| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : TME GROUP PTY LTD -v- H ROLF ENGINEERING SERVICES PTY LTD [2012] WADC 173 CORAM : WAGER DCJ HEARD : 11, 12, 26 & 27 APRIL & 4 SEPTEMBER 2012 DELIVERED : 12 DECEMBER 2012 FILE NO/S : CIV 2891 of 2008 BETWEEN : TME GROUP PTY LTD Plaintiff
AND
H ROLF ENGINEERING SERVICES PTY LTD
Defendant
Catchwords: Contract partly oral partly written - Determination of preliminary issues - Scope of works - Was time of the essence - Was the contract an entire contract Legislation: Nil Result: Preliminary issues determined
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Representation: Counsel:
Plaintiff : Mr T H Offer
Defendant : Mr G M Abbott
Solicitors:
Plaintiff : Lewis Blyth & Hooper
Defendant : Hopgood Ganim
Case(s) referred to in judgment(s):
Attorney General of Botswana v Aussie Diamond Products Pty Ltd [No 3] [2012] WASC 141
BP Refinery (Western Port) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Cordon Investments Pty Ltd v Lesdor Property Pty Ltd [2012] NSWCA 184
Douglas v Cicirello [2006] WASCA 226
Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234
McCourt v Cranston [2012] WASCA 60
MR & RC Smith Pty Ltd t/as Ultra Tune (Osborne Park) v Wyatt [No 2] [2012] WASCA 110
Reed v Peridis [2005] SASC 136
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1 WAGER DCJ: H Rolf Engineering Services Pty Ltd (HRES) were engaged by Barrick Mining to assess concrete remediation work that they needed to have performed at the Plutonic Gold Mine processing plant. TME Group Pty Ltd (TME) conducted business in concrete remediation. TME entered into a contract with HRES to carry out the required remediation work at the Plutonic gold mining process plant. The parties agreed that a contract in relation to the remediation work was formed on or about 30 August 2007 and that the agreement was partly written and partly oral however the terms of the contract are in issue.
2 This matter was listed as a trial of preliminary issues to resolve 20 questions relevant to the contract proposed by the parties in an agreement of orders dated 20 June 2011. 3 Although the preliminary hearing related to 20 questions, once the trial of preliminary issues had commenced it became clear that those questions were not the relevant ones. Both parties sought to amend their pleadings and vary the questions to be answered. After a protracted period I made orders on 4 September 2011 allowing the parties to have leave to file substituted preliminary issue questions and to file a minute of amended substituted statement of claim and an amended substituted defence and counterclaim. The filed documents stand as substituted documents for the purposes of these proceedings. 4 Accordingly the matters to be determined at the trial of preliminary issues are: 1. the identification of the scope of the works that was to be performed pursuant to the contract (the Contract); 2. the identification of the works, if any, that were agreed to be performed pursuant to any of the 'variations' and which were not included in the works under the Contract; 3. whether the Contract included a term that the plaintiff was to perform the works in accordance with Australian standards or industry standards; 4. whether the Contract included a term that all works had to be carried out by skilled tradespeople or under the supervision of a skilled tradesperson; 5. whether the Contract included a term that all works had to be completed by the end of the shutdown of the processing operation (Page 4)
on the site, and whether, if it was, time was of the essence in that regard; 6. whether the Contract included a term that the works be carried out in accordance with a fixed timetable and whether, if it was, time was of the essence in that regard; 7. whether the Contract was an 'entire' or 'divisible' agreement; and 8. whether the rate for any of the 'variations' planned as in 'variations 4, 4A and 4B' was fixed by agreement or whether it was determined on some other basis and, if so, how was the relevant rate to be determined. 5 I will set out the agreed factual history between the parties, the evidence led in relation to matters in dispute and my findings in relation to the eight matters to be determined.
Factual history - matters not in dispute 6 In 2006 and 2007 Barrick Mining operated the Plutonic gold processing plant. The processing plant had been constructed in 1994 and was situated 600 km north-east of Perth. Structurally the plant consisted of two ball mills, the east ball mill and the west ball mill, a semi-autogenous grinding mill (SAG) and a primary crusher that contained a steel structure known as a run of mine (ROM) bin. 7 In 2006 Barrick Mining engaged Savcor Finn Pty Ltd to perform a reinforced concrete condition survey and prepare a report about the state of the concrete works at the plant (report August 2006, exhibit 1). 8 The report concluded that there was concrete deterioration at the processing plant and that remedial resolution to areas of concrete deterioration and corrosion of embedded reinforcing steel needed to be completed in the near future to prevent further concrete deterioration. 9 The deterioration reported was noted as being expansive cracking, delamination and spalling of covered concrete associated with embedded reinforcement corrosion. It was evident in various areas along the structure but was most significant in the SAG mill (exhibit 1, page 11 and pages 3 - 5). The report recommended that conventional repairs should be undertaken utilising sacrificial anodes to optimise the repair life expectancy and delay the formation of insipient anodes. The application of an anti-chloride penetrating primer and elastomeric topcoat to the (Page 5)
concrete surfaces to prevent the ingress of saline process/wash water was highly recommended (exhibit 1, page 11). 10 Barrick Mining engaged HRES to perform, amongst other things, the recommended concrete remediation works at the processing plant. The director of HRES, Mr Rolf, formed the opinion that the work required on the plant included: (i) removal of all delaminating and spalling cover concrete; (ii) removal of all loose grout and all grout higher than the associated underside of all steel plates for the mill's drive trains; (iii) removal of all concrete subjected to impact from the ROM bin by way of a rectangular cut-out and placement of a 50 mm grout cover; and (iv) treatment of all exposed reinforcement steel work and the replacement of all cover concrete. 11 Mr Rolf chose to engage a sub-contractor to perform the remediation work and arranged for Mr Gray who was the manager of TME's concrete repair division to attend the site on behalf of TME in order to physically assess the work. TME was also to confirm the areas that required concrete remediation. Mr Gray attended the site in July 2007 and carried out an assessment of the areas requiring remediation by looking at the area to see if it had deteriorated or by carrying out a drummy test that involved tapping on the concrete with a hammer to determine whether it gave off a hollow sound consistent with deterioration. Mr Gray carried out the breakout work on the damaged areas with the assistance of Mr Dieter Posthausen who was an engineering consultant and the owner of DIMA Consulting that had also been engaged by HRES to determine the scope of work that needed to be undertaken in order to remediate the deteriorated concrete at the plant. 12 The areas identified by Mr Gray and Mr Posthausen were marked by paint from a spray can that was applied to the outer extent of the drummy concrete. However some other areas requiring remediation were marked with a painted cross and there were also areas that were so obviously in a poor condition that they were clearly to be the subject of remediation regardless of whether they were marked by paint or not. TME charged and was paid an hourly rate in respect of the breakout work that was carried out and completed over a three-day period in July 2007. (Page 6)
13 While Mr Gray was carrying out the breakout work HRES invited TME to quote on the remediation work required to be carried out on the two ball mills and the SAG mill, however HRES was not clear about the precise details or quantity of work that HRES wanted performed. Mr Gray had a general idea of what was required because he had carried out the breakout work in July 2007 and had had a three-day opportunity to assess the full scope of the concrete remediation work that would have to be performed and determine the depth to which the concrete needed to be remediated. 14 Mr Gray agreed to provide a quotation in relation to the remediation work on the ball mills being quotation C61. After providing C61 Mr Gray was then asked to provide a further quotation for repairs to the primary crusher. The quotation included remediation work, the preparation of a void and the related finishing of the surface. Scaffolding was required for the work to be carried out. The quotation document prepared relating to the primary crusher was C66. 15 Mr Gray returned to the mine site again in late August 2007. At this time he was requested to provide a combined quotation in respect of all of the work to be performed. He prepared a single draft quotation being C76 that addressed the scope of works in respect of the earlier quotations and incorporated the quotation C66. The contract price proposed in respect of C76 was $138,000 plus GST. 16 Following the presentation of C76 to HRES Mr Gray and Mr Rolf carried out a further inspection of the site and, as a result of discussions during their inspection, Mr Gray increased the quotation price by $12,000 to $150,000 plus GST. (Page 7)
17 The budget estimate for (C66) was as follows: (Page 8)
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18 The final budget estimate (C76) was as follows: (Page 10)
19 There is no dispute that C76 (incorporating C66) is the written part of the contract between the two parties. The parties also agreed that some terms of the contract were oral. The scope of the terms and the oral terms are in dispute.
The disputed issues
The evidence 20 The only evidence called at the trial of the preliminary issues was from Mr Gray on behalf of the plaintiff and from Mr Rolf on behalf of the defendant. (Page 11)
Mr Gray 21 Mr Gray was employed from April 2007 until April 2008 as the manager of both TME's concrete repair division and the blasting and painting division. TME's core business worldwide was relining of mills. The divisions he managed were quite small, separate niche divisions. Mr Gray had skills and experience in concrete remediation having had 22 years of technical experience. 22 Mr Gray had an opportunity to assess the work required when he carried out the breakout work in July 2007 however he stated that he did not have an opportunity to assess the full scope of the concrete remediation that was required nor was the full scope of the work clarified by HRES at that time. Mr Gray said that it was only after he completed the breakout work in July 2007 that Mr Posthausen telephoned him and advised that TME would be asked to quote on the concrete remediation work however no specific details of what was required were provided over the telephone. 23 Mr Gray's evidence was that he went to the site on a second occasion in July 2007 after completing the breakout work and after preparing a first budget estimate C61 in respect of remediation work on the mills. C61 refers to a 'plutonic mine and the upcoming 3 day shutdown' consistent with an understanding that the work would have to be performed during the shutdown. The duration quoted is 'we to complete the above scope of work within 3 days'. 24 On the second occasion in July 2007 Mr Gray inspected the primary crusher and prepared TME budget estimate C66 in respect of the primary crusher. In order to prepare the C66 quotation Mr Gray calculated an estimate of the hours required to undertake the work over a four-day period taking into account the scope of the work that had been specified by HRES. Prior to the preparation of C66 Mr Gray had been advised that the mine site would be shut down for a period of 18 days so that the work on the primary crusher could be carried out because the work could only be performed when the site was shut down. 25 It is for this reason that C66 states 'We to complete the above scope of work within 4 days' in respect of the primary crusher however the words in relation to the shutdown commitment are the same as on C61, that is, plutonic mine future four-day shutdown. The word 'future' rather than 'upcoming' is used. I find that in the circumstances the meaning is identical. The duration quoted is 'we to complete the above scope of work within 4 days'. (Page 12)
26 In cross-examination Mr Gray initially denied that he had factored in to the quotation that at least some of the work to be performed pursuant to C66 would have to be performed on nightshift, however he accepted that the TME quotation that referred to a breakdown of costs of $51,736, being an identical sum to that quoted in C66, related to quotation C66. The breakdown of costs quotation made reference to a night crew supervisor being required for 55 hours and a nightshift special applicator being required for 55 hours. In cross-examination Mr Gray conceded that the quotation in respect of nightshift was consistent with HRES requesting that at least part of the work be performed at night. The quotation also included a breakdown of labour costs for dayshift. The dayshift hours were the majority of the hours quoted. The quotation is consistent with an understanding that the work had to be performed over a four-day period with night work and day work being required. Given that 55 hours, when divided by four, provides for 14 hours each night over a four-day period was quoted. 27 Mr Gray returned to the site again after the end of July but before 30 August 2007 in order to take core samples of the concrete supporting the SAG mill. He carried out the work at the request of the maintenance manager from Barrick Mining, Mr Reynolds. Mr Gray did not receive any further direction in relation to the scope of the work from HRES relevant to the final quotation at that time. 28 On 28 August 2007 Mr Gray returned to the site again and met up again with Mr Rolf. He accepted in evidence that he had been asked to combine the quotations of C61 and C66 and he had therefore drafted budget estimate C76 in respect of all work to be performed on site. The draft C76 had a quotation price of $138,000. 29 Mr Gray took photographs of the areas where concrete remediation had to be performed and of the lead up work that had already been performed as part of the breakout contract. After either providing a copy of the draft C76 quotation to Mr Rolf or discussing the contents of it with Mr Rolf, Mr Gray and Mr Rolf carried out a further inspection of the mine site. Mr Gray stated that Mr Rolf pointed out additional minor concrete remediation repairs to be undertaken to the primary crusher and additional grout replacement works to be undertaken on the SAG mill and ball mills during the course of this inspection. Mr Gray stated that these areas identified in the final inspection had not been included in the draft C76 quotation and accordingly he redrafted C76 adding an additional cost of $12,000 to cover the additional work identified on or after 28 August 2007 so that the final estimate to carry out the full scope of work was (Page 13)
$150,000 plus GST. The additional sums are added to the quotation for the primary crusher wall breakout and repair and the SAG and ball mill grout removal and plate preparation. 30 In cross-examination Mr Gray rejected the proposition that the increase in the total cost of C76 was due to Mr Rolf suggesting to him that his quotation was too low and that an additional sum needed to be added to it to cover scaffolding and to ensure that TME had sufficient labour on site in order to complete all works by the end of the shutdown period. Mr Gray said that the estimated cost of scaffolding had already been included in the budget estimate C66, relevant only to the primary crusher, and that C66 was simply adopted in full in budget estimate C76. Accordingly the price of $51,736 for work to be performed on the primary crusher included the cost of scaffolding. 31 Mr Gray also said that when he prepared C66 and C76 he did not know the length of the proposed shutdown or the date of the shutdown and that he was not advised of these dates until September 2007. He anticipated there would be some work at night and he anticipated that he would do his best to complete the work in the shutdown period but he did not accept that there was a set timeframe in which the work was to be performed. His understanding at the time of drafting C76 was that the shutdown would be for 18 days. Ultimately the shutdown was for 14 days only. 32 Mr Gray accepts that the major works were planned around the shutdown and that the work on the primary crusher and the SAG mill had to be completed in the shutdown period because there would be no other opportunity to complete it. When he was advised that the shutdown was for a period of 14 days and not 18 days he accepted that the work on the SAG mill had to be completed within the 14-day period but he did not agree that all work TME had contracted to perform had to be completed by the end of the shutdown period. In relation to being bound by the shutdown period Mr Gray said (t 68): Not strictly no, no. As I understand it we still had time after the shutdown to finish off any lower priority works that were peripheral if you like as in not being directly under the mills and therefore not a danger to anyone. 33 Despite not being bound by a set timeframe Mr Gray stated that it was the aim of TME to complete the work as soon as possible and that he personally carried out jackhammer work, inspection supervision and coordination in order to complete the job by the end of the shutdown. He stated however (t 160) that had he known that all of the work that did (Page 14)
not require the site to be shutdown had to be completed before the shutdown then he would have increased the price of his quotation. As a new manager with TME he did not want to get a bad name in the industry. It was important to Mr Gray to complete the job promptly but he thought that he had time after the shutdown to complete the work the subject of C76. Unlike C61 and C66, C76 refers only to the opportunity to quote for Plutonic mine. There is no reference to a shutdown. In relation to duration it states 'we anticipate completing the above scope of works within Sept/Oct shuts 18 days'. 34 Mr Gray had an excellent recall of the work that he was required to perform on the site in 2007 however his recollection of dates, meetings and conversations was vague. Mr Gray is a truthful witness. I accept that he had difficulty in remembering dates, meetings and discussions and that this is in part due to the passing of time given that the events occurred in 2007. He completed his witness statement on 16 August 2011 and gave evidence in April 2012.
Mr Rolf 35 Mr Rolf carried out a first inspection of the site with Mr Gray and confirmed the scope of the concrete remediation required at the plant. During that inspection he said that he pointed out the areas of the plant that required work and told Mr Gray that the concrete remediation needed to be performed immediately due to the criticality of the repair work. Mr Rolf said that he told Mr Gray that all work that did not require the shutdown of the plant was to be completed before the scheduled shutdown of the plant in late September/early October 2007 (witness statement dated 8 June 2010, exhibit 10). 36 Mr Rolf confirmed with Mr Gray that during the shutdown the machinery at the SAG mill would be lifted from its foundation in order to allow remediation work and that all work, except for the work to the top of the SAG mill area and the rectangular cut-out near the ROM bin (primary crusher) should be completed before the shutdown in late September/early October 2007 (witness statement dated 8 June 2010 exhibit 10, page 16 par 19). 37 Mr Rolf said that Mr Rob Taylor, a representative of Plutonic Operations Ltd, was present during the first inspection with Mr Gray and said words to the effect that all loose grout and all grout higher than the underside of each steel base plate of the SAG mill had to be removed. Mr Gray appeared to nod his head or say yes when these matters were raised. (Page 15)
38 Mr Rolf said that he requested Mr Gray to issue separate quotations from TME for the mills and for the primary crusher area of the plant and that on or about 21 July 2007 he received from Mr Posthausen Mr Gray's quotation C61 in relation to the mills and C66 in relation to the plant's primary crusher. 39 On 28 August 2007 Mr Rolf again met with Mr Gray in order to discuss the full scope of the works. Mr Rolf requested that TME issue one single quotation in respect of all of the concrete remediation work to be performed on site. After a second inspection of the site on about 29 August 2007 that was conducted in order to clarify the scope of the works Mr Gray calculated a final inclusive quotation of $138,000 plus GST consistent with the draft quotation C76. This sum was greater than C61 added to C66. It included all of C66 but also additional work that had been identified since the time when C61 was drafted. 40 Mr Rolf said that he then asked Mr Gray to accompany him for a final inspection of the plant during which they visited the primary crusher/ROM bin area. Mr Rolf said that he pointed to the area of the plant wall behind the ROM bin which was to be cut-out and said words to the effect that sufficient safe scaffolding would need to be used to reach the area that had to be cut-out. He said that Mr Gray then said words to the effect that he had allowed approximately $10,000 to cover the costs of scaffolding for the area in the draft C76 quotation. 41 Mr Gray and Mr Rolf then continued with the inspection by walking to the SAG mill area where Mr Rolf said words to the effect that all loose grout and all grout higher than the underside of all steel base plates must be removed, all rust cleaned off the steel base plates, grout re-applied and a slot 3 mm wide and 30 mm deep cut around the perimeter of all steel base plates. Mr Rolf said that Mr Gray again responded by nodding his head and saying words like 'yes' and 'yeah'. They then walked back to the office where Mr Rolf proceeded to sketch the area to be cut out of the plant wall behind the ROM bin. Mr Rolf said that he suggested to Mr Gray that TME's quotation of $138,000 for draft C76 should be increased to $150,000 to allow TME to work efficiently to ensure that all possible work was done before the plant shutdown in late September/early October and to do the work safely without compromising on quality. Mr Rolf said that it was after this discussion that the final quotation budget estimate C76 dated 30 October 2007 that the final figure of $150,000 (an increase of $12,000) was produced by Mr Gray and provided to him. (Page 16)
42 Mr Rolf said that prior to the shutdown in September 2007 he handed a copy of the provisional timetable for the shutdown of the plant to Mr Gray. Mr Rolf said that Mr Gray told him that he had requested more personnel from the head office of TME and that he would therefore be able to complete all of the work that did not require the site to be shutdown before the shutdown started. Mr Rolf said that a final timetable that was similar to the provisional timetable was provided to Mr Gray although Mr Gray denied that he ever received a final timetable. 43 In cross-examination Mr Rolf confirmed that although he asserted that time was of the essence in relation to the contract with TME, HRES' contracts with Barrick Mining and with Plutonic Operations Ltd did not set out that HRES was to complete the concrete remediation work by a particular date. Mr Rolf denied that when he carried out negotiations with TME those negotiations were in the same vein and that arranging work that had been identified in a report dated August 2006 approximately one year later indicated that the work was not considered urgent. He denied that there had been no discussions in relation to a requirement to complete all work by the end of the shutdown period prior to Mr Gray compiling the final C76. Mr Rolf was emphatic that there could not have been any ambiguity in relation to the need to complete the work by the end of the shutdown because he said this constantly to Mr Gray. 44 Mr Rolf said that the reason why he went around the site with Mr Gray for the third and final inspection at the end of August 2007 prior to the preparation of the final C76 document was because of his concerns about safety not because there was a need for him to clarify the scope of the works. He said that the scope of the works had already been agreed through the provisional C61 and C66. In cross-examination Mr Rolf said (t 215): And you say that you had this additional conversation just to be sure? --- Yes. I felt in a crusher area - looking at the scaffold plans, his price seemed very low. It just didn't - didn't make sense to me, because the scaffold itself, that cost about 10 to $20,000 if you do it right. And because of - that's the concern I have, because the price didn't seem to fit what I felt needed to be done. 45 Mr Rolf denied adding the requirement to remove loose grout and grouting higher than the underside of steel plates on the SAG mill to the scope of works during the course of the final site inspection in August 2007. He stated that the full scope of works had been made clear to Mr Gray from the beginning of the negotiations in July 2007. Mr Rolf agreed however that he went around the site with Mr Gray for the (Page 17)
final inspection because he wanted to ensure that everything was included and he did not want to be caught with variations for 'odds and sods' afterwards as well as wanting to make sure that the work would be performed safely on site (t 215). 46 In cross-examination Mr Rolf said that he was pretty sure that he provided a portion of the major shutdown schedule that was relevant to Mr Gray. He cannot recall how it was transmitted but he believed that it was sent. He accepted that he had not included the fact that only a portion of the timetable was provided to Mr Gray in the statement Mr Rolf prepared for these proceedings. He said that he omitted to include the detail that only a portion of the timetable was provided because it had not crossed his mind that a shortened version of the document had been provided to Mr Gray until he was asked specific questions in cross-examination. 47 Mr Rolf said that the shutdown schedule was shown on the wall of his office on site via a projector and that Mr Gray and others came together to coordinate the whole framework of the shutdown. As a result of the coordination, communication, meetings and discussions he disputed that once the timetable was prepared Mr Gray would have been unaware of the dates and the length of the shutdown period. 48 I find Mr Rolf to be an honest witness however he delivered his answers in a verbose and blustery manner. He did not always answer the question that was asked in cross-examination and repeated answers that were favourable to HRES. I accept that his anxiety was in part due to this matter relating to discussions and events that are now four years old. I find that Mr Rolf's recollection of conversations is unlikely to be totally accurate because his recollection is of very clear discussions and instructions between the parties. It would be unlikely that the documentation would fail to note matters relevant to the agreement that has now become the subject of this trial if the discussions between the parties were so clear and concise and had been clear and concise from July until 30 August 2007.
The identification of the scope of the works that was to be performed pursuant to the contract 49 The written quotations are inconsistent with the scope of works being agreed in July 2007 because C61 had a price of $54,215.60 and C66 had a price of $51,736. The first draft of C76 was for $138,528 (and $51,736 is included in that sum). (Page 18)
50 The quotation for the entire scope of works (before discussion on 30 August 2007) in relation to the areas other than the primary crusher had therefore increased from $54,215.60 to $86,792 consistent with oral agreements to carrying out a significant amount of additional work prior to the final agreement on 30 August 2007. 51 C61 and C66 refer to the work being completed within the shutdown period. The total time is seven days. However C76 does not include this requirement. C76 (both in first draft and in final draft) states that TME anticipate completing the scope of work within the 'Sept/Oct shuts 18 days'. There is no reference to starting the work prior to the shutdown period and no undertaking to complete within the shutdown. 52 In Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234, Campbell JA summarised the principles that apply to the interpretation of contracts that are partly written and partly oral. His Honour said at [90] (4) and [90] (5): (4) Where a contract is partly written and partly oral, the terms of the contract are to be ascertained from the whole of the circumstances as a matter of fact: [case citations omitted] … (5) In determining what are the terms of a contract that is partly written and partly oral, surrounding circumstances may be used as an aid to finding what the terms of the contract are: Stones v Dowler at LJ Ex 124; RR 884 per Martin B; Deane v The City Bank of Sydney at 209 per Griffith CJ, Barton and O'Connor JJ; Handbury v Nolan at 341-2 per Barwick CJ, at 346 per Stephen J, at 348 -9 per Jacobs J; Liverpool City Council v Irwin [1977] AC 239 at 253C-E per Lord Wilberforce. If it is possible to make a finding about what were the words the parties said to each other, the meaning of those words is ascertained in the light of the surrounding circumstances: Dean v The City Bank of Sydney at 209; Handbury v Nolan at 341-2, 346, 348-9. If it is not possible to make a finding about the particular words that were used (as sometimes happens when a contract is partly written, partly oral and partly inferred from conduct) the surrounding circumstances can be looked at to find what in substance the parties agreed: County Securities v Challenger Group Holdings at [7] - [8] per Spigelman CJ. 53 In submissions both parties referred to the interpretation of written contracts. I have considered the matters recently raised by Templeman J in McCourt v Cranston [2012] WASCA 60 however the current contract is not solely in writing. (Page 19)
54 Given that the contract is partly written and partly oral I have considered the surrounding circumstances in order to determine the terms of the contract consistent with the approach of Campbell JA. 55 The discussions in relation to the scope of works are essentially agreed. The parties disagree on the timing of their discussions in that Mr Rolf said that the primary crusher rectangular cut-out was raised early in negotiations whereas Mr Gray referred to these discussions occurring immediately prior to the final draft of C76 however ultimately there is very little dispute about the scope of works. 56 I find that the scope of works included that TME: 1. Mobilise the crew and equipment to site, attend inductions, complete JSA Toolbox QA. 2. In areas identified of the east ball mill, west ball mill, SAG mill and primary crusher breakout defective concrete to a reasonable depth behind the reinforcing bar, replace reinforcement where necessary and carry out a basic blast steel reinforcing. Apply Nitoprime Zincrich or equivalent primer to blasted steel. Apply Shotcrete micro-concrete grout or high build repair mortar as necessary and apply Concure WB compound where necessary. 3. Remove concrete and reinforcing bar from the north wall of the primary crusher to leave a void that measures 8 m by 2 m and smooth off the edges, sandblast and treat any exposed reinforcing bars and apply appropriate products to the edges of the cut-out. 4. Strip any formwork from treated area; and immobilise from site. 57 TME was also required to remove concrete and reinforcing bar from the northern wall of the primary crusher to leave a void of approximately 8 m by 2 m and smooth off the edges, sandblast and treat any reinforcing bars that were exposed, apply an appropriate product to the edges of their rectangular cut-out.
The identification of the works, if any, that were agreed to be performed pursuant to any of the 'Variations' and which were not included in the works under the contract 58 The parties accept that if the work performed had not been identified as being within the scope of works with the contract then it was additional to the contract and did not alter or affect the party's obligations under the contract. (Page 20)
Variation 1 59 The parties agreed that TME would perform variation 1 for the price of $5,322 (including GST).
Variation 2
| Description | Units | Charge Rate | Total Costs | | Rhesure 58 fibres | 60.00 | $9.50 | $570 | Tetraguard AS21
(shrinkage reducing admixture) | 60.00 | $8.50 | $510 | Rhocure 736
(internal curing compound) | 40.00 | $7.00 | $280 | | Total | $1,360 | 60 Barrick Mining operated, a concrete batching plant near to the site and orally advised TME that it could use the batched concrete when carrying out the remediation work. TME stated in C76 that 'TME will be responsible for the provision of consumables'. C76 did not state that HRES had an obligation to provide concrete. 61 During one of the inspections on site prior to 30 August 2007, Mr Gray provided a blank copy of TME's concrete works sheet to Mr Posthausen. The blank sheet set out 15 topics relevant to concrete. Mr Gray accepted that it was very likely that he said the words that have been handwritten onto the concrete works sheet and he accepts that the words handwritten onto it are consistent with the discussion between him and Mr Posthausen. 62 The words noted include 'concrete/shotcrete MP and 40' and 'Renderoc HB70 trowelled, Renderoc LA55 poured'. These notes are consistent with the names and types of treatment that would be applied to concrete. The words 'tests with batching plant' are also written on the sheet. 63 Problems arose when TME applied the concrete from the batch onsite during remediation. Mr Gray sent an email to Mr Rolf (exhibit 7, 4 September 2012) suggesting a solution: (Page 21)
From: TME - Wayne Gray Sent: 11 September 2007, 5.23 pm To: (Harald Rolf) Cc: (Peter Brown) Subject: Concrete Shrinkage Controls Attachments: Rheocure 736.pdf; Tetraguard AS21.pdf; Rheosure 58.pdf Harald, Following unsatisfactory early age shrinkage of the sprayed concrete at Plutonic last Thursday night we nominate the following controls in an effort to ensure shrinkage of this magnitude does not occur in future. 1. The use of a polypropylene fibre to provide crack control; 2. The use of a shrinkage reducing agent; 3 The use of an internal curing admixture; 4. Thorough Wet Hessian curing through the first 24 hours and beyond. Nominated products and dosages are as follows: 1. Rheosure 58 - polypropylene fibre (8 kilograms per metres cubed) 2. Tetraguard AS21 - shrinkage reducing agent (6 litres per metre cubed) 3. Rheocure 736 - internal curing admixture (5 litres per metres cubed) I attach technical datasheets for these DASF (formally known as MBT) products. Our aim would be for us to add these products on-site to the batch concrete and agitate for the nominated period. This would place the control in our hands rather than with the concrete batch plant. Regards, Wayne Gray 64 Mr Gray stated in evidence that he had provided information in the email in relation to the price of the provision of the admixtures because HRES would ultimately be paying for the products in order to ensure that the concrete was up to standard. However in cross-examination Mr Gray acknowledged that he did not refer to pricing in the email. (Page 22)
65 Mr Rolf said in his responsive witness statement at par 28: During one of the inspections, most probably the first inspection, I said to Wayne Gray words to the effect that the plaintiff was responsible for the quality of the concrete they obtained from the onsite batching facilities. Wayne Gray then said to me words to the effect that he agreed and explained that he would follow TME's usual quality assurance procedures and hand me TME's concrete pour check sheet. 66 The concrete batching plant was on site because it was convenient. TME however always had the responsibility of ensuring that the concrete was satisfactory so that the work that they had been contracted to perform would be of a reasonable standard. I find that TME is responsible for the charges listed on variation 2 because: 1. In C76, TME stated that it would be responsible for the provision of consumables. 2. I accept that Mr Gray told Mr Rolf that he would follow TME's usual quality assurance procedures. 3. The notes on the concrete pour check sheet are consistent with Mr Gray giving an undertaking prior to 30 August 2007 that admixtures would be used if required. 4. The email from Mr Gray to Mr Rolf dated 11 September 2007 does not refer to cost. It is consistent with TME taking control of the quality of the concrete. There is no suggestion in the email that HRES would have this obligation. 67 Variation 2 is not work performed in addition to the contract.
Variation 3 68 HRES states in par 15(c)(iii) further amended substituted defence and counterclaim dated 4 September 2012: (iii) the defendant denies that the plaintiff has any entitlement to that planned by the plaintiff in 'variation 3' and says that the plaintiff and defendant made an agreement that the defendant would reimburse the plaintiff for the cost of the hire of concrete agitator truck for three days at the cost of $6,600 (inclusive of GST). 69 HRES has agreed to reimburse TME the sum of $6,600 (inclusive of GST). (Page 23)
Variation 4
| Description | Units m2 | Charge Rate | Total Costs | | Southern Plinth | 2.50 | $3,500 | $8,750 | | Southern Plinth | 1.90 | $3,500 | $6,650 | | Pinion Motor (Conbextra EP65 Apoxy) | 5.00 | $350 | $1,750 | | Total | $17,150 | 70 Mr Gray conceded in cross-examination (ts 101) that the portion of the variation claim relevant to Pinion Motor (Conbextra EP65 Apoxy) at a cost of $1,750 is not a variation and is included in the scope of the works. 71 HRES conceded that the area of the southern plinth relating to 2.5 sqm at a cost of $8,750 is not within the scope of the works and is therefore a properly claimable variation although the rate charged for that work is not agreed between the parties. 72 In his signed statement, Mr Rolf said at pars 223 – 225 (exhibit 2): As each further area requiring concrete remediation was made known to me, I pointed this out to Rolf and asked him 'do you want us to break these out, or do you want us to leave them?' In all instances Rolf authorised me to break out the area I had indicated to him and acknowledged on each occasion that the additional breakout would be a variation. Rolf asked me when an initial additional area for breakout was pointed out to him, words to the effect 'what will that cost?' and I said '$3,500 for every additional square metre is TME's rate'. That rate was exclusive of GST. I do not recall Rolf's specific response to the $3,500 per sqm rate but he gave me the go ahead to break out that initial area at that price. Thereafter when additional areas were discovered, I had individual discussions with Rolf and on those further occasions, Rolf gave me an instruction to proceed with a further concrete breakout but the rate of $3,500 was not again discussed. (Page 24)
73 Mr Rolf denied that he agreed to the rate of $3,500 per sqm and stated that the rate was unreasonable. 74 I do not accept that Mr Rolf agreed to a rate of $3,500 per sqm for each and every variation because it is a sum that is greater than a reasonable rate that would be charged per square metre. There is no evidence of the exact rate per square metre in respect of C76 however Mr Rolf's evidence in cross-examination is that if a rate of $3,500 applied to each square metre of the contract then that would mean that the contract would cost $800,000 to $900,000. Given that the cost of the contract including scaffolding and other matters is $150,000 I accept that $3,500 is not a reasonable rate and that it is not a rate that would have been accepted by Mr Rolf. Mr Rolf suggested a rate of $1,500 to $1,700 would be reasonable however there is no evidence other than Mr Rolf's opinion that this sum is a reasonable rate. Given the ongoing oral discussions about the work to be performed, the remote location of the mine site and HRES's request that the variations be performed I find that it was an implied condition that if TME agreed to carry out a variation then a reasonable rate applied to the work performed by way of variation however I am not in a position to set a rate on the evidence I have seen and heard. 75 The 1.9 sqm relating to the southern plinth was the subject of a hand drawn plan by Mr Gray (exhibit 8). Mr Gray said that it became apparent in the course of removing the concrete that the deterioration of the concrete extended beyond the area that had been marked up and therefore he made the calculation in respect of the additional 1.9 sqm. He accepted that the area showed some exposed reinforced bar consistent with it being part of the scope of the works but said that the eventual depth and width of the area had not been clear prior to commencing the work. He claimed that the area was therefore a variation. 76 I accept that Mr Gray's evidence in relation to the workings on-site because his recollection was clear and he had a good recollection of the work performed although he did not have a good recollection of the dates, meetings and identities who attended the meetings during the course of negotiations and work on site. Mr Gray was able to clarify that he had measured the area of 1.9 sqm once he was shown the drawing of exhibit 8 during the course of cross-examination. Prior to considering exhibit 8, Mr Gray gave an estimate as to how he had determined the size of the variation by multiplying the width by the height, given that both methods provided a similar calculation of 1.9 sqm. Rather than the two (Page 25)
explanations diminishing Mr Gray's credibility in relation to the area I find that, given the two answers were very similar, it supports the claim. 77 The 1.9 sqm southern plinth variation is additional to the contract. A reasonable charge rate applies.
Variation 4A
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