AGC INDUSTRIES PTY LTD -v- KARARA MINING LTD [2019] WASC 140 | Case summary

AGC INDUSTRIES PTY LTD -v- KARARA MINING LTD [2019] WASC 140 | Case summary | Zoe

[208]

Karara also called Mr Johnny Gervoe, the director of Softline Solutions Pty Ltd.[15] Softline Solutions developed and maintained a steel tracking database which enabled those working on the Project to keep track of the manufacture and movement of structural steel coming from China.
Karara tendered the statements of Ms Natasha Leigh, Karara's legal counsel,[16] and Mr Christopher Scott Gerrard, Karara's general counsel and company secretary.[17] Neither of them was required for cross-examination. Their witness statements related to Karara's approaches to Mr Murdoch, through Ms Leigh and Mr Gerrard, to discuss his giving evidence in the case.
Each party adduced expert evidence.
There was also an extensive record of contemporaneous documents, including emails and letters.
Where it is necessary, I will set out my specific findings on the witnesses in the context of their evidence. Generally, I had no reason to doubt that any of the witnesses was other than truthful, and trying to answer questions as well as they could.
Several potential witnesses were not called. The most significant was Mr Murdoch, Karara's CEO at the time of the negotiation and execution of the Main Works Contract. AGC's case for misleading or deceptive conduct relied on oral representations that it alleged Mr Murdoch made at two meetings in 2012 with Mr Kenny. The failure of Karara to call its former CEO left the evidence of Mr Kenny about those meetings uncontradicted (although not unchallenged).
When Ms Leigh and Mr Gerrard contacted Mr Murdoch he demonstrated a clear unwillingness to assist. Karara could have subpoenaed him to attend, and I do not doubt that he would have complied with an order of the court. But, from what he said to Mr Gerrard and Ms Leigh, Karara had no reason to believe that he was likely to cooperate further.
AGC submitted that the court should, in accordance with the rule in Jones v Dunkel,[18] infer that nothing Mr Murdoch had to say would assist Karara's case.
The rule in Jones v Dunkel was explained by Hill, Dowsett and Hely JJ in Kordan Pty Limited v Federal Commissioner of Taxation in this way:

[214]

The terms of the Early Works Contract were relevant as part of the circumstances in which Mr Kenny and Mr Murdoch conducted the discussions, on which AGC relied in its claim for misleading or deceptive conduct. The Early Works Contract was also part of the objective factual circumstances in which the Main Works Contract was to operate.
Pursuant to the Early Works Contract, AGC was to perform pre‑mobilisation, procurement, cost estimation, programming activities and certain parts of the Scope of Work (as defined in the Contract) for the SMP Works. The Formal Instrument of Agreement to the Early Works Contract recited the parties' understanding that they would work together to negotiate the terms and conditions of a contract for AGC to perform 'the balance of the Scope of Work'.[20]
The 'Scope of Work' was defined in Special Condition of Contract, SC 1.1 as 'construction and installation of all structural, mechanical and piping works for the Project's process plant'.
The Early Works Contract was not for a lump sum contract amount, but AGC was to submit monthly progress claims on a cash flow neutral basis and be reimbursed for approved direct costs together with payment of COP.[21]
AGC was required to carry out and complete Work Under Contract (WUC) in accordance with the Contract and Directions authorised by the Contract.[22] AGC was responsible for the 'provision of suitably experienced, skilled, qualified and trained labour personnel and supervision for the completion of WUC'.[23]
Karara was required to give AGC access to the Site at commencement of WUC and to enable AGC to carry out WUC and other obligations under the Contract.[24]
By General Conditions of Early Works Contract, GC 39, AGC was liable to liquidated damages if it did not achieve acceptance of The Works within the time prescribed.
By GC 49.2, Karara could give AGC written notice of a proposed Variation. AGC was, within five business days, to notify Karara whether the proposed Variation could be effected, together with its estimate of the effect on the Program and cost. It was pursuant to a notice under GC 49 that AGC commenced the Main Works.
Schedules to the Early Works Contract included the Scope of Work and technical specifications (sch 1) and Pricing Schedules (sch 2).
The Scope of Work, included Installation of Company-Supplied items and Construction Work. AGC was to 'provide appropriate personnel to undertake Work in order to provide the Company with a cost estimate and optimised program for completion of the remainder of activities in the Scope of Work for the complete installation and construction of the [SMP] work at the Company's process plant'.[25] And AGC was to prepare a detailed cost estimate, program, and Resources Plan for the balance of The Works.[26]
The Pricing Schedules set out the Direct Costs reimbursable under the Early Works Contract,[27] and provided generally for COP, which included AGC's costs for activities not directly involved in undertaking the WUC.[28] COP was calculated by multiplying the amount of Direct Costs (excluding fuel) by a COP factor of 15%.[29]

[218]

On 1 July 2011, AGC submitted a Cost Estimate and Program for Balance of Works, including a Construction Schedule.[32]
On 1 September 2011, AGC was formally advised of a proposed Variation of the Early Works Contract under GC 49 to commence to mobilise to Site the plant, equipment, and labour in preparation for the Full Works SMP Package to commence on 3 October 2011.[33] AGC was given notice to provide pricing and documentation, after which Karara would be able to formulate a Variation to the Contract.
On 2 September 2011, Mr Kenny (AGC) met Mr Murdoch (Karara) and expressed his concern about various issues, including that AGC did not have a construction manager on Site.[34] Mr Kenny explained that AGC wanted a steering committee of senior personnel from both Karara and AGC to oversee the Project.[35] Mr Kenny and Mr Murdoch also discussed the need to finalise commercial arrangements, including the parties' differences over the rate of COP for the Main Works Contract.[36]
On 14 September 2011, in an internal email, Mr Matthews (Karara) expressed concerns about the ability of AGC to meet manning requirements and suggested 'discreet enquiries' into rates from alternative companies as back-up.[37]
On 17 September 2011, in an internal email, Tyler Counsel (AGC), raised several concerns including the lack of a construction or project manager on Site, the lack of an organisation chart, the manner in which Karara treated AGC staff, and the high turnover of staff.[38]
At the end of September, there had still been no formal letter of commitment to AGC.[39]
On 12 October 2011, Mr Geddes (Karara) sent a marked up copy of the Full SMP Works Contract, excluding the Schedules, to Mr Nicol (AGC) and others. The mark-up was to show changes made by Karara to the Early Works Contract. AGC was asked to provide their clarification register response by 17 October 2011.[40]
In the 12 October 2011 draft, several fundamental changes from the Early Works Contract were apparent. The character of the two contracts is quite different. Under the Main Works Contract, Karara assumed responsibility for management of The Works but also assumed risk, including the risk of late completion. Provision for extension of time was removed. The Program was now to be supplied by the Company. The definition of Variation included 'an increase, decrease or reduction of the Workforce or the Workforce Requirements or any part'.[41] There were also substantial changes regarding Workforce, Company-Supplied Documents and Company-Supplied Items.[42] The obligation on AGC to reach Practical Completion by the Date of Practical Completion was deleted.
In late October 2011, Karara was considering a 'carve out', with some of the Scope of Work to be given to Programmed Construction & Maintenance (PC&M).[43]
Around this time, Karara introduced an incentive scheme with bonuses for senior staff linked to completion of the Dirty Concentrate Works by three milestones: 1 July 2012, 1 September 2012, and 1 October 2012.[44]
In November 2011, Mr Stark (Karara) directed AGC to hold further recruitment of labour/staff, referring to ongoing issues with late deliverables.[45]
While AGC prepared for the commencement of Works on 3 October 2011, it still sought a letter of commitment from Karara to meet internal procedures for spending against the proposed new contract.[46]
Between December 2011 and January 2012, AGC and Karara continued negotiations. Mr Nicol was responsible for conducting the day-to-day negotiations for AGC; Mr Kenny described his role as to supervise the negotiations.[47]
The COP rate was a matter of contention in the negotiations. AGC proposed a rate of 15% and Karara a rate of or closer to 6%.[48] By 19 December 2011, the discussion of the COP rate was to be escalated to Project Director and CEO level.
The Scope of Works was also an issue. By letter dated 14 December 2011, Karara advised AGC that certain areas had been removed from the Scope of Works under the Main Works Contract, in entirety or for later reallocation, 'so that the Contractor [AGC] can focus all its resources on the remaining areas under the Scope of Works with priority focus on the Dirty Concentrate Circuit works'.[49] Mr Kenny was advised about this in December 2011 or January 2012, although he did not see the letter.[50] AGC estimated the value of that re‑allocated work at approximately $43 ‑ $50 million.[51]
In further negotiations the COP rate was linked to the Scope of Works to be done by AGC.[52] On 21 December 2011, the parties discussed a rate of 13% based on approximately $50 million of Work (on AGC's valuation) being brought back into the Scope of Works, subject to performance, and a possible incentive scheme tied to project milestones.[53] Other matters were also in issue. In particular, AGC proposed no liquidated damages for non-provision of people, and a 20% cap on liability for defects.
On 18 January 2011, Mr Geddes and Mr Sims (Karara) met with Mr Nicol. AGC proposed either a flat 13% margin or a 12% margin plus a 3% incentive, a 20% cap on liability, and inclusion of work not already allocated.[54]
On or about 19 January 2012, Mr Bourne and Mr Kenny spoke again about the margin. Mr Bourne testified that Mr Kenny said AGC needed 13%, and Mr Bourne contended that 10% was the industry norm.[55] Mr Kenny recalled that he had an informal discussion with Mr Bourne where the margin was mentioned, but not what was said.[56]
Mr Kenny and Mr Murdoch met on 23 January 2012 and again on 2 March 2012. AGC relied on what was said at these meetings as the foundation of its claim for damages for misleading or deceptive conduct.

[219]

It is useful at this stage to give an overview of the case pleaded by AGC under the Australian Consumer Law.
On one level, the pleaded case for misleading or deceptive conduct was relatively simple. AGC relied on what was said at two meetings between Mr Kenny and Mr Murdoch on 23 January 2012 and 2 March 2012.
With regard to the January meeting, however, AGC pleaded six separate representations, the first of which had six parts to it (the January 2012 representations).[57] AGC then separately pleaded that by making the January 2012 representations, Karara made three further representations.[58]
Similarly, with regard to the March 2012 meeting, AGC pleaded three representations (the March 2012 representations), each of which had at least two parts.[59] AGC separately pleaded that by making the March 2012 Representations, Karara made four further representations.[60]
The further representations in each case were pleaded to be the 'Pre‑Contract Representations'. AGC pleaded that it relied upon the Pre‑Contract Representations and entered into the Main Works Contract.[61]
AGC pleaded that had the Pre‑Contract Representations not been made 'and the true state of affairs been known to AGC' it would have sought to negotiate and been awarded a different contract (the Alternative Contract). AGC put forward four alternative contracts, two of which themselves had alternatives.[62]
By reference to the paragraphs which pleaded the January 2012 representations, the March 2012 representations, and the Pre‑Contract Representations, AGC sought damages on six alternative bases, not apparently related to the alternative contracts it pleaded it would have been awarded.[63] At least two of the damages claims (in statement of claim [32(v)] and [32(vi)] are not related to the claim under the Australian Consumer Law.
Further and alternatively, AGC sought a declaration pursuant to s 87 of the Competition and Consumer Act, to the effect that the rate for COP under sch 2J of the Main Works Contract, once determined, should apply to the whole of the works completed under the Main Works Contract.[64]

[245]

Mr Kenny said he sent the email to ensure that the matters agreed went into the Contract, and he was relying on AGC's team to ensure that happened.[74]
There was no formal record of the January 2012 meeting, other than the extent to which it was recorded in the Main Works Contract. Mr Kenny understood that Mr Murdoch was identifying what Karara was prepared to have included in, or perhaps have removed from, a written contract.[75] Mr Kenny and Mr Murdoch did not exchange a note or otherwise confirm their understanding following the meeting.
The notes Mr Kenny took for himself are of little probative value. They identify topics, but do not record what was said or by whom.
The email Mr Kenny sent to Mr Nicol the same day records what Mr Kenny said was agreed. But only one statement is attributed to Mr Murdoch - 'Steve believes there will be an additional $8m - $10m available for AGC to earn'.[76]
The provisions for COP were to be found in sch 2J of the Contract, and milestone dates were now also to be included in that schedule. On 3 February 2012, Mr Geddes sent an email to Mr Nicol and Ms Tibbits, with a revised version of sch 2J 'to reflect the deal on the margin agreed by Steve Murdoch and Stuart Kenny dated 23 January 2012.'[77]
The General Conditions were also revised 'to give effect to the deal'. Changes included the deletion of liquidated damages for delay, and also the removal of clauses dealing with extensions of time.[78]
In the draft sent on 3 February 2012, sch 2J unequivocally limits the increased COP that AGC could earn to an 'Interim Period'. This did not change up to the signing of the Contract on 15 March 2012.
Having regard to the detailed cross‑examination of Mr Kenny, I make the following further findings.
First, Mr Kenny professed to be able to remember who had said what at the meeting, but he was unable to recall the specific words used by either party.[79]
AGC was to be reimbursed its direct costs with a COP margin. Mr Murdoch said (and Mr Kenny agreed) that there would be a series of milestones by reference to which the rate of COP would vary between 11 and 15%. When asked if he could tell the court what words were used about the 11% base COP rate, Mr Kenny could not. He said, 'I've got the notes there, and it was a discussion around the table ... '[80] The notes, however, say nothing more than '11%. Max 15% with incentives.'[81]
Mr Kenny could not recall the specific words used about the removal of AGC's risk, or about there being no downside 'other than we were both in agreement at that meeting as to a way to move forward.'[82]
In his witness statement, Mr Kenny said that Mr Murdoch said words to the effect, 'with the additional 4%, and the reinstatement of $43 to $50 million of works, AGC stood to earn an additional $8 to $10 million.'[83] When those words were put to him in cross-examination Mr Kenny said:

[255]

In the weeks leading up to the execution of the Main Works Contract, negotiations continued. Mr Kenny and Mr Murdoch discussed productivity issues on the project.[96] AGC wanted to have a senior construction manager on site. Karara did not agree.[97]
Mr Kenny was receiving information from various AGC employees about progress on the site. In the second week of February, Stephen Andrews, superintendent for the Project, told him 'there was a lack of steel on site and progress was only 1% for the week.'[98] Around the same time, Mr Kenny was also advised by another AGC employee, Mr Stuart Arndt, that AGC were erecting piping and steel out of sequence.[99]
On 10 February 2012, Mr Geddes sent an email to Mr Watson (AGC), referring to the agreement made by Mr Murdoch and Mr Kenny, and requesting Mr Watson revise the cash flow spreadsheet for sch 10 of the Contract. The cash flow for the full SMP works (that is reintroducing excluded areas) was $200 million plus COP.[100] Approximately $60 million of that total was for the period from October 2011 to February 2012 (inclusive).
On 15 February 2012, Mr Geddes sent Mr Nicol and Ms Tibbits a draft of the Main Works Contract for final review.[101] On 17 February, Mr Geddes re-sent the cashflow forecast that became sch 10 to the Contract, with a contract value of $177 million, of which $23 million was COP (that is, a rate of 15% COP).[102]
Mr Kenny was unaware of those documents, but he was aware that the negotiating teams, and those advising them, were determining the values for insertion into the Contract.[103] He relied on Ms Tibbits and Mr Nicol to 'sort out whatever the number should be and put it correctly into the [contract] schedule'.[104]
In mid-February 2012, Mr Bourne (Karara) advised Mr Kenny about some concerns with AGC's work practices. Mr Bourne complained about the standard of AGC supervision on site, and that AGC had been short in the number of personnel required, although manning was now up to date.[105]
On 20 February 2012, by an internal email, Mr Sleeman (AGC) advised several of his colleagues, including Mr Nicol and Mr Arndt, that, in his opinion, there was no way AGC could meet any of the then proposed incentive milestones for Practical Completion of the Dirty Concentrate Works.[106] In another email of 23 February 2012, Mr Sleeman described the incentive proposal as 'useless to us'.[107]
Mr Kenny was to meet Mr Murdoch again on 2 March 2012. On 28 February, Mr Murdoch emailed Mr Kenny in these terms:

[257]

Corporate Overhead and Profit - You and I agreed a ratchet clause that took the margin from 15% to 14% to 12% to 11% whilst last AGC response requested margin to go from 15% to 14% to 13% to 12%. I have rejected AGC's proposal as what I put on the table was actually better in many respects to what you requested. This is a done deal in my mind.
Commencement Date - we proposed commencement date to be 23 January 2012 whilst AGC has indicated the commencement date should be the date the contract is signed. I have rejected AGC's proposal. I have countered by indicating we would accept start date of 1 February 2012, which would make a clean cut of the works performed during early works and full works regarding advance payment/reconciliation structures. This is a fair compromise and stalling will not get a better position in fact it puts at risk the increased scope I offered.[108]
Mr Kenny was also copied into an email from Ms Tibbits, regarding her attempt to discuss with Mr Geddes items that AGC considered were still open but Karara did not. Karara had stated the position that 'if AGC did not execute the contract as it is then [AGC] will face "dire consequences" in relation to the amount of work that [AGC would] receive under the contract'.[109]
On 29 February 2012, Mr Vorster advised Mr Kenny by email that it was 'nearly impossible' to achieve any of the then proposed milestone dates of 1 July, 1 August, and 12 September.[110] Mr Vorster provided an analysis identifying these factors:
- the still unknown scope to complete for the Dirty Concentrate Works;
- scheduled completion of Client Main Deliverables;
- accommodation capacity limitations restricting the amount of resources that can be mobilised;
- quality issues with steelworks fabricated in China;
- interface issues with other Contractors;
- Client Specifications; and
- attrition and turnover of project personnel.
Mr Kenny had done further investigations and had also determined that the milestone dates then contemplated were probably unrealistic.[111] He was unable, in his oral evidence, to specify from where that information came, or what precisely caused him to form that view. He agreed, however, that he had probably discussed matters including AGC's productivity, matters relating to the delivery and erection of steel, recruitment of labour, the availability of accommodation, and the availability of plant and equipment with AGC staff.[112]

[265]

In his witness statement, to a greater extent than with the January meeting, Mr Kenny acknowledged the limits of his memory of what was said. For example, Mr Kenny stated that he did not recall Mr Murdoch's exact response when Mr Kenny said that AGC was of the view that the 1 July 2012 milestones were not achievable and should be extended.[119] Despite it being a main point of the meeting, Mr Kenny had no independent recollection of Mr Murdoch telling him the dates on which the milestones were to be set, and the profit rate for each milestone.[120] Nor did he record the dates in his notes. He did not recall whether Mr Murdoch proposed all of the milestone dates and profit rates or only some of them.[121]
In oral evidence, Mr Kenny could not recall telling Mr Murdoch that the milestone of 1 July was not achievable and the milestones should be extended by a month.[122] He said that AGC recognised the dates were not achievable and he 'would have said' that AGC's view was 'we're not going to be able to get there. We can't sign up for those dates'.[123]
When asked about what his notes meant - in particular the '1/3% now' ‑ he said he could only speculate.[124] While he had made a note of figures that were discussed ('14.5T to 13.5T to 12.5'), and that they were a record of current progress, he could not now recall whether Mr Murdoch said it was a rate per day, or per week.[125] He just recalled that the figures he wrote down were from Mr Murdoch 'because he was receiving it from site'.[126]
More generally, Mr Kenny's answers in cross‑examination demonstrated that he had an inexact recollection of what had been said by Mr Murdoch at the meeting. When pressed, Mr Kenny said he could recall Mr Murdoch saying 'beds were available', 'accommodation wouldn't be a restriction', 'there's float built into the erection program' and 'there's acceleration built into it'.[127] He said he also recalled Mr Murdoch saying that 'KML key staff were incentivised', although that was not referred to in his witness statement as a matter discussed at this meeting, nor included in his notes.[128]
Mr Kenny was asked directly (about par 72(a) of his witness statement):

[277]

In summary, Mr Kenny loaded many assumptions into his recollection of what Mr Murdoch said to him, and what it meant. I am not satisfied to what extent he was testifying about what was said, and to what extent his evidence was a composite of what was discussed with his own assumptions and expectations, not necessarily known to Mr Murdoch. This is not to deny that the surrounding circumstances are important in determining what was represented by what was said, and whether, in all the circumstances, it was misleading. But where oral representations are relied upon, it is first necessary to find what was said. And I am not able to find what Mr Murdoch said to Mr Kenny, and to separate it from what Mr Kenny hoped to take out of the meeting and what, with hindsight, he believes should have been in the Contract.
I am satisfied that Mr Murdoch said words to the effect that there was acceleration built into either the mobilisation plan or the program; that there was float in the program; that beds were available (although not how many); and that after April extra beds would be available. I am also satisfied that there was a discussion about the tonnage of steel then being erected and targets that needed to be met to achieve the first milestone, but I can be no more precise.
In his witness statement, Mr Kenny said that, based on his conversation with Mr Murdoch, he believed AGC had 'good prospects' of achieving practical completion of the Dirty Concentrate Works by the first milestone, and even better prospects of meeting each subsequent milestone. Because of that he agreed to the Milestone Dates and percentages.[134] In oral evidence, he said that at the end of the meeting with Mr Murdoch he believed that the 1 August, 29 August, and 12 September dates were all 'probably unrealistic, but not impossible.'[135] That is not consistent with Mr Kenny being misled into believing that Practical Completion of the Dirty Concentrate Works would be earlier than or by the first milestone.

[281]

Mr Geddes then sent Karara's final response to AGC's clarifications 'taking into account the agreed sch 2J and also KML's position on Schedule 9 [Contractor's Workforce]'.[140]
AGC received the Main Works Contract on about 8 March 2012. On 9 March 2012, Ms Tibbits requested that someone from the Karara team review the Scope of Work documents to ensure they were correct before the signing of the Contract the following week.[141]
On 15 March 2012, AGC and KML executed the written contract pursuant to which AGC was to provide manpower and plant resources for the SMP works for the Project. Mr Kenny signed the Contract on behalf of AGC. The system in place in AGC ensured that someone had checked the Contract to ensure that it contained what had been agreed between the parties.[142] Mr Kenny did not read it before signing it, relying on the work of the negotiating team and the fact that the Contract had been read and each page initialled by Ms Tibbits.[143]
When Mr Kenny was taken in evidence to the terms of the Main Works Contract signed by him, he said that he was surprised that the cash flow forecast in sch 10 forecast a total cash flow, inclusive of COP, of $176.789 million. Mr Kenny said that it was the first time he had been made aware that the figure was not at or above $200 million.[144]
AGC reported to the Singapore Stock Exchange that the value of the Contract was 'in excess of $160 million'.[145]
Although Mr Kenny was uncertain in his evidence, the documentary evidence suggests that Board approval was required for a contract with a value above $50 million. With that approval, Mr Kenny, as CEO, had delegated authority to sign the Contract.[146]
In accordance with the AGC and AusGroup protocols, there should have been something in writing explaining to the Board the essential details of the Contract in order for them to approve it. A document in those terms was called for, but not produced.[147]
On the evidence I cannot find when, or on what information, the AusGroup Board approved the signing of the Contract with Karara.

[310]

Based on my findings as to what was said at the January meeting I am satisfied that Karara, by Mr Murdoch, represented that it would reinstate work which it had previously said it was going to remove from AGC's Scope of Work for later reallocation. I am not satisfied that Mr Murdoch represented the value of the Contract to be approximately $200 million. The works to be re‑introduced into the scope of works should have been identifiable in the factual context.
I am not satisfied that Karara represented that the 15% rate would apply to the whole of the SMP works, that is, that a 15% COP rate would apply to the completion of The Works and not only to works undertaken during the Interim Period. AGC has not established that a representation to that effect arises from what was said at the January 2012 meeting.
Further, having regard to the factual context, such a representation could not reasonably arise. The parties' agreement was to be the subject of a detailed written contract, and that Contract was unequivocal that the margin applied only to the defined Interim Period.
In its pleading of the January 2012 representations, AGC conflated the agreement that it would not be exposed to liquidated damages (which was not controversial), with the alleged representation that Karara would not delay its performance. I am not satisfied that those two matters were linked in that way in the relevant meetings. AGC was not exposed to liquidated damages because it was not bound to a date for Practical Completion and there was no contractual liability for delay.
I am satisfied that Mr Murdoch did advise Mr Kenny, truthfully, that there were incentives for Karara staff. I am not satisfied, however, that AGC proved a representation that the incentives were 'insurance' for the Project, or that Karara would not do anything to prevent AGC from completing the Dirty Concentrate Works by the first milestone.
AGC also relied on the March 2012 Representations. AGC pleaded that, at that meeting, Mr Kenny and Mr Murdoch discussed the terms of the proposed Main Works Contract, and Mr Murdoch informed Mr Kenny:

[328]

AGC pleaded that, insofar as the representations were with respect to future matters, it relied on s 4 of the Australian Consumer Law.[171] This form of plea is unhelpful. A plea that relies on s 4 should make it clear that it involves the allegation that the representor did not have reasonable grounds for making the statement alleged.[172] It should also state which representations are with respect to future matters.[173] A plea that invokes s 4 may be read as raising the implication that there were no reasonable grounds,[174] but AGC pleads multiple representations and makes no attempt to specify to which of them or to what future matters s 4 applies.
With the exceptions of par (a) and (f) referred to above, AGC has not established that Mr Murdoch made the representation on which the plea in par 28 of the statement of claim was based.
I am satisfied that, at the meeting of 23 January 2012, Mr Murdoch said that Karara would reintroduce work into the Contract that had been removed from the Scope of Works.
On 10 February 2012, Mr Geddes sent an email to Mr Watson, referring to the agreement made by Mr Murdoch (Karara) and Mr Kenny (AGC), and requesting Mr Watson revise the cash flow forecast for sch 10 of the Contract. The cash flow for the full SMP works (that is reintroducing excluded areas) was $200 million plus COP. Approximately $60 million of that total was for the period from October 2011 to February 2012 (inclusive).[175]
On 15 February 2012, Mr Geddes sent Mr Nicol and Ms Tibbits (AGC) a draft of the Main Works Contract for final review.[176] On 17 February 2012, he re-mailed the cash flow forecast that became sch 10 to the Contract, with a contract value of $177 million, of which $23 million was COP (a rate of 15% COP).[177]
Schedule 10 of the Contract, as executed on 15 March 2012, estimated total costs of just under $177 million from 1 February 2012 (the specified date of commencement).
The effect is that The Works, to the value of about $50 million, were reintroduced. And AGC was aware, as recorded in sch 10 of the Contract, of the cash flow forecast for the term of the Contract. From 17 February 2012, it was aware that the expected contract value, after reintroduction of work previously removed from the Scope, was about $177 million.
The claim in par 28(a) of the statement of claim relies upon the allegation that work that was within the Scope of Works in the Main Works Contract was later reassigned to Ausco.
AGC did not plead that, at the time of the January 2012 meeting, Karara intended to remove the work that was being reintroduced into the Scope of Works, or part of it, and give it to Ausco. That, however, was how AGC put its case in final submissions. AGC submitted that there was evidence sufficient to infer 'deliberate misleading or deceptive conduct', in that Karara always intended giving Ausco work that was within AGC's Scope of Work.[178] In my opinion, a case of deliberate deceit should be pleaded. Only then would it be possible to address what Mr Murdoch knew and intended in the context of what others, and in particular Mr Bourne, may have contemplated.
AGC put two further alternative cases. First, it submitted that Karara did not intend AGC to perform all of the Scope of Work in the Contract. This case, similarly, was not pleaded. I cannot, in any event, find what was intended at the time Mr Murdoch made the representations.
Second, AGC submitted that Mr Murdoch lacked a reasonable basis for his representation. That is, the representation was not as to an existing fact but with respect to future matters.
The representation that the Scope of Work would include the work which Karara had earlier indicated would be removed was, in my opinion, not simply a representation that the work would be included in the Contract. It must reasonably be understood as meaning that the reintroduced work was work that AGC would carry out and be paid for.
There was no evidence adduced in the trial that Karara had reasonable grounds for representing that AGC would be able to carry out the work that was re‑instated into its Scope of Work.
Any forecast improvement in accommodation must be understood in the context were both AGC and Karara were aware that the availability of accommodation was a constraint on the mobilisation of personnel to Site. It was not, of course, the only constraint. I consider later, evidence that total personnel numbers is not, or may not be, a sufficiently nuanced measure of the effect of labour resources on the progress of the project.
In its closing submissions, AGC relied on the inferences to be drawn from the 'levelled' schedules issued by Karara, particularly in January 2012,[179] that Karara knew that accommodation limits would prevent AGC from mobilising sufficient personnel to meet the contemplated milestones. Again, that is not the pleaded case. The scheduling does, however, demonstrate that Karara would not have had reasonable grounds for a representation that accommodation would not be an impediment to AGC mobilising sufficient personnel to Site to achieve Practical Completion of the Dirty Concentrate Works by the first (or any later) milestone.
I accept Karara's submission on the particular issue of what representations were made by Mr Murdoch at the March 2012 meeting. Mr Kenny's note of the meeting was that 'after April' extra beds would be available. That limited representation was not false or misleading.
The evidence was that, by a range of measures, more beds were available after April 2012. These measures included giving priority for accommodation to construction personnel; moving other construction contractors' personnel out of the Lochada Camp by finding alternative accommodation or because their work had been completed; moving some labour (including the PC&M labour force) from Karara Village to Lochada Camp; and limiting the use of rooms at the Karara Village and Lochada Camp for overnight or short stays.[180]
I am not satisfied that the broader representation about accommodation was made.

[337]

After discussing the representations he said were made on 23 January and 2 March 2012, Mr Kenny attributed different consequences to each representation. [185]
Section 18 of the Australian Consumer Law prohibits conduct in trade or commerce that is misleading or deceptive or likely to mislead or deceive. AGC may recover the amount of any loss or damage it suffered by Karara's conduct in contravention of s 18.[186] The loss of an opportunity or chance is compensable. But to establish loss or damage on the basis claimed, AGC must show, to the usual standard, that there was a substantial prospect of a beneficial outcome.[187] That is, there was a 'substantial, and not a merely speculative, prospect' that the benefit would be acquired.[188]
To establish that the contravening conduct caused the loss of an opportunity which had some value (not being a negligible value), the value of the opportunity must be ascertained by reference to the degree of probability or possibility that AGC would have been awarded a different contract on one of the alternative bases pleaded.
There is an inherent uncertainty in the case advanced by AGC where it asserted alternative contracts, none of which was shown to have been advanced in negotiation or to have received any degree of acceptance from Karara.
Although AGC pleaded that it lost the opportunity to enter into a lump sum contract, it adduced no evidence that it would have sought such a contract or what its value would have been.
AGC did not show that any of the other alternatives was a possible outcome of further negotiation with Karara.
AGC and Karara negotiated the rate of COP over several months. The parties' positions were reflected in the commercial clarification register at 19 December 2011.[189] Karara proposed 6% in sch 2J. AGC proposed 15%. Karara's response was 'AGC's request to have a Corporate Profit and Overhead margin of 15% is unacceptable given that most of the risk has been transferred over to KML. KML requests that AGC submit a more realistic margin, as KML's view is it should be closer to KML's view being 6% than AGC's view of 15%'.[190]
On 22 December 2011, AGC proposed a margin of 13%, conditional upon re‑inclusion of Works not contracted to PC&M; an incentive of 2% margin for hitting agreed Milestone Dates; no liquidated damages for non-provision of people; and a 20% cap on liability for defects.[191] Karara did not accept the proposal, and proposed 10% COP, but said it would consider an incentive scheme.[192]
At a meeting on 18 January 2012, between Mr Geddes and Mr Sims (Karara) and Mr Nicol (AGC), AGC proposed either a flat 13% margin, or a 12% margin plus a 3% incentive, a 20% cap on liability and re‑inclusion of work not already allocated.[193]
On 19 January 2012, at a meeting between Mr Kenny (AGC) and Mr Bourne (Karara), AGC still continued to press for 13%, but Karara responded that the industry norm was 10%.[194] The question of alternative milestone dates was not canvassed.
In summary, I am not satisfied that any of the proposed alternatives was remotely achievable. Nor did AGC show that it may have achieved a greater profit on any of the alternative contracts it advanced. There were other trade-offs in the deal that was struck, including the re‑inclusion of Works into the scope, and the removal of liability for damages.
I would dismiss the claim made under the Australian Consumer Law.

[452]

AGC asserted that it was delayed or prevented by Karara in meeting the contractual milestones, and referred to the principle commonly referred to as the 'prevention principle'. Where that principle applies, a party cannot insist on the performance of a contractual obligation by the other party if the first party is itself the cause of the other party's non-performance.[267]
The prevention principle may be applied where delays in practical completion of a contract have been caused by acts or omissions of the principal, either within the scope of the contract or in breach, that prevent practical completion within the time stipulated in the contract. Contractual consequences, such as liability for liquidated damages for failure to complete within time, may not be enforced.
In Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd [No 2], McLure P characterised this principle 'as a particular manifestation of the obligation to cooperate implied as a matter of law in all contracts'.[268]
There is also a line of authority giving an alternative basis for the prevention principle: the refusal or inability of one contracting party to comply with its contractual obligations, rendering it impossible or pointless for the other party to perform, will absolve the innocent party from the obligation to perform; a person cannot take advantage of the existence of a state of things that he has produced himself.[269]
The prevention principle may also be relevant to the exercise of powers under a contract.[270] AGC issued notices of delay, none of which was accepted. But no question arises as to whether Karara acted fairly and honestly in rejecting those notices. The Main Works Contract made no provision for extension of time, and conferred no discretionary power to be exercised.
Schedule 2J, cl 1.7, provided for the Company's Representative 'acting reasonably' to adjust the milestones where a Force Majeure Event had occurred, or where the Contractor had been requested to suspend carrying out the Contractor's Responsibilities. AGC did not, however, bring a claim based on failure by Karara to act reasonably in exercising the power under this clause.
Counsel for AGC was unable to point to any authority where the prevention principle had been the basis of liability, rather than a matter excusing performance. I am not aware of any. I doubt that the prevention principles can ground a cause of action. But it is not necessary to decide that question, because the claims made by AGC that are based upon the principle are all claims for consequential loss. The liability of Karara for those claims is subject to the exclusion agreed by the parties in GC 28.2.
In case I am wrong, I will separately consider the claims based on the prevention principle, and the other grounds on which those claims were opposed.

[458]

The construction of a clause limiting liability depends on the language used, read in context, and not on assumptions that particular events were not to be protected. The exclusion of liability may still apply even where those events may defeat the main object of the contract. [276]
GC 28 should not be approached on the assumption that it was not intended to apply to acts or events which prevented AGC completing the Dirty Concentrate Works by the milestone dates and affected AGC's opportunity to earn increased COP. Reading GC 28.2, incorporating the definition of consequential loss, the following matters are important.
First, the exclusion was expressed to operate according to the nature of the loss, and not the act or event which caused it.
Second, the opening words, 'in no event', demonstrate the intention of the parties that the exclusion was to apply broadly. When the subclause is read in the context of GC 28 as a whole, the breadth of the exclusion of liability for Karara may be contrasted with that for AGC. The limitation of the Contractor's liability for consequential loss was subject to exclusions, including 'liability for wilful or deliberate breach of the Contract'.[277] The Company's limitation of liability was not subject to any exclusions.[278]
Third, the exclusion applied to consequential loss (as defined) 'arising out of or in connection with the Contract'.[279] Those words are of wide operation.
Fourth, the seven paragraphs of the definition of consequential loss were joined by 'or'. Paragraph (g) did not limit the preceding paragraphs to 'indirect losses'.[280] Nor did GC 28.2 invite consideration of whether losses are normal or indirect.[281] The terms 'loss of opportunity', 'loss of revenue', and 'loss of anticipated profit' should be given their normal meaning and not constrained by any assumption as to their scope.
Fifth, Karara's liability under the Contract was to reimburse actual costs and COP at the applicable rate. I accept that the parties intended that AGC should have the opportunity to earn COP at the higher rate by meeting the Milestones in sch 2J. But GC 28.2 could still apply to events which prevented AGC from realising that opportunity and earning anticipated profits because it expressly excluded liability for losses of that kind.

[467]

The principles to be applied in construing the Main Works Contract as a commercial agreement are not controversial:
1. The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
2. In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
3. Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
4. However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. It may be necessary in determining the proper construction where there is a constructional choice ...
5. Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.
6. Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption 'that the parties ... intended to produce a commercial result'. Put another way, a commercial contract should be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'.[285]
The Main Works Contract contained several defined terms. In construing the agreement, the task is to read the words of the definitions into the operative provisions, and then construe the operative provisions incorporating the defined terms.[286]
In determining the proper construction of GC 48, it is necessary to consider the context of the whole of the Contract including the detailed provisions for pricing and payment. I have earlier given an overview of the whole Contract.
AGC was entitled to be reimbursed for its Direct Costs, according to the Pricing Schedules, and to payment of the prescribed rate of COP. A Variation was also to be reimbursed on that basis.
The Pricing Schedules provided in detail for costs of staff; direct labour; contractor's plant and equipment; tools, consumables and PPE; worksite facilities; materials; subcontracts and services; fuel; guarantees; contractor's IT equipment; and COP.
GC 47 provided for payment of those costs. Other than in the case of the first payment claim, AGC was to submit a Payment Claim on the first calendar day of each month detailing its forecast of Direct Costs and amount for COP for that calendar month.[287] Each payment claim was required to detail the amount of Direct Costs claimed, the amount of COP claimed, and cumulative totals.[288] Further clauses in GC 47 provided for review and verification of each Payment Claim, including by cost reconciliation of the previous month's claim.[289]
The basis of reimbursement was specified in detail. For example, for direct labour, AGC was to be reimbursed 'for actual net costs incurred for payment of Direct Labour, made up of actual payroll costs to the Direct Labour and the agreed 'on costs' from the Contractor ...'.[290] AGC was to make its claims for payment 'on the basis of actual hours worked and wages paid ... as verified by payroll records ...'.[291] For Construction Plant and Equipment, claims for payment were calculated on the basis of days that a particular item was on-site and fit and ready for use.[292] Karara would reimburse AGC for tools and consumables, 'on actual cost with no mark-up for all tools, consumables and PPE used as required by this Contract and directed by the Company's Representative in performance of the WUC'.[293] Karara would reimburse 'on the provision of third party invoices evidencing the purchase of tools, consumables and PPE'.[294]
These provisions are incompatible with a construction that entitled AGC to reimbursement for costs not actually incurred, or COP on costs that would have been, but were not, incurred. A reasonable business person would not understand the words used in this Contract to have the meaning asserted by AGC.
The construction proposed by AGC would also entitle it to payment for lost opportunity, revenue and anticipated profit. This would be inconsistent with GC 28.2 which expressly excluded Karara's liability for such consequential loss.

[484]

Applying those principles, there is no sound basis for implying the proposed Loss of Opportunity Term.
First, it is not necessary to give the Contract business efficacy.
The Contract provided for AGC to perform the Contractor's Responsibilities, as directed, and for Karara to pay the Contractor for its performance of those responsibilities in accordance with the Pricing Schedule. The Contractor's Responsibilities included but were not limited to the Dirty Concentrate Works, which were defined as 'a Separable Part of the Works'. The milestone scheme provided an incentive for completing the Dirty Concentrate Works. But the incentives were one part only of the Contract: the Contractor may or may not earn the higher rates of COP under it its terms.
Second, the proposed Loss of Opportunity Term is inconsistent with the detailed scheme for verification of Direct Costs and payment of those costs and COP.
Third, the Contract expressly excluded liability for consequential loss. It would be incongruous to imply a term for the payment of loss of opportunity to earn the higher rate of COP in the face of that exclusion.
Fourth, sch 2J provided for adjustment of the milestone dates in defined, but limited, circumstances. There was no more general express power to adjust dates or to extend time.
Fifth, the Loss of Opportunity Term would qualify the express power of Karara to issue Variations.
Sixth, the expression of the proposed implied term, as a series of alternatives, is neither clear nor obvious.
Finally, an implied term is one which the court presumes the parties would have agreed upon had they turned their minds to it.[300] It cannot be presumed that both parties intended the incentive scheme to apply by reference to something other than the actual date of Practical Completion, when the commercially valuable Dirty Concentrate could be produced.
For the same reasons, I do not accept that the Contract has the substantially similar implied term pleaded by AGC in statement of claim par [99].

[502]

Of the 18 notices of delay, Mr Kong identified five 'driving the contemporaneous [Dirty Concentrate Works] critical paths'.[315] Three of them were for delayed delivery of Company‑Supplied Items; two were for rework or additional work.[316]
Mr Kong concluded that it was necessary to look beyond the matters that were the subject of AGC's notices of delay to identify the real cause of delay.[317]
Mr Kong also considered the possibility of inherent weaknesses in 'traditional delay analysis', which involves the expert assessing the duration of a delay caused by a compensable event, and its effect on the critical path.[318] He concluded that traditional delay analysis cannot be applied to the Main Works Contract.[319] In his opinion, a combination of factors jointly contributed to the overall delay and the operation of these events and matters was interactive.[320] In place of delay analysis, Mr Kong carried out a comparison of available resources with planned resources. He also sought to determine the 'point of no return': the point at which AGC could no longer achieve any of the milestones, despite the mitigating measures put in place to reduce delay.[321]
In Mr Kong's opinion, the key issue was the lack of manpower.[322] He concluded that an email of 30 March 2012, requiring AGC to hold all recruitment, was probably the 'main tipping point' because 'the imposition of the constraint on employment of personnel had effectively removed AGC's ability to mobilise more personnel to reduce the delay'.[323] In Mr Kong's opinion, the direction on 30 March 2012 to hold recruitment of personnel was the point of no return.
While he identified manpower as the key issue, Mr Kong considered that there was also a constant issue of late delivery of materials, and a significant number of man hours allocated to carry out variation works to rectify defective materials.[324]
I will deal specifically with some of Mr Kong's conclusions in the context of the particular claims made by AGC. I make one general comment: sections of Mr Kong's report, at times, tended towards advocacy on behalf of AGC.[325]

[529]

On 3 April 2012, again by email, Mr Stark advised Ms Buchanan, based on the labour report for the week ending 1 April 2012, that the direction for no further recruitment 'would equate to a hold on 63 blue collar and 9 x Third party going forward. No replacement at this stage the natural attrition unless authorised by Steve Andrews'.[341]
On 10 April 2012, AGC responded to the direction given on 3 April 2012 by issuing a 'Notice of Delay' pursuant to GC 37.2.[342] AGC requested an extension of time to the milestone dates agreed under sch 2J.[343] The request to extend time to the milestone dates was rejected.[344]
Mr Kong identified the email notice on 30 March 2012 as the 'tipping point'.[345] I do not accept Mr Kong's opinion about the significance of that direction for the following reasons.
First, the direction did not, in fact, hold all recruitment.
At 25 March 2012, the actual complement of blue collar personnel on Site was 466, with 43 in the pipeline (that is, personnel who had accepted the employment offer and were being processed for arrival on Site). This number was 68 short of the approved total of 577.[346] The notice of 30 March 2012 was followed by an email of 8 April 2012, in which Mr Stark advised Ms Buchanan that the hold 'was not an indication that KML does not want further employees on the project but a pause to allow the team now to focus on key areas and skills to complete the project... this skill set will be formalised over the next couple of weeks'.[347]
On 12 April 2012, that is less than two weeks after the 'hold', instructions were given to AGC to recruit a further 32 employees.[348] On 23 April 2012, AGC requested approval for another 33 personnel.[349] On 27 April 2012, Mr Stark also advised AGC that replacement of 23 personnel due to natural attrition, as requested by Mr Andrews, was approved by Karara.[350] On 30 April 2012, AGC advised that, of the 78 requisitions submitted since 12 April, 50 ‑ 60 personnel would be provided to Site in the next three weeks and the remaining 20 or so in a further one to two weeks. [351] The combined result was that for the week ending 29 April 2012, AGC was approved to hire up to 554 employees, and had 469 employees on Site and 16 in the pipeline.[352]
On 11 May 2012, Ms Buchanan (AGC) advised Mr Stark that AGC would be mobilising between 20 to 55 personnel to the Site the next week.[353] On 14 May 2012, Mr Stark responded:

[560]

Karara denied that it directed AGC to perform additional or varied works and denied that the matters alleged by AGC were a Variation within the meaning of GC 1 and GC 48.1.2.[387] AGC put forward five arguments in response.
First, AGC submitted that Karara's position was inconsistent with its general argument that there was no fixed Scope of Work under the Main Works Contract. That argument does not meet the present issue: was the work in the Work Packs within the Scope of Work that AGC was required to carry out to perform its responsibilities under the Contract.
Second, AGC submitted that the work described in sch 1A, cl 2.4.1 involved, in part, an assessment by Karara as to whether the steel was defective. Until Karara determined that steel was defective, AGC was not required to perform rectification works. That argument, with respect, does not address whether the work was within scope.
Third, AGC submitted that the work described in sch 1A, cl 2.4.1 was not quantified in any way and not valued. In a contract where AGC was to be reimbursed its Direct Costs with a COP margin, it is of no significance, in the proper construction of the Scope of Work under the Contract, that the work required to be done had not been quantified or valued.
Fourth, AGC said that the 25 January 2012 schedule did not include or make an allowance for Work Pack works. Again, the issue is one of construction of the Contract. Whether the works were within a schedule - particularly where the Contract did not include a Program as part of the contract document - does not assist in the question of construction. In any event, there is an issue about the status of the 25 January schedule and other schedules.
Fifth, AGC said that, on the evidence, the parties accepted the Work Packs were additional works.
AGC approached the additional work in the Work Packs on the assumption that it was a Variation. Mr Kong was instructed to assume that the Work Packs were 'used to record changes to the works (variations)', and, 'In summary, a Work Pack was out of scope work'.[388]
Mr Arndt (AGC) regarded each Work Pack as an instruction to carry out a Variation. He agreed, however, that AGC did not receive a signed Variation order for any of the Work Packs.[389] AGC kept the register of Work Packs for Karara, to enable it to back charge for material that was missing or needed to be rectified.
Each party referred to examples of Work Packs as illustrating that the work recorded in it was within scope, or was out of scope. Perhaps understandably, that exercise was not carried out for all of the more than 1,800 Work Packs. However, I accept Karara's submissions to the following effect:

[647]

The Main Works Contract had not then been signed. Mr Murdoch and Mr Kenny had met on 23 January and discussed the Scope of Work for AGC, and the reintroduction of work into the scope. They met on 2 March 2012 but, on Mr Kenny's evidence, scope was not again discussed.
The minutes of the SMP Weekly Progress Meeting for the week ending 7 March 2012 recorded that Ausco (as ad hoc labour hire) would be on Site to assist AGC with the conveyor system only.[493] The minutes of the meeting for the week ending 21 March 2012 show Ausco still on Site, 'under the banner' of Karara with equipment to be supplied by AGC.[494]
The Main Works Contract was signed on 15 March 2012. The Scope of Work was set out in sch 1A, and in detail in vols 2 and 3 of the Contract, by reference to 24 work areas: Areas 1301 ‑ 1324.
Within each area, there was further specification of structural, mechanical, area services (including piping), and, in some work areas, electrical work.
Some sections were removed from the Scope of Works 'in entirety': Work Areas 1301 (primary crushing - structural, mechanical and area services); Work Area 1302 (stockpile, stacking and reclaim ‑ mechanical for a specified transfer chute); and Work Area 1303 (secondary crushing and screening - structural, mechanical and area services).[495]
The Scope of Work also generally excluded the matters set out in cl 3.2 of the Scope of Works, all bulk concrete works (cl 3.3.1), and various items described as supplied and installed 'by others'. These last items included tanks described as 'built in situ', all underground piping,[496] and conveyor trestle civil installations.[497]
On 25 March 2012, Mr Bourne wrote to Ausco confirming that Karara required 12 personnel in addition to those already mobilised or due to be mobilised in the next couple of weeks.[498] On the same day, Mr Gangell sent to Mr Thistlethwaite and others a breakdown of the Works within Ausco's scope.
1. Ausco are responsible for the fit-out of all trusses/gantrys.
2. Ausco's responsibility for the truss fit-out ends once the truss has been removed from their possession.
3. All trusses are to be complete with electrical fittings, cable tray, piping, mechanical and structural components
4. Ausco will erect all conveyor truss's and trestles for 1319‑CV‑041 to the battery limit of 1318
5. Ausco will erect all conveyor truss's and trestles for 1319‑CV‑042
6. Ausco will erect all conveyor truss's and trestles for 1319‑CV‑043
7. Ausco will erect all conveyor truss's and trestles for 1314‑CV‑020 to the battery limit of 1314
8. Ausco will erect the take up at the intersection of CV020 and CV021
9. Ausco will erect all conveyor truss's and trestles for 1315‑cv‑021
10. Ausco will erect the take up at the intersection of cv021 and cv022
11. Ausco will erect all conveyor truss's and trestles for 1315‑cv‑022
12. Ausco will erect all conveyor truss's and trestles for 1315‑CV‑023
13. Ausco will erect all conveyor truss's and trestles for 1315‑CV‑024
14. All progress in works will be shown in the individual contractors schedules. Ausco will not generate a new schedule.
15. Ausco will ‑ where practicable ‑ accommodate contractors priority requests.

[654]

AGC responded on 13 August 2012, seeking clarification of what Karara meant in its direction to 'integrate' the Ausco workforce, and referring to provisions of the Main Works Contract limiting its responsibility to its own Personnel and Workforce.[506]
On 12 October 2012, at a meeting on site, Mr Bourne instructed AGC to provide a plan for how AGC were to effectively integrate the Ausco workforce, or Karara would demobilise AGC.[507] AGC then prepared an SMP Optimisation Plan for integrating the two workforces.[508]
On about 20 November 2012, two further areas were removed from the AGC Scope of Work.[509]
Ausco remained on Site performing SMP works until July 2013.[510]
Karara maintained that its engagement of Ausco was because AGC could not recruit labour in a timely manner.[511]
AGC submitted that Karara's stance was more cynical. Mr Bourne was looking for a cheaper source of labour, while saddling AGC with the responsibility for integration of the workforces, reporting and recording Ausco's works into schedule, and supplying equipment. The evidence does not support a finding to that effect. Karara was looking to supplement AGC as a source of blue collar work because ‑ rightly or wrongly ‑ it perceived that AGC was unlikely to supply all required labour when required.[512] During the course of the Main Works Contract, particularly around April and May of 2012, Karara issued letters to AGC regarding its compliance, workforce and production. There were five such letters between 24 April and 20 May 2012. The letter of 1 May 2012, listed 21 alleged breaches, including:
1. failure to provide the required number of personnel working on site, as requested by the Company;
2. failure to recruit and maintain the required number of personnel without reduction and otherwise in accordance with the Workforce requirements, the effect of which has caused a significant loss of man hours to WUC. [513]
On 7 May 2012, Mr Vorster (AGC), provided a detailed response to the 1 May letter. AGC maintained that it had met its obligations, in line with Karara's directions.[514]
It is not necessary to resolve that dispute. I am not satisfied that Karara acted in bad faith.

[670]

The Contract Sum was defined in the General Conditions to mean Direct Costs reimbursed to the Contractor, and COP paid to the Contractor.[521]
AGC relied on sch 10, which set out the Contractor's cash flow forecasts to be used by Karara and was 'an indication of the value to be controlled'. The amount in sch 10 of the signed Contract was $176,789,041.95. This amount was used to define the amount payable by AGC for provision of securities pursuant to GC 5 and Item 9 of the Annexure to the Formal Instrument of Agreement, which specified the amount of security as a percentage of the Contract Sum.
AGC further submitted that, by GC 28.3.1, its total liability as the Contractor arising from or in connection with the subject matter of the Contract was limited to 20% of the Contract Sum.
These provisions regarding the Contract Sum are not consistent 'with' Karara's position that AGC was obliged to carry out, and be reimbursed for, only such work as Karara directed.
Third, AGC submitted that The Works and Work under the Main Works Contract had a more tangible meaning than Karara would give them. In particular, AGC referred to provisions for acceptance and completion. Importantly, AGC was obliged to complete The Works in accordance with the design documents, the project requirements, and all of the requirements of the Contract.
AGC submitted that the reference to 'as directed by the Company's Representative' was concerned with 'when' the work was to be undertaken and not 'if'.
The language is unclear, and the Contract does present a constructional choice.
The construction advanced by AGC is consistent with the Scope of Work, as defined in SC 1.1: 'construction and installation of all structural, mechanical and piping works for the Project's process plant as further described in the Scope of Work'. It is also consistent with the requirement that AGC provide both blue collar labour and staff, and construction plant. The Contract contains a detailed specification of what is included in the Scope of Work, what is excluded, and what Work is to be done by others. It is also consistent with the incentive in sch 2J for completion of the Dirty Concentrate Works.
Karara had a much greater degree of control than one normally finds in a construction contract. It had taken control of the construction schedule and provided the construction manager. It controlled the labour and materials that AGC could bring to Site. Karara carried the risks from delay and redundancy. But even taking those unusual features into account, a reasonable business person would understand the Contract as obliging AGC to carry out the Scope of Work as directed, and not if directed.
Where the meaning of the text is unclear, the court may have regard to 'events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context.'[522]
In particular, I refer to five further matters which, in my opinion, support the construction advanced by AGC.
First, AGC performed the Early Works Contract under which its Scope of Works included:

[692]

I have not provisionally assessed the damages consequent on the Ausco claim.
The onus lay on AGC to prove both the fact and the amount of the damage it had suffered.[535]
I am satisfied that AGC proved that it suffered some loss. AGC's profit on the Contract was a component of the COP factor payable to it on the Direct Costs it incurred in performing work. It suffered loss when work was removed from its scope of work.
The question of remoteness does not arise. It must have been in the contemplation of a reasonable person in the position of Karara that AGC would suffer a loss of COP should Karara breach the Contract by removing work from AGC.
AGC claimed that it was entitled to damages which it had quantified by reference to the hours performed by Ausco tradesmen, with AGC's equivalent trade rate applied to the relevant hours. It then calculated the COP on those Direct Costs at each of the rates set out in sch 2J.
AGC calculated the value of the Ausco work, on AGC rates, as $62,022,264.90. Applying the various COP rates, it quantified its loss as between $6,822,422.23 (at 11%) and $9,303,324.73 (at 15%). AGC further submitted that the proper rate was 15% 'given the parties' bargain'.[536]
It is convenient to deal immediately with an alternative submission. AGC submitted that Karara paid Ausco about $65.5 million for work completing SMP works that were within AGC's scope of work, and that figure may be used. I do not accept that the amount paid to Ausco is the proper measure of the damage AGC suffered.
Damages for breach of contract are compensatory. The general rule at common law is that a party which sustains a loss by reason of a breach of contract is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.[537] The evidence was that the rates paid to AGC and Ausco differed. Had the work not been assigned to Ausco, AGC would have performed the work at its rates, not the Ausco rates.
There is no good reason to adopt a COP factor of 15%. The parties' bargain was that the higher rate would be payable according to when the Dirty Concentrate Works were completed, and there were clear commercial reasons for tying a higher rate to that result. The milestones were not met, and the assignment of work to Ausco did not cause that result. It is at least possible that AGC would have finished even later had it performed the additional work.
The difficulty lies in determining what part of the work done by Ausco was assigned to it in breach of the Contract.
First, while I accept AGC's case that the Contract provided a Scope of Work which it was to perform, there were express exclusions, including the work assigned to PC&M.[538] The Scope of Work also generally excluded the matters set out in cl 3.2 of the Scope of Works: all bulk concrete works (cl 3.3.1); and various items described as supplied and installed 'by others'.
In June 2012, AGC was advised that Karara intended to recommence work in Areas 1301 and 1303 using mixed labour from AGC and Ausco.[539] No direction was issued including that Work into the Scope of Work under the Contract. AGC was only supervising the work done by Ausco.[540]
The result is that it is necessary to identify and exclude that part of the Work done by Ausco that was not within AGC's Scope of Works. Reliance on the total hours worked by Ausco does not permit that necessary discrimination.
Second, Ausco also performed Work outside the Scope of Work. For example, '20 odd' Work Packs were issued to Ausco for piping, and the hours in that work were not taken into account in AGC's calculations.[541] Similarly, AGC did not allow for hours spent by Ausco in remedying its own defective work.[542]
Third, Karara submitted (and I accept), that AGC had the capacity to calculate, or at least estimate, the hours and costs of AGC performing the work that was within the Scope of Work, but done by Ausco.
Karara also argued that the hours worked by Ausco would have to be adjusted for the possibility that AGC might work more productively. Even if AGC might have been more (or less) productive, there is always an element of estimation in the assessment of damages: 'Where precise evidence is not available the court must do the best it can.'[543]
The result is that, while I accept that the removal and reassignment of work was a contractual breach, and that AGC has proved it caused loss, I do not accept the basis on which AGC assessed its damages. It is not, however, a case for nominal damages. AGC has proved not only breach, but that the breach caused real loss. Were it not for my finding regarding the exclusion of consequential loss, I would invite submissions on whether, consistently with my reasons that the loss cannot be directly based on the hours worked by Ausco, damage may be assessed on the evidence already adduced at trial.

[693]

AGC pleaded that, on or about 16 October 2011, alternatively on or about 1 December 2011, Karara directed AGC to pay its leading hands one extra hour per day. The additional pay was referred to by the parties as the SPEC Allowance.[544]
In particulars, AGC specified an oral direction given on or about 13 October 2011 by Richard Tarr (AGC) to Elaine Buchanan (Karara), confirmed by email on 16 October and 1 December 2011.[545] AGC did not plead Mr Tarr's actual or apparent authority. It did not plead that he was Karara's Company Representative, or a nominee or delegate of the Company Representative.
AGC pleaded that it incurred direct costs for the SPEC allowance in performing the Early Works and was entitled to incur those costs, and was reimbursed by Karara for the direct SPEC allowance.[546] It also incurred direct costs for the SPEC allowance in performing the Main Works, was entitled to incur those costs, and was reimbursed by Karara for the SPEC allowance costs it incurred.[547]
AGC further pleaded its entitlement to reimbursement for the SPEC allowance as a contractual entitlement pursuant to GC 2.1.2 and sch 2B of the Early Works Contract, and GC 2.3(a) and sch 2B of the Main Works Contract.[548]
On or about 30 August 2013, Karara issued a Progress Certificate to AGC in which Karara deducted $1,941,027.80 plus GST for the SPEC allowance costs incurred by AGC under the Early Works Contract and the Main Works Contract.[549]
AGC pleaded that, by reason of the matters pleaded in statement of claim pars [113] ‑ [115], Karara's representative was not entitled to deduct the SPEC allowance costs AGC incurred.[550] Further and alternatively, AGC pleaded that Karara breached the terms of the Early Works Contract and Main Works Contract in deducting the allowance.[551]
Alternatively, AGC alleged inferred agreements between AGC and Karara to the effect that AGC would pay its leading hands the SPEC allowance and that Karara would reimburse that allowance under the Early Works Contract and the Main Works Contract.[552] AGC alleged a breach of those agreements by Karara in deducting the SPEC allowance.

[735]

On the facts set out above, I am satisfied that, from March 2012 at the latest, AGC was aware that Karara questioned the payment of the SPEC allowance, and that Karara had not accepted that it was liable to reimburse the SPEC allowance. On those findings, AGC cannot establish that the parties shared an underlying assumption about the payment and reimbursement of the allowance in the period of the Main Works Contract.
Neither law nor equity would estop Karara from denying a liability that does not arise under the terms of the Contract and which it did not earlier accept. '[T]he basal purpose of the doctrine of estoppel, which is to avoid a detriment by compelling the party who has created an assumption, or expectation, on which the innocent party has acted, to adhere to it'.[602] Karara may have initially led AGC to believe that the SPEC allowance would be reimbursed, but it should not be held to have continuing responsibility for any detrimental reliance by AGC after it had questioned the payment.
The factual position is different under the Early Works Contract. Karara did not then question the payment of the SPEC allowance. Although it was not done at the level of Company Representative, a Karara employee approved the change of condition forms for Leading Hands, which first included payment for an extra hour, and later provided for payment of an allowance. In those circumstances it is more likely than not, as a matter of inference, that Karara and AGC proceeded on the basis that the allowance was payable.
The difficulty, however, is that it remains unclear what the underlying assumption or representation was that AGC took to be conveyed by Mr Tarr's emails - would Karara reimburse an extra hour's pay for 'one extra hour on what they work', or only for 'time worked'? And it is equally unclear on what basis AGC paid the allowance to its Leading Hands and sought reimbursement.
For that reason, I am not satisfied that AGC has established that Karara is estopped from denying its liability for the SPEC allowance.

[804]

AGC argued that, by May 2013, the payment process had broken down. AGC issued weekly cost reconciliation statements on 7, 14, 31 and 25 April 2013. In or about 17 May 2013, AGC issued an invoice for $9,185,819, although Karara had not then issued a Progress Certificate and did not issue a Progress Certificate to AGC until 30 August 2013. The Progress Certificate, when issued, was for $2,501,520.31 (including GST).[632]
Further, AGC did not provide a payment guarantee. It argued that was because the parties have been unable to agree the cost forecast for the May 2013 advanced payment. AGC appeared to argue that the payment regime had been abandoned, while at the same time relying upon times specified in that regime for when payments were due.
The situation was similar for the June and July 2013 payment claims. AGC issued weekly Cost Reconciliation Statements and an Invoice, but Karara did not issue a Progress Certificate. On 5 June 2013, AGC provided an invoice in the amount of $11,670,689.80,[633] which it said was in anticipation of Direct Costs that AGC expected to pay in June 2013 and therefore represented its final invoice for the project.[634]
With regard to the March 2013 invoice, Karara admitted that its representative issued a Progress Certificate to AGC in the amount of $11,817,451.52 (excluding GST) on or about 14 March 2013. It admitted that AGC issued an invoice in that amount on or about 14 March 2013 and that GST was payable. Karara further admitted that AGC obtained Advance Payment security for March 2013 and that security was exchanged for the February 2013 Advance Payment Security. Karara admitted that it was required to pay the invoice within two business days of receiving it - that is, by 18 March 2013 - and that it did not pay by then.[635] Karara submitted that AGC's sole remedy for late payment was interest and that interest was paid in accordance with GC 47.3.
With regard to the later invoices, Karara argued that they were not submitted in accordance with the stipulated payment process under GC 47. There is no doubt that the prescribed contractual process, including the provision of payment security, was not followed. AGC's case is that the process had been replaced by the 'agreed payment process'. For the reasons given earlier, I do not accept that argument.
With regard to the June 2013 invoice, I further accept Karara's submission that 'in accordance with the process in the Contract', AGC was not entitled to issue an invoice on the fifth day of the month.

[813]

Karara pleaded that any claims which had not already been barred were barred after the expiration of the period for lodging a Final Payment Claim.[641]
The question, on Karara's case, is whether the parties have complied with the procedure in GC 49, including the prescribed time limits.
In the context of my earlier findings, the issue is largely academic. It was, however, pleaded in answer to the SPEC allowance claim where I have found Karara was not entitled to deduct the amounts which it had paid.
It was not in dispute that AGC did not give Karara a Final Payment Claim within 20 days of the expiry of the Defects Liability Period.
In its reply, AGC contended that it was not required to make a Final Payment Claim where it had given notice of a dispute and where Karara knew of the existence of the disputed claims.[642]
AGC further pleaded, in reply, that the parties conducted themselves on the assumption that they no longer considered themselves bound by the terms of the Contract and, in effect, abandoned it. [643] Alternatively, AGC pleaded an estoppel by conventional course of dealings which prevented Karara from asserting that GC 49.1.1 operated in the way Karara pleaded (that is, in accordance with its terms).[644]
Karara submitted that it was entitled to insist on strict contractual position and deny liability for any claim barred under GC 49. The time bar in GC 49 is to be given its natural and ordinary meaning, in the context of the Contract as·a whole.
The claim that Karara breached either the Early Works Contract or the Main Works Contract by issuing a Progress Certificate in which it deducted the amount of SPEC allowance, alternatively that Karara breached an agreement to reimburse AGC the amount of the SPEC allowance that it had paid, is a claim 'in connection with the subject matter of the Contract' or a claim 'arising out of [an] alleged breach of the Contract'. AGC was required to include such a claim in a Final Payment Claim. The consequence of not doing so was that the claim was barred under GC 49.1.1.b.
The effect of Karara relying on its strict contractual entitlements is, no doubt, harsh. That is not itself reason to deny to it the effect of the agreement.
AGC will suffer detriment by reason of not submitting a Final Payment Claim, but the evidence does not support a finding that there was any common assumption between the parties modifying their obligations or entitlements under the Contract. In particular, there is no evidence that Karara accepted that AGC should be able to assert claims in the way it now seeks to do, or in any way led AGC to assume that Karara would not insist on its contractual rights.

[865]

Ultimately, it was not in dispute that this matter was unusually difficult and complex. I also accept Mr Bereyne's evidence that this action was important because of the size and the nature of the claim.
On the evidence, and my own experience as the judge at trial, this action required a well-resourced litigation firm with expertise in large, complex disputes. The senior lawyers engaged, for whom the uplift is sought, are all senior practitioners experienced in complex construction disputes.
The plaintiff submitted that the defendant was required to present evidence 'why no other practitioner within the Western Australian jurisdiction was available to undertake the legal work performed at the hourly rates in the relevant determination, or whether the party was unable to engage a solicitor to undertake the work at the Scale hourly rates'.[652] The plaintiff relied upon comments of Edelman J in Crawley Investments Pty Ltd v Elman.[653] The reliance was not, in my opinion, well placed. First, while Edelman J acknowledged that the arguments before him concerned a number of difficult, and unresolved legal issues, his decision was in relation to the costs of an application to set aside the issue and service of a writ out of the jurisdiction. In contrast, the matter before me results from a trial of many days, after about four years of preparation. Second, I do not believe that Edelman J was purporting to state a requirement of the kind contended for by the plaintiff. His Honour referred to the absence of any evidence or submission about the availability of other practitioners, but decided the application on the basis that it was not fairly arguable that the importance, difficulty or complexity of the issues was such that the maximum amount in the relevant scale would be inadequate. In the present matter, the court is able to form an opinion on that question without the evidence which the plaintiff submitted is needed.
The plaintiff also submitted that while the action was complex and important, the nature of the work required a large legal team, as opposed to specialist practitioners with high hourly rates: 'engaging solicitors and senior counsel who charged more than the rates provided for in the Scale is to be regarded as a luxury of litigation, which is a cost that ought to be borne by the party indulging in that luxury...'[654]
I do not accept the submission. Once it is accepted that the matter is complex and difficult, requiring a large legal team, it is reasonable that one or more experienced senior practitioners with experience and specific expertise in construction disputes will be required to manage the litigation. Similarly, the engaging of senior counsel with undoubted experience and expertise in such disputes was reasonable and proper.
The plaintiff made further submissions regarding the effect of GST and the need to avoid 'double dipping' in relation to the fees for senior counsel. That question does not arise on this application. I am not determining the amount payable in respect of counsel's fees, and whether the amount allowed should be on a GST inclusive basis.
Finally, the plaintiff submitted that hourly rates allowed to Mr Bereyne and Mr Pratt for their work as counsel should reflect the differentiation in rates between solicitors and counsel. Again, in my opinion, that is a question for the taxing officer. I would, however, make one comment. Neither of those practitioners is senior counsel. The Court of Appeal has said that, only in very exceptional circumstances would a person who has not been appointed senior counsel, with its attendant rights and responsibilities, have their costs assessed at the rate designated for senior counsel in the Determination.[655]

AGC INDUSTRIES PTY LTD -v- KARARA MINING LTD [2019] WASC 140 (3 May 2019)

At a glance

Court

Decision date

Before

Source

Judgment (1077 paragraphs)

AGC INDUSTRIES PTY LTD -v- KARARA MINING LTD [2019] WASC 140 (4 December 2019)

Legislation Cited (4)

Cases Cited (39)