Thiess Pty Ltd v Arup Pty Ltd
[2012] QSC 185
•10 July 2012
SUPREME COURT OF QUEENSLAND
CITATION: | Thiess Pty Ltd & Anor v Arup Pty Ltd & Ors [2012] QSC 185 | ||
PARTIES: | THIESS PTY LTD ABN 87 010 221 486 | ||
FILE NO: | 4441 of 2011 | ||
DIVISION: | Trial Division | ||
PROCEEDING: | Originating Application | ||
ORIGINATING COURT: | Supreme Court of Queensland | ||
DELIVERED ON: | 10 July 2012 | ||
DELIVERED AT: | Brisbane | ||
HEARING DATE: | 10-11, 14-18, 21-23 and 25 May 2012 | ||
JUDGE: | Applegarth J | ||
ORDER: | 1. Within 7 days the first and second respondents submit draft minutes of orders reflecting the declarations to be made in their favour and the resolution of the Access to Records Dispute. 2. Within a further 14 days the parties confer in relation to the terms of declaratory and other orders. 3. The proceedings be adjourned to 16 August 2012 for the purpose of any further submissions as to the form of orders.
| ||
CATCHWORDS: | CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where applicants (“TJH”) engaged first and second respondents (“PBA”) as consultants – where TJH and PBA entered into a Collaborative Consultancy Agreement (“CCA”) for design of infrastructure project – where Schedule 7 to the CCA governs compensation of PBA for work performed under the CCA – where Schedule 7 establishes a “3-element” compensation model – where first element reimburses PBA for “actual cost” related to work performed under the CCA – where TJH contends that the words “actual cost” in cl S7-1 of the CCA bear their ordinary meaning – where TJH contends that later provisions in Schedule 7 relate only to the quantum of progress payments and do not govern PBA’s entitlement to compensation – where PBA contends that the words “actual cost” in cl S7-1 in relation to staff rates are defined by cl S7-3 – whether, upon proper interpretation of the CCA, cl S7-1, cl S7-3 and cl S7-4 specify and thereby define costs for which PBA is to be compensated by TJH EQUITY – GENERAL PRINCIPLES – MISTAKE – EQUITABLE RELIEF IN CASE OF MISTAKE – Rectification – Particular cases – where, following negotiations, TJH and PBA entered into the CCA as a written agreement – where Schedule 7 to the CCA refers to various “multipliers” to be applied to “raw rates” in determining compensation under the agreement for cost of personnel – whether, had the CCA mistakenly recorded the parties’ agreement, TJH and PBA held a common intention at the time of entering into the CCA that the multipliers would not be “subject to audit” – whether PBA engaged in conduct lacking in good faith precluding it from seeking the remedy of rectification TRADE PRACTICES AND RELATED MATTERS – MISLEADING OR DECEPTIVE CONDUCT – Trade Practices Act 1974 (Cth) (“TPA”) – where TJH and PBA entered into the CCA following negotiations – where those negotiations included discussion about a 2.8 multiplier to be applied in determining cost of full time staff under the CCA – whether PBA engaged in conduct in breach of s 52 TPA by failing to disclose that it had not undertaken a specific examination of its financial records, as pleaded by TJH, prior to entering into the CCA CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where the CCA provided for “Compliance Audits” to be undertaken by an auditor and the production of a “Compliance Audit Report” – whether the investigations undertaken by Easdown Consulting Pty Ltd (“Easdown”) constitute Compliance Audits for the purposes of the CCA – whether the report produced by Easdown constitutes the Compliance Audit Report contemplated by the CCA – whether, in the alternative, TJH is estopped from denying that the investigations undertaken by Easdown constitute Compliance Audits and the report produced by it the Compliance Audit Report CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – OFFER AND ACCEPTANCE – Agreement to amend existing contract – where a meeting of TJH and PBA representatives with responsibility for administering the CCA purported to amend certain principles relevant to PBA’s compensation under the agreement – whether agreement was reached at that meeting – whether it was agreed that the reduced overtime rate of 1.1 would apply after 37.5 hours or 45 hours – whether, in the alternative, TJH is estopped from denying that agreement was reached at that meeting that the reduced overtime rate of 1.1 would apply after 45 hours Trade Practices Act 1974 (Cth), s 52 ACIL v England Unreported, Supreme Court of South Australia, 1 November 1995; BC9502398, cited Thiess Pty Ltd v FLSMIDTH Minerals Pty Ltd [2010] QSC 006, followed | ||
COUNSEL: | A J Myers AO QC, P L O’Shea SC and T J Bradley for the applicants | ||
SOLICITORS: | Freehills for the first and second applicants | ||
| Introduction PART A:THE INTERPRETATION OF THE CCA’S COMMERCIAL FRAMEWORK PART B:PBA’S ALTERNATIVE CLAIM FOR RECTIFICATION PART C:MISLEADING OR DECEPTIVE CONDUCT PART D:THE COMPLIANCE AUDIT ISSUE PART E:THE OVERTIME ISSUE PART F:THE ACCESS TO RECORDS DISPUTE PART G:CONCLUSION | [1] – [31] [32] – [86] [87] – [209] [210] – [265] [266] – [301] [302] – [349] [350] – [359] [360] – [372] | ||
Introduction
The applicants (“TJH”) and the first and second respondents (“PBA”) are parties to a “Collaborative Consultancy Agreement” (“the CCA”) dated 16 May 2008 in respect of the Airport Link, Northern Busway (Windsor to Kedron) and East-West Arterial Gateway Projects. TJH engaged PBA as consultants for the design of the project.
Some of the matters in dispute in these proceedings arise because TJH and PBA contend for different interpretations of the terms of the CCA that govern PBA’s entitlement to compensation under the agreement. The proper interpretation of those provisions has implications for the audits and other steps that the Collaborative Agreement Auditor carries out and the documents of PBA to which it is entitled to have access.
Clause 16.1 of the CCA states that the compensation “set out in the Commercial Framework will be the sole compensation to the Consultant for the complete fulfilment of all of their obligations under this Agreement.” The Commercial Framework contained in Schedule 7 to the CCA provides a “3-Element” compensation model. Clause S7-1.1.1 relevantly provides:
“... the Consultant will be compensated for participating in carrying out Collaborative Agreement Work in accordance with the following ‘3-Element’ model, where:
Element 1 = The following costs incurred directly by the Consultant on the Collaborative Agreement Work will be reimbursed at actual cost subject to audit:
(i)the cost of personnel performing the Collaborative Agreement Work, including mistakes, rework and wasted effort, but not including costs incurred as a result of, or in committing, remedying or addressing a Wilful Default;
(ii)Project-specific overheads related to the Collaborative Agreement Work; and
(iii)actual costs of Project-specific plant and materials (being items the Consultant would not be required to procure if located in their respective home locations).
Reimbursement to the Consultant under Element 1 must not include any recovery of non Project-specific overheads or profit or costs arising under clause 22.4(b)(ii).
Element 2 = A fee (‘the Fee$’) to cover normal profit and a contribution towards recovery of non Project-specific overheads. The entire Element 2 fee paid or payable to the Consultant for all work under this Collaborative Consultancy Agreement is ‘at risk’ based on outcomes of Element 3, in accordance with this Commercial Framework.
Element 3 = A share of ‘gain’ or ‘pain’ depending on how our collective actual performance compares with pre-agreed targets in various cost and non-cost key result areas (KRA).”
Later clauses of Schedule 7 make detailed provision about each of the three elements. For example, cl S7-3 relevantly provides the following about staff rates under Element 1:
“S7-3.1.2 Actual Element 1 rates for the Consultant’s staff, Consultant’s contracted staff, and sub-consultants’ staff will be calculated as ‘multiplier’ x ‘Raw Rate’, with the ‘Raw Rate’ to be confirmed during the Compliance Audit.
Raw Rate Element 1 Multiplier Consultant Full Time Staff = Total Salary Package/1950
= $hrs= 2.8 Consultant Staff (other than Full Time) including Permanent Part Time Staff, and In-House Contract Staff
= Hourly rate to be determined by CCA Auditor = to be determined by CCA Auditor
Consultant Contract Staff (staff employed by and integrated into the Consultant team for ALNB or EWAG works only)
= agreed hourly rate = 1.5 Consultant’s Sub-consultants = agreed hourly rate = 1.1 S7-3.1.3 Without limiting clause S7-4.1.1, items not included in the Raw Rate include project specific hardware and software, travel ‘allowables’ to and from project design office from home office, out-of-town specialist travel and accommodation costs (by agreement with Collaborative Agreement Manager), vehicles for CPS, personnel protective equipment (PPE), etc.
S7-3.1.4 Actual items included in the Element 1 staff rates comprise (without limitation) salary and salary related overheads, sick leave and the like, tax including superannuation, holiday leave and pay, training not specifically project related, work tools (including hardware and software normally used), staff procurement costs, home office administration support, bonuses, promotions (including salary increases associated with same), mobile phone (including costs), etc.”
Clause S7-4 contains a table that provides “a high-level summary of what is reimbursable under Element 1” and states that the bases of reimbursement in each category will be as set out in the Compliance Audit Report. Clause S7-5 specifies the manner in which the Element 2 Fee is calculated. Clause S7-6 contains detailed provisions in relation to Element 3 and commences, “We will share gain/pain as detailed below in this clause S7-6.”
The CCA provides for TJH to appoint a Collaborative Agreement Auditor whose “overriding brief is to carry out audits, to audit and verify Consultant Collaborative Agreement Costs incurred by Participants and to ensure that in respect of all payments made pursuant to this Agreement that PBA receives its exact entitlements as set out in Schedule 7.”[1]
[1]Clause 20.2(c).
Clause S7-1.3.1 provides:
“Within one month of the Commencement Date of this Collaborative Agreement the Collaborative Agreement Auditor will conduct investigations (‘Compliance Audits’) on the Consultant’s financial records:
(a) to clarify the basis of reimbursement under Element 1; and
(b)to ensure that the demarcation between items reimbursable under Element 1 and items that are deemed to be covered under Element 2 (and therefore not directly reimbursable) is clear.”
Clause S7-1.3.2 provides:
“All Payments made pursuant to this Collaborative Agreement are subject to investigation by the Collaborative Agreement Auditor and are subject to validation by the Collaborative Agreement Auditor that they are in accordance with the terms of compensation set out in this Schedule 7 and the principles of reimbursement determined during the Compliance Audits or those principles as amended by the Collaborative Leadership Team (CLT).” (emphasis original)
Clause S7-1.3.3 provides:
“TJH will only be liable to reimburse costs to the Consultant to the extent such costs are verified by the Collaborative Agreement Auditor. Any payment made by TJH shall be on account only until verified by the Collaborative Agreement Auditor.”
Clauses S7-1.3.1 and S7-1.3.2 envisage two distinct roles for the Collaborative Agreement Auditor. The first is to conduct the investigations described in
cl S7-1.3.1 as “Compliance Audits” within one month of the commencement date of the CCA. The second is to undertake tasks of investigation and validation in respect of payments made pursuant to the CCA.
Easdown Consulting Pty Ltd (“Easdown”) was appointed by TJH as the Collaborative Agreement Auditor pursuant to the CCA. In June and July 2008 Easdown conducted investigations into PBA’s financial records. Easdown produced a report dated 25 July 2008 (“the Easdown Report”).
The Easdown Report was circulated to TJH and PBA and was considered and discussed at a meeting of the Collaborative Agreement Leadership Team (“CLT”) at its meeting on 28 August 2008. The CLT comprises three representatives of TJH and two representatives of PBA, and is established under the CCA to administer the agreement and “provide guidance and leadership to the parties with respect to the Collaborative Agreement Work.” The CLT Meeting on 28 August 2008 (“CLT‑3”) addressed the issue of overtime, and made a decision about overtime that comprised an amendment of the principles of reimbursement pursuant to cl S7-1.3.2.
After CLT-3 PBA claimed reimbursement on the basis that CLT-3 had decided:
(a) the multiplier should be 1.1 for overtime hours; and
(b) overtime hours comprised hours worked in excess of 45 hours per week.
For a long time thereafter claims by PBA were made, validated, certified and paid on this basis. Much later TJH asserted that this was wrong, and that CLT-3 had in fact agreed that overtime comprised hours worked in excess of 37.5 hours per week. I shall refer to this as “The Overtime Issue”. In these proceedings PBA seeks a declaration in accordance with what it contends was the CLT-3 decision, which it says was confirmed shortly after CLT-3 in an e-mail to the Collaborative Agreement Manager (“CAM”). Alternatively, it seeks a declaration that TJH is estopped from denying that the CLT amended the principles of reimbursement to the effect that the multiplier should be 1.1 for overtime hours and that overtime hours comprised hours worked in excess of 45 hours per week.
After July 2008 Easdown accessed certain records of PBA and validated progress claims. In July 2009 a meeting of the CLT determined that Easdown was not required to conduct audits of PBA’s progress claims until further notice.
In April 2010 the CLT resolved to instruct Easdown to resume investigation and validation of PBA’s progress claims, however, Easdown did not complete any validation of further progress claims and on 23 July 2010 resigned as Collaborative Agreement Auditor.
Subsequently, the third respondent (“BDO”) was approached by TJH to undertake the role of Collaborative Agreement Auditor. It was appointed in October 2010.
BDO sought access to certain records and a dispute arose as to whether PBA was obliged to provide access to them. The contentions of the parties in that regard appear in a schedule to the second further amended defence and counterclaim and it is convenient to refer to this dispute as the “Access to Records Dispute”. The Access to Records Dispute arises principally due to different contentions between TJH and PBA about the basis of PBA’s entitlement to be reimbursed for the costs incurred directly by PBA for the Collaborative Agreement Work.
PBA contends Easdown’s investigations in June and July 2008 were the “Compliance Audits” provided for in cl S7-1.3.1 and that the Easdown Report is the “Compliance Audit Report” referred to in cl S7-4 of the CCA.
It was not until 9 August 2011 that TJH asserted that Easdown did not undertake the Compliance Audits required by the CCA. PBA’s primary position is that Easdown undertook the Compliance Audits required by the CCA. Its alternative position is that TJH is estopped from denying that the Easdown investigations and the Easdown Report produced as a result of them are Compliance Audits for the purposes of the CCA. It is convenient to refer to this aspect as the “Compliance Audit Issue”.
The issue of interpretation
The issue of interpretation centres on whether PBA’s entitlement to be reimbursed the actual cost of personnel performing the Collaborative Agreement Work is governed by the detailed provisions of cl S7-3. This is PBA’s position. TJH contends that cl S7-3 relates only to the calculation of payments on account of PBA’s entitlement, and that PBA’s entitlement to reimbursement is not governed by cl S7-3.
PBA seeks a declaration that the result of multiplying a personnel member’s “Raw Rate” by the applicable multiplier constitutes “actual costs” of PBA for the purposes of cl S7-1 of Schedule 7 of the CCA.
Related to this fundamental issue of contractual interpretation is an apprehension on PBA’s part that BDO (with TJH’s encouragement) has sought access to documents of PBA to which it is not entitled under the CCA because those documents are not related to the calculation of actual costs, as specified in the CCA. An associated issue is PBA’s contention that BDO is seeking certain documents (“the Disputed Records”) on the basis that the multipliers stated in cl S7-3 (and the multiplier for “Consultant Staff (other than Full Time)” determined by Easdown) are not fixed and are subject to audit. PBA seeks declarations to the effect that these multipliers are fixed (having been either agreed in the CCA or determined by Easdown) and are not subject to audit by the Collaborative Agreement Auditor.
The rectification issue
In the alternative, PBA pleads that if on the proper construction of the CCA:
(a) the values of the multipliers are subject to audit by the Collaborative Agreement Auditor; and
(b) the Collaborative Agreement Auditor is entitled to access its records so as to verify the values of the multipliers,
then this is inconsistent with the common intention of the parties, as disclosed in their communications in negotiating the CCA. It seeks rectification of the CCA on the basis that its effect is inconsistent with the consensus reached during those negotiations and the common intention of the parties. It seeks an order that the CCA be rectified by inserting at the end of cl S7-3.1.2 the following:
“Notwithstanding any other provision of this Collaborative Agreement, the value of the multipliers set out in this Collaborative Agreement are not subject to audit by the Collaborative Agreement Auditor, and the value of the multipliers determined by the Collaborative Agreement Auditor during the Compliance Audit are not subject to further audit by the Collaborative Agreement Auditor.”
TJH’s submissions describe the issue of whether the multipliers are “subject to audit” as a “non-issue”. It does not contend that they are, and submits that the “point at issue is whether PBA are obliged to provide BDO with access to their financial and accounting records so that BDO can audit PBA’s actual costs.”
TJH submits that if its view of the interpretation issue is adopted the remedy of rectification is unnecessary and lacks utility. It argues that even if the agreement was rectified in the form sought by PBA, the Collaborative Agreement Auditor can still access the Disputed Records for a variety of purposes, including ascertaining PBA’s “actual costs” which may be very different to the amount that is payable under the CCA on account of PBA’s true entitlement.
TJH opposes PBA’s alternative claim for rectification on a number of grounds. These include that the common intention alleged by PBA was not held by the persons who controlled the conduct of Thiess and John Holland in relation to their entry into the CCA. TJH also pleads that the Court in its discretion should refuse to rectify the CCA because of conduct of PBA that was wanting in good faith and likely to mislead or deceive TJH.
Misleading or deceptive conduct
TJH also relies on PBA’s alleged conduct as constituting a contravention of s 52 of the Trade Practices Act 1974 (Cth). In essence, TJH argues that dealings between the parties in the course of negotiations gave rise to a reasonable expectation that if there had been no examination of the nature described in sub-paragraph 85(r) of TJH’s defence, then PBA would disclose that fact to TJH before it executed the CCA. The examination is pleaded as one involving a careful analysis of the financial records of PBA for a period reasonably close to 2007 by a person with accounting or audit qualifications or experience which had ascertained:
“(i)that multiplying the ‘raw cost’ of PBA’s full time employees who were to perform the design and certification work of the kind described as ‘Collaborative Agreement Work’ in the CCA by a multiplier of 2.8 yielded a figure which was no more than the actual cost to PBA of:
(A) those personnel performing work of that kind; and
(B) overheads related to that work that were specific to the Project; and
(ii)what value of the multiplier would yield a figure which was no more than the actual cost to PBA of those personnel performing the said design and certification work and the said overheads and did not include any recovery of overheads not specific to the Project or any profit.”
TJH pleads that PBA refrained from disclosing that there had been no such examination, that the failure to disclose was not inadvertent and that the conduct was likely to mislead or deceive.
PBA disputes that its conduct gave rise to a reasonable expectation of the kind alleged, and submits that TJH witnesses did not claim to have such an expectation. Further, any failure to disclose was not deliberate.
The issues
Against that background, the substantial issues may be summarised as follows:
1. The interpretation of the CCA’s Commercial Framework;
2. PBA’s alterative claim for rectification;
3. TJH’s discretionary defence to the claim for rectification and its counterclaim on the grounds of misleading or deceptive conduct;
4. The Compliance Audit Issue;
5. The Overtime Issue;
6. The Access to Records Dispute.
These proceedings were commenced by TJH as a result of unresolved disputes over BDO’s access to certain documents. Directions were made for pleadings and TJH in its counterclaim seeks a declaration in relation to certain disputed records. However, resolution of the underlying issue of contractual interpretation and, if necessary, the claim for rectification, may serve to quell at least part of the Access to Records Dispute. TJH and PBA agreed at the conclusion of the hearing on 25 May 2012 that the making of any declarations in relation to the Access to Records Dispute should await the resolution of other issues, and the provision to BDO of an opportunity to be heard concerning the form of any declaratory relief that may affect it. BDO was excused from appearing during the trial. No substantive relief was sought against it, and it indicated, through its solicitors, that it would abide the orders made by the court on the substantive issues that were tried between TJH and PBA.
PART A:THE INTERPRETATION OF THE CCA’S COMMERCIAL FRAMEWORK
The issue of interpretation arises in the context of a dispute over access to PBA records which are sought for a variety of reasons, including management accounts which TJH says will “enable BDO to verify which costs are being claimed in the Element 1 multiplier of 2.8”. More generally, TJH contends that BDO, as the Collaborative Agreement Auditor, is entitled to access such records as are necessary to verify the actual costs incurred by PBA. The Access to Records Dispute prompts consideration of the provisions of the CCA that relate to audits, including the Collaborative Agreement Auditor’s “overriding brief” to audit and verify Consultant Collaborative Agreement Costs and “to ensure that in respect of all payments made pursuant to [the CCA] that [PBA] receives its exact entitlement as set out in Schedule 7.” This, in turn, directs attention to Schedule 7 which governs PBA’s entitlement to compensation.
The issue of interpretation arises in respect of PBA’s entitlement to compensation for the cost of personnel performing the Collaborative Agreement Work. However, resolution of the issue of interpretation has broader implications with respect to reimbursement of other costs, being project-specific overheads and project-specific plant and materials.
The immediate issue of interpretation is whether cl S7-3 with respect to staff rates specifies, and thereby defines, PBA’s entitlement to compensation for such costs, or only governs the quantum of payments to be made on account of PBA’s entitlement to compensation. Expressed differently, the issue is whether PBA’s entitlement to be compensated by being reimbursed for costs incurred directly by it at “actual cost” subject to audit is determined by the application of specific provisions such as cl S7‑3.
TJH’s essential submission is that the meaning of “actual cost” in cl S7-1 is its ordinary meaning, unqualified and unaffected by later clauses such as cl S7-3. According to TJH, cl S7-3 is not concerned with PBA’s entitlement to compensation. Its purpose is submitted to be the calculation of payments which are made on account.
PBA’s position is that while cl S7-1.1.1 sets out the broad compensation framework, later clauses such as S7-3 and S7-4 define what costs are to be reimbursed under Element 1. Clause S7-3 is a contractual prescription that the actual costs of staff are to be calculated in accordance with the formula of “multiplier x raw rate”. PBA submits that the CCA specifies the formula by which its actual costs of personnel performing work are to be calculated for the purposes of Element 1. According to PBA, the product of the formula is PBA’s actual labour and related on-costs. Clause S7-3 defines PBA’s entitlement to be reimbursed for personnel costs, not simply the quantum of progress payments on account of its entitlement. According to PBA, if cl S7-3 was limited to calculating progress payments, then this purpose would be stated, but it is not.
Relevant provisions
In addition to the most relevant provisions which have been quoted in the Introduction, it is necessary to refer to a number of additional provisions which are relevant to the issue of interpretation and provide the context in which the Commercial Framework contained in Schedule 7 falls to be interpreted.
The CCA contains certain “Behavioural Commitments” by which the parties agreed to work together in delivering the Collaborative Agreement Work and to:
“share all risks and opportunities associated with the delivery of the Collaborative Agreement Work except those we have specifically agreed will be retained by one party only.”[2]
[2]Clause 1(b).
The parties agreed to “fully disclose to the other any conflict of interest or duty that exists or may arise in connection with the performance of the Collaborative Agreement Work”.[3] They undertook to establish and maintain “an environment which encourages honest, open and timely sharing of information with respect to the Collaborative Agreement Work.”[4] By cl 1(f) they undertook “to act reasonably and to do all things properly and reasonably within [their] power that are necessary to give effect to the spirit and intent of this Agreement.” Clause 1(g) provides:
“We undertake to act in good faith in conducting all activities arising out of this Agreement and will:
(i) be fair and honest; and
(ii) not impede or restrict each other’s performance.”
[3]CCA, cl 1(d).
[4]CCA, cl 1(e).
Clause 22 creates a “Limited ‘No Blame’ Framework”. Subject to its provisions, the parties stated that they did not “intend to allocate blame or legal liability to Participants for errors, mistakes and poor performance”. However, cl 22 qualifies this by making detailed provision for the allocation of liability for certain design errors.
The day-to-day affairs of the Collaborative Agreement are managed and
co-ordinated by a management team known as the Collaborative Management Team (“CMT”), operating under the leadership of the CAM. The CMT supervises and manages the Integrated Project Team in the performance of the Collaborative Agreement Work. The CMT is made up of persons from each of the Participants.
As previously noted, the CLT is the leadership team that directs and governs the CCA, and comprises three representatives of TJH and two representatives of PBA. The CLT meets at least once every month and, with limited exceptions, every decision by the CLT must be unanimous.
Reference also should be had to the following provisions of the CCA:
(a) Clause 18.1(a) which provides:
“By the last business day of each month (or such other date as decided by the CLT), the Collaborate Agreement Manager will, with input from the Participants, prepare and submit a Payment Certificate to TJH which includes:
(i)costs incurred individually by each Participant, separated into the Airport Link, Northern Busway, and East-West Arterial Gateway (EWAG) elements of the Collaborative Agreement Work; and
(ii)entitlements of the Consultant to Fees and (if applicable) Performance Adjustments.”
(b)Clause 18.1(d) which provides:
“At the frequency specified in the C.A.M.P. or as determined by the CLT, Certificates must be accompanied by a statement by the Collaborative Agreement Auditor confirming that the amounts shown in the certificate are in accordance with the terms of this Agreement.”
(c) Clause 18.3(b) which provides:
“Progress payments by TJH will not be evidence of the value of work, or an admission of liability, or that the work has been executed satisfactorily, but will be deemed to be provisional payments on account and subject to a final verification audit by the Collaborative Agreement Auditor.”
(d)Clause 20.1(a) which provides:
“[The Participants] acknowledge that it is of paramount importance that all commercial aspects of this Agreement are administered in a transparent manner that demonstrates to both Participants that all payments made under this Agreement are in accordance with the terms of this Agreement.”
(e)Clause 20.3(a) which provides:
“Until all payments under this Agreement have been made, the Collaborative Agreement Auditor will have access at all reasonable times to the personnel and Records of the Participants that are related to Consultant Collaborative Agreement Costs pursuant to this Agreement.”
Clause 31.3(a) is an “Entire Agreement” clause which states:
“This Agreement as amended from time to time contains the entire agreement between us in relation to the Collaborative Agreement Work. This Agreement supersedes all prior arrangements whether written or oral and any heads of agreement, letters of intent, representations, warranties, promises, statements, negotiations and other documents in relation to the Collaborative Agreement Work issued or entered into prior to this Agreement.”
Clause 31.3(b) confirms that the provisions of the CCA were not intended to be legally binding until it had been signed on behalf of each participant by a person or persons authorised to represent that participant.
Clause 21 provides for the resolution of disagreements, and requires the parties to use their best endeavours to settle any Collaborative Agreement Disagreement in good faith and in a manner consistent with the Collaborative Agreement Charter. In the event that a dispute cannot be so resolved or if at any time a party considers that the other party is not making reasonable efforts to resolve the dispute, the party may by notice in writing refer such dispute to arbitration or litigation.
The provisions of the CCA, including the Behavioural Commitments contained in
cl 1, the provisions for the sharing of risks and opportunities and the three-limb compensation model in Schedule 7 comprising reimbursement of costs, a fee to cover normal profit and a contribution towards recovery of non project-specific overheads and a share of “gain” or “pain” (depending on how the parties’ collective actual performance compared with pre-agreed targets), permit the CCA to be described as a “relationship-based agreement” or a form of “soft-contracting”. These labels are used in contradistinction to other labels such as “hard-dollar contract” to provide a general description of the contract. The CCA is styled a “Collaborative Consultancy Agreement”. The contract’s detailed provisions in relation to the parties’ relationship, delivering the Collaborative Agreement Work and the compensation for that work are more important than any label. Relevantly, cl 31.4(a) states:
“This Agreement is not intended to create nor will it be construed as creating any legal partnership, joint venture or fiduciary relationship between us and it will not give rise to any obligations between us apart from those obligations expressly stated in this Agreement or imposed by law.”
The parties’ submissions on the issue of interpretation
The parties’ extensive submissions on the issue of interpretation have been briefly summarised above. TJH submits that the expression “actual costs” in the Commercial Framework bears its ordinary meaning, “actual” meaning “existing in act or fact; real.”[5] It contends that the interpretation asserted by PBA strains against the balance of the CCA, is not in accordance with what commercial people would understand the words to mean and is not consistent with “business commonsense”. It submits that if PBA’s interpretation were open, it would not be the “more commercially sensible” construction.
[5]Shorter Oxford Dictionary 6th ed 2007.
According to TJH, it made good commercial sense for the parties to agree a process for calculating the progress payments that was simple, leaving any debate about the overall accuracy of the interim calculations to occur outside the progress payment regime. In those circumstances, and in the context of the balance of the CCA, the “evident purpose” of cl S7-3.1.2 (and cl S7-3.1.3 and cl S7-3.1.4) was to provide a simple way of calculating progress payments, without the burdensome process of auditing PBA’s exact costs every month.
PBA responds by reference to the terms and structure of Schedule 7, which after stating in cl 7.1 the model for compensation, later specifies the costs of personnel and in cl S7-3.1.2 prescribes how these costs are to be calculated. In doing so it prescribes that “Actual Element 1 rates” for PBA staff will be calculated in accordance with the stated formula. The evident intention is that the “actual” staff rates are to be calculated as “multiplier x raw rate” so that the product of this formula is taken to be the actual staff rates.
As to TJH’s “business commonsense” argument, PBA responds that it is clearly not commercially sensible to leave such a fundamental point, the amount of compensation payable, undetermined until an audit some time after the work has been undertaken. This is particularly the case where there may be uncertainty and difficulty in drawing a line between project specific on-costs and non
project-specific on-costs. Accordingly, the commercially sensible approach was to define at the outset how such costs are to be calculated, rather than to leave it as a matter of potential dispute.
PBA also argues that the provisions for payment “on account” of TJH’s entitlement are on account only until verified by the Collaborative Agreement Auditor. In any event, in the case of staff rates, PBA’s entitlement is to be calculated in accordance with the specific provisions of Schedule 7. While in each case the “Raw Rate” is to be confirmed during the Compliance Audit, the other part of the formula, the multiplier, is not required to be confirmed or otherwise reviewed. The Schedule’s detailed provisions in relation to fixed multipliers, for one other multiplier to be “determined by the CCA Auditor” and for “raw rates” to be confirmed by the Collaborative Agreement Auditor are said to not sit comfortably with “TJH’s theory that all payments, whether verified or not, are subject to some universal or overriding right of open book audit.” PBA contends that it makes no business sense for the parties to establish the ground rules for compensation at the outset if at any time thereafter the Collaborative Agreement Auditor was to carry out some overriding or universal audit.
As noted, TJH submits that the formula to calculate actual personnel and other costs in cl S7-3 and cl S7-4 is only a calculation for the purpose of provisional progress payments. In response PBA makes a number of submissions. It is necessary to refer to only some of them. First, PBA submits that there is nothing express or implied in cl S7-3 to indicate that it applies only to progress payments. Second, provisions in the CCA for progress payments (cl 18.3) and providing for audits do not suggest that the multipliers and raw rates are provisional. Thirdly, the use of the expression “Actual Element 1 rates ...” in cl S7-3.1.2 is inconsistent with TJH’s argument. If cl S7-3.1.2 was concerned with the calculation of progress payments it would read “For the purposes of progress payments, Element 1 rates ... will be calculated as ...”. Fourthly, PBA’s interpretation envisages that Element 1 payments will be audited, except for the multiplier. On PBA’s interpretation, the raw rate, the hours worked and every cost claimed for disbursements is subject to audit or verification. Accordingly, the staff rates are subject to audit.
TJH argues that PBA’s preferred interpretation gives no effect to the detailed description of Element 1 in cl S7-1 in relation to the parties’ respective obligations and entitlements concerning payments under the CCA, and no effect to the reflection of that in the payment provisions of cl S7-9. These provisions address the quantum of payments prior to practical completion and upon practical completion (when there is a provisional estimate of the net amount of the gain/pain under Element 3), and also provide for a final payment calculated by the addition of the three elements from which the total amount already paid is deducted. The total cost of items reimbursable under Element 1 for the purpose of the final payment is based on “actual cost of items already invoiced to and/or paid by the Consultant”, with accruals being not acceptable. TJH relies upon the reference to “actual cost” in the payment provisions of cl S7-9 as a further indication that the expression “actual cost” is not defined by reference to the detailed provisions of cl S7-3 and cl S7-4.
TJH also argues that PBA’s interpretation would create an inconsistency between
cl S7-1.1.1 and cl S7-3.1.2, which could not be reconciled so that the later clause should be rejected as repugnant and the earlier clause should prevail. More generally, and importantly, it argues that an interpretation of cl S7-3.1.2 that would entitle PBA to recover profit and non project-specific overheads under Element 1 would be repugnant to the substance of the contract in relation to compensation.
PBA responds that to suggest, as TJH does, that cl S7-1.1.1 should prevail over the later provisions in determining PBA’s entitlements misconceives the relationship between these provisions. According to PBA, cl S7-1.1.1 prescribes the model for compensation and later clauses, including cl S7-3, contain specific provisions about how these actual costs are to be calculated. These include the detailed provisions of cl S7-3.1.3 and cl S7-3.1.4 which define the items that are included in the Element 1 staff rates and items that are not included in the Raw Rate. There is no inconsistency between the earlier clause that prescribes the model for compensation and later detailed provisions which prescribe the method of calculating PBA’s actual costs. Contrary to TJH’s submissions, the formula does not entitle PBA to recover profit and non project-specific overheads. The parties agreed on rules specifying or defining what its actual costs (including staff and project-specific overheads) are to be and how they are to be measured for the purpose of the agreement. PBA submits that the parties have agreed to a method for the reimbursement of PBA’s costs. Schedule 7 in effect says, “We will reimburse your costs at these rates”.
PBA’s submissions acknowledge that there is obviously no precision in the application of a multiplier and there is no evident intention that it be precise. PBA notes that even in the case of an Alliance Agreement (which might allow parties to agree multipliers before entry into such an agreement on the basis of an Establishment Audit that is undertaken before the agreement is executed) it is plain that costs vary from time to time and so figures fixed by or agreed after an Establishment Audit can only be proxies for anticipated future costs.
It is to avoid the costs, uncertainty and potential for dispute associated with the calculation of actual cost at the end of a long project that parties agree in a case such as this to a formula for the calculation of actual costs, and thereby define the meaning of “actual cost” for the purpose of their agreement. This definition is of actual costs for the purpose of the agreement, not simply the regime for progress payments.
Discussion – the issue of interpretation
I conclude that the interpretation contended for by PBA best accords with the words and structure of the provisions of the CCA that determine PBA’s compensation. Contrary to TJH’s submissions, PBA’s interpretation accords with what commercial people would understand Schedule 7 as a whole to mean, and in that regard, makes commercial sense. It makes sense for parties to an agreement of this kind to define the consultant’s entitlement to be reimbursed costs incurred directly in performing the work. If the provisions of cl S7-3 and cl S7-4 were not intended to define PBA’s entitlement to reimbursement of staff and other costs, and were included only for the purpose of progress payments on account of its entitlement, then one would expect this to be stated, for example, by the inclusion of words at the start of
cl S7-3.1.2, such as, “For the purpose of payments made ...”. Instead, cl S7-3.1.2 refers to “Actual Element 1 rates ...” and this provision specifies and thereby defines PBA’s actual costs, with audits to ensure that PBA receives its entitlement as set out in Schedule 7.
The interpretation which I favour is not inconsistent with the apparent intention of the parties, which was to define PBA’s entitlement to compensation in accordance with the “3-Element” compensation model by the detailed provisions of Schedule 7. Such an interpretation does not ignore and is not repugnant to the term “actual cost” in cl S7-1.1.1 or in cl S7-9. Instead, it gives meaning to those words according to the terms and structure of Schedule 7 viewed as a whole. Had Schedule 7 only included cl S7-1, with its reference to “actual cost”, then the parties may have committed themselves to a broad-ranging inquiry into the actual costs incurred by PBA over the life of this lengthy project followed by litigation of that issue if the amount could not be agreed. This would include extensive inquiry over the preceding years into whether certain on-costs constituted the actual cost of personnel performing the work. It would include vexed issues of whether costs associated with the project, such as the cost of making staff who were employed on it redundant and the cost of redundant office space which was leased for the purpose of performing the Collaborative Agreement Work, constitute actual costs for which PBA was entitled to reimbursement. Any inquiry by an auditor into PBA’s actual cost would be followed by arbitration or litigation if the parties could not agree what PBA’s actual costs were. These inquiries and dispute resolution processes would be required to be undertaken to determine PBA’s actual costs in the absence of provisions that defined them.
Viewed in isolation, cl S7-1 leaves actual costs to be determined according to its ordinary meaning after the event in litigation if the parties are unable to agree. However, the inclusion of additional provisions in Schedule 7 which specify, among other things, a formula for the calculation of PBA’s personnel costs, indicates that the parties chose to define PBA’s entitlement to be reimbursed by reference to these provisions.
The terms of cl S7-3 and cl S7-4 govern PBA’s entitlement to reimbursement, not simply the mechanics for progress payments.
TJH submits that the “evident purpose” of the provisions about staff rates was to calculate progress payments. But this purpose is not evident from the words of
cl S7-3 which, when read in the context of cl S7-1, define the terms of PBA’s compensation.
The provisions of the CCA, including cl S7-1.3.3, which state that payments made by TJH are “on account”, require consideration of the entitlement of PBA in respect of which payment is on account. Depending on the circumstances, a payment on account may be subject to verification of an entitlement to the payment or the entitlement to compensation. In general terms, the CCA provides for progress payments which are “deemed to be provisional payments on account and subject to a final verification audit by the Collaborative Agreement Auditor”.[6] The evident purpose of such provisions is to ensure a regular cash flow to PBA during the progress of the work. It is unnecessary to refer to the extensive case law cited in TJH’s submissions to the effect that progress payments are advanced to be treated as sums paid on account of whatever the contractor might eventually be entitled to recover under the contract, and that such payments are provisional and subject to adjustment at the end of the contract. It is sufficient to observe that payments are on account of whatever PBA might eventually establish its entitlements to be.
[6]Clause 18.3(b).
The CCA makes detailed provision in relation to Payment Certificates and also for a Final Payment Certificate. Payments made in respect of the Final Payment Certificate are deemed to be in full and final settlement of all entitlements to compensation arising pursuant to the Commercial Framework, except for further payments which become due under provisions for pass-through insurance payments or matters that have been deliberately or fraudulently concealed.[7] Again, the reference to entitlements to compensation directs attention to those parts of Schedule 7 in which PBA’s entitlements are specified.
[7]CCA, cl 18.3(c).
Any audit that verifies the amount of the final payment must have regard to PBA’s entitlement to be reimbursed for the actual costs of items that are reimbursable to it under Element 1, and the actual cost of those items is specified and thereby defined by the specific provisions of Schedule 7.
In the case of compensation for the costs incurred directly by PBA of personnel performing the Collaborative Agreement Work, project-specific overheads and project-specific plant and materials, these costs are defined by cl S7-1, cl S7-3 and cl S7-4.
TJH’s argument that to define PBA’s “actual cost” by reference to these provisions permits it to be reimbursed in amounts that are more or less than its actual costs, contrary to the commercial objective of the CCA and the apparent intent of the parties, tends to ignore that the parties, by their agreement, specified or defined how actual costs were to be calculated. PBA’s entitlement is to reimbursement at “actual cost” as defined in the agreement, not the actual costs which might be determined by a process of arbitration or litigation in the absence of those specific terms.
The “actual costs” as defined by the parties’ agreement and calculated in accordance with agreed multipliers might differ from “actual costs” as determined by a lengthy process once all of those costs were audited and litigated. TJH argues that this fact supports the conclusion that the relevant provisions, including the application of agreed multipliers, relates to progress payments. According to TJH it makes commercial sense for the parties to have PBA’s actual costs determined according to the ordinary meaning of “actual cost” once those costs are incurred, if necessary in litigation after the conclusion of the project and without reference to cl S7-3 and cl S7-4.
This argument is met, in my view, by PBA’s submission that it is not commercially sensible to leave such a fundamental point, namely the amount of compensation payable, undetermined until an audit some time after the work has been undertaken, and that a commercially sensible approach, supported by the terms of the agreement, is to define at the outset how such costs are to be calculated.
PBA’s interpretation reflects a commercially sensible approach of defining in the agreement how actual costs are to be determined, thereby permitting progress payments to be made on the basis of such a defined entitlement, rather than leave PBA’s actual costs to be worked out after the project is completed.
The proper interpretation of the contract is not determined in this case simply by competing contentions about which interpretation is the “more commercially sensible” construction. It is determined by the words of the agreement that were chosen by the parties, and the structure of Schedule 7. By their words, the parties stated the compensation model and how each of the elements of that compensation model was to be determined. Element 1 defines PBA’s entitlement to be reimbursed at “actual cost” by reference to all of Schedule 7, not simply the general words of cl S7-1. In respect of personnel costs, PBA’s costs were specified to be calculated according to the formula in cl S7-3.1.2 with the items to be included in the Element 1 staff rates further defined by cl S7-3.1.3 and cl S7-3.1.4.
Consequences of this interpretation
One immediate consequence of the interpretation of the CCA that I have adopted is to justify granting PBA declaratory relief. PBA’s further amended statement of claim sought a declaration that:
“The result of multiplying a personnel member’s ‘Raw Rate’ by the applicable multiplier constitutes ‘actual costs’ of PBA for the purposes of S7-1 of Schedule 7 of the CCA.”
Subject to hearing the parties about the form of this declaration, and any other declarations that may be appropriate as a result of my decision on the issue of interpretation, I intend to make such a declaration.
Resolving the issues of interpretation also has implications for the Access to Records Dispute which I will address further at the conclusion of this judgment. In simple terms, if BDO has sought access to documents in order to determine PBA’s “actual costs” on the basis that they are determined other than in accordance with the actual costs specified in cl S7-1, cl S7-3 and cl S7-4 of Schedule 7 of the CCA, then BDO’s requests may have extended beyond documents that are related to the Consultant Collaborative Agreement Costs.
PBA seeks declarations that the figure stated in the CCA as the relevant Element 1 multiplier:
(a) is a figure agreed by the parties to the CCA; and
(b) is not subject to audit by the Collaborative Agreement Auditor.
TJH submits that such declarations are unnecessary. TJH accepts that the multipliers are agreed and describes the issue of whether the multipliers are subject to audit as being a “non-issue”, since TJH does not contend that they are. I consider that declarations to the effect that the multipliers are agreed and are not subject to audit by the Collaborative Agreement Auditor have utility in quelling at least part of the Access to Records Dispute.
There remains scope for audits of payments made and to be made so as to ensure that payments accord with PBA’s entitlements, as set out in Schedule 7. If PBA has been paid in accordance with its entitlements, as defined in Schedule 7, and the Collaborative Agreement Auditor has certified to this effect, then there may be no practical need for BDO to revisit these payments. PBA will have been paid in accordance with its entitlement. If, however, there has been an error in the making of payments and PBA has been paid more or less than its entitlement, then it should be open to the Collaborative Agreement Auditor to investigate the matter. Also, if for example, the CLT agrees to amend the principles of reimbursement determined during the Compliance Audits and these amendments have retrospective effect, then it would be necessary for the auditor to investigate payments that have been made and validate future payments to ensure that payments are in accordance with PBA’s entitlements.
If the CCA has been administered properly then payments on account of entitlements under Element 1 should match PBA’s entitlement to be reimbursed its actual costs under this element. Elements 2 and 3 are subject to separate calculations and may affect the amount of any final payment.
On the interpretation that I have adopted, the Collaborative Agreement Auditor has a role in determining PBA’s actual costs as calculated in accordance with the terms of cl S7-1, cl S7-3 and cl S7-4. This does not extend to an investigation of PBA’s “actual costs” on a different basis, and it does not require the auditor to subject the agreed multipliers, or a multiplier determined by the Collaborative Agreement Auditor in respect of consultant staff (other than full time), to an audit to determine their appropriateness.
The auditor has functions as part of its overriding brief to audit and verify Collaborative Agreement Costs and to ensure that in respect of all payments made pursuant to the CCA PBA receives its exact entitlement as set out in Schedule 7. These include, in the case of Element 1, audits of the Raw Rate, the hours worked, costs claimed for project-specific overheads and project-specific plant and materials. These audits are necessary to determine PBA’s entitlements and also to validate payments made pursuant to the CCA since, by cl S7-1.3.2, all payments made pursuant to the agreement are subject to validation by the Collaborative Agreement Auditor that they are in accordance with the terms of compensation set out in Schedule 7 and the principles of reimbursement determined during the Compliance Audits or those principles as amended by the CLT. The audits that the Collaborative Agreement Auditor is authorised to undertake in order to calculate PBA’s entitlements and to validate that payments are in accordance with those entitlements require the auditor to access PBA’s records. So too do other tasks entrusted to the Collaborative Agreement Auditor.
Whilst the Collaborative Agreement Auditor has a number of functions to perform under the CCA, it is not part of the auditor’s role to revisit agreed multipliers to ascertain if their application to Raw Rates yields a product that differs from PBA’s “actual costs” as determined without reference to the specific provisions of Schedule 7 about how those costs are to be determined. It is not part of the Collaborative Agreement Auditor’s overriding brief, or any part of any more specific brief under the CCA, to undertake some broader audit of PBA’s actual costs without regard to the fact that the whole of Schedule 7, and not just cl S7-1, defines what they are for the purposes of the CCA.
PBA is entitled to declarations reflecting the interpretation of the CCA which I have made. It is also entitled to declarations of the kind sought by it to the effect that each multiplier is a figure agreed by the parties to the CCA and is not subject to audit by the Collaborative Agreement Auditor. Subject to hearing the parties as to the form of declaration, it seems appropriate to make a declaration in the form sought in paragraph 78(b) of the further amended statement of claim that:
“The Collaborative Agreement Auditor is not entitled to access to the personnel and records of PBA so as to verify the figure of 2.8 specified in S7-3.1.2 as the Element 1 multiplier for consultant full time staff.”
Subject to further submissions concerning the form of declarations, there should be a declaration of the kind sought by PBA in its final submissions, namely that:
“On its proper construction, cl 20.3 of the CCA does not permit the Collaborative Agreement Auditor access to personnel and records related only to the multipliers specified in S7-3.1.2 or determined by Easdown pursuant to S7-3.1.2.”
The resolution of the issue of interpretation may not resolve all of the matters in issue in the Access to Records Dispute. However, the declarations made in respect of the issue of interpretation should make it clear to the Collaborative Agreement Auditor that its investigations and the records to which it is entitled to have access are limited by the terms by which the parties chose to define PBA’s entitlement to compensation for actual costs.
I conclude that upon a proper interpretation of the CCA, the figures of 2.8, 1.5 and 1.1 specified in cl S7-3.1.2 are agreed by the parties to the CCA and not subject to audit by the Collaborative Agreement Auditor. If the determination made by Easdown of a multiplier for consultant staff (other than full time) is found to have been determined as part of the Compliance Audits, then that multiplier will not be subject to audit by the Collaborative Agreement Auditor.
The agreed multipliers are not subject to audit so as to verify that the figures of 2.8, 1.5 and 1.1 are reflective of actual costs. Once the multiplier for consultant staff (other than full time) is determined during the Compliance Audits, it is not thereafter subject to further audit for the same purpose.
BDO is not entitled to access the records of PBA in order to determine “that the Element 1 multiplier of 2.8 comprises actual Element 1 costs”. The figure of 2.8 was agreed by the parties and is not subject to revision on the grounds that the auditor is of the opinion that it is too high or too low to compensate PBA for its actual costs. The Collaborative Agreement Auditor is entitled to know the items that are included within the multiplier of 2.8 so as to ensure a demarcation between the items reimbursable under Element 1 and items that are deemed to be covered under Element 2. The CCA itself identifies items that are included in the Element 1 staff rates and items that are not included in the Raw Rate. The Compliance Audits and the Compliance Audit Report should have clarified such matters. The CCA provided for the parties to develop procedures and systems to implement the intent of the terms of compensation in Schedule 7 and which meet the requirements of the Collaborative Agreement Auditor. If, however, the Collaborative Agreement Auditor remains in doubt concerning the items that are included within Element 1 staff rates, items that are reimbursable as project-specific overheads and items that are deemed to be covered under Element 2, then the Collaborative Agreement Auditor may need to undertake inquiries and investigations so as to clarify these matters.
Element 1 defines PBA’s entitlement to be reimbursed at “actual cost” by reference to all of Schedule 7, not simply the general words of cl S7-1. In respect of personnel costs, PBA’s costs were specified to be calculated according to the formula in cl S7-3.1.2 with the items to be included in the Element 1 staff rates further defined by cl S7-3.1.3 and cl S7-3.1.4.
The reasons for the interpretation favoured by me appear earlier in these reasons. In essence, I have found that the specific provisions of cl S7-3 and cl S7-4 specify and thereby define PBA’s entitlements, and not simply the calculation of progress payments that are made on account of those entitlements.
This interpretation affects the records to which the Collaborative Agreement Auditor is entitled to access. The prescribed functions of the Collaborative Agreement Auditor do not extend to undertaking an open-ended investigation into PBA’s actual costs on the basis that such costs might be determined without reference to the specific terms of Schedule 7.
The interpretation submitted by PBA accepts that the agreed multipliers are not necessarily reflective of actual costs. The parties, by the words they chose in their contract, defined PBA’s actual costs by reference to a multiplier, rather than leaving them to be determined by some other process which, in the absence of agreement between the parties, would lead the actual costs of PBA over the course of a four year project being determined by arbitration or litigation. The fact that the PBA approach to interpretation accepts that the multipliers are not necessarily reflective of actual costs is not a compelling reason to reject that interpretation. Any agreed multiplier, if it defines a party’s entitlement, has the potential to be not reflective of actual costs as determined according to their ordinary meaning. The same could be said of an agreed multiplier that follows a full open-book Establishment Audit before an agreement is made. It is obvious that costs may vary from time to time and so fixed multipliers (as in the CCA) or multipliers that are agreed after an Establishment Audit in the case of an Alliance Agreement can only be proxies for anticipated future costs.
Because of my conclusions on issues of interpretation it is unnecessary to grant PBA’s alternative claim for rectification. However, for the reasons given by me, had I reached a different conclusion about the agreed multipliers, then PBA would have established its alternative claim for rectification.
That claim for rectification was not defeated by the discretionary defence raised by TJH since PBA did not engage in misleading or deceptive conduct by not disclosing that there had not been an 85 (r) examination.
TJH’s counterclaim for this alleged contravention of the Trade Practices Act 1974 (Cth) is dismissed.
The investigations conducted by Easdown in June and July 2008 were Compliance Audits within the meaning of cl S7-1.3.1 and constituted the Compliance Audit referred to in cl S7-3.1.2.
PBA has established an entitlement to a declaration in its favour in relation to the Overtime Issue. I have concluded that CLT-3 agreed that a multiplier of 1.1 should apply for overtime hours, being hours worked in excess of 45 hours per week, save for senior staff (being Associates and Executives) who would not charge for hours worked above 45 hours per week. The agreed multiplier of 2.8 continued to apply for hours worked up to and including 45 hours.
Orders
Subject to hearing the parties as to the form of declarations, PBA should have declarations substantially in the form of sub-paragraphs 78(a), (aa), (ab), (ac), (b), (ba) and (k) of the further amended statement of claim to reflect my determination of the issues of interpretation. As to the Compliance Audit Issue, in lieu of the form of declaration sought in sub-paragraph 78(c), I propose a slightly modified declaration, namely that:
“The Easdown investigations referred to in paragraph 7 of the further amended statement of claim constitute Compliance Audits for the purposes of cl S7-1.3.1 and the Compliance Audit for the purpose cl S7-1.3.2 of Schedule 7 of the CCA.”
Also, I will declare that the CCA does not entitle BDO, as the Collaborative Agreement Auditor, to now carry out a Compliance Audit within the meaning of cl S7-3.1.2, or Compliance Audits within the meaning of cl S7-1.3.1.
As indicated, to reflect my determination of the Overtime Issue there should be a declaration to the effect that CLT-3 decided that the multiplier should be 1.1 for all overtime hours and that overtime hours comprised hours worked in excess of 45 hours per week, save for senior staff (being Associates and Executives) who would not charge for hours worked above 45 hours per week.
I will hear the parties on 16 August 2012 in relation to the terms of declaratory and other orders and, if required, the issue of costs.
5
0
1