Skilled Group Ltd v CSR Viridian Pty Ltd & Anor
[2012] VSC 290
•4 July 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
TECHNOLOGY, ENGINEERING AND CONSTRUCTION LIST
No. SCI 2010 03928
| SKILLED GROUP LIMITED (ACN 005 585 811) | Plaintiff |
| V | |
| CSR VIRIDIAN LTD (ACN 006 904 052) and PILKINGTON AUSTRALIA ENGINEERING PTY LTD (ACN 126 263 205) | First Defendant Second Defendant |
---
JUDGE: | Vickery J | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 20–24, 29 February; 1, 5-7, 19-20 March 2012 | |
DATE OF JUDGMENT: | 4 July 2012 | |
CASE MAY BE CITED AS: | Skilled Group Ltd v CSR Viridian Ltd & Anor | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 290 | |
---
Building Contracts – Unexecuted sub-contracts - Whether binding sub-contracts entered into – Sub-contracts implied from conduct – Whether conduct of parties evidenced a concluded bargain and on what terms - Fourth class of Masters v Cameron (1954) 91 CLR 353 considered and applied - Whether party estopped from denying binding sub-contracts – Whether restitutionary quantum meruit available - Lumbers v W Cook Builders Pty Limited (2007) 232 CLR 635 considered and applied - Milestone dates for progressive completion of stages of works not agreed – Whether milestone dates essential terms - Whether free acceptance of benefit arises – Construction and effect of final certificates issued by superintendent under General Conditions of AS2124 – 1992 as amended – Entitlement for payment pursuant to final certificates.
Contract - Whether conduct of parties evidenced a concluded bargain and on what terms - Fourth class of Masters v Cameron (1954) 91 CLR 353 considered and applied - Whether party estopped from denying binding contract – Lumbers v W Cook Builders Pty Limited (2007) 232 CLR 635 considered and applied - Whether restitutionary quantum meruit available.
---
APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr M R Scott SC | Clayton Utz |
| For the First Defendant | Mr M Rudge SC and Mr FP Hicks | DibbsBarker |
| For the Second Defendant | Mr A Laird | Freehills |
HIS HONOUR:
Background
Outline of Contractual Relationships
In this case the plaintiff Skilled Group Ltd claims monies it alleges to be due to it by way of a restitutionary quantum meruit for engineering work it performed at a glass manufacturing plant known as the “Dandenong Float Glass Plant” situated at 95 Greens Road Dandenong in Victoria (the “Plant”).
The first defendant, CSR Viridian Ltd (“CSR”), is the owner of the Plant and the proprietor in respect of the works conducted at the Plant (the “Project Works”).
In 2007, CSR contracted with the second defendant, Pilkington Australia Engineering Pty Ltd (“Pilkington”), to carry out a $120 million upgrade of the Plant (the “Project”).
Pilkington and CSR entered into three head contracts for the Project Works (together the “Head Contracts”). The Head Contracts comprised:
(a)A contract for the design, installation and testing of a new 4300tpw batch plant to replace the existing facility 3500tpw at the Plant, to be completed by September 2008; (the “Batch Head Contract”);
(b)A contract for the design, supply, installation and testing of a five beam on line CVD coating system including the necessary bath and building modifications, to be completed for commercial production in April 2009 (the “Coating Head Contract”); and
(c)A contract for the repair and refurbishment of the existing float glass manufacturing line to be completed by September 2008 (the “Repair Head Contract”).
Pilkington in turn sub-contracted out parts of the Project Works under the Head Contracts to twelve (12) sub-contractors.
These parts of the works involved a total of about $46.9 million worth of the total Project Works.
The plaintiff, Skilled Group Ltd (“Skilled”), was one of these contractors retained by Pilkington. It performed approximately $6.5 million worth of the $46.9 million work sub-contracted by Pilkington (the “Skilled Engagement”).
Pursuant to the Skilled Engagement, the Skilled Works comprised part of the repair and refurbishment works to the Furnace and Bath, Lehr and Cutting Line components of the existing float glass manufacturing line in the Plant (together, the “Skilled Works”).
The Skilled Works were divided into three works packages. These packages can broadly be described as:
(a)The Cutting Line package of works (the “Cutting Line Works”);
(b)The Furnace and Bath package of works (the “Furnace and Bath Works”); and
(c)The Lehr package of works (the “Lehr Works”).
The proceeding arises out of these relatively small parts of the overall Project Works, comprising three works packages under the Repair Head Contract that Pilkington awarded to Skilled comprising the Skilled Works.
Float Glass Process
Pilkington developed the ‘float process’ of glass production during the 1950s and 1960s. This process is highly specialised and requires the use of sophisticated machinery and equipment.
In the first stage of the process, glass is heated to approximately 1600ºC in a furnace (the “Furnace”).
In the second stage of the process, the molten glass is poured continuously from the furnace onto a shallow bath of molten tin, called a bath (the “Bath”). The molten glass ‘floats’ on the bath and spreads out to form a level surface. The thickness of the glass is controlled by the speed at which the solidifying glass ribbon is removed from the bath by a conveyor that takes the glass to the next stage of the process.
In the third stage of the process, a conveyor transports the glass from the Furnace and Bath towards a kiln with precisely controlled temperatures, called an annealing lehr (the “Lehr”). When the glass enters the Lehr it has already cooled to approximately 600ºC. Once inside the Lehr, the glass undergoes a further controlled cooling process. When the glass leaves the Lehr, it has solidified.
In the fourth stage of the process, the glass is inspected either by personnel or by automated computers. Substandard or flawed glass is removed from the conveyor. The glass remaining on the conveyor is then cut using diamond-wheel glass cutters. These glass cutters are controlled by computers which guide around any remaining imperfections. The conveyor and associated equipment used to inspect, guide and cut the glass is referred to as the ‘cold end’ or ‘cutting line’ (the “Cutting Line”).
Skilled’s Scope of Works
The scope of the Skilled Works for each of the Furnace and Bath, Lehr and Cutting Line components of the upgrade works is summarised below:
(a) Skilled’s scope of works for the Furnace and Bath Works in general terms involved dismantling steelwork and installation of new steelwork associated with the demolition and construction of a new and larger furnace, and enlarging the width of the bath to accommodate wider sheets of molten glass. Steelwork was also involved. More specifically the work involved:
(i) pre-works, removal, modification and installation works to be undertaken prior to shutdown of the furnace; and
(ii) works to be undertaken during the shut down. This work largely involved the removal of steel to allow demolition to occur, the removal of steel for modification and subsequent re-installation and installation of new steel.
(b) Skilled’s scope of works for the Lehr Works included the installation of new supplied plant being a new Lehr and drive system and the alignment of those items.
(c) Skilled’s scope of works for the Cutting Line Works involved the assembly and installation of supplied conveyor and associated equipment used to cut, convey and offload glass and the alignment of those items.
Issues for Determination
The following issues were ordered to be heard and determined in this separate liability trial (the “Liability Trial”):
a.Did the plaintiff (Skilled) and the second defendant (Pilkington) enter into legally binding contracts (the “Sub-contracts”) for the works for which Skilled sues the first defendant (CSR) in this proceeding, being those works described as:
i.The Cutting Line works; and/or
ii.The Furnace and Bath works; and/or
iii.The Lehr works.
(“the Contract issue”)
b.If the answer to question (a) (i) and/or (a) (ii) and/or (a) (iii) is no is Skilled estopped from denying the existence of a contract or contracts?
(“the Estoppel issue”)
c.If the answer to question (a) (i) and/or (a) (ii) and/or (a) (iii) is yes:
i.should Skilled’s claim against CSR be dismissed; and/or
(“the Dismissal issue”)
ii.is Pilkington entitled to be paid the sum certified as payable by the Superintendent in the Final Certificate that was issued under the relevant contract?(“the Final Certificate issue”)
To these I will add the following question in order to finally dispose of issues squarely raised in the Liability Trial:
d.Were the Cutting Line Works, Furnace and Bath Works or Lehr works performed at the request, or with the acquiescence of, CSR?
I will approach this case on the basis that the Contract issue is logically the first question to be answered. If the question is answered in the affirmative, it will not be necessary for the Court to deal with the Estoppel issue. Further, if the Contract issue is answered in the affirmative, it would also appear to follow that the Dismissal issue must be answered in the affirmative. The Contract issue is also a necessary precursor to the Final Certificate issue, which is a question of construction of the relevant contract.
Skilled’s claim is as follows: It says that between about April 2008 and November 2008 Skilled performed the Skilled Works at the Plant. These involved mobilisation of labour and equipment to site; work on the Furnace and Bath (steelwork removal, modification and installation); work on the Lehr (installation, labour and meeting tool requirements); and Cutting Line (installation); additional items of work; and demobilisation of labour and equipment from site.
Skilled says further that the Skilled Works were performed at the request, or with the acquiescence, of CSR and that CSR accepted the benefit of the works and was accordingly advantaged. It then says that the fair and reasonable value of the works was $16,170,150 (plus GST), however, CSR has to date paid, or caused Skilled to be paid, only $10,593,643.88 (plus GST) for the Skilled Works. It says further that, in these circumstances, CSR has been unjustly enriched at the expense of Skilled and it claims the sum of $5,576,506.12 (plus GST) as the reasonable and unpaid value of the works.
CSR resists Skilled’s claim for the payment of monies by way of a restitutionary quantum meruit (the “QM Claim”). It says that where, as it alleges was the case here, there is a sub-contract between CSR and Pilkington, there is no room for Skilled’s QM Claim to operate. In particular, CSR contends:
(a)There was a legally binding sub-contract between CSR and Pilkington for the works the subject of the QM Claim;
(b)Further, there was a legally binding head contract between Pilkington and Skilled for the works the subject of the QM Claim; and
(c)Further, and in the alternative, Skilled is estopped from asserting its QM Claim.
Whether Restitutionary Principles Applicable
Where there is a binding and enforceable contract in respect of relevant work between a Proprietor (in this case CSR) and a Head Contractor (in this case Pilkington), there is no basis in law to permit a third party Sub-contractor or Supplier (in this case Skilled) to make a claim upon the Proprietor by way of a restitutionary quantum meruit for part or all of that work.[1]
[1] Lumbers v W Cook Builders Pty Limited (2007) 232 CLR 635 (Lumbers’ case) at 674 [124] to [127]
In Lumbers v W Cook Builders Pty Limited (“Lumbers”)[2] the facts were these:
[2] Supra
In 1993 the owner and lessee for life of land in North Haven, Adelaide, Mathew and Warwick Lumbers (the “Lumbers”), entered into an oral contract with a building company, W. Cook & Sons Pty Ltd (“Sons”) to construct a house on the land. The Lumbers chose Sons because of its reputation and because they had confidence in a member of the company known to them. The contract between the Lumbers and Sons was never put into writing, and no invoices were ever issued. However, most of the work required by the contract was performed, not by Sons, but by W. Cook Builders Pty Ltd (In Liq) (“Builders”). Builders made a claim against the Lumbers for services it performed on the project. The claims included claims for reimbursement of amounts paid to various sub-contractors and a fee for supervision of their work. The Lumbers made progress payments to Sons as requested from time to time. Without the knowledge of the Lumbers, Sons paid those amounts to Builders. Builders claimed that a balance (ultimately found to be $261,715) remained due and unpaid. Builders made a demand for payment from the Lumbers in November 1999, more than a year after it went into liquidation.
Builders commenced a proceeding in the District Court of South Australia, joining as defendants both the Lumbers and Sons for the sum claimed. Builders claimed against the Lumbers on the basis that Sons had assigned the contract to Builders (rather than it being a sub-contractor) and for restitution/unjust enrichment. Both claims were dismissed at first instance. On appeal the Court of Appeal of South Australia rejected the assignment claim, but upheld the appeal on restitution, holding in essence that an incontrovertible benefit was conferred on the Lumbers at Builders’ expense and it would be unconscionable for them to keep the benefit of the service without paying a reasonable sum for it. The Lumbers appealed to the High Court which unanimously allowed the appeal and restored the judgment at first instance.
The High Court in substance held that the Court of Appeal had not taken sufficient account of the rights and obligations under the contractual relationship between Sons and the Lumbers. The Lumbers were not shown to have unconscionably accepted a benefit at Builders’ expense. They had never asked Builders to do anything in connection with the house construction. It held that Builders’ remedies lay under its sub-contract with Sons.
In the joint judgment of Gummow, Hayne, Crennan and Kiefel JJ in Lumbers the contractual position of the parties was analysed at [124] to 126] in the following way:
[124]When account is taken of the contractual relationship between the Lumbers and Sons several observations may be made.
[125]First, the Lumbers accepted no benefit at the expenses of Builders which it would [be] unconscionable to retain. The Lumbers made a contract with Sons which either has been fully performed by both parties or has not. Sons made an arrangement or agreement with Builders which again has either been fully performed or it has not. If neither the agreement between Sons and the Lumbers or the agreement or arrangement between Sons and Builders has not been performed (because all that is owned by one party to the other has not been paid) that is a matter between the parties to the relevant agreement. A failure of performance of either agreement is no reason to conclude that Builders should then have some claim against Lumbers, parties with whom Builders should then have some claim against the Lumbers, parties with whom Builders has no contract.
[126]Because Builders had no dealings with Lumbers, Builders has no claim against the Lumbers for the price of any work and labour Builders performed or for any money that Builders may have paid in relation to the construction. Builders has no such claim because it can point to no request by the Lumbers directed to Builders that Builders do any work it did or pay any money it did. Reference to whether the Lumbers ‘accepted’ any work that Builders did or ‘accepted’ the benefits of any money it paid is irrelevant. It is irrelevant because it distracts attention from the legal relationships between the three parties: the Lumbers, Sons and Builders. To now impose on the Lumbers an obligation to pay Builders would constitute a radical alteration of the bargains the parties struck and of the rights and obligations which each party thus assumed. There is no warrant for doing that.
The Lumbers decision was considered and applied by the Court of Appeal (Victoria) in Henderson's Automotive Technologies Pty Ltd (in liq) v Flaton Management Pty Ltd.[3] Tate JA (with whom Ashley and Neave JJA agreed) said at [55] to [56]:
[3] [2011] VSCA 167; 84 ACSR 93
[55]The High Court [in Lumbers’ case] held that the majority of the Full Court had wrongly applied the doctrine of ‘free acceptance’ (that is, acceptance of a benefit in the absence of a request), in upholding the plaintiff’s claim in restitution; had wrongly put aside consideration of the contractual arrangements as relevant to the parties’ obligations; and had applied, when it should not have done so, the principles from Angelopoulos v Sabatino. In Angelopoulos, it was held that, in addition to an implied request for work to be done or money paid, there were numerous other factors to be given separate consideration before restitution could be awarded, including, as a factor, whether a benefit was conferred at another party’s expense. In considering the analysis proffered by the majority below, in Lumbers v Cook, Gummow, Hayne, Crennan and Keifel JJ said (at 662-3 [78]-[79] (citations omitted)):
“The application of a framework for analysis expressed only at the level of abstraction adopted in this case, by reference to ‘benefit’, ‘expense’ and ‘acceptance’ coupled with considerations of unconscionability, creates a serious risk of producing a result that is discordant with accepted principle, thus creating a lack of coherence with other branches of the law. There are two reasons of particular relevance to this case why that is so. ... First, does applying the posited framework for analysis to the facts of the present case extend the availability of recovery beyond the circumstances in which a claim for work and labour done (or money paid) for and at the request of the defendant would be available? Secondly, and no less importantly, how is the result of applying this framework for analysis consistent with the obligations relevant parties undertook by their contractual arrangements?
The doing of work, or payment of money, for and at the request of another, are archetypal cases in which it may be said that a person receives a ‘benefit’ at the ‘expense’ of another which the recipient ‘accepts’ and which it would be unconscionable for the recipient to retain without payment. And as is well apparent from this Court’s decision in Steele v Tardiani, an essential step in considering a claim in quantum meruit (or money paid) is to ask whether and how that claim fits with any particular contract the parties have made. It is essential to consider how the claim fits with contracts the parties have made because, as Lord Goff of Chieveley rightly warned in Pan Ocean Shipping Co Ltd v Creditcorp Ltd, ‘serious difficulties arise if the law seeks to expand the law of restitution to redistribute risks for which provision has been made under an applicable contract’. In a similar vein, in the Comments under s 29 of the proposed Restatement, (3d), ‘Restitution and Unjust Enrichment’, the Reporter says:
‘Even if restitution is the claimant’s only recourse, a claim under this Section will be denied where the imposition of a liability in restitution would overturn an existing allocation of risk or limitation of liability previously established by contract.’”
[56]There can be no doubt from these pronouncements that, even where a claim for restitution is properly brought, primacy is to be given to any legal relationships that exist between the parties, as Flaton Management argued on the appeal. Moreover, as Lumbers v Cook makes clear, where there is an agreement between the parties, the scope of that agreement will almost invariably govern the relationship between the parties independently of any questions about so-called incontrovertible benefits or unconscionability.
To like effect is a recent decision of the English Court of Appeal, MacDonald Dickens & Macklin v Costello & Other[4] where it was held that restitutionary relief for unjust enrichment was not available against a Defendant who had benefited from the Claimant’s services rendered pursuant to a contract to which that Defendant was not a party. It was held that the obligations in respect of the Claimant’s works and services, and in particular the risk of non-payment, was contractually confined to the Head Contractor. If a claim was permitted directly against the Proprietors, “it would shatter that contractual containment”. It would also alter the usual consequences of insolvency.[5]
[4][2011] 3 WLR 1341
[5] Supra at [21]
Lord Justice Etherton summarised the general rule as follows:[6]
The general rule should be to uphold contractual arrangements by which parties have defined and allocated and, to that extent, restricted their mutual obligations, and, in so doing, have similarly allocated and circumscribed the consequences of non-performance.
That general rule reflects a sound legal policy, which acknowledges the parties autonomy to configure the legal relations between them and provides certainty, and so limits disputes and litigation.
[6]Ibid at [23]
In the context of construction law there are sound practical policy considerations for the application of the Lumbers principle.
First, in the absence of the principle, commercial uncertainty could arise – a Proprietor could be obliged to meet claims by third party suppliers and contractors of an unknown and unmanageable dimension, notwithstanding the existence of a binding and legally enforceable contract between the Proprietor and a Head Contractor for the work.
Second, multiple obligations in respect of the same work would be imposed on a Proprietor – those agreed under the Head Contract and those imposed in favour of third party Sub-contractors and Suppliers.
Third, the Proprietor would be left with no control or protection in respect of:
i. The price of the works – any agreement as to a lump sum or a schedule of rates would become immaterial;
ii. The cost of the works – any regime for notice and claim in respect of variations, delay costs, etc, would become immaterial.
Fourth, the level of risk for a Proprietor associated with these matters may well impact adversely on the financing of construction projects.
Fifth, the ability of a Proprietor to communicate with those undertaking the works on site may well be inhibited in circumstances where any communication could be later asserted by a disgruntled third party Sub-contractor or Supplier to amount to an implied “request” to perform the works, in turn resulting in liability being imposed on the Proprietor through a quantum meruit claim. As Emmitt and Gorse write in Communication in Construction Teams, which I fully endorse:
Communication is arguably the one aspect of project management that pervades all others, for without effective communication between the participants the project team cannot succeed in realising its objectives.[7]
[7]Stephen Emmitt and Christopher Gorse, Communication in Construction Teams (1st ed, 2007) 3
In order to avoid these consequences, the law recognises under the Lumbers principle that full effect should be given to the binding contractual arrangements of the parties as the basis of their dealings in the administration of a construction contract.
It is critical therefore to determine whether any and what legal relationships existed between the parties involved in the works comprised in part of the repair and refurbishment works to the Furnace and Bath, Lehr and Cutting Line components of the existing Plant, and in particular, whether there was any and what contract between CSR and Pilkington and whether there was any and what sub-contract between Pilkington and Skilled.
The Head Contracts Between CSR and Pilkington
Structure of Head Contracts
Each of the three Head Contracts were in writing and executed by the parties to them. Under the Head Contracts, CSR was the Principal and Pilkington was the contractor.
Steve Rauer was appointed and named as the Contractor’s Representative under clause 7.3 of Schedule 7 of each of the Head Contracts. He was therefore required to act on behalf of Pilkington in respect of its responsibilities and obligations under the Head Contracts.
The Batch Head Contract required Pilkington to design, supply, install and test a new Batch Plant at the Plant.
The Coating Head Contract required Pilkington to design, supply, install and test a five beam on-line coating system to be installed with associated support equipment to facilitate the manufacture of certain products at the Plant.
The Repair Head Contract required Pilkington to perform repair and refurbishment works of the existing floating glass manufacturing line installed and operated at the Plant.
Each of the Head Contracts also provided in relation to the project administration of each contract:
7.1 Generally
7.1.1The detailed project administration procedures shall be agreed between the Principal and the Contractor prior to commencement of work under the Contract and in accordance with the principles set out below. In the event that one of the parties wants to make a change or the parties cannot agree the issue will be referred to the Steering Committee and the Steering Committee’s ruling shall apply.
Clause 7.2 of Schedule 7 of the Head Contracts also required that a steering committee for the Project be formed comprising representatives of CSR and Pilkington. Steve Rauer was nominated in clause 7.2 of Schedule 7 of the Head Contracts as a Pilkington representative on the Project Steering Committee, as was Chris Newitt. As Project Manager Steve Rauer was responsible for reporting to the Steering Committee on, among other things, time, cost and quality issues.
Under the Head Contracts it was CSR rather than Pilkington that was responsible for industrial relations issues. This was because CSR had significantly more relevant local experience with industrial relations matters. In practice CSR managed the various industrial relations issues that arose on the Project, including issues that concerned Pilkington’s subcontractors.
Engagement of Sub-contractors Under Head Contracts
The Head Contracts contemplated that Pilkington would engage subcontractors to perform the works required. Specifically, clause 9.2 of the Head Contracts provided that Pilkington could subcontract without CSR’s approval.
Clause 9.2 provided:
9.2 Sub-contracting generally
The Contractor [Pilkington] may sub-contract any part of the Works without the approval of the Principal or the Superintendent.
Further, Clause 1.2.2 of Schedule 1 defined Pilkington’s scope of work under each Head Contract to include engaging subcontractors. Ultimately, Pilkington engaged approximately 15 to 20 main subcontractors to perform the works under the Head Contracts.
Payment of Sub-contractors Under Head Contracts
Under clause 37.7 and clause 8.4 of Schedule 8 of the Head Contracts CSR was required to reimburse Pilkington for the cost of subcontractors engaged by Pilkington to perform the works on the Project.
However, this arrangement gave rise to practical difficulties. Pilkington, which was UK based, in order to administer the contractual payment system would have been required to incur additional expenditure in establishing in Australia a local accounts team to manage payments and financial transactions for the Project.
In order to resolve this difficulty, CSR and Pilkington engaged in discussions which resulted in a more workable regime under which Pilkington’s sub-contractors would be paid directly by CSR. This arrangement was confirmed in a ‘side letter’ between CSR and Pilkington that was signed by Pilkington in December 2007. Under the side letter, it was agreed that CSR would pay Pilkington’s subcontractors directly, upon Pilkington issuing to CSR a direction to pay each time a subcontractor was required to be paid. In the case of the Skilled Works, a direction to pay was typically prepared on a monthly basis.
The payment arrangement was evidenced for example in an email dated 8 May 2008 from CSR to contractors on the Project concerning the payment arrangements under the various installation contracts for the float line repair. The email confirmed that the contractors had been engaged by Pilkington and stated, among other things, that:
Regarding the installation contract(s) you are conducting for the Dandenong Float line repair that you have engaged by [sic] PILKINGTON AUSTRALIA ENGINEERING PTY LTD. Just a reminder about submitting your invoices/progress claims.
Can you please ensure they are made out to:
PILKINGTON AUSTRALIA ENGINEERING PTY LTD (ABN 63 126 263 205)
And please submit/deliver invoices to our site location:
Attention: Sharon Bailey ([email protected])
VIRIDIAN GLASS
95 Greens Road, Dandenong, Vic 3175.
In my opinion, the fact that this arrangement for payment was agreed upon between CSR and Pilkington and put into effect as far as third party contractors engaged by Pilkington on the Project were concerned, does not evidence any contract directly between CSR and those contractors. The arrangement was a creature of convenience and had nothing to do with any actual or perceived alteration in the contractual structure between any of the parties.
Local Team Under Head Contracts
Under the Head Contracts, CSR agreed to ‘second and make available… on a full-time basis’ to Pilkington certain CSR personnel, in order to ensure continuity and local knowledge during the Project. A number of these CSR personnel, including Tom Zilic, had been employed by Pilkington prior to the sale of the business to CSR. These CSR personnel were referred to in the Head Contract as the Local Team.
Under Clause 8.5 of the Head Contracts, CSR, among other things, retained responsibility as the employer of members of the Local Team and was responsible for the performance of the Local Team and any increased costs, loss or damage attributable to the performance of the Local Team. CSR was also required to ensure that the Local Team carried out their functions, complied with all instructions and directions of Pilkington and fully co-operated with Pilkington, or with Steve Rauer as the Contractor's Representative under the Head Contracts.
Clause 8.5 of each of the Head Contracts provided:
8.5 Local Team
The Principal shall second and make available to the Contractor on a full time basis the Local Team. The Principal shall remain responsible as the employer of the Local Team for all aspects of employment including but not limited to payment (and shall indemnify the Contractor in respect thereof) but the Local Team shall in all other respects comply with the directions of and report to the Contractor.
…
The Local Team shall act on behalf of the Contractor in respect of ensuring the Contractor fulfils its obligations under the Fixed Lump Sum Price in relating to legislative requirements in Australia, relevant Australian standards and importation requirements.
The Local Team shall also act on behalf of the Contractor in respect of the Local Element and shall be responsible for ensuring the Contractor’s compliance with the Local Element and such work will include without limitation advising on all matters in relations to the execution of the WUC in Australia and elsewhere, customs clearance at Melbourne Harbour and Airport, arranging inland transportation to the site, assembling the necessary information for the required procurement of all sub contracts, inviting tenders from sub Contractors, awarding sub contracts, administering the sub contracts, managing the rectification of any defects, managing the cost of the said work and keeping sufficient and adequate records of the said work to satisfy the Principal, the Superintendent, the Steering Committee and the Contractor as to the costs of the said work on an ‘open book’ Actual Cost basis, and liaising with and providing services in relation to the requirements of any State, Federal, local or other authority with jurisdictions over the WUC.
Not withstanding any direction given by the Contractor to the Local Team the Principal shall be responsible for the performance of the Local Team and if the Contractor incurs any increased costs, loss or damage not recoverable as Actual Cost as a consequence of any act, default or omission of the Local Team the Contractor shall be entitled to claim such costs, loss or damage from the Principal.
“Local Team” was defined to mean the individuals named in clause 7.5 of Schedule 7 or any person agreed between the Principal and the Contractor to be a replacement for any named member of any team.
Thus, under clause 8.5 of the Head Contracts, the Local Team was to be under the direct supervision and instruction of Pilkington, and was required to act on behalf of Pilkington in respect of ensuring that Pilkington fulfilled its obligations under the Head Contracts. This included:
(a) advising on all matters in relation to the execution of the works under contract;
(b) assembling the necessary information for the required procurement of all subcontracts;
(c) inviting tenders from subcontractors;
(d) awarding subcontracts;
(e) administering subcontracts;
(f) managing the rectification of any defects; and
(g) managing the cost of the said work and keeping records of the cost of the work.
Clause 7.5 of Schedule 7 of each of the Head Contracts provided:
7.5 The Local Team
The Principal undertakes to maintain the continuity, wherever possible, of all the Principal’s personnel to the end of the project, and to discuss any changes with the Contractor before making them. The Local Team shall comprise the following named employees of the Principal and where no names are inserted individuals of sufficient experience, training and competence to carry out the duties as listed:
Neil Robinson - Manager of Local Team and Principal’s representative (full-time)
Peter Adamovskis - Operations Manager (part-time up to repair and then full-time during the repair)
Mr Tom Zilic – Project Buyer, Expeditor, Shipping and Documentation (full-time)
… [then follows 17 nominated persons or persons to be advised shown as “TBA”]
…
The Local Team Manager (Mr N. Robinson) shall be responsible for managing the Local Team under the directions of the Contractor’s EPM. Mr Robinson shall play an active day-to-day role in the execution of the Local Element and he shall ensure that the Local Team comply with their obligations under clause 8.5 of the General Conditions of Contract and that they use their best endeavours at all times to provide advice and assistance to the Contractor that will enable the Contractor, as far as practicable and taking account of his with his (sic) obligations and duties under the Contract, to minimise the amount of the Actual Cost expenditure.
…
For the purposes of the administration of the Project, the members of the Local Team, although they continued to be employed by CSR, were appointed as agents of the contractor Pilkington and were obliged to comply with the directions of and report to Pilkington.
Whether a Sub-Contracts Between Pilkington and Skilled
“Sub-Contract” Engagement Terms
Skilled’s contention was that the Skilled Works were never undertaken pursuant to any concluded Sub-contract between itself and Pilkington because, in essence, there was never any agreement as to two essential terms of the proposed sub-contracts, namely the dates for practical completion and the proposed milestone dates for the purposes of calculation of liquidated damages, should any be claimed.
It said that it was for these reasons that none of the proposed Sub-contracts were executed as contemplated by the parties they would be.
A further issue arises, namely in the light of there being in place unexecuted agreements of Sub-contract in writing which otherwise was used to govern the relationship between Pilkington and Skilled in carrying out the Skilled Works, and in the light of there being an intention on the part of one or other or both of the parties expressed from time to time to enter into formal executed contracts, do any and which classes of case described in Masters v Cameron[8] apply?
[8](1954) 91 CLR 353 at 360
Non-Execution of Sub-Contracts
It is common ground that neither Pilkington or Skilled ever physically executed the sub-contract documents.
Nevertheless, binding and enforceable contracts can arise in the absence of formal execution by implication.
Two recent examples are PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd and Anor[9] and Ambridge Investments Pty Ltd v Baker & Ors[10].
[9](2007) 20 VR 487
[10][2010] VSC 59
An implied contract may arise where it is to be inferred from the evidence that the parties agreed by their conduct to act on an agreement embracing all of the essential terms.[11]
[11]Brogden v Metropolitan Railway Co. (1877) 2 App Cas 666 at 693; Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 at 79; PRA Electrical v Perseverance Exploration (2007) 20 VR 487 at 501 – 505 per Ashley JA; Ambridge Investments Pty Ltd v Baker & Ors [2010] VSC 59 at [182 – 204] per Vickery J
“Sub-Contract” Tender Documents
On 14 January 2008, Pilkington sent out invitations to tender for the Skilled Works to a number of companies, including Skilled inviting them to tender for the Pilkington “Repair Furnace Steelwork – Pre-Works Removal, Modification and Installation Line Removal & Installation” and the “Repair Cutting Line Removal & Installation”. On 18 January 2008 Skilled was invited by Pilkington to tender for the Furnace & Bath Steelwork – Removal, Modification and Installation. The contract documents, specifications and drawings were enclosed for the Furnace and Bath works (the “Tender Documents”).
There was no doubt that the tender documents were sent out to the market, including Skilled, by Pilkington as the prospective principal under the proposed Sub-contracts.
On 15 February 2008, Skilled submitted a proposal entitled “Pilkington Australia Engineering Ltd Request for Proposal for Furnace Steelwork Friday, 15 February 2008”, as well as Skilled’s completed “Furnace-Bath Steelwork Install A Tenders”. At paragraph A.2 “Statement of Conformance”, Skilled notes:
1.In submitting this response to tender Skilled must advise Pilkington that it reserves its position to negotiate the terms and conditions under which it proposes to perform the works.
Skilled has received the General Conditions of contract contained in AS 2124 – 1992 and the Special Conditions provided by Pilkington as amendments to that standard. As a result of our review we have concluded that the documents presented do not support the services to be undertaken and as such we have provided no comment other than to request that Pilkington consider an alternative form of contract more aligned to the scope of work and the responsibilities to be accepted by the relevant parties.
Each of Skilled’s tenders contained qualifications. The qualification concerned amendments to the standard AS-2124 1992 wording that were proposed by Pilkington. This issue was resolved following negotiations and Skilled and Pilkington agreed on a compromise wording, being the Special conditions of contract dated 10 January 2008, marked up with Skilled’s amendments of 21 April 2008.
By 6 May 2008, Pilkington had confirmed and finalised the award to Skilled for the Cutting line Works, Furnace and Bath Works and the Lehr Works and had supplied the negotiated contract documents to Skilled ready for execution (the “Sub-contracts”). This was evidenced in an email of that date sent by Zilic, a local team member acting for Pilkington, to Charles, Skilled’s Senior Project Manager.
By that time, I am also satisfied that the parties had agreed to operate under the terms of the Sub-contracts comprising the Australian Standard contract conditions contained in AS 2124 – 1992 as modified by agreed special conditions in respect of all three Sub-contracts. This was confirmed by an email on or about 15 May 2008, received by Zilic of Pilkington from Piers O’Brien, Skilled’s Group Manager Commercial Contracts and Strategic Bids. The email stated:
Tom
Further to our discussion earlier this week, I’d be grateful if you could please confirm:
1.The actual dates of practical completion under each of the 3 contracts; and
2.The LD milestones (and associated dates) for each of the three contracts.
In respect of LDs, Barry and I agreed that LDs under each contract would be subject to one milestone AND the date for practical completion.
Despite the fact that we’ve agreed that we’re operating under the terms of the relevant Australian Standard (as modified by the agreed special conditions) I can’t get signatures on the contracts until we’ve clarified these dates.[12]
[12]Underlined for emphasis
I accept this email as an admission on the part of Skilled as to the true position, namely that by early May 2008 Skilled and Pilkington had agreed that the Skilled Works were to be conducted pursuant to the written Sub-contracts which had been negotiated and supplied by that time, however, formal execution of those documents would not be effected by Skilled until agreement had been achieved in relation to each of the three Sub-contracts for the dates of practical completion and milestones.
Sub-contract Specifications
The specifications which comprised part of the Furnace and Bath unexecuted Sub-contract (the “Furnace and Bath Specifications”) included the following clauses in its introduction:
1: Introduction
This document is to be used as a tender document, and later as a basis for contract, for the steelwork removal modification and installation for the repair of a Float Furnace and Float Bath at Dandenong near Melbourne in Victoria, Australia.
The description given hereafter gives a detailed scope of work together with a list of drawings and a programme which must be met, or improved on.
The Contractor will be required to work closely with the Refractory Demolition and Refractory Installation Contractors throughout the furnace construction. The onus will be on the Contractors to work together to complete the project successfully.
Sub-contract Specifications in Relation to Programming
The Furnace and Bath Specifications contained in the unexecuted Sub-contract (“Specification Document 4428-401-B03-41R7”) also included the following in relation to programming:
Programme
A detailed manning schedule for the installation shall be prepared by the Contractor so as to describe to Pilkington how he intends to achieve the overall timescale allowed to him, this is to include the manning he proposes for each area of activity and include the skills of the persons involves, i.e. welders, fitters, labourers etc.
Site Mobilisation for Main Repair complete by 25/04/08 Furnace Shutdown 07/05/08 Remove all Waist Refiner & Working End Steel complete by 23/05/208 Start Installation of Furnace Bottom transverse Beams (At waist and working end) start by 26/05/08 Complete installation of Bottom Transverse beams complete by 02/06/08 Install and Set Melt End Steel incl Springer plates complete by 16/06/08 Install waist Working End Steelwork & Refiner Steel complete by 13/06/08 Set working End Steel incl springers complete by 18/06/08 Install Front Wall frame incl. castings complete by 19/07/08 All Furnace Steelwork installed complete by 27/07/08 Bath Roof Support Steelwork extension complete by 12/06/08 Install New Bath Casings complete by 06/06/08 Widen Narrow End bath casings complete by 05/06/08 Complete all Bath Casing incl. Lip Plate complete by 24/06/08 Complete Steelwork mods and installation to Bath Roof casings excluding Roof plates complete by 30/07/08 Refit all Roof plates (tack welded) complete by 06/08/08 Install Coater Steelwork complete by 03/07/08 Warm up of Furnace 28/07/08
Working hours and deployment of personnel shall be planned such that the above deadlines are complies with. If required, work can be in multiple shifts (“around the clock”) in accordance with the applicable statutory regulations.
The Contractor is expected to work to the Pilkington Schedule provided DA2-4428-493-P24-05R10 14-12-07. In the event that the Contractor proposes an alternative schedule this be agreed in advance by the Pilkington Engineer.
It is the Contractor’s responsibility to keep or better the programme agreed. To ensure that this is done the Contractor will provide a permanent engineer during the day shift to be stationed on site. This engineer will attend daily informal construction meetings with the Construction Engineer with formal ones on a weekly basis. At these meetings he will provide a chart to show how he is meeting the required programme.
The Contractor is reminded that he will be working alongside other Contractors during the build i.e. pipe work, ducting and refractory etc. co-ordination of these activities will be jointly carried out with the respective Contractors and the Pilkington Engineer. A high level of co-ordination and co-operation is expected.
I construe the phrase used in the last item of the above table “Warm up of Furnace 28/07/08” in the Specification Document 4428-401-B03-41R7 to mean completion of the Furnace and Bath Works was programmed to be undertaken by 28 July 2008 or earlier, unless an alternative schedule proposed by the Contractor, in this case Skilled, was agreed in advance by the “Pilkington Engineer” as described in the Furnace and Bath Specifications.
As can also be seen, the programme for the Furnace and Bath in the Specification Document 4428-401-B03-41R7 set out milestone dates from the completion of various components of the works.
The programming obligations also need to be viewed in the light of the “ ‘C’ Special Conditions of Contract”. Clause 33.3 relating to ‘Planning and Scheduling’ provided:
This clause 33.3 defines the form and time of the construction program which the Contractor is hereby deemed to have been directed to furnish the Superintendent under Clause 33.2 of the General Conditions of Contract.
Within two weeks of the Date of Acceptance of Tender, the Contractor shall submit a detailed program for the whole of the work of the Contract to the Superintendent for approval. Upon approval of the program, the dates and duration for each activity shall be fixed and form the ‘Baseline’ against which progress will be monitored. The program shall be in the form of a time-chart clearly indicating all activities including design, procurement, construction, receival of Principal supplied equipment and availability of windows and arranged to show a “certain path”. The program shall show against each activity the percentage allocated to it of the total work, and a plotted “S” curve of planned progress, measured as described below, against time.
…
Throughout the progress of the works during the relevant period work was done on production and modification of programmes for the Skilled works. For example, on 2 May 2008, Bill Charles, Skilled’s Senior Project manager, wrote an email to Rauer, Pilkington’s Project Manager, in which he said:
Steve,
We have completed an initial draft Schedule that includes the Furnace and Bath.
We have based our programme on the dates as listed in the specification document 4428-401-B03-41R7 and the project schedule DA2-4428-493-P24-05R15.
We are now in the process of finalising the programme and have arranged a meeting today with Neil Crompton to discuss and review the schedule and terminology used in both documents.
As at 1 May 2008 the Skilled programme which was prepared was based on the dates as listed in the Specification Document 4428-401-B03-41R7 and the project schedule issued 17 March 2008.
However, it seems to me that from the time of the adoption of the Sub-contract to regulate the contract, although there was in place what appeared to be a “default position” with regard to the project programme which would apply in the absence of agreement to the contrary, the parties did not manifest an intention to apply the Furnace and Bath Specifications in this way. The Specifications were not referred to by either Skilled or Pilkington as a default position in the course of their discussions in May and June of 2008 which concerned alternative and different dates for practical completion and a single milestone date for each of the Sub-contracts as a reference point.
“Sub-Contract” Principal Issue
Much of the trial was devoted to the factual issue as to whether there was agreement between Pilkington and Skilled as to completion dates for the Skilled Works comprising the Furnace and Bath Works in the context of the Furnace and Bath Unexecuted Agreement. A second issue is, if there was no such agreement, did that result in there being no binding sub-contract.
Skilled submitted tenders between 1 February 2008 (Furnace and Bath Steelwork) and 2 May 2008 (Lehr) and a single price for Cutting Line and Furnace and Bath was settled on 19 March 2008, with a 10% cap on liquidated damages and in principle agreement of one interim milestone and one practical completion date for liquidated damages on 16 April 2008.
Skilled commenced work on site before formal Sub-contracts were signed. This is not unusual in construction and engineering projects. In this case, at the time when Skilled commenced work, negotiations were ongoing with respect to milestones, milestone dates and practical completion dates. Other contractors were on site, and as a practical matter, in the interests of the Project, the Skilled work had to start.
Contracts were not executed between Pilkington and Skilled for any of the Furnace and Bath, Cutting Line or Lehr works.
Skilled’s case rested in part on evidence which it said pointed to Pilkington's insistence that there had to be signed sub-contracts in place and that this was inconsistent with Pilkington now contending there was nevertheless an enforceable agreement in existence. Skilled further contended that the only explanation for the absence of executed agreements was that the bargain between the parties had not been concluded. It said that it was fundamental to the proposed subcontracts that there be an agreed program and commitment to specific milestone dates and through them practical completion dates and these terms were never agreed.
Skilled submitted that the risk allocation between CSR and Pilkington and the evidence about what CSR knew and what CSR did establishes that Pilkington was Project Manager not head contractor in any conventional risk allocation sense. It submitted that CSR obtained works insurance on those terms and that the risk allocation between CSR and Pilkington under the contract between them as varied was only consistent with this characterisation.
On the other hand, Pilkington submitted that it was common ground between it and Skilled that Jones and O’Brien reached agreement on the following issues on 16 April 2008:
a.Liquidated damages (LDs) would be assessed at a daily rate of 0.5% of the relevant contract sum capped at 10% of the relevant contract value; and
b.PILKINGTON would have two separate triggers for an entitlement to LDs. These two separate triggers were the relevant Dates for Practical Completion under the subcontracts and an agreed interim milestone.
Accordingly the only issues that remained to be agreed as of 16 April 2008 were the relevant Dates for Practical Completion under each of the subcontracts and the separate agreed interim milestone.
Pilkington submitted that, viewed objectively:
a.it is reasonable to infer based on the conduct of Skilled and Pilkington that agreement was reached on the Dates for Practical Completion for each of the Furnace and Bath, Cutting Line and Lehr subcontracts by no later than late May 2008; and
b.it is also reasonable to infer based on the conduct of Skilled and Pilkington that agreement was reached on a separate milestone for both the Lehr and the Cutting Line by no later than late May 2008.
Pilkington’s alternative argument was that, if agreement on the Dates for Practical Completion cannot be inferred, then Pilkington and Skilled were clearly in a contractual relationship and that fair and reasonable original Dates for Practical Completion can and should be implied into the subcontracts. Skilled placed reliance on the fact that in addition to the conduct from which the existence of sub-contracts can be inferred clause 6.2 of the sub-contract terms expressly provided “Irrespective of the date upon which a Formal Instrument of Agreement is executed the Contract will take effect from the Date of Acceptance of Tender”.
In relation to the issue of agreement on separate milestones, where it was conceded there was no agreement in respect of the Furnace and Bath works, it was Pilkington’s position that this issue was ultimately of no practical importance. This was so because Pilkington only claimed, and the Superintendent only assessed, Pilkington’s entitlement to LDs by reference to the adjusted Dates for Practical Completion under each of the sub-contracts and not by reference to separate milestones. For this reason, even if the Court was to find that agreement cannot reasonably be inferred in relation to separate milestones (or one or more of them), it is submitted that this issue can and should be severed from the sub-contracts.
“Sub-Contract” Legal Analysis – Formation of the Contract
In any determination as to whether a binding contract exists, it is the objective intent of the parties, as revealed in the factual context, that is the paramount consideration. The fact of agreement and its content is to be determined by the communications between the parties considered objectively. It is also legitimate to consider the factual context in which the communications took place. Regard may also be had to communications between the parties subsequent to the date of the alleged contract, at least to the extent to which those communications may inform the meaning of the language used by the parties in earlier exchanges between them which evidenced the fact of agreement and its content and defined the commercial context.
The subjective intention of the parties, as it may be expressed, for example in internal memoranda, or statements made by individuals as to as to subjective intention in the course of giving evidence, is generally inadmissible. However, in some circumstances such expressions of intention may amount to admissions and be admissible on that basis. However, care needs to be exercised in determining the content of any such admission.
The issue was explored in Australian Broadcasting Corporation v X1VTH Commonwealth Games Ltd,[13] and was explained in the following terms by Gleeson CJ (as he then was, and with whose reasons for judgment Hope and Mahoney JJA agreed):
… The case involves the objective determination of the intention of the parties from a consideration of a series of communications exchanged by them in the context of their dealings over a period of time. In those circumstances it is both appropriate and necessary to have regard to the commercial circumstances surrounding the exchange of communications and, in particular to the subject matter of those communications: Allen v Carbone (1975) 132 CLR 528 at 531-532. Furthermore, as was noted earlier, it is proper to have regard to communications between the parties subsequent to the date of the alleged contract to the extent to which those communications throw light upon the meaning of the language which is being considered for the purpose of determining whether it expresses an intention one way or the other upon the critical matter. At the least, such subsequent communications will often form part of the context in which the particular exchanges in question are to be evaluated.
The position is by no means so clear, however, in connection with internal memoranda… or statements as to subjective intention made by individuals in the course of giving evidence. As it happens, although the learned judge had a good deal of material of this kind put before him at the hearing, it was not particularly helpful even if admissible. In the first place, a great deal of it was equivocal and individual pieces of evidence were contradictory in effect. Some of the persons who participated in the negotiations in question were called to the witness box and vigorously examined as to what was going on inside their minds at particular times.
This process in the end principally served to demonstrate what might have been expected to be the case, that is to say, that the witnesses, not being lawyers themselves, were in a state of considerable confusion about the issue that ultimately emerged as determinative of the rights of the parties…
In so far as acts or statements of the kind referred to, not involving communications between the parties, are claimed to be relevant in a case such as the present upon the ground that they constitute an admission, it seems to me that it will often be necessary to identify with some care the fact which is said to have been admitted. As was noted, there may be cases in which the issue is such that the fact of the subjective state of mind of one or other of the parties is relevant. Normally, however, what is in issue is not their subjective state of mind but their “intention as expressed” (cf Inland Revenue Commissioners v Raphael [1935] AC 96 at 142 per Lord Wright) and
caution may need to be exercised in relating the fact which is said to be admitted to the fact which is legally relevant.
[13](1988) 18 NSWLR 540, at 550 and following
In Brambles Holdings Ltd v Bathurst City Council,[14] Heydon JA (as he then was) reviewed the authorities and stated the accepted principles of the law to be applied in determining the existence of (and construction of) a contract. What was in issue in Brambles was the conduct of the parties before the contract was made, their conduct after the contract was made, and their subjective beliefs about the implication of terms and the construction of those terms. Relevantly, in relation to pre-contractual and post-contractual conduct in relation to a contract, the following statements of principle are provided:[15]
[14][2001] NSWCA 61
[15]Derived from paragraphs [24-28] and [71 – 81] of Brambles Holdings Ltd v Bathurst City Council ibid
(a)The first relevant principle of law is that pre-contractual conduct is only admissible on questions of construction if the contract is ambiguous and if the pre-contractual conduct casts ht on the genesis of the contract, its objective aim, or the meaning of any descriptive term: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales[1982] HCA 24; (1982) 149 CLR 337 at 347-352;
(b)The second relevant principle is that post-contractual conduct is admissible on the question of whether a contract was formed: Howard Smith & Co Ltd v Varawa[1907] HCA 38; (1907) 5 CLR 68 at 77; Barrier Wharfs Ltd v W Scott Fell & Co Ltd(1908) 5 CLR 647 at 668, 669 and 672; B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR [97011] at 9149 and 9154-9156; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR [97023] at 9255.
(c)The third relevant principle is that post-contractual conduct is not admissible on the question of what a contract means as distinct from the question of whether it was formed. As explained by Priestley JA (Meagher JA agreeing) in Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd(1990) 20 NSWLR 310 at 326-330, the status of the relevant High Court authorities is unclear: hence unless it is demonstrated that the later decisions of the Victorian Full Court and Court of Appeal against admissibility, Ryan v Textile Clothing & Footwear Union of Australia[1996] 2 VR 235 and FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd[1993] 2 VR 343, are clearly wrong or they are overruled, they should be followed in New South Wales. No attempt was made to demonstrate that they are clearly wrong.
Piers: If this can wait till tomorrow when I am on site I can get the exact dates, if not Jon & Kieron have the dates for the Bath.
Please advise.
At 5.25 PM on 19 May 2008 Charles sent O’Brien an email that said:
Will have milestone dates for you tomorrow. (Tuesday 20th).
Can you please email me a copy of the contract to date.
O’Brien responded to Charles email at 5.36 PM and said:
Thanks Bill.
The contract is AS2124 - 1992 version.
I've attached the special conditions which have been agreed with Pilks other than a slight change that I've made to clause 17 to fit in the Lehr contract (as this wasn't included when we agreed the final document). The same Special Conditions will apply to each of the three jobs.
20 May 2008
On 20 May 2008 Charles responded to O’Brien’s email of 16 May 2008 (copied to Olsen, Frewen and Ceccomancini) at 5:17 PM and said:
Milestone dates for LD's are below.
I am still having difficulty getting confirmed dates out of Neil Crompton for the Furnace and Bath sections.
They are constantly changing the schedule. I will try Thursday 22nd morning.
BUT I need to talk to you about the Furnace and Bath sections.
Lehr
The dates I had agreed with Bill Charles are:
- Lehr Rollers Installed – Complete by 23 June 2008
-Practical Completion – Total Lehr Installation (ready for Cold Commissioning) – Complete by 16 July 2008
Cutting Line
-Mechanical and Electrical Installation of Main Line (M201-M229, M301-M333) – Complete by 17 July 2008
-Practical Completion - Mechanical and Electrical Installation of all Equipment (and Safety Fencing) - Complete by 8 August 2008
Furnace-Bath Steel Work ???????
21 May 2008
Charles sent O’Brien an email on 21 May 2008 at 17:21:13 (copied to Olsen, Frewen and Ceccomancini) responding to O’Brien’s email of 19 May 2008 5:36 PM:
The Lehr and cutting line dates we have identified. It is the Furnace and Bath dates we still have to finalise.
Pilkington onsite personnel have been moving the goal posts (schedule) every week, they cannot give me any dates till late tonight. 7.00pm But definitely tomorrow morning.
Looks like I can get a schedule as a base line as from 21-May-08.
If they wish to make changes then we will be submitting a variation for EOT and Costs if applicable.
Once we have this schedule we will be reviewing this baseline and quickly identifying the critical path. This will make it easy to identify the variations.
We do not have full control over scheduling of these works, I will make the comment I'm not happy with intermediate milestones as LD dates.
Confidentially: Pilkington's onsite scheduling and coordination is below standard.
26 May 2008
On 26 May 2008 Zilic emailed Charles in the following terms:
Have you confirmed the final dates you were waiting upon from Neil Crompton so we can sign off on the contracts?
27 May 2008
On 27 May 2008 Frewen emailed the Superintendent a 1 day EOT claim in relation to the Cutting Line specifying a revised Date for Practical Completion of 5 August 2008. This EOT claim nominated the original Date for Practical Completion for the Cutting Line as being 4 August 2008. Skilled subsequently lodged another 6 EOT claims for the Cutting Line. Those claims also proceeded on the basis that 4 August 2008 was the original Date for Practical Completion for the Cutting Line. The Superintendent approved Skilled’s EOT claim for the Cutting Line dated 26 May 2008 on 27 June 2008 and Skilled’s EOT claim for the Cutting Line dated 23 July 2008 on 24 July 2008.
28 May 2008
On 28 May 2008 at 11:12:11 Frewen sent an email to the Superintendent (copied to Charles) attaching an EOT claim for the Bath component of the Furnace and Bath that proceeded on the basis of an original Date for Practical Completion for the Furnace and Bath of 4 August 2008. Skilled subsequently lodged another 3 EOT claims for the Bath component of the Furnace and Bath. Those claims also proceeded on the basis that 4 August 2008 was the original Date for Practical Completion for the Furnace and Bath. The Superintendent approved Skilled’s EOT claim for the Bath dated 28 May 2008 on 27 June 2008 and Skilled’s EOT claim for the Bath dated 1 July 2008 on 24 July 2008.
3 June 2008
On 3 June 2008, Frewen emailed the Superintendent attaching an EOT claim for the Furnace component of the Furnace and Bath that also proceeded on the basis of an original Date for Practical Completion for the Furnace and Bath of 4 August 2008.
24 June 2008
On 24 June 2008 at 5.00 PM, Ng emailed the Superintendent (copied to Charles and Frewen):
Chris
We are in a process of assessing the extension of time claims submitted by Skilled for the Bath, Cutting Line, Furnace and Lehr. In accordance with SCC clause 35.5.2, they are required under the contract to provide a revised programme for the works which identifies the impact of the delay and the new date on which Skilled anticipates reaching Practical Completion. It is also their obligation under SCC clause 33 to provide weekly programme to assist the superintendent to monitoring the progress of works.
Chris, could you please instruct Skilled to provide revised programme for their contracts?
On 24 June 2008 at 5:23 PM the Superintendent emailed Ng (copied to Charles, Frewen and Rauer):
Bill, Anthony
As Louis as pointed out under the contract you have an obligation to supply a revised programme showing the PC for all the areas, also a weekly programme to monitor your progress.
Can you please supply:-
1)A revised programme showing PC for the Furnace, bath, lehr and cutting line
2)A weekly progress programme for the Furnace, bath, lehr and cutting line
Can you please ensure I have both of the above programmes for all your areas, no later then 12 Noon Friday 27/06/08
27 June 2008
On 27 June 2008 Charles emailed Smith (copied to McKee, Frewen and Ceccomancini) at 1.57PM forwarding a copy of the Superintendent’s email of 24 June 2008 and said:
Just confirming.
Please get a copy of Marius’s (Lehr) Schedule from him.
Furnace is done,
Bath still to update,
Cutting Line still to update.
And, when you have completed printing the schedules for all areas, please give a copy of these to Anthony Frewen to hand to Chris Newitt on Monday 2:00pm.
Please ensure there is some slack time allowed in each job.
Charles then emailed the Superintendent and Ng at 14:12:50 on 27 June 2008 (copied to Frewen, Rauer, McKee and Ceccomancini) in response to the Superintendent’s email of 24 June 2008 and said:
Chris,
We have completed the Schedule for the Furnace.
As per discussions with Steve Rauer, your planner will complete your proposed schedule and meet with Tony Love, John Smith and Andreco Hurll, to develop a coordinated schedule.
Marius Marginean (Lehr) is keeping his schedule up to date. Jon Smith is currently working on the Bath and the CuttingLine.
These completed schedules will be handed to Anthony Frewen to hand to you at the 2:00pm Meeting Monday.
Frewen responded to Charles and Smith at 2.25PM on 27 June 2008 (copied to McKee and Ceccomancini) in the following terms:
Wouldn't we want to go with the dates as per the E.O.T's we have claimed as per my rec I sent out this morning & summarised below.
Project Original Date P.C E.O.T's Days Revised Date
P.C
Cuttine Line 4th Aug 08 15 21st Aug 08
Lehr 16th July 08 11 29th July 08
Bath 4th Aug 08 39 18th Sept 08
Furnace 4th Aug 08 44 24th Sept 08
Using these dtaes (sic) would deffinatly (sic) give us some slack.
Your call.
30 minutes later on 27 June 2008 Frewen sent a further email to Charles (copied to McKee and Ceccomancini) forwarding his earlier email and said:
Actually the more I think of it we need to use these dates otherwise Pilks could well & truly come back & ask why do we need to have all the additional E.O.T's & costs approved.
I can counter that by saying the claims are for actual time & costs & the schedule is just an estimate but I would prefer not to give them the opportunity to delay signing off on the claims.
I will not hurt for us to have an earlier date in our programm (sic) than the one we submit to Pilks.
In fact it will make us look good if we can bring it in earlier than scheduled & will increase our escalation costs if they ask us to compress, which they probably will.
2 July 2008
On 2 July 2008 the following email exchange between Jones and Olsen had occurred:
Jones wrote:
I understand from our site team that the contracts for both the furnace and cutting line installations have not been signed and returned.
Would you advise if there is a problem?
Olsen responded:
You are correct, there seems to be a problem in providing key dates for the contract?
In any event we are committed to the agreement.
I'm staying close to all projects.
Perhaps we could discuss one other sensitive matter over the phone?
3 July 2008
On 3 July 2008 at 15.53.04 Smith emailed McKee, Frewen and Charles as follows:
Attached is a simplified version of my latest program for the completion of the Cutting line.
Anthony, in your email last week, you had an original practical completion date of 4th August which as far as I can ascertain is the date when the mechanical and electrical installation was scheduled to be completed. In the original contract specification this is the date for the completion of all electrical works. (Mechanical installation is completed prior to this). However, in the Addendum to the specification, the latest completion date is the 8th August. Which date should we really be working to?
At this stage I have based the new schedule on the 4th plus 15 days as the new completion date. To achieve this I have had to do quite a bit of padding and in reality I believe that with no further unforeseen delays we should come in at least 2 weeks
sooner. If we use the 8th plus 15 days then better still. Can somebody please clarify?
Pilks are nagging me for this schedule but I do not want to issue it until you are in agreement.
5 July 2008
On 5 July 2008 Charles responded to Frewen’s email (also sent to Smith, McKee and Ceccomancini) in the following terms:
I agree, considering Pilks want to push this project we should use these dates, as we will finish well within these current milestone dates.
---
[28]Emphasis added
6
5
0