WÄRtsilÄ Australia Pty Ltd v Primero Group Ltd

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
WÄRTSILÄ AUSTRALIA PTY LTD v PRIMERO GROUP LTD
[2023] SASC 121
Judgment of the Honourable Justice Stein
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - CASE MANAGEMENT - OTHER MATTERS
The applicant and respondent are parties to a subcontract which involved certain works relating to the Barker Inlet Power Station in South Australia. The respondent performed works and claims, by a cross claim, damages pursuant to s 236 of sch 2 of the Competition and Consumer Act 2010 (Cth) or, in the alternative, entitlements pursuant to contract.
The trial is listed to commence at the end of August.
The respondent sought leave to amend parts of its cross claim relating to the claims in contract and to amend its pleading of loss consequential on asserted misleading and deceptive conduct. The applicant opposed some of the proposed amendments and sought to strike out certain parts of the extant cross claim.
Prior to amendment, the respondent pleaded that by reason of misleading and deceptive representations made by the applicant, the respondent entered into the subcontract and suffered loss being the difference between the costs incurred by the respondent in carrying out the works and the amounts received from the applicant. The proposed amendment pleaded loss of contribution to head office overheads and profit. The applicant resisted the amendment on grounds including that the pleading was deficient and failed to give fair notice of the case to be run. The applicant contended that the respondent’s case was a “no transaction” case and to claim loss of contribution to head office overhead and profits it was necessary for the respondent to plead and prove that the respondent could and would have entered into alternative projects or taken steps to avoid incurring costs. The respondent contended it was not required to plead and prove a counterfactual and it was sufficient to prove that it sustained loss caused by the applicant’s misleading and deceptive conduct.
Through amendments to multiple paragraphs of the cross claim, the respondent claimed the direct and indirect costs of performing variations and materially different works and consequential disruption. The applicant opposed the amendments on grounds including that indirect costs and disruption costs were impermissibly addressed on a global basis and not by reference to each specific variation. The respondent submitted that all costs were previously pleaded, the amendments sought only to split costs into direct and indirect costs in accordance with an expert report and the applicant’s position rested on a construction of the contract to be considered at trial.
Held, granting leave to amend the cross claim in the form of the proposed cross claim (revision 5), but refusing leave to amend [8TT]:
1.The proposed [8TT] fails to plead sufficient material facts to support a claim for loss of contribution to head office overhead and profits and fails to give fair notice of the case to be run at trial.
2.The objections to the paragraphs which rely on asserted contractual entitlements depend on the applicant’s interpretation of the contract and questions of sufficiency of evidence. Those are matters to be addressed by the trial Judge.

Competition and Consumer Act 2010 (Cth) sch 2 s 236; Uniform Civil Rules 2020 (SA) r 67; Trade Practices Act 1974 (Cth) ss 52, 82, referred to.
Adelaide Brighton Cement Ltd v Hallett Concrete Pty Ltd (2020) 137 SASR 117; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Kyogle Shire Council v Francis (1988) 13 NSWLR 396; Wyzenbeek v Australasian Marine Imports Pty Ltd (in liq) (2019) 272 FCR 373; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; Avenhouse v Hornsby Shire Council [1995] Aust Torts Reports 81-351; Strategic Minerals Corporation NL v Hendry Rae & Court (1996) 14 ACLC 485; Price Higgins & Fidge v Drysdale [1996] 1 VR 346; CH2M Hill v New South Wales [2012] NSWSC 963; Thiess Watkins White Construction Ltd v Commonwealth of Australia (1998) 14 BCL 61; Banabelle Electrical v New South Wales [2005] NSWSC 714; Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; Westpac Banking Corporation v Jamieson [2016] 1 Qd R 495; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; John Holland Construction & Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd (1996) 8 VR 681; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, considered.

WÄRTSILÄ AUSTRALIA PTY LTD v PRIMERO GROUP LTD
[2023] SASC 121
Civil: Application
STEIN J.
Background

Wärtsilä Australia Pty Ltd (“Wärtsilä”) and Primero Group Ltd (“Primero”) are parties to a subcontract which involved certain works relating to the Barker Inlet Power Station in South Australia. Primero performed works and claims damages pursuant to s 236 of sch 2 of the Competition and Consumer Act 2010 (Cth), being the Australian Consumer Law (“ACL”) or, alternatively, entitlements pursuant to the subcontract. Relevantly for the purposes of the applications before me, the claimed entitlements include claims for Variations, works described as materially different works and disruption.
The action has been case managed by Blue J and is listed for a lengthy trial to commence before Blue J at the end of August. Primero seeks leave to amend its cross claim (revision 4). Wärtsilä opposes the grant of leave and seeks to strike out certain parts of the cross claim (revision 4). Justice Blue dispensed with the need for formal applications on the basis the parties’ submissions would articulate the relevant issues and set a timetable for submissions and argument with two days set aside. I heard the argument in Blue J’s unavoidable absence. I am treating the argument as addressing Wärtsilä’s opposition to an informal application for leave to amend the cross claim and Wärtsilä’s informal application to strike out aspects of the existing pleading.
Given the proximity of the hearing to the commencement of trial and the likelihood that any decision will impact trial preparation and potentially the conduct of the trial, I have prepared these reasons at short notice as a matter of urgency. Accordingly, for reasons of expedition, I have not fully summarised or referred to all aspects of counsel’s arguments or the materials to which reference was made.
Materials relied on
In addition to written submissions, I received an affidavit of Nicholas Hay made on 14 July 2023, an affidavit of Rachael King made 21 July 2023, an affidavit of Jordan Schutz made 24 July 2023, together with the exhibits to those affidavits which included the subcontract and expert reports. I received a bundle of documents in two lever arch folders which contained documents including the expert report of Mr Atkinson, the expert report of Ms Wenham, accounting reports and witness statements.
Paragraphs to which there is no opposition
Wärtsilä does not oppose and accordingly I give leave to Primero to amend [8Y], [8AA], [8BB], [8EE], [8GG], [8II], [8QQ], [8SS], [38], [39A], [40A], [41], [41A], [41B], [47], [56], [58], [61], [70], [71], [73], [75], [90B] and to delete [51], [52], [53], [53A], [53B], [54A], [54B], [55].
Amended cross claim – revision 5
The proposed amendments to the pleading fall into two general groups. The first amendment, set out in [8TT], in broad terms pleads loss said to be incurred as a consequence of alleged misleading and deceptive conduct. The second group of proposed amendments to the pleadings relates to asserted entitlements under the subcontract.
Should I consider the application or leave it to the trial Judge?
Wärtsilä asked me to determine the applications on the basis that Wärtsilä should know the case it has to meet in advance of trial. Primero’s primary position was that the applications ought to be left for consideration by the trial Judge. Wärtsilä’s point that it is preferable for the parties to know in advance of the start of the trial whether the proposed amendments are allowed so that they can prepare accordingly is reasonable. Further, the pleading argument was referred to me by the trial Judge to address in his absence. Accordingly, I have determined to proceed to address the applications where I consider it possible to do so. I remain conscious of Primero’s opposition to any aspects of the applications that would involve conclusions amounting to final determinations of rights on the basis any such matters properly should be addressed by the trial Judge and would have an impact on the conduct of the trial, including the potential for concurrent appeals.
Misleading and deceptive conduct – [8TT]
Primero pleads that various representations were made by Wärtsilä which were relied on by it and which constituted misleading and deceptive conduct. Primero pleads that, but for the representations, it would not have entered into the subcontract. Wärtsilä refers to the pleading as one of a “no transaction” case. Prior to amendment, the cross claim pleaded loss described as the net difference between the costs incurred by Primero in performing the Works and complying with its obligations under the subcontract and the total sums paid by Wärtsilä to Primero.
The proposed amendment to [8TT] contained in the draft pleading has been overtaken by a new version set out in [122] of Primero’s submissions. I am asked to address the version in the submissions at [122] as set out below.
8TT.Primero claims the losses that it incurred in entering into the Subcontract in reliance on the Representations.
Particulars
(i)      Wärtsilä has paid Primero a total amount of $108,202,216.79 (excluding GST) in relation to the Subcontract; and
(ii)     Primero esimates it has incurred costs of approximately $134,178,614.00 $133,010,174 in relation to the Subcontract (narrowed only to those costs the subject of a claim for payment by Primero).
(iii)    The net difference between the costs incurred by Primero in performing the Works and complying with its obligations under the Subcontract and the total sums paid by Wärtsilä to Primero is a loss incurred by Primero as a result of being induced to enter into the Subcontract.
(iv)    Further,
(a) Primero was induced to enter into the BIPS Subcontract by Wärtsilä’s misleading or deceptive conduct;
(b) Primero would not have entered into the BIPS Subcontract but for that conduct;
(c) On entering into the BIPS Subcontract Primero committed its resources to completing the BIPS Subcontract;
(d) Because of that commitment, Primero did not act on any alternative project opportunities that may have utilised such resources;
(e) Primero made a loss on the BIPS Subcontract;
(f) Primero was thereby deprived of any contribution to its head office overheads and profit by the BIPS Subcontract running at a loss;
(g) Primero’s other projects being undertaken during the period of the BIPS Subcontract contributed 9.9% of as a percentage of project costs to overhead and profit, such percentage equating to the BIPS Subcontract 10% margin for overheads and profit;
(h) Primero continued during the course of the BIPS Subcontract to incur head office overheads; and
(i) The contribution to head office overhead and profit that was not contributed to from the BIPS Project was a loss caused by Wärtsilä’s misleading or deceptive conduct, and as a percentage on costs incurred equates to $13,125,244 or $12,955,559.
(j) For the reasons explained above, the allegations up to and including paragraph 8TT reduce to the following propositions that are evidently triable:
Without summarising the detail of the history of matters raised in correspondence and during the hearings before Blue J from July 2021 onwards, it is apparent that for some time, counsel for Wärtsilä has been raising concerns in relation to whether the claim in [8TT] incorporated any claim for costs in the nature of overhead. Wärtsilä has asserted that if there was to be any such claim, it would have to be based on an expressly pleaded, positive case that in the absence of entering into the subcontract, the overheads would have been deployed in some other profit making manner.
The pleading previously alleged loss being a difference between the costs incurred by Primero in carrying out the works and amounts received from Wärtsilä. As can be seen by the proposed amendment, it expressly adds a plea that further, by reason of the misleading and deceptive representations, Primero entered the subcontract and committed its resources to the subcontract. It pleads that because of that commitment, it did not act on any alternative project opportunities and made a loss and was thereby deprived of any contribution to its head office overheads and profit. It pleads its other contracts contributed 9.9 percent to overheads and profits and the contribution to head office overhead and profits that was not contributed to by the subcontract was a loss caused by the misleading and deceptive conduct.
Wärtsilä does not submit that, as a matter of law, a claim for overhead and lost profit can never be made in a context in which a party claims it would not have entered into a contract if misleading representations upon which it relied had not been made. Rather, Wärtsilä submits that a claim for contribution to head office overheads is a claim for recovery of fixed costs which would be incurred in any event. Accordingly, if such a claim is to be made, it amounts to a claim for a loss of opportunity to engage in a different transaction which would have resulted in contribution to overhead and profit. Wärtsilä submits that if such a claim is to be run, it is necessary to plead and prove that the party could and would have entered into the alternative transaction or taken other steps to avoid incurring costs, such as terminating staff. Wärtsilä says that absent a pleading of material facts as to what Primero could and would have done, the pleading fails to comply with the Uniform Civil Rules 2020 (SA) (“UCR”) and ought not be allowed to proceed. Wärtsilä referred to UCR r 67 which requires that pleadings must, among other things, set out the affirmative facts and statutory provisions relied on by a party and give fair notice to avoid taking the opposing party by surprise at trial. Wärtsilä relies on the decision of Doyle J in Adelaide Brighton Cement Ltd v Hallett Concrete Pty Ltd.[1]
[1] (2020) 137 SASR 117 at [61]-[65].
Wärtsilä submits that the issue of the pleading of loss referable to overhead has been lurking for two years, with Wärtsilä endeavouring to obtain clarity as to whether the losses claimed included a contribution to overheads and profit. Wärtsilä submits that Primero previously maintained it did not make such a claim but has recently changed its position. Wärtsilä contends that to allow the amendment will cause Wärtsilä prejudice because even if Primero does not intend to file further evidence or provide further discovery, Wärtsilä is entitled to a proper pleading which sets out the material facts, allows Wärtsilä to know the case it is to meet and gives Wärtsilä the opportunity to seek particulars and further discovery. Wärtsilä submits that in circumstances in which the trial is to commence in about four weeks, leave ought not be granted and Primero should then determine whether to proffer a further proposed pleading which may meet the pleading requirements.
Wärtsilä took me to a number of authorities, including Sellars v Adelaide Petroleum NL[2] (“Sellars”) and Kyogle Shire Council v Francis[3] (“Kyogle”) as support for the proposition that if Primero is to be entitled to any contribution to overhead and profit, rather than simply the variable costs attributable to the project, Primero must plead and establish what it could and would have done instead, such as by reducing staff to reduce costs or entering into other profit making transactions. As the quantification of this claim is in the order of $13 million it is significant.
[2] (1994) 179 CLR 332.
[3] (1988) 13 NSWLR 396.
Primero maintains it is not constrained to run its case through any particular construct of “no transaction” or “loss of opportunity” which imposes any obligation to demonstrate other hypothetical steps Primero might have taken. Primero refers to evidence provided by Mr McFarlane and Mr Henry, Primero’s Chief Executive Officer. That evidence is said to support the proposition that the subcontract project was consuming approximately 75 percent of Primero’s resources and consequently, in the particular and unusual circumstances of this case, the distinction between onsite and offsite overheads falls away. Primero submits the offsite overheads were necessarily the consequence of support for the resources and cost commitments on this particular project. Consequently, Primero submits it is not the sort of claim in which delay in progress on one project could be addressed without sacrificing other contracts it might have available. I understood Primero to be submitting that, in the particular circumstances of this case, by reason of the significant extent to which Primero’s resources were engaged on the subcontract with associated significant application of Primero’s overhead to the project itself, those costs are costs arising because of the conduct of Wärtsilä, the impugned conduct being a cause of Primero entering into a loss making project.
Primero also refers to the evidence of Mr McFarlane in which Mr McFarlane explains his task in certain paragraphs as being to “address a counterfactual regarding Primero’s costs and resources if Primero did not tender for and/or enter into the Subcontract with Wärtsilä”. The task described by Mr McFarlane included identifying the project based and non-project based costs incurred by Primero necessary to service the project and identifying which of those costs would not have been incurred, offsite or otherwise, if the project had not been undertaken. This covered staff engaged solely on the project, staff not retained after the project concluded, staff who had productive time split and so on. Primero also points to the accounting expert reports which considered the contribution to overhead referable to other projects addressed by Primero at the time of the subcontract. Primero relies on upon the decision in Wyzenbeek v Australasian Marine Imports Pty Ltd (in liq)[4] (“Wyzenbeek”) as supporting its position that it is not obliged to plead and prove a counterfactual.
[4] (2019) 272 FCR 373.
I turn to consider the authorities upon which the parties relied to make good their propositions.
In Sellars the High Court considered a claim for loss under s 82 of the Trade Practices Act 1974 (Cth) (“TPA”) which provided that a person who suffers loss or damage by the conduct of another person in contravention of a relevant provision of the TPA may recover the amount of the loss or damage. The factual background was that Adelaide Petroleum’s directors had entered into parallel negotiations with two companies with the object of persuading them to acquire the directors’ shareholdings as an element of a restructure. One company was Poseidon and the other was Pagini Resources. It was alleged that misrepresentations were made in contravention of s 52 of the TPA which resulted in loss or damage and that, but for the representations, Adelaide Petroleum would have entered into the Pagini Resources agreement but had lost the benefit of that agreement and suffered losses.

Chief Justice Mason, Dawson, Toohey and Gaudron JJ observed that the gist of the action under s 52 is loss or damage. In the context of contraventions in the form of misrepresentations, acts done by the representee in reliance on the misrepresentations amount to a sufficient connection to satisfy the concept of causation. If those acts result in economic or financial loss it will ordinarily be recoverable under s 82.[5] In Sellars, the respondents suffered the loss of the opportunity to secure commercial benefits which entry into the Pagini Resources agreement would have brought. The question for consideration was how the value of the lost opportunity or chance was to be measured. Their Honours observed that the general standard of proof in civil actions will ordinarily govern the issue of causation. The applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. In Sellars, the applicant showed some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some, not negligible, value with the value being ascertained by reference to the degree of probabilities or possibilities. The damage for deprivation of the commercial opportunity, whether occurring by reason of breach of contract, tort or contravention of s 52 is to be ascertained by reference to the Court’s assessments of the prospects of success of that opportunity had it been pursued.[6]
[5] Sellarsv Adelaide Petroleum NL (1994) 179 CLR 332 at 348.
[6] Sellarsv Adelaide Petroleum NL (1994) 179 CLR 332 at 355.
Justice Brennan observed that where loss is produced as a result of conduct in contravention of s 52, the existence of a compensable loss and the amount of compensation is ascertained by enquiring whether and by how much the person is worse off as a result of acting on the inducement of false representations.[7] His Honour observed that in cases under s 82 of the TPA, as in cases of tort, where damage is the gist of the action, there may or may not be a compensable loss as a result of a lost opportunity. The existence and causation of a compensable loss cannot be proved by reference to the promise to afford an opportunity and the plaintiff must prove the existence and causation of the alleged loss in another way. Justice Brennan referred to Gates v City Mutual Life Assurance Society Ltd,[8] in particular, to the statement by Mason, Wilson and Dawson JJ that it is necessary to determine what the plaintiff would have done had he not relied on the representation. If the reliance deprived the plaintiff of an opportunity of entering a different contract on which he would have made a profit, the profit can be recovered on the footing that it is part of the loss suffered in consequence of the plaintiff altering his or her position under the inducement of the representation. It would require the plaintiff to establish that he could and would have entered into the different contract and it would have yielded the benefit claimed. Justice Brennan observed that for the purposes of s 82, the loss of a mere opportunity to acquire a benefit is not itself a loss but the loss of the benefit will be a loss if the plaintiff proves he could and would have taken the opportunity and the benefit would then have been yielded. Justice Brennan stated that in this respect the law under s 82 is no different from the law of torts.[9] While observing that it would be inappropriate to exclude the loss of a valuable commercial opportunity from loss and damage in s 82, nevertheless a causal relationship between the loss of the opportunity and the defendant’s contravening conduct must be proved before any issue of assessment of the amount of the loss arises. While loss and the assessment of its amount are distinct concepts, often the same body of evidence will tend to establish both.[10]
[7] Sellarsv Adelaide Petroleum NL (1994) 179 CLR 332 at 357.
[8] (1986) 160 CLR 1.
[9] Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 362.
[10] Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 364.
In Kyogle, the New South Wales Court of Appeal addressed a case in which the plaintiff purchased land, intending to profitably subdivide it, and relied on zoning certificates which incorrectly stated the property was zoned in a way which would have allowed subdivision. The plaintiff sued for damages for negligent misrepresentation. It was accepted that if the correct zoning information had been supplied, the plaintiff would not have purchased the land. The trial Judge awarded the plaintiff damages representing the profits he would have made had he been able to subdivide and re-sell the land.
On appeal, Clarke JA stated that the loss of profit was a reliance loss and a plaintiff seeking to recover damages of that nature must establish that if he or she had not been induced to enter into this contract, he or she would have entered into another contract from which he or she would have expected a profit. In this case, the respondent did not plead or lead evidence to show that if he had not bought the particular parcel, he would have bought another block of land and subdivided it for expected profit. Justice Clarke concluded the loss of profits could not be regarded as flowing from the tort.[11]
[11] Kyogle Shire Council v Francis (1988) 13 NSWLR 396 at 418A.
A similar approach was taken by Spender AJ in Avenhouse v Hornsby Shire Council.[12] Acting Justice Spender referred to Kyogle in concluding the plaintiffs could only recover loss for an alternative use of money, whether in another investment or on the basis of a loss of a chance to make another investment, if the evidence established such a case.
[12] [1995] Aust Torts Reports 81-351.
In Strategic Minerals Corporation NL v Hendry Rae & Court,[13] Scott J addressed a claim for loss of use of funds which a company asserted it would have had available to it had it not undertaken a particular transaction. Justice Scott stated that the plaintiff was required to adduce evidence which at the least pointed to an alternative transaction which would have been taken up but for the inducement to enter into the disputed transaction.[14]
[13] (1996) 14 ACLC 485.
[14] Strategic Minerals Corporation NL v Hendry Rae & Court (1996) 14 ACLC 485 at 501.
In Price Higgins & Fidge v Drysdale,[15] the Court addressed a claim that by reason of negligent conduct, the plaintiff had lost an opportunity. President Winneke, with whom Ormiston and Charles JJA agreed, stated that the existence of a relevant loss of opportunity must be proved. One cannot simply assume a plaintiff has lost a valuable opportunity because events supervening upon the defendant’s conduct might suggest a loss has occurred. The plaintiff must prove that the loss has occurred and that it has been caused by the defendant’s contravening conduct and to do so the plaintiff must demonstrate not only that the prospect had a real value, but if the true position had been disclosed, he or she would have acted to secure the benefit. The plaintiff must establish by evidence that, but for the contravening conduct, he or she could have and would have taken the opportunity and the benefit it would have yielded.[16]
[15] [1996] 1 VR 346.
[16] Price Higgins & Fidge v Drysdale [1996] 1 VR 346 at 355.
In CH2M Hill v New South Wales,[17] McDougall J referred to Thiess Watkins White Construction Ltd v Commonwealth of Australia (“Thiess”),[18] and observed that a claim in respect of corporate overheads is really a claim for loss of opportunity to make and earn profit under another contract. Accordingly, the entitlement to recover corporate overheads depends on showing, among other things, that the contractor did not have sufficient resources or flexibility to enable it to take other work notwithstanding the problems in the particular contract.[19] Justice McDougall referred also to Banabelle Electrical v New South Wales[20] (also a delay case) in which McDougall J considered that it is wrong to make an allowance for recovery of offsite or fixed head office overhead or loss of profit unless there is a basis for concluding overhead or profit could have been recovered or earned through the performance of other profitable work where the effect of delay is to prevent the contractor from undertaking other profitable work. While these cases were in the context of contractual delay, Wärtsilä submits the same principles are applicable. Primero, however, puts a different position which I address below.
[17] [2012] NSWSC 963.
[18] (1998) 14 BCL 61.
[19] CH2M Hill v New South Wales [2012] NSWSC 963 at [406]
[20] [2005] NSWSC 714.
Wärtsilä relied on the authorities to which it referred for the proposition that it is necessary for Primero to plead and prove what it could have and would have done. It described the case as a “no transaction” case and characterised the claim for contribution to overhead and profit as one which constitutes a “loss of opportunity” case. Primero objects to that characterisation and submits that it cannot be required by Wärtsilä or the Court to characterise and plead its claim in any particular way.
Primero primarily relied on Wyzenbeek. In addition, it referred to particular observations made by Giles J in Thiess in which Giles J considered whether offsite overheads were allowable as delay costs. Justice Giles observed that offsite overheads are costs incurred which can be considered to be incurred in relation to the performance of all the contracts on foot from time to time but in part are costs incurred in the performance of any given contract. His Honour observed that it is common for a contractor to include a percentage of the estimated direct costs in its price in order to recover a share of offsite overheads and profit.[21] The share of offsite overheads attributed to the contract must be justified and in principle it must be shown that a true loss has been suffered.[22] Justice Giles quoted from Engineering Law and I.C.E. Contracts[23] to the effect that where a delay affects a small part of a large contractor’s total resources, the organisation has sufficient flexibility to cope with extra time onsite without sacrificing any other contracts that may be available so the total overhead return and profit is not in fact adversely affected.[24] However, this is contrasted with a case in which a major part of the resources are tied on a site because of delay such that the contractor genuinely may be inhibited from tendering for other work. Justice Giles observed that if difficulties of proof can be overcome, a loss will have been shown because during the extended period of the contract the contractor will have incurred increased costs of offsite overheads but received the same payment. Primero submits that it seeks to put its claim for a contribution to overhead within the kind of case to which Giles J referred, that is, a case in which a major part of the resources of Primero were tied up on the subcontract project.
[21] Thiess Watkins White Construction Ltd v Commonwealth of Australia (1998) 14 BCL 61 at 77
[22] Thiess Watkins White Construction Ltd v Commonwealth of Australia (1998) 14 BCL 61 at 77.
[23] Max Abrahamson, Engineering Law and I.C.E. Contracts (CRC Press, 4^th ed, 1979) at 369.
[24] Thiess Watkins White Construction Ltd v Commonwealth of Australia (1998) 14 BCL 61 at 77.
Primero also submits that the authorities upon which Wärtsilä relied are not cases in the context of s 236 of the ACL and, in bringing a claim for loss under s 236, it is not constrained in the manner put by Wärtsilä. Primero relied upon the decision of the Full Federal Court in Wyzenbeek in support of its position that it is not required to plead and prove a counterfactual. Primero submits that all that is required is for it to establish on the applicable causation principles that Wärtsilä’s acts caused the loss or damage claimed.
In Wyzenbeek, the plaintiffs purchased a yacht as a consequence of misleading and deceptive conduct constituted by representations that the yacht was an ocean-going vessel. The case was run on the basis that the applicants would not have purchased the yacht had they known the representations were false. The respondents contended that if the misleading representations had not been made, the applicants would have acquired a different vessel and would be in substantially the same position in which they found themselves.
The central question for consideration was described as being the proper analysis as to causation and assessment of loss where, but for the wrongdoer’s misleading and deceptive conduct, the transaction in question would not have occurred.[25]
[25] Wyzenbeek v Australasian Marine ImportsPty Ltd (in liq) (2019) 272 FCR 373 at [3] per Rares, Burley and Anastassiou JJ.
The Full Court stated that a no transaction case is a legal construct to accommodate the position of a person claiming to be injured by entering into a contract as a result of a representation of someone and it is not necessary to plead and prove a counterfactual.
The Full Court considered the primary Judge’s analysis of the damages claim to be erroneous. The Full Court stated that as part of the primary Judge’s analysis, the trial Judge considered it necessary to quantify the loss caused by the contravener’s conduct and to exclude losses arising from other causes. The trial Judge held that once a claimant established that he, she or it suffered loss as a result of misleading conduct, that necessitated a consideration of whether they also suffered consequential losses if those losses were directly related to the consequences of the wrongful conduct and did not arise from independent causes. The trial Judge considered that regardless of what method of assessment was applied to the calculation of damages consequent on the claimant having been induced to enter into a transaction, a further issue arose which was what the claimant would have done had they not been so induced. The trial Judge treated this as a separate step to the quantification of loss arising directly from the entry into the transaction. The separate step concerned the claimant’s counterfactual economic position. The trial Judge considered that if the claimant would have entered into a similar transaction which would have cause the same or similar loss, the Court was entitled to take that into account.
The Full Court observed that if a claimant is induced to enter into a transaction by misleading conduct, that, together with loss flowing from the inducement is all that is required to be proved.[26] The Full Court referred to previous High Court authority[27] to the effect that it is wrong to approach s 82 by drawing an analogy with any particular form of claim or remedy under the general law and the reference to loss or damage cannot be given a narrow meaning and loss or damage under s 82 is not confined to economic loss.[28] A person may recover loss or damage causally connected to a contravention of s 52. The Full Court referred to I& L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd[29] to the effect that the relevant question is whether the contravention was a cause, in the sense of materially contributing to, the loss. Accordingly, cases in which it will be necessary and appropriate to attribute parts of the loss to particular causative events are likely to be rare. It is sufficient to attract the remedial provisions in s 82 if the misleading conduct in contravention of s 52 is a cause of the loss or damage.[30] The measure of damage stipulated is the loss or damage of which the conduct was a cause and not the sole cause.
[26] Wyzenbeek v Australasian Marine ImportsPty Ltd (in liq) (2019) 272 FCR 373 at [59].
[27] Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 at [31].
[28] See Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494.
[29] (2002) 210 CLR 109 at [62] per Gaudron, Gummow and Hayne JJ.
[30] I& L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at [33] per Gleeson CJ.
The Full Court observed that it is always open to a person who claims to have suffered loss by a misrepresentation to allege that, if aware of the true position, he or she would not have entered into any transaction at all or would have entered into a different transaction.[31] In a no transaction case, the claimant should be granted relief on the basis of being restored to the position that would have existed if there had not been a transaction. In a different transaction case, where the claimant asserts they would have acted differently, the claimant is not seeking to be restored to his or her original position but to a hypothetical one based on a postulated difference.[32]
[31] Wyzenbeek v Australasian Marine ImportsPty Ltd (in liq) (2019) 272 FCR 373 at [89].
[32] Wyzenbeek v Australasian Marine ImportsPty Ltd (in liq) (2019) 272 FCR 373 at [89].
Following this comment, the Full Court observed that the primary Judge’s investigation of a counterfactual scenario “eschewed the principle that a claimant is entitled to compensation” if he or she establishes on the applicable causation principles or test for the cause of action that the wrongdoer’s act or omission caused the loss claimed.[33] Ordinarily, it is irrelevant to that enquiry to speculate about whether, hypothetically, the claimant would have done something else and also suffered some other loss. The Full Court observed that this would require the Court to evaluate whether, and to what extent, the claimant would have arrived at some hypothesised similar loss which changed the analysis from examining the actual facts of the case to comparing a position of the existing state of affairs to a chance that had the claimant acted differently he, she or it would have had an opportunity to incur some other loss.[34]
[33] Wyzenbeek v Australasian Marine ImportsPty Ltd (in liq) (2019) 272 FCR 373 at [90].
[34] Wyzenbeek v Australasian Marine Imports Pty Ltd (in liq) (2019) 272 FCR 373 at [90].
The Full Court considered the approach in Westpac Banking Corporation v Jamieson[35] to be wrong on the basis that it required proof of causation and damage by a comparison between the loss caused by the wrongdoer that the claimant actually suffered with the evaluation of a chance the claimant may have engaged in a different hypothetical transaction in which he, she or it would have incurred similar loss or damage.[36] The Court continued to observe that the applicants were not required to prove and that the respondent could not seek to prove that there were other courses of action which would have resulted in the claimant being in a similar position as that induced by the wrongdoer’s contravention. That task would deflect the Court from deciding whether the claimant suffered loss or damage by the wrongdoer’s contravention. If the contravention is a cause of the loss, then it is not necessary to divide up the loss or damage and analyse the operation of other possible causes.[37]
[35] [2016] 1 Qd R 495.
[36] Wyzenbeek v Australasian Marine ImportsPty Ltd (in liq) (2019) 272 FCR 373 at [92].
[37] Wyzenbeek v Australasian Marine ImportsPty Ltd (in liq) (2019) 272 FCR 373 at [93].
The Full Court stated that the purpose of s 82 is to compensate a person who has suffered loss or damage by misleading conduct in contravention of the TPA where that conduct was a cause that materially contributed to the loss or damage. The statutory purpose prescribes a norm of conduct and gives a person misled a remedy for the loss or damage suffered by the contravening conduct. The statutory purpose is not served by a hypothetical or counterfactual investigation of what else might have happened that the representor seeks to raise as exculpation or mitigation of its liability. The Full Court observed that it would not serve the statutory purpose for a contravener to be able to say that, despite the misleading and deceptive conduct, the representee is no worse off because he or she would have suffered the same loss in some other transaction that did not eventuate.[38]
[38] Wyzenbeek v Australasian Marine ImportsPty Ltd (in liq) (2019) 272 FCR 373 at [118].

In my view, Wyzenbeek does not stand for the breadth of proposition for which it was put by Primero. In my view, it stands for the proposition that if misleading and deceptive conduct is a cause that materially contributes to loss or damage, it is no answer to say that, in the absence of entering into the particular transaction, the representee would have entered into another transaction which would have resulted in the representee incurring a similar or other loss. In my view, it addresses the context in which a representor seeks to exculpate or mitigate his, her or its liability on the basis that, had the representee not relied on the representation and entered into the contract, the representee would have taken some action which would also have resulted in loss and therefore, the loss to be assessed ought to be reduced.
The Full Court referred to the investigation by the trial Judge of a counterfactual scenario as eschewing the proper principle that a claimant is entitled to compensation if he or she establishes on the applicable causation principles that the wrongdoer’s act caused the loss claimed. I do not consider the Full Court’s observations support the position that it is not ever necessary for a claimant to plead and prove a counterfactual in circumstances in which a claimant pleads loss as a consequence of entry into a contract which would not have been entered into if misleading representations had not been made. I reach that view taking into account the observations of the Full Court in the context of the particular approach adopted by the trial Judge which was the subject of the appeal. After considering the loss which flowed from the misleading and deceptive conduct, the trial Judge took a further step which involved reducing the damages on account of what may have happened had the claimant entered into a different contract which would also have resulted in a loss Accordingly, the Full Court considered the trial Judge was comparing the loss the claimant actually suffered with the chance the claimant would have incurred a similar loss had the claimant entered into a different hypothetical transaction and therefore the trial Judge failed to assess the loss which flowed from entry into the particular transaction.
The question what loss the claimant actually suffered as a result of the contravening conduct is not determined by the application of any particular characterisation or label but is to be determined in the context of the particular allegations and circumstances. Whether or not it will be necessary for a claimant to plead and prove a counterfactual will depend on the nature of the claim and the particular circumstances of the matter.
Assertion concerning application of significant resources to the subcontract
As discussed above, Primero points to what it says are unusual circumstances in which a significant proportion of its resources were committed to this transaction. It seeks to recover overhead on the basis of a blurring of the usual distinction between onsite cost and offsite overhead. I do not consider it would be necessary to plead a counterfactual to run that kind of case, which in essence asserts loss was actually suffered flowing directly from entry into the contract. However, if that is the case to be run, in order to comply with the UCR, the pleading ought to provide clear notice of it.
While Primero’s submissions set out the basis upon which it claims it can run that case, in my view the proposed pleading in [122] of Primero’s submissions does not clearly articulate that position in a manner compliant with the UCR. The proposed amendment pleads that Primero committed its resources to completing the subcontract; because of the commitment, Primero did not act on alternative project opportunities that may have utilised such resources; Primero made a loss and was thereby deprived of any contribution to head office overheads and profit by the subcontract running at a loss. There is no pleading of material facts to support a claim along the lines submitted, that the offsite overhead costs were devoted in large part to the subcontract works and the scale of project costs relative to the overall business costs were such that any usual demarcation between onsite projects, specific overheads and offsite (fixed or wider business) overheads did not exist in this case. If that case is to be run, in my view, to comply with the requirements of the UCR, the material facts upon which it is based must expressly be pleaded.
Counterfactual?
Primero, in submissions, referred to some aspects of Mr McFarlane’s statement as “addressing a counterfactual”.[39] The proposed pleading in [8TT(iv)(d)] refers to Primero not acting on alternative project opportunities that may have utilised resources.[40] Primero submits that, if it be necessary to infer, the Court could find Primero would not otherwise have suffered the loss and would either not have retained the offsite costs or would have availed itself of the pipeline of works and contracted on other projects that would have earned it the 9.9 percent margin.
[39] Written submissions of respondent (Primero) dated 24 July 2023 (“Primero written submissions”) at [115].
[40] Primero written submissions at [122].
While Primero makes the submission that a significant portion of its resources were committed to this project, it does not submit that all resources were committed to this project and relies for its claim of 9.9 percent contribution to overheads on the remaining project work being conducted by Primero at the time of the subcontract. It is therefore implicit in the submission and the reference to the evidence that there is consideration of a counterfactual. That counterfactual is either, or a combination of, Primero avoiding costs which could have been reduced and entering into alternative transactions in its pipeline of proposed works from which it would have obtained contribution to its overhead and profits in amounts consistent with the contribution earned on other projects run at the time of the subcontract. In my view, in respect of this aspect of the proposed pleading, based on the authorities on which Wärtsilä relied, it would be necessary to plead a counterfactual to run that kind of case.
In my view, the proposed pleading fails to plead sufficient material facts to support the claim for loss by way of a failure to earn a contribution to overhead and profit and it fails to give adequate notice of the claim to be run.
I therefore refuse to grant leave to Primero to amend the cross claim (revision 4) by adding the proposed [8TT] in the terms set out in [122] of Primero’s written submissions. I make clear that in so doing I am only considering the question of the sufficiency of the pleading. I do not form any view as to whether such a claim, if pleaded, would be tenable. Accordingly, it is open to Primero to attempt to reformulate the proposed plea and to seek leave to amend accordingly.
As a consequence of my conclusions, it is not necessary for me to address the Aon Risk Services Australia Ltd v Australian National University[41] prejudice to which Wärtsilä referred. If Primero seeks to amend [8TT] in a different manner which is opposed by Wärtsilä, that question will then fall for consideration.
Contract claims
[41] (2009) 239 CLR 175.
Proposed amendments
I set out below a summary of the relevant paragraphs of the cross claim and the proposed amendments.
Overall, relevantly for the applications, Primero claims the direct and indirect costs of performing Variations, the direct and indirect costs of materially different works and the direct and indirect costs associated with disruption arising from Variations and the materially different works. Particulars are given including by reference to the expert report of Mr Atkinson, a quantity surveyor, dated August 2022.
Wärtsilä objects to the amendments to [42(b)], [42A], [48]-[50]; [54], [54C], [54D], [64], [64A], [65], [66] and [91].
I set out below a summary of the sections of the pleading relevant to assist in understanding the opposition to the application to amend.
Variation claims
Variations are addressed in [36]-[46D].
The cross claim pleads terms of the subcontract in [9(n)]. It pleads an asserted effect of cl 14 of the subcontract, including cl 14.4(b), and refers to the definition of “Variation” in cl 1.1 of the subcontract. That definition is relevant to Primero’s claim that materially different work constitutes Variations.
Paragraph 36 onwards pleads that the parties agreed to vary the process for directing and performing Variations such that, in effect, a Variation could be directed and then commenced without the requirement of a formal Variation Order. The pleading pleads that Wärtsilä represented that it did not, and would not, require a Variation Order before Primero commenced Variation works. It pleads in a new [39A] that by its conduct, Wärtsilä acted consistently with prior representations. Paragraph 40 pleads that by Wärtsilä’s representations, Primero was induced to assume it was not required to comply with cl 14.5 of the subcontract (which provides in effect that Primero must not perform a Variation except in accordance with a Variation Order) before commencing Variation works and it is entitled to be paid the reasonable additional cost of the Variations. Paragraph 40A pleads further or alternatively that the parties shared a common assumption to the effect pleaded in [36]-[39].
Paragraph 41 pleads that in reliance on the representations or common assumption referred to in [39] and [20A], Primero performed Variation works on receipt of various documents including site instructions and revised Design Documents. The reference to “Design Documents” is not introduced by amendment and was contained in the cross claim (revision 4). Paragraph 41(b) pleads that Primero incurred direct and indirect costs with respect to the performance of those Variations (for which Primero claims payment) in addition to direct and indirect costs and other costs and losses arising from disruption caused by the Variations. That paragraph previously pleaded that Primero incurred reasonable additional direct costs in addition to indirect costs and other costs and losses arising from disruption. It appears therefore that the paragraph prior to the proposed amendment referred to both direct costs and indirect costs and other costs and losses arising from disruption.
Paragraph 41A pleads that Wärtsilä knew Primero was performing Variation works as pleaded at [41] and was doing so in accordance with the common assumption pleaded at [40A]. Paragraph 41B pleads that where the parties shared the common assumption pleaded in [40A], and Primero was with Wärtsilä’s knowledge performing Variations, it would cause detriment to Primero, and be unconscionable for Wärtsilä to depart from that assumption.
Paragraph 42 pleads that Primero performed work described in Appendix A which constituted an addition or change to the scope or requirements of the subcontract. Appendix A is entitled “Variations” and lists 505 “VR” items. Appendix A does not include materially different work claims.[42]
[42] This is apparent from [843] of the report of Mr Atkinson.
Paragraph 42(b) pleads that Primero incurred direct and indirect costs in respect of the performance of each Variation. The particulars refer to the report of Mr Atkinson at s 2.7 and s 5 and appendices referred to therein.
Paragraph 42A pleads the amount to which Primero claims it is entitled by reason of [36]-[42], particularised by reference to the report of Mr Atkinson at s 2.7 and s 5 and appendices referred to therein.
“Design Documents” are defined by the contract as drawings, specifications and documents describing the works to be constructed. Apart from the reference to “Design Documents”, the paragraphs in the section of the pleading under the heading “Variations” appear to be expressed in the language of Variations.
Prior to amendment, by a combination of the previous [47] and [54], Primero claimed its costs and losses consequent on losses of productivity and other disruption caused by the Variations and its direct costs of performing Variations and its indirect costs arising from the management and supervision of the Variations. I read revision 4 as having pleaded the direct costs and the indirect costs of Variations and the cost and losses resulting from disruption, although not separated out in the manner of the proposed pleading and by reference to specific parts of Mr Atkinson’s report.
Disruption claims
The title “Disruption” has been amended to read “Additional Disruption and Indirect Costs”. Amendments are contained in [48]-[50] and [54]-[54D].
Paragraph 47 pleads by reference to cl 14.4(b) of the subcontract that Primero is entitled to increased direct costs and losses consequent on disruption in addition to direct and indirect costs of performing the Variation works.
Paragraph 48 pleads that the Variation work referred to in [41(b)] and [62] set out in Appendix A and Appendix B caused Primero to incur costs and losses consequent on disruption. The proposed amendment adds the reference to [62] and Appendix B and thereby expressly incorporates a reference to materially different work claims. The particulars to [48] incorporate a reference to s 2.6 of the report of Mr Atkinson, in particular [147] and [75].
Paragraph 49 pleads that by reason of [48], Primero required more direct man hours to complete the works. The particulars refer to the report of Mr Atkinson. Paragraph 50 pleads by reference to the amounts set out in [48] and [49] an entitlement to an adjustment to the subcontract price particularised by reference to the report of Mr Atkinson.
Paragraph 54 pleads that by reason of cl 14.4(b) of the subcontract, Primero is entitled to its direct and indirect costs of performing the Variation works and also to increased indirect costs and losses caused by the Variations. Prior to the proposed amendment the paragraph referred both to “direct costs of performing the Variation works” and “indirect costs”.
Paragraph 54C pleads that by reason of [48] (which by the amendment incorporates reference to both Variation and materially different work claims) Primero required greater indirect man hours and plant and equipment to complete the works. The particulars refer to the report of Mr Atkinson, particularly [196] and s 2.7 relating to indirect costs.
Paragraph 54D provides for the adjustment to which Primero is said to be entitled by reason of the matters pleaded in [48] and [54C] and particularised by reference to the report of Mr Atkinson.
Materially different work claims
Materially different work claims are addressed in [60D]-[69] and Appendix B.
Materially different work claims are based on a contractual provision in cl 3.7 of the subcontract which in essence provides that if the Design Documents are materially different to the baseline design, then to the extent such materially difference impacts the unit rates, Primero will be entitled to an adjustment of the price payable in accordance with a schedule to the subcontract. The pleading pleads that Design Documents were materially different and caused Primero to incur additional costs set out in Appendix B.
Paragraph 9(e) pleads cl 3.7(b) of the subcontract which provides the consequences if the Design Documents are materially different to the baseline design. Those consequences include that Primero would be entitled to an adjustment of the subcontract prices in accordance with Schedule 2.
In [61] Primero pleads Design Documents were provided which were materially different to the baseline design. The particulars refer to a Scott Schedule to be finalised following finalisation of joint expert evidence.
Paragraph 62 pleads that work performed was materially different and caused Primero to incur additional costs as particularised in Appendix B. Appendix B includes a claim amount without disruption and a disruption amount and a total.
Paragraph 63 pleads that the work referred to in [62] also constituted Variations because that work was an addition, substitution or change to the scope requirements within the definition of Variation in cl 1.1 of the subcontract.
The pleading prior to amendment pleaded that materially different work also constituted Variations.
Paragraph 64 pleads that by reason of cl 14.4(b), in addition to direct and indirect costs of performing materially different work, as part of its reasonable additional costs arising from Variations, Primero is entitled to increased direct costs and losses consequent on disruption. Before amendment, [64] pleaded that by reason of cl 14.4(b), as part of its reasonable costs of Variations, Primero was entitled to costs and losses consequent on disruption caused by the materially different work.
Paragraph 64A pleads that by reason of cl 14.4(b), in addition to direct and indirect costs of performing materially different work, Primero is entitled to increased indirect costs and losses in connection with Primero’s work caused by the materially different work.
Paragraph 65 pleads that as referred to in [48], [49] and [54C], the work which was materially different work caused it to incur both direct and indirect costs and losses consequent on disruption. I note that [48], [49] and [54C] appear to be paragraphs relating to the pleading which I will refer to generically as the estoppel pleading.
Paragraph 66 pleads that by reason of the matters pleaded in [60D] to [65] and the terms of the subcontract, Primero is entitled to an adjustment of the subcontract price being the total of the amounts claimed in respect of each materially different works claim in Appendix B and particularised by reference to Mr Atkinson’s report in ss 2.7 and 3 and appendices therein. Section 2.7 of Mr Atkinson’s report relates to indirect costs and s 3 relates to materially different work claims. Paragraph 66 also claims direct costs of disruption arising from materially different work as referred to in [48] to [50] and additional indirect costs arising from materially different work as referred to in [48], [54], [54C] and [54D]. Paragraph 54 is pleaded by reference to cl 14.4(b) of the subcontract. Paragraphs 54C and 54D cross refer to [48] which in turn relates to the estoppel pleading.
Paragraph 91 is a prayer for relief. Prior to amendment it pleaded entitlement to, among other things, direct costs of Variations, indirect costs of Variations, Variations including materially different work (disruption) and materially different work. The amendment pleads entitlement to Variations (direct and indirect and disruption) costs.
On a not unduly technical reading of the cross claim (revision 4), I consider prior to amendment it pleaded entitlement to direct and indirect costs of Variations, disruption in relation to Variations and materially different works and the costs of materially different works. The proposed pleading separates out disruption and additional indirect costs arising out of Variations and materially different works.
Submissions
Wärtsilä
Wärtsilä objects to the proposed amendments for indirect costs and disruption by reference to ss 2.6 and 2.7 of the report of Mr Atkinson on the basis Mr Atkinson has approached indirect costs and disruption costs on a global basis. Wärtsilä submits that to the extent the proposed amendments seek to rely on Mr Atkinson’s global claim analysis in ss 2.6 and 2.7 of his report, they are both embarrassing as pleaded and substantively untenable.
Wärtsilä summarises Mr Atkinson’s approach to disruption costs as taking the total direct costs for the project, determining which were recovered elsewhere and then dealing with the remaining unrecovered hours globally and without cause and effect of particular events. The total hours spent not recovered through other assessments or payments are identified, then Mr Atkinson identifies recovery of unrecovered disruption hours through other means. Wärtsilä asserts he then removes potential duplication, shows cause and effect to the extent possible and then reduces for other disruption factors for which Wärtsilä is not responsible. Wärtsilä describes the allocation of the global costs across Variations and materially different works claims as arbitrary. Wärtsilä takes issue with the comparison of planned to actual resources and costs and submits that reliance on planned costs is a fundamental weakness in the analysis.

Wärtsilä contends that Primero does not advance a global claim because the relevant effects from specific causes are causally indivisible but because Primero cannot separate cause and effect due to poor record keeping.
Wärtsilä contends that its issue is not just with quantification but with articulation of the material facts necessary to satisfy the cl 14.4(b) subcontract requirement that costs arise out of the Variation.
Wärtsilä submits that each claim for a Variation gives rise to a standalone contractual right with an alleged entitlement to the effects attributable to each particular cause and must be pleaded accordingly. Wärtsilä describes Mr Atkinson’s approach to indirect costs as adopting the same global claim approach adopted in relation to disruption. The approach is described as a modified total cost based analysis. Wärtsilä submits that allocation after adjustments of unrecovered indirect hours is done without regard to specific variations but on the basis of a percentage rate, which is inconsistent with the contractual mechanism.
Wärtsilä submits that the proposed amendments in relation to the contractual claims fail to comply with the UCR and Primero must plead its claim in accordance with the contractual provisions. It submits that cl 14.4(b) of the subcontract provides that in the event that Wärtsilä directs Primero to perform a Variation pursuant to a Variation Order, and if the parties fail to agree any adjustment to milestone payments, then the payments must be adjusted by a reasonable price or price reduction determined on the basis of the reasonable additional costs and cost savings which will arise out of the Variation excluding overheads and profit. Wärtsilä submits that the reference to “the” Variation requires a Variation by Variation approach to the assessment of costs.
Wärtsilä submits that the correct interpretation of the subcontract is pleaded by Primero in [42(b)] which refers to incurring costs in relation to “each” Variation. Wärtsilä contends that the global claims for indirect costs and for disruption do not causally connect any particular costs to any particular Variation or materially different work claim despite the requirements of cl 14.4(b) of the subcontract. It submits that the subcontract does not enable such a global approach and accordingly a failure to plead individual variation by variation cost consequences is embarrassing. Wärtsilä submits that if the approach Primero adopts is not a global approach, then then it must plead with particularity in respect of each claim said to arise from the subcontract the cause and relevant effect said to flow on a Variation by Variation basis in relation to each Variation and materially different work claim and the quantification of each. To the extent that the pleadings seek to rely upon Mr Atkinson’s global claim analysis, Wärtsilä contends they are deficient and substantively untenable.
Wärtsilä further submits that Primero’s indirect costs claimed for Variations and materially different works claims are untenable because they include overheads which are precluded by the terms of cl 14.4(b) of the subcontract, which expressly excludes overheads and profits. Wärtsilä points to the express reference in cl 14.4(b) to “excluding overheads and profit”. Wärtsilä refers to the descriptions of certain indirect resources by reference to title and submits that those descriptions indicate they appear to be roles properly described as head office overheads. Accordingly, Wärtsilä submits that it is apparent that at least some hours included relate to employees who plainly do form part of the overheads and those hours cannot be disentangled from the totality. Wärtsilä further complains that by also including an allegation of entitlement to the profit and overheads margin, Primero double dips.
While accepting that it is possible for global claims to the pleaded and proved, Wärtsilä points to the dangers inherent in global claims as referred to by Byrne J in John Holland Construction & Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd.[43]
[43] (1996) 8 VR 681.
Wärtsilä says that Mr Atkinson’s approach incorporates indirect costs for which there is no contractual mechanism for recovery. Making an adjustment for causes for which Wärtsilä is responsible by deducting 20 percent in an overarching manner is said to fail properly to disentangle costs for which Wärtsilä would not be responsible and to fail to consider specific events and exclude them from the analysis.
Wärtsilä submits that [42(b)] and [42A] are confined to Variation claims, yet global claims must cover all the Variation claims and all the materially different works claims. Wärtsilä submits that by dealing with Variation claims separately at [42(b)] and [42A] and Variation and materially different works claims at [47]-[55] and [64]-[66], global claims for indirect costs and disruption must fail because success only on Variations or Variations and materially different works claims would not entitle Primero to pursue its global claims because the claims incorporate causes for which Wärtsilä is not responsible.
Wärtsilä acknowledges that Mr Atkinson has recently been asked to proceed to allocate disruption costs on a Variation by Variation basis. It contends if that occurs, then it will be a separate question whether an approach involving the arbitrary global allocation of costs to individual Variations is untenable.
Wärtsilä also complains that materially different work claims and Variation claims are conflated by Primero treating materially different work claims as both materially different work claims under cl 3.7(b)(2)(B) and as Variations pursuant to cl 14. Wärtsilä submits that conflation is untenable and cannot be resolved by repleading. Wärtsilä submits that cls 3.7(b)(2)(B) and 14 have different fields of operations and conditions which attach to them in terms of the costs recoverable and the formal requirements for recovery. Wärtsilä submits that Primero does not allege that it complied with the contractual requirement in cl 14.5 of the subcontract in respect of the materially different work claims. Wärtsilä submits that in order to rely on cl 14.4(b) for materially different work claims, Primero must advance those claims as Variations including in compliance with the conditions and limitations that apply to cl 14. Further, Wärtsilä submits that the estoppel plea cannot save the materially different work claims on the basis that the estoppel allegations are confined to Variations and do not extend to materially different work claims.
Primero
Primero submits that all the groups of costs have previously been identified and are not new in the pleading but rather the amendments split out costs into direct and indirect costs in accordance with Mr Atkinson’s report which has been in evidence since August 2022.
Primero submits that [42(b)] and [42A] concern claims for Variations in the “unadulterated” cl 14.4(b) context, that is Variations without the inclusion of materially different works claims. It submits that the amendments to [42(b)] and [42A] are made so as to be consistent with the evidence and direct and indirect costs associated with each Variation have always been claimed. Primero submits that the submission that the particulars are wrapped up in global claim is not sustainable as s 5 and the appendices to Mr Atkinson’s report break up the costs for Variations. Primero submits that the Scott Schedule has always set out Primero’s total claim for Variation costs.
Primero submits that disruption associated with Variations is pleaded at [48]-[50] and this section of the pleading is intended to cover both Variations within Appendix A and also materially different work claims and the amendments split out indirect and indirect costs occasioned to original scope works by reason of the change works in the Appendix A Variations and the Appendix B materially different work claims.
Primero submits that a material difference claim is a change to the scope of works and a design document change is the direction for a material difference. It submits that a material difference is also a Variation by reason of the breadth of the definition and the quantification method in clause 14.4 is engaged for materially different work claims. Accordingly, it submits that the estoppel argument does not arise in the way Primero puts the proper construction of the subcontract.
Primero submits that [64] pleads that due to materially different works claims, Primero suffered indirect costs payable under cl 14.4(b) and [66] separates out the various kinds of costs.
Primero submits that Mr Atkinson’s approach in relation to indirect costs (relevant to [42(b)] and [42A]) is a modified total cost method in which the majority of the indirect costs have been allocated on a Variation by Variation basis. There remains a group of indirect costs which cannot directly be attributed to particular Variations. In the case of the remaining group of indirect costs, Primero submits Mr Atkinson assesses the nature of the costs on a trade by trade basis to determine the appropriate allocation of the otherwise unallocated indirect costs using an allocation process involving the proportion of direct costs to indirect costs associated with those activities. It follows that not all of the costs are apportioned costs. Primero submits that the methodology employed in Mr Atkinson’s report is ultimately a matter of the proper interpretation of the clauses of the subcontract and the sufficiency of evidence and is one for determination at trial.
Primero submits that the pleading that materially different work claims caused disruption are not new. Primero contends that there are compelling procedural reasons why the criticisms made by Wärtsilä are premature for reasons including because Wärtsilä filed an expert report of Ms Wenham on disruption on 30 June 2023 and Mr Atkinson is still to confer with Ms Wenham to produce a joint report, consequently the evidence is not yet finalised.
Primero maintains that embedded in Wärtsilä’s position is both a contractual construction issue and a question of sufficiency of evidence, neither of which ought to be determined by me, but should be left to the trial Judge. Primero submits that as Wärtsilä’s complaints are founded upon Wärtsilä’s interpretation of the subcontract, they are self assuming.
Primero submits that the parties are in significant dispute as to the proper interpretation of the subcontract and that is a matter which impacts upon the asserted deficiency in the proposed amended pleading and falls to be determined at trial. Questions hotly in dispute include the proper interpretation of the definition of Variation in cl 1.1, the proper interpretation of cls 3.7 and 14.4(b), the interrelationship between materially different claims and Variation claims and what is included in the concept of overheads and profit referred to by way of exclusion in cl 14.4(b). Primero disputes as a matter of contractual interpretation that cl 14.4(b) limits Primero to Appendix A Variations. Primero disputes that on a proper construction of cl 14.4(b) it can only bring a claim for indirect costs on a Variation by Variation basis. Primero submits that the subcontract properly construed does not limit Primero or constrain it to establishing causation or quantifying and establishing loss in the manner put by Wärtsilä. It disputes that the subcontract requires direct and indirect costs associated with each Variation to be built from the ground up on a Variation by Variation basis. Primero submits that the subcontract does not prescribe a code of quantification and the construction upon which Wärtsilä’s submissions proceed is the antithesis of a businesslike construction of the subcontract. It contends that the question whether a Variation as defined and employed in cl 14.4(b) of the subcontract can never include materially different works claims is a matter of contract construction. It denies that in order to call in aid cl 14.4(b) for materially different work claims, Primero has to advance those claims as Variations including in compliance with cl 14. Primero contends its case with respect to Variations, including materially different work claims, is and always has been, that the parties agreed to vary the necessary process or shared a common assumption that Primero was not required to comply with cl 14.5.
Primero submits that to reject the proposed amendments would require the Court to find that cl 14.4(b) operates only in the way Wärtsilä contends it operates and mandates Primero to only have one form of claim quantification such that unless it advanced a pleading conforming with Wärtsilä’s view of the quantification required by cl 14.4(b), it could not proceed.
Primero disputes that position as a matter of contractual construction but further opposes the Court making a finding the claim is untenable in a General Steel Industries Inc v Commissioner for Railways (NSW)[44] sense. Primero maintains its claims are arguable.
Consideration
[44] (1964) 112 CLR 125.
As is apparent from the summary above, Wärtsilä’s submissions are based on its view of the meaning of the subcontract including the contention that cl 14.4(b) only entitles Primero to the reasonable additional cost arising out of “the” Variation and accordingly that there must be an individual Variation by Variation establishment of a necessary causal nexus between “the” Variation and the costs claimed. Wärtsilä seeks an articulation in the pleading by way of material facts to satisfy what it states is the threshold issue within cl 14.4(b) that the costs arise out of the Variation. It contends that Primero is not articulating its case in a manner conforming to the subcontract.
Primero has pleaded the provisions of the subcontract upon which it relies. The reference to “each” Variation in [41(b)] does not, in my view, necessarily plead a contractual interpretation only consistent with the position put by Wärtsilä.
The proper construction of the subcontract, including the issue of the definition of “Variation”, the interrelationship between cls 3.7(b)(2)(B) and 14.4(b) and the meaning of “overheads” in the parentheses in cl 14.4(b), is a question properly to be determined at trial. The complaints about the pleading made by Wärtsilä are significantly founded on Wärtsilä’s interpretation of the subcontract, which is disputed. The complaints are also entwined with complaints about the sufficiency of the evidence and the methodology employed by Mr Atkinson as not complying with the contractual requirements. The sufficiency of evidence and any asserted position about compliance with the subcontract requirements also falls for determination by the trial Judge. Generally speaking, taking into account my comments about the estoppel plea below, I do not consider the complaints about the sufficiency of the pleading concerning the contractual entitlements warrant my refusing leave to amend or striking them out given the significant interrelationship between those complaints and Wärtsilä’s interpretation of the subcontract and questions about the sufficiency of the evidence and the need for determination of such issues at trial. I consider it would not be appropriate for me, as opposed to the trial Judge, to make determinations as to the proper construction of the subcontract or whether claims founded upon the provisions of the subcontract or the evidence are tenable. This is particularly so in circumstances in which the process of expert conferral is continuing. My decision is not intended to preclude Wärtsilä in due course from bringing any further applications agitating such complaints before the trial Judge.
Wärtsilä indicated that it would object to Mr Atkinson updating certain figures following the conferral on the basis that to do so was not contemplated by the orders made by Blue J on 14 June 2023. That dispute properly is one to be addressed by Blue J after the process of conferral is complete and if and when Primero seeks to file further updated evidence or materials.
Given the views I have formed on the interrelationship between the state of the pleading, the questions of contractual interpretation and issues concerning the sufficiency of evidence, and taking into account that some aspects of the proposed amended pleading are not entirely new, putting aside for one moment the estoppel pleading, I consider I ought not refuse leave to amend, or strike out, paragraphs of the proposed pleading which rely on the asserted entitlements pursuant to the contract. In relation to the paragraphs opposed by Wärtsilä that would appear to cover [42(b)] (with one proviso to which I return); [42A], [47], [54], [64], [64A], [66] (in part) and [91].
However, this leaves a conundrum in relation to paragraphs that cross refer to paragraphs which rely on the estoppel pleading. On my reading of the pleading, [48], [49], [50], [54C], [54D], [65] and [66] (in part) appear to be paragraphs which relate to, or rely on, the estoppel claim by cross reference. I turn to consider the estoppel pleading issues.
Estoppel
Wärtsilä does not oppose the proposed amendments in relation to Primero’s estoppel claim. However, it considers the estoppel claim is limited to a pleading of estoppel in relation to the Variation claims as opposed to materially different work claims.
Primero submits that the estoppel plea has always included a reference to the materially different work claims. It contends the cross claim pleaded a reference to Variations as encompassing materially different claims and that the reference to “Design Documents” in [41(a)(i)] of the cross claim incorporated reference to materially different work because revised Design Documents can only have a relevance to materially different works and not Variations per se.
In the section headed “Variation”, Primero pleads that the parties agree to vary the process for directing and performing Variations such that, despite cl 14.5(a), Wärtsilä could direct Primero to perform a Variation without issuing a Variation. Primero pleads an estoppel or, further in the alternative, that the parties shared a certain common assumption. In [41], Wärtsilä pleads that in reliance on Wärtsilä’s representations, Primero performed Variation work on the receipt of directions by way of site instructions, responses to Primero’s technical queries, emails and revised Design Documents in the absence of a Variation Order and without giving the notice referred to in cl 14.5(b). Primero then pleads that it incurred its reasonable direct and indirect costs with respect to the performance of the Variations in addition to direct and indirect costs and other costs and losses arising from disruption caused by the Variations. Paragraphs 41A and 41B flesh out the details of the allegations based on a common assumption. In [42], Primero alleges it performed the work described in Appendix A (which sets out 505 Variations) and incurred the direct and indirect costs claimed in respect of the performance of each Variation. The amended pleading particularises by reference to the report of Mr Atkinson, particularly ss 2.7 and 5.
In the section now titled “Additional disruption and indirect costs”, [48] previously pleaded that the Variation work referred to in [42(a)] and set out in Appendix A caused Primero to incur costs and losses consequent on disruption. Primero seeks to amend [48] to add a reference to [62] and Appendix B which relate to materially different work claims.
Wärtsilä submits that [36] to [42A] only plead an estoppel in relation to Variations. Wärtsilä does not submit that revised Design Documents might never be a foundation for an estoppel but rather that it has never been advanced before now that the materially different work claims give rise to an estoppel. Wärtsilä submits that to say revised Design Documents can be Variations must be read through the requirement of cl 14.5 such that unless a species of estoppel that permits the operation of cl 14.5 to be avoided is pleaded and proved, there is no basis for bringing the materially different work claims into the Variation rubric. Wärtsilä submits that what is being claimed at [48] is the cost of disruption on the basis that materially different work can be recovered as Variations and what is implicit, but not explicit, is any articulation of how the materially different work claims fall within the estoppel rubric. Wärtsilä submits that if Primero seeks to claim materially different works by adding a reference to materially different work to the claim at [48], it is necessary for Primero to plead the foundation for estoppel as it applies to materially different work and not just to Variations given the very significant conceptual difference between materially different work claims and Variations. Wärtsilä contends that it is difficult to see how it could be pleaded given the difference in the nature of a materially different works claim and a Variation, but that is a question for another day. Wärtsilä submits that it is a necessary precondition to what Primero seeks to do that the estoppel case relates to the materially different work claims.

Wärtsilä submits that the pleading should be construed such that the materially different claims are funnelled through the estoppel case and there is no separate pleading of a contractual right in relation to materially different work claims giving rise to an entitlement to indirect costs and disruption consequential on the materially different work claims. Wärtsilä invited me to find there is no estoppel claim presently formulated that encapsulates the materially different work claims.
Primero submits that an estoppel was pleaded in relation to materially different work claims by virtue of the reference to revised Design Documents in [41(a)] of the pleading. Primero disputes the assertion that the materially different work claims is only made, and can only be made, via the estoppel pleadings and points to [66] of the pleading as setting out a contractual entitlement to direct and indirect costs and disruption costs through cls 3.7(b)(2)(b) and 14.4(b) of the subcontract.
It is not immediately obvious that the estoppel claim incorporates the material difference work claims when the pleadings in relation to estoppel are found in the Variation section and the pleading is structured to contain separate sections addressing Variations, disruption and materially different work claims. However, there are cross references across the different sections which are not neatly limited to each separate topic. For example, [65], prior to amendment, claims disruption relating to materially different work claims and cross refers to [48] and [49] which in turn refer to Variation work causing Primero to incur costs and losses consequent upon disruption. The pleading in [41(a)] in its current form refers to “revised Design Documents” and Primero submits that reference can only have work to do in the context of materially different work claims. While it is not unambiguously clear that the reference to “revised Design Documents” or the cross references can only have the effect for which Primero contends, it is also not apparent what work the references would have to do apart from introducing a reference to materially different works.
Paragraphs 64 and 64A of the pleading contain claims for direct and indirect costs of materially different work and for increased direct and indirect costs and losses consequent on disruption arising from materially different works based on 14.4(b) of the subcontract. I do not read this pleading as reliant on the estoppel pleading. Paragraph 66 pleads entitlement by reference to cls 3.7(b)(2)(B) and 14.4(b) although in part by cross reference to [48] (which relies on the addition of the cross reference to [62] and Appendix B). Accordingly, it does not appear that the existing pleading of materially different work claims is limited to, and only dependent on, the estoppel case.
There was not fulsome argument on whether the estoppel claim as currently pleaded incorporates materially different works in part because of the manner in which the argument unfolded. Primero's submission that the estoppel argument does not arise in the manner put by Wärtsilä was not fully developed. In the circumstances, and given the terms of the current pleading, I do not consider I should accede to Wärtsilä’s invitation that I rule to the effect that the pleading does not include an estoppel claim in relation to materially different work claims. Given the contract interpretation issues, I do not consider I ought to determine whether such claim is only capable of being brought through the estoppel avenue. I consider that the question whether the existing pleading contains a plea of estoppel in relation to materially different work claims together with the question whether as a matter of contract interpretation Primero can claim for materially different works as a Variation other than via an estoppel claim ought to be addressed by the trial Judge.
Given my conclusions above, it follows that the amendments to [48] which seek to incorporate a cross-reference to [62] and Appendix B ought to be left for determination by the trial Judge. To the extent paragraphs such as [54C] and [54D] cross refer by amendment to [48], it is not clear to me whether the cross references depend on the addition by amendment to [48] of the cross reference to [62] and Appendix B (addressing materially different work claims) and accordingly what approach I ought take to those paragraphs. Further, the possibility that I might grant leave in respect of paragraphs of the proposed pleading not apparently relating to the estoppel pleading and reserve to the trial Judge paragraphs apparently relating to the estoppel pleading was not put to the parties and they were not given the opportunity to make submissions on that proposed course. There may be difficulties with that proposed course which the parties did not have the opportunity to consider and put to me. In order to accord procedural fairness in relation to the position I am inclined to take, I will give the parties the opportunity to put to me further submissions and suggested minutes of order in relation to the course which I am inclined to adopt. I ask the parties to email my Chambers in relation to the form in which they seek to put further submissions, including whether they are content to limit themselves to written submissions, and what time they require to put any further submissions on the course I have proposed.
Wärtsilä also submits that the disruption amounts contained in Appendix B do not correspond to those amounts identified by Mr Atkinson and should accordingly be deleted. Primero submitted that the figures in Appendix B will be updated following the conferral process and Appendix B ought to be left as it stands pending that exercise.
The particulars to [42(b)] refer to the Scott Schedule to be updated on finalisation of joint expert evidence. I understood that the updated Scott Schedule, in respect of each separate Variation and each materially different work claim, updates amounts claimed in conformity with expert evidence and provides full and complete particulars of each Variation and materially different work claim including the matters referred to in the orders made by Blue J on 14 June 2023. Wärtsilä complains about the status of Appendix B. While ordinarily I would be inclined to accept Wärtsilä’s submission that leave ought not be granted in respect of a pleading which inconsistently cross-refers to material which is still to be updated, in the particular circumstances of this matter, including the proximity to the commencement of trial and Primero’s counsel’s statement that Appendix B will be updated, I am not inclined to order the deletion of Appendix B. Any dispute as to whether or not Mr Atkinson ought to be able to prepare any further material which does not strictly fall within the orders made by order 3 on 14 June 2023 ought to be left for the determination of the trial Judge.
Orders
I grant leave to Primero to amend the cross claim (revision 4) to add [8Y], [8AA], [8BB], [8EE], [8GG], [8II], [8QQ], [8SS], [38], [39A], [40A], [41], [41A], [41B], [47], [56], [58], [61], [70], [71], [73], [75], [90B] and to delete [51], [52], [53], [53A], [53B], [54A], [54B], [55] in the form of the proposed cross claim (revision 5).
I refuse leave to Primero to amend [8TT] of the cross claim (revision 4) in the terms set out in [122] of Primero’s submissions.
I give the parties the opportunity to put further submissions to me in relation to the approach I propose to adopt in addressing the remaining paragraphs in relation to which leave was opposed.
I refuse to strike out any paragraphs of cross claim (revision 4).
Further submissions – 16 August 2023
After delivering my decision and receiving correspondence from the parties, I listed a hearing to address further submissions on the estoppel pleading issue and a number of other matters which had arisen, including a further application by Primero for leave to amend [8TT].
The parties agreed the orders to be made to address the pleadings issues and some other matters.
Orders
I made the following orders:
1.The respondent has leave to further amend the cross claim (revision 4) in the form of the proposed cross claim (revision 5) save for [8TT]. Arguments as to the effect or tenability of some of those amendments that are to be permitted is to be left to the trial Judge.
2.The respondent’s application dated 10 August 2023 (FDN 273) in respect of leave to amend [8TT] of the cross claim is referred to the trial Judge for determination, noting that the respondent’s evidence in chief support of that application is complete and the applicant is to complete any evidence in respect of that application by Friday 18 August 2023.
3.Costs of the hearing on 25 and 26 July 2023 are costs in the cause.
4.As regards to the respondent’s application dated 10 August 2023, for some witnesses to give evidence by AVL:
(a)By 18 August 2023, the applicant is to provide the respondent with a document identifying the indicative cross-examination length sought in respect of each of the respondent’s lay witnesses.
(b)By 23 August 2023, the parties are to have conferred and agreed a trial plan in respect of, at least, the first two weeks of trial, and provide a copy of that to the associate to Blue J, and in that respect will work cooperatively to identify witnesses who might give evidence by AVL.
(c)That application is otherwise stood over to Blue J on 28 August 2023.
5.The costs of today’s hearing are costs in the cause.
6. Liberty to apply.

[2023] SASC 121

1 August 2023