Valmont Interiors Pty Limited v Giorgio Armani Australia Pty Limited

[2020] NSWDC 395

District Court

New South Wales

Medium Neutral Citation:

Valmont Interiors Pty Limited v Giorgio Armani Australia Pty Limited [2020] NSWDC 395

Hearing dates:

20-24 and 29 July 2020

Date of orders:

27 August 2020

Decision date:

27 August 2020

Jurisdiction:

Civil

Before:

Smith SC, DCJ

Decision:

The orders of the Court are:

1. Judgment for the plaintiff in the amount of $130,973.00.

2. Judgment for the defendant on the cross claim in the amount of $235,611.29.

3. The plaintiff to pay 50% of the defendant’s costs as agreed or assessed.

Catchwords:

BUILDING AND CONSTRUCTION – Construction contract – Completion – delay damages – scope of work – defects

Legislation Cited:

Civil Procedure Act 2005, s 90(2)(b)

Airports (Building Control) Regulations 1966 (Cth), reg 2.03(4)

Cases Cited:

Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570

AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170

Andrews v Australia & New Zealand Banking Group Ltd (2012) 247 CLR 205

Bellgrove v Eldridge (1954) 90 CLR 613

Esanda Finance Corporation Ltd v Plessnig (1989) 166 CLR 131

Liebe v Molloy (1906) 4 CLR 347

Lissenden v CAV Bosch Ltd [1940] AC 412

Paciocco v Australia & New Zealand Banking Group Ltd (2016) 258 CLR 525

Pridmore v Magenta Nominees Pty Ltd (1999) 161 ALR 458

Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82

Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656

Tabcorp Holdings v Bowen Investments (2009) 236 CLR 272

Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251

Category:

Principal judgment

Parties:

Valmont Interiors Pty Limited (ACN 117 035 864)
- Plaintiff / Cross Defendant
Giorgio Armani Australia Pty Limited (ACN 084 424 037)
- Defendant / Cross Claimant

Representation:

Counsel:
Mr M Dawson and Mr D Elliott - Plaintiff
Mr M Klooster - Defendant
Solicitors:
EMK Counsel Co – Plaintiff
Madison Marcus Law Firm – Defendant

File Number(s):

2017/184944

Publication restriction:

Nil

Judgment

1. In January 2016 the defendant (Armani) engaged the plaintiff (Valmont) to fit out its retail store at Sydney International Airport. There was some urgency about the works and instructions about it were updated after the contract was entered into. The plaintiff claims that it was asked to perform and did perform work outside the scope of the contract, and has not been paid for that work. It also claims that the defendant has not paid it the final instalment of the contract price. The defendant claims that certain of the works were defective and that it lost money because of the plaintiff’s delay in completing the work.

2. In order to understand these issues it is first necessary to set out a little of the factual background to the disputes between the parties.

Background facts

3. The defendant needs no introduction. It is the Australian presence of a world-wide fashion house based in Milan, Italy. Like a number of its competitors, it has a number of levels to its business enterprise. This case involves the mid-tier Emporio Armani. Also, like many of its competitors, the defendant had a store in the duty free section of the International Airport at Sydney.

4. In 2015 the Sydney Airport Corporation Limited (“SACL”) decided to increase the presence of upper end fashion stores, such as Emporio Armani, within the International Airport.

5. To this end, it offered the defendant a lease of larger premises at the airport and to break the lease of its then current premises. The aim was for the defendant to close its old premises over the Christmas period and re-open in larger premises in early 2016. The defendant accepted this proposal and started preparing plans for the fitout of the new premises.

6. It engaged architects (Gensler) to prepare those plans and invited a number of firms to quote on the work as defined by the plans.

7. On 29 October 2015 Camilla Brown, who was responsible for running the project for the defendant, sent a design package for the project to the plaintiff inviting it to tender. [1] In her email, Ms Brown wrote:

“… As most tenders are driven by cost, due to the location of the build, timing and level of fitout we will be more driven by who can deliver a quality project over Christmas and by a reasonable date. …”

1. Supplementary court book, p 66.

8. The design package sent to the plaintiff did not include a complete set of construction drawings and did not include any final design documents for the façade.

9. On 2 November 2015 a Chinese joinery manufacturer, Sun Bright, sent Armani a quotation for the supply of the joinery required for the fitout. [2]

   2. Supplementary court book, pp 108-110.

10. Preliminary façade design drawings were sent by Ms Brown to the plaintiff on 19 November 2015 [3] and, on 24 November 2015, Ms Brown sent updated design documents.

    3. Supplementary court book, p 171.

11. The plaintiff submitted an initial quotation for the work on 1 December 2015. [4] This quotation was for $1,121,005 (excluding GST). After receiving this, Ms Brown spoke to Marcel Zalloua, a director of the plaintiff:

“Brown:   The cost of joinery is too expensive. I have a quote for joinery to be manufactured and assembled in China. You will only need to have it installed.

Zalloua:   I’m not comfortable using a company to manufacture and assemble joinery overseas.

Brown:   I have worked with this company previously on another Armani store and they were reliable. I will get them to give me a cheaper price.

Zalloua:   Ok.”

4. Supplementary court book, p 232.

12. Later, and some time before 9 December 2015, they had a further conversation in the following terms:

“Zalloua:   We can procure the joinery locally. It can be completed within the time you require and it will probably be better in quality.

Brown:   No. It will be too expensive, and we need to save as much money as possible. I will organise and buy the joinery from China using an existing supplier who recently just completed a store for us [Armani] in Melbourne. I trust them. You will just be required to supply the labour to install all joinery supplied.”

13. On 9 December 2015 Mr Zalloua sent the defendant an email with the plaintiff’s quotation for the work. [5] In his email Mr Zalloua noted that the quotation contained “Revised joinery to $324,000.00 + $30,000.00 for install totalling $354,000.00” and that this, together with another change bought “the price down to your target of $989,810.00 + gst”.

    5. Supplementary court book, p 289.

14. A number of the items in the quotation (including the joinery) were listed as provisional sums.

15. The plaintiff was chosen by the defendant as the preferred tenderer on the basis of this quotation.

16. On 8 January 2016 the Chief Executive Officer of the defendant, Frederico Molteni, signed the contract between the defendant and the plaintiff and Ms Brown sent it to the plaintiff.

17. In her email to the plaintiff [6] , Ms Brown wrote:

“Please find attached the signed contract for EA Sydney Airport project for Giorgio Armani. Please be note the dates and capped off cost which was agreed upon.

Please be very aware of the Sydney Airport security guidelines. They are very strict and any small deviation on site workers can lead to a delay in the project and could push you past the deadline date.

Site handover will be the 15th January, 2016. All staff will need to be inducted online and be SACL approved.GA are supplying the floor tiles, part joinery and security items. All other items are under the umbrella of Valmont. I have the contact details of suppliers for specific information …”

(Without correction)

6. Supplementary court book, p 544.

18. It will be necessary to consider some of the provisions in the contract in detail later in these reasons. For present purposes, it is relevant to note the following:

1. First, the supply of a number of items was to be undertaken by the defendant and was excluded from the price; however, the price included the installation of those items.

2. Secondly, the contract was for a fixed sum and there was nothing in it to allow for provisional sums; however, there was a provision for variations: cl 15.

3. Thirdly, the start date for the works was 11 January 2015 and the date for practical completion was listed as 5 March 2015 – there was no issue that these dates should have been 2016 or that the start date was changed to 24 February 2016 (the day on which work actually commenced) and the date for practical completion was changed to 21 April 2016 (although there is a dispute as to whether there was a further delay of practical completion pursuant to the extension provision in cl. 16).

4. Fourthly, if the provisions relating to variations and delay were not complied with by the plaintiff, any claim (including a claim based on quantum meruit) was waived.

5. Fifthly, the plaintiff was required to pay liquidated damages in the amount of $7,000 for each day practical completion was delayed.

6. Sixthly, there was a six month defect period during which the plaintiff was required to rectify any defects notified by the defendant and after which the retention amount would be paid to it (less any amount properly claimed by way of set off).

19. On 12 January 2016 the plaintiff issued a construction program [7] by email to the defendant. The program ran for eight weeks starting on 15 January 2016 and ending 10 March 2016. As noted in the email, it was prepared on the assumption that the joinery would be received on 24 February 2016, four days after the expected arrival notified by the shipping company.

    7. Supplementary court book, p 728.

20. On 1 February 2016 Sun Bright sent Armani a further quotation for the joinery. [8] Sun Bright indicated that it was unable to supply all of the joinery items required and indicated on the quotation and plans those items it could supply and those that should be supplied by the contractor (the plaintiff).

    8. Supplementary court book, pp 831-845.

21. Armani then directed the plaintiff to supply the joinery items which Sun Bright indicated that it would not supply. [9]

    9. Supplementary court book, pp 908-910.

22. On 22 February 2016 the plaintiff issued an amended construction program. [10] This program showed a starting date of 8 February 2016 (which was, by that time, impossible) and a finishing date of 7 April 2016.

    10. Supplementary court book, p 917.

23. On 23 February 2016 SACL issued its consent to the proposed fitout works and an Airport Works Plan. [11] On 24 February 2016 the Department of Infrastructure and Regional Development issued a Building Permit in respect of the works. [12] The plaintiff commenced the works on the same day.

    11. Supplementary court book, pp 919-942. The consent was required by statute: Airports (Building Control) Regulations 1966 (Cth), reg 2.03(4).

    12. Supplementary court book, p 937.

24. On 11 May 2016 the defendant was issued with a certificate of compliance for occupancy in respect of the premises. It took possession of the premises on that day and the store was opened for business on the following day.

25. The plaintiff attended to certain further work until September 2016. Following a continued dispute over payment, the plaintiff left the site at that time and did not return. The defendant then engaged a third party, Sidgreaves & Co, to undertake certain work on the premises.

Consideration

26. There are a large number of issues in the proceedings. In order to clarify precisely what was in issue and the respective positions of the parties on each issue, the parties were ordered to prepare a list of issues and to structure their written submissions by reference to this list.

27. Fortunately, the parties were able to resolve a number of the issues during the course of the proceedings. Unfortunately, the written submissions were not structured by reference to the agreed list of issues. In spite of that, it is convenient to structure the balance of these reasons by reference to that list of issues.

28. The list of issues was divided into four segments: construction contract, completion, delay damages and defects.

1. Construction Contract

1.1   Is the Construction Contract wholly contained in the “Works Contract” dated 8 January 2016?

29. The parties agreed that the answer to this issue is “yes”. Clause 1.1 provided that the Contract Documents constituted the entire agreement between the parties. In light of that, and the absence of any ambiguity or claim for misleading conduct, the parties’ agreement is correct.

1.2   If the answer to 1.1 is yes, are the items described as “Client Supply Items” in the Details to the Construction Contract, namely, light fittings, security equipment and joinery (item 6) to be supplied by the defendant without allowance from the Contract Price?

30. The parties agreed that the answer to this was “yes”; however, the defendant argued that not all joinery items were to be supplied by the defendant, only the joinery items specified.

31. This requires some explanation.

32. Clause 2.1 of the Contract required Valmont to “carry out and complete the Works”. “Works” was defined in cl 1.6 to mean “the whole of the work required to be performed by the Contractor pursuant to the Contract as described in the Details and including variations provided for by the terms and conditions”.

33. The Details included the following “Description of Works” referring to cl 2:

“For the fcomplete construction and fitout works for the proposed design of EA Sydney Airport. The contract sum is a fixed project price inclusive of all items – excluding those supplied by the client. Project Management, site management, security, supply and installation of all items as described in the Contract Design Documents (Schedule 1).”

(Without correction)

34. The Details also specified items described as “Client Supply Items” (a term defined in cl 1.6 as the items listed in the Details which Armani was to provide to Valmont):

“Client Supply Item:	Date available:
Light Fittings	10th February 2016
Security equipment	10th February 2016
Joinery (as specified)	27th February 2016”

35. The plain meaning of these terms is that, subject to any variations, Armani was to supply Valmont with the three items specified in the Details as “Client Supply Items” without any deduction from the contract price. As Armani noted, its obligation was only to supply joinery “as specified”.

1.3   Alternatively, did the quotation issued by the plaintiff on 9 December 2015 in the sum of $989,810 (exclusive of GST) form part of the Construction Contract or alternatively a collateral contract?

36. The parties agree, and I accept, that the answer to this question is “no”.

1.4   If the answer to question 1.3 is “yes”

37. This issue does not arise.

1.5   Was Armani obliged to supply the LED video as part of the “joinery as specified” client supply item?

38. The parties agree that the joinery “as specified” is a reference to the items included in the Furniture Schedule contained in drawing A06.02. [13] The first item in that Schedule was described as:

“LED VIDEO SP.6 CONNECT WITH MQUBE SYSTEM (BACK TO 50MM FROM EXTERNAL FRAME); 50MM SUDDEN FRAME. BACK OPENABLE OR REMOVABLE FOR LAMPS MAINTENANCE”

13. Supplementary court book, p 755. This was the version provided on 22 January 2016 but there was no relevant change to this item from any previous version.

39. There was also a reference to drawing A12.66 [14] which contained details of both the LED screen and the frame in which it was to be fixed.

    14. Supplementary court book, p 778.

40. Although the LED screen was contained in the “Furniture Schedule” it did not form part of the joinery as specified and so was not a client supply item. That means that Valmont was responsible for its supply within the contract price.

41. First, the ordinary meaning of joinery includes wooden components of a building. It does not include electronics. Secondly, the Chinese joinery company excluded the LED screen from its scope of work in a quotation provided to Valmont before the Contract, indeed, before Valmont’s revised quotation.

1.6   What is the balance of the Contract Price due to the plaintiff?

42. The parties agree that $98,981 (plus GST) is the balance of the Contract Sum that has not been paid to Valmont. The question whether Armani must pay that sum (and interest) may depend on whether it is entitled to any amount from Valmont in respect of defective or incomplete work or liquidated damages: see cl 12.6.

1.7   What sum is due to the plaintiff for variation claims – “in contract” works?

1.8   What sum is due to the plaintiff for additional claims – “out of contract” works?

43. It is convenient to deal with both of these issues together.

44. Valmont adopted the terms “in contract” and “out of contract” to describe different aspects of its claim. It used “out of contract” works to describe the supply by it of joinery, lighting and security that were included in the Client Supply items set out in the Details of the Contract. It argued that, because that supply was “out of contract”, it was entitled to recover payment on the basis of an inferred or implied contract. The term “in contract” was used to describe variations requested in connection with work that fell within the terms of the contract.

45. Valmont argued that the distinction is important because the contractual restrictions for payment of variations to the contract (see cl 15) did not apply to “out of contract” work, but did apply to “in contract” work.

46. Valmont’s argument relies on the summary of the decision of the High Court in Liebe v Molloy (1906) 4 CLR 347 by Justice Priestley in Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251 at 272:

“The High Court … said (at 354), that if the proper inferences from the facts were (i) that the employer had actual knowledge of the extra works as they were being done, (ii) knew that they were outside the contract and (iii) knew that the builder expected to be paid for them as extras then a contract to pay for them could properly be implied. ...”

47. Importantly, the Court in Liebe explained further (at 354):

“… Such an implication of course arises from an express request to do work made under such circumstances as to exclude the idea that the work was covered by a written contract. ...”

48. The difficulty for Valmont here is that there was provision within the contract for directions to be given by Armani that expanded the scope of the works to be conducted by Valmont. Clause 15.1 relevantly provided:

“15.1   GAA is entitled to direct the Contractor to increase, decrease or change the Works, the sequence in which the Works are performed or the materials or classes of work specified (Variation) …”

(Emphasis in original)

49. This clause envisaged that works that were not expressly identified in the contract as part of the works to be carried out under the contract were still to be covered by the terms of the written contract. That clause is part of the circumstances to be considered in determining whether or not the principle in Liebe applies to the facts of this case. I conclude that this clause is determinative of that issue, and that any direction given by Armani that related to the subject matter of the contract (i.e. the fitout of the EA retail store at the Sydney International Airport) was intended to come within the scope of the written contract.

50. For that reason, the works identified by Valmont as “out of contract” work, fall to be considered by reference to the terms of the contract and so both issues may be dealt with together as “variation” claims.

51. Before turning to the details of each claim, it should be noted that these issues, as formulated, involve a number of different questions and require some unpacking.

52. The question, as agreed, is what sum “is due” to the plaintiff in respect of these claims. Leaving aside the right to set off under cl 16.6 of the Contract, Armani says that nothing “is due” because Valmont did not comply with the variation provision in cl 15. That requires some analysis (see [56] – [61] below).

49. Next, Valmont argues that Armani is estopped from relying on cl 15 (see issue 1.9). Armani replies that, even if that is the case, which is denied, the amounts claimed are not reasonable (see issue 1.10).

50. Although each issue raised by Armani may make it unnecessary to deal with the detail of each variation claim, I will deal with them as briefly as each permits. It may be noted that, although I have concluded that there is no “out of contract” work, I make findings as to the value of those claims that may be applied to that work even if I were wrong in that conclusion.

51. The variation claims have been set out in a table by the parties. [15] Each item is described as “CV” (contract variation) followed by a number. This follows the format adopted by Valmont in its variation reports for the project. [16]

    15. As a schedule to the plaintiff’s submissions and is a document described as “Variations Bundle” by the defendant.

    16. See supplementary court book, p 1024.

52. The starting point for this issue is the Contract. It will be recalled that the Works to be performed by Valmont included “variations provided for by the terms and conditions”. Clause 15 provided for variations:

“15. Variations

15.1   GAA is entitled to direct the Contractor to increase, decrease or change the Works, the sequence in which the Works are performed or the materials or classes of work specified (Variation) by issuing a written direction to perform a Variation stating the direction is being issued pursuant to clause 15 (Variation Direction). The Contractor must not perform a Variation until the price of the Variation, and any effect on the Contractor’s Program, has been confirmed in writing.

15.2   If the Contractor considers that a Direction of GAA is a Variation but GAA has not issued a Variation Direction, the Contractor must give notice of the purported Variation to GAA within 5 Business Days after the Direction by GAA that constitutes the purported Variation and clause 15.1 will apply to the purported Variation. If notice not provided by the Contractor in accordance with this clause 15.2 the Contractor releases and waives any entitlement it may have to a Claim against GAA in connection with, or arising from, the purported Variation.

15.3   Within 5 Business Days of receipt of a Variation Direction or provision of a notice under clause 15.2, the Contractor must provide its price for the value of the Variation.

15.4   The parties must use their best endeavours to agree in writing on a reasonable value of a Variation.

15.5   If the parties fail to agree on a reasonable value of a Variation the Contractor will be entitled to the direct costs reasonably incurred in performing the Variation plus an additional 10 percent.

15.6   If GAA directs a Variation which involves the deletion or omission of any part of the Works, GAA may itself, or have another person, carry out that work and the Contractor shall have no Claim, and releases and waives any entitlement it may have to a Claim arising out of GAA or another person carrying out that work.”

(Emphasis in original)

57. The scope of the power of Armani to give a variation direction is very broad and is only limited by its context and purpose. The context of the Contract as a whole limits that scope of work to “fit out works” for the Emporio Armani shop at Sydney International Airport.

58. The ability to give a direction about the “materials or classes of work specified” is also very broad. There is a requirement that the power be exercised in writing and to state that it is being given pursuant to cl 15.1. However, given the provision in cl 15.2, a direction that does not comply with those requirements remains a valid direction.

59. If there is a direction that complies with cl 15.1 there is a prohibition on Valmont performing the variation until the price of it, and the effect on the Contractor’s program have been confirmed in writing.

60. Clause 15.2 deals with a direction by Armani that does not comply with the requirements of cl 15.1 but which Valmont considers is a variation. Importantly, if no notice is given under this provision, Valmont is not entitled to make any claim against Armani in connection with the variation. I will return to the breadth and effect of that clause later in these reasons.

61. At this point it may be noted that, while there were a number of written directions given by Armani to Valmont, none of them complied with the formal requirements of cl 15.1 in that they did not state that they were being given pursuant to that provision. Accordingly, in order to be able to make any claim for payment in respect of these variations, Valmont was required to comply with the provisions of cl 15.2 of the Contract. It did not. Subject to Valmont’s argument that Armani is estopped from relying on cl 15.2 of the Contract, there is no amount due in respect of any variation.

62. I then turn to each of the variation claims.

a.   CV1: Disconnection and removal of electrical and plumbing

63. Mr Zalloua’s evidence was that, in February 2016, he was asked by Ms Brown to remove all the existing plumbing and electrical cabling from the existing store. [17] Without giving any notice under cl 15.2 Valmont proceeded to have the work done. The variation cost $2,450 in total [18] and was approved in writing by Ms Brown on 16 March 2016. [19] This amount was subsequently paid.

    17. Affidavit of Marcel Zalloua dated 12 July 2018 at [59].

    18. Supplementary court book, pp 873 and 875.

    19. Supplementary court book p 1034.

64. There is no issue about this claim.

b.   CV3: Façade certification

65. The re-designed façade of the store required additional steel support. This, in turn, required certification. Valmont was asked by Armani to obtain this. Valmont obtained the certification using a contractor who charged $1,200 (inclusive of GST). This amount was included in a variation schedule and approved by Ms Brown on 16 March 2016. This amount was paid.

66. There is no issue about this claim.

c.   CV9: Glass shelving design and post-construction review by Inhabit Engineering

67. This shelving was originally to have been provided by Sun Bright. Valmont was directed to provide it, and in doing so, incurred additional costs in connection with its design and review because of concerns with the structural integrity of the original design. This was approved in the amount of $3,200.

68. There is no issue about this claim.

d.   CV12: Façade and shopfront

69. The drawings for the façade and shopfront are A09.01-A09.05. There is no issue that the revised drawings that were issued on 22 January 2016 changed the scope of the works in respect of the design and materials used. [20] There is a claim for $366,411 for the increase in the scope of the works. That claim is unsustainable. As a matter of principle, the only claim can be for additional costs incurred by the re-design, not the entire cost of the façade and shopfront. That is because there was always a façade and shopfront to be constructed as part of the works.

    20. Ex 6, A1 and A2.

70. The experts had a slightly different opinion about the cost of the additional work, although each was based on quotations given by a third party contractor (Ramvek) for the construction of the façade as originally designed and as re-designed. Mr Madden, who was qualified by Armani, agreed Ramvek’s quotation was reasonable but thought that it should be “decelerated” by 3% per annum to allow for the general increase in construction costs since 2016. I accept that this approach most closely establishes the reasonable costs of the additional façade works and find that they are $28,792.

e.   CV15: Alterations to existing drain lines

71. This item relates to alterations to the existing two 160mm syphonic drainage lines in the ceiling. The only evidence about this is an email from Ms Brown sent at 6:45pm on 2 March 2016 in which she wrote:

“Camilla has contacted Damien and he will be in tomorrow regarding the sewer pipe relocation/adjustment.”

72. Valmont also relies on an invoice addressed to it from plumbers dated 30 March 2016 in the amount of $3,120 (excl GST). [21] None of this establishes that this was in fact outside the scope of the original works and the claim is rejected.

f.   CV16: Labour and material to supply skirting

21. Supplementary court book, p 1093.

73. Mr Zalloua explains[22] that this item refers to 100mm white skirting in three change rooms and 25mm in black trim between aluminium blades to two curved walls. He says that they were not in the design documents, but that is not correct. In paragraph 26 under General Notes in document A00.10 [23] there is a requirement for new skirting. The claim for this item is rejected.

g.   CV17: Re-swing doors and new door jambs

22. Affidavit of Marcel Zalloua dated 12 July 2018 at [82].

23. Supplementary court book, p 179.

74. This item relates to items that Mr Zalloua says were not incorporated in the quotation. The quotation did not form part of the Contract and, for that reason, did not define the scope of work to be carried out under the Contract.

75. However, Mr Zalloua says that he received instructions from Gensler by email at 3:51pm on 18 April 2016 [24] to re-swing the doors outwards rather than inwards as shown in drawing A02.02. Mr Zalloua also refers to an email from Ms Brown dated 24 June 2016 [25] in which she refers to the “proposed doors”. It is difficult to see how this latter email deals with the same issue, given that Valmont relies on the door manufacturer’s invoice dated 27 April 2016 [26] and I would refuse this claim.

h.   CV18: Supply and install of parliament hinges and smoke seals

24. Supplementary court book, p 1201.

25. Supplementary court book, pp 1553-1554.

26. Supplementary court book, p1231.

76. The only basis for this claim is that these items were not included in the quotation. [27] That fact does not establish that this item fell outside the scope of the Works under the Contract and the item is disallowed.

i.   CV19: Supply and install of door closers

27. Affidavit of Marcel Zalloua dated 12 July 2018 at [89].

77. The only basis for this claim is that these items were not included in the quotation. [28] That fact does not establish that this item fell outside the scope of the Works under the Contract and the item is disallowed.

j.   CV20: Supply and install wall strengthening

28. Affidavit of Marcel Zalloua dated 12 July 2018 at [91].

78. The only basis for this claim is that these items were not included in the quotation. [29] That fact does not establish that this item fell outside the scope of the Works under the Contract and the item is disallowed.

k.   CV21: Supply and install 41 light boxes

29. Affidavit of Marcel Zalloua dated 12 July 2018 at [93].

79. This claim is not entirely clear. Mr Zalloua says that, but does not explain why [30] “the light boxes were required” but were not specified in any of the design documents. He then says that Armani’s light fitting supplier (Euroluce) did not supply all of the light fittings by 24 February 2016 as required but were delayed by 61 days. He refers to an email from Euroluce dated 29 February 2016 [31] which states:

“Further to this and as discussed, the fittings known as Sirio which are used in the Façade and a couple of other areas are not due here until 6 weeks from today …”

30. Affidavit of Marcel Zalloua dated 12 July 2018 at [95]-[98].

31. Supplementary court book, p 991.

80. This email relates to light fittings, not light boxes and does not assist in determining whether this item was inside or outside the scope of the Contract. Mr Zalloua’s statement that the light boxes were required does not help much either, but it does show that this item is not a “light fitting”. This means that it was not a “Client Supply Item” as shown in the Details but, rather, reasonably necessary for the installation of those fittings on the site. Clause 1.3 then operates to bring the boxes inside the scope of works. This claim is rejected.

l.   CV22: Plywood support

81. Mr Zalloua says[32] that additional structural supports were required for this installation of “Displays Niche”. [33] This item falls within the installation cost of the project which was Valmont’s responsibility and fell within the scope of the Works. The item is disallowed.

m.   CV24: Installation of LED Screen [actually cabinet for screen]

32. Affidavit of Marcel Zalloua dated 12 July 2018 at [100].

33. Drawing A12.50; item EA 02A.

82. This is also an installation item and part of Valmont’s general obligation to install everything, regardless of who supplied it. The item is disallowed.

n.   CV25: Supply and install metal fixing

83. Valmont argues that metal fixings were required in order to install lights that were supplied by Armani. [34] That may be accepted, however, it does not establish that this is a variation. The installation of lights was Valmont’s responsibility and the supply of plates to enable installation fell within the scope of that responsibility. The item is disallowed.

o.   CV26: Supply, installation and programming of exit and emergency lighting

34. Affidavit of Marcel Zalloua dated 12 July 2018 at [105].

84. Mr Zalloua says[35] that independent testing of exit and emergency lighting was required before occupation of the premises by Armani. Again, that may be accepted, however, it was Valmont’s responsibility under the contract to have this done: see “Certification” under “Building Regs Notes”. [36] This item is disallowed.

p.   CV27: Supply and installation of security door controller etc

35. Affidavit of Marcel Zalloua dated 12 July 2018 at [108].

36. Supplementary court book, p 179.

85. Mr Zalloua explains[37] that this item “relates to the installation of a security door controller and electronic door strikes” that were not allowed for in the quotation. As I have explained, the quotation has no bearing on this issue.

    37. Affidavit of Marcel Zalloua dated 12 July 2018 at [110].

86. On the basis of the evidence the claim must be rejected. Although the security items were a Client Supply Item in the Details of the Contract, Valmont was still responsible for installing those items. It cannot claim the cost of installation as a variation.

87. However, the invoice to Valmont in respect of these items [38] includes both supply and installation of the items. The problems for Valmont are, firstly, that the reference to “supply” is inconsistent with Mr Zalloua’s evidence, and, secondly, there is no way of identifying what part of the total charge related to installation and what part related to supply. Given the state of the evidence, I cannot be satisfied that Valmont has established that this is an item of work that fell outside of the Contract and the claim is rejected.

q.   CV28: Supply labour

38. Supplementary court book, p 1399.

88. This item relates to the “supply of labour to remove and cut framing, plywood, including the removal of plasterboard for sprinkler relocation”. [39] Mr Zalloua explained that the work was required in order to make the fire services compliant. As I have explained above, Valmont’s obligation generally included any work required to make the services compliant. There is no basis to distinguish this from the scope of works required by the Contract and the item is disallowed.

r.   CV30 / CV31: Rubbish removal

39. Affidavit of Marcel Zalloua dated 12 July 2018 at [112].

89. This claim is for the removal of pallets and packaging that were required for the delivery of tiles and Marmorino. [40] There is no question that Valmont was required to remove rubbish from the site: see, for example cl 1.3. This item was for work that fell within the scope of the works and the claim is disallowed.

s.   CV32: Demolition works

40. Affidavit of Marcel Zalloua dated 12 July 2018 at [116]-[119]. Marmorino is a type of plaster finish.

90. This claim is for the demolition and removal of 80mm of sand and cement screed prior to the installation of terrazzo stone. [41] There is no evidence that the work was not reasonably necessary for the installation of the stone which was, itself, required by the Contract. For that reason, cl 1.3 operated to bring this item within the scope of works. The item is disallowed.

t.   CV33: Additional fire sprinklers

41. Affidavit of Marcel Zalloua dated 12 July 2018 at [121].

91. This item was required to ensure compliance with relevant regulations and so was within the scope of works. The claim is disallowed.

u.   CV34: Removal and reinstatement of FH/FHR

92. Mr Zalloua asserts[42] that it was necessary to remove and then reinstate a fire hydrant/fire hydrant reel in order to construct the shop front. Even if that assertion is accepted without further explanation, which it is not, the item would fall within the scope of works by operation of cl 1.3. The claim is rejected.

v.   CV35: Joinery

42. Affidavit of Marcel Zalloua dated 12 July 2018 at [125].

93. The issue may be summarised as follows. At the time of the contract, all joinery was a “Client Supply Item” and so was to be supplied by Armani. Armani had intended its Chinese supplier, Sun Bright to manufacture and supply all of the joinery; however, on 1 February 2016 Sun Bright wrote to Armani identifying certain parts of the joinery that it would not supply and items of joinery that were to be supplied “by GC”. It is understood that “GC” meant “general contractor”, that is, Valmont. [43]

    43. Supplementary court book, p 831.

94. It did this by putting a dollar figure (in HKD) next to the items it would supply and “By GC” next to the items it would not supply.

95. As I have noted above, Armani instructed Valmont to supply the items that would not be supplied by Sun Bright. This direction changed what Valmont was required to do but, again, there was no direction in accordance with cl 15.1 and no compliance with cl 15.2 by Valmont.

96. Assuming for present purposes, that cl 15.2 does not prevent a claim for the additional amounts that should be paid to Valmont for the joinery it supplied pursuant to the direction, the question is what is the reasonable charge for compliance with the direction?

97. Mr Zalloua included in his first affidavit a table entitled “Provisional Sum Adjustment”. [44] This table included details for the following items:

    44. Supplementary court book, p 1697.

Original Contract value (taken from the quotation):	$354,000
Contract Works	$430,265
Additional Works – in house	$20,180
Additional works – furniture supplied by Armani	$75,096.89

He then subtracted the Contract value ($354,000) from the total of the last three items ($525,542.55) to arrive at $171,542.55, added 10% for preliminaries and margin and arrived at total (excluding GST) of $188,696.81.

98. The plaintiff’s expert, Mr Abbott, gave the following opinions [45] :

1. performance of the joinery direction was costlier than performance of the original joinery work [46] ;

2. assuming the joinery was a provisional sum, the appropriate adjustment was to subtract that sum ($354,000) from the actual cost ($525,542) and add 10% ($188,696 excluding GST) [47] ;

3. on a quantum meruit basis, a quote from a qualified shopfitter (Ramvek) was used to arrive at $480,251 for the Works set out in Mr Zalloua’s schedule including installation costs. Mr Abbott later agrees that this should be reduced to $442,871.75 to take into account the increase in building prices. [48]

   45. Report of Stephen Abbott, SJA Construction Services Pty Ltd dated 25 March 2019.

   46. Report of Stephen Abbott, SJA Construction Services Pty Ltd dated 25 March 2019, item 1.

   47. Report of Stephen Abbott, SJA Construction Services Pty Ltd dated 25 March 2019, item 7, p 16.

   48. Report of Stephen Abbott, SJA Construction Services Pty Ltd dated 10 July 2020, item 4, p 12.

99. Armani’s expert, Mr Madden, gave the following relevant opinions [49] :

1. taking the provisional sum adjustment approach, he accepted Ramvek’s quotation as market based but excluded two items (LED video and carpet) as not being joinery, excluded additional time for installation as being included in the Contract sum and adjusted the whole quotation to account for increases in building costs since 2016. The result was an adjustment of $35,163;

1. he had insufficient information to verify a quantum meruit claim because of the bespoke nature of the joinery; however, in the joint report of the experts [50] , Mr Madden says that the value of the Works (as shown in the Ramvek quotation and adjusted to remove the two items mentioned above) is $322,034.

   49. Ex 4.

   50. Ex 6, p 4, item A8.

100. It is difficult to assess this claim for a number of reasons. First, as the experts later agree, there is no provision in the Contract for the adjustment of provisional sums. Secondly, the schedule prepared by Mr Zalloua includes work that was already included in the Contract price: for example, the LED screen which was not joinery, installation of joinery and other work supplied by Armani (totalling $75,096.09) and the supply of doors (item 3.3). Secondly, apart from invoices [51] there is no evidence of precisely what work was done.

     51. Supplementary court book, pp 1558-1560 and 1727.

101. In those circumstances, it is not fruitful to rely on Mr Zalloua’s document, and the invoices that underlie it. Rather, I accept that the Ramvek quotation of 7 March 2019 provides a market based, and therefore, reasonable value for the work performed in connection with the joinery direction. However, it is to be adjusted in a number of ways.

102. First, it includes two items that were not supplied to Armani: items 9 and 10. The fact that Armani had not agreed to pay variations was not to the point. This amounted to $89,651. Secondly, it includes an amount of $52,416 for after-hours installation. It is agreed (albeit for different reasons) that that should be excluded. Fourthly, there is provision for carpet ($7,904) which is clearly not joinery. However, it is accepted that allowance should be made for the fact that the original scope called for sudden finish. Mr Madden’s evidence [52] allowed for $80/m² for this. As there was 27.25m² of carpet, the claim for carpet should be allowed, but reduced by $2,180. Extracting these amounts, the total for the work amounts is $268,048. That should then be reduced (or decelerated) in accounting for differences in building costs between 2016 and 2019 (i.e. 14.3% or $38,330) leaving a total amount of $229,718.

     52. Court book, tab 72, p 2110 at 7.6.

103. I note that the Ramvek quotation generally included installation of the joinery. This was already included as part of the contract price and so should not be included. However, there is no basis in the evidence for a calculation of the cost of the supply without installation and, for that reason, I have not reduced the figure in [102] to account for installation.

1.9   Is the defendant estopped from relying on cl 15 of the Contract?

104. Valmont argues that Armani is estopped from relying on cl 15 of the Contract or alternatively, that Armani had waived or abandoned any right to rely on that clause. In argument, counsel for Armani, Mr Dawson who appeared with Mr Elliott, relied on an email from Ms Brown to Mr Zalloua in which she said that there were no variations under the Contract and it was a capped price contract. That was not an accurate understanding of the contract. This assertion, it was argued [53] , prevented Armani from now relying on the clause because to do so would be to approbate and reprobate. Counsel explained [54] that the email created the assumption on the part of Valmont that there was no point in seeking written confirmation or approval of variations in strict compliance with cl 15. He also referred to the prevention principle [55] and to the decision of the High Court in Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 (Gardiner).

     53. Tcpt, 29 July 2020, p 214 (24).

     54. Tcpt, 29 July 2020, p 215.

     55. Tcpt, 29 July 2020, p 215 (49).

105. There are two insuperable difficulties facing the acceptance of Valmont’s argument. First, it is not supported on the facts; and secondly, it is not pleaded.

106. Before turning to the email of 11 April 2016, it may be recalled that, on several occasions variations were agreed to, and paid, without insistence on compliance with the terms of cl 15: see CV1 (at [63]), CV3 (at [65]) and CV9 (at [67]) above. Armani rightly acknowledged that this conduct might lend support to an estoppel. Armani also accepted that there may be an estoppel in respect of the façade variation. I will return to those. For present purposes, it may be noted that whatever may have been the situation up to 11 April 2016, it came to an abrupt halt following Ms Brown’s email of that day.

107. On 11 April 2016 there was a project meeting. The minutes of that meeting refer to a number of variations and record that they were noted. [56]

     56. The minutes are at supplementary court book, p 1159.

108. By email sent 6:06pm on 11 April 2016 [57] , Mr Takach, Valmont’s contract administrator, (copying Mr Zalloua in) sent Ms Brown a contract variation spreadsheet with an amount of $258,241.62 (excluding GST), asking her to review it and confirm her acceptance of it.

     57. Supplementary court book, p 1153.

109. Ms Brown replied promptly by email at 6:24pm the same day:

“There are no variations on this project. It is a capped off cost which means items cannot be issued under variation and it is a lump sum amount which covers the project. I am happy to discuss this anytime. Please see the original paperwork which secured you the project 11^th December.

If you would like to deviate from this original agreement – let’s discuss what and why.”

There is no document dated 11 December in evidence.

110. There was no immediate response to that email. Ms Brown and Mr Zalloua corresponded the following day; however, they did not deal with the issue of variations [58] until an email from Mr Zalloua at 5:00pm. [59] He wrote (relevantly):

     58. Supplementary court book, pp 1161-1162.

     59. Supplementary court book, p 1163.

“Please find attached the variations that still require approval.

…

We have proceeded with the structural steel works which will commence installation as of tomorrow evening. We require approval of the remaining variations for the façade design prior to these works being completed.”

Ms Brown replied by email at 7:48pm on 13 April 2016 [60] :

“I do not understand why you are sending variations on a project that has a fixed price? To be sending variations at this late stage is not in line with a collaborative approach.

It was agreed on 7/12/15 at your offices that this sum was to be ‘capped off’ cost. No additional project costs or provisional sums can be applied, this was the agreement. I think if you check your correspondence and records you will find that you were in possession of the updated drawings (see attached email) prior to 1 – agreeing on a sum and 2 – signing the contract of agreed sum so the agreement stands as was intended. Additionally you want to refer to the original quote – the initial façade design with glass and steel – is far more expensive than the one we are using – so logically additional costs would not be applicable.

You are contracted for completion of the project and are aware you cannot stop works. I hope that you can see reason and recall the agreed terms as they were and we can complete the project as we started out – with your goal of long term benefit to Valmont in a new sector and a quality project for us.

I am happy to meet you tomorrow not to agree on additional costs but to discuss the schedule of works.”

60. Supplementary court book, p 1167.

111. This email prompted a response from Mr Zalloua at 10:25pm that evening [61] :

“Clearly we are at odds with this situation. Firstly you have already approved in writing that the Structural steel variation was approved, so I don’t understand your reasoning that there can be no variations and it was a fixed cost contract. Secondly the contract both parties has signed is not a fixed price contract with no variations allowed so I am a little baffled as to why you feel there is no variations on this project.

Valmont was happy to agree terms on the drawings that were issued and priced on, Valmont is not in a position to absorb costs of a complete redesign of the façade which had to be completely redesigned both structurally and in finishes. We are not talking about a $10,000 variation. This is significant and Valmont has continually made you aware of the costs long before now. The façade was noted as a provisional sum on our quotation due to the lack of detail around what was being completed, the standard practice is the provisional sum is adjusted to suit the new drawings that were issued.

Unfortunately Valmont is not in a position to continue to proceed with these works without written approval, we will complete the structural steel works as we have been issued an approval for this, however no further works will be completed until we have a resolution to the variations.

Valmont has continued to work in good faith and with Armani’s best interest at heart and it is hard to fathom that we are in this situation when all our correspondence has been so clear from the outset.

I am not willing to meet to discuss the schedule tomorrow morning if you are not willing to discuss the variations as it will be of no benefit to either party.”

61. Supplementary court book, p 1166.

112. It appears that, in spite of the last paragraph in his email, Mr Zalloua did meet Ms Brown the following morning. At 10:26am on 14 April 2016, she wrote to him [62] :

“From our conversation this morning it seems we are both on the same page and want the same outcome. In keeping with this Armani agree to pay the full contract sum of the project as per our conversation this morning no variations will apply to works. ‘The contract sum is a fixed project price inclusive of all items – excluding those supplied by the client’.

I am happy with our agreement to work together moving forward for a collaborative approach to the completion of works.”

62. Supplementary court book, p 1166.

113. Mr Zalloua replied to this email at 3:53pm that afternoon:

“Thanks Camilla, for the clarification on the contract, however the variations are allowed under clause 15 of the contract. Regardless the offer we discussed this morning is as below;

*   Valmont receives its full contract sum of $989,810.00 exc. GST

*   Armani pays all costs associated with the joinery received from Sunbright Construction Company totalling $1,334,545 [63] which is as per the contract. Confirmation that Armani will not reduce or alter the contract amount to fund the payment of Sunbright or any other associated costs with the furniture ordered from China.

*   Valmont will pay all costs associated with rectification and completion of the joinery received from Sunbright. This will be paid from the payment of the full contract sum as stipulated in point 1.

*   Valmont will complete the façade works and will complete all unapproved variations on the basis of the above. Written confirmation is required prior to Valmont proceeding on this basis.”

63. This is Hong Kong dollars: see supplementary court book, p 849.

114. There was no reply to that email in evidence. Neither Mr Zalloua nor Ms Brown gave evidence about the meeting on the morning of 14 April 2016.

115. Leaving aside what may have been said, or assumed but not proved on the evidence, several observations may be made from this correspondence. First, Mr Zalloua appears to have initially overlooked or misunderstood the entire agreement clause in cl 1.1 of the Contract and to have wrongly thought that the Contract allowed for a provisional sum for certain items. Secondly, at least by 12 April 2016, Mr Zalloua was aware of the requirements for variations in cl 15 of the Contract: noting the need for written confirmation. Thirdly, if he had been under any misapprehension at that time, there is no doubt that by 14 April 2016 he had either reverted to the Contract and read cl 15 for himself or had been told about it; he expressly refers to it in his last email to Ms Brown on that day.

116. For those reasons, nothing Ms Brown wrote in her email of 11 April 2016, or subsequently, led Mr Zalloua to assume that cl 15 was to be relied on and that Valmont could carry on with variations without regard to the procedures laid down by that provision. For that reason alone, Valmont’s estoppel argument must be rejected.

117. The same facts reveal that there was also no waiver (in the sense of election, forbearance, abandonment) as understood in light of the decision in Gardiner. Armani neither chose between inconsistent rights and, as is evident from its defence of these proceedings, abandoned its right to rely on cl 15.

118. Next, it is necessary to consider the pleadings.

119. In its defence to each of the claimed variations, Armani relied, amongst other things, on cl 15.2 (referred to as “Express Release and Waiver”) in response to the claim that it was required to pay the plaintiff for works described as variations [see the following paragraphs of the defence: 21(d), 27(d), 34(d); 39(d); 45(d); 51(d); 57(d); 63(d); 69(d); 75(d); 82(d); 88(d); 94(d); 100(d); 106(d); 111(d); 116(d); 121(d)].

120. In its Reply, Valmont pleaded “estoppel, waiver and abandonment” in answer to Armani’s reliance on cl 15: Reply at [1]. There follows a recitation of six facts, none of which included the 11 April 2016 email from Ms Brown or the later related correspondence set out above:

“…

2.   On 21 January 2016, Armani notified Valmont of revised drawings for the works to be performed under the Works Contract and instructed that such drawings were “for your team”, thereby implying that Armani was directed to perform works under the Works Contract in accordance with the revised drawings.

Particulars

Email from C Brown of Armani to M Zalloua of Valmont sent at 11:19am on 21 January 2016, a copy of which is at Tab 12, p281 of Exhibit MZ-1 to the affidavit of Marcel Zalloua sworn 12 July 2018 (Zalloua Affidavit).

3.   On or about 22 January 2016, Armani issued revised drawings to Valmont for the works to be performed under the Works Contract.

Particulars

Revised drawings marked “22/01/2016 Issue for Construction”, a copy of which is at Tab 13 of Exhibit MZ-1 to the Zalloua Affidavit.

4.   On 11 February 2016, C Brown of Armani asked M Zalloua of Valmont as to the price which the façade works under the Works Contract were “coming in at”, thereby implying that there would be additional payment to Valmont in respect of any additional or variation work which Valmont was to perform under the Works Contract.

Particulars

Email from C Brown of Armani to M Zalloua of Valmont sent at 1:17pm on 11 February 2016, a copy of which is at Tab 14, p322 of Exhibit MZ-1 to the Zalloua Affidavit.

5.   On 16 March 2016, Armani notified Valmont that all claims for additional payment for additional work or variations to the works under the Works Contract were “approved” and did not stipulate any requirement for strict compliance with clause 15 of the Works Contract for such approval.

Particulars

Email from C Brown of Armani to A Takach and M Zalloua of Valmont sent at 5:16pm on 16 March 2016, a copy of which is at Tab 31, p417 of the Zalloua affidavit.

6.   On 17 May 2016, Armani notified Valmont that it was “happy to agree” upon additional payment to Valmont for additional work or variations to the works under the Works Contract upon completion of the works and did not stipulate any requirement for strict compliance with clause 15 of the Works Contract for such additional payment.

Particulars

Email from C Brown to Mr Zalloua sent on 11:54am on 17 May 2016, a copy of which is at Tab 34, p439 of Exhibit MZ-1 to the Zalloua affidavit.

7.   On 18 May 2016, Armani confirmed to Valmont that there would be “extra moneys” to Valmont for additional work or variations to the works under the Works Contract and did not stipulate any requirement for strict compliance with clause 15 of the Works Contract for such extra payment.

Particulars

Email from C Brown to M Zalloua sent at 1:51pm on 18 May 2016, a copy of which is at Tab 36, p462 of Exhibit MZ-1 to the Zalloua affidavit.”

(Emphasis in original)

121. Next, at [8] of the Reply, it is pleaded that, on the basis of these facts:

1. Valmont adopted the assumption that Armani waived or did not insist on strict compliance with cl 15 in relation to paying Valmont for performing additional work or variations to the works under the Contract (Payment Assumption);

2. “the Payment Assumption was shared, or alternatively encouraged or acquiesced in by Armani”;

3. “in the event that the Court determines that Valmont did not comply strictly with clause 15 of the Works Contract, such non-compliance was based on and in reliance on the Payment Assumption”;

4. by reason of the matters pleaded in [2] to [7], “Valmont and Armani conducted the relationship between them on the basis of the Payment Assumption”; and

5. “Armani knew of, or should be taken to have known of, or ought to have been aware of, Valmont’s reliance on the Payment Assumption”.

122. Valmont then pleaded that it would suffer detriment if Armani were permitted to deny the existence of, or depart from the Payment Assumption. Finally, Valmont pleaded that Armani is estopped from denying the existence of, or resiling from the Payment Assumption: [11]. Relying on precisely the same facts, Valmont pleads, in the alternative, that Armani waived the requirement for compliance with cl 15 of the Contract or abandoned cl 15.

123. In answer to the pleaded Payment Assumption, Armani relied on the correspondence commencing with the 11 April 2016 email from Ms Brown.

124. The pleaded estoppel case cannot survive the 11 April 2016 email. If there had been any conduct of Armani’s prior to that time that led Valmont to assume that compliance with cl 15 was unnecessary, that came to an abrupt halt with that email. Certainly, the allegation that Armani shared that assumption could not be established in light of the email (and was, in any event, abandoned expressly in oral submissions). [64]

     64. Tcpt, 29 July 2020, p 213 (41) – p 214 (4).

125. As I have mentioned, Valmont also relied on election in its Reply on the basis of the same facts as it relied on to claim an estoppel. In its written submissions Valmont appears to support the claim of an election as follows [65] :

“…

B.   The Defendant breached the variation procedure by maintaining an intransigent and absolute position that there was no contractual entitlement to vary the Contract Price. In doing so the Defendant renounced the benefit of the clause 15 variation mechanism: see Gardiner.

C.   Having rejected the operation of clause 15 and clause 16, the Defendant cannot now seek to invoke it in defence of the Plaintiff’s entitlement to variations and EOTs - the Defendant cannot approbate and reprobate;

…”

65. Plaintiff’s submissions dated 28 July 2020 at [3.4(d)(ii)].

126. It is not at all clear what this means. In oral submissions, Mr Dawson emphasised that the point was that Armani cannot “approbate and reprobate”. In other words, that it could not completely disavow the contractual availability of variation and then rely on that provision to dispute entitlement to variations that did not conform with the procedural requirements of the contract. [66]

     66. Tcpt, 29 July 2020, p 214 (23-30).

127. The phrase “approbate and reprobate” is a synonym for the equitable doctrine of election. [67] As the plurality explained in Gardiner (at [57] referring to Pridmore v Magenta Nominees Pty Ltd (1999) 161 ALR 458 at 470 [66]):

“ … Equity fastens upon the conscience of a party taking under a deed or will and requires the party to choose between taking the benefit and accepting the burden of any stipulated conditions or rejecting the benefit. …”

67. Agricultural & Rural Finance Pty Ltd v Gardiner (2000) 238 CLR 570 at [57] referring to Lissenden v CAV Bosch Ltd [1940] AC 412 at 417.

128. Once again, this argument suffers the difficulty of relying on the 11 April 2016 email and was not pleaded. In any event, in spite of relying on Gardiner, Valmont did not explain how the doctrine of equitable election applied in a commercial contract for the performance of building works.

4.2   To the extent the works are incomplete, was that state caused by the conduct of the Defendant?

226. No. Valmont left the site and did not return because Armani did not comply with its demand to pay it $250,000 on account of variations to which it was not entitled.

4.3   What is the direct cost incurred by the Defendant to rectify the defects?

227. This claim is based on a number of invoices that are asserted to have been for the rectification of defects. They are set out in Appendix D to Mr Madden’s second report and dealt with in the table below by reference to the item number in that appendix:

Item	Contractor	Invoice Date and Reference	Comment
28	Midas Construction Group	30.9.16 SCB 1649	The work is described as “remove and rectify shelving”. It does not say what shelving, or what was wrong with it.
29	RJA Retails Joinery	21.11.16 SCB 1703	The description is “rectification works … as quoted”. The quotation refers to the removal and replacement of aluminium battens. Mr Madden suggests that this was within the defects identified by Armani, but does not say which. The closest defect to this description is the black metal blades that were defect 3 above. This is supported by Mr Zakos’ report: see [7.3] at p 13 of his report. I have concluded that that was not a defect: [207]. This claim would have been double counting in any event.
31	API Services & Solutions Pty Ltd	20.10.17 SCB 1759	This is described as “repair 2 patch fits on front door … repair break glass … and replace latch on another.” Mr Madden suggests that this is also a defect identified by Armani; however, that item (see p. 13 of Mr Zakos’ report) was only for a non-existing lock which is item 10 in the defects list with an agreed value of $348.14.
32	Sidgreaves & Co	21.12.17 SCB 1761	This work is for the LED screen mirror, shopfront rectification works, glass edges and replacement of acrylic shelves. This is the subject of a number of defects determinations and is double-counting.

228. None of these claims is allowed.

Summary of findings on the cross-claim

229. Armani is entitled to judgment for the following amounts:

(1)	Liquidated damages:	$140,000.00
(2)	Defects:	$95,611.29
(3)	TOTAL	$235,611.29

CONCLUSION

230. Under cl 18.3 of the Contract, Armani is entitled to either deduct liquidated damages from payments due to Valmont or to have recourse to security. In its defence, it admitted (at [123]) the final payment under the contract but pleaded that it was “subject to set offs and deductions under the Works Contract”. In those circumstances it is not clear which of the options under cl 18.3 Armani has elected to take and, accordingly, it is appropriate to give judgment in favour of each party in the amounts to which I have found it is entitled: see s 90(2)(b) Civil Procedure Act 2005.

231. Each party has been successful in respect of different aspects of its claims and unsuccessful in respect of others. There is little doubt that the costs involved far exceed the amount of the judgments given and it is important not to increase those any further than is absolutely necessary. For those reasons, having regard to the fact that Armani was more successful on its cross claim, the appropriate order for costs is that Valmont pay 50% of Armani’s costs as agreed or assessed.

**********

Endnotes

Decision last updated: 27 August 2020