Contract.”

I accept Payce’s submission that this clause required Payce to carry out and complete the Work Under Contract in accordance with the Fit Out Agreement and the “directions” authorised by the Fit Out Agreement. Payce’s claim for variations is based on “directions” it contends it received from the Council.
Clause 2.1 also required the Council to pay Payce the lump sum, adjusted by any additions or deductions made pursuant to the Fit Out Agreement. Here, Payce relies upon the Council’s refusal to pay for work that it directed Payce to perform that gives rise to the breach.
Under cl 36.4, the Superintendent had the functional role of pricing any variation. I do not see there to be any interaction between that provision and cl 2.1.
Payce’s case is that the Council refused to pay it for work that Council had directed to be done. That is the damage of which Payce complains.
In my opinion, that pleading is apt to encompass the claim for damages that Payce makes in these proceedings.

The Superintendent point

As an alternative to its claim for damages, Payce made a claim under a certificate issued by the Superintendent, pursuant to cl 37.4.
There was debate before me as to whether the certificates given by the Superintendent could be impugned on the basis that the Superintendent had not acted reasonably in good faith and as to whether, in any event, the Council had adequately pleaded any such case.
As Payce advances its claim under the Superintendent’s certificates only as an alternative to its claim in damages, and as Payce’s submissions before me focused on the question of damages, I do not propose to consider this point further; save to observe that cl 37.4 provided that the Superintendent certificates were final and binding. This was so other than in four specified circumstances, and a breach of any obligation of the Superintendent to act reasonably and in good faith was not any one of those circumstances.

The Independent Certifier point

I have set out above the provisions in the Umbrella Agreement concerning the role of the Independent Certifier. [22]
22. See [31] to [34].
In their opening submissions, Mr DeBuse and Mr Brown submitted that Payce had represented “impliedly or by silence” that Mr Rigby was an “independent” certifier, that this representation was untrue and that this was “sufficient to make out this claim for relief”; evidently “by way of estoppel against reliance on there being variations to the ‘FOA Contract Price’”. Mr DeBuse and Mr Brown referred to judicial observations concerning the making of “false statements” and propounding “a falsehood”. [23]
23. Reference was made to Gould v Vaggelas (1985) 157 CLR 215; [1985] HCA 75 at 238 (Wilson J); BP Exploration Operating Co Ltd v Chevron Shipping Co (Scotland) [2001] UKHL 50; [2003] 1AC 197 at [105] (Lord Millett).
But no such case is pleaded.
The only reference in the Council’s pleadings to Mr Rigby’s asserted lack of independence is in paragraph C20(4)(b) of the Council’s List Response.
That paragraph is not directed to Mr Rigby’s role leading to the 24 February 2017 agreement concerning the FOA Contract but is in response to Payce’s contention that, on 10 September 2018 (many years after the 2015 RLB Estimate), Rider Levett Bucknall assessed the quantum of Payce’s variation claims at $1,748,242.
The Council did not plead in its List Response or elsewhere any consequence said to flow from Mr Rigby’s alleged lack of independence.
Mr DeBuse and Mr Brown returned to the subject of Mr Rigby’s alleged lack of independence in their closing submissions but this time directed attention to Mr Rigby’s 10 September 2018 assessment seeking to impugn the Superintendent’s Certificate.
The submissions were untethered to any pleaded allegation and do not assist me to resolve the issues in these proceedings.

Council’s misleading or deceptive conduct case

The Council claims that Payce engaged in misleading or deceptive conduct for the purposes of s 18 of the Australian Consumer Law [24] by remaining silent about the increasing cost of variations from July 2017 onwards.
24. Competition and Consumer Act 2010 (Cth) Sch 2.
Mr DeBuse and Mr Brown put the matter this way in their closing submissions:

“From July 2017 onwards, knowing the [Council] had asked for pricing of variations that had then been identified (six in total), [Payce] delayed [Rider Levett Bucknall] undertaking that task, without direction from Council to delay, will [sic] full knowledge then that [the Builders’] pricing showed large price increase[s] on what had been budgeted and told to the [Council] …
[Payce], by it[s] silence, represented in so far as it did not keep the [Council] informed of the changes and costs to work that it undertook which it now alleges were a variation to the final design that [there were] no further costs.
In all the circumstances where [the Council] had requested an updated pricing and had been conscious of pricing variations, it was incumbent on [Payce] not to simply remain silent when it was on notice that there were, as at 7 July 2017, ‘some significant cost changes’.”

This claim is not borne out by the contemporary documentary evidence.
On 23 May 2017, Mr Philip Waters from CK Design wrote to Ms Rifi from Jacquel Australia Project Management, Payce’s project manager, stating that he had met with Council officers to discuss changes in the design to the library fit out.
Ms Rifi replied, asking:

“… can CKD please keep the design brief up to date with your tracked changes to allow the pluses and minuses to be easily identified at the end of the design development?”

Ms Rifi copied her email to Mr Kim Goh, the project manager employed by the Council, asking him to “confirm these are consistent with Councils requests”.
On 6 July 2017, Ms Rifi wrote to Rider Levett Bucknall, with a copy to Council, stating:

“CKD have now progressed with the library services coordination and documentation is being issued with For Construction status.
Please see below dropbox link with the following final documentation:
• Partition Plan
• Interior elevation
• Furniture Plan
• RCPs
• Ceiling details
• Acoustic requirements
• Final mechanical design package for the library
…

Can you please provide a fee proposal to conducted [sic] a detailed assessment of these costs and advise the extra over amounts from the current allowances?
The final electrical design should be issued next week so please include the cost assessment for this in your fee proposal also.”

On 18 September 2017, Ms Rifi wrote to the Council stating that as the “For Construction documentation” had, by that time, been issued for architectural designs and all services for the library and community centre, and because there had been “many design changes … during this process”, it was necessary that the fit out costs be updated by Rider Levett Bucknall “to reflect the final design”.
On 20 September 2017, Mr Naidoo, the Council’s Manager of the Works and Projects Unit, replied stating that the “request to proceed” with Rider Levett Bucknall was approved. Mr Naidoo took issue with the fee that Rider Levett Bucknall were proposing to charge for this recosting exercise but did not cavil with the recosting process itself.
On 24 October 2017, Ms Rifi wrote to the Council:

“Since we recommenced design meetings in 2017 there have been a number of scope changes – many additions and a few deductions.
All of this has to be issued to [Ryder Levett Bucknall] who, as the Independent assessor, will produce a final library fitout cost to Council. The variation associated with the final design will need to be subsequently approved by Council.
It was agreed with [Mr Goh] that the works were to proceed as per the design changes incorporated by CKD, for the costs to be resolved at a later date when the design is absolutely final.
When council confirm that the design is locked in and final (no further changes) – we will instruct [Rider Levett Bucknall] to assess the final fitout cost. This will capture all the additional items and deductions and you will be presented with a net cost adjustment for final approval.
If you choose to remove these items from [the builders] scope, this information will be passed onto [Rider Levett Bucknall] to incorporate in their final fitout cost.
Hence we urge Council to resolve all outstanding queries and advise when the final design documentation can be issued to [Rider Levett Bucknall] for final assessment.” (My emphasis)

Ms Rifi was here recording that the Council, through Mr Goh, had agreed that because the fit out design was undergoing change, the cost of the final design would be resolved later, after the design was “absolutely final”.
In cross-examination, Mr Goh agreed that this was the case. Thus, he gave this evidence:

“Q. That’s what you knew was going to occur at the time that you then signed off on the project, it was your understanding and you were proceeding on the basis as the person tracking against budget that once all of the “for construction” drawings were done--
A. Yep.
Q. --they would then be costed up to work out extra over cost, correct?
A. Yep.”

Mr Naidoo gave evidence to the same effect:

“Q. You knew well and truly then, didn’t you, from at least 24 October onwards, that the process that was being followed on the site was that the works were being constructed in accordance with the “for construction” drawings that had finally issued and that they were then going to be priced at a later time by RLB, correct?
A. Yes.”

Mr Tran, from the Council, replied to Ms Rifi’s email:

“I’m happy to continue with my predecessor’s [ie Mr Goh’s] agreement. Please remove the items below from [the builders] scope as noted in your previous email and ensure these items are captured on a change tracker.”

On 13 November 2017, Ms Rifi wrote to the Council:

“Since your previous approval for [Rider Levett Bucknall] to proceed, there have been many items of the design that needed clarification following [the builders] review so we told [Rider Levett Bucknall] to hold until all elements were locked in. Now that the majority of items have been clarified, I believe it is an appropriate time to get [Rider Levett Bucknall] started on the reprice so we can get this within two weeks. Please confirm the same.”

Mr Tran, from the Council, replied the following day:

“Agreed. Please instruct [Rider Levett Bucknall] to reprice for the works.”

On 7 December 2017, Ms Rifi’s colleague, Mr Malek from Jaquel Australia, wrote to the Council:

“[Rider Levett Bucknall] have now completed their revised cost of the Riverwood Library and Community Hub fitout based on 2017 For Construction documentation, finishes and specifications …
This is still not 100% complete as there are still changes even as recent as yesterday, that will amount to additional costs …”

Mr Malek’s email stated that the “2017 Variance … to be approved by Council” was $1,910,287.
Mr Naidoo then replied on 20 December 2017:

“I am appalled at the suggestion that Council is up for costs to this value. We will be vehemently rejecting this claim, on the basis that the variations post our General Manager’s approval of costs in February 2017, is significantly less than that being proposed.”

Thus, despite what had passed earlier between Payce and the Council, and despite the evidence he gave before me, Mr Naidoo at this stage was expressing dissatisfaction with the fit out costs.
However, what emerges from the communications to which I have referred is that Payce did not remain silent about the fit out costs and, through its project manager, and Ms Rifi in particular, kept the Council informed of those matters.
Ultimately, the Council agreed to the proposal made by Mr Rifi, as recorded in her 24 October 2017 email: that the costs of the variations would “be resolved at a later date when the design was absolutely final”.
I find there to be no substance in the Council’s misleading or deceptive conduct case.

The final payment claim point

On 9 September 2019, Payce served on the Council a “Final Payment Claim” in the sum of $1,514,494.09 (plus GST).
I was unclear as to what point, beyond that made in respect of the Superintendent’s certificate, the Council sought to make about the Final Payment Claim.
In its closing submissions, Payce referred to the Council’s submission as being that the Final Payment Claim was a cap on the amount Payce was able to claim in these proceedings.
If that was the Council’s point, I see no basis for it.

The wrong entity submission

In final submissions, and for the first time, Mr DeBuse submitted that Payce had suffered no loss because the party that entered into the Building Contract with the Builder was not Payce but, rather, Payce No 4. [25]
25. See [7] above.
The point was that, as I understood it, as Payce No 4, and not Payce itself, was a party to the Building Contract, it, rather than Payce, had incurred the costs and expenses involved in the variations contended for.
There is no hint in the Council’s pleadings of this contention.
If the Council were to take such a point, it should have been pleaded.
Payce may have wished to adduce evidence to answer the point. As Mr Miller and Mr Sheldon submitted in reply:

“There were potentially a number of answers to that issue, none of which Payce was able to explore for the purposes of the proceedings, including potentially (and Payce does not say this is the case, it has not gone back and investigated its records since yesterday [26] ) that the companies may have had internal arrangements which meant that [Payce] did bear the ultimate cost”.
26. That is, the day when the issue was first raised.

In any event, the submission misses the point. Payce, and not Payce No 4, was a party to the Umbrella Agreement and the Fit Out Agreement. As Mr Miller and Mr Sheldon pointed out, Payce makes a case for expectation damages. That case is that the Council had breached its obligations to pay it the amount properly payable for the variations. That entitlement does not depend upon Payce being the first entity actually to incur the expenses; but rather upon its contractual entitlement, as it asserts, under the Fit Out Agreement.
It may be that, if Payce is successful, it might have to account to Payce No 4 for whatever sum that company has incurred under the Building Agreement. That is a matter between Payce and Payce No 4 and not a matter which can affect Payce’s entitlements as against the Council.

The “BCA” point

In the course of submissions, and cross examination, Mr DeBuse made references to the “BCA requirements” for the library.
The Council did not plead that any matter associated with the Building Code of Australia was relevant to Payce’s claims in the proceedings. In particular, the Council did not plead that there was any particular BCA requirement that should have been considered in the course of effecting the variations the subject of Payce’s claim.
The Council’s pleading concerning the FOA Contract Price did not suggest that any BCA requirement had a role to play in the scope of the work the subject of the FOA Contract Price.

Quantum

Payce adduced evidence from a quantity surveyor, Mr Charles Daubney.
The Council adduced evidence from a quantity surveyor, Mr Ian Berson and from an architect, Mr Ian Brewster.
Very little of Mr Berson’s and Mr Brewster’s reports survived objection.
In substance, only Mr Daubney’s evidence as to the reasonable cost of the variations for which Payce contends was received. Mr Berson’s opinions were only received in relation to a small number of low value variations and as to admissions he made concerning work done. That part of Mr Brewster’s report as was received in evidence amounted to little more than his subjective opinion as to whether the variations for which Payce contended were part of the Base Build.

Mr Daubney’s references to Mr Rigby’s affidavit

Mr Daubney’s first report made a number of references to an affidavit of Mr Rigby made in these proceedings, but which Mr Miller and Mr Sheldon did not read. Mr Sheldon, who dealt with this part of the case for Payce, did not read the corresponding passages in Mr Daubney’s report.
Mr Brown, who presented this part of the argument for the Council, submitted that because Mr Daubney had assumed the correctness of a number of matters to which Mr Rigby deposed, it followed from the fact that Mr Rigby’s affidavit was not read, that Mr Daubney’s report was not admissible. [27]
27. See Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21 at [66] and [90] (Heydon J).
I did not agree and allowed Mr Daubney’s report. I concluded that, although Mr Daubney had referred to evidence given by Mr Rigby in his affidavit, his reasoning did not depend upon those matters and that the integrity of his report was not affected by the fact that the passages in his report reciting Mr Rigby’s evidence were not read.
For example, although Mr Daubney said that he was “instructed that the scope contemplated as the Fit Out Works is set out in the Rigby affidavit”,[28] his “Brief” from Payce’s solicitors asked him to assume:

“the original scope of the Fit Out Works under the [Fit Out Agreement] is identified in the 2015 Estimate and further detailed in paragraphs 40 to 42 and 48 to 55 of the Rigby affidavit”. (My emphasis)
28. Mr Daubney’s Expert Report at [31].

The emphasised passage showed that the reference to Mr Rigby’s affidavit was not essential to the matter Mr Daubney assumed: namely, the “2015 Estimate”.
Careful analysis of the opinions Mr Daubney expressed in relation to the variations claimed by Payce showed that his reasoning did not depend on anything Mr Rigby had said in his affidavit.
For example, in relation to Variation 18 for “Mechanical Services”, although Mr Daubney set out a “Mechanical Base Build Scope” taken from Mr Rigby’s affidavit, his reasoning as to the amount that should be allowed for the variation was not based on what Mr Rigby had said. Rather, it was based on the actual invoiced cost of the variation work compared with the amount he reasoned was allowed in the FOA Contract Price, being the mean between what Mr Rigby and Mr Gallagher had allowed in the 2015 RLB Estimate and 2016 Hollis Estimate for mechanical services.
I will return to that process of reasoning below. The point for present purposes is that Mr Daubney’s reasoning was not based on Mr Rigby’s unread affidavit.
I reached the same conclusion in relation to the other parts of Mr Daubney’s report on which reference to Mr Rigby’s affidavit was made.

The integers in Payce’s damages calculation

Speaking generally, Payce calculates its entitlement to variations by taking the actual cost of those variations and deducting:

that part of such costs as ought to be attributed to the work that Payce agreed to perform in consideration of the $2.171 FOA Contract Price; and

that component of the Base Build, as identified in the 2012 Design[29] as should be attributed to the variation work.
29. See [46] – [48] above.

Actual costs as best evidence of reasonable costs

Thus, the first integer adopted by Mr Daubney in his calculation of Payce’s claim for variations was the actual cost of the variations.
In Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd & Anor, Giles JA (with whom Sheller JA agreed) said:[30]

“This does not mean that a theoretical reasonable cost is to be preferred over the actual cost where the actual cost is known and can be taken as the reasonable cost ... [I]f the rectification work has been carried out and the actual cost is known, that provides sound evidence of the reasonable cost…If the rectification work has been carried out and the actual cost is known, that provides sound evidence of the reasonable cost and should ordinarily provide the basis for damages.”
30. [2001] NSWCA 313 at [99].

In the same case, Meagher JA said that actual costs were the “impeccable” measure of reasonable costs for the purpose of determining the reasonable measure of costs to rectify defects. [31]
31. At [19].
I did not detect in Mr DeBuse’s submissions any suggestion that the actual costs incurred, in performing the works Payce contends to be variations, were unreasonable. I propose to proceed upon the basis that the actual costs incurred were reasonable.
Nor did I detect in Mr DeBuse’s submissions any suggestion that the costs were not incurred.

The amount to be attributed to the FOA Contract Price

The second integer of Mr Daubney’s calculations was the amount that should be attributed to each of the trade description elements in the agreed FOA Contract Price of $2.171 million.
It will be recalled that the agreed FOA Contract Price of $2.171 million was the result of a “split of the cost difference” agreement between the Council and Payce concerning the opinions expressed in the 2015 RLB Estimate and 2016 Hollis Estimate.
In those documents, Mr Rigby and Mr Gallagher each expressed their opinions by reference to elements within those trade descriptions.
Mr Daubney performed the arithmetical exercise of calculating what percentage of Mr Rigby’s total estimate of $2.344 million was attributable to each trade description and calculating the dollar value of the corresponding percentage of the negotiated “split of the cost difference” figure of $2.171 million (“the RLB Apportioned Figure”).
For example, in relation to ceiling finishes, Mr Daubney calculated that Mr Rigby’s figure of $100,700 was 4.3% of Mr Rigby’s total figure of $2.344 million and that the corresponding component of the $2.171 million was $93,261.10. [32]
32. 4.3% of $2.171 million in fact equals $95,353; the difference is immaterial and can no doubt be accounted for as a result of Mr Daubney rounding figures for ease of calculation.
Mr Miller and Mr Sheldon performed a similar task in relation to Mr Gallagher’s figures (“the Hollis Apportioned Figure”) and also calculated, as a matter of arithmetic, the midpoint between the resultant figures (“the Mid Point Figure”).
The result was a table Annexure MFI-13 (212981, pdf) which formed part of MFI 13 (altering the headings on the fourth to sixth columns to adopt the abbreviations I have adopted).
For the purpose of calculating Payce’s damages in cases where Payce seeks to adopt Mr Daubney’s reasoning, [33] I propose to adopt, as a conservative course, the largest of those figures as the figure to be deducted from actual costs.
33. In some cases, Payce did not seek to resort to that reasoning.

The Base Build Costs

The third integer in Mr Daubney’s calculations was the amount that should be attributed to each trade description in the 2012 Design and thus in the Base Build.
Mr Daubney adopted the figures as set out in the 2012 Design.
Mr DeBuse and Mr Brown submitted that those figures should be adjusted to reflect the fact that the actual cost of building escalated between 2012 and 2017/2018 when the work, said to be the subject of the variations, was effected.
Mr DeBuse and Mr Brown asserted that “using simple arithmetic on the numbers applied by Mr Rigby … costs have escalated 12% in just over two years from 2012 to 2015” and that “[i]t is not unreasonable to consider that the Base Build costs have escalated at least that amount and more probably 20% over the five years to 2017”.
During the concurrent evidence of Mr Daubney, Mr Berson and Mr Brewster, Mr Miller asked Mr Daubney why he had not escalated “the 2012 allowance to a 2015 figure”.
Mr Daubney replied:

“Because I was pulling out a figure from 2012, I thought it would be incorrect and inconsistent to escalate any amounts that I was deducting on the assumption that Payce was also not allowed to escalate the price that it received for the base build due to any delay”. [34]
34. At T349.44.

Although Mr DeBuse did not challenge Mr Daubney in relation to this opinion, I think Mr DeBuse was correct to submit that, in order that “like” be deducted from “like”, and to assess fairly to what extent Payce’s actual costs for the variations was over and above the cost Payce would have incurred to do the Base Build (assuming that a component of the cost of the variations should be attributed to a matter the subject of the Base Build), the Base Build figure should be escalated to some extent to reflect 2017 values.
Neither party adduced evidence as to how much costs had in fact increased between 2012 and 2017. In addition, Mr Miller and Mr Sheldon did not challenge Mr DeBuse’s submission that “using similar arithmetic on the numbers applied by Mr Rigby” produced an increase of 12%. In these circumstances my conclusion is that, to the extent that Mr Daubney deducted from the quantification of Payce’s claim for variations an amount referable to the 2012 Design, that deduction should be increased by 12%.
I will not perform this calculation for each variation. Insofar as my conclusions adopt Mr Daubney’s deduction of elements in the 2012 Design, the relevant figure should be increased by 12%.

The Builder’s margin

The experts agree that Payce is entitled to charge a margin of 10% on top of the cost of variations; reflecting the ongoing role that Payce, together with its Project Manager, had in liaising with the Council and the Council’s architect as the design developed.
Pursuant to the Building Contract, the Builder also charged a 10% margin on the costs it incurred to deal with such matters as the Builder’s attendance, supervision and coordination of the variation works and such matters as preliminaries and overheads.
As this was the Builder’s contractual entitlement, it appears to me to be reasonable that, assuming Payce is otherwise successful in relation to the variations for which it contends, Payce should be reimbursed in respect of that margin.
I will not refer to this further, but it should be assumed that Payce’s damages will include a figure reflecting this element for each variation it sustains.

Escalation of the 2012 Design prices

The claims where the parties have agreed to a “split the difference”

The amounts in dispute in relation to six of those variations, numbers 2, 6, 10, 13, 28, 34 and 36 were modest, and the parties agreed to a “split the difference” of the amount in dispute.
I will not refer to these variations further.
I now turn to the remaining variations.

Variation 1 – internal walls - $12,078

This claim is for the supply and installation of laminate feature panels on the operable wall and sliding door in the library.
Mr Iskander Nader, the Builder’s project manager, gave evidence that at a Design Meeting held on 3 May 2017, representatives of the Council stated:

“[The Council] wants their finishing to [the wall] to be laminated feature panels, which is the same finish as the adjoining walls. The laminated panels must also be installed on the sliding door.”

The minutes of that meeting recorded:

“The following items agreed in order of priority …
- operable wall confirmation …”

A short time later, CK Design uploaded drawings to Webspace, a virtual platform within which documents relevant to this project were stored, reflecting this instruction.
I find these steps to be a “direction” of the kind called for by cl 36.1 of the Fit Out Agreement. [35]
35. See [41] to [42] and [114] – [118] above.
Mr Berson in his report agreed that:

“ … the feature laminate wall panels to the wall and sliding panel at the Foyer were not previously indicated in the pre Feb 2017 documents.”

Mr Daubney identified an invoice from the relevant contract which showed that the cost of this work was $10,980.
To that figure, Mr Daubney added an “allowance for subcontractor margin” of 10%. That, however, appears to duplicate the Builder’s margin.
I therefore conclude that the amount that Payce has established by way of variation for this item is $10,980.

Variation 3 – modification to operable wall track in function room - $6,086.02

This was a variation for the reinstallation of an operable wall resulting from a change in the design of the operable wall arrangements in the library function room.
Mr Brewster gave this evidence concerning this variation:

“The operable walls as constructed were divided into 3 sections, which stacked into 2 locations. The additional track, which forms the basis of this claim, was necessitated by the change from 2 sections of wall to 3 sections. This change in turn was necessitated by the insertion of 2 large centrally located columns into the centre of the layout of the Hall. These columns were not anticipated by the original design which provided a large open space which was uninterrupted by columns.
The design of the Hall without central columns is a much preferable functional arrangement. In my experience it would have been possible, although much more costly to construct the building without these columns, as it was originally intended.”

Based on these observations, Mr DeBuse submitted that “[t]his is a design change solely to overcome flaws created by the base build”.
The alleged “flaws” were that the development space had central columns when the relevant construction could have taken place without the central columns; albeit, as Mr Brewster said, on a “much more costly” basis.
My attention has not been directed to any evidence to show the circumstances in which a decision was made to follow the less expensive course of constructing this part of the library without central columns.
In the circumstances I see no basis upon which I could conclude that a construction with central columns was a “flaw”.
There was no other challenge to this relatively modest aspect of Payce’s claim and I propose to allow it.

Variation 5 – CO2 monitoring - $15,290

This claim is for installation of CO2 monitoring systems to supplement the air conditioning system.
The Council offered no answer to this claim beyond the pleading point referred to above [36] and the “wrong entity submission”. [37] However, as I have rejected both those points, I propose to allow this claim for variation.
36. At [82] to [99].
37. See [167] to [173].

Variation 7 – skylight - $7,194.15

This claim relates to an extension of the skylight in the central stair lobby of the library.
Mr Berson agreed that:

“ … there is an increase in the size of the skylight outlined in the pre Feb 2017 documents and the post Feb 2017 documents.”

Mr Daubney stated:

“I am instructed that Payce actually installed a skylight measuring 3.5m x 3.5m in order to locate the tower crane in that opening.”

Mr Nader said that he told the Council’s architect, Ms Kugler, on 12 April 2017:

“The works for the skylight have changed because the skylight is now larger and has been moved further away from the stairs than originally provided for in the previous design.”

However, Payce did not refer to any direction by the Council to increase the size of the skylight.
In these circumstances, I am not satisfied that the increase was as a result of any direction from the Council. Accordingly, I do not propose to allow this amount.

Variation 8 – security door - $6,147

I have received no submissions in respect of this variation and assume that it is not pressed.

Variation 9 – walls and windows - $28,719.64

This claim relates to cosmetic variations to the walls and windows of the library.
Mr Berson agreed that:

“… the glazed feature wall did not form part of the pre Feb documents, and as a result, there is a change in scope/quantity resulting in a variation to the fit out agreement.”

Payce claims the amount actually spent on this work plus its agreed margin of 10%.
The direction to Payce to do this work was recorded in a number of identified CK Design drawings.
Mr DeBuse submitted that:

“The relevant walls always had to be a feature wall. No specific finish was noted on the 2015 design for the “feature”.

However, as Mr Berson accepted that there had been a “change in scope” and that the change in scope came about as a result of the CK Design drawings, I propose to allow this amount.

Variation 12 – boxing out of column to concierge - $10,459

I have received no submissions in respect of this variation and assume that it is not pressed.

Variation 14 – library – comms room wall - $7,500

I have received no submissions in respect of this variation and assume it is not pressed.

Variation 15 – library – comms room air conditioning - $1,170

I have received no submissions in respect of this variation and assume it is not pressed.

Variation 16 – library – young adults glazed balustrade - $37,094

I have received no submissions in respect of this variation and assume it is not pressed.

Variation 17 – automatic fire detection and warning system

This variation is not pressed.

Variation 18 – mechanical system - $192,010.51

This variation concerns changes that were necessary to be made to the air conditioning system following directions from the Council.
Mr Berson agreed that:

“… there is a difference in the scope of the mechanical system between pre Feb 2017 and post Feb 2017.”

The 2015 Design, on which the FOA Contract Price was based, called for an air conditioning system with, mostly, square outlets. At a Design Meeting, Mr Goh directed that the mezzanine balustrade in the library be of full height glass. This had the effect of changing the air conditioning mechanical requirements.
At a further Design Meeting on 21 June 2017, Mr Goh agreed with CK Design’s suggestion to use air conditioning diffusers and beam lights. This also changed the air conditioning mechanical requirements. On 11 and 13 July 2017, CK Design uploaded drawings reflecting these changes to Webspace.
These steps constituted a direction from the Council to vary the works.
Mr Daubney said that these changes to the mechanical design of the air conditioning system were significant.
Mr Nader described the updated air conditioning design as follows:

“The updated design of the mechanical system included linear diffusers, increased AC requirements due to the full height of the glazing to the mezzanine, system upgrades, relocation of AC units, new penetrations and façade glazing louvres.”

The actual cost of the work was $608,966.52.
From that should be deducted that part of the FOA Contract Price which is attributable to mechanical services air conditioning work.
The largest of the relevant figures[38] for that element is the RLB Apportioned Figure of $230,911.51.
38. See [203] above.
Further deduction should be made for that part of the Base Build as is attributable to mechanical services air conditioning, $203,500, which should be escalated by 12%.

Variation 19 – supply of lighting - $276,070.33

Both the 2012 Design and the 2015 Design made allowances for lighting.
The 2015 Design specified that troffer lights, downlights and medium and large pendants were to be supplied and installed throughout the library. It did not specify the intended quality, size or number of those lighting fixtures.
At a Design Meeting on 21 June 2017, Mr Goh said, “We want all lights in the library to include beam lights”.
The minutes of that Design Meeting recorded that Mr Goh approved aluminium extrusion lighting, which was reported to be almost three times as expensive as the “current lighting” and that CK Design were instructed to issue a “schedule of selected light fittings to incorporate in design plans”.
Shelmerdines Consulting, mechanical and electrical consulting engineers, uploaded the requisite drawings to Webspace shortly thereafter.
These steps constituted a direction by the Council to effect these changes.
Mr Berson agreed that:

“… there is an increase in the scope and quantity of the lighting in the as built design from the pre Feb 2017 design”.

Mr Daubney has made an analysis of the light fittings installed to assess what lighting has been installed over and above that contemplated by the 2015 Design.
He described the process he undertook in his report as follows:

“I have counted the number and types of light fittings shown in the 2015 Design and the 2017 Design, and compared and reconciled the changes. My count of light fittings by type based on the 2017 Design differs from that included in a light schedule supplied to me as part of the Carrier Electrical Invoices. I am instructed that the Carrier light schedule represents the as-built lighting schedule, and I have used that as the basis of my assessment. I have applied the rates for the specific light fittings charged by Carrier on the basis they represent the market price for those items. I have adjusted those rates to deduct an amount for the base build cost of a standard energy efficient troffer. I have calculated the base build cost as $70/unit. This method provides for the actual cost less the Base Build amount (which effectively is the extra over cost intended by the Fit Out Agreement).”

As an attachment to the Joint Statement with Mr Berson and Mr Brewster, Mr Daubney revised that opinion as follows.

“Mr Daubney has revised his opinion of Variation No.19 to include for the extra over costs of the entire 2017 lighting design. Mr Daubney’s initial analysis only included for costs associated with the increase in lighting between 2015 and 2017 (i.e., the extra over quantities only) and therefore did not value the full extent of the cost impact resulting from the changes in lighting design and specification during this period.
Consequently, Mr Daubney has revised his opinion to include for the following:
(a) The extra over costs for the supply of lighting for all 568 lighting fixtures in accordance with the SCC Lighting Schedule Rev A;
(b) A deduction of $18,865.00 for the extra over allowance made by RLB within their 2015 estimate; and
(c) A reasonable allowance for the supply and installation of additional base build lighting as a result of the increase in lighting between the 2015 and 2017 designs (172 No. total).”

Mr Daubney then set out a table detailing his analysis that the value of the lighting work over and above that in the 2015 Design was $276,070.33.
There was no other evidence on this topic. I accept Mr Daubney’s analysis and allow this item.

Variation 20 – power and data point

This variation is not pressed.

Variation 21 – electrical – miscellaneous - $30,226

I have received no submissions in respect of this variation and assume it is not pressed.

Variation 22 – wifi

This variation is not pressed.

Variation 23 – ceiling finishes - $372,598.48

The 2005 Design, on which Mr Rigby and Mr Gallagher based their opinion, called for a suspended grid ceiling with plasterboard and acoustic plasterboard.

On 12 April 2017, Mr Goh from the Council directed the ceiling finishes instead be “suspended ceiling blade”, as recorded in the minutes of a Design Meeting held on 12 April 2017.
At a further Design Meeting on 21 June 2017, CKD’s representative, Ms Cecilia Kluger, proposed a “Décor panel” for the ceiling design.
On 7 November 2017, CK Design uploaded to Webspace, drawings showing the Décor ceiling panel design.
These steps constituted a direction from the Council to effect the changes.
Mr Berson agreed that:

“… there is a change in scope of the ceiling finish requirements”.

Mr Daubney calculated the reasonable costs of this variation by taking, first, the actual cost for the supply and installation of the Décor ceiling panel design. The total invoiced amount from the relevant supplier, Bright Construction Group Pty Limited, was $539,941.99.
A component of that figure was $230,241.44 for “plasterboard ceilings”.
This was the amount that Bright Constructions charged for what Mr Daubney described as “double layers of plasterboard” that were required “to comply with Fire and Acoustic specifications”.
Mr DeBuse submitted that this evidence showed that the double plasterboard of the ceiling was the responsibility of Payce under the Base Build and that:

“Under the warm shell specification, the ceilings had to be acoustically sound for BCA compliance, at Payce’s cost.”

Mr DeBuse did not refer to any particular provision in the Warm Shell Specification to justify this submission. The only reference to “ceilings” that I can find in that specification is:

“Ceilings to be suspended grid ceilings with troffer lighting …”[39]
39. See [23] above.

The Warm Shell Specification did also state that the building must “comply with the BCA requirements and Australian standards” but I can find no provision of the kind to which Mr DeBuse referred.
The allowance in the 2012 Design for ceilings in the Base Build contained two amounts for “mineral fiber tile ceiling” (totalling $68,695).
The drawings priced by Mr Rigby and Mr Gallagher made no reference to double layer plasterboard and referred only to “set perforated acoustic plasterboard ceiling”.
I am, in these circumstances, persuaded that the component of the Bright Construction Group invoice for “plasterboard ceilings” represents a cost not included in the earlier estimates.
From that actual cost, Mr Daubney deducted the RLB Apportioned Figure of $93,261.10 as reflecting that part of the ceiling costs that should be attributed to the FOA Contract Price.
For the reasons I have set out above,[40] I propose to adopt the slightly higher Hollis Apportioned Figure of $101,342.51.
40. At [203].
Mr Gallagher then deducted a further sum of $107,955, being the cost attributable to ceilings in the 2012 Design.
For the reasons I have explained, I consider this figure should be increased by 12%.

Variation 24 – hearing loop - $142,279.50

At a Design Meeting on 12 July 2017, Mr Goh directed that there be a “hearing loop wherever there is an [audiovisual] system”.
There was no hearing loop priced as part of the FOA Contract Price.
Indeed, both Mr Rigby and Mr Gallagher in terms excluded any price for an audiovisual system.
The Builder had noted as part of a “new brief” (July 2015) that there was to be added an amount of $54,850 for:

“Supply and Install for Hearing Loop System in areas defined in the Fit Out Spec – Design”.

Mr DeBuse sought to develop an argument that it was somehow implicit in the Base Build cost that hearing loops would be installed.
Mr DeBuse referred to a communication from an acoustics engineer which he said “sets out hearing augmentation requirements for a public space”. However, the documents to which Mr DeBuse referred do not appear to me to set out such requirements.
Further, the Builder’s document to which Mr DeBuse referred contrasted the “Old Brief October 2012” with the “New Brief (July 2015)”, suggesting the figure of $54,850, therein referred to, was not part of the Base Build.
As the requirement of a hearing loop was not referred to in the 2015 RLB Estimate or the 2016 Hollis estimate and was therefore not part of the FOA Contract Price, I am satisfied that the amount claimed by Payce should be allowed as a variation.

Variation 25 – security system - $40,233.38

This claim relates to the supply and installation of a security system consisting of a CCTV system, an access control and intercom system, and an intruder detection system.
The direction to perform this work was made at a number of Design Meetings and a CK Design drawing, as well as electrical drawings from Shelmerdines.
Mr Berson reported that he had:

“…been instructed that the scope and quantity changes provided by Payce are correct”.

The Council resisted the quantum of this aspect of Payce’s claim on the basis that Mr Nader told Mr Goh that the costs would be $5,126.
However, Mr Nader’s evidence was that he gave that price only for “the [nine] additional cameras you requested”.
The drawings and specifications on which Payce relies are directed to more than the cameras, and also to the access control and intercom systems and an intruder detection system.
I propose to allow this item.

Variation 26 – internal glazing - $30,071.60

This claim relates to an increase in the thickness of internal glazing.
Mr Nader said that this variation was:

“ … for increasing the millimetre thickness of internal glazing required to be installed on Site from 6.38mm to 12.38mm in accordance with updated Australian standard industry practice for acoustic requirements, which was updated in 2017.”

In the light of this evidence, I am not persuaded this was a variation “directed” by the Council.
As Mr DeBuse submitted, this was a “variation required so that Payce could comply with relevant industry standards” and that “[w]indows were always required to be installed as part of the fit out and the concept drawings”.
Payce’s pleaded case is for the cost of variations it was directed by Council to effect.
This is not such a variation and I do not propose to allow it.

Variation 27 – blinds - $11,860

This variation was not pressed.

Variation 29 – acoustic screen - $23,430

Mr Nader said this variation was:

“… for the supply and installation of acoustic screens in accordance with the requirements of the Building Code of Australia.”

There are no requirements or specifications for acoustic installation in the 2015 design, nor in the 2015 RLB Estimate or 2016 Hollis Estimate that led to the FOA Contract Price.
The acoustic screens were installed as a result of a report from Acoustic Logic, who had conducted a Noise Compliance Test in relation to noise emission “from operation of Function Room to apartments above” and “from Function Room to all noise receivers external of project site.”
Mr Nader agreed in cross-examination that:

“[The] acoustic screens operate to cut down the noise that would be affecting the private units above ...”

The acoustic screens were installed on the roof of the library for that purpose. In those circumstances I see substance in Mr DeBuse’s submission that this was not fit out work. Further, Payce does not point to any direction from the Council that this work be effected.
I do not propose to allow this amount.

Variation 30 – acoustic insulation - $77,754.60

Payce claims this amount in relation to what it contends to be additional works on account of installing acoustic insulation.
Mr Nader described this work as a “variation for the supply and installation of acoustic insulation to the library ceiling space in order to comply with BCA Requirements”.
Mr Nader said that the works were specified in a “2017 Acoustic Report” which stated that these works needed to be carried out (adopting Mr Nader’s words) “to ensure that the Fit Out Works were compliant”. Mr Nader said that the works “were not included in the 2015 Design”.
There was no provision in the 2012 Design for such insulation, nor was such insulation referred to in the 2015 RLB Estimate or the 2016 Hollis estimate. It therefore did not form part of the FOA Contract Price.
Mr DeBuse submitted that:

“The insulation was installed in the roof space above the ceiling. It is either Base Build or Warm Shell. There is no element of ‘Fit Out’ in this. This was required for regulatory compliance. Mr Nader says so in his affidavit … The location and purpose of the insulation does not suggest that the batts are a discretionary matter related to the enjoyment of the Library. The fact that they are not in the 2012 RLB estimate or in fact in any estimate does not change the character.”

It is clear from Mr Nader’s evidence that the acoustic insulation was required for regulatory compliance.
But the evidence also shows that it was work over and above that in the 2012 Design and was not work the subject of the FOA Contract Price.
I accept that this amount is recoverable by Payce as a variation.

Variation 31 – picture rail and hangers - $10,128

I have received no submissions in respect of this variation and assume it is not pressed.

Variations 33 and 33A – other consultant fees $88,250 – CKD’s fees $38,700

Payce claims reimbursement of $88,250 in consultancy fees and $38,700 for fees it has paid to CK Design.
Payce’s entitlement to recover these amounts depends upon the proper construction of the relevant part of cl 9.7 of the Umbrella Agreement.
To repeat, the relevant part of cl 9.7(c) provided:

“The FOA Contract Price will be the amount determined by the Independent Certifier … except that
(i) the cost of the architect will be paid for by Payce as to the first $70,000 and thereafter as part of the FOA Contract Price; and
(ii) the cost of other consultants will be paid for by Payce as to the first $25,000 and thereafter as part of the FOA Contract Price.”

Mr Miller and Mr Sheldon submitted that the effect of this clause is that Payce must pay the first $70,000 of the architect’s fees and the first $25,000 of the other consultants’ fees, but that, on the proper construction of this clause, the Council must pay those fees over and above these amounts.
I do not agree.
In my opinion, on the natural reading of the clause, the words “will be paid for by Payce” govern not only the nominated figures of $70,000 and $25,000, but also the words “thereafter as part of the FOA Contract Price”.
The effect of this clause is that Payce is to pay the first $70,000 and $25,000 of those fees and that otherwise Payce is obliged to pay the architect’s and the consultants’ fees “as part of the FOA Contract Price”; now agreed to be $2.171 million.
It follows that my conclusion is that Payce does not have any entitlement to recover these fees from the Council.

Variation 41 – plasterboard and painting to staff room - $7,098.42

This claim relates to design development of modifying a void space into a staff room, including installing plasterboard and the painting of the staff room.
Mr Daubney gave unchallenged evidence that, based on a comparison between the 2015 Design and what in fact occurred, there was an additional cost by reason of the change in the drawings.
The actual cost of the plasterboard and painting was $5,526. The amount claimed appears also to include a “subcontractor margin”.
If this is intended to be in excess of the (agreed) margin for Payce itself, I would not allow it. Otherwise I propose to allow this figure.

Variation 42 – section 96 application fees - $10,480

I have received no submissions in respect of this variation and assume it is not pressed.

Variation 43 – section 96 planner fees - $6,500

I have received no submissions in respect of this variation and assume that it is not pressed.

Variation 52 – additional works - $86,020

These additional works are items, summarised in Mr Daubney’s report, that are additional costs billed to Payce for work done which was not found anywhere in the 2015 RLB Estimate or the 2016 Hollis estimate.
However, Payce does not refer to any direction given by the Council in relation to these matters and I do not propose to allow them.

Conclusion

Payce is entitled to damages to compensate it for the Council’s failure to pay for the variations I have outlined.
The parties should confer and agree on the quantum of those damages consistently with these reasons and, on the consequences of that calculation, in light of the payments made by the Council under the SOP Act.

**********

Endnotes

Decision last updated: 06 April 2021

Medium Neutral Citation:	Payce Communities Pty Ltd v Canterbury-Bankstown Council [2021] NSWSC 331
Hearing dates:	1 to 4 March and 8 to 10 March 2021; further written submissions 11, 12, 16, 18, 19 March 2021
Date of orders:	06 April 2021
Decision date:	06 April 2021
Jurisdiction:	Equity - Technology and Construction List
Before:	Stevenson J
Decision:	Plaintiff entitled to damages for variations
Catchwords:	BUILDING AND CONSTRUCTION – contract – damages – variation – where parties agreed that the Fit Out Agreement (FOA) Contract Price was $2.171 million – dispute as to the scope of work to be done for the FOA Contract Price – whether variations claimed by developer were in respect of work to be done for the FOA Contract Price
Legislation Cited:	Building and Construction Industry Security of Payment Act 1999 Competition and Consumer Act 2010 (Cth)
Cases Cited:	BP Exploration Operating Co Ltd v Chevron Shipping Co (Scotland) [2001] UKHL 50; [2003] 1AC 197 Canterbury-Bankstown Council v Payce Communities Pty Ltd [2019] NSWSC 1419 Canterbury-Bankstown Council v Payce Communities Pty Ltd [2019] NSWSC 1803 Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21 Gould v Vaggelas (1985) 157 CLR 215; [1985] HCA 75 Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd & Anor [2001] NSWCA 313
Category:	Principal judgment
Parties:	Payce Communities Pty Ltd (Plaintiff) Canterbury-Bankstown Council (Defendant)
Representation:	Counsel: Mr D T Miller SC with Mr M Sheldon (Plaintiff) Mr B DeBuse with Mr J E F Brown (Defendant) Solicitors: Vincent Young Lawyers (Plaintiff) Marsdens Law Group (Defendant)
File Number(s):	2019/133490