V601 v Probuild
[2022] VSC 3
•12 January 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
TECHNOLOGY, ENGINEERING AND CONSTRUCTION LIST
S ECI 2016 0024
| V601 DEVELOPMENTS PTY LTD (ACN 082 670 595) | Plaintiff |
| v | |
| PROBUILD CONSTRUCTIONS (AUST) PTY LTD (ACN 095 250 945) | Defendant |
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JUDGE: | DIGBY J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF RULING: | 12 January 2022 |
CASE MAY BE CITED AS: | V601 v Probuild |
MEDIUM NEUTRAL CITATION: | [2022] VSC 3 |
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FINALISATION OF ORDERS – Calculation of Bonus entitlements – Interest – Costs.
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HIS HONOUR:
Ruling in relation to the parties’ submissions as to the form of final orders including the defendant’s bonus entitlement, interest and costs[1]
[1]Probuild Submissions, 10 January 2022; V601 Submissions (received 10 January 2022); Probuild Supplementary Submissions, 11 January 2022 and email from V601’s lawyers 11 January 2022 (2:52pm).
Reasons for Judgment in this matter were handed down on 22 December 2021 (Reasons).[2] These proceedings, including extensive processes before a Referee, and the Trial of this proceeding was lengthy, complex and very document and fact intensive.
[2]V601 Developments Pty Ltd v Probuild Constructions (Aust) Pty Ltd [2021] VSC 849.
The defendant (Probuild) was overwhelmingly successful on its claims. The plaintiff (V601) was unsuccessful on its claim.
The Reasons referred to the orders, including declarations, which I considered appropriate on the basis of the Reasons and the conclusions and finding therein.
In the closing paragraphs of the Reasons, the parties were given leave to put forward their proposals, if necessary, as to final orders, including in relation to the calculation of the defendant’s Bonus entitlement, and in relation to interest and costs.
The defendant’s submissions
By the defendant’s submissions as to final order dated 20 January 2022, and accompanying affidavit of Paul Benedict Woods, sworn 10 January 2022, the defendant provided its submissions within the terms of the leave granted on 22 December 2021:
(a) Bonus payment
The defendant provided its quantification of the defendant’s Bonus entitlement found in the Reasons.
The defendant’s calculation of the amount of the defendant’s Bonus entitlement arising from the Reasons involves a mechanical calculation by the defendant’s Programming and Delay Expert, Mr Lyall, who uses the contractually specified rates for any bonus payable under the Contract between the parties, and applies that contractually fixed rate to the contractually relevant period between the Contract Dates for Practical Completion, as adjusted by the extensions of time which I have allowed, and granted the defendant in the Reasons for Judgment, and the Dates of Practical Completion which I have also found and declared in the Reasons for Judgment.
(b) Costs
The defendant seeks costs on a standard basis up to 1 August 2016, the date upon which it made a Calderbank offer to the plaintiff to settle this proceeding and on an indemnity basis thereafter. The Calderbank offer of 1 August 2016 was the first of a series of offers to settle the proceeding which, in the end result, were all very substantially overtopped by the defendant’s successful claims against the plaintiff and the judgment in the proceedings.
(c) The defendant exhibits its numerous offers to settle this proceeding. Those offers informed the plaintiff that the defendant intended to rely upon them with a view to obtaining an order for indemnity costs should the defendant achieve a more favourable outcome at trial compared with the terms of its offers to settle the proceedings.
(d) The defendant also seeks payment out of Court of the substantial amount paid by the defendant by way of security for costs.
(e) The defendant seeks interest, and supports its application in detail by [27]–[28] of Mr Wood’s affidavit of 10 January 2022.
The defendant also proposed orders substantially congruous with the Court’s proposed orders included in the Reasons for Judgment, save that the defendant’s proposed Order 6 and proposed Order 8 seek orders setting out the adjusted Dates for Practical Completion for each Separable Portion consequent upon the extensions of time allowed and granted to the defendant in the Reasons for Judgment,[3] and proposed Order 8 sets out the Bonus payable to the defendant calculated as provided for in the Contract.
[3]The Dates for Practical Completion at order 6 of Probuild’s proposed order are those explained at [22]—[26] of Paul Benedict Wood’s affidavit of 10 January 2022, and calculated by Mr Lyall.
The plaintiff’s submissions
The plaintiff’s submissions provided on 10 January 2022 go well beyond the terms of the leave granted on 22 December 2021, both in length and scope. In effect, those submissions commence by taking issue with the mechanical calculation of the quantum of the defendant’s Bonus entitlement established by the Reasons for Judgment, and end contending in substance that the defendant has failed to prove a key part of its case and the plaintiff should be seen as the successful party overall.
The plaintiff argues in essence that:
(a) There have been no findings made by the Court as to the Dates for Practical Completion.
(b) The adjusted dates for Practical Completion cannot be ascertained or specified on the current state of the evidence, and that the original Contract date for Practical Completion must continue to apply and the parties’ entitlement should be calculated on that basis.
(c) The defendant’s calculation of the amount of its Bonus entitlement undertaken by Mr Lyall, the defendant’s programming and delay analysis expert, amounts to introduction of fresh evidence in the nature of a new opinion in the proceeding and is impermissible.
(d) Mr Lyall’s analysis does not disclose a path of reasoning.
(e) Mr Lyall’s new unreasoned opinion should result in the defendant being unable to maintain the present award of Delay Damages because Mr Lyall’s new opinion observes (for the purposes of the defendant’s Bonus calculation) that after adjusting the Contract Dates for Practical Completion by the extension of time allowed and granted to the defendant pursuant to cl 9A of the contract, there are no further adjustments beyond that extension of time, pursuant to cl 34.
(f) The result of the above is that:
(i) The Court cannot quantify the defendant’s claimed EOTs and, therefore, no such EOTs can have been allowed in this litigation;
(ii) Because the defendant has failed for the above reasons on quantum across its extension related claims and its Bonus claim, the plaintiff is also entitled to its Liquidated Damages claim.
(g) Interest should be calculated on the basis that the date of default in payment under the contract cl 37.5 is the date on which the contractual entitlement arose.
(h) The defendant is entitlement to interest on its Façade Variation claim from 16 July 2013, and the plaintiff is entitled to interest on its Liquidated Damages claim, however, there should be no interest awarded on the defendant’s acceleration claim.
Finally, the plaintiff contends that in the above circumstances it should be entitled to judgment in the sum of $10,110,652, plus interest, plus costs.
The plaintiff also seeks a stay of execution of 90 days.
Considerations/conclusions
I am satisfied that the defendant’s proposed orders (with minor additions I have made, as set out below) are appropriate to effect the orders I proposed as appropriate at the end of the Reasons, having regard to those Reasons and my conclusions and findings therein.
I reject the plaintiff’s contention that the Court has not made any findings as to the Dates for Practical Completion.
The Reasons deal with and decide the defendant’s many claims for extension of time under cl 34 of the Contract, including cl 9A of the contract.
The conclusions, findings and declarations in the Ruling as to the defendant’s entitlement to extensions of time, adjust the Contract Dates for Practical Completion, and accord with the contractual mechanism for adjustment of the Dates for Practical Completion.
As noted in the Reasons for Judgment, the Contract provides that Date for Practical Completion’ means the date provided in the Separable Portions, Item 7 of Part A of the contract. The Contract further provides that if any EOT for Practical Completion is directed by the Project Manager or allowed in any dispute resolution process adopted by the parties pursuant to cl 42 or litigation, it means the date resulting therefrom [Contract cl 1 (Definition Date for Practical Completion)].
In the above regard the Reasons explains that as a result of my conclusions and findings the Contract Dates for Practical Completion for each Separable Portion and the WUC (Works Under Construction) are extended and adjusted by the extension of time allowed and granted to the defendant thereunder.[4] Those findings and declarations of the defendant’s entitlement, namely to specific adjustments by the extent of specific extension of time allowed and granted by the Court in relation to specific relevant Separable Portions and the WUC, is also reflected in the final relief referred to in the Reasons at [1442] and [1446].
[4]Reasons for Judgment, [1442].
In accord with the provision contained in cl 1 of the Contract, the allowance and grant of extensions of time to the defendant resulted in adjusted Dates for Practical Completion in relation to all applicable Separable Portions.
The identification of the resultant dates for Practical Completion, given the conclusions and findings in the Reasons in relation to the specific periods of extension of time to specific Separable Portions, is a matter of basic calculation which I invited the parties to agree if possible, or undertake so as to calculate the sum payable to the defendant in respect of the Bonus entitlement awarded to the defendant.
Further, I consider that the calculation in issue is only necessary to arrive at the amount of the defendant’s entitlement to a Bonus.
The process referred to in the last two preceding paragraphs, in my view should be akin to the straightforward calculation of a party’s interest entitlement subsequent to a monetary judgment.
It is disappointing that efforts are presently being made to, in my view, unjustifiably complicate what I also considered, and presently also consider, to be a simple calculation to fix upon the defendant’s Bonus entitlements.
I reject the plaintiff’s contention that complex programming analysis is involved in identifying the Dates for Practical Completion resultant upon the extension time which have been granted to the defendant.
I reject that the original Contract Dates for Practical Completion remain unadjusted. For the reasons outlined above, and earlier reflected in the Reasons, the original Contract Dates for Practical Completion are adjusted by the extensions of time I have allowed, declared and granted as the defendant’s entitlement.
Further, I do not accept that application of the Baseline Program and Lyall’s methodology, both of which were I note the subject of findings in the Reasons which, accepting the Baseline Program as the appropriate contractual program for the evaluation of the defendant’s extension of time entitlements, and also accepting Lyall’s programming and delay analysis methodology, cannot be simply applied to identify the Dates for Practical Completion which I have adjusted, in the way contemplated by the Contract as explained above.
As contemplated in the proposed Orders in the Reasons, the defendant’s Minutes of Proposed Order quantifies the Bonus payment to which the defendant is entitled, as required by [1449] of the Court’s reasons. The defendant’s expert, James Lyall, calculated that Bonus and explained how he did so as summarised at [22]–[26] in the accompanying affidavit of Paul Benedict Woods sworn 10 January 2022.
Mr Lyall used the program the Court has accepted, in substance, as constituting the Approved Contractor’s Program and inputted the defendant’s extension of time entitlement under cl 9A of the Contract.
Based on the cl 9A extension allowed and granted, Mr Lyall calculates that the defendant is entitled to a Bonus payment for all separable portions, save Separable Portion 3 (Building D). The Bonus payment has been calculated using the contractually specified rates.
Mr Lyall explains that no Bonus payment arises in respect of Separable Portion 3 because, once the Court’s findings are taken into account, that Separable Portion was completed seven days late on 17 December 2013, compared with the adjusted Date for Practical Completion which was 10 December 2013.
I consider the defendant’s calculation of the Bonus entitlement referred to above to be mechanical and of the type commonly undertaken in the process of calculating the financial consequences of orders in accordance with clear contract items.
Furthermore, the defendant is entitled to extensions of time pursuant to cl 9A up to 7 July 2012 for each separable portion (at [761] and [1435]) and Mr Lyall addressed the impact of a cl 9A extension in his First Report. He used a date of 2 July 2012, which is five days less than was allowed. Mr Lyall then calculated the adjusted Dates for Practical Completion (at [386]–[387]). Mr Lyall was not cross-examined on this part of his analysis and methodology. This methodology and analysis was disclosed by Lyall at trial and accepted.
At page 31 to Exhibit PBW-1, Mr Lyall simply and mechanically updates his earlier analysis to reflect the Court’s finding that Early Works Completion was achieved five days later. This is not in my view, in the circumstances ‘new’ or ‘fresh’ opinion evidence.
I note, however, that the defendant submits that if the Court is minded to disregard Mr Lyall’s latest email, then the defendant relies on Mr Lyall’s accepted analysis premised on Early Works Completion having been achieved on 2 July 2021. This would understate the defendant’s true entitlement by five days only and the adjusted dates can in any event be calculated by adding five days to Mr Lyall’s figures.
Furthermore, I reject that ‘[t]he Court accepted the defendant’s argument that cl 9A was not intended to preserve the Contract Period’ (at [11]). No such finding was made. The paragraph of the Reasons the plaintiff refers to at [724] is part of a passage in the plaintiff’s thesis that cl 9A was intended to prevent the defendant performing WUC work alongside the Early Works such that the defendant did not have the opportunity to obtain windfall bonus payments under cl 34.8 (at [723]) was rejected The Reasons at [725] also refer to the plaintiff accepting that cl 9A(c) ‘was to maintain the ‘Contract period’.
Further, I am also unwilling to draw the inference which the plaintiff seeks at [23] of its submissions, that Lyall has prepared and utilised a new Revised Baseline Program, for the purpose of calculating the defendant’s Bonus entitlements.
I therefore also reject the plaintiff’s submission that the defendant has not proved the proper calculation of its Bonus entitlement under the Contract.
Finally, I reject that the Wood’s affidavit, exhibiting Mr Lyall’s email of 2 January 2022, constitutes a ‘new opinion’ or ‘fresh opinion evidence’, and /or that Lyall’s email does not disclose Lyall’s path of ‘reasoning’ to identify the adjusted Dates for Practical Completion.
For the reasons I have sought to earlier explain, in my view the plaintiff’s attempt to characterise the defendant’s identification of the Dates for Practical Completion, in accordance with my adjustment of the original Contract Dates for Practical Completion so as to calculate the defendant’s Bonus under the Contract and the extensions of time now allowed and granted to the defendant, as a new complex chapter of expert evidence, is unjustified and exaggerated. I consider Lyall’s identification of those consequential Dates for Practical Completion for the purposes of calculating the defendant’s Bonus entitlement, as uncomplicated and mechanical in nature and analogous to a post-judgment calculation of interest.
Further, for reasons I have earlier outlined, I am satisfied that Lyall does expose his method of calculation at ‘PBW-1’ [31] and [32].
I am unpersuaded by the plaintiff’s assertion that there has been any ‘proposed introduction of fresh evidence’ or that the material filed by the defendant to explain its calculation of the defendant’s Bonus entitlement entitles the plaintiff to cross-examine Lyall or necessarily entitles the plaintiff to adduce undefined contradictory evidence as to the adjusted Dates for Practical Completion.
Further, I have, quite separately to my conclusions and findings in relation to the defendant’s Early Works cl 9A claim, allowed and granted a number of the defendant’s cl 34 time extension claims and determined the extensions of time granted to the defendant. These entitlements were also part of the relief decided and found in the defendant’s favour and were reflected in the proposed Orders in the Reasons.
In relation to the decisions and findings referred to in the last preceding paragraph, I have also separately found that the defendant is entitled to delay damages. Those delay damages are a component of the relief I have found should be granted to the defendant and are reflected in my proposed orders.
The defendant’s suggestions that Mr Lyall’s reference to what he describes as ‘… the defendant’s alternative claims under cl 34’ and comments he may make in his letter of 2 January 2022,[5] have no bearing or effect on my conclusions and findings in the Reasons.
[5]‘PBW-1’, p 31-32
The plaintiff appears to confuse and incorrectly conflate the issue it first raised, namely what it submits is a new case put by the defendant in relation to identifying the Date for Practical Completion integer which the defendant uses to calculate the Bonus entitlement established by the Judgment of 22 December 2021, with the defendant’s separate declared entitlement to many cl 34 extensions of time, and associated delay costs.
The plaintiff submits:
Having failed on the issue of quantum, Probuild’s claims for the Early Works extension, EOTs and Delay Damages must be dismissed. Applying the Contract Dates for Practical Completion, adjusted as agreed and accepted, Probuild’s Bonus entitlements are extinguished.
I consider this submission nonsense and it is rejected.
Contrary to the plaintiff’s submissions, the defendant has prevailed on its time extension claims, and its delay damages claims, its Bonus claim which is yet to be quantified and, as appears to be acknowledged by the plaintiff, the defendant’s Façade Variation claim and acceleration claim. The matters the plaintiff seeks to raise in its submissions under consideration cannot and do not alter those outcomes, conclusions, decisions and findings.
Interest
The plaintiff accepts the defendant’s entitlement to interest at 12% under cl 37.5 of the Contract, in respect of its contractual claims, and asserts that the relevant date of default should be the date on which the contractual entitlement arose.
I am satisfied that the defendant’s interest calculations set out in the Wood affidavit are appropriate and reasonable.
The plaintiff makes the point that the defendant’s successful acceleration claim is not an award which should attract interest under the Contract.
I reject the plaintiff’s above submission because I consider that the basis upon which I have upheld the defendant’s acceleration claim entitlements, namely as a result of the plaintiff’s breaches of the Contract, entitles the defendant to interest for at least the time the Defendant served its Counterclaim on the Plaintiff, as the defendant has calculated.
I reject the plaintiff’s submission on costs which is predicated on a construct of the Judgment in this matter amounting to an outcome in the plaintiff’s favour. For the reasons I have mentioned above and because I have, as explained in the Reasons, rejected the plaintiff’s Liquidated Damages Claim, I consider the plaintiff’s cost submission to be wholly unfounded.
I am satisfied for the above reasons concerning the outcome of these proceedings that the defendant should pay the plaintiff’s costs of this proceeding. I am also comfortably persuaded that, on the basis of the above outlined offers by the defendant to settle this matter, which I find, in the circumstances, the plaintiff unreasonably rejected, the defendant is entitled to indemnity costs after 1 August 2016, and prior to that the defendant is entitled to its costs on a standard basis.
The plaintiff also seeks a stay of 90 days for the bald reasons referred to at [37] of its submissions.
I shall, for reasons which include the Court’s convenience, stay my Order in this matter until 4:00pm on Friday 28 January 2022.
Orders
For the Reasons and for the above reasons, I shall order:
Declarations that :
1. The defendant is entitled to the following extensions of time pursuant to cl 9A of the Contract in relation to Early Works:
(a) 165 calendar days, from 25 January 2012 to 7 July 2012 in respect of SP3 and SP4; and
(b) 199 calendar days, from 22 December 2011 to 7 July 2012, in respect of SP1, SP2, SP5, SP6, SP6A, and SP7.
2. The:
(a) ‘Soft Spots’ referred to in the defendant's EOT2A claim; and
(b) ‘Hydrocarbon Contamination’ referred to in the defendant’s EOT2A claim;
constitute Latent Conditions under cls 25.1, 25.1A and 25.2 of the Contract.
3. The defendant is entitled to the following extensions of time under cl 34 of the Contract in respect of the following Separable Portions.
EOT Claim Delay
2A – Soft Spots • SP3 - 10 working days - 27 April 2012 to 10 May 2012
• SP4 - 35 working days - 10 May 2012 to 5 July 2012
• SP7 - 35 working days - 10 May 2012 to 5 July 20123 - Hydrocarbon Contamination • SP1 - 28 working days - 5 April 2012 to 24 May 2012
• SP6 - 28 working days - 5 April 2012 to 24 May 2012
• SP6A - 28 working days - 5 April 2012 to 24 May 20126 - Building C Childcare Centre • SP5 - 21 working days - 18 July 2012 to 17 August 2012
7 - Glazing
• SP1 - 41 working days - 13 December 2012 to 6 March 2013
• SP3 - 65 working days - 17 May 2013 to 27 August 2013
• SP4 - 44 working days - 28 June 2013 to 3 September 2013
• SP5 - 44 working days - 1 May 2013 to 9 July 2013
• SP6 - 25 working days - 13 June 2013 to 22 July 2013
• SP6A - 42 working days - 23 December 2012 to 20 March 2013
• SP7 - 44 working days - 28 June 2013 to 3 September 2013
4. The defendant is entitled to be paid apportioned delay damages by the plaintiff in the total sum of $3,572,805.
5. The Lyall Baseline program (WUCP01) as updated, in substance, constitutes the Approved Contractor’s Program, including for the purposes of cl 34.4(b)(ii) of the Contract for the purposes of determining the defendant's entitlements to extensions of time.
6. The adjusted Dates for Practical Completion for each Separable Portion resulting from the extensions of time allowed to the defendant by these orders are as follows:
(a) Separable Portion 1 (A1 retail)) - 25 September 2013
(b) Separable Portion 2 (C1 commercial) - 1 October 2013
(c) Separable Portion 3 - (D) - 10 December 2013
(d) Separable Portion 4 - (E) - 29 January 2014
(e) Separable Portion 5 - (C2 residential) - 4 February 2014
(f) Separable Portion 6 - (B) - 17 February 2014
(g) Separable Portion 6A - (A2 residential) - 17 February 2014
(h) Separable Portion 7 - (common areas) - 25 February 2014
7. The defendant achieved Practical Completion in relation to the following Separable Portions on the following dates:
(a) Separable Portion 1 (A1 retail) - 3 July 2013
(b) Separable Portion 2 - (C1 commercial) - 31 July 2013
(c) Separable Portion 3 - (D) - 17 December 2013
(d) Separable Portion 4 - (E) - 17 December 2013
(e) Separable Portion 5 - (C2 residential) - 12 November 2013
(f) Separable Portion 6 - (B) - 12 November 2013
(g) Separable Portion 6A - (A2 residential) - 12 November 2013
(h) Separable Portion 7 - (common areas) - 17 December 2013
8. The defendant is entitled to Bonus payments pursuant to cl 34.8 of the Contract in the sums specified below on account of the following Separable Portions achieving Practical Completion earlier than the Date for Practical Completion:
(a) Separable Portion 1 - $87,864
(b) Separable Portion 2 - $69,875
(c) Separable Portion 3 - Nil
(d) Separable Portion 4 - $647,623
(e) Separable Portion 5 - $242,508
(f) Separable Portion 6 - $1,495,546
(g) Separable Portion 6A - $169,944
(h) Separable Portion 7 - $70
Total: $2,713,429
9. The defendant is entitled to be paid acceleration costs by the plaintiff in the sum of $1,346,799.
10. The defendant is entitled to be paid the sum of $520,436 (plus GST) by the plaintiff in respect of the defendant’s Façade Variation claim.
FURTHER ORDERS THAT:
11. The plaintiff pay the defendant the sum of $13,846,409.10, which sum is comprised of:
(a) Delay damages $3,572,805.00
(b) Acceleration costs $1,346,799.00
(c) A Bonus payment $2,713,429.00
(d) For the defendant’s Facade Variation claim $572,479.60 (incl. GST)
(e) Interest on (a) to (d) for the period from and
including 24 April 2013 to and including
15 January 2022 $5,640,896.50
Total: $13,846,409.10
12. For the purposes of section 101 of the Supreme Court Act 1986 (Vic), for every calendar day from and including 16 January 2022 until the plaintiff pays the defendant the sum ordered in paragraph 9 above, the defendant shall be entitled to and the plaintiff shall also pay interest to the defendant on that sum or any part thereof which remains outstanding, with such interest to be calculated at the rate applying from time to time in section 2 of the Penalty Interest Rates Act 1983 (Vic), which presently amounts to the sum of $3,793.54, per calendar day.
13. The plaintiff’s claims in respect of the following are dismissed:
(a) the sum of $4,712,519 by way of Liquidated Damages to 17 December 2013;
(b) interest due pursuant to cl 37.5 of the Contract in respect of Liquidated Damages asserted as due and payable;
(c) declarations of the Dates of Practical Completion as certified by the Project Manager; and
(d) the Dates of Practical Completion as certified by the Project Manager, save in relation to Dates of Practical Completion which are not in dispute.
14. The defendant’s alternative claim for damages for delay is dismissed.
15. The plaintiff must pay the defendant’s costs of the proceeding, including the defendant’s costs of and associated with the parties’ applications by way of written submissions in January 2022 in relation to appropriate orders, including any reserved costs and all the fees of Anthony Nolan QC incurred in connection with the special reference in this proceeding, on a standard basis up to 1 August 2016, and on an indemnity basis thereafter, with such costs to be taxed in default of an agreement.
16. Within 21 days of the date of this order, the plaintiff’s solicitors shall release to the defendant’s solicitors the amounts held as security for costs pursuant to the orders made by the Honourable Justice Vickery on 2 September 2016 and 7 December 2016 and by the Honourable Justice Digby on 13 September 2018 and 7 December 2018, including interest accruing on those amounts, in partial satisfaction of the costs order in paragraph 13 above.
17. These orders are stayed until 4:00pm on Friday 28 January 2022.
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