CPB Contractors Pty Limited v WSP New Zealand Limited
[2024] NZHC 640
•22 March 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-627
[2024] NZHC 640
BETWEEN CPB CONTRACTORS PTY LIMITED
Plaintiff
AND
WSP NEW ZEALAND LIMITED
Defendant
Hearing: 2 to 6 October, 10 October 2023 Appearances:
K Quinn and M Gillard for Plaintiff
AG Hazelton, M Holland and KE Weekly for Defendant
Judgment:
22 March 2024
Reissued:
8 April 2024
JUDGMENT OF JOHNSTONE J
This judgment was recalled and reissued by me on 8 April 2024 pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Simpson Grierson Auckland Hazelton Law, Wellington
CPB CONTRACTORS PTY LTD v WSP NZ LTD [2024] NZHC 640 [22 March 2024]
TABLE OF CONTENTS
Summary of findings and structure of judgment [6]
Chronology of tender, project award, and post-award dealings [8]
CPB looks at SCI Project [8]
CPB and WSP come together [10]
The first draft Tender Services Agreement [14]
CPB and WSP start working together [16]
Request for Proposal documents issued and reviewed [23]CPB and WSP continue work together [30] The second draft Tender Services Agreement – signed 14 April 2015 [35] Certificate A [39]
Tender Advice Notification (TAN) 057 [41] Post-TSA correspondence on scope of ‘detailed design services’ (for DSA) [42] Tender Advice Notification (TAN) 110 [49] Assumption concerning subgrade strength [54]
Re-drafting of TAN110 [56]
CPB’s tender [60]
Review of other tenderers’ designs [64]
CPB’s tender formally accepted [66]
WSP’s fee for tender design services [69]
Exploration of full depth asphalt alternative design [70]
Concern regarding “vertical elastic modulus” [73]
“Issued for Construction” designs [75]
Variations to scope of SCI Project [76]
SCI Project pavements constructed and invoiced (at a loss) [77]
Chronology and nature of CPB’s claim [79]
WSP’s Tender Pavement Review [79]
CIRCLY modelling [81]
EIC’s Pavement Design Review for CPB [87]
CPB’s original statement of claim [91]
CPB’s amended statement of claim [96]
WSP’s affirmative defence under the Limitation Act 2010 [101]WSP’s mainline CIRCLY modelling is discovered [102]
CPB’s second amended statement of claim [105]
Mr Bowman’s evidence that WSP’s pavement designs were
non-compliant with the PRs [107]
Did the Tender Services Agreement (TSA) between CPB and
WSP require WSP to provide tender designs that met the Principal’s
Requirements? [112]CPB’s position [112]
WSP’s position [116]Legal principles [123]
Analysis [127]
Conclusion [139]
How has CPB calculated its loss? [140]
The Bowman Design [141]
Delay estimation [144]
Price calculation [149]
Summary of loss calculation [152]
Is CPB’s loss calculation proper? [154]
CPB’s position [154]
WSP’s position [156]
Legal principles [163]
Costain [167]
“Cost of piling” [170]
Prolongation costs [176]
Additional construction costs [179]
Summary [181]
Van Oord [182]
Context for assessment of loss — CPB’s position upon
receipt of compliant tender design [185]The expert evidence [189]
No evidence of re-design costs being passed on [196]Bevan Investments [200]
Conclusion [209]
Is CPB’s claim caught by the exclusion clause? [210] WSP’s position [211]
Legal principles [213]
Analysis [214]
Summary [225]
Does WSP have a defence to CPB’s claim under the Limitation Act 2010? [226]
The Limitation Act 2010 [226]
WSP’s position [228]
CPB’s position [230]
Legal principles [232]
Did CPB’s amended statement of claim allege what amounted
to new causes of action? [237]Conclusion [241]
Post-script regarding late knowledge [242]
Result [245]
[1] In 2014, Waka Kotahi (the New Zealand Transport Agency) commenced the process of calling for tenders to design and construct an upgrade to State Highway 1, between Manukau and Papakura (the Southern Corridor Improvement (SCI) Project). The process included issuing documents setting out its design requirements (the Principal’s Requirements).
[2] The plaintiff (CPB) is a construction company. The defendant (WSP) provides engineering and professional services. WSP assisted CPB by providing designs and other information for CPB to submit as part of its tender. CPB’s tender, at a price of just less than $192 million, was successful.
[3] CPB proceeded to undertake construction of the SCI Project, WSP having further assisted by developing its tender designs to an “issued for construction” level of detail. CPB’s evidence is that, in completing the project, it suffered a financial loss.
[4] In this proceeding, CPB alleges a breach of contract, or alternatively negligence, on the part of WSP, in failing to provide CPB with tender designs of pavements and surfacing that met the Principal’s Requirements (PRs). CPB claims for loss that it says is appropriately quantified by reference to the larger price that it would have tendered had WSP not either breached the contract or acted negligently.
[5] WSP accepts that the tender pavement designs it provided did not meet the PRs. But it says:
(a)WSP was not obliged to provide CPB with compliant tender designs;
(b)CPB’s claim for loss is not calculated correctly: it does not address the cost consequences of compliant design;
(c)CPB’s claim is excluded by way of a contractual exclusion clause; and
(d)CPB’s claim is time-barred under the Limitation Act 2010.
Summary of findings and structure of judgment
[6]On each of these points, I find in favour of CPB.
[7] To explain that finding requires discussion of much of the background to CPB’s claim, and the way in which it has been particularised over time. I will:
(a)set out a broadly chronological account of the tender, the awarding of the SCI Project, and certain post-award dealings between CPB and WSP;
(b)set out the chronology and nature of CPB’s claim; and
(c)address the issues, explaining why:
(i)WSP was contractually obliged to provide compliant tender designs;
(ii)CPB calculated its loss correctly; and
(iii)CPB’s claim was neither excluded by the exclusion clause, nor time-barred.
Chronology of tender, project award, and post-award dealings
CPB looks at SCI Project
[8] From around 2006 to 2010, CPB (then named Leighton Contractors Pty Ltd) was the head contractor for the State Highway 20 Manukau Extension project in South Auckland. As part of its involvement in that project, CPB became aware from around late 2010 of Waka Kotahi’s desire to widen State Highway 1 immediately south of the SH20 and SH1 interchange. In addition, as a regular attendee at the Waka Kotahi Industry Liaison Group meetings, CPB received a presentation from Waka Kotahi about future projects. One of those projects was the SCI Project.
[9] CPB started to develop its approach to its SCI Project tender in July 2014. Steven Knowles, a civil engineer with experience in project management and motorway design and construction, including at CPB since 1994, was appointed as CPB’s Pre-Contracts Manager, responsible for co-ordinating resources in New Zealand including designers.
CPB and WSP come together
[10] Mr Knowles was aware that WSP (then Opus International Consultants Limited) was interested in working on the SCI Project, and would look to partner with a major construction contractor: either CPB or one of its competitors. A meeting between CPB and WSP was arranged.
[11] At that meeting, on 31 July 2014, WSP provided CPB with a written proposal, described as a Capability Statement, to provide design services in respect of the SCI Project. WSP’s Capability Statement addressed its understanding of the project and described its proposed team, their skill and experience. It also expressed WSP’s understanding that “successful Design & Construct projects are all about developing innovative solutions at the lowest cost which will meet the Principal’s requirements”.
[12] By 25 August 2014, WSP had executed the “confidentiality/exclusivity undertaking” that CPB had sought, indicating that the parties were minded to work together towards formal agreement over the services to be provided. Eventually, as appears to be customary, two agreements were entered: an agreement relating to the services to be provided at the tender stage (the Tender Services Agreement (TSA)); and an agreement relating to further services to be provided in the event CPB won the tender (the Design Services Agreement (DSA)). In August 2014, these agreements were contemplated but yet to be negotiated.
[13] On 1 September 2014, Waka Kotahi issued an advertisement on the Government Electronic Tenders Service seeking registrations of interest. With CPB having registered its interest on 25 September, Waka Kotahi advised on 20 October 2014 there was no shortlisting required for the tender.
The first draft Tender Services Agreement
[14] CPB sent WSP a draft TSA some time before 30 October 2014. On that date, WSP personnel indicated they were working through the draft. They requested a draft of CPB’s standard contract for what would become the DSA (assuming the CPB/WSP bid was successful). This was needed for WSP to complete its review, because the draft TSA provided that subject to agreement, the DSA would be in the form of CPB’s standard contract.
[15]The pre-30 October draft TSA contained the following clauses:
(a)Recitals clauses including the following:
D. [WSP] represents to [CPB] that it has the requisite skills, expertise, experience and resources to perform the Preliminary Services and, if necessary, to perform the Services.
E. In reliance upon the representations made by [WSP], [CPB] agrees to enter into this Agreement with [WSP].
(b)A definitions clause including the following:
Main Contract means a contract between [CPB] and the Principal (and which may include other parties) for the design and construction (and possibly other aspects) of the Project.
Preliminary Services means all services to be performed and obligations to be fulfilled by [WSP] in accordance with this Agreement, including any services described in Schedule 1.
Services means all services to be performed and obligations to be fulfilled by [WSP] in connection with the Main Contract if:
(a)[CPB] enters into the Main Contract; and
(b) the Parties enter into the [DSA]. (emphasis added)
(c)Clauses under the heading “2. Intent of the Parties” as follows:
2.1[WSP] agrees to associate and cooperate with [CPB] and, to the extent required by [CPB] and relevant to [WSP]’s expertise:
(a)…
(b)provide design services relevant to the Tender and otherwise assist [CPB] with other things reasonably necessary in connection with the Tender so as to derive economical solutions and maximise [CPB]’s chance of being awarded the Main Contract in accordance with [CPB]'s preferred construction methodologies and practices.
2.2[WSP] warrants that it has and will provide the requisite professional skill, expertise, experience and resources necessary to perform the Preliminary Services and, if relevant, the Services.
2.3 …
2.4[WSP] acknowledges and agrees that [CPB] has entered into this Agreement in reliance on [WSP]'s warranty and representations stated in this clause 2.
(emphasis added)
(d)Schedule 1, headed “Preliminary Services Scope” including:
1. General
The services and obligations described in this Schedule 1 are in addition to the services and obligations of [WSP] described elsewhere in this Agreement.
2. Design Services
The Preliminary Services include civil engineering design services necessary for [CPB] to submit or assist with the submission of any EOI and to submit the Tender. These include:
(a) roading
(b) pavement
(c) geotechnical; and
(d) structural design. (emphasis added)
CPB and WSP start working together
[16]Tender design work commenced while the TSA remained under negotiation.
[17] On 5 December 2014, a “pre-bid workshop” was held involving WSP and CPB staff. Notes were circulated following the workshop, under two headings: “strategy
to win” and “competitor assessment”. The “project specific themes” of the strategy included reference to “[u]nderstand[ing] Contract and Principal’s Requirements”.
[18] On 12 December 2014, Mr Knowles sent WSP a template for the form in which CPB sought that WSP would convey its design advice to CPB. The form described itself as a “Tender Advice Notification” (TAN). TANs are a regular feature of industry practice. The essence of WSP’s work for CPB during the tender phase in the first half of 2015 saw it providing TANs, colloquially referred to as “pricing packs”, intended to enable CPB to price its tender on the basis of WSP’s designs. TANs were generally issued in a series of up to four steps ranging from “Initial” to “Final Issue”.
[19]The final page of CPB’s template contained the following:
[20] Ken Boam, a civil engineer with extensive experience in designing and directing projects, and in team leadership and management, was appointed as WSP’s Design Manager for the SCI Project in January 2015. Mr Boam was in the habit of keeping a journal. His journal indicates that, by 28 January 2015, it had become his task, amongst others, to progress WSP’s agreement(s) with CPB over design services.
[21] On 29 January 2015, Mr Boam made journal notes confirming that WSP’s “agreement(s)” with CPB were to be comprised of two aspects, the agreement for the “preliminary services” relating to the tender (what became the TSA), and the
“services” agreement related to services “post award” (the DSA). Mr Boam’s journal entries indicate that he undertook a detailed review of the draft TSA on that day. In relation to the clauses of the draft TSA set out at [15], Mr Boam noted:
(a)in respect of clause 2.1, that he considered the phrase “to the extent required by [CPB]” to require definition; and
(b)in respect of Schedule 1, that clause 1 was “ok providing 2.1 dealt with”, and that clause 2 should have the phrase “civil engineering” deleted and the disciplines “environmental” and “urban design” added.
[22] Mr Boam’s evidence before me confirmed that his interest in these aspects was to ensure that the extent of WSP’s work for CPB be properly defined. Mr Boam also noted in his journal, under the heading “needing to be covered somewhere”, the topics “Limit of Liability”, “Obligation to award Services on award”. and “Success Fee”, amongst others. A note purportedly of a conversation with Mr Knowles at around 2:30 pm on 29 January 2015 records that Mr Boam asked to meet Mr Knowles to discuss the agreement(s) between WSP and CPB “ASAP next week”.
Request for Proposal documents issued and reviewed
[23] On Friday, 30 January 2015, Waka Kotahi issued the Request for Proposal (RFP) documentation for the SCI Project, including its Instructions for Tendering (IFTs) and the bulk of its PRs, on a series of USB memory drives. CPB downloaded these files onto CPB’s servers. As the files were too large to attach to an email (they included detailed information, such as drawings and reports), Mr Knowles provided the USB memory drives to WSP so they could be uploaded to the WSP network.
[24] Clause 1.17.6 of the IFTs instructed that “(t)he Conceptual Design shall comply with the Principal’s Requirements”. By express incorporation of the definition set out in the PRs, the Conceptual Design was defined as the “Drawings, Specifications and other related documents forming part of the Contractor’s tender submission.”
[25] Part 5 of the IFTs addressed departures from standards or requirements of Waka Kotahi’s tender documents. Waka Kotahi instructed that it would consider such
departures provided they did not change the project’s scope. It instructed that departures “shall be submitted in a Departure Request form, available from [Waka Kotahi] on request”, and that tenderers were to submit a “Departure Report”.
[26] The IFTs also instructed each tenderer to provide a “Preliminary Conceptual Design”, described as “Certificate A”. Waka Kotahi instructed that it would respond to each tenderer’s Certificate A, noting possible non-compliance or general concerns “on an information only basis”.
[27] A note in Mr Boam’s journal indicates that he began his review of the PRs set out in the RFP documentation prior to 5 pm on 30 January 2015. Five pages of notes in Mr Boam’s journal under the heading “PRs” describe his more detailed review of the PRs, commencing shortly after 6 am on Sunday, 1 February 2015. When asked in cross-examination whether when doing so he was planning to meet his lead designers to get their feedback on what they thought of the PRs, Mr Boam agreed, and said:
Might it be helpful for me to elaborate on why I did all of this and it was really for me as design manager to understand what was in the PRs. I mean I can't lead a team if I don’t know what the rules of the game are, so this was for my information and then the design leads would refer to their particular PRs and design accordingly.
[28] A note in Mr Boam’s journal dated 2 February describes the structure of the Referral for Tender documents, comprised of Waka Kotahi’s IFTs and the PRs, amongst others. The note sets out Mr Boam’s list of key dates, identifiable by reference to the IFTs, including those for the Departure Report (10 April), for Certificate A (13 April), and for submission of the tender itself (2 June).
[29] Also on 2 February 2015, Mr Boam emailed members of WSP’s tender design team, copying in Mr Knowles, advising that Waka Kotahi’s RFP documents were available. He observed that:
There is a lot of documentation, but the key technical documents, comprised of the Principal’s Requirements and appendices, are in [an identified, electronic] folder. Some reference material and drawings are in [another folder]. Please don’t be distracted by the other documents, Steven Knowles and myself will be managing them.
CPB and WSP continue work together
[30] From around this time, Mr Knowles and at least one other CPB employee were based with Mr Boam and his design team at WSP’s office in Manukau. On occasion, Mr Knowles and Mr Boam attended meetings together with Waka Kotahi. At trial, there was a difference of opinion between Mr Knowles and Mr Boam over the extent to which CPB contributed to development of the tender design. Mr Boam’s view was that CPB played a passive role during the tender stage, receiving TANs and undertaking pricing at its head office in Sydney.
[31] Appendix A09 of the PRs, dealing with pavement and surfacing, were not issued until 3 March 2015. Mr Knowles received Appendix A09 and provided it to Mr Boam that day. Waka Kotahi proceeded to issue a series of revisions to Appendix A09, each of which Mr Knowles forwarded on to Mr Boam either upon receipt or the following day.
[32] I return to specific aspects of Appendix A09 below. But here I observe that the first substantive clause of Appendix A09 (clause A9.1.1) required pavement design and construction to comply with the requirements of the Austroads Guide to Pavement Technology (AGPT02-12) as modified by the NZTA supplement (2007), and all relevant NZTA standards, specifications and guidelines. Austroads is the Association of the Australian and New Zealand transport agencies.
[33] Minutes of a design governance meeting at the Manukau office on 4 March 2015, at which Mr Knowles and Mr Boam were present, confirm that the “pavement PRs” had just been issued and were still being reviewed. There were “(n)o other technical issues”. Team culture was described as involving “good team interaction and spirit”, with “team briefs held every Monday”. The TSA was largely agreed, and Mr Knowles had issued a draft DSA for comments from WSP. The draft DSA would require further consideration after Waka Kotahi had provided its response to CPB’s Certificate A. As Mr Boam wrote in his brief of evidence:
Everyone was clear that the TSA was to cover the design work for CPB to make use of in its tender to NZTA. If CPB was successful, then a DSA was to be entered into to cover the detailed design.
[34] On 24 March 2015, WSP’s lead pavement designer, Michael Haydon, emailed Mr Knowles and another CPB employee, copying Mr Boam and an employee of CPB’s pavement subcontractor, Higgins Contractors Limited. Mr Haydon wrote that the “preferred pavement type” is “non-complying with the PR(s)… in respect of the asphalt thickness require(d)”. Mr Haydon observed that “we are preparing a departure to go below 175mm”. This departure request was made the next day. It was declined by Waka Kotahi’s advisor on 3 April 2015.
The second draft Tender Services Agreement – signed 14 April 2015
[35] Also on 24 March 2015, following a discussion that day with Mr Boam about the TSA, Mr Knowles sent him a further draft. The clauses set out at [15] above were unchanged, except that the list of “design services” at clause 2 of Schedule 1 was no longer confined to “civil engineering” design services, but expanded to include “environmental” and “urban design and landscaping” design services.
[36]Reflecting Mr Boam’s other concerns described at [21]–[22] above:
(a)a new clause 15.15, headed “Limitations on Liability” was added; and
(b)Schedule 2, dealing with WSP’s fee, was substantially developed including:
(i)new clauses under the heading “2. Tender Budget and Tender Costs”, including:
2.1 The parties shall agree a detailed description of the scope of the services that will form the Preliminary Services to be undertaken within the estimated Tender Cost.
(ii)and provision made for CPB to pay WSP a success fee if awarded the Main Contract.
[37] This was substantially the form in which the TSA was signed for both CPB and WSP on 14 April 2015. Despite the new clause 2.1 of Schedule 2 (see [36](b)(i)), it was common ground in the evidence at trial that no detailed description of the scope of services forming the Preliminary Services was ever agreed.
[38]At the point the TSA was signed, the draft DSA remained under negotiation.
Certificate A
[39] In the meantime, CPB submitted its Certificate A as required on 13 March 2015. The certificate was branded with the logos of both CPB (then Leighton) and WSP (then Opus). The inside front cover bore Mr Boam’s signature, under the words “Approved for Issue”, and above his description as “Design Manager”. The following was stated in the introduction:
Our preliminary conceptual design is predicated in part on Departures from the Principal’s Requirements. … Our approach is to assume these requests will be granted while recognising that some changes to our concepts will be required if this is not the case.
Meeting the Principal’s expectations is intrinsic to our preliminary conceptual design. …
[40] The introduction, and subsequent sections of the certificate, proceeded to describe the various aspects of the conceptual design, repeatedly highlighting its compliance with the PRs, but also identifying several aspects, such as those relating to drainage and bridges, where departures had been requested and either granted or were under consideration by Waka Kotahi. In respect of “Pavements and Surfacing”, the certificate stated:
8.5 Design Standards and Guidelines
The design approach followed for this conceptual design is in accordance with the Principal’s Requirements and the following documents:
AGPT02-12 Austroads Guide to Pavement Technology Part 2: Pavement Structural Design
2007 New Zealand Supplement to the 2004 Austroads Guide
NZTA Standard Specifications (as provided in Cl. A9.1.1).
Tender Advice Notification (TAN) 057
[41] On 23 April 2015, WSP provided CPB with a Tender Advice Notification labelled TAN057. It contained a preliminary design relating to pavements and surfacing. It described its status as “Initial Issue”, and its purpose as “For Pricing”.
Post-TSA correspondence on scope of ‘detailed design services’ (for DSA)
[42] On 17 May 2015, Mr Boam emailed Mr Knowles and another CPB employee, Greg Edwards, attaching a “draft copy of the scope of detailed design services for [their] review and discussion”. That document referred to various stages of completeness as applicable to certain aspects of the project, albeit not pavements: a “design philosophy (30%)” stage, a “design freeze (50%)” stage, and final design stages such as the “Issued for Construction (IFC)” stage. And it included the following passage:
For all disciplines it has been assumed the Detailed Design will develop the same concepts shown in the Tender Design and that no revisiting or innovation of the Tender Design Concepts are required. It has also been assumed that Design Development, including construction input will be complete by the 50% stage, following this no further Design Development will be undertaken.
[43] Under the heading “exclusions”, the same document noted that “it [is] incumbent on the design team to inform [CPB] of any non-compliance with the PR’s or specifications prior to agreeing the design freeze”.
[44] Mr Edwards responded by email dated 19 May 2015. His response included the following:
No Optimisation from Tender design prior to design freeze at 50%?/ Don’t understand this concept from (WSP) as we should have the opportunity to Optimise design up to the Freeze point as well as ensuring we have the correct design based on NZTA scope.
[45] Mr Boam in his evidence also reported various discussions around this time with CPB personnel, including intensive scrutiny on the part of Mr Edwards, about WSP’s proposed fee for the detailed design services to be contracted under the DSA, should CPB’s tender be successful. These discussions appeared to have been resolved when Mr Edwards responded to a further fee proposal made by email on 27 May 2015, observing this was “a good outcome”.
[46] The Design Services Agreement (DSA) between CPB and WSP was not formally entered until much later. On 2 March 2016, Peter Wiles of WSP prompted Mr Knowles for a response to proposed amendments. Mr Knowles responded by sending a version discussed earlier, referring to a list of exclusions that had been
discussed, and adding “the design scope is the Principal’s Requirements with the exclusions listed (as discussed) the only areas of the design that are not completed by (WSP)”.
[47] The DSA was eventually signed on 1 July 2016. Amongst other things, it described the “Services” to be provided by WSP, at Annexure C, as follows:
The Services include engineering design work required for the development and refinement of the tender design concepts in accordance with the Principals Requirements for the following elements of the Main Contract Works. Each of the design outputs listed below will be issued three times at an appropriate level of detail:
- 50% stage for review by [CPB]
- 85% stage for external review
- For Construction.
[48] The extensive list of “design outputs” that were described in following pages included “pavements and surfacing”.
Tender Advice Notification (TAN) 110
[49] On 20 May 2015, WSP provided CPB with TAN110, its “Motorway Pavement and Surfacing Final Pricing Package”, superseding TAN057. It described its status as “Final Draft”, and its purpose as “Final Pricing”. As might be expected, it is a dense document, replete with highly technical information. Amongst other things, it provided a design of the pavement and surfacing of the mainline motorway, by reference to the following diagram:
[50] Similar diagrams, depicting the same order and composition of layers but with varying thicknesses, were provided for pavement and surfacing of the on- and off- ramps, and the local roads (parts of Great South Road and Spartan Road), which formed the balance of the SCI Project.
[51] TAN110 explained the pavement model that had been used in developing the design, by reference to the PRs. Referring to the fourth version of the PRs (issued on 7 May 2015) set out in Appendix A09, it observed that clause A9.2.2(b) specified that “heavy duty structural asphalt” pavements were to be formed and comprised of a minimum thickness of structural asphalt over a minimum thicknesses of either:
(a)cement stabilised granular material; or
(b)unbound or granular material (which might have small quantities of binders added while still maintaining the properties of unbound granular material).
[52] The “option to price” (that is, the pavement model) adopted by TAN110 was the latter. The mainline pavement design was thus to be formed by:
(a)structural asphalt, comprised of:
(i)the surface (Epoxy Modified Open Graded Porous Asphalt (EMOGPA)) layer; and
(ii)intermediate (Asphalt Concrete with 20 mm aggregate (AC20) and High Bitumen Asphalt Concrete with 14 mm aggregate (AC14HB)) layers; over
(b)unbound or granular material, comprised of a cement modified base layer, an unbound subbase layer, and a subgrade improvement layer (SIL).
[53] The description of the “cement modified base layer” as such might require clarification: this layer was not to be so heavily modified by cement as to amount to a
cement stabilised layer. Instead, it was regarded as a layer of “unbound or granular” materials, with the relatively small quantity of cement to be added, maintaining its properties as such, in line with the qualification noted at [51](b) above.
Assumption concerning subgrade strength
[54] The California Bearing Ratio (CBR) of the subgrade over which a pavement is built is a measure of that subgrade’s strength. WSP regarded the PRs to require a CBR testing method which understated the SCI Project’s in situ subgrade. The significance was that the stronger the assumed subgrade, the lesser the required thicknesses of pavement layers.
[55] TAN110 noted that the PRs limited the subgrade CBR allowed in design to a range of 3.5 to 5 per cent, and that a departure from this requirement had been sought but declined. TAN110 further noted that WSP would try to have the required testing method changed in the event of a successful tender, but that “there [was] a risk that the PRs will prevail forcing a design requiring sub-grade improvement”.
Re-drafting of TAN110
[56] WSP had made the departure request concerning subgrade CBR on 13 May 2015. The response on behalf of Waka Kotahi declining the departure request was received only on 18 May 2015, two days prior to TAN110 being issued.
[57] These late developments required WSP to amend a draft of TAN110 which had been prepared anticipating approval of the CBR departure request. The attestation section of the draft of TAN110, which Mr Haydon had signed while the document remained in draft,1 accordingly contained a reference to WSP’s “pending departure”, as follows:
1 The draft did not, for example, yet include any diagrams of the type shown at [49].
Compliance with Tender Requirements / Approved Standards (select one) ☑ This advice complies with the Tender Requirements and approved standards – subject to agreement to our pending departure regarding method of test for subgrade CBR.
□ This advice DOES NOT fully comply with the tender requirements / approved standards in the following way:
Prepared by: Michael Haydon Signed [Redacted]
Design Manager Approval: Ken Boam
Signed
Reviewed by: Signed
[58] When TAN110 was amended to account for the CBR departure being declined, there was no change made to the above attestation, except that Mr Boam added his signature before TAN110 was issued to CPB.
[59] Despite this potential source of confusion, it is clear that WSP professed that the version of TAN110 that was issued to CPB on 20 May 2015 specified designs that complied with the PRs, including in respect of subgrade CBR:
(a)As with the draft attestation, the second of the two options was left unchecked.
(b)As noted at [55], TAN110 commenced by noting that WSP’s CBR departure had been declined. The upshot was that, for the time being, TAN110 specified construction of a 200 millimetre subgrade improvement layer (as can be seen in the diagram at [49]), for all roading sections.
(c)Further, TAN110 contained the following advice:
(d)Mr Boam sent CPB a follow-up email within minutes of TAN110 being issued, referring to the CBR departure request having been declined, and adding:
While we will try again post award to get common sense to prevail the implications if we don’t succeed is that sub-grade improvement will be required. The attached TAN 110 provides information for you to make an appropriate allowance for this contingency.
(e)And Mr Boam’s evidence at trial was that:
[A]t the conclusion of the tender it was firmly my belief that we had produced a design that met the PRs and that stood the best chance of being part of a winning tender. It was up to CPB to decide how it priced the job and the risks attendant with that including taking account of the information that it had and knowing that substantial design work remained to be undertaken.
CPB’s tender
[60] CPB used the tender pavement designs set out in TAN110 as inputs for its price estimating software, known as CATS (computer aided tendering system). Other inputs included the prices of materials to be provided by CPB’s pavements subcontractor, Higgins Contractors, the road’s geometric design (and thus the quantities of materials required), and the other costs of installation. This process generated an overall estimate of cost to CPB of installing the SCI Project’s pavements.
[61] This cost was collated with the project’s other estimated costs. CPB then allowed for contingency in its pricing, including in relation to pavements, by setting out its analysis of risk and opportunities arising from the likelihood of there being a variance between the circumstances assumed for the purpose of the tender and the
actual circumstances yet to be experienced. The risk and opportunities schedule, provided internally to CPB’s managing director as part of a package of documents so that he might authorise its proposed tender, allocated a contingency of $2,650,000 as the “most likely” value of the “100%” probability of “design growth/scope growth”.
[62] On 2 June 2015, CPB submitted its tender to Waka Kotahi, stating a tender price of $190,845,111.61, excluding GST. In doing so, it allowed a total of
$24,231,351 for works relating to construction of the pavement of the motorway and other roads.
[63] On 20 July 2015, CPB was nominated as the preferred tenderer, which permitted exclusive discussions between CPB and Waka Kotahi to resolve certain aspects, unrelated to pavements, by increasing the tender price by $1,000,000.
Review of other tenderers’ designs
[64] In accordance with the agreed rules of the tender, CPB as preferred tenderer received the estimate of Waka Kotahi’s own engineer, together with the tender designs that had been submitted by the other three tenderers. CPB requested WSP to review the others’ tender designs. Mr Boam explained to his team by email dated 29 July 2015 that:
… [CPB] is reviewing whether they have missed anything in their pricing which has given them a tender price significantly less than the Engineer’s estimate. Their review of the other tenderer’s designs is they are generally more conservative than ours, e.g. thicker pavements, more piling, etc. which gives them some confidence they are in the right ballpark, but want to double check they have got everything covered.
[65] Mr Boam’s journal records that he met Mr Knowles and others involved in the design process on 30 July 2015, and that, in respect of pavements, those present observed that the CPB/WSP design provided for a lesser thickness of asphalt. Other tenderers were “using full depth in lieu of in-situ stabilisation”. Mr Boam’s recollection given in evidence was that nothing significant regarding pavements was found. Mr Knowles’ overall summary was recorded as being that he “[did]n’t see anything we have missed”.
CPB’s tender formally accepted
[66] On 12 August 2015, Waka Kotahi issued its formal acceptance notice to CPB, confirming its tender price of $191,845.111.61, excluding GST. Again in accordance with the tender rules, Waka Kotahi provided CPB with pricing information relating to the other, unsuccessful tenders, including that the next lowest tender price was more than $67,500,000 higher.
[67] The acceptance notice indicated that, in deciding to award the SCI Project to CPB, the grading process for tender had identified a “supplier quality premium”, informed by non-price grades afforded to each tender by virtue of the experience and skills of each contractor and designer, and the methodology employed by each tender. The experience and skills of CPB as contractor and WSP as designer, and their methodology, were such that their tender had not been afforded a quality/non-price premium. However, the maximum quality/non-price premium was stated as
$16,720,000.
[68] I take from this that CPB’s tender could have been up to around $50,000,000 higher, and would likely still have been accepted.
WSP’s fee for tender design services
[69] Mr Boam stated in evidence that WSP charged CPB a total of $1,780,148 for the preliminary services it provided under the Tender Services Agreement, excluding its success fee and win bonus. The spreadsheet he cited in support of that evidence provides the following breakdown: $1,087,133.93 for the submission of Certificate A; and $693,013.61 for WSP’s “remaining services”. I understand these figures exclude GST.
Exploration of full depth asphalt alternative design
[70] After CPB was awarded the SCI Project, work re-commenced as had been contemplated, with WSP developing more detailed designs. Part of this work included investigation into whether the “deep asphalt” pavement option that an unsuccessful tenderer had proposed might offer cost benefits to CPB.
[71] By 6 January 2016, CPB had advised WSP that its preference was to proceed with a deep asphalt design, rather than the design it had tendered. At the end of April 2016, WSP reported to CPB on the three deep asphalt models it had developed for the mainline. In doing so, it summarised the design phases that had occurred to date. And it observed that “at the time of tender, [WSP] prepared, under direction/agreement, the most economic, effective, pavement design to meet the Principal’s Requirements”.
[72] By the end of May 2016, CPB had reviewed the cost implications of WSP’s deep asphalt designs. By email dated 29 May 2016, CPB advised WSP to “go back to the tender design as soon as we can”.
Concern regarding “vertical elastic modulus”
[73] By the end of September 2016, CPB’s “design checker” (Bartley Consultants Ltd) had identified a concern related to the tender design. For the purpose of its design calculations, WSP had adopted a “vertical elastic modulus” for the modified base layer of 750 megapascals (MPa), it appears in reliance on clause A.9.3.5(c) of Appendix A09 (the PRs relating to pavements and surfacing). This modulus is a measure of the stiffness of an elastic layer such as the modified base layer specified in the tender design. Clause A.9.3.5(c) is stated to apply only to “granular pavements”, not to the “heavy duty structural asphalt” pavements that the SCI Project required. The checker’s view was that the figure adopted should not have exceeded 210 MPa, a figure specified in Austroads’ Guide to Pavement Technology.
[74] WSP suggested to CPB that the issue should be raised with Waka Kotahi’s principal advisor. Following a meeting on 18 October 2016, the advisor accepted that clause A9.3.5(c) was intended to apply, so as to “limit the maximum strength of the modified material to a maximum of 750 MPa”.
“Issued for Construction” designs
[75] WSP completed its designs and issued its IFC (Issued for Construction) Design Report on 31 July 2017.
Variations to scope of SCI Project
[76] Also following the award of the SCI Project to CPB, in the period from late 2015 to 2017, Waka Kotahi agreed on two substantial variations to the project’s scope:
(a)The first variation related to the Takanini interchange, which had been designed as diamond-shaped. The variation provided for the northbound on-ramp to maintain its original loop shape. Waka Kotahi agreed to pay an additional $28,059,560 for this variation, and to extend completion by 317 days.
(b)The other substantial variation involved replacing, rather than widening, two motorway bridges due to structural problems identified during investigative works. Waka Kotahi agreed to pay an additional
$17,450,000 for this variation, there being no agreed time extension.
SCI Project pavements constructed and invoiced (at a loss)
[77] As might be expected, construction by CPB of the SCI Project’s pavements and surfacing in accordance with WSP’s IFC design took time. By 30 November 2019, CPB had invoiced for the entire sum of $24,231,351, excluding GST, which it had allowed for that work.
[78]Mr Knowles’ evidence was that:
(a)CPB incurred an overall loss on the SCI Project in the order of
$42 million; and
(b)in constructing the project’s pavements, CPB actually spent around
$12 to $15 million more for that work than it had allowed, excluding variations and cost fluctuations for the purpose of proper comparison.
Chronology and nature of CPB’s claim
WSP’s Tender Pavement Review
[79] Concern about the scale of pavement construction costs was raised with WSP in early 2019. In response, WSP issued CPB with a memorandum headed “Tender Pavement Review” dated 1 April 2019. In the introduction to that memorandum, WSP asserted:
In respect to the pavement design, [WSP] produced a compliant tender design to the Principal’s Requirements, limited tender data available, instructions from CPB on preferred options based upon CPB’s inputs of constructability, value and risk, plus asphalt mix design information provided by Higgins Contractors Limited, who were also engaged by CPB during the tender phase.
[80] However, WSP’s memorandum made other observations which captured CPB’s attention:
(a)It indicated that the 200 millimetre subgrade improvement layers specified in each of the TAN110 pavement designs were modelled on the basis they would generate a CBR of 15 per cent.
(b)It confirmed a matter discussed at a meeting on 20 March 2019: WSP had been unable to locate the CIRCLY models it had produced when generating the TAN110 designs.
CIRCLY modelling
[81]An introduction to CIRCLY modelling is required.
[82] CIRCLY is elastic layer analysis software. It was developed by MINCAD Systems Pty Ltd, of Melbourne, Australia, and has been in widespread use since 1988, both in Australia and overseas. CIRCLY adopts a mechanistic approach to flexible pavement design, using a mathematical model with inputs of engineering properties and outputs derived from material performance data. Pavement design was previously empirically based.
[83] The evolution of the CIRCLY software has been heavily linked to the development of the Austroads flexible pavement design method. CIRCLY was officially adopted for flexible pavement design by Austroads in 1987. As noted at [32], the PRs (at Appendix A09) required the tender pavement design to comply with the Austroads Guide to Pavement Technology (AGPT02-12) as modified by the NZTA supplement (2007), and all relevant NZTA standards, specifications and guidelines.
[84] CIRCLY’s mechanistic design method involves a calculation of pavement damage, using an empirical equation
where N is the predicted life (repetitions of ε), k is a constant reflective of the material being used, b is the damage exponent of the material, and ε is the load-induced strain. The parameters k and b are determined by calibrating the design method against observed performance of test pavements or of pavements in service.
[85] CIRCLY further adopts the concept of a Cumulative Damage Factor (CDF) as the primary means of presenting results. The CDF is the outcome of a calculation that takes account of pavement damage against traffic loadings and the pavement’s desired (design) life. The pavement being modelled is presumed to reach its design life when the CDF reaches 1.0. If the CDF is less than or equal to 1.0, the pavement has sufficient capacity, and the CDF value represents the proportion of pavement life consumed by the anticipated traffic loading. Conversely, if the CDF is greater than 1.0, the pavement is deemed to be unacceptable and must be modified in the next trial so that the deficiency is overcome. This might mean, for example, an increase in pavement thickness or a modification to pavement material stiffness. The process is repeated iteratively until a satisfactory result is achieved.
[86] The CIRCLY model for a particular pavement design records the full suite of assumed engineering property inputs used in respect of each pavement layer, including the subgrade, and identifies outputs so as to generate an identified CDF for each layer.
EIC’s Pavement Design Review for CPB
[87] CPB commissioned an external consultant, David Barker of EIC Activities Pty Ltd, to review WSP’s tender designs. EIC’s Pavement Design Review dated 4 April 2019 identified various deficiencies.
[88] First, EIC observed that TAN110 did not specify the design parameters WSP had used, and that WSP did not provide its CIRCLY models when issuing TAN110. EIC therefore could not repeat WSP’s pavement design calculations with absolute certainty. However, WSP’s Tender Pavement Review of 1 April 2019 had provided sufficient information for EIC to reproduce WSP’s tender design calculations with some confidence. EIC’s Pavement Design Review of 4 April 2019 therefore commenced by setting out EIC’s back-calculation of the pavement profiles, parameters, and modelling that it expected WSP to have adopted when generating its tender designs. This back-calculation was set out in tabular form as follows:
[89] As can be seen, EIC’s back-calculation worked backwards from the CDF values stated in WSP’s Tender Pavement Review dated 1 April 2019, and gave rise to concern that WSP had adopted incorrect performance constants for each of the AC20 and AC14 intermediate pavement layers.
[90] However, EIC’s review then proceeded on the basis that “[i]f we ignore concerns we have with the AC20 and AC14 performance constant values” there were two significant issues with the WSP tender designs:
(a)First, EIC observed that the calculations did not seem to allow for design tolerance adjustments required by clause A9.3.1(b) for the “critical” AC14 layer, and by clause A9.3.4(a) for the EMOGPA layer.
(b)Second, EIC asserted that the “stiffness modulus/CBR” of 15 per cent adopted for what it described as the “infinite”, “modified subgrade” layer, did not comply with Appendix A09.
CPB’s original statement of claim
[91] On 13 April 2021, CPB filed its statement of claim, just over one month short of six years from when WSP issued TAN110 on 20 May 2015.
[92] CPB’s statement of claim set out a first cause of action, for breach of contract, and a second cause of action in negligence, founded upon alleged deficiencies in WSP’s tender design. At paragraph 12, the first cause of action alleged non-compliance as follows:
12.[WSP’s] Tender Pavement Design did not comply with the Principal’s Requirements including (but not limited to) in the following respects:
Particulars
12.1Appendix A09 of the Principal’s Requirements set out the requirements for pavement and subsurfacing. [CPB] relies on the Principal’s Requirements as if set out here in full.
12.2Clause A9.3.3 of Appendix A09 specified, among other things, that:
(a)The in situ subgrade layers are to be assumed to be infinite thickness in the pavement design; and
(b)The California Bearing Ratio (CBR) value for in situ sub-grades is to be limited in the pavement design to a maximum of 5% CBR.
12.3In breach of the requirements of Appendix A09 [WSP’s] Tender Pavement Design assumed a CBR value of 15% for
the in-situ subgrade layer, and applied that CBR value for the infinite subgrade layer.
12.4[WSP’s] breach of the requirements of Appendix A09 resulted in the Tender Pavement Design being too thin to comply with the Principal’s Requirements.
[93] At paragraph 19, the second cause of action alleged non-compliance, not with “the Principal’s Requirements”, but with “the technical and design requirements of the Project”. In all other respects, the alleged breach in negligence was substantively identical to the alleged breach of contract, including the entirety of the stated particulars.
[94] As can be seen, the alleged non-compliance was expressed to “include” but not be “limited to” non-compliance of the design assumption made relating to “in situ subgrade layers” (the ground upon which the SCI Project’s pavement layers were to be constructed).
[95] In each case, the statement of claim pleaded that CPB suffered loss as a consequence of the design deficiency. That loss was alleged to be the cost of increasing the thickness of the constructed pavement in order to achieve compliance with the Principal’s Requirements.
CPB’s amended statement of claim
[96]CPB filed an amended statement of claim dated 10 June 2022.
[97] CPB’s amended statement of claim sought to add a third cause of action, relating to WSP’s “issued for construction” (IFC) design, but that cause of action was later abandoned.
[98] CPB’s first and second causes of action were structured in substantially the same way as its original statement of claim, alleging non-compliance of WSP’s tender pavement design with the PRs, and with the technical and design requirements of the SCI Project. But the particulars of the way in which the design failed to comply were amended:
(a)Reference to the design assuming a CBR for in situ subgrades of 15 per cent rather than five per cent, and in that way failing to comply with clause A9.3.3, was removed.
(b)Reference to the design failing to comply, in various respects, with clauses A9.3.1(a) and (b), A9.3.4, and A9.2.2 and A9.3.5 (in combination), and (therefore) A9.2.3(a), was added.
[99] The detail of the various modes of non-compliance that were added is explored below. At this stage, I observe only that they relate to the design of the pavement layers to be constructed over the “in situ subgrade”. The allegation that WSP had assumed a stronger subgrade than it should was accordingly, by means of CPB’s amended statement of claim, withdrawn.
[100] Again, the first and second causes of action pleaded that CPB suffered loss as a consequence of the design deficiency. However, that loss was no longer alleged to be the cost of increasing the thickness of the constructed pavement to achieve compliance with the Principal’s Requirements. Instead, the loss was alleged to be the difference between the price CPB would have tendered, on the basis of compliant tender designs, and the price that it did tender (and which Waka Kotahi accepted).
WSP’s affirmative defence under the Limitation Act 2010
[101] WSP filed a statement of defence dated 1 July 2022 to CPB’s amended statement of claim, affirmatively pleading that CPB’s first and second causes of action as set out in that document were time-barred under s 10(1) of the Limitation Act 2010.
WSP’s mainline CIRCLY modelling is discovered
[102] By letter dated 26 November 2021, WSP’s solicitors provided CPB’s solicitors with a copy of the CIRCLY output model said to have been created during 13 to 20 May 2015 and used in WSP’s mainline carriageway tender design. WSP’s earlier position, that none of the CIRCLY modelling for any of WSP’s tender designs could be located, had proved to be incorrect. Nevertheless, the CIRCLY modelling for the
on- and off-ramp and local road, pavement designs, remained (and remains) outstanding.
[103] Notably, the mainline carriageway CIRCLY modelling discovered in November 2021 assumed engineering inputs as follows:
(a)for the EMOGPA surface layer, a thickness of 30 millimetres;
(b)for the AC20 intermediate layer, a thickness of 85 millimetres;
(c)for the AC14HB intermediate layer, a performance constant of 0.005043;
(d)for the cement modified layer, a vertical elastic modulus of 750 megapascals; and
(e)for the subgrade, a CBR of 5 per cent.
[104] The model generated a Cumulative Damage Factor for the AC14HB layer of 0.98, indicating the pavement’s design life would exceed 25 years.
CPB’s second amended statement of claim
[105] CPB’s second amended statement of claim dated 17 March 2023 abandoned the third cause of action, relating to WSP’s “issued for construction” design, set out in the amended statement of claim.
[106] The particulars set out in relation to CPB’s first and second causes of action, describing the way in which the design failed to comply with the PRs, were unchanged.
Mr Bowman’s evidence that WSP’s pavement designs were non-compliant with the PRs
[107] As stated above, CPB’s original and amended statements of claim alleged that WSP’s tender pavement designs set out in TAN110 failed to comply with the PRs in various respects. WSP’s statements of defence largely denied these allegations.
[108] Accordingly, CPB called expert evidence from Allan Bowman, an experienced consultant pavement engineer, setting out the basis for his opinion that WSP’s mainline, ramp and local road tender pavement designs did not comply with the PRs.
[109] In the course of Mr Hazelton’s opening submissions for WSP, made after CPB had concluded its case, he observed that “WSP does not dispute that the PRs were not met by its tender design as contained in TAN110. Mr Bowman’s evidence is not challenged in that regard”.
[110] Despite that concession, and because the topic has relevance to an aspect of WSP’s limitation defence discussed below, it is necessary to summarise the ways in which Mr Bowman considers the tender designs to be non-compliant. These mirror the modes of non-compliance set out in the amended, and second amended, statements of claim:
(a)in breach of clause A9.3.4 of Appendix A09, the EMOGPA surface layer stated in the pavement designs was not reduced from the nominal 30 millimetre layer that had been modelled;
(b)in breach of clause A9.3.1(a)(ii), the AC20 intermediate layer was not rounded up by 5 millimetres;
(c)in breach of clause A9.3.1(b), an additional 10 millimetres was not added to the AC20 intermediate layer;
(d)in breach of clause A9.1.1(a), the performance (fatigue) constant for the AC14HB layer was incorrectly calculated, otherwise than in accordance with ASGP02-12;
(e)in breach of clauses A9.2.2 and A9.3.5, the vertical elastic modulus of 750 megapascals for the cement modified layer was that specified by A9.3.5 as applicable for “granular pavements”, whereas it should have been that specified by A9.2.2 for “heavy duty structural asphalt” pavements (in this regard, Mr Bowman considers the concession made on behalf of Waka Kotahi at [74] to be ill-advised); and
(f)as a consequence of the above, in breach of clause A9.2.3(a), WSP’s tender designs had a design life of significantly less than 25 years.
[111] As Mr Hazelton’s limited concession implies, WSP continues to challenge Mr Bowman’s other evidence. A description of that evidence, and my findings relating to WSP’s challenge, are set out further below.
Did the Tender Services Agreement (TSA) between CPB and WSP require WSP to provide tender designs that met the Principal’s Requirements?
CPB’s position
[112] In its second amended statement of claim, CPB referred to the wording of the TSA and claimed that:
8. The [TSA] required that the Services performed by [WSP] would comply with the technical and design requirements of the Project, including the tender documents and the Principal’s Requirements (Tender Design Compliance Requirement).
Particulars
8.1 The proper interpretation of the [TSA] requires [WSP] to comply with the Tender Design Compliance Requirement; or
8.2 In the alternative, the Tender Design Compliance Requirement is an implied term of the [TSA].
[113] In his closing submissions for CPB, Mr Quinn also referred to the wording of the TSA, and in particular to the emphasised passages set out at [15](c)] and [15](d)] above. As may be recalled, those passages provided that:
(a)WSP agreed, to the extent required by [CPB] and relevant to [WSP’s] expertise, to provide design services relevant to the Tender (clause 2.1);
(b)WSP warranted that it had and would provide the requisite professional skill, expertise, experience and resources necessary to perform the Preliminary Services (clause 2.2);
(c)Preliminary Services meant all services to be performed and obligations to be fulfilled by [WSP] in accordance with the draft TSA, including any services described in Schedule 1 (the definitions clause); and
(d)The Preliminary Services included design services necessary for CPB to submit the Tender (Schedule 1, clause 2).
[114] Mr Quinn submitted that, accordingly, the key issue for determination is the proper construction of WSP’s obligation to “provide design services necessary to submit the Tender”. Relying on the need to interpret contracts by reference to the context in which they were made, confirmed by Tipping J in the Supreme Court in Vector Gas Ltd v Bay of Plenty Energy Ltd,2 Mr Quinn submitted that the proper, contextual construction of “necessary” in clause 2.2 and in clause 2 of Schedule 1 (see [113](b)] and [113](d)] above) is that the design services had to comply with the Principal’s Requirements. Alternatively, if it were thought that this “construction/interpretation” route did not resolve the issue, a term requiring compliance with the PRs should be implied.
[115] Given the above pleading and Mr Quinn’s submissions, I interpret his assertion earlier in his closing, that “[t]he TSA lacks an express clause requiring compliance with the Principal’s Requirements”, to concede only that the above TSA clauses do not employ that specific wording. The broader submission he made was indeed that compliance with the PRs was fundamentally what the TSA, properly interpreted, required.
WSP’s position
[116] For WSP, Mr Hazelton submitted that the issue whether the TSA required WSP to provide compliant tender designs was “not about interpretation but implication”.
2 Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444 at [19].
On that basis, he submitted that the circumstances before the Supreme Court in Vector Gas are not analogous to those of this case. Instead, the Court would be required to consider the test, discussed in Bathurst Resources Ltd v L & M Coal Holdings Ltd,3 for whether a term should be implied.
36 Limitation Act 2010, s 11(2) and (3).
WSP’s position
[228] Drawing in aid Lester AJ’s judgment in Body Corporate 355492 v Queenstown Lakes District Council,37 Mr Hazelton submitted that CPB’s amended statement of claim dated 10 June 2022 opened an “entirely new area of factual enquiry”, and amounted to a new cause of action brought more than six years after the alleged breach. Clause A9.3.3 of Appendix A09, the Principal’s Requirements, pertained to the in situ subgrades: the ground on which the pavement layers would be built. By contrast, the clauses relied upon in the amended statement of claim’s particulars of breach all pertained to the pavement layers.
[229] Further, Mr Hazelton submitted that CPB could not rely on late knowledge. He pointed to WSP’s Tender Pavement Review memorandum of 1 April 2019, and to the memorandum CPB obtained from EIC Activities Pty Ltd dated 4 April 2019. And he submitted that those documents identified or put CPB on notice of all of the alleged breaches particularised in CPB’s first and second amended statements of claim (and later explained in Mr Bowman’s evidence).
CPB’s position
[230] Mr Quinn submitted that CPB’s amended statements of claim “essentially … further particularise[d] WSP’s failure to comply with the Principal’s Requirements”, and was not “essentially different” from the initial statement of claim.
[231] If that submission were not accepted, Mr Quinn submitted that CPB could rely on late knowledge: it was not until WSP provided discovery, on 10 November 2022, of a document known as the “CIRCLY output”, which WSP used for its mainline motorway design, that the particulars pleaded in CPB’s amended statements of claim were known to or discoverable by CPB and its advisors.
37 Body Corporate 355492 v Queenstown Lakes District Council [2022] NZHC 678.
Legal principles
[232] In Commerce Commission v Visy Board Pty Ltd, the Court of Appeal observed that:38
[141] The applicable principles to determine whether an amendment creates a fresh cause of action are summarised by this Court in Transpower New Zealand Ltd v Todd Energy Ltd:39
(a) A cause of action is a factual situation the existence of which entitles one person to obtain a legal remedy against another (Letang v Cooper [1965] 1 QB 232 at 242–243 (CA) per Diplock LJ);
(b) Only material facts are taken into account and the selection of those facts “is made at the highest level of abstraction” (Paragon Finance plc v D B Thakerar & Co (a firm) [1999] 1 All ER 400 at 405 (CA) per Millett LJ);
(c) The test of whether an amended pleading is “fresh” is whether it is something “essentially different” (Chilcott v Goss [1995] 1 NZLR 263 at 273 (CA) citing Smith v Wilkins & Davies Construction Co Ltd [1958] NZLR 958 at 961 (SC) per McCarthy J). Whether there is such a change is a question of degree. The change in character could be brought about by alterations in matters of law, or of fact, or both; and
(d) A plaintiff will not be permitted, after the period of limitations has run, to setup a new case “varying so substantially” from the previous pleadings that it would involve investigation of factual or legal matters, or both, “different from what have already been raised and of which no fair warning has been given” (Chilcott at 273 noting that this test from Harris v Raggatt [1965] VR 779 at 785 (SC) per Sholl J was adopted in Gabites v Australasian T & G Mutual Life Assurance Society Ltd [1968] NZLR 1145 at 1151 (CA)).
[142] The question is therefore whether the amendment to the pleadings changes the claim against the defendant so that it is something essentially different from what it was before the amendment. A change of that nature can, as is clear from paragraph (c) of the passage from Transpower above, occur as a result of an alteration in matters of fact. ...
[233]The Court in Commerce Commission v Visy Board Pty Ltd noted that:40
… in order for an amendment to amount to a new cause of action, there must be a change to the legal basis for the claim. That can, in theory, occur through the addition of new facts, but only if the facts added are so fundamental that they change the essence of the case against the defendant. If the basic legal
38 Commerce Commission v Visy Board Pty Ltd [2012] NZCA 383.
39 Transpower New Zealand Ltd v Todd Energy Ltd [2007] NZCA 302 at [61] (referring to The Ophthalmological Society of New Zealand Inc v The Commerce Commission CA168/01, 26 September 2001 at [22]–[24]). Leave to appeal refused: Transpower New Zealand Ltd v Todd Energy Ltd [2007] NZSC 106.
40 Commerce Commission v Visy Board Pty Ltd, above n 37, at [146].
claims made are the same, and they are simply backed up by the addition or substitution of a new fact, that is unlikely to amount to a new cause of action.
(emphasis added)
[234] Associate Judge Lester expressly relied on these principles when deciding Body Corporate 355492 v Queenstown Lakes District Council.41 In that case, the plaintiffs had sued in respect of weather tightness and structural issues discovered in an apartment building soon after construction was completed in June 2006. The claims were of what Lester AJ described as “standard causes”, relating to balconies, roof and barge junctions, service penetrations of external walls, cladding cavities, defective fire systems, and tilt slab walls panels, but also including “structural and/or fire and/or acoustic and/or other defects to be particularised”.42
[235] In a sixth amended statement of claim dated 22 February 2019, they claimed in respect of deficiencies in “bathroom pods” that had been constructed off site and craned into location.
[236] Associate Judge Lester accepted the submission of counsel that the complaints in respect of the bathroom pods were wholly unconnected to previously pleaded defects, observing that they amounted to an entirely new area of factual enquiry. The Judge added that the catch-all pleading of defects “to be particularised” did not avoid the question whether the essential nature of the claim had changed:43
To accept that submission would be to signal that the [relevant statutory limitation period] can be avoided by the inclusion of such catchall in a pleading.
Did CPB’s amended statement of claim allege what amounted to new causes of action?
[237] In my view, the essential nature of the claim by CPB against WSP, pursuant to the first and second causes of action pleaded in its original statement of claim, was that WSP had failed to observe an obligation it owed to CPB to provide tender pavement designs that complied with the Principal’s Requirements. The particulars of that non-compliance included “but [were] not limited to” a particular related to the
41 Above n 36, at [24], [26] and [77].
42 At [8] and [7(f)].
43 At [34].
strength of the in situ subgrade, to be assumed in the course of the process of generating compliant pavement designs. As a consequence of that failure, CPB had suffered loss.
[238] CPB’s amended, and second amended, statements of claim did not change that essential nature. In the terms used in Commerce Commission v Visy Board Pty Ltd (see [233] above), the same basic legal claims were made, backed up simply by the substitution of new facts: in particular, the non-compliance of WSP’s tender designs with other parts of the PRs relating to pavements and surfacing, with which compliance was required.
[239] The use of the phrase “not limited to” in CPB’s pleading can, and should, be distinguished from the ineffective “catchall defects pleading” in Body Corporate 355492 v Queenstown Lakes District Council. The former phrase serves to introduce particulars that provide an illustration of the ways in which CPB alleges WSP’s tender pavement designs were defective, by failing to comply with stated requirements. The latter phrase came at the end of a list of allegedly defective construction elements of an apartment building, and was found to be ineffective to cover defective components constructed off site and craned into location. The latter pleading was found to be ineffective to overcome the relevant limitation period by reserving an entitlement to add a fresh cause of action based on an entirely new area of factual enquiry. The former pleading does not seek to do so.
[240] Further, the amendment to the way in which CPB chose to calculate its loss, moving from a loss to be calculated by reference to the cost of constructing a thicker pavement, to a loss calculated by reference to the price it would have tendered in reliance upon a compliant tender design, does not change the essential nature of CPB’s claim. The claim remained that CPB had suffered a quantifiable loss as a consequence of WSP’s failure to provide tender pavement designs that complied with the Principal’s Requirements.
Conclusion
[241] I conclude that the first and second causes of action set out in CPB’s amended statements of claim (and thus its second amended statement of claim) were not
essentially different from CPB’s original statement of claim. Therefore, CPB’s claims are not time-barred under the Limitation Act.
Post-script regarding late knowledge
[242] In case I am found to be wrong in this conclusion, I note that I would not have found that CPB could rely on late knowledge.
[243] This is because EIC’s Pavement Design Review dated 4 April 2016 made known, or at least should reasonably have made known, to CPB all of the modes of non-compliance alleged in CPB’s amended, and second amended, statements of claim. WSP did not discover the actual mainline CIRCLY modelling it had used until November 2021, but this simply confirmed WSP’s use of incorrect engineering inputs such as the AC14HB performance (fatigue) constant that EIC had been able to back-calculate. Indeed, CPB was able to re-state its particulars of WSP’s non-compliance with the PRs without having received the mainline CIRCLY modelling. They have not been amended since.
[244] For this reason, CPB did not have late knowledge of the essential aspects of its claim.
Result
[245]I grant judgment against WSP, in favour of CPB, and award:
(a)damages in the sum of $5,308,666.77; and
(b)interest upon such of that sum as remains unpaid, at the rate of 5 per cent from 17 March 2023 (that being the date of CPB’s second amended statement of claim and in my view the date upon which CPB’s claim was first quantified) until the date of payment, pursuant to s 24 of the Interest on Money Claims Act 2016.
[246]CPB appears entitled to costs. If costs cannot be agreed:
(a)CPB may file a memorandum no more than five pages long, setting out its claim to costs, within 15 working days; and
(b)WSP may file a memorandum no more than five pages long, setting out its response, within a further 10 working days.
[247]I would then deal with the issue of costs on the papers.
Johnstone J
0
4
1