A-Civil Aust Pty Ltd v MESO Solutions Pty Ltd [2026] NSWSC 784 | Case summary

A-Civil Aust Pty Ltd v MESO Solutions Pty Ltd [2026] NSWSC 784 | Case summary | Zoe

At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2026-07-08

Before

Rees J

Catchwords

BUILDING AND CONSTRUCTION — excavation contractor engaged to undertake shoring, excavation and foundation piles for underground carpark —subcontract with piling subcontractor — subcontract not signed until works largely complete — head contract never finalised — inconsistencies in scope of works in subcontract and head contract — messy contractual regime – principles as to if and when a contract is formed at [7]-[9] — subcontractor arranges for contractor and head contractor to supply materials for its works — subcontractor fails to complete works — head contractor takes work out of subcontractor’s hands — subcontractor’s final payment claim provokes back\-charges by head contractor for materials and cost of attending to subcontractor’s scope of works — contractor and head contractor agree informally to simply ‘walk away’ — subcontractor receives payment of final payment claim under Building and Construction Industry Security of Payment Act 1999 (NSW) — whether subcontractor has back-to-back liability with contractor for back-charges — whether contractor entitled to restitution. LIQUIDATED DAMAGES — liquidated damages clause provides $1,000 payable per day “until the Subcontractor achieves Substantial Completion of the Works … or the date that the Agreement is terminated” — subcontractor never achieves Substantial Completion — nor has subcontract been terminated — whether contractor entitled to liquidated damages where neither ‘end point’ in the clause has occurred — case law review at [271]-[276] — application of contra proferentem rule to liquidated damages clauses, principles at [278]-[280] — accrued right to liquidated damages not dissolved if neither ‘end point’ occurs — Triple Point Technology Inc v PTT Public Company Ltd [2021] UKSC 29 followed. INDEMNITY – head contractor has yet to enforce back charges – whether declaratory relief should be made that subcontractor obliged to indemnify contractor if such a claim is made – nature of indemnity at [185] – proper construction of indemnities - necessary to establish that claim arises from subcontractor’s breach, negligence, act or omission — direct connection between breach and claim not required — “arising out of or in connection with” and “arising out of, whether directly, or indirectly, in connection with” discussed at [192] – some back charges within scope of indemnity but not others. PAYMENT SCHEDULE – assessment of contractor’s payment claim results in amount payable to head contractor – whether such payments are ‘on account’ – principles at [171]-[172]. MITIGATION — whether contractor failed to mitigate loss by not signing deed of release proposed by head contractor — principles at [157] — contractor could not give warranty required by deed — commercial assessment — insufficient evidence that decision was unreasonable or improvident.

Source

Original judgment source is linked above.

Catchwords

BUILDING AND CONSTRUCTION — excavation contractor engaged to undertake shoring, excavation and foundation piles for underground carpark —subcontract with piling subcontractor — subcontract not signed until works largely complete — head contract never finalised — inconsistencies in scope of works in subcontract and head contract — messy contractual regime – principles as to if and when a contract is formed at [7]-[9] — subcontractor arranges for contractor and head contractor to supply materials for its works — subcontractor fails to complete works — head contractor takes work out of subcontractor’s hands — subcontractor’s final payment claim provokes back\-charges by head contractor for materials and cost of attending to subcontractor’s scope of works — contractor and head contractor agree informally to simply ‘walk away’ — subcontractor receives payment of final payment claim under Building and Construction Industry Security of Payment Act 1999 (NSW) — whether subcontractor has back-to-back liability with contractor for back-charges — whether contractor entitled to restitution. LIQUIDATED DAMAGES — liquidated damages clause provides $1,000 payable per day “until the Subcontractor achieves Substantial Completion of the Works … or the date that the Agreement is terminated” — subcontractor never achieves Substantial Completion — nor has subcontract been terminated — whether contractor entitled to liquidated damages where neither ‘end point’ in the clause has occurred — case law review at [271]-[276] — application of contra proferentem rule to liquidated damages clauses, principles at [278]-[280] — accrued right to liquidated damages not dissolved if neither ‘end point’ occurs — Triple Point Technology Inc v PTT Public Company Ltd [2021] UKSC 29 followed. INDEMNITY – head contractor has yet to enforce back charges – whether declaratory relief should be made that subcontractor obliged to indemnify contractor if such a claim is made – nature of indemnity at [185] – proper construction of indemnities - necessary to establish that claim arises from subcontractor’s breach, negligence, act or omission — direct connection between breach and claim not required — “arising out of or in connection with” and “arising out of, whether directly, or indirectly, in connection with” discussed at [192] – some back charges within scope of indemnity but not others. PAYMENT SCHEDULE – assessment of contractor’s payment claim results in amount payable to head contractor – whether such payments are ‘on account’ – principles at [171]-[172]. MITIGATION — whether contractor failed to mitigate loss by not signing deed of release proposed by head contractor — principles at [157] — contractor could not give warranty required by deed — commercial assessment — insufficient evidence that decision was unreasonable or improvident.

Judgment

Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.

Medium Neutral Citation: A-Civil Aust Pty Ltd v MESO Solutions Pty Ltd [2026] NSWSC 784

Hearing dates: 23, 24, 25, 27 February 2026, last submissions 17 June 2026.

Date of orders: 8 July 2026

Decision date: 08 July 2026

Jurisdiction: Equity - Technology and Construction List

Before: Rees J

Decision: Declarations made; judgment against defendant with costs.

Catchwords: BUILDING AND CONSTRUCTION — excavation contractor engaged to undertake shoring, excavation and foundation piles for underground carpark —subcontract with piling subcontractor — subcontract not signed until works largely complete — head contract never finalised — inconsistencies in scope of works in subcontract and head contract — messy contractual regime – principles as to if and when a contract is formed at [7]-[9] — subcontractor arranges for contractor and head contractor to supply materials for its works — subcontractor fails to complete works — head contractor takes work out of subcontractor’s hands — subcontractor’s final payment claim provokes back-charges by head contractor for materials and cost of attending to subcontractor’s scope of works — contractor and head contractor agree informally to simply ‘walk away’ — subcontractor receives payment of final payment claim under Building and Construction Industry Security of Payment Act 1999 (NSW) — whether subcontractor has back-to-back liability with contractor for back-charges — whether contractor entitled to restitution.
LIQUIDATED DAMAGES — liquidated damages clause provides $1,000 payable per day “until the Subcontractor achieves Substantial Completion of the Works … or the date that the Agreement is terminated” — subcontractor never achieves Substantial Completion — nor has subcontract been terminated — whether contractor entitled to liquidated damages where neither ‘end point’ in the clause has occurred — case law review at [271]-[276] — application of contra proferentem rule to liquidated damages clauses, principles at [278]-[280] — accrued right to liquidated damages not dissolved if neither ‘end point’ occurs — Triple Point Technology Inc v PTT Public Company Ltd [2021] UKSC 29 followed.
INDEMNITY – head contractor has yet to enforce back charges – whether declaratory relief should be made that subcontractor obliged to indemnify contractor if such a claim is made – nature of indemnity at [185] – proper construction of indemnities - necessary to establish that claim arises from subcontractor’s breach, negligence, act or omission — direct connection between breach and claim not required — “arising out of or in connection with” and “arising out of, whether directly, or indirectly, in connection with” discussed at [192] – some back charges within scope of indemnity but not others. PAYMENT SCHEDULE – assessment of contractor’s payment claim results in amount payable to head contractor – whether such payments are ‘on account’ – principles at [171]-[172]. MITIGATION — whether contractor failed to mitigate loss by not signing deed of release proposed by head contractor — principles at [157] — contractor could not give warranty required by deed — commercial assessment — insufficient evidence that decision was unreasonable or improvident.

Parties

Applicant/Plaintiff:

A-Civil Aust Pty Ltd

Respondent/Defendant:

MESO Solutions Pty Ltd

Legislation Cited (5)

Building and Construction Industry Security of Payment Act 1999(NSW)

Cited:** Building and Construction Industry Security of Payment Act 1999(NSW)

Payment Act 1999

Consumer Act 2010

Procedure Act 2005

Cases Cited (46)

(2024) 281 CLR 39

[2023] NSWSC 372

[2010] NSWSC 985

Cases Cited: A-Civil Aust Pty Ltd v MESO Solutions Pty Ltd [2023] NSWSC 372
AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd [2010] NSWSC 985
Alghussein Establishment v Eton College [1988] 1 WLR 587
AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170; [1986] HCA 63
Bailey v Redebi Pty Ltd [1999] NSWSC 918
Booth v Bosworth (2001) 114 FCR 39; [2001] FCA 1453
Bragg v Alam [1981] 1 NSWLR 668
Bragg v Alam (1982) NSW ConvR 55-082
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61
British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673
Canty v Paperlinx Australia Pty Ltd [2014] NSWCA 309
Cessnock City Council v 123 259 932 Pty Ltd (2024) 281 CLR 39; [2024] HCA 17
Champion Homes Sales Pty Ltd v DCT Projects Pty Ltd [2015] NSWSC 616
Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389
Cook’s Construction Pty Ltd v Brown [2004] NSWCA 105
CSR Ltd v Adecco (Australia) Pty Ltd [2017] NSWCA 121
Felthouse v Brindley [1862] 142 ER 1037
Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9,251
GC NSW Pty Ltd v Galati [2020] NSWCA 326
GLJ v Trustees of Roman Catholic Church for Diocese of Lismore (2023) 280 CLR 442; [2023] HCA 32
Ho v Powell (2001) 51 NSWLR 572; [2001] NSWCA 168
Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110
Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8
Mackay v Dick (1881) 6 App Cas 251
Novawest Contracting Pty Ltd v Altona Industrial Centre Pty Ltd [2011] VSCA 104
Onley v Catlin Syndicate Ltd [2018] FCAFC 119
Payzu Ltd v Saunders [1919] 2 KB 581
Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 111
Peter Turnbull & Co Pty Ltd v Mundus Trading Co (A/asia) Pty Ltd (1954) 90 CLR 235; [1954] HCA 25
Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151
Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2016] NSWSC 770
Rava v Logan Wines Pty Ltd [2007] NSWCA 62
Re Concrete Constructions Group Pty Ltd [1997] 1 Qd R 6; [1997] QCA 086
Regional Development Australia Murraylands and Riverland Inc v Smith [2015] SASCFC 160
Roude v Helwani [2020] NSWCA 310
Ruthol Pty Ltd v Tricon (Aust) Pty Ltd [2005] NSWCA 443
R v Khazaal (2012) 246 CLR 601; [2012] HCA 26
Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd (No 2) (2016) 95 NSWLR 157; [2016] NSWCA 379
State Government Insurance Commission v Stevens Brothers Pty Ltd (1984) 154 CLR 552; [1984] HCA 32
TC Industrial Plant Pty Ltd v Robert’s Queensland Pty Ltd (1963) 180 CLR 130; [1963] HCA 57
Triple Point Technology Inc v PTT Public Company Ltd [2021] UKSC 29
Uber Builders and Developers Pty Ltd v MIFA Pty Ltd [2020] VSC 596
Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603; [1998] HCA 38

This is the ‘wash up’ of commercial dealings between an excavation contractor, A-Civil Aust Pty Ltd, and a piling subcontractor, MESO Solutions Pty Ltd. They worked together on several projects. In particular, A-Civil was engaged by head contractor, Paynter Dixon Constructions Pty Ltd, to undertake shoring, excavation and foundation piles for an underground carpark for Parramatta RSL. A-Civil subcontracted some of these works to MESO. A-Civil now seeks $980,607.15 from MESO in respect of the Parramatta RSL project, while MESO seeks $187,836 said to be owing on all projects.
The focus was on the Parramatta RSL project. Of interest, the subcontract was not signed until the works were largely complete, while the head contract between A-Civil and Paynter Dixon was never finalised. This has made resolving the issues in dispute a little messy. The Parramatta RSL project faced other challenges: wet weather; COVID-19 lockdowns; and problems re-starting work when the lockdowns were lifted. Some rectification work was also needed, when the footpath adjoining the ever-deepening hole began to subside and when a shoring wall (Wall 5) needed repeated attention.
In the end, MESO did not complete the works under the subcontract in respect of the Parramatta RSL project. Paynter Dixon took back the work and arranged for it to be done by another contractor. But MESO then issued a final payment claim to A-Civil, who submitted it ‘up the line’ to Paynter Dixon. The head contractor was unimpressed, issuing ‘back-charges’ to A-Civil for the cost of attending to the work that it was said that MESO should have done, together with rectification costs. A-Civil was, by and large, in an invidious position between the head contractor and the subcontractor.
So far as the evidence reveals, A-Civil and Paynter Dixon agreed informally to simply ‘walk away’. As the proffered deed of release was never signed, this part of the case is messy too. But MESO was not part of this informal arrangement and pressed for payment. MESO obtained an adjudication determination in its favour under the Building and Construction Industry Security of Payment Act 1999 (NSW), which A-Civil failed to set aside: A-Civil Aust Pty Ltd v MESO Solutions Pty Ltd [2023] NSWSC 372. MESO thereby received some $365,000.
The issues which remain to be resolved are:
Does MESO have ‘back-to-back’ liability to A-Civil for the ‘back-charges’ issued by Paynter Dixon?
Is MESO liable to pay liquidated damages to A-Civil for failing to bring the Works to Substantial Completion by 1 September 2021 or at all?
Is MESO obliged to pay A-Civil some $223,000 for the supply of steel and concrete for the works, and a further $10,000 to rectify defects?
What amounts, if any, are payable having regard to any monies owed on other projects or monies already received by MESO following the adjudication determination?
Given the messy nature of the contractual arrangements, in particular, the head contract between A-Civil and Paynter Dixon and the unsigned deed of release, it is convenient to note the principles when determining if, and when, a contract is formed.
The conventional approach is to analyse when an offer has been accepted, although this analysis does not work well in a range of circumstances: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [71] (Heydon JA, Mason P and Ipp AJA relevantly agreeing). In that event, the better question may be what a reasonable person would have thought in all the circumstances as to whether there was a concluded bargain: Brambles at [81].
In Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110, McHugh JA (Hope and Mahoney JJA agreeing) observed at 11,118:

A-Civil relied on the evidence of project manager Chaudhury Mostafiz, site manager George Matta and chief executive officer (and George’s father) Nasser Matta. MESO relied on the evidence of director Timothy Orr.
A-Civil sought Jones v Dunkel inferences in respect of MESO’s failure to call its operations manager Chris Deruiter, technical director Edward (Eddie) Bobek or the team leader for the “walling team”, Jerome Albert. All are employed by MESO and there is no evidence that they are unavailable. Where MESO contended that it was prevented from completing the Works by A-Civil, it was submitted that there was no evidence from these gentlemen to support that proposition. A further inference was sought in respect of Mr Orr’s failure to respond to two affidavits of Nasser Matta, the affidavits of Mr Mostafiz or the affidavit of George Matta: Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 419 (Handley JA, Kirby P agreeing). MESO submitted that this was a “red herring” where the onus of proof lay on A-Civil. It was said that A-Civil’s “faint criticisms” of MESO’s failure to call certain evidence did not fill gaps in A-Civil’s evidence.
The fact that the onus of proof is on the plaintiff is not a complete answer. Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 was itself a case where an adverse inference was drawn against a party who did not bear the onus of proof: see Ho v Powell (2001) 51 NSWLR 572; [2001] NSWCA 168 at [16] (Hodgson JA, Beazley JA and Davies AJA agreeing); GLJ v Trustees of Roman Catholic Church for Diocese of Lismore (2023) 280 CLR 442; [2023] HCA 32 at [58] (Kiefel CJ, Gageler and Jagot JJ); Cook’s Construction Pty Ltd v Brown [2004] NSWCA 105 at [32] (Young CJ in Eq, Hodgson and Santow JJA agreeing).
Where the party that does not bear the onus of proof fails to call witnesses, the approach to the rule in Jones v Dunkel is as laid out by Branson J in Booth v Bosworth (2001) 114 FCR 39; [2001] FCA 1453 at [42]:

Paynter Dixon constructed a new Parramatta RSL club. In March 2020, A-Civil was engaged to demolish the old RSL club, where a three-level underground carpark would be built. A-Civil was keen to undertake shoring, excavation and foundation piles for the new carpark. Nasser Matta approached MESO for a quote for the shoring works.
Mr Orr prepared a series of quotes. On 6 May 2020, Nasser Matta and Mr Orr met. According to Mr Orr, Mr Matta asked him to adjust the supply rates for the reinforcing (or reo), as A-Civil could procure the reinforcing at a lower rate than MESO charged. Mr Matta asked Mr Orr to charge $1,180 per tonne for reinforcement and $250 per m3 for concrete, as these were the rates that Mr Matta said that he could supply at. Mr Orr said he was concerned at the time, as he had heard that steel and concrete was “on the way up”. Mr Matta denied this and said that he did not know what rates steel and concrete suppliers would charge, particularly given that the price for construction materials was increasing and unpredictable due to the COVID-19 pandemic. The contemporaneous documents support Mr Orr’s version of this conversation, and I accept that this is what the parties initially discussed: see [77], [85].
Paynter Dixon engaged structural engineer, Meinhardt (NSW) Pty Ltd, to design the permanent walls for the underground car park. On 7 May 2020, Mr Orr met with Meinhardt and provided MESO’s drawings of the shoring and reinforced concrete (or RC) wall design that it recommended. MESO used engineers, MetAus Pty Ltd, to assist with its design. MetAus and MESO are related companies. Questions and answers passed between the parties in respect of Meinhardt and MESO’s designs. Relevantly, on 15 May 2020, Paynter Dixon’s geotechnical engineers, JC Geotechnics Pty Ltd, queried “how do you ensure the toe stability where excavation is below the toe level of the sheet pile wall (i.e. in sections of Wall 5 …)?” MetAus replied that toes would be restrained by a toe anchor which held the bottom of the sheet in lieu of the toe. (This item was “closed” on 28 May 2020 and thus, presumably, MetAus’ reply was considered satisfactory.)
JC Geotechnics further noted, “the sheet piling for Wall 5 stops above Basement 2 which appears to stop in rock that is less than high strength”. MetAus replied, “We have said that the sheet piles will reach the medium to high strength rock and will be restrained by a toe anchor which holds the bottom of the sheet in lieu of the toe. We will confirm actual length of the sheets by the drilling at intervals to confirm and map the top of the competent rock”. JC Geotechnics further queried:

On 16 December 2020, MESO unloaded its gear on site. Although the design of the permanent walls was still to be finalised, this did not prevent the shoring works from commencing. From 17 to 21 December 2020, MESO drilled test holes for the sheet piles. On 24 December 2020, A-Civil paid MESO $70,000 on account of the Parramatta excavation.
On 2 January 2021, Mr Orr circulated the latest shoring shop drawings, with rock levels from the test drilling. On 4 January 2021, MESO began installing sheet piles. On 8 January 2021, A-Civil paid MESO $50,000 on account of the Parramatta RSL project. Mr Orr re-submitted MESO’s earlier progress claims for materials, “I know that you didn’t have a contract with Paynter Dixon at the time so didn’t want to enter these into your system. I assume that you do now”.
On 14 January 2021, Mr Orr emailed Nasser Matta again, complaining that MESO had not been paid the initial amounts for materials and manufacturing. Nor did MESO have a formal contract. Further, the current situation had “become untenable for me and I have no clear and assured understanding for payments of the outstanding claims and so I will need to redeploy our men and resources to other projects where they are sorely needed in any case”. Mr Orr advised that MESO would continue with the works until the afternoon of the following day.
At the end of that day, Mr Orr emailed Nasser Matta again, expressing disappointment that he had had no response to his email or calls. Mr Orr issued a notice to suspend works. Mr Matta replied that evening, “you are not to continue any more work tomorrow, A-Civil has paid you on account for the commitment we have made and not on the invoice that has been rejected twice … Work will proceed once you have signed your contract and terms have been agreed”. Mr Orr confirmed that no MESO staff would attend site the next day nor until the matter was settled. Paynter Dixon’s site diary for 15 January 2021 noted that here was a disagreement between MESO and A-Civil, and MESO was not on site.
On 18 January 2021, Nasser Matta emailed Mr Orr, asking when he could remove MESO’s machines from the site “as they are getting in the way”. Mr Orr advised that he would make arrangements to remove the equipment. On 20 January 2021, MESO returned to site and continued predrilling and sheet piling. On 22 January 2021, A-Civil paid MESO $50,000 on account.
On 25 January 2021, Paynter Dixon provided comments on A-Civil’s recent progress claim, advising that the full signed contract had not been received, “We will not be releasing any further payments until the full unamended contract is returned with every page initialled.” Nasser Matta pressed to meet as soon as possible to finalise the contract, noting that he had just received the drawings for construction and had been pushing to finalise outstanding terms since before Christmas. Paynter Dixon replied, “The documents in the contract are as per issued at tender stage, therefore construction information/drawings will have no impact on the contract.” But a meeting was offered.
On 27 January 2021, Paynter Dixon pressed A-Civil to address all queries from geotechnical engineer JC Geotechnics. This included the earlier comment about Wall 5, which remained open: see [19]. MetAus responded, “Sheet piles are driven to reach medium to high strength rock.” The item was closed.

On 3 February 2021, Mr Mostafiz rejoined. In respect of the proposed change of drawings in Schedule 9, Mr Mostafiz responded that the sheet pile and contract wall price was based on A-Civil’s supplied design, so the two drawings in Schedule 9 “can’t be part of our contract”. A-Civil’s design for the sheet pile and RC wall should be part of the contract. He noted that Paynter Dixon had agreed to the other requested changes on contracts for other jobs. There was no response. So far as the evidence reveals, negotiations between the parties as to the terms of the head contract did not progress any further. From time to time, Mr Mostafiz followed up Paynter Dixon for a signed contract, but there is no evidence that one was provided: see [66], [124], [129].
On the pleadings, A-Civil contends – and MESO admits – that A-Civil and Paynter Dixon entered into a contract on or about 20 November 2020. In their closing submissions, the parties accepted that the contract was not entered into on that date. The parties relied on different versions of the contract as embodying the final terms of the agreement.
A-Civil relied on a copy of the contract initialled by A-Civil but not yet signed by Paynter Dixon. This was the contract emailed to Paynter Dixon on 1 February 2021, which included some proposed amendments to the contract, not all of which were accepted.
MESO relied on a copy of the contract produced on subpoena by Paynter Dixon. Most, but not all, pages of the contract are initialled by both parties. Other pages are initialled by A-Civil but not by Paynter Dixon. The contract has a number of ‘post-it’ notes and handwritten comments which, when compared with the emails from 1 to 3 February 2021, record Paynter Dixon’s views on the amendments sought by A-Civil. That is, the document produced on subpoena was not a final and concluded contract executed by both parties but a ‘work in progress’. By my count, there were eight points of difference between the parties that were never resolved.
MESO submitted that, by commencing the Works, A-Civil accepted the terms of the unamended contract by conduct. The contract was said to be varied on 2 February 2021 when Paynter Dixon agreed to several amendments proposed by A-Civil. I do not accept this submission. When A-Civil began work, it had a proposed contract from Paynter Dixon. A-Civil had requested some of the drawings and plans referred to in the contract, which it apparently did not have. A-Civil was in the process of reviewing the proposed contract. By starting work without having signed a finalised contract, A-Civil was certainly taking the risk that the contract may never be finalised and it may not be paid for the work it was then doing. But I do not think a reasonable person would have thought in all the circumstances that A-Civil accepted the proposed contract in its entirety at that time: Brambles at [81].
Nor do I accept A-Civil’s submission that Mr Mostafiz’s pronouncement on 24 June 2021 (see [124]) had the effect that the contract sent to Paynter Dixon on 1 February 2021 became the final contractual document, notwithstanding Paynter Dixon’s non-acceptance of some of the amendments there proposed. Paynter Dixon had made plain that it did not accept some of these amendments; its subsequent silence in the face of Mr Mostafiz’s email of 24 June 2021 was not acceptance: Felthouse v Brindley [1862] 142 ER 1037.
Nor is it necessary to fix with precision the date on which any contract between A-Civil and Paynter Dixon was formed. The parties agreed – at least for the purpose of these proceedings – that there was a binding contract between Paynter Dixon and A-Civil which contained the clauses relevant to their dispute. The unresolved amendments largely concerned other provisions of the contract, with one exception. A-Civil’s proposed amendment to Schedule 9 – swapping Meinhardt’s drawings to MESO’s drawings – is relevant to some of the back-charges. On the contract produced by Paynter Dixon on subpoena, a handwritten note records, “Drawing 50625 & 50626 to remain as a contract document, this document was issued in the tender package issued on the 2/9/20.” The two drawings added by A-Civil were crossed out, with a note “These Doc’s Did not Form part of the tender Document issued on 2/9/20.”

Mr Orr said that sheet piles along Wall 5 were installed by MESO before A-Civil excavated the area. George Matta explained that the sequence of work was that MESO would install sheet piles. MetAus would then issue an excavation certificate to permit A-Civil to excavate down to a certain level. A-Civil would excavate down to that level, which was usually 1.5 m for each drop. After that, MESO installed anchors.
On 3 February 2021, geotechnical engineers JC Geotechnics did a site visit. Tension cracking and slumping was observed behind the sheet pile wall. A series of recommendations was made. Paynter Dixon provided JC Geotechnics’ comments to A-Civil on 4 February 2021, for response and action. Later on 5 February 2021, Nasser Matta replied to Paynter Dixon, responding to the geotechnical engineer’s concerns with the assistance of Mr Orr. A-Civil also paid $100,000 to MESO on account.
On 8 February 2021, Paynter Dixon asked A-Civil to provide calculations to address JC Geotechnics’ concerns. MESO issued As-Built drawings for the temporary shoring plan. JC Geotechnics inspected the rockface again, including Wall 5, and issued a report. Mr Mostafiz provided the report to Mr Orr for comment. According to the report, the sheet piles for Wall 5 had been installed and excavation was at Reduced Levels of RL 7.658 m for Wall 5. The shale bedrock below the toe of the sheet piles along Wall 5 was unsupported near the vertical cut face. Water was ponding at the base of the excavation in numerous locations. Two rows of anchors had been installed. The shale was observed to be highly fractured, distinctly weathered and of low strength.
JC Geotechnics recommended that the low strength shale be removed before excavation continued. Several issues needed to be addressed before excavating further, “The contractor should provide a rectification methodology for review by the project structural and geotechnical engineer.” Clarification was also sought in respect of the variation in the installation depths of some of the anchors, together with an assessment on the potential impact to nearby structures, infrastructure and buried services, “The reason for this is to provide [Paynter Dixon] with some confidence that the sheet pile system and excavation will have no adverse impact on the surrounding structures.” Vibration monitors were also recommended, where vibration induced during the installation process carried the potential risk of damage to nearby services and infrastructure.
On 10 February 2021, MESO provided comments on the geotechnical engineer’s inspection report. On 11 February 2021, Paynter Dixon provided Meinhardt and JC Geotechnics with the calculations for the RC wall, provided by A-Civil, for review and comment.
But MESO was becoming concerned at the involvement of JC Geotechnics, who was said to be “holding up production” at the expense of MESO and A-Civil. MESO asked A-Civil if Paynter Dixon wanted the sheets underpinned and, if so, to provide the design. At the same time, Meinhardt queried the information provided by A-Civil, which was “pretty much the same type of information we have already received”. Information was sought on lateral loading values used in their analysis to provide the results for their wall design. Mr Orr contacted another geotechnical engineer, Stephen Kim of EI Australia, to inspect the site and be in a position to provide his expert view at a meeting with Paynter Dixon “and to remove JC Geotechnics from the equation”.
On 15 February 2021, Meinhardt provided Paynter Dixon with their calculations, advising, “As a consequence to changed wall heights, the reinforcement for [Wall] 5 is to be reviewed”. Paynter Dixon asked A-Civil to confirm with their engineer what loads the original design had used for input information for the wall design. Mr Mostafiz asked Mr Orr to cross-check with the engineer. Mr Orr asked MetAus, who advised that the surcharge loads were similar to what they had adopted in their design.
On 18 February 2021, Paynter Dixon emailed Nasser Matta, attaching photographs of cracks appearing in the pavement on site, “Please ensure this is monitored and testing is as per [MESO] notes (daily)”. Mr Mostafiz forwarded the photographs to Mr Orr, requesting that he organise his geotechnical engineer to review the site condition and provide a reason for such a crack. Mr Orr replied that, if the sheets were moving, then cracking may be seen close to the back of the sheets rather than 2.5 m to 3 m away.
On 19 February 2021, MESO attended the site and inspected the cracking on the pavement adjacent to the project site. According to Paynter Dixon’s site diary, MESO “verbally told me nothing to worry about just fracturing locally on top layer”. The vibration monitoring was not being done correctly and would be raised with A-Civil. Mr Orr made arrangements for EI Australia to attend the site. A-Civil paid MESO $50,000 on account.
On 22 February 2021, Mr Bobek reported to A-Civil on his site inspection, noting that the sheet piles and anchors showed no signs of deflection. The cracks in the asphalt seemed to have been caused by the de-tensioning of soils when concrete garden beds in the area were removed, as well as the digging of the trench to place the sheet piles. On 23 February 2021, EI Australia’s principal engineering geologist attended the site with Mr Orr and provided recommendations to George Matta on the excavation works. George Matta forwarded the recommendations to Paynter Dixon.
On 26 February 2021, MESO was back on site, applying grout to a corner where defects had been nominated by the geotechnical engineer. EI Australia undertook a further inspection of the rockface. Mr Orr also sought the advice of Graeme Deaker of Vandermeer, as Nasser Matta had asked for an opinion on MESO’s wall specifications. Mr Orr complained that Meinhardt’s specifications “are much more conservative than ours and would add $30-$40k to the costs of the walls which we are not happy with”. The additional cost was said to be driven by their specifications, including “that our walls extend above each slab and somehow we are to provide cogged bars through our shutters somehow.”
EI Australia inspected the rockface again on 1 March 2021, approving excavation to the next 1.5 m interval. Further advice to plug gaps beneath the sheet pile, where residual clays had fallen through due to recent rainfall, would be given by email. Paynter Dixon asked A-Civil for the report from EI Australia, to close out the comments raised by JC Geotechnics and responded to by MESO. Mr Mostafiz also sent Mr Orr a further design clarification from Paynter Dixon. Mr Orr replied, “I am really over this. I cannot accommodate the L-bar connecting the slabs to the walls. … Markham stated to me that they strongly prefer our approach. All it does is make i[t] much harder to place the walls.”
On 8 March 2021, Paynter Dixon asked A-Civil when MESO would be back on site for sheet piling. On 11 March 2021, MESO returned to site but to pick up redundant gear. Mr Mostafiz asked MESO to forward comments on JC Geotechnics’ report “on how you did the rectification” and rock anchor installation records. Mr Bobek replied:

Mr Orr replied that he would review and revert. On 8 April 2021, A-Civil provided MESO with RC wall design issued by Meinhardt ‘For Construction’, which included the installation of cog bars and L-bars (also known as ‘starter bars’ or ‘dowels’). Mr Mostafiz understood that these drawings were listed at Annexure M to the subcontract. Mr Orr said the for construction plans allowed placement of cog bars while forming the concrete walls, which differed from the scope of works attached to the proposed subcontract then in circulation. As the first draft of the subcontract is not in evidence, I cannot say.
On 14 April 2021, A-Civil followed up Paynter Dixon for a signed copy of the head contract.
On 20 April 2021, Mr Mostafiz advised Mr Orr that Wall 5 had moved by 25 mm, creating large cracks on the footpath. Photographs were supplied. Mr Orr was asked to take all necessary steps to avoid any further damage and to consider this as an urgent matter. Mr Mostafiz added “the bottom sheet on [W]all 5 wasn’t installed as there was a hole at the back of the sheet. Could you please send someone to fix this”. Mr Bobek attended site. Mr Orr advised that they could not see any evidence of movement but they were looking to remedy the sheet at Wall 5, “The actual issue was that [it] encountered an obstruction when it was driven that led [it] to deviate somewhat”.
On 23 April 2021, MetAus provided a letter in respect of the reported ground movements, concluding that the temporary shoring walls were performing as per design requirements and had not moved excessively or beyond modelling and design outputs. Mr Mostafiz also followed up MESO for its comments on the ‘For Construction’ drawings. Mr Orr replied that the issue was that “we can’t place the cog bar through our shutters”.
On 30 April 2021, Mr Mostafiz asked EI Australia to organise a rockface visit on 4 May 2021, including for Wall 5. On 4 May 2021, EI Australia reported that two potential locations were observed in Wall 5 where stabilisation measures using rock bolts may be required, subject to a further inspection following the final detail excavation along the wall.
On 6 May 2021, Mr Mostafiz asked Mr Orr to order all of the steel except the cog bars, as A-Civil had informed Paynter Dixon that it could not proceed with the cog as per Paynter Dixon’s design and was waiting on a response. Mr Mostafiz also asked MESO to provide the specifications for its formwork system and method of installation, with a drawing showing the support details.
On 7 May 2021, MESO provided specifications of its formwork system and method of installation. MESO also issued As-Built drawings for sheet piles and anchors and installation records. Mr Mostafiz said that, from his review of the sheet pile design and the sheet pile As-Built shop drawing, he noticed that the As-Built sheet piles for Wall 5 did not match the design, specifically, in relation to sheet piles 84 to 104. This was the first time that he became aware that the sheet piles were not installed in accordance with the design.
On 10 May 2021, Mr Mostafiz advised MESO that he had forwarded the details of its formwork system and method of installation to Paynter Dixon for their comment, “however I believe [Paynter Dixon] are more asking for the specification of your aluminium shutter and the fixation method. Also regarding the cog they proposed a methodology as attached”. MESO’s comments were sought.
On 11 May 2021, Mr Mostafiz emailed EI Australia’s report on Wall 5 to Mr Orr. EI Australia recommended shotcrete and mesh be applied to low strength shale bedrock exposed over the excavation face. Mr Orr was asked to check with his engineer and advise how he would fix this.
On 12 May 2021, Mr Mostafiz advised Mr Bobek that A-Civil had had a meeting with Paynter Dixon, “and confirmed we are not doing the cog bar, [Paynter Dixon] will drill on our wall later on.” Mr Mostafiz explained that he was referring to the cog bar used in the ground slab; this would be supplied by the company who did that slab. Mr Orr said that, based on these emails, MESO began placing the concrete walls on the project without L-bars and without placing cog bars.
Between 12 and 21 May 2021, Mr Mostafiz exchanged emails with EI Australia and Mr Bobek regarding Wall 5 and rectification works that needed to be carried out. On 12 May 2021, Mr Mostafiz spoke to Mr Bobek, who said that it would take four to five weeks to install the reinforced concrete wall at Wall 5. Mr Mostafiz asked Mr Bobek to check with EI Australia or MESO’s engineer whether this would have any impact on the wall’s stability for this period or whether grout could be injected to avoid using shotcrete.
On 20 May 2021, MESO provided A-Civil with extensive comments on the proposed subcontract42 EI Australia also provided further recommendations to A-Civil in respect of Wall 5, following a further inspection:

As I understand A-Civil’s comments, the requirement to install cog bars into the slabs had changed, as had the agreement that concrete and reinforcement would be calculated at fixed rates. That this was a “Lump Sum Contract” suggested that, whatever the materials cost, it was to be allowed for by MESO in its lump sum price.
On 25 May 2021, Mr Mostafiz advised Mr Bobek that he believed they needed to find some temporary protection to avoid Wall 5 collapsing. Mr Mostafiz asked Mr Bobek to come up with a solution to stabilise the wall. For his part, Mr Orr advised that they needed to finalise the subcontract and payment so that they could proceed. On 26 May 2021, Mr Mostafiz replied that there was nothing pending on A-Civil’s side regarding the contract, “The major item for the RC wall was the cog bar, and this was resolved as we are not doing the cog. As such there is nothing pending on our side regarding the contract”. Further, the schedule for the RC wall was communicated with MESO several time[s], “as such any delay will be forwarded to MESO”.
Mr Orr disagreed, noting that he had told A-Civil “that we could not undertake the works as it was designed on a number of occasions and so there was no point spending any time on contracts until or if that could be resolved. A couple of weeks ago Nasser called me and told me that he had just agreed with [Paynter Dixon] that they had agreed that we didn’t need to place the cog bars. I said that, on that basis, we would immediately review the contract and revert with our comments”. Whilst that had been attended to, A-Civil’s response to MESO’s comments had not necessarily led to agreement.
A-Civil replied that they understood that Nasser Matta and Mr Orr “have resolved the current issues” and asked whether MESO would be on site the next day to start the RC walls and for details to arrange the first concrete pour. Mr Orr pressed for the contract to be finalised, with Mr Bobek to mark up the relevant pages and send them through to Nasser Matta together with a reconciliation showing outstanding payment amounts. MESO would be on site the next day. On 27 May 2021, Mr Bobek emailed Nasser Matta, attaching marked-up pages of the contract “amended to what we usually agree to”.
According to Nasser Matta, Mr Orr asked if A-Civil could arrange for the supply of steel and concrete for the reinforced concrete walls, as MESO’s accounts with its suppliers were “on hold”. Mr Matta had known Mr Orr for many years and was prepared to assist MESO so that it could start work on the project. He said that A-Civil would arrange for the supply of the steel reinforcement and concrete and would back-charge MESO for whatever amounts were invoiced by suppliers without any mark-up. Mr Orr agreed. Mr Orr denied that he told Mr Matta that A-Civil needed to supply the steel reinforcement as MESO’s account was “on hold”, or that MESO had issues with its credit supplier and thus agreed to reimburse A-Civil for the cost of supplying the concrete directly. He said that MESO never agreed to supply the reinforcement or concrete for the permanent walls.
On 28 May 2021, Mr Mostafiz provided concrete supplier Hanson Construction Materials Pty Ltd, MESO and Paynter Dixon with a concrete booking summary for the next week. This was the first order that he placed for the supply of concrete for the reinforced concrete walls. The quantities ordered were based on quantities provided to Mr Mostafiz by Mr Orr or MESO’s operations manager or confirmed with them. Hanson issued invoices to A-Civil for the concrete so ordered. On 2 June 2021, MESO started pouring the reinforced concrete walls.
Problems emerged between Paynter Dixon and A-Civil as to whether A-Civil was obliged to provide starter bars for the slabs or whether this was outside its scope of works. Given the unclear state of the contractual arrangements between these parties, such disputes were probably inevitable. On 11 June 2021, A-Civil provided Paynter Dixon with its rates for a variation, to drill dowel bars and apply epoxy. Approval was sought to proceed. Paynter Dixon replied that this formed part of A-Civil’s scope of works, referring to item 6(w) in Schedule 8. Further, “We have discussed this in our weekly meetings that it is under your contract to provide starter bars to the slabs”. A-Civil replied that its tender price was based on the design that A-Civil submitted, “refer to contract drawing register as attached. As such we never allowed any cog bars for the RC wall”. The contract drawing register referred to is not in evidence but, presumably, was the amended Schedule 9 to the contract submitted to Paynter Dixon on 1 February 2021 and not accepted.
On 23 June 2021, Mr Mostafiz finally responded to Mr Bobek’s comments on the proposed subcontract, including:

On 8 July 2021, Paynter Dixon emailed Mr Mostafiz regarding “notice of backcharge”, again setting out Item 6(w) from the Scope of Works. Paynter Dixon noted, “Please see below extract from signed Contract Scope for Dowel starters which is what I can only go from. … as of yesterday the instruction from George [Matta] was that you are no longer installing dowels … To not delay the job [Paynter Dixon] have hired extra labour / material [so] as to keep programme, We will document accordingly for our upper management to sort out”.
On Saturday, 17 July 2021, Paynter Dixon advised that all construction sites in the Greater Sydney area were to stop work, apparently as part of the COVID-19 lockdowns. A-Civil was directed to close up the site and make it safe on Monday morning, 19 July 2021. On 21 July 2021, A-Civil paid MESO $100,000. A further $50,000 was paid on 29 July 2021.
Mr Mostafiz said that, by 31 July 2021, MESO had completed 65% of the Basement level 3 reinforced concrete wall and 45% of Basement level 2 reinforced concrete wall. Mr Mostafiz prepared a marked-up drawing of progress, which accompanied A-Civil’s progress claim to Paynter Dixon and was approved.
On 9 August 2021, Paynter Dixon circulated the new rules to allow construction sites to reopen, depending on which local government area workers came from. Mr Orr advised A-Civil that’s its crews were currently committed elsewhere “as we had to pivot to projects that were not restricted” in other local government areas.
Paynter Dixon endeavoured to re-start work on site. On 17 August 2021, Paynter Dixon asked A-Civil to confirm a start date for MESO. Paynter Dixon expressed concerns, noting that MESO was then working on another site and that no one was eligible to return to the Parramatta site either. Nasser Matta advised that MESO would recommence on 23 August 2021 and everyone was doing the best that they could in a challenging climate. On 18 August 2021, George Matta updated Paynter Dixon that A-Civil was hoping to start by the end of the week, but it was difficult to get employees to the job due to the global pandemic.
On 23 August 2021, Paynter Dixon informed A-Civil that the cost of formwork to extend a wall from the top of MESO’s aluminium shutters would be passed back to A-Civil / MESO. Mr Orr asked for a detailed breakdown of the quotation provided by the formworker. Mr Mostafiz passed this request on to Paynter Dixon. Nasser Matta asked Paynter Dixon to proceed with the quote but to send a breakdown.
On 26 August 2021, George Matta asked MESO for its forecast program regarding the remaining RC wall, together with steel and concrete orders “so that we can organise everything to run smoothly”. Mr Orr was reluctant, advising on 27 August 2021 that he was in a difficult situation and could not afford to keep committing resources to the project and did not have the money to spare to pay wages and other costs. On 30 August 2021, Mr Orr emailed again after a discussion that morning, noting that the arrears were over $500,000 and he could not keep providing resources to the project without payments approximating the contract between them. Mr Orr proposed to reallocate his resources to projects where MESO was being paid until this could be sorted out and, absent resolution, would cease work on the site altogether.
On 1 September 2021, MESO issued a notice under s 27 of the Building and Construction Industry Security of Payment Act, suspending work. MESO also issued a payment withholding request to Paynter Dixon, claiming to be owed $558,075.69. The Date for Substantial Completion under the subcontract, being 1 September 2021, came and went.
EI Australia also provided a further inspection report on Wall 5. Mr Mostafiz asked Mr Orr to advise “when you can organi[s]e the rectification”. EI Australia recommended:

On 14 September 2021, a site meeting was held, attended by MESO. The meeting was prompted when significant movement in the footpath behind Wall 5 was noticed on arrival at site. Work stopped. The way forward was discussed. Photographs record obvious subsidence in the footpath and a loss of material at the bottom of the sheet piling for Wall 5.
Mr Orr asked MetAus to meet with MESO’s operations manager on site and discuss an appropriate approach, “With the rain last night it has washed material from behind the sheets where they pre-drilled which has led to some footpath subsidence. … it also looked like one of the anchors has been caught with a bucket when it was being excavated or something and reefed it”.
George Matta took photographs of anchors protruding out of Wall 5 and voids behind some of the sheet piles in Wall 5. He said the anchors did not show any damage caused by the excavation process. That may be so, but one of the anchors does look like it has been “reefed”, in that there is a gap between the anchor and sheet behind it, and the rod is bent. George Matta arranged for backfill material to be pushed against Wall 5 to prevent further subsidence beneath Wall 5.
Later that day, EI Australia advised that the movements and settlements of the footpath behind the sheet pile walls was “likely due to loss of the fill and soil material through the gaps between the sheet pile wall toe and the weathered shale beneath, which was also compounded by the build-up of water behind the sheet pile overtime”.
On 15 September 2021, Paynter Dixon required A-Civil to have MESO check the walls to confirm the adequacy of the anchors, given “the alarming findings today of 3 failed anchors”. Mr Orr rejected the suggestion that the anchors had failed, “We have never had failed anchors. I suggest your terminology is incorrect.” Paynter Dixon rejoined that, whatever the correct terminology was, the footpath remained closed with 24 hour traffic control and lane closure in effect.
MESO’s site diary for 15 September 2021 records, “Checked anchors that had been hit to see if they were still holding weights. 3 Anchors had been damaged and broken and could be removed by hand.” Mr Orr advised Paynter Dixon and A-Civil that the anchors in the area had been inspected closely that morning; three anchors had been compromised. The remainder of the area was successfully load-tested and the anchors held their design loads. MESO was in the process of placing and tensioning three replacement anchors and that would be done that day. The wall was “perfectly stable”. Mr Orr provided a shoring assessment report from MetAus that evening. The report stated that, in the third row of anchors, one anchor appeared to be heavily damaged and one anchor had its anchor plate not flush with the wall. The third row of anchors on sheet piles 90, 92 and 94 were damaged and needed to be replaced.
On 16 September 2021, George Matta proposed rectification work for the footpath. Paynter Dixon said they still wanted to shotcrete at the base the wall before the footpath was rectified “in case when you pull out the material below, all your work at the top sinks again”. On 17 September 2021, EI Australia confirmed that the shoring wall had been rectified and was stable to support the soil behind the wall. Recommendations were made for the procedure to rectify the footpath, which Paynter Dixon accepted.
On 22 September 2021, A-Civil carried out shotcreting works on site as recommended by EI Australia. George Matta said that MESO’s employees assisted with the steel-fixing. Paynter Dixon asked MESO to test the remaining anchors in the affected subsidence area. EI Australia inspected the site where the footpath had subsided and made further recommendations.
Nasser Matta said that he met with Paynter Dixon at about this time, when A-Civil’s excavation works were largely completed. He told Paynter Dixon that, in circumstances where A-Civil was close to completing its works which had not been subcontracted, Paynter Dixon could communicate directly with MESO in relation to the works that MESO needed to carry out. By that stage, MESO was carrying out works to install the reinforced concrete walls. He also said that Paynter Dixon needed to supply the concrete and steel to MESO for the reinforced concrete walls. He informed Mr Orr of the discussion shortly after the meeting.
On 23 September 2021, Paynter Dixon advised that it would be taking over organising concrete and reo supply, with costs to be on-charged to A-Civil and onto MESO. Mr Mostafiz said that Paynter Dixon then arranged for the supply of concrete and steel reinforcement for MESO’s works. Hanson issued invoices to Paynter Dixon for this concrete while Mesh & Bar Pty Ltd rendered invoices to Paynter Dixon for steel reinforcement supply.
On 24 September 2021, MESO provided a further letter from MetAus, confirming anchor inspection and testing. The report stated that one anchor at sheet pile 102 was not holding the required lock-off load and this was proof-loaded again. Following anchor testing, it was observed that the gap between the sheet piles and the retained soil had closed.
On 25 September 2021, A-Civil paid MESO $30,000 on account. On 28 September 2021, Mr Mostafiz asked Paynter Dixon what the rate for the steel and concrete would be so that he could inform MESO.
On 29 September 2021, EI Australia advised that part of the footpath could be reopened. EI Australia wanted to know who it should invoice, and Paynter Dixon suggested that A-Civil should be billed “as they need to recover this from their subcontractor”. EI Australia ultimately issued an invoice to Paynter Dixon who said “we will discuss with Subbie separately”.
On 30 September 2021, Mr Mostafiz also asked Paynter Dixon to send through a copy of the contract signed by Paynter Dixon, advising that A-Civil would not provide any further resources on site until it was received.
On 1 October 2021, A-Civil paid MESO $30,000 on account. George Matta said that A-Civil completed its works on the site in about mid-October 2021, which involved finishing detailed excavation and loading out the material. Mr Mostafiz said, “Only work was remaining there was MESO’s work.” Nasser Matta agreed that A-Civil did not complete all of the work under its contract with Paynter Dixon, but clarified that the portion of works which was not completed was that which MESO was supposed to perform under its subcontract.
According to the site diaries, 18 October 2021 was also MESO’s last day on the site for a little time. On 21 October 2021, MESO’s operations manager asked to remove the walling system so that other projects could be completed. Mr Orr said that MESO re-deployed its resources to other projects, as the company had commitments to other clients. He said it was very time consuming for MESO to pack up all of its equipment and transport this back and forth from the Parramatta RSL project and other projects the company was committed to.
MESO returned to site on 4 November 2021. On 4 November 2021, A-Civil paid MESO $50,000 on account. On 5 November 2021, Mr Mostafiz pressed Mr Orr on progress, asking Mr Orr to confirm that MESO would be on site tomorrow as Paynter Dixon had booked concrete. Mr Orr replied, “As I have discussed with Nasser, we all scheduled this work to be completed months ago and had committed to other projects for this part of the year. We can’t just wait around waiting at Paynter Dixon’s pleasure and jump whenever they decide. We are committed on other projects … neither A Civil nor MESO caused these delays … and so they are simply going to have to wait for us.”
On 6 November 2021, Paynter Dixon complained that MESO was nowhere to be seen. Mr Mostafiz passed this on to Mr Orr, also complaining that Paynter Dixon did not keep A-Civil advised of what it was discussing with MESO directly. On 9 November 2021, Paynter Dixon followed up MESO directly, and Mr Orr asked A-Civil to instruct their client to desist in this practice.
On Friday, 12 November 2021, Paynter Dixon requested A-Civil to return to site by 15 November 2021 as the RC wall was a critical path activity. Otherwise Paynter Dixon would engage an alternate subcontractor. Paynter Dixon also advised the costs of concrete and reo being supplied. Mr Mostafiz provided this email to Mr Orr late on Sunday night, 14 November 2021, noting, “The double shutter works need to be commence urgently (Tuesday – 16/11/2021).” Mr Mostafiz said he did not receive a response from Mr Orr in relation to his email but understood from his conversation with Mr Orr that MESO’s employees attended the site on 16 November 2021. Mr Mostafiz agreed that it would have been hard for MESO to organise itself in the time available.
On Tuesday, 16 November 2021, Paynter Dixon’s alternative contractors started work. MESO attended the site and saw that there were third party contractors forming B3. Mr Mostafiz complained to Paynter Dixon, “I am not sure what confirmation you are waiting from us as you already star[t]ed with your alternative contractor. Just for the records the steel fixation was completed by MESO in this wall.”
On Monday, 22 November 2021, Paynter Dixon asked A-Civil when the formwork shutters were returning to site. Alternative subcontractors would now commence the next area, B2, from 25 November 2021, with costs applied back to A-Civil. Paynter Dixon sent a follow-up on Friday, 26 November 2021. Mr Mostafiz provided Paynter Dixon’s email to Mr Orr and sought his advice at his earliest convenience. Mr Mostafiz received no response to this email. Paynter Dixon also approached MESO directly asking for the delivery of foam inserts for the Parramatta RSL project or the supplier’s details, “If not I will source elsewhere and back charges will incur accordingly”.
On 1 December 2021, Paynter Dixon contacted MESO again, requesting more foam and labour to complete its installation. Mr Orr asked Paynter Dixon to communicate with A-Civil, not MESO. On 2 December 2021, Paynter Dixon emailed A-Civil noting that works to the RC wall needed to be commenced on 11 December 2021, otherwise an alternative contractor would be engaged. A-Civil asked MESO. Mr Orr advised that its formwork system remained stuck on other sites, where MESO was experiencing substantial delays. A-Civil advised Paynter Dixon accordingly.
On 9 December 2021, Paynter Dixon advised A-Civil that it would continue with the shutters until further notice. Mr Mostafiz spoke to Mr Orr about the email. He then emailed Mr Orr, “As discussed at this moment you will only continue [to] place void formers and steel fixing from Monday 13/12/2021.” Paynter Dixon was so advised.
On 16 December 2021, Paynter Dixon advised A-Civil that the next area ready for a pour was B1 pour 2, with shutters needed on 5 January 2022. If this could not be achieved, then an alternative contractor would be engaged to complete and charged accordingly. A-Civil was asked whether MESO would return to install the reo and foam to the walls. MESO was asked. According to Paynter Dixon’s site diary, this was the last occasion on which MESO did any substantive work on site, being to finish the installation of reo in certain areas on B2. Mr Orr said that MESO carried out some minor steel fixing on the project on 15 and 16 December 2021.
On 21 December 2021, Mr Mostafiz asked whether the work could be put back to the end of January 2022. Paynter Dixon advised that they could push the work back to 17 January 2022 but otherwise would need to engage an alternate contractor in order not to come to a stop. On 23 December 2021, A-Civil paid MESO $40,000 on account.

On 11 January 2022, Paynter Dixon emailed Mr Mostafiz and MESO’s operations manager, noting that Paynter Dixon had spoken to MESO about the installation of reo and sought confirmation “we can get men accordingly”. According to Paynter Dixon’s site diary, this was the last occasion on which MESO attended the site, being to “pick up scaffold”.
On 12 January 2022, MESO’s operations manager emailed Paynter Dixon and Mr Mostafiz, advising that he had tried to allocate men for the project but was “dropping men daily” and could not commit any resources. Mr Orr had been asked to see if the project could be accommodated “but with still no outcome on man power”. On 13 January 2022, Paynter Dixon confirmed that it would organise labour to complete on MESO’s behalf.
On 18 January 2022, MESO submitted Payment Claim No 13 for $123,860.20 plus GST, with the amount outstanding then said to be $269,128.39 (including GST). MESO claimed 100% completion of Basement levels 2 and 3 reinforced concrete walls, 67% completion of Basement level 1 walls and 54% completion of the ground floor walls. MESO allowed ‘credits’ or negative variations for concrete and steel supplied by A-Civil. On 19 January 2022, A-Civil submitted Progress Claim No 12 to Paynter Dixon, being $169,133.92 plus GST. Included in the payment claim was a payment claim breakdown for MESO, repeating the percentage completion stated in MESO’s Payment Claim No 13.
On 20 January 2022, Paynter Dixon circulated a program update to A-Civil and MESO, seeking confirmation that “you will have men and materials to start on the[se] dates” and confirming that a third party contractor would continue forming and pouring as a backcharge. Paynter Dixon followed up A-Civil and MESO on Sunday, 23 January 2022, noting that MESO’s operations manager had attended the site on Saturday “and was going to give an answer by the end of the day”. A response was sought before noon on Monday, 24 January 2022, “so I can arrange other labour on your behalf”.
In the wee hours of 24 January 2022, Mr Orr emailed George Matta, advising that MESO could not keep returning to site with materials and men to undertake the work if A-Civil or MESO was not being paid. The amount of money owing was said to be quite large; he understood that A-Civil was also owed a substantial amount of money. If Paynter Dixon were not paying in accordance with the contract, then Mr Orr said it made no sense to become further exposed to what would, in the end, become a legal dispute.
At the end of that day, at 5.00 pm, Mr Orr emailed again, noting that Paynter Dixon had contacted MESO’s operations manager directly, “we can only take our instructions from ACivil”. Mr Orr had apparently tried to speak to Mr Mostafiz and George Matta without success to try to determine what action should be taken but, “As of right now in the absence of that we have not put any plans in place to provide materials or staff to the site.”
Mr Mostafiz agreed that Mr Orr was indicating that he was waiting on A-Civil to give him further instructions to attend to work under the contract. Mr Mostafiz agreed that he did not issue MESO with any instruction to carry out work in 2022. But Mr Orr’s emails are a little contrived, given the history of this project. Mr Orr had been communicating directly with Paynter Dixon for some time. In fact, Mr Orr had received a call from Paynter Dixon that day. He said that MESO did not complete any further works on the project as Paynter Dixon had advised it would arrange for the remaining walls to be placed.
I accept Mr Mostafiz’s evidence that he did not issue any stand down orders to MESO, nor was he aware of any instructions given to MESO to stand down. Where MESO’s employees who would have been the recipients of such stand down orders did not give evidence, I infer that their evidence would not have assisted MESO. Mr Orr appears to have been simply unable to commit any further resources to this project given the other projects on which MESO was engaged.

On 1 February 2022, Paynter Dixon assessed A-Civil’s Progress Claim 12 and issued a payment schedule, allowing $ nil for the claim made and asserting that A-Civil / MESO had not achieved completion to the extent claimed and noting that the remainder of the works had been “completed by others”. In addition, Paynter Dixon claimed various back-charges including:
the cost to engage another subcontractor to complete a portion of A-Civil’s contracted works, being a concrete pump, steel fixing and formwork for the RC shoring walls, in the amount of $365,514 (BC02);
the cost to supply and install starter bars to the reinforced concrete walls, said to form part of A-Civil’s contracted works, being $19,391 (BC03);
the rectification cost of the shoring wall collapse “caused by A-Civil” including asphalt works to rectify the footpath and pedestrian control, being $44,427 (BC12);
the cost of supplying concrete and reinforcement to the RC shoring walls, being $161,829.70 (BC17); and
the estimated cost to complete the RC shoring walls, being $184,744 (BC19).
The Payment Schedule tallied a deficit of $898,358.04 plus GST against A-Civil and in favour of Paynter Dixon, of which $775,905.70 related to the back-charges set out above. Mr Mostafiz said that the difference between these figures was to do with defective works which A-Civil had carried out. Each back-charge was detailed in a separate table supported by accompanying invoices and reports. A-Civil provided the back-charges to Mr Orr for his assistance in preparing a reply. The email to Mr Orr included the Dropbox link that had been provided by Paynter Dixon to A-Civil and, as such, Mr Orr had access to the supporting detail and documentation for each back-charge.
On 9 February 2022, Mr Mostafiz advised Paynter Dixon that, pursuant to cl 21.1(a) of the contract, A-Civil was disputing the assessment of Progress Claim No 12 and would submit a formal reply in due course, “however Nasser is happy to sit for a meeting with [Paynter Dixon] and MESO”. On 1 March 2022, Paynter Dixon created a list of eight “Defect items for … Stage 2 Car Park Parramatta RSL”, all of which were “assigned” to Mr Mostafiz to rectify.
The parties met on 3 March 2022. Nasser Matta did not attend the meeting; Mr Mostafiz and contract administrator George Agha attended for A-Civil. Mr Orr attended for MESO. According to later emails from Mr Bobek, “Tim argued these points [in respect of back-charges] in the meeting at Paynter’s” before “he excused himself as commercial discussions that concerned [A-Civil] and Paynter [Dixon] were about to be raised”.
Mr Mostafiz told Paynter Dixon in the meeting that some of the back-charges were excessive, including the estimated cost to complete the RC shoring walls in BC19. He blamed Paynter Dixon for causing interruptions to A-Civil progressing the work on some of the items. Mr Mostafiz said that no agreement was reached.
After the meeting, A-Civil did not proceed to provide any formal response to the payment schedule. Paynter Dixon did not pay A-Civil the sum claimed in Payment Claim No 12. A-Civil did not pay any part of the payment schedule. Nor did A-Civil return to the site to address any of the defect items. Nor did Paynter Dixon provide A-Civil with a definitive amount for BC19.
After the meeting, MESO also emailed A-Civil, endeavouring to work together to persuade Paynter Dixon to pay for their work. Mr Bobek advised Nasser Matta on 1 April 2022, “I can understand not paying for part of the walls to which we will and have indicated we are prepared to sit and work out a reasonable figure for backing out this part of the contract.” On 1 May 2022, MESO submitted Payment Claim No 15. Mr Bobek’s cover email explained that MESO had “calculated a fair price for the basement walls on past emails from Paynter [Dixon] and their form worker.” As I understand it, MESO took into account the work which it had not done and which Paynter Dixon had arranged to be done by another subcontractor. I have not been able to spot the difference.
On 30 May 2022, MESO submitted Payment Claim No 16, effectively reducing its earlier payment claims. (Presumably, this allowed for the back-charges which was to be included in a previous payment claim, but was not.) The total amount now owing was said to be $366,813.79. In its final payment claim, MESO stated that the Works were 100% complete. MESO allowed ‘credits’ or negative variations for:
the supply of steel and concrete by A-Civil;
works not required; and
back-charges for reinforcing, formwork and concrete placement, totalling $131,258.78, which I take to be work under the subcontract which MESO accepted it had not performed and was performed by another subcontractor.
On 4 August 2022, MESO lodged an adjudication application. On 5 August 2022, MESO gave Paynter Dixon a notice of withholding request. On 12 August 2022, an adjudication determination was issued: A-Civil was to pay $366,813.79 including GST to MESO by 30 June 2022. That is, the final payment claim was allowed in full. On 17 August 2022, MESO provided the adjudication determination to Paynter Dixon. On 24 August 2022, A-Civil filed a Summons, challenging the validity of the adjudication determination.

On 26 August 2022, Paynter Dixon emailed Mr Mostafiz and Nasser Matta, “Further to our meeting please find attached Deed of Release for your signing and return.” Mr Mostafiz said there was no meeting with Paynter Dixon in August 2022. On receipt of the email, Mr Mostafiz wondered whether Paynter Dixon was referring to the meeting on 3 March 2022. He reviewed the deed of release and discussed it with Mr Matta. Mr Mostafiz did not sign the deed, as he said this was a decision for Mr Matta. Mr Mostafiz did not respond to Paynter Dixon’s email either, but left the matter with Mr Matta.
Nasser Matta said he read the title of the email and attachment but “I ignored it because I was at no meeting”. He briefly looked at the deed, “and I could see it was all one-sided. And as I just didn’t attend any meeting, I just ignored it.” He did not respond to the email nor have any discussions with Paynter Dixon after August 2022 regarding the deed.
I accept Mr Mostafiz’s evidence that the only meeting he attended with Paynter Dixon to discuss back-charges, or any resolution of the contract or the Parramatta RSL project, was the meeting on 3 March 2022. He was a credible witness. There are no contemporaneous records (other than perhaps the cover email) which point to any subsequent meeting. Where Paynter Dixon had received a notice of withholding request from MESO on 5 August 2022, followed by an adjudication determination on 17 August 2022, Paynter Dixon was likely prompted to follow up what had been discussed at the meeting on 3 March 2022.
Looking at the terms of the proposed deed, the recitals noted that Paynter Dixon and A-Civil wished to settle the balance of the terms of their contract on the basis set out in the deed. The proposed operative parts provided:
the parties agreed that A-Civil was no longer required to carry out any works required under the contract: cl 1;
A-Civil agreed that there were no further monies due and owing under the contract and Paynter Dixon had authority to proceed to claim the balance of any retention monies held: cl 2;
A-Civil warranted inter alia that its subcontractors had been paid in full for work carried out in relation to the contract: cl 3(iii); and
while A-Civil continued to have obligations in the defect liability period or retention period, the parties otherwise released each other from their obligations under the contract: cll 5 and 6.
Paynter Dixon appears to have been prompted to attend to other housekeeping in respect of the Parramatta RSL project as well. On 25 September 2022, Paynter Dixon made an entry on a “Sub Contractor Status Card” in respect of A-Civil and the Parramatta project, reducing the contract value by $384,911.51. The description for this entry was “Release remaining contract value as remaining works completed by others”.
It is convenient to deal with MESO’s contention that A-Civil failed to mitigate its loss by not signing the deed of release: Bailey v Redebi Pty Ltd [1999] NSWSC 918 at [102] (Santow J). Had it done so, any liability of A-Civil to Paynter Dixon would have been “waive[d], release[d] and forever discharge[d]” and, as such, A-Civil would have avoided a loss altogether. The effective cause of the plaintiff's loss was said to be its own failure to mitigate. A defendant will not, as a matter of causation, be held liable for the plaintiff's loss: J Bailey, Construction Law, (Vol II, 2016, Informa Law) at [13.124].
In assessing loss for breach of contract, “loss which is due to unreasonable or improvident actions of the plaintiff is generally disregarded by application of the rules of mitigation of loss”: Cessnock City Council v 123 259 932 Pty Ltd (2024) 281 CLR 39; [2024] HCA 17 at [120] (Edelman, Steward, Gleeson and Beech-Jones JJ). Only reasonable steps need be taken in mitigation: Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603; [1998] HCA 38 at [134] (Hayne J). What is reasonable for a person to do in mitigation of damages is a question of fact in the circumstances of each case: Payzu Ltd v Saunders [1919] 2 KB 581 at 589 (Bankes LJ); British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673 at 688-9 (Viscount Haldane LC); Regional Development Australia Murraylands and Riverland Inc v Smith [2015] SASCFC 160 at [139] (Nicholson J, Gray and Sulan JJ agreeing). Where it is contended that a plaintiff should have taken steps by way of mitigation, the onus of proof is on the defendant: Cessnock City Council v 123 259 932 at [121], citing TC Industrial Plant Pty Ltd v Robert’s Queensland Pty Ltd (1963) 180 CLR 130 at 138 (Kitto, Windeyer and Owen JJ); [1963] HCA 57.
The defendant has not discharged this onus. By the time that the deed was received on 26 August 2022, A-Civil was in no position to give the warranty referred to in cl 3(iii) of the deed, being that its subcontractors had been paid in full for their work. MESO had recently obtained an adjudication determination in its favour, requiring A-Civil to pay $366,813.79, which A-Civil was in the process of challenging.
Nor does it follow that A-Civil would have suffered no loss or damage if it signed the deed. True it is that Paynter Dixon could no longer pursue A-Civil for the amounts calculated in the payment schedule. But A-Civil would have had to surrender its right to recover monies owed, which Nasser Matta said then stood at $419,257.95. A-Civil would also lose its ability to recover retention monies of $99,135.
Without further negotiation of cl 3(iii) of the deed, A-Civil was in no position to sign the deed as presented. And whether A-Civil should sign the deed at all depended on an assessment by Mr Matta of what A-Civil would gain or lose by doing so. That was a commercial assessment which he was well-placed to make. There is insufficient evidence to conclude that a decision not to sign the deed was unreasonable or improvident.

In November 2022, A-Civil commenced these proceedings, seeking a declaration that MESO had failed to comply with its obligations under the subcontract. A-Civil sought damages or, in the alternative, an order under s 32(3) of the Building and Construction Industry Security of Payment Act.
On 27 March 2023, Paynter Dixon closed the relevant items on its defects list in respect of the Parramatta RSL carpark, notwithstanding that most of the defect items were recorded as requiring work by A-Civil.
In May 2023, Richmond J made orders dismissing the Summons filed by A-Civil against MESO in respect of the adjudication determination. The monies paid into Court by A-Civil, being $375,012.75, were to be paid out to MESO.
On 17 August 2023, Paynter Dixon made a final entry on the “Sub Contractor Status Card” in respect of A-Civil and the Parramatta RSL project, reducing the contract value to nil after deducting $99,135.98 with the narration “UNCLAIMED RETENTION”. Retention monies of $99,135.98 was “taken up”.
On 20 September 2023, A-Civil amended its pleadings, seeking an additional declaration that MESO was obliged to indemnify A-Civil for its liability to Paynter Dixon, including for liquidated damages, and restitution for the monies paid to MESO in compliance with the order made by Richmond J.
As to whether A-Civil has paid liquidated damages to Paynter Dixon, Mr Mostafiz said “So far, no”. Mr Mostafiz agreed that A-Civil did not request a certificate of completion or receive a notice certifying completion. Nasser Matta said that A-Civil has not “at this stage” pursued Paynter Dixon for monies owing of $419,257.95 for the project “because Paynter Dixon makes claims against A-Civil”. Mr Matta said that he is concerned that $419,257.45 has not been paid to A-Civil, and that Paynter Dixon can pursue A-Civil for the difference between that amount and the payment schedule, being $568,935.89. Nor has Paynter Dixon sought to recover monies owing from A-Civil.

As a general proposition, that is undoubtedly correct. The contract in Re Concrete Constructions provided that payments by either the contractor or the principal “shall not prejudice the right of either party to dispute … whether the amount so paid is the amount properly due and payable …”. But it remains the case that the parties to a contract may always make a different agreement.
There is a distinct difference in the drafting of adjacent sub-cll 17.4(b) and 17.4(c). If Paynter Dixon’s assessment of a Payment Claim results in an amount to be paid to A-Civil, then cl 17.4(b) provides that payment by Paynter Dixon of the Payment Claim is “payment on account only”. But if Paynter Dixon’s assessment of a Payment Claim results in an amount to be paid by A-Civil, then cl 17.4(c) does not provide that this will be “payment on account only”. A sensible, objective construction of the sub-clauses is that the contrast is deliberate: see, for example, Uber Builders and Developers Pty Ltd v MIFA Pty Ltd [2020] VSC 596 at [56] (Nichols J). The different drafting suggests that the parties intended that a payment by A-Civil under cl 17.4(c) would not be on account only.
Further, if the amount specified in the Payment Schedule was only “due” from A-Civil to Paynter Dixon under cl 17.4(c) on a final accounting at the end of the contract, then cl 17.4(c) would become largely redundant. A-Civil was entitled to submit a Payment Claim once every month: cl 17.2(a)(i). If Paynter Dixon’s assessment of the Payment Claims resulted in an amount to be paid by A-Civil, then MESO’s proposed construction would have the result that Paynter Dixon would have to wait until completion of the contract for its money in respect of such assessments. As Ball J noted in AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd [2010] NSWSC 985, “The general principle is that the words of a contract should be interpreted in a way which gives them an effect rather than a way in which makes them redundant”: at [13]. This tells against MESO’s proffered construction.
Finally, MESO’s proffered construction is inconsistent with the terms of cl 17.4(c) itself, which requires that any amount due from A-Civil to Paynter Dixon under the Payment Schedule is to be paid “within 5 (five) Business Days of the Payment Schedule being issued”, not at the end of contractual performance. When cl 17.4(c) is read in its entirety, the reference to an amount being “due” is a reference to the ‘bottom line’ of the Payment Schedule, that is, that Paynter Dixon’s assessment of the Payment Claims has resulted in an amount to be paid by A-Civil. It follows that A-Civil was obliged to pay the amount in the Payment Schedule to Paynter Dixon under the head contract.
Turning to the subcontract, cl 10.10 of the General Conditions concerned “Pass Through Obligations”, defined as the provisions of the head contract having back-to-back application to the subcontract: cl 2.1. MESO was obliged to comply with Pass Through Obligations so that A-Civil could satisfy its obligations under the head contract: cl 10.10(b). The provisions of the head contract had back-to-back application to the subcontract in relation to the Works, with the obligations of A-Civil and the rights and remedies of the principal deemed to be incorporated into the subcontract: cl 10.10(d). Further, cl 10.10(i) of the General Conditions provided:

The clear import of these provisions is that MESO was obliged to pay the amount in the Payment Schedule to A-Civil, so that A-Civil could pay that amount onto Paynter Dixon under the head contract.
The next question is what implications, if any, do A-Civil’s subsequent “commercial discussions” with Paynter Dixon have on these obligations? In short, have A-Civil and Paynter Dixon subsequently agreed that A-Civil is not obliged to pay the amount in the Payment Schedule in accordance with cl 17.4(c) of the head contract or at all? Accepting that MESO’s Pass Through Obligations do not depend on Paynter Dixon having exercised its rights, has Paynter Dixon agree to forego those rights: cl 10.10(i)(v), General Conditions?
I have earlier set out the relevant principles. Paynter Dixon’s cover email, circulating the Deed of Release stated, “Further to our meeting please find attached Deed of release for your signing and return.” The cover email suggests that the author considered the deed of release as suitable to be signed and returned, that is, reflecting what had been discussed at the meeting on 3 March 2022. The deed recorded, effectively, an agreement to ‘walk away’, with the parties to forego their claims against one another save that Paynter Dixon could claim the balance of the retention monies and A-Civil continued to have responsibilities in the defect liability period.
Nasser Matta’s evidence that he simply ignored the email and deed of release as “I was at no meeting” is unlikely, where A-Civil had two representatives at that meeting. The fact that Mr Matta did not attend himself did not make the meeting irrelevant. Mr Mostafiz said that he discussed the deed of release with Mr Matta on receipt, and I accept that they did so. Presumably, they spoke about whether the deed of release reflected the “commercial discussions” which took place on 3 March 2022, for which Mr Orr “excused himself”: see [225]. But the deed of release was not signed.
Mr Matta gave evidence on this subject orally, in chief. He appeared quite stressed at the time. Mr Matta was careful to say that he had no discussions with Paynter Dixon “regarding this deed” or “in regard to this email or deed”. As a matter of impression formed at the time, I inferred that Mr Matta may have had other discussions with Paynter Dixon which he regarded as falling outside this description.
Paynter Dixon and A-Civil have subsequently conducted themselves consistently with an agreement to ‘walk away’ in the following three years. Paynter Dixon has taken up the retention monies and closed the defect items relevant to A-Civil’s works. Paynter Dixon has not sought to enforce any of its rights under its contract with A-Civil. Perhaps the fact that the head contract was never finalised, so far as the evidence reveals, had something to do with Paynter Dixon’s approach.
And the subsequent conduct of the parties – which is consistent with an agreement to ‘walk away’ – is very telling. Having read the contemporaneous communications between Paynter Dixon and A-Civil during the course of the Parramatta RSL project, the head contractor actively managed A-Civil and, later, MESO’s performance of the works. Paynter Dixon communicated with A-Civil and, later, MESO, promptly and frequently. Despite the absence of a finalised contract, Paynter Dixon did not take a backward step in its dealings with A-Civil. By sharp contrast, there is then three years of silence.
In the result, I find that A-Civil and Paynter Dixon agreed informally to simply ‘walk away’. My finding in these proceedings does not, of course, bind Paynter Dixon, which is still within time to enforce its rights to have the amount in the Payment Schedule paid or to claim liquidated damages. And fortunately, this possibility is addressed by the very nature of an indemnity.
In Canty v Paperlinx Australia Pty Ltd [2014] NSWCA 309, Gleeson JA (Barrett and Emmett JJA agreeing) described the difference between a guarantee and an indemnity. A guarantee is “a binding promise of one person to be answerable for the debt or obligation of another if that other defaults … The distinctive feature of a contract of guarantee is the secondary nature of the obligation which is assumed by the guarantor. There must be another person who is primarily liable”: at [38]. By contrast, “under an indemnity, a person assumes a primary liability. A contract of indemnity is “a contract by one party to keep the other harmless against loss” and is not dependent on the continuing liability of the principal debtor. An indemnity is an independent obligation to make good a loss”: at [39].
And the appropriate remedy here is to grant the declaratory relief sought by A-Civil such that, in the event that Paynter Dixon does seek to recover the sum specified in the Payment Schedule or liquidated damages, then MESO will be obliged to keep A-Civil harmless against that loss. The extent to which MESO is obliged to make good that loss turns on whether MESO is obliged to indemnify A-Civil in respect of the back-charges or liquidated damages on the proper construction of the indemnities in the subcontract.
Clause 3.2(b) of the subcontract provides:

MESO did not cavil with the proposition that the Payment Schedule was a “Claim” but submitted that A-Civil’s reliance on cll 3.1 and 3.2 was misconceived, where A-Civil had not sought to identify or prove any breach of these clauses. The fact that the Date for Substantial Completion was not achieved did not prove that, when or how MESO failed to complete the work diligently, without delay and with due expedition. The indemnity was said to be triggered on MESO’s breach of contract and its liability was reduced to the extent that A-Civil contributed: cl 10.11(b). That sub-clause must apply to cll 3.2(b) and 3.4(c), otherwise it would have little work to do.
I accept MESO’s submission that it is necessary to establish that the back-charges or liquidated damages arise from MESO’s breach of the subcontract, at least in respect of the indemnities given by MESO in cl 3.2(b) and cl 10.11(a)(i). The same requirement to establish a breach by MESO is not present in the indemnities given in cl 10.11(a)(ii) or (viii). Those sub-clauses do require, however, that there is a “negligent or wrongful act or omission” on the part of MESO, or an “act, omission or default”. That is, MESO’s obligation to indemnify A-Civil is not at large but depends upon MESO failing in some way to attend to its obligations under, or duties arising out of, the subcontract.
The connection between MESO’s breach of the subcontract / negligence / act or omission and the Claim does necessarily need to be direct, but “arising out of or in connection with” such breach (cl 3.2(b)) or “arising out of, whether directly, or indirectly, in connection with” such breach (cl 10.11(a)(i)). The expression “arising out of” generally requires an element of cause or consequence, but not a direct or proximate relationship that might be required by the words “caused by”: State Government Insurance Commission v Stevens Brothers Pty Ltd (1984) 154 CLR 552 at 555, 559 (Murphy, Wilson, Brennan and Deane JJ); [1984] HCA 32. The words “in connection with” are “capable of describing a spectrum of relationships ranging from the direct and immediate to the tenuous and remote”, but “do not require a causal connection between the matters said to be connected”: CSR Ltd v Adecco (Australia) Pty Ltd [2017] NSWCA 121 at [210] (McColl, Macfarlan and Simpson JJA) and the authorities cited there. The phrase has been described as “ambulatory words” covering a variety of relationships between the specified subjects: R v Khazaal (2012) 246 CLR 601; [2012] HCA 26 at [31] (French CJ).
But I do not accept MESO’s submission that MESO’s liability is reduced to the extent that A-Civil contributed to that liability. Clause 10.11(b) provides that MESO’s liability to indemnify A-Civil will be reduced proportionately to the extent that A-Civil caused or contributed to the Damages. That term is separately defined in the subcontract as follows:

Nasser Matta said that, after the COVID-19 construction lockdown, the project site was reopened for works but MESO had committed its crews to work elsewhere. Ultimately Paynter Dixon engaged another subcontractor to complete reinforced shoring walls that MESO was supposed to complete, but did not. That does appear to be what happened.
A-Civil submitted that $365,514 was substantiated by the invoices issued by Capital Form, and the liability for same arose under cl 17.4 of the contract. It did not matter that MESO later reduced its claim for payment on the basis that it did not perform these works; that ‘credit’ does not answer the claim of A-Civil for indemnity. MESO’s failure to complete the works was a breach of the subcontract and put A-Civil in breach of its contract with Paynter Dixon.
MESO submitted that these costs were wildly excessive as compared to the costs of A-Civil and MESO to complete the works under their contracts. That these costs were more than double what A-Civil would have charged for these works could not be attributed to establishment costs of having a new contractor carry out the works, as Capital Form was already on site. Paynter Dixon was said to have both deducted the value of A-Civil’s cost to complete the work and back-charged A-Civil in the amount of the alleged cost to complete. This would mean that Paynter Dixon got the walls for free.
While MESO accepted that it requested steel fixers to assist it on 10, 11, 20 and 21 September 2021 and 7 October 2021, the remaining attendances by Capital Form on 2 September 2021, 19, 25, 26 and 29 November 2021, 2, 15 and 21 December 2021 and 25 January 2022 were said to be not caused by MESO. MESO was not on site on 2 September 2021 because it had suspended the Works under s 27 of the Building and Construction Industry Security of Payment Act. MESO was not liable for any loss or damage suffered by A-Civil as a consequence of MESO not carrying out work during the period of suspension: s 27(3) of the Building and Construction Industry Security of Payment Act. On 19 October 2021, MESO was not onsite because it had been instructed by Paynter Dixon and A-Civil to stand down from 19 October 2021 indefinitely. (I do not accept this.) Paynter Dixon was required to engage Capital Form to carry out RC Wall Works in November and early December 2021 because A-Civil did not pass on Paynter Dixon’s directions to do works in November until after the deadlines imposed by Paynter Dixon. (I do not accept this either.) MESO did not carry out works on 25 January 2022 because A-Civil did not instruct MESO to do so. (Where MESO had been taking instructions from Paynter Dixon directly for some time, it is unclear why MESO needed instructions from A-Civil directly again. More likely, MESO was engaged on other projects elsewhere and had no interest in returning to site.)
The only question that I need to answer is whether this back-charge arises out of or in connection with any breach by MESO of its obligations under the subcontract. And it clearly does. MESO was obliged to perform this work under the subcontract and did not do so. That was not because A-Civil gave a direction for MESO to stand down, or failed to give a (self-evident) direction that MESO should continue its work. It was because MESO diverted its equipment and manpower from the Parramatta RSL work site during the COVID-19 lockdown and, on resumption of work on site, struggled to re-divert its equipment and manpower back to the site again. Paynter Dixon and A-Civil tried for some time to use MESO to complete this work, but were unsuccessful. Paynter Dixon engaged another subcontractor, having given fair warning that that was what it was going to do.
It may be that the back-charge is excessive. It is not necessary for me to fix a precise quantum for this back-charge, including because such a determination will not bind Paynter Dixon. But this back-charge is certainly a Claim “arising out of or in connection” with a breach by MESO of its obligations under the subcontract. Should Paynter Dixon ever pursue this back-charge, then MESO is obliged to indemnify A-Civil against the Claim.

The “comments” part of the payment schedule noted, “Work in progress as not all the contracted starter bar works to the RC walls are completed. Refer to the attached schedule and material / labour invoices for details. Refer to attached shoring wall drawings (S0625/T1 & S0626/T1) which detail the connection point. Please refer to the signed scope of works (item 6(w)) which details the starter bar works. Works omitted from your contract are pursuant to clause 16 & 17.8 of your signed contract agreement.”
Paynter Dixon provided supporting invoices for tools and injectable mortar, together with labour hire. In addition, relevant emails were provided, together with a marked-up Paynter Dixon scope of works related to perimeter walls and starter bars and structural drawings of walls.
A-Civil submitted that this formed part of A-Civil’s scope of works under the contract and was part of MESO’s Works under the subcontract, being required under the For Construction drawings prepared by Meinhardt and referred to in Annexure M. Mr Mostafiz’ email of 23 June 2021 did not change this. He there noted that cog bars were excluded and not part of the design, in particular, in answer to a proposed deletion by MESO of parts of the A-Civil scope of works under the contract with Paynter Dixon. Mr Mostafiz also stated that, as the subcontract was to be “back-to-back”, nothing was to be crossed out. As such, the subcontract maintained the full scope of works.
A-Civil submitted that it engaged with Paynter Dixon to determine whether it was possible to change the Meinhardt design to allow for an alternate methodology that would work better with MESO’s aluminium shutter formwork. Ultimately, and despite procuring an alternative design, Paynter Dixon determined not to amend the design, leaving A-Civil and MESO with the agreed scope of works. As MESO did not carry out the work to install the L bars, Paynter Dixon engaged alternate contractors. In circumstances where A-Civil had now incurred a liability to Paynter Dixon in respect of BC03, it was entitled to be indemnified by MESO for same.
MESO submitted that the installation of starter bars for the concrete walls was within A-Civil’s scope of works but was not a part of MESO’s scope of works.
MESO’s contractual obligations in relation to the starter bars is one of the messier elements of the contractual relationships between the parties. Mr Orr’s objection to this element of the scope of works was raised early and often. A-Civil pressed Paynter Dixon to have the work performed in the manner suggested by Mr Orr. Paynter Dixon does appear to have tried to accommodate Mr Orr, including paying for a redesign to allow MESO to deploy its usual methodology.
But the Scope of Works is to be found in the subcontract as executed. The subcontractor was obliged to carry out and complete the Works: cl 3.2. Annexure A, Item 1 included a brief description of Works as follows:

Annexure J was not used. As such, MESO’s scope of works was defined in Annexure M. This included Item 23, which was identical to Item 6(w) in the head contract: see [64]. Under this Scope of Works, MESO was obliged to undertake this work. The problem is that there is an inconsistency between the Scope of Works in Annexure M and the Scope of Works in Annexure N. The inconsistency arises because Annexure N was a redundant copy of the head contract, which had been submitted by A-Civil to Paynter Dixon four months earlier with proposed amendments, but not accepted. This confusion is also resolved by the subcontract.
Clause 2.1 of the Formal Instrument of Agreement lists the Contract Documents in their order of precedence, where the Head Contract ranks above Annexure M. Should the Contract Documents contain inconsistencies, these are to be resolved by reference to this order of precedence: cl 2.5. By cl 4 of the Formal Instrument of Agreement, MESO acknowledged that the terms and conditions of the head contract between A-Civil and Paynter Dixon would have ‘back-to-back’ application to the subcontract; MESO agreed to be bound to A-Civil “by the like obligations” by which A-Civil was bound to Paynter Dixon under the head contract.
As such, the Scope of Works in the head contract at Annexure N had precedence over the Scope of Works in Annexure M. The fact that the redacted head contract at Annexure N included amendments which had not been accepted by Paynter Dixon did not, I think, change MESO’s obligations under the subcontract. The subcontractor could only agree to be bound to A-Civil by the back-to-back application of the head contract which it had seen, as annexed to the subcontract.
As such, failure to complete this work was a breach of A-Civil’s obligations under the head contract, but was not a breach of MESO’s obligations under the subcontract. As this back-charge does not arise out of or in connection with any breach by MESO of its obligations under the subcontract, MESO is not obliged to indemnify A-Civil against any Claim in respect of this back-charge.

The “comments” part of the payment schedule noted, “The sheet wall moved and caused footpath to sink, this was a safety matter created by the sheet pile wall not reaching adequate rock strength. Associated costs of monitoring, safety, Traffic control, rectification apply. Refer to the attached for details on the cost break-up. [R]efer to the attached photos for details of the wall movements and damaged caused. Works omitted from your contract are pursuant to clause 16 & 17.8 of your signed contract agreement.”
In support of this back-charge, Paynter Dixon provided invoices from EI Australia for site visits on 15 and 22 September 2021 for inspection of footpath settlement together with invoices for traffic controllers, asphalt works, photographs of the footpath collapse and a traffic management plan.
Mr Mostafiz explained that BC12 included costs incurred by Paynter Dixon to Renville Contractors Pty Ltd, which was for rectification work to the footpath. He said that MESO did not install the sheet piles in accordance with the design. While he asked Mr Orr to organise rectification works in September 2021, and followed him up, MESO did not do so notwithstanding that the sheet pile shoring system was designed and installed by MESO.
A-Civil submitted that BC12 arose directly out of a need to manage the consequences of MESO’s failure to construct Wall 5 in accordance with the approved design or functional requirements. The temporary shoring system was designed by MESO together with its engineering company, MetAus. The As-Built sheet piles for Wall 5 did not match the design. Mr Mostafiz had prepared a side-by-side comparison, which demonstrated the relative shallowness of a number of the sheet piles that had allowed subsidence and caused a loss of support and damage to the footpath. His evidence was not challenged. George Matta gave evidence as to why A-Civil could not have been the cause of the subsidence and his evidence was not challenged either.
MESO submitted that it had not been proved that the footpath collapse was caused by its “failure, neglect and refusal” to carry out the Works in accordance with the subcontract. There were a number of possible causes. On 15 September 2021, the design engineer found that the third-row anchors on sheet piles 90, 92 and 94 had been “damaged” and “one anchor appeared to be heavily damaged”.18 The day before, Mr Orr observed that “it also looked like one of the anchors has been caught with a bucket when it was being excavated or something and reefed it”. On the same day, Paynter Dixon emailed representatives from EI Australia, A-Civil and Meso stating “we are unsure how long [the affected anchor] has been failed or hit”.18 (emphasis added) There was no evidence that made it more probable that the anchor had “failed” as opposed to being “hit” or “damaged”.
MESO submitted that, in any case, contrary to the assertions of Paynter Dixon and A-Civil, the geotechnical engineer did not express the opinion that the footpath collapse was caused by a “failed” anchor. The geotechnical engineer expressed the opinion that “… the movements and settlements of the footpath behind the sheet pile walls is likely due to loss of the fill and soil material through the gaps between the sheet pile wall toe and the weathered shale beneath, which was also compounded by the build-up of water behind the sheet pile overtime. The geotechnical engineer did not explain how “likely” it was that the footpath collapse was “due to loss of the fill and soil material through the gaps between the sheet pile wall toe and the weathered shale beneath”. Nor did he express an opinion as to what created the “gaps” between the sheet pile wall toe and the weathered shale beneath. EI Australia had previously expressed the opinion that gaps between the sheet pile and the rock on Wall 5 had been created by the method of excavation. There was no evidence to suggest that the footpath collapse would not have been avoided had the geotechnical engineer’s recommendations of 1 September 2021 been implemented.
MESO submitted that one of the expenses in BC12 was the cost of Renville Contractors to carry out “Asphalt Works”. Those works were originally undertaken by A-Civil on 30 September 2021 but it then “abandoned the site”. On 9 October 2021, Renville Contractors were engaged to rectify A-Civil’s footpath rectification works, according to Paynter Dixon’s site diary. A significant amount of the costs claimed under BC12 did not relate to rectifying the footpath collapse but instead related to rectifying A-Civil’s defective work in attempting to rectify the footpath collapse. (This submission, which was largely assertion, does not deal with the problem that the footpath may not need to have been rectified in the first place but for the suggested deficiencies in MESO’s design and construction of Wall 5 below it.)
There is no dispute that the design and construction of Wall 5 was the responsibility of MESO. In order for MESO to be obliged to indemnify A-Civil in respect of this back-charge, it is necessary to be satisfied that the back-charge arises out of or in connection with a breach by MESO of the subcontract or a “negligent or wrongful act or omission” or an “act, omission or default”.
I did not have the benefit of expert evidence on this subject. I did have contemporaneous records, which indicate that concerns were raised about the design of Wall 5 at the outset by JC Geotechnics. These concerns were addressed by MESO’s engineer, MetAus, shortly before the sheet piles along Wall 5 were installed. Once installed, JC Geotechnics identified problems immediately, on 3 February 2021. Queries were raised with MESO’s design, and answered by MetAus. Mr Orr does not appear to have had much time for JC Geotechnics and engaged another geotechnical engineer “to remove JC Geotechnics from the equation”.
EI Australia was engaged, apparently, to provide an alternate view. But the problems with Wall 5 did not go away. EI Australia inspected Wall 5 a number of times and made a series of recommendations. Cracks and subsidence in the footpath above Wall 5 were noticed and actioned on three occasions. Wall 5 had to be repaired, supplemented by a further row of anchors, rock bolts added and, after the footpath significantly subsided in September 2021, the addition of shotcrete. It may be that one to three anchors were damaged at that time, but query whether that would have made a difference to the stability of Wall 5, where there were then three rows of anchors in place.
Critical to the question of breach is, I think, Mr Mostafiz’s evidence. He reviewed the sheet pile design and the As-Built shop drawings when problems had emerged and observed that the sheet piles were not installed in accordance with the design. Mr Mostafiz has a Bachelor of Science (Civil Engineering) and has worked in the construction industry for some 20 years. He was qualified to undertake this task and form this assessment. Mr Mostafiz’s comparison indicates that MESO drilled less length of steel and anchor than what they had allowed for in their final design.
I can see from the photographs of the base of Wall 5 that the area where sheet was to be installed, but was not, broadly corresponds with where weak shale substrata was found and where gaps between the bottom of the sheet and the substrata emerged. I do not think that I need an expert report to be satisfied that the failure to install the sheet and anchors in accordance with MetAus’ design likely contributed to the slumping of the footpath above.
The subcontractor agreed to perform the works in a proper and workmanlike manner with due skill, care and diligence: cl 3.18(a)(iv). The simple fact that MESO did not comply with the design of its engineer is itself, I think, a breach of the subcontract, a negligent act or omission, or an act, omission or default such that the indemnity applies.

The “comments” part of the payment schedule noted, “Work in progress as not all the contract RC shoring walls are completed. Refer to the attached for details on the cost break-up. $89,195.7 Concrete $72,634 Reinforcement. Works omitted from your contract are pursuant to clause 16 & 17.8 of your signed contract agreement.”
Paynter Dixon provided invoices rendered by Hanson to Paynter Dixon for the supply of concrete together with Mesh & Bar invoices for steel reinforcement bars. Mr Mostafiz agreed that some of the invoices rendered by Mesh & Bar had nothing to do with the work carried out by MESO, but were for pile rectification.
A-Civil submitted that the supply of materials was part of MESO’s Works under the subcontract. The $1.4 million contract price included an allowance for the supply of materials. While Mr Orr cavilled with this proposition, there was said to be no logical basis for the system of negative variations unless it were the case. A-Civil agreed to procure concrete and steel for MESO to use, with a credit to be given “[a]s per invoice[s] from suppliers”. Mr Orr’s practice was to apply a credit to its payment claims for such concrete and steel. From October 2021, Paynter Dixon took over the supply of concrete and steel for MESO’s use on site. Mr Orr accepted as much. BC17 was substantiated by two bundles of invoices issued by Hanson (concrete) and Mesh & Bar (steel). While Mr Orr said he had accounted for the supplies by A-Civil and Paynter Dixon in the final payment claim, being a credit of $262,216.96, that could not be correct. A-Civil supplied $106,977.37 in steel and $116,251.50 in concrete. Paynter Dixon supplied $161,829.70 worth of concrete and steel.
MESO submitted that it had allowed for the supply of concrete and reinforcement by way of negative variations. Some of the concrete claimed by Paynter Dixon was for the wrong design code and did not use the rate agreed between MESO and A-Civil. Nor did A-Civil delineate between the concrete used for columns (not within MESO’s scope) and the concrete used for walls.
The only question that I need to answer is whether this back-charge arises out of or in connection with any breach by MESO of its obligations under the subcontract. I do not need to determine the correct quantum of the back-charge. That determination will not bind Paynter Dixon and can be determined should Paynter Dixon ever pursue the back-charge.
This back-charge is a Claim that falls within the scope of the indemnities. The subcontractor was obliged to carry out and complete the Works: cl 3.2. The Works included: (emphasis added)

A-Civil submitted that MESO sought no extension of time. Nor did MESO reach Substantial Completion on or by 1 September 2021. Rather, on that date, MESO issued a notice under s 27 of the Building and Construction Industry Security of Payment Act indicating that it would suspend works at the expiration of two business days. No suspension actually occurred and the statutory defence under s 27(3) was not pleaded, albeit A-Civil accepted that a few days should be allowed on this account. While MESO asserted that A-Civil prevented MESO from achieving Substantial Completion by three stop work orders and failure to give a direction to complete the balance of the works, this could have been the subject of notice and claim under cl 5. Failure to make such a claim meant that the delay was deemed not to have occurred: cl 5.1(c). Nor was there evidence of any stop work orders or MESO seeking instructions to complete the works. MESO was clearly unwilling and unable to complete the works at the time.
A-Civil submitted that, accepting that MESO’s liability for liquidated damages was not open ended, A-Civil was entitled to liquidated damages from 2 September 2021 to 30 May 2022, when MESO made a final payment claim stating that the Works were 100% complete. Liquidated damages for this period were $270,000. It was submitted that MESO could not benefit from its own wrongdoing, being its failure to complete the Works, to avoid liquidated damages: Mackay v Dick (1881) 6 App Cas 251; Alghussein Establishment v Eton College [1988] 1 WLR 587; Peter Turnbull & Co Pty Ltd v Mundus Trading Co (A/asia) Pty Ltd (1954) 90 CLR 235; [1954] HCA 25; Bragg v Alam [1981] 1 NSWLR 668 at 673-4 (Rath J), and on appeal (1982) NSW ConvR 55-082; Ruthol Pty Ltd v Tricon (Aust) Pty Ltd [2005] NSWCA 443.
A-Civil submitted that the fact that Substantial Completion was not achieved and the contract was not terminated did not disentitle a party in the position of A-Civil to liquidated damages: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2016] NSWSC 770 at [75]-[77]; Novawest Contracting Pty Ltd v Altona Industrial Centre Pty Ltd [2011] VSCA 104 at [17]; Triple Point Technology Inc v PTT Public Company Ltd [2021] UKSC 29 at [34]-[36]. It was said to be enough that the date for practical completion had passed, without the project being completed.
MESO submitted that cl 5.11(a) provided that MESO was liable to pay liquidated damages until MESO achieved Substantial Completion of the Works or the date that the Contract was terminated under the Contract. The Date for Substantial Completion was 1 September 2021, which differed from the "Date for Completion" in the Paynter Dixon contract annexed to the subcontract, which was 1 September 2021 "subject to concrete completion". (The relevance of this was unclear, where the Paynter Dixon contract was not cross-referenced in the operative provisions of the subcontract.) Substantial Completion was defined in three places: cll 2.1, 5.2(a) of the General Conditions and cl 7(d) of the Formal Instrument of Agreement. (The relevance of this was also unclear, where these three provisions, as I read them, operate harmoniously and it is not suggested that Substantial Completion was reached under any of these provisions.)
MESO submitted that cl 5.11(a) could only be enlivened if either Substantial Completion was achieved or the Contract was terminated, otherwise there was no end date to the calculation of liquidated damages under cl 5.11. The Works did not reach Substantial Completion. Nor was the contract terminated. Rather, MESO submitted that A-Civil accepted MESO’s work by 16 December 2021, being MESO’s last day on site. A liquidated damages clause will be interpreted strictly against the party seeking to rely upon the clause, and any non-compliance with the clause will result in liquidated damages being irrecoverable: Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151 at [129] citing Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 111 at 121. A-Civil was said to have made the forensic decision not to issue a Certificate of Substantial Completion nor terminate the subcontract. Triple Point was said to support MESO’s position: at [48], [89]. Alternatively, liquidated damages was only payable until 16 December 2021, as A-Civil gave no further instructions for MESO to return to carry out further work.

Lady Arden considered that the clause should be construed as meaning that liquidated damages were payable for each day of delay “up to the date (if any) [the customer] accepts such work”: at [38]. The parties were unlikely to have intended that the right to liquidated damages, once it had accrued, was simply extinguished: at [40]. By contrast, it was “perfectly natural that the parties should seek to put an end date on the accrual of liquidated damages to prevent a party who had accepted the performance of work from continuing to demand liquidated damages”: at [41]. On its true construction, the clause provided for liquidated damages if the contractor did not discharge its obligations within the time fixed by the contract, irrespective of whether the customer accepted any works which were completed late: at [48]. While the clause provided an end date for liquidated damages, on acceptance of the works, “it did not follow that there were to be no liquidated damages if there was no acceptance. To reach that conclusion would be to render the liquidated damages clause of little value in a commercial contract [and to throw] out the baby with the bathwater”: at [48].
Lord Leggatt added that the liquidated damages clause contained two conditions, being that the contractor failed to deliver the work within the time specified, and that the delay had not been introduced by the customer. If these two conditions were satisfied, then liquidated damages were payable from the due date for delivery of the work until when the customer accepted the work: at [89]. Termination of the contract did not affect the liability of the contractor to pay liquidated damages for delay which had already occurred before the contract was terminated: at [91]. To conclude otherwise, being that if the contract was terminated by the customer because of the contractor’s repudiatory breach, that then there never was a date when the customer accepted the work and thus no liability to pay liquidated damages, would be inconsistent with both the language and commercial purpose of the clause: at [92].
Returning to the clause in this subcontract, once the Date for Substantial Completion passed, on 1 September 2021, liquidated damages began to accrue at the daily rate of $1,000. MESO did not achieve Substantial Completion of the Works. I reject the submission that A-Civil accepted the works on 16 December 2021, being MESO’s last day on site. The Works were incomplete. A-Civil pressed MESO for several weeks to return to the site and progress the Works. A-Civil has not terminated the subcontract either.
It has been said that liquidated damages clauses in printed forms of contract must be construed strictly contra proferentem: Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 111 at 121 (Salmon LJ); followed in Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151 at [129] (McColl JA, Beazley ACJ and Macfarlan JA agreeing). This contract was not on a printed form. The parties agreed that the contract would not be construed to the disadvantage of A-Civil on the basis that it put forward the contract documents: cl 2.5, Formal Instrument of Agreement.
As Campbell JA explained in Rava v Logan Wines Pty Ltd [2007] NSWCA 62, “the contra proferentem rule is to be used only where the document is otherwise ambiguous, and … is a principle of last resort … Where it is understood in that way, the application of the principle … does not involve preparing a list of all the possible meanings of a clause that the language can bear without breaking, and choosing the meaning that it most favourable to [in that case] the guarantor … Rather, the choice is limited to choosing amongst meanings that are fairly open by reason of the application of other rules of construction”: at [55]-[56]. The contra proferentum rule may be used whilst “bearing in mind the fundamental purpose of construction of a document, namely, to ascertain the intention of the parties arising from the document as a whole and reading the document with such background information as was known by all the parties to it”: at [51], [53].
The commercial purpose of liquidated damages clauses bears repetition. As Lord Leggatt (Lord Burrows agreeing) observed in Triple Point Technology Inc v PTT Public Company Ltd [2021] UKSC 29, liquidated clauses are a “standard feature” in major construction contracts, enabling the contracting parties to better manage the risk of delay by limiting “the contractor’s exposure to liability of an otherwise unknown and open-ended kind, while at the same time giving the [principal] certainty about the amount that it will be entitled to recover as compensation”: at [74]. Similarly, in AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170; [1986] HCA 63 Mason and Wilson JJ noted that liquidated damages clauses provide “greater certainty by allowing the parties to determine more precisely their rights and liabilities consequent upon breach or termination, and thus enables them to provide for compensation in situations where loss may be difficult or impossible to quantify [and] in a way that avoids costly and time-consuming litigation”: at 193.
The subcontract obliged MESO to complete the Works in a timely manner, but anticipated that the subcontractor may fail in that regard. The liquidated damages clause envisaged that the subcontractor may ultimately fulfill its obligations, albeit late, achieving Substantial Completion of the Works. Otherwise, the subcontractor may not achieve Substantial Completion at all, including by reason of the contractor terminating the subcontract. The clause prescribed an agreed formula to calculate damages in that event, to save the contractor the trouble of proving the actual damages suffered by reason of the subcontractor’s delay, and to protect the subcontractor from exposure to damages at large.
The reference to the ‘end points’ in cl 15.11(a), beyond which liquidated damages is no longer payable, are for clarity and to avoid doubt, where the fact that liquidated damages do not continue to accrue after the work has been complete, or the contract terminated, goes without saying: Triple Point Technology v PTT at [35]; Shade Systems at [23]. The clause does not mean that, if those ‘end points’ are never reached, the liquidated damages regime is dissolved and any accrued damages disappear; that would be inconsistent with the language and commercial purpose of the clause: Triple Point at [36], [92]; Shade Systems at [25]. As observed in Onley v Catlin Syndicate Ltd [2018] FCAFC 119, “It goes without saying that a construction that avoids capricious, unreasonable, inconvenient or unjust consequences, is to be preferred where the words of the agreement permit”: at [33] (Allsop CJ, Lee and Derrington JJ).
As such, the fact that A-Civil has not terminated the subcontract is not fatal to its claim for liquidated damages. Once the Date for Substantial Completion of the Works passed on 1 September 2021, liquidated damages began to accrue at the daily rate. A-Civil was then entitled to bring an action for such damages, even if the final date beyond which liquidated damages ceased to accrue had not then been fixed: cl 5.11(a); Shade Systems at [22]-[25]; Novawest at [17]; Triple Point Technology. The Works will never reach Substantial Completion. Whether, or when, A-Civil will terminate the subcontract is not known. A-Civil has waived its right to recover liquidated damages post-30 May 2022. But A-Civil is entitled to liquidated damages until 30 May 2022, in the sum sought.

A-Civil was asked to tender on a development project in Camelia. The developer was Summer Hill Business Estate Pty Ltd; Charbel (Charlie) Demian was a director of that company. The builder was Linx Constructions Pty Ltd; David Smedley worked for that company. Linx Constructions asked A-Civil to submit a tender for civil and remediation works, including sheet piling and shoring works.
In January 2020, Nasser Matta spoke to Mr Orr about MESO potentially carrying out sheet piling and shoring works on the project. He asked Mr Orr to provide a quote. According to Mr Matta, Mr Orr indicated that he would provide a design for his proposed shoring method. But at no time did Mr Orr, or anyone at MESO, indicate that he or the company required or expected to be paid for the design that was provided during the tender process. Mr Matta said that MESO had provided a design for their proposed method on other projects that A-Civil had asked MESO to submit a tender for, including the Parramatta RSL project. From working with MESO on other projects over a number of years, Mr Matta understood that this was part of MESO’s business model and process.
In February 2020, Nasser Matta emailed a Design Report and Certification for the shoring for the project to the developer and builder. This included MESO shop drawings. On 6 March 2020, Mr Orr provided Mr Matta with a summary page in respect of the estimated costs of constructing in accordance with MESO’s design. The attached summary of costs for the works included, for each stage of the works, an amount for “Engineering Design, Certification, Oversight”. From time to time, Mr Orr provided an updated summary of these costs as the scope of works or the cost of materials changed.
On 20 March 2020, the builder provided comments on MESO’s design. On 21 March 2020, Mr Orr responded to these comments. On 25 March 2020, the parties met. On 26 March 2020, Mr Orr provided Nasser Matta with an updated summary of the costs associated with the proposed works. Mr Orr noted the challenges in securing the relevant materials, “Basically, if [Mr Demian] wants this to go ahead in the next few months I need to be acting on all this this week which means [he] needs to make a pretty sizeable payment so that I can start.”
On 27 April 2020, Mr Orr emailed Nasser Matta and Ralph Kress at A-Civil, advising that MESO had arranged to have some men on the Camelia site the next morning to prepare for the arrival of three semi-trailer loads of sheet piles, with a further delivery coming the following week. A revised summary of costs showing the payments associated with the sheet deliveries was provided. The first delivery would be $304,992.65, including $249,529.12 for sheet piling, $52,963.53 for engineering design, certification and oversight and $2,500 for preliminaries.
On 28 April 2020, Mr Kress asked Mr Orr to submit a formal price for the project. On 29 April 2020, MESO submitted a letter of offer. The quotation included preparation of a design. On 29 April 2020, MESO also rendered an invoice for $304,992.65 plus GST for the delivery of sheets to site. According to Nasser Matta, he asked Mr Orr why MESO was charging this amount, “we don’t even have a contract in place.” While Mr Orr had an agreement with Mr Demian to pay for the materials delivered, the developer would not pay any more than that. Mr Orr explained that the invoice included the design cost and Mr Matta said, “Okay, well that is not what he agreed to.” Mr Orr agreed to get the invoice changed.
On 8 May 2020, Mr Kress emailed MESO’s chief financial officer, Paul De Araugo, “please amend invoice for the supply only of sheets without design certification … so I can forward to client for payment thanks.” This was done. The revised invoice was $249,529.12 plus GST.
Nasser Matta said that A-Civil “paid MESO for the sheets he delivered, without A-Civil requesting him to deliver [a] thing, as he went direct to the client. … that’s what happened.” Further, “at the time when I did find out they were delivering sheets, I rang [Mr Orr], and I was with Charlie Demian. And he had no idea as well, and we said what the hell is going on. His excuse was there’s a shortage of sheets, and convinced Dave Smedley”.
In mid May 2020, Nasser Matta had a meeting with Mr Demian and Mr Smedley; they discussed whether Mr Demian would agree to pay MESO for the design and certification before the sheet piles were installed and certified. Mr Demian said that he had only agreed to pay Mr Orr for the materials because they were then in short supply. But Mr Demian had not been told that Mr Orr would charge for design and certification before the sheet piles were installed and certified. Mr Demian said he would pay for the design and certification once there was a contract in place and the sheet piles had been installed and certified by an engineer.
A-Civil made a series of payments towards MESO’s invoice of $274,482.03 (including GST) until the balance of the invoice was $24,482.03. According to Mr Matta, Mr Orr asked him when the balance of the invoice would be paid and Mr Matta said he would get Mr Demian to pay it once Mr Orr sent a copy of his supplier’s invoice, “You need to show me how much you have paid for the sheet piles so I can show [Mr Demian, who] said he is not giving you a cent more because you told him that it was $250,000 all up including GST”.
On 22 February 2021, MESO issued an invoice to A-Civil, albeit dated 29 April 2020, for engineering and design in the amount of $55,463.54 plus GST. Mr Orr did not explain why this invoice was issued at this time.
Nasser Matta said that A-Civil was never awarded any contract for the Camelia project; the tender was not complete and did not proceed. The site was eventually sold by the developer in May 2022. Mr Matta denied engaging MESO to design a certified temporary shoring system for the project or to prepare shop drawings. While the summary costings provided by Mr Orr from time to time included a cost for the design component, “The tender did not go on … no one won the tender.” He disagreed that A-Civil engaged MESO to carry out some of the work in the quote. Mr Matta said there was no contract between A-Civil and MESO in relation to the Camelia project. He said that the invoice was “not even valid”.
Mr Matta also said that he had not previously seen MESO’s tax invoice for $61,009.89 (including GST), until it was attached to Mr Orr’s affidavit in these proceedings. Having searched his emails, and those of Mr Kress and other staff, he was not able to find any emails from MESO attaching that tax invoice.
MESO submitted that MESO’s design was provided to the developer, who commented on the design; MESO made changes to its design, which were said to have been “in effect taken on by the developer.” Mr Matta was aware of the pricing that MESO wanted to get paid for the design. No objection was made. Nor was there any objection to the invoice for materials for some time, before Mr Matta said he had a conversation in which he said that someone else was going to pay the invoice. These things were said to be an implied admission that the amounts were payable
Whether MESO is entitled to the payment of these invoices depends on whether it had an agreement with A-Civil to pay for either of the items the subject of the invoices. I repeat the principles earlier set out: see [7]-[9].
In respect of the first invoice, MESO pressed the developer to organise materials for this project, where materials were said to be in short supply. Mr Orr circulated a summary of the costs of the project, including the first delivery of sheet piles. But there is no evidence that anyone formally accepted this offer. MESO proceeded to deliver the sheet piles and issue an invoice, which A-Civil progressively paid save for the extent to which the invoice exceeded $250,000. From Mr Matta’s discussion with the developer, that was all that the developer was prepared to pay for materials absent proof that the materials had cost MESO more than that. Mr Orr did not respond to Mr Matta’s affidavit on this subject and I take it that he did not disagree with Mr Matta’s evidence. In the result, I am not satisfied that A-Civil agreed to pay for the sheet piles for the figure put forward in Mr Orr’s summary of costs and thus I am not satisfied that MESO is entitled to have the balance of the first invoice paid.
The position is clearer with the second invoice, where there is no evidence of an agreement to pay for the design. MESO did prepare a design in the course of participating in a tender with A-Civil. But the tender was not accepted. There is no evidence that A-Civil agreed to pay for MESO’s design in the event that the tender was not successful. That Mr Matta objected to MESO including a charge for the design in its invoice when first issued, and that MESO agreed to remove that element from the invoice, is consistent with an appreciation on MESO’s part that it was not then entitled to charge for the design absent acceptance of its letter of offer.
Also consistent with this is the fact that MESO did not issue an invoice for the design until sometime later. What prompted the issue of the invoice is not known. True it is that A-Civil admitted, in its pleading, that MESO issued the tax invoice. A-Civil did not admit, however, that MESO had sent the invoice to A-Civil, or that A-Civil had received the invoice. No contemporaneous email providing the invoice to A-Civil is in evidence and the invoice appears to have come something ‘out of the blue’. MESO is not entitled to payment of this invoice either.

A-Civil submitted that, on MESO’s own reconciliation, A-Civil was entitled to restitution of the amount of $34,404.54. By the Final Payment Claim, MESO asserted or admitted that it was entitled to be paid $974,918.25 (plus GST) for the Works. The Final Payment Claim included a series of ‘credits’ or negative variations for works performed and materials supplied by others. Upon this account, and including GST, the amount that MESO stated it was entitled to be paid was $1,072,409.25. MESO has received $1,106,813.79 for the Parramatta RSL project, according to Nasser Matta. As such, A-Civil submitted that MESO has been overpaid of $34,404.54, leaving aside any issue as to whether the ‘credits’ or negative variations reflect the correct value of the amounts due and payable by MESO in respect of the items identified, the liabilities claimed by Paynter Dixon, and the damages separately claimed by A-Civil.
MESO prepared a schedule of invoices rendered by MESO on five projects, crediting payments received from A-Civil and providing a running total. After receipt of the adjudication sum, the amount owing was said to be $281,750.37. But MESO accepted that the ‘credits’ given in its final payment claim of $93,914.26 should be deducted from this running total, leaving $187,836.
I think, with respect, that it is simpler than this. MESO accepted that it had been fully paid on three projects. I have concluded that MESO is not entitled to be paid the remaining invoices on the Camelia project. This leaves the Parramatta RSL project. Each of MESO’s payment claims had a running tally of the amount owing in respect of that project. The total amount owing was paid in full following the adjudication determination, being the amount owing in the final payment claim on 30 May 2022.
I have concluded that A-Civil is entitled to be paid Charge CR03 and Charge CR04 for the supply of steel and concrete for MESO’s works on the Parramatta RSL project, totalling $223,228.87 (excluding GST). But A-Civil has already been given some ‘credits’ in respect of these supplies, which reduced the payment claims. A-Civil is not entitled to the whole $223,228.87 or it will be over-paid. There are two problems here. First, MESO gave ‘credit’ based on the fixed rate agreed with Mr Matta for the purposes of preparing a tender, whereas the parties later agreed that MESO should pay for these materials as per the supplier’s invoice. Second, some of the materials were supplied by Paynter Dixon. But as A-Civil has had the benefit of that credit, whether it related to materials supplied by A-Civil or Paynter Dixon, then A-Civil must bring it to account.
The amount of the ‘credit’ given by MESO to A-Civil in respect of the supply of reo and concrete was controversial. MESO gave ‘credits’ in its July 2021 payment claim ($136,710.75), September 2021 ($63,185.24), December 2021 ($103,168.89) and May 2022 ($25,187.42). Adding up these ‘credits’ gives a total of $328,252.30 (excluding GST). MESO submitted that this figure should be used. But the problem is, as A-Civil pointed out, MESO’s final payment claim of 30 May 2022 gave a different total ‘credit’, being $261,766.96. A-Civil submitted that this figure should be used.
The parties’ accounting was messy too. The total ‘credit’ stated in the final payment claim of $261,766.96 should be used, as it was this amount that was deducted from what MESO otherwise claimed from A-Civil in the adjudication application, not the ‘credits’ set out in the earlier payment claims. Where the reo and concrete cost A-Civil $223,228.87 (excluding GST), then A-Civil is not entitled to any further sum on this account. MESO has already given a ‘credit’ of $38,538.09 (excluding GST) in excess of the cost of the supplies to A-Civil. The excess is referable to the fact that some of ‘credits’ related to materials supplied by Paynter Dixon.
MESO submitted that the surplus ‘credit’ should be set off against any amounts otherwise payable to A-Civil. A-Civil submitted that MESO can claim the surplus ‘credit’ if and when Paynter Dixon makes a claim against A-Civil for BC19 and A-Civil calls on the indemnity.
The ‘credit’ of $261,766.96 in MESO’s final payment claim reduced the amount which A-Civil was otherwise obliged to pay MESO under the adjudication determination. A-Civil must bring to account that ‘credit’, whether the ‘credit’ was given by MESO in respect of materials supplied by A-Civil or materials supplied by Paynter Dixon. Otherwise, A-Civil would be unjustly enriched. The surplus credit of $38,538.09 may be set-off against $10,619.92 for Charge CR05 and $270,000 for liquidated damages. This totals $242,081.83.

A-Civil Aust Pty Ltd v MESO Solutions Pty Ltd

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment

Parties

Legislation Cited (5)

Cases Cited (46)

JUDGMENT

Witnesses and documents

Parramatta RSL project

MESO starts work

The head contract

Wall 5

The subcontract

Work continues

Moving footpath

MESO leaves site

Payment schedule

A release?

These proceedings

Liability for back-charges

Back-charge BC02

Back-charge BC03

Back-charge BC12

Back-charge BC17

Back-charge BC19

Liquidated damages claim by Paynter Dixon

Charges

Charge CR03

Charge CR04

Charge CR05

Liquidated damages

Contractual provisions

Submissions

Consideration

Unpaid invoices

Camelia project

Parramatta RSL project

Restitution and set off

Orders

Amendments

22 July 2026