Wunda Projects Australia P/L v Kyren P/L
[2010] SADC 96
•29 July 2010
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
WUNDA PROJECTS AUSTRALIA P/L v KYREN P/L
[2010] SADC 96
Judgment of His Honour Judge Herriman
29 July 2010
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - PERFORMANCE OF WORK - REMEDIES FOR BREACH OF CONTRACT - DAMAGES - OTHER MATTERS
Construction of city apartment building – principal removes works from contractor - contractor’s claim against principal for unpaid works, variations and lost profit based upon principal's unlawful repudiation of AS 2124 contract – principal’s cross claim for breach of contract, costs of completion and liquidated damages – disputes over variations of terms, construction program, superintendence, delay, time extensions, variation claims, notices to show cause, works removed from contract, termination of contract - assessment of damages and interest – consideration of prevention principle. Judgment for plaintiff and cross claim dismissed.
Trade Practices Act 1974 (Cth) s 52, referred to.
FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340; Dixon v The South Australian Railways Commissioner (1923) 34 CLR 71; Perini Corporation v Commonwealth [1969] 2 NSWR 530; Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd (2002) 18 BCL 322; Roberts v Bury Commissioners (1870) LR 5 CP 310; Ottawa Northern and Western Railway Co. v Dominion Bridge Co. (1905) 36 SCR 347; SMK Cabinets v Hili Modern Electrics Pty Ltd [1984] VR 391; Peak Construction (Liverpool) Ltd v McKinney Foundation Ltd (1970) 1 BLR 111; Multiplex Constructions (UK) v Honeywell Control Systems [2007] BLR 195; Kane Constructions Pty Ltd v Sopov (2006) 22 BCL 92; McAlpine Humberoak Ltd v McDermott International Inc (No 1) (1992) 58 BLR 1; 620 Collins Street Pty Ltd v Abigroup Contractors Pty Ltd (No 2) [2006] VSC 491; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 63 ALJR 37, applied.
Turner Corporation (In Provisional Liquidation) v Co-Ordinated Industries Pty Ltd & Ors (1995) 11 BCL 202; Gaymark Investments Pty Ltd v Walter Construction Group Pty Ltd (2000) 16 BCL 449, not followed.
Turner Corporation Limited (Receiver and Manager Appointed) v Austotel Pty Ltd (1997) 13 BCL 378, considered.
WUNDA PROJECTS AUSTRALIA P/L v KYREN P/L
[2010] SADC 96CONTENTS
A. Introduction
B. General Observations
C. Observations as to Witnesses
D. The Issues
1. The Contract
2. Variation of Contract Terms
3. Construction Programs
4. The Superintendent
5. Minutes of Site Meetings
6. The Progress of Works
7. Asserted Causes of Delay
8. Liquidated Damages and the Prevention Principle
9. Extensions of Time
10. Variation Claims
11. The Notices to Show Cause
12. Termination of the Contract
13. Actions Taken by Kyren after Termination
14. Wunda’s Profit Margin
15. Works Removed from the Contract
E. Summary and Damages
F. The Cross Action
G..... Conclusion......................................................................................................... 150
A. Introduction
In June 2006 the plaintiff, Wunda Projects Australia Pty Ltd (‘Wunda’), a building contractor, contracted with the defendant, Kyren Pty Ltd (‘Kyren’), to carry out certain internal finishing works on a multistorey apartment building being constructed by Kyren on land owned by it in North Terrace, Adelaide.
The building was to be known as the Palais Apartment Building (‘the Palais’ or ‘the building’) and was to comprise five levels: a ground floor to be let out to commercial tenancies and each of the four higher levels to contain 25 apartments of varying sizes. There were also two underground car parks.
The primary objective of the defendant in establishing the apartments was to house university students and its plan was to have all of them completed in time for the commencement of the 2007 academic year.
By the time of the contract, Kyren, by itself and through other contractors, had partially completed the building structure and it went on to complete construction of all floor levels. It otherwise contracted out the interior finishing works to Wunda and other contractors.
Wunda’s contract was to provide services in three discrete areas or ‘packages’:
(1)the installation of plasterboard partitioning, corridor and internal walling and ceilings. These works were to be carried out to Levels 1-4 according to an agreed program but the timing and extent of works on the ground floor was left open pending the completion of the defendant’s negotiations with prospective tenants.
For convenience and by way of adopting the code used by the parties, this aspect of the plasterboard works on the ceiling and the walls is referred to as the ceilings and walls or ‘CW’ contract or works;
(2)the completion of certain carpentry works, more particularly specified in contract documents but essentially involving floor skirtings, inbuilt furnishings and doors (this work is referred to as the ‘carpentry’ works);
(3)painting works on all levels, involving specified numbers of coats, to be completed as the project advanced (hereafter called ‘painting’ works).
At the same time as Wunda was to complete these works, other contractors engaged by Kyren were to attend to:
·fire protection works (Trojan Fire Protection Pty Ltd);
·plumbing (Smith Brothers Plumbing);
·mechanical services/air-conditioning (Westside Mechanical Contracting Pty Ltd); and
·electrical (Nilsen Electrical (SA) Pty Ltd).
Of necessity, the interconnected work of these finishing trades required a level of cooperation between them and overall a significant level of coordination by Kyren.
Wunda, for its part, directly undertook the carpentry works but it otherwise subcontracted the CW and the painting works respectively to E & M Linings Pty Ltd (‘E & M’) and Asset Painting & Maintenance Services Pty Ltd (‘Asset Painting’).
I will in a moment discuss the relevant documentation but it is enough to say for now that the contract between Wunda and Kyren was agreed to have been entered into on 2 June 2006 and it provided, inter alia, that the Practical Completion date for all three packages would be 31 January 2007.
Wunda commenced work on the site on 24 July 2006 but the performance of its contracted works did not, for disputed reasons, proceed happily or smoothly, they fell behind schedule and, on 18 January 2007, Kyren took out of Wunda’s hands the remaining works required for the completion of the painting and CW packages and, on 1 February 2007, the remaining carpentry works.
Kyren then paid other contractors to complete them and Practical Completion was achieved on 20 March 2007.
Wunda contends:
(1)that Kyren unlawfully repudiated the contract in January 2007 by taking the various contractual works out of Wunda’s hands, which repudiation Wunda ultimately accepted, and Wunda is therefore entitled to damages for Kyren’s breach;
(2)that it has not in any event been paid the full amounts due to it for contract works performed up to the time when works were taken away from it;
(3)that during the course of the works, it submitted particular claims arising out of contract variations ordered by Kyren, for which Kyren has refused to pay any or the appropriate value;
(4)that Kyren was not entitled, after January 2007, to remove from the scope of works envisaged by the contract particular works which were not completed so as to deny or limit Wunda’s damages claim for lost profit;
(5)that Kyren cannot succeed upon its cross claims for the extra costs of completion or liquidated damages because delays in completion were due to its mismanagement of the supply of necessary plant and materials, its failure to properly deal with ground floor and Level 4 works, and its poor coordination of trades and of the construction program generally. It further says that the construction program upon which Kyren relies was never realistic, was soon out of date and was never revised as it ought to have been; that notwithstanding that it failed to request time extensions under the contract arising from delays for which Kyren was responsible, Kyren ought to have dealt with them by ensuring its Superintendent granted Wunda appropriate extensions of time for completion anyway. In that respect, Wunda says that Kyren cannot rely upon its own preventing behaviour, which delayed Practical Completion, in pursuing its claim for liquidated damages.
In consequence, Wunda claims from Kyren the value of works for which it has not been paid, the value of unpaid variation claims, its loss of profit arising from Kyren’s repudiation and interest under the contract. It concedes some reductions in the scope of works.
For its part, Kyren denies it breached the contract in any of the alleged ways. It alleges that Wunda failed to carry out the works in a timely manner and in accordance with the construction programs it provided. In consequence, it served upon Wunda several Notices to Show Cause why it should not withdraw from Wunda the balance of works to be carried out under the various packages and it contends that in each case Wunda failed to show such cause. Accordingly, in January and February 2007 it properly withdrew from Wunda the works described above.
Kyren denies that by withdrawing those works it repudiated the contract and says that Wunda’s own purported termination on the basis of repudiation was itself a repudiation of the contract.
Further, says Kyren, the plaintiff became disentitled to receive:
·certain contractual payments because it either failed to statutorily declare that it had paid contractors relevant to those particular works or otherwise falsely declared that it had done so when it had not;
·extensions of time because it had never claimed them or complied with contractual notice provisions;
·certain payments claimed as variations, either in the amounts claimed or, in some cases, at all.
In consequence, Kyren says, it paid substantial moneys to have Wunda’s contract works completed, they being moneys in excess of what it would otherwise have had to pay Wunda, that it is entitled to credits in respect of particular works not required to be done and it is otherwise entitled upon its counterclaim to liquidated damages by reason of the late completion of the building contract, which it says is attributable to Wunda’s asserted breaches.
B. General Observations
In these reasons I will in a moment deal with my observations as to witnesses, as credit assumed some importance in the trial. I will then deal with the contract and oral variations to it, the construction programs applicable to the works and the progress of works through to the time the contract was terminated. I will discuss each of the significant areas of dispute and the circumstances leading to the termination of the contract. I will then go to the question of damages.
Before I do that, however, it is appropriate that I make some general observations.
In the first place, it is apparent that interior floor finishing works were mismanaged from beginning to end. Kyren failed to ensure the timely provision of required plant and materials, in particular to support those packages for which Wunda was responsible, and failed to deal in any satisfactory way with the works required on the ground floor. It sought to establish a construction program for finishing trades to follow on Levels 1-4, but that program was compromised even as of the time it was first published, was very soon hopelessly out of date and was never revised, at the least to reflect those delays for which Kyren was responsible. Those failures of Kyren resulted in continuing trade sequencing and coordination problems on site, which were mismanaged or poorly managed by its site manager, Anthony Moore (‘Moore’), or Project Manager or Superintendent Kon Corolis (‘Corolis’).
As both project consulting experts noted, there was a remarkable lack of contemporaneous documentation relating to the progress of works and how it was measured against the program upon which Kyren relied, and the absence of that material was never satisfactorily explained by Kyren.
Wunda must also be criticised for its failure to properly manage E & M’s performance of CW works and otherwise its own failures to definitively record or document numerous external interruptions to the progress of works, the problems it was experiencing with E & M, alterations to the payment scheme under the contract, particular variation claims, and its own account of discussions with Kyren representatives. Even more significantly, it failed, abjectly, to make numerous requests for extensions of time under the contract, as it ought to have done, and these, more than anything else, lay at the heart of this litigation.
All of these problems were compounded by what I have found to be the ineptitude and lack of independence exhibited by Kyren’s appointed Superintendent and the failure of Wunda to ensure that its subcontractor E & M was adequately resourced at critical times during the performance of the CW works.
At trial, I was considerably disadvantaged by not having access to documentation which ought to have been kept and retained by both parties, particularly by Wunda, and, further, by the failure of Wunda to call its site manager, Adrian Tonkin (‘Tonkin’), and the failure of Kyren to call witnesses from E & M and Asset Painting.
The trial occupied 46 sitting days between 6 April and 15 September 2009. In all, there were 97 exhibits but many of the individual exhibits were voluminous and, in particular, Exhibit P1 comprised 21 volumes and 7,252 pages. The plaintiff’s total claim was in an amount of $946,325. The cross claim was in an amount of $341,058.71. Each claimant sought interest.
I am, of course, not aware of the costs incurred by either party but, on any view of the matter, they will be greatly in excess of the disputed sums and, irrespective of the outcome, neither party was ever destined to achieve any significant financial benefit from this litigation.
I was called upon to adjudicate variation claims, extensions of time and deductions from the scope of the works, each of them requiring the consideration of evidence from the parties and, indeed expert, evidence. As these lengthy reasons will demonstrate, that involved resolving many small issues.
The parties had been at liberty to seek to arbitrate their differences, but plainly chose not to. It would have been a cheaper and much faster process. Otherwise, they were at liberty to seek to resolve them by mediation, but failed to do so.
They were represented by competent solicitors and counsel, who I am satisfied did their best to limit the areas of dispute, but with limited success.
The case, and indeed its outcome, simply served to demonstrate the financial imprudence of parties seeking to resolve disputes of this specialised kind and of this dimension through ordinary court process. I made mention of these matters at an early stage but ultimately the parties chose to proceed. This then is the outcome.
C. Observations as to Witnesses
Significant issues of fact arose during the course of the trial and, in resolving them, I have necessarily had to consider the credibility or reliability of the evidence given by particular witnesses.
In saying that, I refer to the principal lay witnesses. I will deal with them in the order in which they were called.
- Lian Cowling (‘Cowling’)
Cowling was a registered architect, having completed a Bachelor of Interior Architecture at University of SA in about 2004. She had also completed a Building Certificate IV course at Marleston TAFE. She had commenced as an employee of Wunda in April 2006, some few months before her involvement in the project.
On any account, her on-the-ground experience in contract management was limited and the circumstances of this matter amply demonstrated that.
Her role in the project management of the Palais site was shared with Basile. In effect, Basile was the principal Project Manager and Cowling’s role was to assist him.
That division of their functions was never satisfactorily defined and this led to many of the problems which later arose.
Whilst Cowling was prepared to acknowledge the greater experience of Basile in project management generally, it appeared to me that her young age and limited experience likely meant that she not only deferred to his position, but in some manner appeared to assume that he was undertaking a leadership and decision-making role in the project when, as I find it, he was not.
Indeed, having heard Basile’s evidence, I gained the distinct impression that he did not consider himself to be a details person, that that was a task for others (here, Cowling) and that if any problems arose they could be solved informally by discussing them personally with Corolis. He made the bland, naïve and mistaken assumption that, because he believed he had a good relationship with Corolis, everything would be worked out satisfactorily between them.
In short, each of he and Cowling appeared to gravely misapprehend the extent of involvement and responsibility that the other had in project management. That led to many difficulties, but in particular these:
(1)Neither of them took on the responsibility of attempting to document such important matters as concerns about programming; limitations in work face access; altered payment arrangements; the consequences of the late provision by the defendant of adequate loading docks and cranage; the consequences of the defendant’s inability to bring on site, within scheduled time, door frames, doors, door hardware, window tracks and windows; contract variations; time extensions; and the consequences of the defendant’s failure, until the very end, to decide just what ground floor works were to be undertaken, how and when they were to be undertaken and how they were to be integrated into the existing construction program.
(2)The obvious fact that, as a result of many matters, including some for which the defendant was responsible, the construction program soon fell well behind schedule, yet the plaintiff failed to make or document any or adequate representations to the defendant about that or about its management of work faces; failed to object to matters recorded in the minutes of site meetings, which on its own account were plainly inaccurate; failed to seek revision of the construction program or the Practical Completion date; and failed to properly document and pursue variations.
Although I heard no evidence from the contractor E & M, I am satisfied, too, that Wunda failed to properly manage or control its activities on the site.
This was Cowling’s first attempt at project management of a multistorey building, albeit as the junior Project Manager. It appeared to me that she was not fully prepared for it. She had not been involved in the contract negotiations but had read the contract documents in June, albeit that she acknowledged she had not read them all and was not completely familiar with the principal contract document (elsewhere identified as ‘AS 2124’). In particular, it seems that she had not noticed that specifications critical to Wunda’s contract and relating to CW works were not, as I find, contained within them. For reasons which never became clear, this was not fully appreciated until August, when they were requested.
She was criticised for being absent in Perth on another site in the last two weeks of July and later in September, but I was not persuaded that her absence, in itself, created site problems. She remained in email contact during the latter period and was entitled to expect, Basile being with her, that Wunda’s site manager Tonkin would remain on site and that Wunda’s overall manager, Bruno Marveggio (‘Marveggio’) would in the meantime act as Project Manager.
As junior Project Manager she saw her task as doing most of the management work, including the paperwork, attendances on site, requests for information and site coordination, and the papers reveal that she was indeed the party most frequently corresponding with Moore or Corolis, albeit after consultation with Basile, but her record-keeping was otherwise abysmal. She had not made or kept any significant notes of site problems or progress or of discussions with Kyren personnel and she failed, abjectly as I have found, to consider or activate any claim whatsoever for extensions of time (in circumstances where they were clearly justified) and to fully pursue all the variations that ought to have been sought. That was no doubt due to her very limited experience and it may well have been encouraged by Basile’s own naivety and misplaced optimism.
She seemed unable to appreciate that it was incumbent upon Wunda to raise with Kyren or respond to it in a formal and written way over problems and delays that arose during the works.
Soon after the contract was terminated, she had prepared her own chronology of events, but it had been based principally upon the correspondence between the parties, her very limited diary notes, which mostly recorded the fact of attendances and did not identify their content, and her own recollections at that time. Tonkin, as the site foreman, was always on site and would generally report to her.
Despite having read the contract, it was not until August 2006 that she first became aware of the Practical Completion date being set for the end of January 2007.
Having prepared the chronology of which I have spoken, it became evident that outside of it or any documents which served to refresh her memory, her recollection of events was quite limited.
She appeared to accept Kyren’s request that more men were needed on site at a particular time, but then relied too much on what I accept was Corolis’ assurance that he would find them.
She spoke in evidence about the lack of cooperation from the mechanical and plumbing contractors on site but appeared to have done very little about it in any formal way. She spoke about problems with the availability of the crane and landing platforms but did nothing formal about that, albeit that Corolis’ minutes recorded some of the issues. She appeared to consider after August that the Practical Completion date was never going to be achieved but put nothing in writing about that.
She was alert to the complaints about the progress being made by E & M and its resources, but seemed to take the view that because Kyren was responsible wholly or in part for delays, it was Kyren’s task to accommodate E & M.
She asserted that there was no construction program in existence at the time the contract was signed, but did not appear to press the matter of obtaining one after that and, on her own account, never received a complete one.
In dealing with variations, she failed to consider any implications they carried in terms of time extensions, nor were many of them properly documented.
She failed to document the changed arrangements for payment of CW claims.
To some extent she was shut out of matters, because she had not been involved in contract negotiations and it appeared that whenever Corolis wanted to deal with significant matters, he went over her head and spoke to Basile.
All those matters reflect on her lack of any significant experience in managing a project like this. Despite them, I should say that I found her to be a conscientious person and one who did her best to be truthful and recall what had happened. I generally had confidence in what she said.
- Tony Basile (‘Basile’)
I found Basile to be an earnest but unconvincing witness. He obviously had quite extensive experience in the building industry and in project management of CW works, but he skated over his responsibilities as senior Project Manager and appeared to rely on Cowling or, later, Marveggio to pick up what he had not attended to, and that was a considerable amount. He otherwise seemed to rely upon his perceived friendship with Corolis to smooth over any difficulties. Indeed, he was at pains to paint a picture of a good business and semi-business relationship with Corolis leading up to the contract and during the course of it; Corolis gave a quite different account of that. Elsewhere I have expressed the gravest reservations about Corolis’ credit, but even so I find it surprising that Basile can have been so naïve as to imagine, as he seemed to do, that a casual conversation with Corolis over a cup of coffee in the morning, without any follow-up note or communication, would resolve so many of the difficulties that arose.
Whilst it appears he left Cowling to attend to record-keeping, note-taking and the like, it is not obvious that he made any attempt to ascertain whether she was attending to document important contractual events, and that was extremely ill‑advised, particularly in circumstances where she was a new employee and he was aware of her age and limited experience. Notwithstanding his claims that he had played an active role in project management at the site, it appeared to me that the amount of time he spent there was limited, indeed. Even when he was personally involved in discussing matters, he failed to keep any records or diary relating to them, which, again considering his experience, was remarkable.
He provided a most extraordinary explanation for his failure to seek particular variations or extensions of time, suggesting that due to Corolis’ limited experience as a Project Manager/Superintendent, he was in fact nursing him through the process and that, rather than cause trouble for Corolis, had chosen not to make those requests or respond in any confronting way to Corolis’ correspondence, even when it hinted at liquidated damages claims. He appeared to regard his relationship with Corolis as a strategic one and he was not disposed to rock the boat.
As to Wunda’s adherence to the 24 August Program (elsewhere defined), he suggested that all such programs were flawed, that they changed on site from day to day, and he discounted the suggestion that either party seriously relied on that particular program from a time soon after it was published or that later references to the construction program were to it.
He had limited recollection of any involvement in exchanges over E & M’s resources on site. I found that surprising in the circumstances.
He took no apparent objection to matters in the minutes or correspondence which were from Wunda’s viewpoint plainly contentious and, indeed, did not appear to take them very seriously. He seemed to think that Cowling or Marveggio would resolve those matters or perhaps again he had misplaced confidence that his perceived friendship with Corolis would see everything right.
In his first statement (Exhibit P18), at paragraph 14, he spoke of an awareness that Cowling was maintaining a site diary, when the evidence showed that she was plainly not doing that. In the first place, one would have expected he would check that diary himself and, secondly, there were site matters in which only he was involved and which he did not record, anyway. At the point where contract negotiations were proceeding, it would seem that he did not even then have all the specifications for CW works. That may not have been a bad error of judgment because, on his account, CW works tend to follow much the same format and cost, but I remain surprised that Wunda was prepared to enter into a subcontract with E & M for those works without having a full set of specifications.
He purported to say that during the course of the contract he spent 90% of his time on it. On what was before me, that appeared to be a considerable exaggeration. Whilst it might well be that a good part of his time was off site, even so there is simply nothing in the documentation which would suggest a significant level of time involvement on his part.
All in all, it appeared to me he adopted a remarkably ‘hands off’, or indeed lazy, approach to the whole project and seemingly took the naïve view that if Kyren or other contractors were causing delays which impacted on Wunda’s performance, then Kyren would be alert to that and understand and accept that they were inevitable and that the Practical Completion date would not be met; that there was no need for Wunda to complain about this, document it or seek formal extensions.
He was to be sadly disabused of that belief. Whilst Corolis, as I find it, also distanced himself remarkably from events on site, he was well aware of all the delaying factors, yet on behalf of Kyren he accepted no responsibility for any of them, considered they were Wunda’s problem and had an uncompromising expectation that it would resolve them.
For all the above reasons, I had quite limited confidence in Basile’s account of events. He was inclined to exaggerate at times and to subconsciously reconstruct and he had a limited ability to recollect even important matters.
Notwithstanding all those reservations, I thought he generally sought to give a fair account of what he did recall. Where his evidence conflicted with that of Cowling, I preferred her account of events but where it conflicted with that of Corolis, I preferred that of Basile.
- Bruno Marveggio (‘Marveggio’)
I was not particularly impressed with the evidence of Marveggio.
There was no doubt that he had been actively involved in the negotiations and correspondence which led to the submission of Wunda’s tender and the conclusion of the contract, but after that time he appeared to leave matters almost entirely to Basile, assisted by Cowling. Even when called upon to take over project management whilst they were in Perth in September and December, he failed to immerse himself in the detail of the works and the problems which had arisen in a manner sufficient to enable him to make any proper judgment. He was content to leave the management of the contract to Basile and to refer all matters to either Basile or Cowling, particularly when matters became confrontational.
That was understandable in the early stages, but after they had gone to Perth in December, he became obliged to confront and deal with some difficult decisions and yet, as I find it, he did not then seek to properly inform himself and grapple with them.
He did not appear to be fully alert to the difficulties arising from Kyren’s attempts to seek adherence to a long-outmoded contract program, nor to the significance for his company of the numerous site delays, whether or not they were of its making.
Like Basile, he failed to commit important matters to writing.
Whilst I am satisfied that E & M’s performance of its contractual obligations had fallen away well before then, he seemed to think, even up to the time when Wunda sent a Notice to Show Cause to it, that it had not been instrumental in causing delays. By any account, everybody else on site knew otherwise.
He appeared to lack any sense of urgency or concern as to the direction in which the contractual relationship was progressing from and after December. He took the simplistic view that Kyren was entirely at fault, that for the most part, at least up till that time, E & M had performed its works properly and that Wunda was thus not accountable.
All of those matters limited, in my estimation, the reliability of anything he said or did in his dealings with Corolis.
In many respects, his position in the matter corresponded with that of Samaras, who also had a very limited knowledge of what all the various disputes were about, albeit that Marveggio had had a greater level of involvement in day-to-day matters.
The position was thus presented whereby Marveggio did not appreciate and seemingly did not want to deal with the site problems that arose and his conduct in deflecting almost every issue to Basile and/or Cowling was ill‑advised because, even between the two of them, neither accepted the ultimate responsibility. In truth, Basile, as the senior Project Manager, ought to have, but he failed to do that.
It was Marveggio who accompanied Corolis on the site inspection when Corolis mentioned the particular locations ‘available’ for CW works and he did not take issue with that. I was not, however, minded to regard his response or lack of it as a concession by him that Wunda was then free to exploit those sites. As other evidence showed, there were problems with secondary work faces and other trades’ sign-offs, as well as E & M resourcing. In consequence, I did not consider that evidence told strongly against his credit.
For reasons expressed elsewhere, however, I thought his dealings with E & M over the statutory declaration (discussed elsewhere) and his evidence about them did him little credit and, generally, I had limited confidence in what he said. He was minded to correspond and give evidence about matters of which he had very limited, if any, direct knowledge.
- Anthony Moore (‘Moore’)
Moore was a site manager subcontracted to that position by Kyren. He was not otherwise a regular employee of the defendant.
It was plain that he had considerable experience in the industry and in site management. He began work on the Palais project in May 2006. His tasks included general site management, liaison with trades, monitoring works and progress, issuing site instructions and managing materials and loading.
His direct liaison with Kyren was through Corolis, but he separately engaged in lengthy correspondence with various site contractors and, indeed, in the early stages of Wunda’s contract he appeared to me to be the principal party dealing with Wunda and in that role undertook tasks that were within Corolis’ province as Project Manager/Superintendent and ought to have been performed by the latter.
His evidence effectively comprised a reference to or summary of his correspondence and dealings with the parties, including Wunda, and his attendances at site meetings. He explained the development of the construction program and how it proceeded from the original to the various subsequent programs. He spoke of the delay and interruption problems identified by Wunda and described them as ‘notorious’ (T/S 1531), that is to say, delays over windows, doors, hardware, loading platforms, cranage and toilet doors. He could not recall problems with the Level 4 ceiling height but conceded there might have been.
On his account, Corolis was infrequently on the site, but he did attend for contractors’ meetings, when special issues arose or for inspections with Samaras or Basile. He also referred Requests for Information (‘RFIs’) to Corolis.
Generally, I thought he did his best to give a fair account of what occurred on site and was frank in acknowledging that delays and interruptions which were the responsibility of Kyren had an impact on the progress of the works and that the 24 August Program was already redundant by early September.
He also affirmed that the sequence of works envisaged by the early construction programs was frustrated by later developments.
Where his evidence conflicted with that of Corolis, I unhesitatingly preferred his evidence and I am satisfied, too, that he had a measure of independence that few of the other witnesses could claim.
- Theo Samaras (‘Samaras’)
Samaras’ evidence comprised two tendered statements (Exhibits D36 and D37) and oral evidence he gave at the hearing.
It appeared to me that the written evidence tendered on his behalf was essentially reconstructed from the documentation.
When tested in cross-examination about various aspects of Exhibit D36, he was obliged to correct a number of statements contained within it. I did not consider that reflected directly upon his credit; rather, it seemed to me that his statement bore all the hallmarks of a solicitor’s document which he had signed without fully considering it.
It appeared to me that he had essentially relied upon and accepted everything that Corolis told him. A single extraordinary revelation which emerged from his evidence was that he was not aware at any relevant time that Corolis was both Superintendent and Project Manager on the site, nor, indeed, was he familiar with the extent of a Superintendent’s duty on site.
It appeared to me that he had very limited recollection of or involvement in most of the site issues which arose in this matter, albeit that he was the person ultimately responsible for decision-making. His evidence was thus of limited value or assistance.
- Kon Corolis (‘Corolis’)
At the time of this contract, Corolis was a recent employee of Kyren, having commenced there in March 2006. Prior to then, he had worked for the Adelaide City Council for several years in various roles, including as Project Manager and on occasions, he said, as both Project Manager and Superintendent.
Principally, he had used the Adelaide City Council standard contract forms but he had also worked with AS 2124.
Of all the witnesses who gave evidence in the trial, I found his evidence to be the most evasive and unconvincing. His general demeanour in dealing with cross-examination was pedantic, truculent, prevaricating and evasive in the extreme. I do not propose here to set out every example of that, as there were occasions too numerous to repeat. He was unprepared to accede to the most obvious and barely contentious propositions.
One outstanding example will suffice. It was plain on all the evidence, including that of Moore, that soon after the Wunda contract commenced, it, along with most other contractors, was told that works to be carried out on the ground floor were put on hold pending the completion of tenancy negotiations with various parties. In consequence, they did not find their way into the 24 August construction program.
Even so, Corolis denied that they had been put on hold, at the same time perversely contending that the 24 August Program was the construction program for the purposes of the contract. He sought to argue that Wunda remained obliged to complete those works, notwithstanding its obligations under the August program. Further, he argued that when, in November, Wunda was directed to carry them out, it fell under an obligation to perform them and, at the same time, adhere to the August program. Elsewhere in his written evidence, he said he had told Wunda to delete 60% of those works, but after some tortuous cross-examination, he retreated from that.
Despite claiming familiarity with AS 2124, he was not fully aware of the Superintendent’s responsibilities under clause 23, nor of the Superintendent’s power to grant extensions of time when the same had not been requested. He conceded he did not fully understand the processes for exclusions and variations in the contract.
Whilst in his statement he professed an awareness of the independent role of the Superintendent as a certifier of particular contractual matters, it became evident from all that transpired that he rarely displayed any measure of independence. So much is evident from his dealings over time extensions and particular variations which I discuss elsewhere. I am satisfied he was acutely aware, soon after it was published, that the 24 August Program could not be adhered to, not the least because Kyren was unable to provide windows, sub-sills, door frames and doors, nor all the lifting and loading facilities it had promised, in a timely way, yet he failed to consider the grant of a single time extension to reflect these matters. Perhaps the most outstanding single example of his bad faith was his rejection of any allowance for Wunda’s variation claim for the cost of coffer installation.
During the course of the works, he had seen himself as beholden to Kyren and had reported directly to Samaras, who was never himself alert to Corolis’ status or responsibilities; indeed, as I have noted, Samaras appeared to have a limited knowledge of the whole matter. Corolis purported to represent Kyren’s position in matters of significant contention, in particular the various Notices to Show Cause, and this role deprived him of any capacity to act independently, honestly or fairly.
I have spoken elsewhere about the unsatisfactory nature of the minutes of site meetings and they reflect his ineptitude. Indeed, his own written and oral evidence demonstrated his inability to follow those documents himself.
Whilst he sought to convey the impression that he was on site a great deal of the time, the evidence of other parties and, indeed, his own witness Moore, gave the lie to that.
His evasiveness is best demonstrated by the evidence he gave, and which I have discussed, as to the reason why he issued an interim certificate in March 2007.
It became apparent, as he gave evidence, that he was the principal party instructing in the defence of the action and the maintenance of the cross claim. His assumption of that role reflected his complete inability, during the subsistence of the contract, to act independently as Superintendent.
Whilst I have elsewhere been critical of other witnesses for their various failures to attend to particular matters or document them, in general I thought those witnesses, and indeed other defence witnesses, mainly sought to give a truthful account of their dealings. I had no such confidence in Corolis and where his evidence conflicts with the evidence of any other witnesses, I have no hesitation in preferring those other parties.
D. The Issues
1. The Contract
During the course of the trial there was much attention focussed upon the contractual arrangements concluded between the parties and alleged breaches of those terms, and it is thus necessary that I identify in some detail the relevant documents and terms.
As is common in such dealings, the documents which preceded the execution of the formal contract contained terms which were to be incorporated in it and ultimately were. When the written agreement was finally executed on 19 July 2006, its date was identified as 2 June 2006, that being the date when negotiations had been finalised and Kyren had sent a letter of intent to Wunda. The agreement comprised Australian Standard General Conditions of Contract (AS 2124 – 1992), along with annexures.
Relevant contractual provisions and certain of those documents will be discussed in detail later but it is necessary that I should first say something about the background against which the negotiations took place.
The parties had not previously been involved in any contractual relationship.
Wunda, for its part, had considerable experience in the fit-out of buildings, in particular apartments or residential spaces, its most recent major undertaking being the refit of a large hotel, the Stamford Plaza on North Terrace, Adelaide. Typically in carrying out that work, it used few employees and subcontracted most tasks and it planned in the same way with this particular job, undertaking the carpentry works itself but otherwise subcontracting the CW and painting works.
For its part, Kyren was a relative newcomer in the project development business. Its principal, Samaras, had been involved for many years as a contractor undertaking structural steelwork on major buildings but the company had not until recently undertaken its own developments. More immediately, however, it had completed an apartment development adjacent to the Palais site known as ‘Alpha Apartments’ and this, along with the Palais, had been undertaken following dealings with the Adelaide City Council.
The circumstances in which the parties came together for the Palais project were largely uncontentious. The defendant’s Project Manager and Superintendent, Corolis, had formerly been employed by the Adelaide City Council (the ‘Council’) and in that role had had previous dealings with Wunda, in particular, over another significant development. Further, Wunda had had separate business dealings with his wife and had, as well, carried out some construction work at his home.
Basile was Wunda’s principal Project Manager and had close business connections with the company and its principal director/shareholder/manager, Marveggio.
From Basile’s perspective at least, his continued good relationship with Corolis whilst the latter was working at the Council had been a matter of some significance to Wunda because the Council had been seen by Wunda as a potential source of business. Basile viewed his relationship with Corolis as both a business and personal one and during the course of his evidence spoke of it, during most of the contractual period, in quite positive terms. Perversely, Corolis seemed to have quite a different view of that and seemed concerned to convey that the two of them had always been at arm’s length, that their relationship was an entirely business one.
Whatever might be said of that, it is beyond a doubt that it was the defendant which approached Wunda in April 2006 and invited it to tender on the CW, carpentry and painting packages and also on the tiling of wet areas in the Palais building. In furtherance of that, on 21 April Corolis supplied the plaintiff with relevant site drawings (Exhibit P63). Wunda thereupon sought quotations from Asset Painting for the painting package but otherwise relied on its own calculations in preparing its tender submission.
In the course of negotiations Kyren provided Wunda with its estimated budget figures for each of those packages and advised it of certain available alterations to CW package works (Exhibit P1.3.1010-1011).
It is common ground that there were two meetings between the parties, one at Wunda’s premises at Edwardstown and the other at Kyren’s premises at Gillman. Not much turns on that and it is generally not disputed that at one of those meetings Wunda raised concerns about Kyren’s payment practices, referring to a rumour it had heard that Kyren had not paid trades during the course of the Alpha Apartments development.
Samaras himself acknowledged that topic was raised but, oddly, Corolis disputed it. If such a remark had been made, he said, he would have been attentive to it and he had no recollection of it being said. He prevaricated somewhat over that.
Marveggio and Basile said that Samaras responded, then or later, by saying that the rumours were untrue and that to demonstrate his good faith Wunda could be assured that contractor payment claims would be met by Kyren on 14-day terms. At first Corolis and Samaras appeared to concede that Samaras had proffered that. Notably, however, Samaras then appeared to contradict himself and said that the conversation about 14-day terms related only to the CW package (T/S 1293/1300). Whether he was saying that that qualification emerged later or not was never clear, but his evidence on the topic led me to have some misgivings over his credibility.
Having regard to these matters and my general observations as to credit, I prefer Marveggio’s and Basile’s accounts of that conversation.
It was seen by them as a significant concession by Kyren because usual payment terms were 28 days. What followed from that point of time was contentious, however, because ultimately the contract itself recited that 14-day payment terms related only to the CW package and not to the balance of the works.
The relevant clause (clause 42.1 and annexure ‘A’) provided that claims would be paid:
within 28 days after receipt by the Superintendent of a claim for Payment for all packages.
with the exception of:
within 14 days after receipt by the Superintendent of a claim for payment for the Wall Partition, Ceiling Systems & Linings Package.
Wunda’s witnesses said and I accept that having received the draft contract document, they overlooked that wording and proceeded to sign it, still believing 14-day terms applied to all claims. In the context of other observations I have made about their attention to detail, I am not particularly surprised at that evidence. At all events, it is clear and I find that Wunda then became bound by those express contractual provisions.
Returning then to the sequence of events, on 22 May 2006 Wunda tendered to Kyren for the painting, CW, carpentry and tiling works in an amount of $3,361,399 plus GST (Exhibit P19H). Pertinently, that tender document contained these provisions:
Exclusions:
…
- Delete coffers to windows and finish ceiling straight into aluminium window frames using P50 shadow line to edge
- Delete 10mm plasterboard to west wall as per discussion on 18th May at Wunda projects office
…
Conditions of Acceptance of Quotation:
1. 14 day payment from date of invoice
…
Qualifications:
1. Where the drawings and/or specifications lack detail or information, we reserve the right to amend our quotation on receipt of any additional detail or information.
…
5. Terms and conditions are to be negotiated along with a construction program mutually agreed upon if this quotation is successful
That letter also tends to corroborate the date on which the previously discussed meeting at Wunda’s premises occurred.
Those terms, with particular regard to payment times, emerged, as I find it, from that meeting and corroborate Wunda’s evidence that it had then sought and Samaras had confirmed that 14‑day payment terms would apply generally.
One other aspect of that quotation, and which goes to credit, relates to the deletion of coffers. The original plan had called for their installation (that is to say, the construction of stepped finishes to ceilings at points where they met external walls or windows) but, on Basile’s and Marveggio’s evidence, which I accept in this respect, they were asked whether costs could be saved if ceilings were finished or butted directly to those surfaces. Curiously, both Samaras and Corolis denied there was any such conversation but, in the face of P19H and what later occurred, this does them little credit. I am satisfied it was discussed.
A later tender dated 25 May 2006 was provided, again including tiling works, and, for unexplained reasons, it became incorporated into the contract documents, but neither party relies upon it and I will disregard it.
At all events, it is common ground that after Wunda’s tender was received there was a further meeting of the parties at Kyren’s premises at Gillman. There was varying evidence as to who was present. The purpose of that meeting was to discuss Wunda’s tender and inclusions or exclusions to the contract works.
The evidence of the parties as to the contents of that meeting fluctuated significantly. Basile did not appear to speak much of it, Marveggio remembered a Wunda boardroom meeting where 14-day payments were discussed and then a separate meeting where only Basile and Corolis were present.
Corolis said that all four parties – that is to say, Samaras, Marveggio, Basile and himself – were present at that meeting and there was a subsequent meeting without Samaras. At both meetings, he said, there was specific discussion about 14-day payment terms applying only to the plasterboard package. Basile and Marveggio rejected that.
Samaras recalled being present at a meeting after a time when the tiling package had been deleted from the tender, at which only one of Marveggio or Basile was present and where there was a tender document on the table.
It is unnecessary to make any firm findings about which meeting was attended by whom, but I am satisfied there was a meeting at which Wunda’s tender letter of 25 May was discussed. For reasons expressed elsewhere, I do not accept the claims of Samaras and Corolis that there was discussion then, or indeed before 19 July 2006, about the 14‑day payment terms being confined to the CW package. Had that been so, having regard to the manner in which negotiations had proceeded and amended tenders proffered, I would have expected that Kyren would have required, and Wunda provided, an amended tender to that effect, but none was provided and the letter of 25 May was incorporated into the contract documents.
What I find then happened was that in preparing the contract schedules, Corolis, of his own motion and despite the tender terms, chose to confine 14‑day terms to the CW package and did nothing to alert Wunda to that (T/S 2259). Further, I accept Basile’s evidence that within 14 days prior to 2 June he had specifically discussed general 14-day payment terms with Corolis. Corolis appeared to concede there had then been some discussion about it, but not for all packages (T/S 2260).
Either at that meeting or shortly afterwards, I am satisfied, Wunda provided Kyren with a revised tender again dated 25 May 2006 (P1.3.912) which, pertinently, omitted any reference to tiling works. It retained the coffers deletion but further provided:
Notes:
- To reinstate coffers to windows as per original drawings $55,618.00 + GST
Further, that letter, with one irrelevant omission, repeated the previous Conditions and Qualifications, and in particular:
Conditions of Acceptance of Quotation:
1. 14 day payment from date of invoice
…
Qualifications:
…
5. Terms and conditions are to be negotiated along with a construction program mutually agreed upon if this quotation is successful.
That letter, I am satisfied, constituted Wunda’s final tender and it became incorporated in the contract as such.
I am further satisfied, on all the evidence, that the terms of the coffer exclusion in that tender clearly spelled out that coffers were deleted from the contract works and they corroborate Wunda’s claim that this exclusion had previously been the subject of specific discussion and provision and then became a specific exclusion from its contract works.
It is a matter of some significance that in each of those tender letters Wunda purported to tender on the basis of drawings which obviously became part of the contract, but neither letter made any reference to specifications. That is, of course, not conclusive, but it tends to corroborate its assertion, which I accept, that it had not by that time been provided with all the specification documents. I do not find it particularly surprising that Wunda was able to submit a tender without them because it had had considerable experience in the installation of plasterboard ceilings and walls and associated carpentry, and am satisfied it was able, as it claimed, to calculate quantities and values on the basis of plans only. Further, I am satisfied that by the time it executed the contract, Wunda had obtained subcontractor quotations for the CW and painting packages. Even so, it may not have been a prudent choice.
The next relevant occurrence was that on 29 May 2006 Wunda wrote to Kyren, inter alia providing a specific quote on external soffits at a figure of $60,000-odd, an amount which plainly found its way into the final tender price (as Kyren’s letter of intent itself confirmed, albeit that Corolis obdurately refused to accept that fact).
On 2 June 2006 Kyren forwarded the letter of intent to Wunda. I will not repeat its terms here but the following observations are pertinent:
(1)Generally, it accepted the plaintiff’s tenders for each of the three packages, the CW package having been augmented by the $60,000-odd I have just mentioned.
(2)It purported to rely upon Wunda’s tenders of 25 and 29 May 2006 and a ‘meeting 2 June 2006’. The reference to those letters plainly identified the tender letter of 25 May (omitting the tiling tender) and the 29 May letter relating, in particular, to the external soffit quotation.
The occurrence of a meeting on 2 June 2006 is not readily apparent from the evidence of the parties but if indeed such a meeting occurred, it would seem that neither relies upon anything specific having come out of it.
(3)In its letter of 29 May Wunda had also provided an additional figure to Kyren for the installation of a particular type of wall (QS2) to corridors and wet areas. Whilst its quotation there for external soffits was taken up in the revised CW package total, the QS2 walls quote was not.
(4)As I have noted elsewhere, Wunda says Kyren had not in fact provided it with the specifications, identified in the letter of intent as relating to sections 17 and 18, and I accept that evidence, but even so, it undoubtedly tendered on the basis of all documents referred to in those specifications and must be taken to have accepted the need to comply with them. It was later obliged to obtain copies of them from Kyren.
The matter thus has no contractual relevance, but it reflects poorly upon Wunda’s level of care and attention to detail at the time the contract was negotiated and finalised.
(5)The letter provided that Kyren would ‘require’ Wunda to provide dollar per square metre rates for the CW trades before works began and, as well, ‘an hourly rate for carpenters’. In fact, no such request was made until much later into the progress of works and it was then made by Corolis in his capacity as Superintendent and in connection with a variation claim. Wunda did not then respond to it.
(6)The letter further provided that an ‘updated construction program’ would be shortly issued to Wunda. Other evidence disclosed that a form of construction program had previously been given to Wunda but I will discuss that matter in a moment.
(7)Australian Standard contract document entitled ‘General Conditions of Contract (AS 2124 – 1992)’ (‘AS 2124’ or ‘the General Conditions’) was nominated as the document which would be executed by the parties and, indeed, that happened.
There was then a period of weeks in the latter part of June 2006 when Corolis was on leave. In that time it would appear that the defendant’s site manager, Moore, was in touch with Basile and Cowling and there was a meeting on site.
On 26 June Cowling emailed Moore advising him that she currently had ‘a set of documentation in which we tendered from’ (P1.3.1078) and asking for five construction sets of documents to be provided so they could send copies on to their contractors.
On 29 June Cowling again wrote to Moore asking when architectural drawings and service drawings and specifications would be available for collection – inferring, as I have found, that Wunda did not have them. Moore replied on 5 July, advising that these materials were available via a particular computer program (P1.4.1109). Further, on 6 July Kyren forwarded to Wunda architectural drawings and an accompanying schedule. Interestingly, that document did not itself appear to identify specification sections 17 and 18 relating to CW works.
On 1 July Moore emailed all contractors setting out some proposed ‘administration guidelines’ relating to architect’s instructions, variations and RFIs. It nominated a format for RFIs and contract variations.
Some time in early July Corolis returned to the site and it appears that, in order to complete preparation of the contract documentation, he requested Wunda to provide a further copy of its 25 May tender document. For reasons which are quite unclear, he denied in evidence having made that request but a copy of that document (P1.3.1004) strongly infers that a further copy was indeed then provided.
At all events, Kyren prepared AS 2124 with its annexures and schedules (P1.3.918), and it was forwarded to and signed by Basile and Marveggio for Wunda on 17 July. It was then returned to Kyren for completion and Samaras executed it for Kyren on 19 July.
There are many features of that document that will require specific discussion but the following should be mentioned now:
(1)It was divided into several sections or parts as follows:
(a)General Conditions.
(b)Part A, being an annexure containing particulars identifying the premises, the parties, the Superintendent and numerous provisions specifying particulars otherwise referred to in the General Conditions and including, in particular, the following:
· ‘The Superintendent: … The Superintendent shall be the Project Manager’.
Here, it is common ground that the Project Manager was Corolis, hence he was also Superintendent.
· The time for giving possession of the site was defined ‘As per Construction Program or by agreement’.
· ‘The Date for Practical Completion: … 31 January 2007 and in accordance with the program for the respective trade packages to be agreed on by Contractor and Kyren P/L’.
· Liquidated damages were fixed at $10,000 per week.
· ‘Times for Payment Claims: (Clause 42.1): … within 28 days after receipt by the Superintendent of a claim for Payment for all packages.
… with the exception of:
within 14 days after receipt by the Superintendent of a claim for payment for the Wall Partition, Ceiling Systems and Linings Package’.
· ‘The rate of interest on overdue payments (clause 42.9): … Current Savings Market Interest Rate as advertised by the Commonwealth Bank’.
In this respect, as I note elsewhere, there was never, at any relevant time, such a rate.
(c)Part B dealt with clauses omitted or amended in the contract and some matters relating to Australian Standards.
(d)Part C, described as ‘Formal Instrument of Agreement – Palais Apartment Building’, identified the agreement date as 2 June 2006 (the date of the letter of intent) and identified the overall contract sum and the relevant documents. It was executed by the parties.
The relevant documents identified in it were numerous but, pertinently, included the following:
· Trade Scope of Work, issued with Invitation to Tender;
· Trade & Associated Specifications, issued with Invitation to Tender.
That particular reference identified, in particular, specification sections 17 and 18 and otherwise the architectural drawings referred to in the tender documents;
· Post-tender correspondence identified as Kyren facsimiles to Wunda of 18 and 19 May 2006 (18 May facsimile related to wall construction and the 19th was Kyren’s letter advising of its budget figures for sections of the construction);
· It referred to ‘Notes from the meeting held 2 June 2006’, but none were attached and it is doubtful that if such a meeting occurred, anything of contractual significance emerged from it.
· The tender submissions of Wunda of 25 and 29 May and the letter of intent of 2 June.
All of those documents, including the conditions of contract and the insurance documents, were agreed as comprising contract documents.
(e)Part D was a public liability insurance certificate relating to Wunda’s contract works.
(f)Part E related to professional indemnity insurance.
(g)Part F was a WorkCover Confirmation of Registration.
(h)Part G identified special conditions applying to the Wunda packages and, relevantly, contained the following clauses:
· ‘2. Construction Programme
a. Time is of the essence in this Contract. The works are to be carried out on site in the shortest possible time, without compromising the standard or quality of the work, or safe work practices.
b. The contractor is to determine with Kyren P/L a suitable work programme of dates and completion times for carrying out the works.
c. Any changes to the agreed programme may only be made with the approval of Kyren P/L or its Superintendent.’
· ‘5. Variation
a. All variations to the Contract must be approved in writing by Kyren P/L or its Representative prior to any work associated with the variation being undertaken. Failure to comply with this instruction may result in non-payment of variations’
(i)Part H identified the scope of the works by reference to specifications, including those specifications relevant to the CW works and the architectural drawings.
(j)Part I was a section containing pre-contract correspondence.
(k)Part J identified the letter of intent.
(l)Part K identified the site working hours.
(2)I should at this stage mention the following matters relating to that contract:
(a)For its part, Wunda was critical of the choice of AS 2124, saying it was inappropriate for the type of contract and created many problems for both parties. Whether or not that was so, it is plain that Wunda did not object to executing it.
(b)Wunda was highly critical, during the course of the trial, of the nomination of the Project Manager (Corolis) as the Superintendent under the contract, yet it plainly accepted that nomination. Even so, I am satisfied that it did indeed lead to many problems.
(c)Notwithstanding what I have accepted was Wunda’s position prior to the contract that it required 14-day payment terms for all packages, the General Conditions ultimately provided for 14-day payment terms only upon the CW package. Whether Wunda became alert to that change but nonetheless chose to execute the contract or whether it overlooked the alteration is of limited relevance. I favour the latter explanation but, in any event, it executed the contract in that form and I am satisfied it became bound by it.
(d)The rate of interest on overdue payments fixed in Annexure A became problematic because there was not at any relevant time a ‘Current Savings Market Interest Rate as advertised by the Commonwealth Bank’. Kyren contended, however, that that provision can and should be interpreted in a commercially realistic way so as to apply a particular Commonwealth Bank rate.
(e)Wunda complained that its tender was based upon representations by Kyren that it would supply lifting and haulage to all levels of the building, rubbish bins on all levels and scaffolding to stairwells and the lobby area. This is to be inferred, it said, from the terms of its tender (P1.3.1005) and indeed they did require that Kyren supply these. Further, the original construction program provided to Wunda (Exhibit D44) stated that there would be two mobile cranes available on site at all times and inferred that a hoist would also be installed. Wunda said it relied upon those matters in providing its quotation and I am satisfied it did. Kyren did not generally dispute this (see Corolis, Exhibit D13 [25]) and I am also satisfied it accepted an obligation to attend to all rubbish removal ([26]).
(f)For its own part, Kyren said that prior to accepting Wunda’s overall package it had received another tender for CW works which was for a lesser amount, but that it elected to take up Wunda’s more costly tender with respect to that package because it perceived there was an advantage in having Wunda project-manage the activities of the three trades that it was responsible for on site.
(g)Further, Kyren said that Wunda agreed to or is otherwise bound by the special provision relating to payment terms.
The latter observation is an important one, for these reasons:
(1)The plaintiff appears to have double-counted by including variation claims in several of the invoices identified in paragraph 5 and then separately claiming the same amounts in paragraphs 12 and 33.
(2)There are no variation claims for painting in the relevant invoices, there is one carpentry claim of $918 which is included in successive accounts, and a review of the CW variation claims in the relevant invoices shows that they were presented as a running account which was repeated and augmented in successive invoices. Ultimately, they totalled $170,161, of which $91,810 remained in contention, but insofar as that or a lesser figure was included in each account, it must be deducted from it.
I have thus removed all variation claims from the Tax Invoices identified in paragraph 5 and the adjusted totals are for CW works $198,299, for carpentry $100,085, and for painting $82,250, an overall adjusted total of $380,634, which I find Kyren is obliged to pay to Wunda by virtue of their agreement over payment of Tax Invoices and, further, by virtue of Wunda’s Notices to Show Cause.
To that figure must then be added the value of variations I have assessed of $83,880, an allowance for GST, the value of Wunda’s lost profits on the balance of the contract works and interest. Assessment of that penultimate loss invites some discussion.
The plaintiff sought to base its claim upon the evidence of the quantity surveying experts Anthony Brewster (‘Brewster’) and Rabone, who had assessed the proportions of contract works completed for each package as at 18 January 2007. Its calculation of asserted loss then involved applying the overall average of its profit margins to the resulting value of uncompleted works.
I am not satisfied that that is a proper approach. In the first place, the value of uncompleted works must be adjusted to take account of the works I have found were properly removed from the contract. Secondly, having found that Wunda is entitled to recover the Tax Invoice value of allegedly completed works for each package based upon a nominated percentage of contract values, it cannot now seek to base a loss of profits claim on a lower completed percentage (as adherence to the quantity surveying estimates would yield).
The completion figures nominated by Brewster and Rabone were indeed lower than Wunda billed, but I am not persuaded anything turns upon that, for the reasons that:
(1)the parties had agreed, as I find it, that Tax Invoices would represent a proportion of completed works and had settled upon an inspection process that would assess that proportion. Corolis had chosen not to be present at later inspections, so the fact that Wunda assessed a higher level of uncompleted works than the quantity surveyors might concede, became an outcome that Kyren was obliged, on the agreed Tax Invoice system, to accept and pay;
(2)neither expert had access to documentary materials or a site inspection upon which he felt he could rely in calculating the level of completion as at 18 January and each of them simply accepted the general reliability of the assessments of the quantity surveyor engaged by Kyren’s financier, namely, Messrs Rider Hunt. It would be reasonable to regard a financier’s assessment as a conservative one and, plainly, no one of them had access to ultimate findings as to variations and works removed;
(3)to the extent that Brewster based certain of his calculations upon the Superintendent’s own assessments, having regard to my findings as to Corolis’ level of independence I have no regard to them;
(4)in considering this question, I have had limited regard to the actual costs of completion asserted by Kyren. Neither E & M nor Asset Painting was called to give evidence and I am not disposed to find either of their costs necessary or reasonable. In reality, the E & M costs implied a figure close to the Wunda assessment of completed works, anyway, although the carpentry and painting costs varied widely from it.
I conclude then that Wunda’s loss of profits claim ought be based upon the relevant profit percentage of the unbilled contract figure for each package adjusted to take account of works properly removed from that package. A review of the final invoices presented by it for each trade demonstrates it had assessed CW works as 92% complete, carpentry as 90% complete and painting as 65% complete.
In calculating those figures, I will apply the profit figures previously found and, as well, take account of my findings as to the value of works removed in each particular package but will, of course, ignore variation claims.
CW Works:
Value of works removed = $36,918
As a proportion of contract price = 1.44%
Proportion of remaining uncompleted works
(100-92+1.44) = 6.56%
Value of remaining uncompleted works = $167,942
_______
Apply profit margin of 12.8% to establish
lost profit = $21,947Carpentry:
Value of works removed = $8,752
As a proportion of contract price = 5.36%
Proportion of remaining uncompleted works
(100-90+5.36) = 4.64%
Value of remaining uncompleted works = $7,575
_______
Apply profit margin of 19.4% to establish
lost profit = $1,470Painting:
Value of works removed = $13,484
As a proportion of contract price = 8.17%
Proportion of remaining uncompleted works
(100-65+8.17) = 26.83%
Value of remaining uncompleted works = $44,270
_______
Apply profit margin of 19.4% to establish
lost profit $6,950Total loss of profit = $30,367
- Interest
Clause 42.9 of the General Conditions has been recited previously and provides that the rate of interest on unpaid moneys shall be as prescribed in the Annexure ‘and if no rate is stated the rate shall be 18 percent per annum’. As also noted, the Annexure provides that the rate of interest was ‘Current Savings Market Interest Rate as advertised by the Commonwealth Bank’.
It is common ground that there was not at the relevant time any Commonwealth Bank interest rate identified as the ‘Current Savings Market Interest Rate’. The plaintiff asserts that in those circumstances the court should interpret the contract as if no interest rate had been stated and therefore apply the 18% figure.
The defendant submits otherwise, saying that the contract ought be interpreted in terms that the parties had effectively agreed to use ‘whatever was the current rate of interest paid by the Commonwealth Bank on funds held in its savings accounts by its customers’. So much, indeed, appears to have been conceded by Marveggio in his affidavit filed in these proceedings on 13 April 2007 ([14]), where he goes so far as to exhibit Commonwealth Bank rates and nominate a figure of 4.68%, being the bank’s Award Saver rate. The defendant relies upon that same Award Saver account rate. Alternatively, Kyren says that the parties plainly evinced an intention to nominate a rate of interest so the default provision in clause 42.9 ought to be ignored and interest should be fixed at the normal commercial rate.
I am persuaded by the primary defence argument. Plainly, the parties have sought to state an interest rate, albeit that the description has not precisely matched any Commonwealth Bank account identified in the same precise terms.
Even so, the intention of the provision in the Annexure is plain enough: it seeks to fix the rate of interest then being paid by that bank on customer savings accounts. That is a description well enough understood, one that matches the obvious intention of the parties, one that best fits the material exhibited to Marveggio’s affidavit and described as the Award Saver account and, indeed, one that Marveggio himself nominated.
I am satisfied that the interest rate to be applied under clause 42.9 should thus be 4.68% and that it should apply to all outstanding invoices and variations. The calculation of interest is complicated by the adjusted amounts of claims and the varying dates upon which particular invoices or variation claims fell due. I do not propose to set out in detail each and every item of legitimate claim, its due date and the interest calculation applying to it, but based on my findings the interest award will be $80,480.
Insofar as the plaintiff’s claim comprises damages by way of lost profit, ordinary commercial rates ought apply. They have fluctuated over the time and do not permit precision in calculation, as on my findings they would have been earned and paid over the period between 25 January and about 5 June 2007, the latter being the latest date upon which claims could have been met had the contract not been terminated. In the circumstances and given that proceedings were instituted on 19 March, I will work from that date and fix a sum in lieu of interest of $8,100.
- Summary
The plaintiff is thus entitled to recover damages as follows:
1. Outstanding Tax Invoices $380,634
2. Variations as found $83,900
3. Interest thereon $80,480
4. Loss of profit $30,367
5. In lieu of interest $8,100
________
$583,481
F. The Cross Action
- Liquidated Damages
Whilst I have found that Wunda ought to have been granted extensions of time setting back the date of Practical Completion to 5 March 2007, it is a matter of record that Practical Completion was in fact certified on 20 March.
Kyren has maintained a cross action for liquidated damages and, according to the terms of clause 35.6, it may pursue that ‘if the Contractor fails to reach Practical Completion by the Date for Practical Completion … ’. On what I have found as to that date and time extensions that ought to have been granted, Wunda might be viewed as nominally responsible for the delay between 5 March and 20 March on the footing that it could be attributed to the poor performance of its CW contractor. But I am not persuaded that Kyren can rely on such a contention in circumstances where it has failed to revise the construction program in the manner I have discussed, failed to ensure the Superintendent granted Wunda appropriate extensions of time and then unlawfully repudiated the contract. In this respect, the factual circumstances differ from those in the Peninsula case (supra), where the contract had been terminated by reason of the builder’s breach and the court was focussing upon the question of how much the liquidated damages period should be written back to account for extensions of time that ought to have been granted.
Put another way, had Kyren acted as it should have and revised the construction program and ensured the appropriate extensions of time were granted, there is no evidence before me that Wunda would inevitably have needed until 20 March to complete the delayed CW works, or indeed any other works. Had the program been properly reframed and Wunda granted the appropriate extensions at the appropriate times, as I am satisfied should have occurred, it would have been at liberty then to bring additional resources to the site to ensure completion of all works by 5 March. It was deprived of that opportunity by Kyren’s failure to attend to these matters and by its unlawful conduct in repudiating its contractual obligations.
Finally, if I am wrong in those conclusions, I am not prepared to conclude that the date for Practical Completion ultimately fixed by Corolis was correctly arrived at, in circumstances where Kyren had unlawfully repudiated and then engaged others, who were not called to give evidence, to complete contract works.
I thus disallow Kyren’s claim for liquidated damages.
- Completion Costs
Further to that claim, Kyren has pursued claims for the additional costs of completion it says it incurred in consequence of Wunda’s default and alleged unlawful termination of the contract. I am not satisfied as to that. Having found that Kyren failed to grant proper extensions of time and unlawfully repudiated the contract, I am not satisfied that it can lawfully seek to recover the additional costs incurred by it in completing the contracted works.
For all these reasons, the defendant’s counterclaim is wholly dismissed.
G. Conclusion
There will be judgment for the plaintiff in the sum of $583,481 inclusive of interest. The counterclaim will be dismissed. I will hear from the parties as to the question of GST and as to consequential orders and costs.
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