211 In all the circumstances of this case I am satisfied that the plaintiff was not required to give the warning to the Council. The Council has failed to establish that the plaintiff breached its retainer or its duty of care to the Council."
116 Despite the dichotomy presented by the parties between incompleteness and inadequacy, the Council's Trade Practices Act case was in fact determined with some regard to the Council's awareness of the risk in proceeding with a GMP construction management contract with a price based on the GMP Documentation. It will have been noted that the trial judge recorded the Council's submission that the "truth" of inadequacy remained hidden, and she was satisfied that the Council was well aware that the GMP Documentation was incomplete. But of more importance to the Council's allegation of misleading conduct were her Honour's reasons for disposing of the warning case.
117 I turn to the Council's submissions on appeal, which were extensive; I have sought to distil their substance.
118 The Council's principal submission, said to bring error in finding that the GMP Documentation was adequate to form a scope of works for a GMP construction management contract (in fact the finding was that the scope of works identified in the GMP Documentation for a GMP with the scope to be identified in more detail in the full documentation to be later completed), was that the trial judge should not have concluded that the GMP Documentation did not have to be appropriate for tendering for a fixed price contract. The Council submitted that the trial judge was in error in failing to equate a GMP construction management contract with a fixed price contract and in failing to hold that the GMP Documentation was therefore inadequate.
119 For reasons I have explained, even if there were the equation it would not follow that Davies had engaged in misleading conduct. But I do not think error has been shown in the trial judge's conclusion.
120 The Council submitted that Mr Davies himself had agreed, with some qualifications not impacting on the force of the concession, that the two kinds of contract were to be equated, because each had a maximum price and the tenderer therefore had to have documentation adequate for reliable tendering. The submission took Mr Davies' evidence out of context. Mr Davies did agree that the GMP Documentation was insufficient to enable tenderers accurately to price the works for a fixed price contract, but maintained that it was sufficient for pricing the works for a GMP construction management contract. As the trial judge observed, Mr Davies' concession was as at the end of the contract, and there was a difference as at their beginnings. Further, it is necessary to have regard to the GMP construction management contract in the present case, one under which to the knowledge of all concerned the design remained to be finalised and the documentation would undergo development. In the circumstances in which Davies was placed there could not be fully developed documentation.
121 Nor did the Council gain assistance, as it submitted, from any qualification in cross-examination to Mr Bullen's evidence in his report that design documents fully describing the works were not necessary in order to have a guaranteed maximum price. Mr Bullen agreed that a fixed price contract and a GMP construction management contract with a defined scope of work both had promises to build what the scope of work defined. As the trial judge observed, his agreement that for the former kind of contract an architect should prepare documentation as for a fixed price contract, defined as sufficiently developed for accurate tendering and for reliable fixed price contracting, was on assumptions which did not take account of Davies' position in February 1999. Davies had suggested that the design be fully developed prior to tendering, but the Council had declined. Davies was not instructed until later to proceed with full documentation. The Council knew there would be development of the drawings and specifications, and in the contract with Austin specifically provided for it.
122 In short, what an architect should do and the adequacy of what the architect does requires consideration of the circumstances. Across the board equation of documentation for tendering for a fixed price contract and for tendering for a GMP construction management contract may be an ideal, but not a necessity. In a contract for a fixed or maximum price the risk that the cost of the works will exceed that price ordinarily falls upon the contractor. Subject to the terms of the contract, in a contract which, as in this case, provides for development of the documentation in the course of the works, the risk that the development of the documentation will increase the cost of the works falls on the contractor. While no doubt tenderers for a GMP construction management contract would prefer to tender on full documentation, in their own interests, they will ordinarily know, and in this case they did know, that development will occur, and should allow for the risk in their tender. It is not correct to equate such a contract with a fixed price contract on fully developed documentation.
123 The Council further submitted that the trial judge was in error in failing to accept and act upon the evidence of Messrs Poiner, Alden, Chow and Wyles, described generally as evidence that the GMP Documentation was inadequate for fixed price contracting. It took the Court extensively to the evidence of the experts. For example, in Mr Alden's opinion the structural steelwork drawings were such that a reliable estimate of the extent or cost could not be made, any contract based on them "would be potentially subject to significant variation", and the construction manager could only offer a price with a large contingency in its costing. He thought the incompleteness of the documentation was obvious. Mr Poiner considered that the works could be the subject of estimation, which as I have said was not in dispute, and (in my summary) that a construction manager might not include a sufficient allowance for the development of the documentation and there was a risk that there would be cost increases which it would be entitled to claim beyond the fixed price.
124 Unless there was equation of a GMP construction management contract with a fixed price contract, evidence of inadequacy for fixed price contracting did not establish inadequacy for contracting under a GMP construction management contract. This, in my view, is what the trial judge meant when she said at [218] that there was no evidence suggesting that the GMP Documentation, although incomplete, was inadequate to form a scope of works for a GMP construction management contract; she went on to explain the difference in the kinds of contract. More particularly, evidence of this kind did not establish inadequacy when the design remained to be finalised and the documentation was to be developed. The tenderer had to make an allowance in its tender, and it was for the principal to tie the tenderer down to the contract price.
125 There may be a question of the architect making the principal aware that development of the documentation could give the tenderer grounds to claim, or provoke it groundlessly to claim, entitlement to an increased contract price; that is another matter. The Council's principal submission should not be accepted.
126 There was regrettable obscurity in the Council's further submissions on appeal in relation to misleading conduct. It eschewed a warning case, but its submissions went in part to such a case. A deal of the evidence of Mr Poiner to which the Council referred the Court was concerned with the architect advising the client that the GMP Documentation was incomplete, that the works could not be accurately costed, and that the construction manager could claim beyond the guaranteed maximum price. As I have said, the Trade Practices Act case was determined with some regard to the Council's awareness of the risk in proceeding as it did. One ground of appeal was that the trial judge failed to make findings as to the Council's knowledge of incompleteness of the GMP Documentation, although it was presented as a ground going to causation.
127 A misleading conduct case is not the same as a warning case, and I consider that as the hearing of the appeal progressed the submissions extended to misleading conduct because the Council was left unaware, when it should have been made aware, that the GMP documentation was such that the construction manager might claim entitlement to an increased guaranteed maximum price. Despite occasional reference to the Council's limited case at trial, I understand Davies to have met the wider submissions. Thus it said in written submissions in reply, albeit in relation to causation of loss -
"What the Council had to show, but did not, was that there was a particular risk of out of scope design development, that it was ignorant of that risk, that the Respondent engaged in misleading and deceptive conduct in producing its design without disclosing the risk, that the risk was encountered and explained the increase in costs, that something could have been done with the incomplete design to avoid such risk and that with proper disclosure the Council would have successfully directed that it be attended to."
128 It is convenient at this point to diverge to an evidentiary matter. Some of the parts of the experts' reports to which the Council referred were said under one of the grounds of appeal to have wrongly been ruled inadmissible. Two subparagraphs in a report of Mr Poiner and ten sub-sub-paragraphs in the report of Mr Alden were identified.
129 At the hearing of the appeal it appeared that the Council did not maintain the ground of appeal that the parts of the reports had wrongly been ruled inadmissible. Counsel for the Council said to the effect that there were already in evidence opinions "to the same extent", and seemed to accept that the rejected parts were "a re-statement and emphasis of inadequacies" and that "every one of those opinions is the same as opinions elsewhere that are in and if we don't get home on those, this is not going to get me home either".
130 However, in written submissions in reply the Council said that it "maintains its ground of appeal 1 as to wrongful rejection, in the event that it does not otherwise succeed on liability". The following sentence asserted that the rejection of the evidence was erroneous because it "properly complied with Makita requirements". This was odd. While Makita (Aust) Pty Ltd v Sprowles [2001] NSWCA 3; (2001) 52 NSWLR 705 appears to have been raised at the trial, it does not seem to have been the basis for the rejection.
131 I do not propose to tabulate in these reasons all the rejected parts of the reports. Most were rejected, correctly, for reasons to do with form or bad expression, for example a structural engineer stating what would be apparent to all professionals, but with leave to call oral evidence on the matter in question. The Court was not taken to where the leave had been exercised, but that was a matter for the Council at the trial. Where leave was not given, the parts of the reports were correctly rejected.
132 The rejected sub-sub-paragraph on which the Council placed particular emphasis was para 5.4.16 of Mr Alden's report, in which he said that he "believe[d] that the Principal should have been warned that there was a real risk of a significant project cost increase because of the very early stage of the development of the design documentation, at the time of the CM contract award". It was rejected after the trial judge suggested to counsel for the Council, and he agreed, that it was for the trial judge to decide whether a warning should have been given, and counsel then suggested that what Mr Alden said was "a reflection of his view of the inadequacy of the documents". The rejection was correct. Counsel said that he did not wish to have reasons for it.
133 The ground of appeal, so far as maintained, should not be upheld, and I do not enter upon whether upholding it would mean a new trial and the operation of Pt 51 r 23 of the UCP Rules.
134 I have earlier referred to the trial judge's regard to Mr Poiner's evidence in relation to adequacy to form a scope of work, and have set out her Honour's references to Mr Poiner's evidence in connection with the warning case.
135 Mr Poiner gave evidence that the GMP Documentation could not be the subject of accurate estimation, by which he meant reliability in the prospective cost. His evidence included that an architect, knowing this and that the estimate was to be the basis of a GMP contract, would advise the client or at least be reasonably satisfied that the client was aware that the works could not be accurately costed, and that extension of the scope of works could entitle the construction manager to claim further costs and charges beyond the guaranteed maximum price and of "the danger of cost increases and hence, of the inherent dangers of such a contract".
136 The nub of Mr Poiner's opinion can be seen in a passage from one of his reports dealing with blockwork -
"The drawings' inadequacy, that is their incompleteness, left the Council open to claims by Austin that the GMP scope of works had increased, leading to high and undeniable blockwork costs and additional management fee charges. I repeat the opinion I expressed earlier herein at paragraph 3.9 that a competent architect (such as the Architect), acting in accordance with accepted practice standards in circumstances such as those under report and seeking to guard its client's interests, would need to be satisfied that the client was aware of the risk of claims by Austin that the GMP scope of works would increase if drawings (such as the Building Contract Drawings - Architectural) were to be used as a basis of a guaranteed maximum price building contract such as the Building Contract. Failing that satisfaction the architect would advise its client against entry into the contract."
137 The import of Mr Poiner's evidence was that the client may not know that the incompleteness meant that the works could not be accurately costed, and of risk in maintaining a guaranteed maximum price. He agreed that it was important in what proper architectural practice required to consider the architect's knowledge of the contractual guarantee. He did not believe, however, that the architect would "accept as inevitable that his clients, however they were constituted, or his clients' legal advisers, whatever experiences they had, would necessarily be in a position to judge the completeness or otherwise of architectural documents and other documents, engineering documents".
138 In cross-examination Mr Poiner said that, if the architect was reasonably satisfied that the client knew about the incompleteness, it was not necessary to warn about incompleteness. His evidence included -
"Q. So ultimately is your opinion this, that a construction manager who produced a figure for a guaranteed maximum price might not, in producing that figure, properly include within its estimate a sufficient allowance for the way in which the design might be completed?
A. Yes.
Q. And is that really all you are telling her Honour your expert opinion is?
A. Yes.
Q. And insofar as the architects are concerned is your opinion only this, that Michael Davies & Associates ought to have informed the council that because the design was incomplete there might be an error in the construction manager's production of a figure for the guaranteed maximum price?
A. Of a figure for the cost of the building.
Q. But relatively to a figure for the cost of building that was going to be stipulated for as a guaranteed maximum price?
A. I don't know when Michael Davies knew that.
Q. Sorry?
A. I don't know when Michael Davies knew that the costs which were being advanced by competing builders and later just Austins were to be translated into a sum within a guaranteed maximum price contract."
139 He also said -
"Q. Are you aware, Mr Poiner, that Michael Davies Associates in or about early 1999 advised the council that it ought to proceed to finalise the design before it entered into any contract for the project?
A. No, I'm not aware of that.
Q. Do you accept that if the council, notwithstanding that advice, elected to proceed nevertheless with construction management with a GMP that has a material bearing upon the opinions that you've expressed?
A. It would.
Q. Because you would regard that advice, wouldn't you, as an appropriate caution for an architect to give to its client in this context?
A. I do indeed.
Q. Are you aware that Michael Davies Associates, after the receipt of the Austin tender response which included a GMP of $16.9 million, told the council that that figure was contrived because it made no allowance for any risk?
A. I'm not aware of that.
Q. Again may I take it you regard that as being material to any proper assessment of what it was that Michael Davies Associates ought properly have advised about or warned of?
A. I think that's sound advice that he gave.
Q. And a proper discharge of the architect's duty?
A. Yes."
140 The Council submitted that the trial judge was in error in saying (at [210]) that "[n]one of the experts gave evidence that there was a 'real risk of a significant increase in the cost of the Project because of the very early stage of the development of the GMP Documentation'". Her Honour's reference to "real risk" came from the cross-claim. There was evidence of potential and danger, but it was correct that the evidence did not go so far as real risk, which was what her Honour meant.
141 The question is whether there was misleading conduct. The GMP Documentation was incomplete; without resorting to the rather unhelpful adjective "inadequate", it did not permit of an accurate tender estimate. That, however, did not mean that there was misleading conduct in Davies issuing the GMP Documentation for the fresh invitation to tender. All the circumstances of Davies' conduct had to be taken into account. It was not necessary that Davies intended by its conduct to mislead, nor was it either necessary or sufficient that the Council be misled by its conduct; there had to be a real and not remote prospect of the Council (which was effectively the sole entity relevantly likely to be affected by the conduct) being led into error. That was a matter for the court.
142 The incompleteness of the GMP Documentation being obvious, Austin and the other tenderers knew that it was subject to development, not only if the various changes flagged in the third post-tender notice and the revised tender form were made but also in its development for construction, and had to allow for that in their tenders. There was the possibility that their allowance would not match additional costs, but if the GMP construction management contract were appropriately framed that would be their risk.
143 The Council was well aware that the GMP Documentation was incomplete. In his evidence in the arbitration Mr Brownlee agreed that he appreciated that only about seventy per cent of the design work had been done and that a number of design developments remained, and while Ms Rosser did not have a clear recollection her awareness must have been similar. Davies had told the Council that the extension of the Police date to the beginning of June 2000 gave more time for full documentation prior to calling tenders. According to Mr Davies, he told Mr James that "he could use the time to fully document the project and then call traditional tenders", and Mr James replied that Mr Brownlee "preferred the flexibility of the construction management methodology". According to Mr Brownlee, Mr Davies suggested that the Council would "be better advised to actually complete the plans and specifications before contracting for the project", and that it would be "better for the Council to actually finish the design before contracting", but Mr Brownlee declined because of the political implications of going back to the Council.
144 The Council as the relevant entity likely to be affected was not inexperienced or gullible (Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198-9 per Gibbs CJ). Mr Brownlee was a qualified engineer, in a responsible position. From his evidence in the arbitration, he appreciated that change in the scope of works from that of the GMP Documentation could increase the cost to the Council -
"Q. So you thought, did you, that even if you had a GMP of $16.9m, there would be circumstances in which the council might have to have resort to a contingency sum?
A. Unforeseen circumstances at that time.
Q. But is this right, that you did think that even if there was a GMP of $16.9m, that there might be circumstances in which the council would be called upon to use the whole or some part of its contingency amount?
A. For unforeseen circumstances.
Q. Well, do you mean by unforeseen circumstances the inclusion of works beyond the scope of works that Austin were required to tender upon?
A. Yes.
Q. So, is this right, that as you understood things in March of 1999, if there was any addition to the scope of the works, that addition to the scope of the works would be required to be met out of the contingency sum?
A. Yes.
Q. And if it was required to be met out of the contingency sum, then the total cost to council of the works might be in excess of $16.9m?
A. In that hypothetical situation."
145 If he was not already aware of it, Mr Brownlee was told at the end of January 1999 about tenderers' allowances for risk. He was told on 11 February 1999 that Mr Davies thought Austin's price was contrived and allowed for no risk at all. It did not need to be spelled out that development of the GMP Documentation might bring additional costs for which tenderers, and Austin in particular, had not allowed. The safeguard of a firm project cost was a contract which properly bound the construction manager to the guaranteed maximum price. The contractual arrangements were to be reviewed by the Council's legal advisers, and in fact the Council caused the preparation of the contract without involvement of Davies. It provided for further development of the drawings and specifications and variations in the manner I have described, and the solicitor's letter to the Council contemplated increase in the guaranteed maximum price as a result of variations as well as reduction.
146 In the circumstances in which Davies was dealing with the Council, I do not think that there was misleading conduct on its part. Mr Poiner pointed out that the client would not necessarily be in a position to judge the incompleteness of the tender documentation, in context meaning the potential for development of the documentation to vitiate the guaranteed maximum price, but the particular circumstances were such that an honest and reasonable person in Davies' position could reasonably regard the Council as aware of the potential, and as responsible for a contract holding the tenderer to the guaranteed maximum price with the necessary development of the documentation.
147 I do not overlook the ground of appeal that the trial judge failed to make factual findings in relation to the Council's knowledge of incompleteness of the GMP Documentation. The Council referred to the assertion in an affidavit sworn to the assertion in an affidavit sworn by Mr Brownlee that "I knew that the GMP Documentation required design development, but I understood this to mean design development in relation to possible savings only". It submitted that it was not put to Mr Brownlee that his awareness went further, to any particular extent of incompleteness or that the state of completeness would "invariably" (I think meaning inevitably), lead to an increase in the cost of the project, and that the trial judge failed to make findings that he had no awareness beyond that he asserted.
148 The trial judge's findings appear in particular in the paragraphs I have set out in relation to the warning case. Her Honour did not expressly deal with Mr Brownlee's assertion that he understood that the design development would be in relation to possible savings only. The assertion could not properly be accepted in the light of evidence which her Honour did accept and the evidence as a whole, and in my opinion was implicitly rejected.
149 Taking into account all these matters, and judged by regard to what had passed between the parties, the knowledge of the Council, Mr Davies' warning about Austin and the circumstantial relativity of the notion of "inadequacy", Davies did not engage in misleading conduct. There were in the circumstances no misrepresentations, and Davies' conduct as a whole was not misleading conduct.