CPB Contractors Pty Limited v Aecom New Zealand Limited
[2021] NZHC 1649
•5 July 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-002177
[2021] NZHC 1649
BETWEEN CPB CONTRACTORS PTY LIMITED
First Plaintiff
HEB CONSTRUCTION LIMITED
Second PlaintiffAND
AECOM NEW ZEALAND LIMITED
First Defendant
AECOM CONSULTING SERVICES (NZ) LIMITED
Second Defendant
Hearing: 28 June 2021 Appearances:
D Bigio QC and R Norris for Plaintiffs/Respondents
A S Ross QC and M A H Macfarlane for Defendants/Applicants
Judgment:
5 July 2021
JUDGMENT OF VENNING J
Discovery
This judgment was delivered by me on 5 July 2021 at 3.45 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Anderson Lloyd, Christchurch
Hesketh Henry, Auckland
Counsel:D Bigio QC, Auckland A S Ross QC, Auckland
CPB CONTRACTORS PTY LTD v AECOM NEW ZEALAND LTD [2021] NZHC 1649 [5 July 2021]
Application
[1]The defendants seek orders for tailored discovery of documents:
(a)evidencing the full terms of the two in-principle agreements reached between Waka Kotahi NZ Transport Agency (NZTA), Wellington Gateway Partnership (WGP), and the plaintiffs in December 2019 and September 2020; and
(b)detailing to NZTA, the plaintiffs’ projected losses/cost overruns on the Transmission Gully Project (Project) prior to the agreements being reached and the causes of those losses/cost overruns, including any correspondence between counsel for WGP or the plaintiffs and NZTA (collectively the settlement documents); and
(c)providing tailored discovery by listing and exchange protocols in accordance with schedule 9 of the High Court Rules 2016 subject to matters set out in previous memoranda exchanged between counsel.
[2]The application is opposed by the plaintiffs.
Background to plaintiffs’ claims
[3] In about May 2013 NZTA issued a Request for Proposal (RFP) in relation to the Project. The plaintiffs decided to participate in a consortium of entities (which became known as the WGP) to submit a proposal in relation to the Project in response to the RFP. The plaintiffs were to be responsible for the design and construction component of the proposal. For present purposes they were to be the “builder”.
[4] In July 2013 the plaintiffs and defendants entered a Tender Services Agreement pursuant to which the defendants were to provide tender design services to the plaintiffs to enable the plaintiffs to prepare a proposal in relation to the construction costs of the Project in response to the RFP.
[5] Under the Tender Services Agreement the defendants produced a tender design for the Project between July 2013 and October 2013 to enable the plaintiffs to prepare the design and construction aspect of the Project.
[6] The plaintiffs say that they used the defendants’ tender design to calculate the estimated cost and margin for the Project at $768,155,234 in response to the RFP. The plaintiffs’ tender estimate comprised:
·direct costs;
·preliminary costs;
·indirect costs (including risk and opportunity);
·profit.
[7] The WGP was the preferred bidder for the Project. After a revised tender design in relation to aspects of some of the bridges, the plaintiffs and WGP entered a contract to design and construct the contract with NZTA on 28 July 2014.1 The design and construct contract price (the D&C contract price) was equal to the revised final cost (FC) estimate of $776,480,396.
[8] On 1 October 2014 the plaintiffs and defendants entered a further contract for design services for the provision of final detailed designs for the Project.
[9] The defendants later produced design documentation which culminated in July 2014 in the “issued for construction” (IFC) design for the Project.
[10] The plaintiffs allege there were material differences between the defendants’ tender design and the IFC design and that the tender design was defective in the following ways:
(a)bridge design errors;
1 They also entered a further financing agreement with NZTA regarding financing the Project.
(b)bridge reinforcement rate quantities;
(c)drainage – cut batter chutes;
(d)drainage – rock scour;
(e)drainage – headwall structures;
(f)drainage – pipe class; and
(g)separately, but not relevant to the present application, the plaintiffs also allege the defendants made errors in the information provided for the tender design in relation to cut slope work relating to transmission tower 297.
[11] The plaintiffs allege breach of contract, in the alternative negligence and as a second alternative, misleading or deceptive conduct in relation to the provision of the services in relation to the tender design errors.
[12] In summary, the plaintiffs plead that had the defendants’ tender design errors and failures to warn not occurred then:
(a)the plaintiffs would have estimated the direct costs, the preliminary costs, and indirect costs at amounts greater than the amounts included in the tender estimate or FC estimate as applicable;
(b)the allowance for profit expressed as a percentage of the amounts would have remained the same, however the total amount would have been greater than the amounts included in the tender estimate or FC estimate; and
(c)the plaintiffs (as part of the WGP consortium) would have submitted a binding proposal to NZTA for an amount in excess of the tender estimate; and
(d)NZTA would have accepted the proposal from the consortium for the adjusted amount (the increased D&C price).
[13] Further, or in the alternative, the plaintiffs allege that to the extent NZTA requested the proposed works requirements be adjusted the plaintiffs would have identified suitable de-scoped components to be removed from the work requirements which would have resulted in a corresponding reduction in direct costs, indirect costs, and the risk and opportunity costs allowances.
[14] The plaintiffs say that, in those alternative circumstances they would have submitted a binding proposal for a tender price substantially identical to the original tender estimate save that de-scoped components would not have to be completed and the NZTA would have accepted the revised proposal.
The plaintiffs’ calculation of loss
[15]The plaintiffs claim they have suffered loss or damage calculated as:
(a)the difference between the increased D&C price and the D&C contract price;
(b)further, and in the alternative, the estimated direct costs and preliminary costs for the de-scoped components, the best measure of which being:
(i)the increased D&C price;
(ii)less the D&C contract price; and
(iii)less an applicable percentage for profit on the difference between the two.
[16] The plaintiffs originally quantified their loss and damages in the order of $48 million in their amended claim. By a letter of 12 May 2021 the plaintiffs’ solicitors revised the estimate of loss occasioned by the additional costs they say were incurred in delivering the Project by reason of the defendants’ errors as follows:
Claim Component Loss and Damage - Tender Rates Loss and Damage - Reasonable
Rates
Direct Costs Bridge 25 to 27 Design Errors & Bridge
25 and 27 Seismic Design Errors
$9,048,480 $10,881,670 Bridge 28 Design Errors $1,905,451 $3,292,361 Bridge 13 to 15 Design $4,731,476 $4,910,537 Bridge Reinforcement Rate Errors
(Bridges 5,7, 11 and 12)
$953,955 $1,686,837 Bridge Reinforcement Rate Errors
(Bridges 2, 4, 6, 8 and 16)
$1,007,432 $1,689,599 Bridge Reinforcement Rate Errors (Bridge
20)
$3,427,413 $3,626,728 Bridge Reinforcement Rate Errors
(Bridges 3, 17, 18 and 19)
$4,480,992 $5,215,748 Cut Batter Chute Seismic Design Error &
Cut Batter Chute Hydraulic Design Error
$94,611.36 $1,614,014 Headwall Design Error $1,241,573 $2,086,506 Rock Scour Design Error N/A $12,147,828
Claim Component Loss and Damage - Tender Rates Loss and Damage - Reasonable
Rates
Pipe Class Design Error N/A $1,034,311 Indirect Costs Structures Management N/A $5,009,706 Structures Design Management N/A $841,927 Drainage Management N/A $1,027,189 Site Wide Management N/A $4,037,150 Preliminaries Costs Time related Prelims Structures N/A $3,898,224 Time related Prelims Drainage N/A $2,102,409 Escalation N/A $4,179,601 Profit Head Office Overheads & Profit N/A $5,958,288 TOTAL $75,240,713
[17] The plaintiffs’ solicitors confirm that the above claim was intended to replace the particulars pleaded in the amended statement of claim. The plaintiffs no longer rely on the amount claimed in the notice of dispute of $48 million.
The reason for the defendants’ application
[18]In a series of documents which have been publicly released NZTA disclosed:
(a)WGP had brought a claim for $352 million against it pertaining to resource consent issues that had delayed the start of the Project. That claim had been settled in December 2019 for $190.6 million; and
(b)WGP had also given notice of a further claim for delay and extension event related to the shutdown under COVID-19, which the NZTA had also settled on 17 December 2020. The COVID-19 settlement agreement provided for compensation payments totalling $164 million and a pavement construction variation of $45 million.
[19] The defendants seek the settlement documents in relation to the claims and the payments by NZTA as they say the information is necessary to enable them to assess whether:
(a)the recovery of the losses alleged by the plaintiffs against them in these proceedings would lead to double recovery; and
(b)the plaintiffs have in fact suffered any loss on the Project at all.
[20] Mr Ross QC submitted that the categories of documents sought would be confined and discovery need not be onerous. During the course of the hearing he handed up a memorandum which revised the extent of the discovery sought by the defendants as follows:
Documents that are sufficient to particularise:
·what losses / cost overruns the plaintiffs sought to recover from NZTA (i.e. the legal and factual grounds on which the D&C JV claimed to be entitled to recover losses / cost overruns against NZTA and the component amounts of the losses / cost overruns attributable to each legal and factual ground); and
·the full terms of the settlement agreements (including to the extent specified, the legal and factual claims that were settled and the monetary amounts and / or other value attributed to each settled legal and factual claim).
[21] The defendants submit the discovery sought is proportionate and not unduly onerous and that the interests of justice are best served by discovery of the settlement
documents to enable the defendants and the Court to better understand and assess the plaintiffs’ claimed losses or damages.
[22] As noted, the application is an application for further tailored discovery under r 8.8, High Court Rules 2016. The parties have already agreed that the interests of justice require tailored discovery in relation to other aspects of the proceeding.
[23] The plaintiffs have confirmed the documents falling within the proposed category of settlement documents exist. The principal issue is whether discovery is necessary on the basis of relevance.
The plaintiffs’ response
[24] Mr Bigio QC confirmed the plaintiffs primarily oppose the application on the basis of relevancy. The plaintiffs say the documents sought are not relevant or material to matters in issue from the pleading.
[25] The plaintiffs say the proper measure of their loss and damage attributable to the actions of the defendants is the difference between the amounts the plaintiffs estimated as the cost of delivering the Project and the amount the plaintiffs would have estimated had the plaintiffs been provided with a tender design prepared in accordance with the terms of the services contract. That assessment must necessarily take place at or immediately prior to entry into the lump sum D&C contract for the design and construction of the Project.
[26] The plaintiffs say that whether or not they have compromised claims against NZTA under the D&C contract relating to the subsequent delivery of the Project is not relevant to the way in which they have both pleaded and assessed the quantum of their claim again the defendants. Mr Stephen Abbott (an experienced project manager appointed by the plaintiffs to assist with this proceeding) has explained the methodology he has applied to calculate the plaintiffs’ damages in this case.2 It does not involve any consideration of the overall profitability of the delivery phase of the contract.
2 See for example Mr Abbott’s reply affidavit of 27 May 2021.
[27] Mr Bigio made a supplementary submission based on the principles referred to in Body Corporate 212050 v Cove Kinloch Auckland Limited, namely that strong policy reasons exist to support confidentiality privilege and settlements which can only be overcome where there is a particularly compelling case for access to the documents relating to the confidential negotiations.3
[28] As to that, NZTA are aware of the current application. Mr Bigio advised that obviously while NZTA were abiding the decision of the Court they regard the settlement documents as confidential.
[29] Apart from relevance the plaintiffs say that the class of documents sought is considerable. The records the plaintiffs will be required to collate would be different and additional to the 163 custodian records (and in excess of 400,000 documents) already collated and reviewed. Discovery would be unduly onerous. They say the interests of justice do not support discovery.
Discussion
[30] The difference between the parties arises from their differing approaches to the plaintiffs’ case and the relevance of the settlement documents to the plaintiffs’ claim against the defendants.
[31] Section 7(3) of the Evidence Act 2006 confirms evidence is relevant in a proceeding if it has a tendency to prove or disprove anything that is of consequence to the determination of the proceeding. That principle is consistent with the approach to discovery as set out in Schedule 9 of the High Court Rules.
[32] The relevance of the settlement documents must be defined by the issues raised in the pleadings. In Chatfield & Co Ltd v Commissioner of Inland Revenue the Court of Appeal observed that:4
As with evidence, the relevance of a document for discovery purposes must be assessed having regard to the pleaded claim.
3 Body Corporate 212050 v Cove Kinloch Auckland Limited [2017] NZHC 2642 at [96].
4 Chatfield & Co Ltd v Commissioner of Inland Revenue [2016] NZCA 614 at [21].
[33] The defendants say that losses the plaintiffs have sustained is a relevant factor in these proceedings. At a general level that is correct, however, the position is rather more nuanced than that.
[34] It is for the plaintiffs to set out their claim and how they calculate the losses they say follow from the defendants’ breaches they alleged in their pleadings. As pleaded the plaintiffs’ claim does not allege breaches by or losses occasioned by the defendants’ actions during the course of the Project itself. The plaintiffs are not seeking to recover actual direct costs associated with the construction of the various design elements. Nor do they allege they suffered loss as a result of any delays caused by the defendants’ tender design.
[35] Rather the plaintiffs’ allegation, which is for them to prove, is that they would have entered a fundamentally different D&C contract with either a higher lump sum contract price or a reduced scope of works had a different tender design, absent the alleged errors, been provided by the defendants. On that basis the subsequent claims it (more accurately WGP) brought against NZTA during the course of the building works because of consenting delays and/or COVID-19 delays and the consequent compensation payments by NZTA during the delivery phase of the Project are not relevant to their claim against the defendants. On the plaintiffs’ case there is no double recovery between the tender phase claim against the defendants and the delivery phase claim against NZTA. The breach the plaintiffs rely on, and the loss flowing from it, both effectively occurred prior to the start of any physical building work.
[36] While acknowledging the way the plaintiffs pleaded its case for damages, Mr Ross submitted that, although damages are usually assessed at the date of the breach, the rule is not fixed. Where necessary and in the interests of justice the Court will fix such other date as may be appropriate in the circumstances.5 He submitted that determining the date at which the loss should be assessed is essentially a factual question based on what date best reflects the value lost due to the contract not being
5 Stirling v Poulgrain [1980] 2 NZLR 402 (CA) at 424; and New Zealand Land Development Co Ltd v Porter [1992] 2 NZLR 462 (HC) at 466.
performed or the breach of a duty. Where appropriate a court can take into account subsequent events.6
[37] The case Mr Ross primarily relied on is the Court of Appeal decision of Stirling v Poulgrain.7 Mrs Stirling had engaged the defendant solicitors to transfer property to a family trust to reduce her estate for duty purposes. The solicitors delayed in implementing the plan and the assessed transfer value increased by $90,000. The rates of duty had also changed from the date of breach to the date of trial (and again by the date of the appeal hearing). All three members of the Court rejected the admission of fresh evidence of the rates as at the date of the appeal. But Woodhouse and Richardson JJ considered the correct date to measure damages based on the change in duty rates was the date of trial. Cooke J, like the trial Judge, took the date of breach. Richardson J noted:8
As a general rule damages for breach of contract are assessed as at the date of the breach. But, as has been stressed in many recent decisions and notably by Lord Wilberforce in Miliangos v Frank (Textiles) Ltd, it is not a universal rule. It yields to the Court's power in the interests of justice to fix such other date as may be appropriate in all the circumstances. Where restitution involves the repair of premises the appropriate damages are the cost of repairs at the time it was reasonable to begin repair; whether the cause of action is in contract; or for compensation under the land compensation legislation (Birmingham City Corporation v West Midland Baptist (Trust) Association). The logic and justice of adopting that special rule so as to hold the balance between plaintiff and defendant where costs and values are changing over time, are self- apparent. In these inflationary days we think more in terms of rising costs but, as Donaldson LJ pointed out in Dodd Properties (Kent) Ltd v Canterbury City Council, it would be wholly unfair to the defendant to charge him which the costs applicable to reinstatement when the damage occurred if the actual reinstatement took place at a later date when improved technology had reduced the cost. So, too, in this case. Mrs Stirling was asking to be put in the position she would have been in had the appellant solicitors performed their contract but she had not incurred any expense in that regard except for additional stamp duty. The application of breach date gift duty rates would involve the award of an admittedly larger sum than required to remedy her loss on the approach she herself adopted to the award of damages. That cannot be right and I think that her position must be determined as at the date of the trial.
6 Golden Strait Corporation v Nippon Yusen Kubishika (The Golden Victory) [2007] UKHL 12, [2007] 2 AC 353.
7 Stirling v Poulgrain, above n 3, at 424.
8 At 424 (footnotes omitted). Reference can also be made to New Zealand Land Development Co Ltd v Porter, at 466.
[38] Importantly, the Court proceeded on the premise that the damages were to be assessed on the basis Mrs Stirling was asking to be put in the position she would have been in had the solicitors not breached their contract. The measure of damage was the additional stamp duty. It was the value of what was required to compensate her, namely the additional stamp duty, that had changed and which meant the interests of justice required the assessment of the duty as at date of trial. In the present case the basis for the valuation of the plaintiffs’ loss is the value of the difference between the cost of the work disclosed by the tender designs and the IFC designs. The value of that claim has not been changed or affected by the settlements paid by NZTA.
[39] In Stirling v Poulgrain and the cases referred to in the above passage, the loss claimed by the plaintiff flowing from the breach differed depending on the date the loss was assessed at, because of a change in the cost of repair, reinstatement or replacement or, in the case of Mrs Stirling, stamp duty damages rates between the date of breach and date of trial. But the loss was still based on the proper approach to the plaintiff’s claim. In the present case the quantification of the loss claimed by the plaintiffs for the defendants’ breach has not changed.
[40] As noted, it is for the plaintiffs to determine the basis for their claim. The plaintiffs have chosen to sue for and will need to establish breach and loss arising in the way they plead. It is not for the defendants to refocus the plaintiffs’ claim or, in this case, to expand the time period to include actions during the delivery phase after NZTA accepted the FC estimate and the parties agreed the D&C contract price. The present case does not involve any change in the way damages are to be calculated between the date of breach and the date of the two settlements. The plaintiffs’ loss was fixed prior to the commencement of the actual work on the Project.
[41] Mr Ross suggested that, even if that were so in relation to the contractual and negligence claims, the claim under the Fair Trading Act for misleading deceptive conduct enabled the Court to give broad relief. While in principle that proposition is correct, I agree with Mr Bigio’s response that on the basis of the claim as currently pleaded it would be extraordinary for the Court to award damages outside the ambit of the plaintiffs’ claim given the commercial context and that the plaintiffs have
disavowed any claim against the defendants for critical path delay.9 Unless the settlement payments paid by NZTA related to the plaintiffs’ claim against the defendants, they are irrelevant.
[42] The public documents released by NZTA confirm NZTA settled the plaintiffs’ claims for the associated increased cost of the delays in the early phases of the delivery of the Project consequent upon NZTA’s alleged failures. The December 2019 settlement between NZTA and WGP related to the claim that NZTA had failed to facilitate the consenting process and the Enabling Works Management Plan (EWMP) for the Project.
[43] The September 2020 settlement agreement arose out of the COVID-19 pandemic and the costs and delays resulting from the Government mandated shutdown.
[44] Neither of the settlements appear to have any apparent bearing or relevance to the allegations in the current proceeding, but I turn to consider them in more detail.
[45] I address first the settlement relating to the COVID-19 claim. In a document released by NZTA in April 2021 authored by NZTA, Treasury and New Zealand Infrastructure for public information it was said:
Why did the Crown agree to pay for COVID-19 impacts?
·The Crown agreed to additional compensation for COVID-19 impacts because it was the right thing to do given that the lock downs were outside the WGP’s control.
·It was fair, reasonable and appropriate to do this, and in line with existing legal obligations in the Project Agreement and consistent with how the Crown has dealt with its impacted suppliers and contractors across its supply chain.
·Any attempt not to share these costs would likely have resulted in litigation, further delay and more cost increases to the Transmission Gully project. It would have prolonged uncertainty which could have negatively impacted the supply chain, particularly in the context of COVID-19.
9 Letter from the plaintiffs’ solicitors dated 18 November 2020.
[46]The following further detail was provided:
The Project Agreement prescribes a process to manage Uninsurable Events if they arise – essentially both parties are obliged to mitigate the risk if they can. In the case of COVID-19 this meant negotiating how to share the costs arising from the Level 4 lockdown and how risks would be shared in the event of any resurgence. If these negotiations did not result in agreement; then either party could have chosen to terminate the Project Agreement.
Waka Kotahi finalised the last of the legal documents to give effect to the settlement on 17 December 2020. The settlement restores time and cost certainty for the project, by providing for compensation payments totalling
$164.2 million, a pavement construction variation of $45.5 million and a revised opening date in September 2021.
Recognising that Transmission Gully attracts high public interest, the Treasury, Te Waihanga, Waka Kotahi and the Ministry of Transport have together elected to proactively release information to help people understand what has happened.
[47] There cannot be any serious argument that the compensation claim in relation to COVID-19 delays could have any bearing on the plaintiffs’ claim against the defendants, particularly when the basis of the plaintiffs’ claim against the defendants is for work they carried out in 2013 and 2014, well before COVID-19 was in contemplation.
[48]That leaves the plaintiffs earlier claim against NZTA.
[49] The defendants argue they cannot at present verify for themselves whether there is any overlap between on the one hand the plaintiffs’ claims against NZTA and/or the sums paid to the plaintiffs by NZTA and, on the other hand, the claims in the current proceedings, particularly in relation to the indirect costs.
[50] The NZTA publicly disclosed a relevant summary in a document prepared by Treasury and New Zealand Infrastructure Commission for the Minister of Finance and Minister for Infrastructure in relation to that claim on 5 June 2020. The details disclosed were:
Challenges and Delays
The project was originally due for completion in April 2020. However, the contractor has experienced a number of challenges, including:
·Significant re-estimation of earthworks requirements, and associated consenting matters.
·Wet weather made early earthworks seasons less productive than expected.
·Kaikoura earthquake damage and repair impacted the availability of resources across supply chains
It is reasonable to assume that under a different procurement model, the agency would share more of the risk of time and cost overruns with the contractor than they are contractually required to under the PPP project agreement
2019 Dispute
·In February 2019 the contractor brought a claim for [redacted but subsequently referred as $352 million] which related to resource consent issues that allegedly delayed the start of the project and had been the subject of discussion since 2016.
·The dispute was settled in December 2019 for $190.6m, with the planned service commencement date for road opening amended to November 2020.
[51] While the document referred generally to re-estimation of earthwork requirements, the specific reference to the 2019 dispute confirmed that the contractor’s claim was in relation to resource consent issues which had delayed the start of the Project.
[52] Further details of the dispute and particularly the resource consent issues were provided by the Office of the Minister of Finance and Office of the Minister of Transport in a further report to the Chair of the Cabinet Economic Development Committee:
2019 Dispute
•In February 2019 the CJV brought a claim against Waka Kotahi through WGP for $352m. This pertained to resource consent issues that allegedly delayed the start of the project (due to the delayed consent to the Enabling Works Management Plan) and had been the subject of discussion since 2016.
•This claim was disputed by Waka Kotahi before it was eventually settled in December 2019 (together with all other existing claims at that time) for $190.6m, with the date for road opening pushed back to November 2020.
And later:
19 February 2019 Formal Notice of Dispute: claim by CJV in respect
of delay to certification of Enabling Works Management plan and L5/L6 Tables. Passed through to [NZTA] by WGP under [clause 88 of] the Project Agreement. Claim for $352m (plus GST)
19 December 2019 Pre-Settlement Agreement signed between the
[NZTA] and the CJV which settled all existing claims (including the [Enabling Works Management Plan] claim above as well as some smaller disputes that had arisen). The Settlement Amount of $190.6m was paid by the [NZTA] to the CJV. …
[53] The disclosed details of the dispute confirm the claim related to a delay to certification of the EWMP and L5/L6 Tables. “Enabling works” as defined in the contractual document referred to “activities necessary to make the Project site ready for the construction of the Project and are restricted to the activities described in condition NZTA.86”. The contract then detailed a substantial list of resource consent matters including tables L5 and L6 in the schedule. The L5/L6 tables were from the Erosion and Sediment Control Monitoring Plan prepared for the purposes of the resource consent.
[54] The contract made it clear that the obligation to prepare and submit the EWMP to the relevant Councils was on the requiring authority, NZTA.
[55] I infer from the information before the Court that the plaintiffs (through WGP) claimed for delays in the Project caused by alleged delays or default by NZTA in obtaining the necessary approvals and consents in a timely manner.
[56] In his reply Mr Ross suggested that the plaintiffs’ claim against the defendants was effectively for their time in relation to the preliminary work and other items which is effectively what they had been compensated for under the settlement with NZTA.
[57] However, the nature of the claims are different. The compensation paid by NZTA relating to the additional costs incurred by the plaintiffs as a consequence of the alleged delays in obtaining the necessary consents, was compensation for time actually lost in the physical building work on the Project itself during the delivery phase rather
than the difference in the cost involved in the pricing of the various design features provided by the defendants.
[58] Mr Ross submitted that the plaintiffs’ claims for cost overruns on the Project would inevitably overlap with the plaintiffs’ claims against the defendants. He suggested that the plaintiffs’ methodology of using the IFC designs developed by the defendants during the post-tender detailed design phase as representative of what the plaintiffs say the tender design should be (which led to a re-estimate of the tender price) confirms the plaintiffs were quantifying their loss by reference to what actually happened.
[59] The defendants also rely on the evidence of Mr David Andrews, a civil engineer engaged by them. He suggests that if the plaintiffs establish that the design joint venture should have provided a different tender design (which would have been accepted) then the Court will need to consider what impact any consenting delays settled with NZTA may have had on the construction programme which would have applied to any different design.
[60] However, that is not the case on the basis of the plaintiffs’ claim as pleaded. The plaintiffs’ claims as formulated refer back to the work the defendants did before the D&C contract was concluded. The plaintiffs’ claim is not pleaded on the basis of any actual costs incurred by them in delivering the Project as is confirmed in the affidavit of Mr Abbott, the plaintiffs’ expert. The plaintiffs’ claim was based on the IFC designs as a test for the corrected design concepts which the plaintiffs say should have been delivered by the defendants within the tender design. There has been full discovery of those issues.
[61] Further, notwithstanding the plaintiffs’ position on the relevance of the request, the plaintiffs have disclosed cost records (including actual costs incurred and projected costs to completion as at October 2019). Those documents include the project ledger, individual accounting transactions, individual cost code records and forecasted staffing costs. As Mr Bigio submitted, on that basis if the defendants wished to assert a connection with the delays associated with the consenting issues by reference to actual costs’ records the defendants had that information.
[62] The documents publicly released by NZTA confirm that the plaintiffs’ claims against NZTA related to issues that arose after the entry by the plaintiffs into the D&C contract. The reference to other “smaller disputes” must, in context, be a reference to other claims during the delivery phase as part of an overall resolution of all claims.
[63] There is a further reason why the settlements are not relevant. Under the contractual documents which have been disclosed there is no basis for the plaintiffs to have claimed against NZTA for failings on behalf of the defendants in their preliminary estimates. The only basis for a claim by the plaintiffs for compensation under the D&C contract arises from a breach by the principal, NZTA. As a matter of logic, NZTA would not pay compensation for losses attributable to the defendants’ actions.
[64] In the course of the written submissions the defendants referred to the rock scour issue. The defendants submit it is implicit that the plaintiffs encountered difficulties with the consenting process in relation to the rock scour issues. They note the plaintiffs’ claim is $12,147,828 in relation to rock scour design issues. However, I accept Mr Bigio’s submission that the relevant allegations in the amended statement of claim in relation to the rock scour design errors and rock scour failures to warn do not relate to consenting issues in respect of the EWMP or L5/L6 tables. It was NZTA that was responsible for obtaining the necessary consents. The plaintiffs would not be able to claim against NZTA for any alleged default by the defendants. As Mr Bigio also noted the defendants in their statement of defence (at [54]–[55]) allege such issues (as pleaded by the plaintiffs in relation to the rock scour issues) arose during the tender design stage and that any issues NZTA raised objections about occurred subsequent to the tender period.
Summary
[65] The issue for the Court is whether the Court should direct discovery to allay the suspicions of the defendant or whether it should take a strict approach to the application and decline it on the basis of relevance. While the final settlement document relating to the $190.6 million could be provided on a confidential basis to
counsel in the first instance to allay the defendants’ concerns, on a principled basis I cannot see any basis for the Court to direct its discovery.
Result
[66] For the above reasons the defendants’ application for the further tailored discovery orders is dismissed.
Costs
[67] The defendants are to pay the plaintiffs’ costs. This is a case where category 3 has been fixed as the appropriate scale. As it is an interlocutory application I make no award for second counsel and confirm the time allowance as category B. The defendants are to pay the plaintiffs’ costs on a 3B basis with disbursements as fixed by the Registrar.
Venning J
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