Broadlex Services v RCR Resolve FM

Broadlex Services v RCR Resolve FM - [2015] NSWSC 1514 - NSWSC 2015 case summary — Zoe

[4]

Background

Serco Australia Pty Ltd or the group of which it forms part (Serco) has a contract with the Commonwealth of Australia, or the relevant Minister of the Commonwealth, to "manage" immigration detention centres and related facilities throughout Australia. Resolve contracted with Serco to provide "facilities management services" at those centres. As part of that contract, Resolve was required to provide cleaning services at each centre.
In about May 2010, Resolve contracted with Broadlex for the latter to supply cleaning services at VIDC and VIRH. There were two separate contracts: one for VIDC and one for VIRH. Only the former is relevant. The parties' contractual relationship continued up until about March 2013.
It is not contentious that, in April 2011, the unfortunate inmates of VIDC rioted, and set fire to some of the buildings within that complex. Very considerable damage was caused. Resolve and Broadlex agreed that Broadlex would undertake additional services, essentially cleaning up the damage and making good. Of course, that was for additional remuneration.
Resolve asserted that it was entitled to be paid $6.3 million by Serco for services provided "to additional assets". It claimed, further, that Serco owed it about $1.4 million in respect of work done and invoiced, but not paid. The total claim was a little in excess of $7.7 million.
Serco defended Resolve's claim, and filed a cross-claim. In that cross-claim, it asserted that Resolve had failed to meet "Key Performance Indicators" (KPIs) in respect of services provided at VIDC. Serco said that it "was entitled to adjust the fee to be paid by [it] to Resolve by the amount of $266,240.45". It said that it had not deducted that amount from fees otherwise due to Resolve, and, accordingly, that the amount was due and payable. That is the "abatement" referred to in the sixth issue.
The claim between Resolve and Serco was settled on 30 June 2015. On that date, the parties executed a deed of release and settlement, under which Serco agreed to pay Resolve $3.685 million in full settlement of all claims, and the parties released each other. That sum was paid a few days later. There is no evidence as to how that sum was calculated. There is no material allocating it between the two claims that Resolve made against Serco, and the abatement that Serco claimed against Resolve.

[5]

The pleaded contract between Broadlex and Resolve

Before I turn to the contract (including, in particular, its genesis in preceding events), I should mention the way in which it was pleaded. Broadlex pleaded that the contract comprised: 1. a written offer to supply routine cleaning services at VIDC; 2. a clarification of the scope of the services to be provided, given by email on 22 February 2010; and 3. acceptance of the offer as clarified by two purchase orders issued by Resolve on 23 April 2010 (one for VIDC and one for VIRH, leading to the two separate contracts to which I have referred).
In its defence, Resolve denied that the contract was so formed. It said that its purchase orders were not an acceptance of the offer that was said to have been made, and, somewhat obscurely, that the purchase orders "gave rise to a contract between [Resolve] and Broadlex to perform cleaning services at VIDC and VIRH".
Resolve's pleading did not condescend to explain how it was that the purchase orders gave rise to a contract. As will become apparent in a moment, that was clarified to some extent in Resolve's cross-claim.
Resolve pleaded, further, that its purchase orders incorporated its standard "terms and conditions" (the general terms). Broadlex appears to accept, in principle, that most of those general terms were incorporated. There is however a dispute as to the extent of incorporation. Specifically, Broadlex says that a particular clause, purporting to have the effect of suspending any entitlement to interest on unpaid charges whilst a dispute remains unresolved, was not sufficiently brought to its attention to form part of the contract between it and Resolve.
Resolve's cross-claim both complicated and simplified matters. It complicated them by pleading that, by the purchase orders, Resolve "engaged Broadlex to perform cleaning services at VIDC and VIRH". As was the case with the somewhat similar allegation in the defence (namely, that the purchase orders "gave rise to a contract"), the pleading did not condescend to explain how the purchase orders, of themselves, could constitute an engagement rather than an offer to engage (or acceptance of an offer to be engaged).
However, that difficulty can be put aside. After pleading what Resolve said were terms incorporated into the purchase orders, the cross-claim alleged (para 15) that Broadlex commenced to supply services on about 1 May 2010 and (para 16) that by doing so, Broadlex accepted the terms of the purchase orders, including the standard terms referred to therein.
The amended defence to that cross-claim took issue with the pleading of "engagement". However, it specifically admitted paragraphs 15 and 16.
Thus, it was admitted on the pleadings that the contracts between Broadlex and Resolve were formed by: 1. Resolve's purchase orders issued to Broadlex; and 2. Broadlex's acceptance of those purchase orders by conduct, in commencing to perform services.
When this became apparent to Mr Gration of Counsel (who appeared for Broadlex), in the course of his final submissions (and on the second day of submissions - the fifth day of the trial), he sought leave to amend. The effect of the amendments sought was: 1. to withdraw the admission as to formation of the contract; and 2. to allege, in substance, that the contract was constituted by an offer by Broadlex, in starting to perform services at VIDC, and Resolve's acceptance by conduct of that offer, in taking the benefit of the services and paying for them in accordance with the quotation provided by Broadlex.
For reasons that I gave at the time, I refused that application. Thus, the submissions continued on the basis that the contract was formed in the manner summarised at [16] above.
Some days after the hearing had completed, and I had reserved my decision, Mr Gration asked for the matter to be relisted. He said that he wished to drawn the Court's attention to two authorities on the question of admissions on pleadings. As I understand it, Mr Gration relied on those authorities for the proposition that, regardless of the admitted state of affairs on the pleadings (at least, where the admission was partly as to fact and partly as to the legal consequences of that fact), the Court should decide the point on the basis of all the evidence, and not merely on the basis of the admission.
I return to this submission at [107] and following below.

[6]

Genesis of the contract between Broadlex and Resolve

In May 2007, Ms Fitzsimmons of Resolve asked Mr Saltirov of Broadlex to provide a quotation for the provision of cleaning services at VIDC. She gave Mr Saltirov an extract from a specification of "General Cleaning Requirements" produced by the then Department of Immigration and Migration. (I shall follow the parties' usage and refer to this department, which has undergone numerous name changes, by what I understand to be a recently current acronym, "DIAC").
The Departmental specification stated that DIAC required the performance of both: • Regular Cleaning and Periodic Cleaning • Provision of Cleaning Service Manual
The second requirement can be put to one side.
The Departmental specification described what it called "Regular and Programmed Cleaning" in section 1.4. Somewhat confusingly, that section also incorporated, by way of apparent definition, a description of "Periodic Cleaning Items". I set out sections 1.4.1 and 1.4.2: 1.4.1 GENERAL Regular and Programmed cleaning mean any work required to ensure all major requirements or parts thereof detailed in this Clause comply with the Cleaning Performance Standards and all statutory requirements. 1.4.2 REGULAR CLEANING SERVICES The purpose of Regular Cleaning is to provide a comprehensive cleaning service including all necessary tasks to ensure a sanitary, clean and tidy environment consistent with the function of the facility. 1.4.2.1 Periodic Cleaning Items The Contractor is to provide and maintain a schedule programming these tasks as listed at each facility. Annual tasks such as window cleaning may be programmed on a rotational basis, however in such case, a clear program indicating proposed and actual cleaning times/dates must be maintained at the facility. Without limiting the obligation to provide the Regular Cleaning Service, a list of periodic cleaning tasks for the facilities is listed below: a) Resilient floors such as vinyl/Lino type floors and sealed wooden floors are to be scrubbed/stripped, polished/sealed as necessary to maintain appearance and gloss. b) Periodical carpet cleaning is cleaning of carpets using water extraction or other suitable alternative method, As a minimum, the Contractor must carry out periodical carpet cleaning once per annum. c) Cloth or fabric covered seating is to be cleaned as necessary to preserve appearance and cleanliness. d) Internal/external facings of windows, including skylights are to be cleaned once per annum, this task includes removal/replacement of flyscreens or other screens except where permanently affixed. Where they are permanently affixed, the Contractor is to approach the Facility Manager to arrange removal, if necessary, for cleaning. Where security screens are permanently affixed, the windows are to be cleaned using a pressure washer. Note that both internal/external facings are to be cleaned as part of same task and not at separate times. e) Ceiling fans and high beams/ledges, over 3 metres high are excluded from the cleaning regime. f) Venetian and vertical blinds are to be thoroughly cleaned as a minimum once per annum, in a suitable manner to remove dust and stains. This cleaning may involve removal/installation of such blinds, which will be undertaken by the Contractor in a manner to avoid damage to the blinds.
Broadlex provided a written quotation. That quotation costed, separately, the provision of "Daily Cleaning Services" and "Periodical Cleaning Services", and did so separately for VIDC and VIRH. Both daily and periodical cleaning services were described as "Routine & Non-Routine Cleaning Services".
Broadlex provided a number of documents in support of that quotation. Those documents stated, more than once, that periodical tasks were included in the total cost. Further, as to the periodical tasks described at (a) to (f) in the Departmental specification, Broadlex provided some sort of schedule or program showing when those services (for obvious reasons, excluding the subject matter of para (e)) would be provided.
The amounts quoted for daily cleaning services (for both VIDC and VIRH) totalled $346,725.06. The amounts quoted for periodical cleaning services (again for both facilities) totalled $30,910.56.
The quotation also specified a figure for which Broadlex would be prepared in addition to clean individual rooms before they were occupied, or after they were vacated, or otherwise when necessary.
Nothing happened in respect of this quotation. That is to say, it was not accepted. However, in December 2009, Ms Berwick of Resolve (who appears to have been an assistant of Resolve's then National Operations Manager, Mr Biddiscombe), contacted Mr Saltirov in connection with a proposed lunch. As it happened, the lunch was put off to the new year.
Mr Saltirov said that he and others from Broadlex met Mr Biddiscombe and Mr Hull of Resolve on 18 February 2010. He said that, at that meeting, Broadlex was asked to provide a quotation within a specified budget for "standard routine cleaning". It was told, he said, that "periodicals and any extra cleaning will be an extra cost that we'll issue separate work orders for".
Mr Breakspear of Counsel, who appeared for Resolve, objected to that evidence, on the ground of relevance. I admitted it subject to relevance. As the case was pleaded, it could not be relevant to contract formation (because it was not pleaded that the contract was partly oral). On general principles, it could not be relevant to the question of construction of the contract. Whether, as the case was pleaded, it could be relevant to the question of characterisation of the conduct said to constitute acceptance of the purchase orders is a question to which I shall return.
I accept, at the level of principle, that the conversation might be relevant to establishing what were the terms of the contract that was made (as opposed to the proper construction of those terms that are proved). However, given the way in which the contract was pleaded (and admitted), that might be thought to have little practical application. Again, I shall return to this. It really seems to me that the conversation could be relevant (if at all) only to the conventional estoppel case. In that context, the conversation could provide some content to or understanding of the way in which the parties dealt with each other on and from 1 May 2010.
Regardless, after the meeting took place and on 22 February 2010 (18 February was a Friday in that year), Mr Saltirov sent an email to Mr Biddiscombe and others. He set out information that he needed: - Number of staff - Starting and finishing times - Floor plans - Type of security clearance required
Mr Hull (who had been copied in on the email) replied the same day saying, among other things: Details as requested 2 staff per shift Mon/Frid 12 hrs per day (2 Staff @ 6 hours per day) Between the hours of - 9am out 4:30pm Sat/Sun 5.5 hrs per day (2 staff @ 2.45 hours per day) Between hours of 9am and midday Security clearance required is police back ground [sic] check.
Broadlex was accustomed to using the service of a Mr Lupeski, on a contract basis, to prepare quotations. Mr Lupeski was given the information provided by Resolve. Later on 22 February 2010, he prepared a quotation.
Mr Lupeski's quotation followed the format of the May 2007 quotation (it may be that Mr Lupeski had prepared that quotation). Relevantly for present purposes, the quotation provided: Villawood Detention Centre Cleaning Services Pricing Schedule Summary FEBRUARY, 2010 Immigration Detention Centre Routine & Non-Routine Cleaning Services Daily Cleaning Services $171,047.11

[12]

A detailed breakdown of the total cost is attached A detailed labour deployment chart is attached

That quotation was supported, as the previous quotation had been, by other documents. One of those documents stated, as one of the "Pricing Assumptions" that had been made, that: Periodical Tasks are NOT included in the total cost.
The quotation also included a sheet showing how labour resources would be deployed. As the previous quotation had done, that sheet referred to the five services (a) to (d) and (f) specifically described in the Departmental specification as "periodical cleaning items". However, and unlike the previous quotation, it showed that those services would not be provided.
Mr Lupeski forwarded his quotation to Mr Saltirov under cover of an email dated 22 February 2010. Omitting formal parts, his email stated: Further to our meeting regarding the above mentioned, I have revised the price and attached accordingly Further to this, the following table must also be forwarded to Resolve FM: EXCLUSIONS FROM SPECIFICATION Note - All periodical tasks are excluded from the quotation, hence the following clauses are removed from the scope fo [sic] works: page 207 of 350 - remove strip and seal vinyl floors MONTHLY page 219 of 350 - remove strip and seal vinyl floors MONTHLY page 222 of 350 - remove scrub external areas MONTHLY page 227 of 350 - remove shampoo MONTHLY page 228 of 350 - remove shampoo fabric surfaces MONTHLY page 231 of 350 - remove Sanitary Bins - N/A page 231 of 350 - remove Annual Steam Clean - N/A page 232 of 350 - removal Waste Collection 'from site' - N/A page 232 of 350 - remove Window Cleaning - N/A
In turn, Mr Saltirov forwarded that email, presumably with its attached quotation and other documents, to Mr Biddiscombe. Mr Saltirov's email to Mr Biddiscombe read (omitting formal parts): Hi Mike Please accept our quote for Villawood Detention Centre as per your request outlining the changes mentioned in our meeting last Thursday. If you have any questions please don't hesitate to give me a call. Please not [sic] the exclusions from the specification in Luke's email below.
When Mr Lupeski wrote, in his email, of "exclusions from specification", he was not referring to the Departmental specification. He was instead referring to a document, called "Part 4 - Scope", issued by Serco for cleaning works at VIDC. It is common ground that Serco's scope had been provided to Broadlex for the purpose of its quotation. That scope cross-referenced another Serco document, known as "Part 7 - Cleaning Standards". The effect of the Part 4 scope was that services were to be performed to the higher of the service levels set out in those two documents. It appears to be common ground, and in any event I find, that the Part 7 standards were not supplied to Broadlex when it prepared its quotation.
The Part 4 scope provided for tasks to be undertaken daily (or several times daily), weekly and, in some circumstances, quarterly. It did not define those tasks (to the extent that they were not required to be performed at least daily) by reference to the Departmental specification. Thus, it is not possible readily to match the Part 4 scope to the Departmental specification in so far as the latter document seeks to describe periodical cleaning services.
Mr Lupeski did not give evidence. However, it is clear from his email of 22 February 2010 to Mr Saltirov that he was instructed that "periodical tasks" (whatever they might be) were to be excluded from the quotation. What Mr Lupeski appears to have done is go through the Part 4 scope and identify in it (so as to remove from the scope of the quotation) what he regarded as periodical tasks.
One of the documents that Mr Lupeski prepared in February 2010, and that was sent to Resolve, was a "Labour Deployment Chart". That chart showed, for each area of the buildings to which the quotation applied, and for each room in each such area of those buildings, the hours of labour that would be deployed weekly in performance of the quoted services. It does not appear to show any allocation of labour for tasks of a lesser than weekly frequency.
At some stage, Mr Lupeski prepared a document called "Periodical Labour Estimates." At some time in 2010 (on or after 22 February), that document was given to Resolve. That document effectively repeated verbatim items (a) to (f) from the Departmental scope, and quoted (with a break-up between various areas of VIDC) a price for items (a) to (d) and (f). The total quoted was $30,910.56. Someone annotated that document by hand "not included in total price". The evidence does not reveal either the identity of the annotator or the date of annotation.
At some stage between 22 February and 8 March 2010, there were discussions between Mr Saltirov and (it would appear) Mr Hull in which, Mr Saltirov says, "we discussed and agreed to a 5 + 2 + 2 term". That is stated in an email of 8 March 2010 that Mr Saltirov sent to Mr Hull.
The next day, 9 March 2010, Resolve gave what might be called a letter of intent to Broadlex, stating that it proposed a contract for 5 years with two two year extensions "as per submitted price". The letter stated that one of the reasons Broadlex had been selected was the "offered best overall valve [sic] in regards [sic] to… Coverage".
On 23 April 2010, Resolve issued its purchase orders: one for VIDC, and one for VIRH. They were not for five years. They were, rather for "twelve montlhy [sic] cleaning… as per tender submission". They stated that: Supply of this order is acceptance of our terms and conditions. A copy of these may be obtained from the issuer.
Also in April 2010, Mr Tarabe and Mr Fourth of Broadlex met Messrs Carroll and Hull at VIDC. This was the meeting that included what might be called the "rubbish bin episode". Mr Tarabe's evidence of that meeting was admitted over Mr Breakspear's objection as to relevance, and subject to relevance. Again, it is for Broadlex to establish the relevance of that evidence. Again, as matters stand and on the state of the pleadings, it seems to me that its primary relevance is to the conventional estoppel case.
I set out in full Mr Tarabe's account of the meeting (affidavit sworn 11 June 2015 at [14]). Before doing so, I note that Mr Tarabe said that he and Mr Gutierrez met Messrs Carroll and Hull, and that Mr Hull had a "Serco specification" (so described). With reference to that specification, according to Mr Tarabe, the following discussion took place: 14. At that meeting, I had a discussion with Hull to the following effect: Me: (gesturing towards the Serco specification) What is it from that document that you want us to do? Hull: You see this? (Hull gestured towards the Serco specification, then threw it in the rubbish bin). Me: Villawood is such a big place, how are we going to do the cleaning without a specification? Hull: Just get me two cleaners and we'll do the rest. I will tell them what to do.
Although I had concerns as to some aspects of Mr Tarabe's evidence, I accept as accurate this aspect of what he said. It was not challenged in cross-examination, and there was no evidence to controvert it.

[19]

Mr Price becomes involved

Mr Price worked for Resolve from August 2011 until September 2014. He was Resolve's National Contract Manager, apparently responsible for administering Resolve's various contracts with Serco.
In about August 2011, Mr Price became concerned at the question of "tick sheets". Those were sheets that DIAC and Serco required to be prepared (in the case of VIDC) by Broadlex's staff, showing that the work for which each staff member was responsible had been performed. (It was Broadlex's position that provision of the tick sheets was not required as part of its contract with Resolve, and that requiring its staff to complete them was a distraction from performance of cleaning work.)
In about March 2012, Mr Price became aware of concerns expressed by employees of Serco as to the quality of cleaning services provided by Broadlex at VIDC. Those concerns had been revealed in audits conducted by DIAC in conjunction with Serco. Mr Price became concerned, in particular, that there was no full time supervisor on site (despite the fact that Resolve had accepted Broadlex's quotation for the provision of one), and that as a result the cleaners' work was not adequately supervised. Mr Price raised his concerns with Mr Tarabe in an email.
Matters continued thus for some months, until July 2012. There were further complaints made by Serco about the quality of cleaning. Mr Price took up those complaints with Broadlex (in particular, Mr Tarabe). I say "took up" because Mr Price sent emails to Mr Tarabe. Mr Tarabe does not seem to have replied to those emails: specifically, the ones that highlighted concerns arising out of the DIAC audits.
Mr Price began to investigate why it was that (as appeared to him, from material he was receiving from Serco) certain cleaning tasks were not being performed by Broadlex. He discussed his concerns at a meeting on 6 August 2012. That meeting was attended by, among others, Mr Tarabe.
Mr Price confirmed his understanding of what had been discussed and agreed at the meeting in an email sent on 7 August 2012 to, among others, Mr Tarabe. Mr Tarabe did not deign to reply. Clearly, the email required him to do so, and to provide information that (according to Mr Price's notes) Mr Tarabe had agreed to provide.
The email is lengthy. I will not set it all out. It started with a "Preamble" which stated Mr Price's understanding of the scope of the contract between Resolve and Broadlex, and the obligations imposed on Broadlex under that contract. It sought a variation for "new building assets and services" that Serco wished to have cleaned or performed. It moved to the topic of "Cleaning Services". Mr Price highlighted what he saw as "several and ongoing cleaning issues - relating to performance, schedule, delivery and standard". It then provided: Email exclusions JT stated that Broadlex and Resolve FM agreed to exclude from the pricing a defined list of scope specifications (as indicated by email) DP asked for this agreement documentation to be provided in full (clearly stating that list of agreed exclusions as indicated by email) - JT to provide Schedule exclusions JT stated that there was a second list of agreed scope specifications excluded from the pricing (as indicated by periodical schedule) DP asked for this agreement documentation to be provided in full (clearly stating the list of agreed exclusions as indicated by periodical schedule) - JT to provide Scope specifications JT stated that Broadlex quoted against a Resolve FM scope (not the Serco scope that DP had at the meeting). DP asked for a copy of the Resolve FM scope that was provided to Broadlex to quote against - JT to provide Periodicals JT stated that "Periodicals" are all cleaning tasks above a Fortnightly schedule - i.e. all tasks Monthly and above DP stated that Periodicals is a subjective terms and does not have a standard meaning, as Periodicals in this context means work outside the agreed list (reactive work / non scheduled work) DP asked for a copy the "Periodicals" definition that was agreed to be used - JT to provide Pricing Summary JT stated that the Pricing Schedule Summary FEB 2010 states "Periodical Cleaning Services - not applicable" DP stated, as per above point, this has no impact on the requirements of the tasks listed in the scope of work Cleaning Performance DP stated that there are issues with routine daily / weekly cleaning - there must not be issues with routine daily / weekly cleaning tasks, schedules or standards DP stated that there is clear physical evidence that cleaning is not being performed regarding non-disputed cleaning tasks - the sheet is ticked but the physical inspection highlights otherwise JT requests access approval for a 'cleaning camera' to record key areas of concern once cleaning is completed - RF to organise … All actions to be completed by Friday 10th August.
"JT" refers to Mr Tarabe (his first name is "Joe"). I find that, at the meeting, Mr Tarabe did agree to provide the four items of information indicated as to be provided by him.
It does not matter for present purposes, but the initials "RF" refer to Mr Reynold Fasavalu, who was Resolve's "Facilities Manager" at VIDC.
Notwithstanding Mr Price's concerns, Resolve continued from time to time to request Broadlex to perform extra charge services at VIDC. Broadlex agreed to do so on receipt of a work order and for additional remuneration. That additional remuneration was invoiced, and was paid without demur.
DIAC, and therefore Serco, continued to be dissatisfied with the standard of cleaning services performed at VIDC. They took up their concerns with Mr Price. Mr Price passed those concerns on to Broadlex. On 28 August 2012, Mr Price forwarded to Mr Vargas and Mr Tarabe (and others) by email a DIAC audit report relating to 22 August 2012. Among other things, Mr Price asked Mr Vargas to attend to all the tasks listed for rectification or completion in the DIAC audit. That was to be done, he said, by 12 noon the following Friday.
Also on 28 August 2012, Mr Price sent an email to Mr Tarabe, copied to Mr Vargas among others, warning that he would issue a "non-conformance letter" once he had available all the information required to complete it. Three days later, on 31 August 2012, Mr Price sent an email to Mr Tarabe, copied to among others Mr Vargas, attaching "formal notice regarding multiple non-conformance issues regarding ongoing cleaning performance at VIDC".
The email stated, further: Additionally, attached are the notes from our 'variation and services meeting' held 06/08/12 with 4 x key actions highlighted with JT to provide - this information has not been provided. Your urgent attention to all matters highlighted are required and recommended.
The "Formal Notice" raised the following non-conformance issues: Scope of Works The following scope tasks are not being performed by Broadlex on a scheduled basis - and when they are completed, Broadlex are invoicing Resolve FM under a chargeable work order: • Cleaning kitchen hoods free of oil • Cleaning of venetian blinds • Walls, floors and ceilings must be deep cleaned in commercial kitchens • Machine scrubbing floor and skirting • Stripping and sealing of vinyl floors • Scrub external areas • Pressure washing external areas • Office areas - dust and wipe columns to full height • Office areas - dust air conditioning ventilation outlets • Carpets, mats and rugs - pile lift and shampooing • Scrubbing of antistatic flooring • Shampooing of fabric surfaces • Washing of window coverings - curtains, venetian blinds, vertical blinds, Holland blinds • Damp wiping and vacuum cleaning of air vents • Window glass, frames and ledges shall be thoroughly cleaned both sides • Fridges & Microwaves • External / Internal glass - wash clean to full height, polish stainless steel fixing plates above doors, clean silicone joints Resolve FM has agreed to the costs presented by Broadlex in the 'Consolidation of Services and Charges - incorporating Part 4 - Scope of Works' offered and accepted September 2010. Resolve FM has not agreed to any part of the scope to be excluded or not-completed.
Mr Tarabe did reply to this email. He did so by email dated 13 September 2012. Among other things, he said: • Scope of Works: - Our agreement and price with Resolve FM does not include the periodical tasks you outlined in your letter. Our initial proposal clearly identifies "periodical tasks NOT included in price". Refer to Attachment 2. - Our task sheet provided to Mark Carroll (Resolve FM) in July 2010, is consistent with our claim that periodicals were not part of our scope of work. Prices for these tasks are attached. Refer to Attachment 3. - You mentioned this was approved by Resolve FM, we do not have that on record and no payment was made to Broadlex in relation to these tasks. Refer to Attachment 4.
"Attachment 2" consisted of three of the pages sent to Resolve on 22 February 2010, as part of Broadlex's quotation. They were: 1. the pricing document which stated, as one of the assumptions on which it was based, "Periodical Tasks are not included in the total price"; 2. the pricing document which referred to the "detailed labour deployment chart" and stated that "Periodical Cleaning Services" were "not applicable"; and 3. the estimate for periodical labour items which priced the five items (a) to (d) and (f) from the Departmental specification.
Mr Tarabe did not attach, among other things, Mr Lupeski's email of 22 February 2012 (see at [39] above).
"Attachment 3" comprised emails from Mr Tarabe to, among others, Mr Carroll of Resolve attaching "the Maintenance Program and Periodical [sic]" and asking Mr Carroll, if there were "any additional information or you require to change anything on the planner", to contact Mr Tarabe. I am satisfied that the attached documents were in the form of the Broadlex cleaning plan, or spreadsheet, identified by Mr Vargas (see at [59] above). More accurately, they were a series of such spreadsheets.
I have set out at [58] above a list of those extra charge services. They correspond substantially, if not identically, with the tasks that Mr Price had identified in his non-conformance notice as being within scope, but not being performed. Had Mr Price read Mr Tarabe's reply (and I have no doubt that he did), he must have realised that Resolve and Broadlex had directly opposed views on whether those services were included within the scope.
"Attachment 4" was presumably intended to be a response to Mr Price's reference to agreement to the consolidation of services charges. That attachment was, or purported to be, an updated pricing breakdown, said to have taken effect from 1 May 2011.
Mr Price remained dissatisfied with the quality and scope of services provided by Broadlex. No doubt, in part, his dissatisfaction was prompted by further DIAC audits. He conveyed his continuing dissatisfaction in emails sent to Mr Tarabe and others of Broadlex.
Mr Price convened a meeting on 12 October 2012. It was attended by representatives of Resolve and, from Broadlex, Messrs Lupeski, Tarabe and Vargas.
Mr Price prepared minutes of the meeting. He sent them out to those who had attended. There is no evidence of any of the attendees' having questioned the accuracy of the minutes. I accept that they were accurate.
Item 1 on the agenda was to "Confirm the scope of work". In relation to that agenda item, Mr Price recorded: 1. Confirm the scope of work • Agree that the full scope was quoted and accepted September 2010 • JT states that even though the full scope was quoted and accepted, a specific list of 'periodicals' was not accepted by RFM - No documentation provided regarding this direction • The term 'periodicals' is not a contract definition but a heading used by BD/Estimators regarding a list of specific tasks originally (pre Sept 10) exempt from the fixed fee to be performed and involved on a Reactive basis. • The list of Periodicals was confirmed by LL as the nine line items listed in the original quotation of February 10: ° page 207 of 350 - remove strip and seal vinyl floors MONTHLY ◦ page 219 of 350 - remove strip and seal vinyl floors MONTHLY ° page 222 of 350 - remove scrub external areas MONTHLY ° page 227 of 350 - remove shampoo MONTHLY ° page 228 of 350 remove shampoo fabric surfaces MONTHLY ° page 231 of 350 - remove Sanitary Bins - N/A ° page 231 of 350 - remove Annual Steam Clean - N/A ° page 232 of 350 - remove Waste Collection 'from site' - N/A ° page 232 of 350 - remove Window Cleaning - N/A ° The periodicals refer to these nine items in the scope - no more and no less - DP to highlight the Periodical listed in the scope (attached) ° JT confirmed that Broadlex service and deliverables are back - to - back with the scope document - except for the list of Periodicals.
Item 4 concerned the requirements for and expectations of the supervision that Broadlex was to provide. Mr Price recorded the outcome as follows: 4. Supervision requirements and expectations • Broadlex need to meet the Supervisor tasks, requirements and obligations of the scope, with or without the additional FTE on-site cleaning supervisor • Agree that the 'Resolve FM Supervisor' is over and above the requirements of the scope and was included to provide direct management of Resolve FM service delivery and performance • Agree to replace the current cleaning supervisor with an individual that will manage on-site cleaning on behalf of Resolve FM
From Mr Price's perspective (and, it may be inferred, from the perspectives of DIAC and Serco), matters did not improve. Accordingly, on 15 October 2012, Mr Price sent yet another email to Mr Tarabe, copied to (among others) Mr Vargas. It pointed out four "Fail" items relating to a recent DIAC audit, Mr Vargas' presence on site and Broadlex's failure to provide an action plan. The email concluded: If the issues were varied and or infrequent, then we could manage the issues in due course, however the matters are common and constant, and there seems to be no evidence that the site staff or supervisor understand the scope requirements - the problems seem to be systemic and will not be rectified without some serious attention.

[20]

The abatement notice

On 16 November 2012, Serco wrote to Resolve. The letter stated Serco's intention to reduce (or "abate") the service fee payable by Serco to Resolve by the sum of $266,240.45 (including GST). Among other things, the letter stated: Serco have been abated by the Department of Immigration and Citizenship (DIAC) a total of six (6) times in the period March 2012 to September 2012 for cleaning performance failures at Villawood IDC (VIDC). Abatements result from documented evidence of cleaning failures collected during weekly cleaning audits conducted by DIAC and attended by Resolve FM and Serco. Audits have consistently reported deficient performance in cleaning service delivery. Such non-compliance identifies a failure on the part of Resolve FM to meet key performance indicators (KPIs). …
A month later, Mr Price notified Mr Tarabe of the abatement notice. He did so in an email of 18 December 2012. Among other things, he asserted that the abatement was "for the ongoing failure of cleaning performance at VIDC" and that it "covers many months". He said, among other things: ■ I am reviewing the abatement figure above against the methodology, content and details used by Serco to ensure that the abatement figure is a true reflection of contracted poor performance.
I interpose to note that Mr Price conceded that he had never been able to satisfy himself that Serco had applied the contractual abatement methodology. Nor was there any other evidence that the abatement complied with the relevant provisions of the contract between Serco and Resolve. Be all that as it may, Mr Tarabe replied the same day expressing his "surprise and disappointment" that Broadlex was involved "in a contractual issue between Resolve FM and Serco". The email continued. Any minor shortfalls found in any inspection are closed off promptly as you are very well aware of, any correspondance [sic] received in relation to cleaning issues they have been addressed promptly and closed off by Broadlex and there is no outstanding issues as we are aware and there is no point talking about MARCH to SEPTEMBER. We remind you that there is still an outstanding amount of around $400,000.00 and the weekly agreed amount has not been received this week.
Some months later, in May 2013, there was a further exchange of emails between Messrs Tarabe and Price. In an email of 28 May 2013, Mr Price referred to information provided by Mr Tarabe. He then said: As mentioned in the meeting in March and in the minutes (and now again) I agree that the financial abatement issue is not a consideration for Broadlex.
Mr Gration relied on this statement to show that Mr Price had effectively conceded that, whatever were the problems that led to the abatement's being imposed by Serco on Resolve, they were not to be sheeted home to Broadlex, and Broadlex should not be backcharged for the abatement. That may or may not be a correct reading of the email. However, since it may not be the only meaning, and since Mr Price was not cross-examined on it, I do not think it appropriate to accept Mr Gration's characterisation of it.

[22]

Some preliminary points

It might be thought that analysis of the first question should start with the proposition, agreed on the pleadings, that the contract between the parties was constituted by: 1. Resolve's offer in the relevant purchase order dated 23 April 2010; and 2. Broadlex's acceptance of that offer by its conduct in commencing to perform the work the subject of the purchase orders.
I repeat that, on the pleadings, the conversations to which I have referred above (both those occurring before 23 April 2010 and those occurring between 23 April and 1 May 2010) are irrelevant to ascertaining the terms of the contract, because the contract is not pleaded as one made partly orally, partly in writing and partly by conduct. Further, and because acceptance by conduct is admitted on the pleadings, they cannot be relevant to the question of characterisation of the conduct to see whether it amounts to an acceptance, or is a counter offer. Finally (and so much was common ground), they cannot be relevant to the question of proper construction of whatever the terms are found to be.
The parties did not address the consequences of the fact that the purchase orders commissioned only 12 months' supply of services, whereas the performance that was tendered and accepted extended for almost two years after that 12 month period. It was of course common ground that the contract (whatever its terms might be) was from time to time varied: for example, by the requirements, accepted by Broadlex to provide cleaning services in respect of more extensive areas of VIDC, for additional remuneration. But it was not argued that any of those variations was in terms a variation which had the or an effect of extending the duration of the contract.
In those circumstances, I think, the parties should be treated as having conducted their contractual relationship on the basis that the terms of the original contract applied (subject to the asserted estoppel) throughout the duration of performance and payment, varied from time to time in respect of the areas to which services were to be supplied and, in consequence, as to the remuneration payable. On that analysis, there would presumably be a contract (strictly speaking, two contracts - one for VIDC and one for VIRH) for a term of 12 months, thereafter determinable either at will or on reasonable notice. Since no question of breach arises from the circumstances in which the contract came to an end, it is not necessary to pursue this point.
Further, although the scope of the work undertaken by Broadlex increased greatly after the riots and fires of April 2011, it does not seem that the parties concluded any express contract dealing with that enlarged scope of works. Presumably, they regarded it too as covered by the terms of the contract that they had made in about May 2010.

[23]

Further submission on the admissions as to formation of the contract

If the contracts were formed by acceptance (by conduct) of the purchase orders, their terms would be found in those purchase orders. Of course, the search for terms may and should extend beyond the verbiage of the purchase orders themselves. It must extend, at least, to documents that are expressly called up by the purchase orders.
As I have noted, Mr Gration submitted, after I had reserved my decision, that it was open to the Court to consider the question of contract formation on the basis of all the evidence before it. He submitted that the Court should not simply conclude this point on the basis of the state of affairs admitted on the pleadings. In effect (and I do not mean to be disrespectful in saying this), Mr Gration's submissions on this point appeared to be a late reaction to the ruling referred to at [18] above on the application described at [17].
Mr Gration referred to the decision of Owen J in Bell Group Ltd (In Liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1 at [4528]. In that paragraph, his Honour considered whether the defendant banks were bound by an admission on their pleadings that the directors of the plaintiff company owed fiduciary duties to it. He recorded that the plaintiff argued, in consequence, that "the banks are not now entitled to raise an issue, generally, whether the duties are fiduciary". The answer to that, his Honour said, could be given as follows: The question whether the proper characterisation of an obligation is or is not fiduciary is a question of law or, at the very least, a mixed question of law and fact. That being so, an admission in the pleadings does not resolve the issue and nor does it absolve the trial judge from the responsibility to ascertain the true state of the law and to apply it in accordance with findings that he or she has made.
If I may say so with respect, I can understand that approach in a case where the question is one of breach of fiduciary duties. The question requires identification and characterisation of the duties said to have been broken. The resolution of that question involves the application of a legal test to the particular facts of the case. And in answering that question, the Court must recognise that although the categories of fiduciary relationships are not closed, the class of fiduciary duties is.
If the duties, although admitted to be fiduciary, could not be so categorised on all the facts available to the Court, it would not be appropriate for the Court to rely on the admission of the fiduciary character of the duties, and thus to make a finding of breach which was not otherwise available. That is taking the role of admissions far beyond their intended purpose. More importantly, it might lend to unintended and unprincipled "development" of the law relating to fiduciary duties; more bluntly, to heresy.
The other case to which Mr Gration referred was the decision of the Court of Appeal of Queensland in Holdway v Arcuri Lawyers (2009) 2 Qd R 18. The plaintiff made a claim against a deceased estate under what appears to have been the Queensland equivalent of s 58 of the Succession Act 2006 (NSW). Her pleaded case was that the deceased's estate had been distributed when transfers of parcels of real property (from the executor in that capacity to himself as devisee) were registered. The trial judge decided the matter on the basis of the pleaded case. One of the questions before the Court of Appeal was whether the trial judge had erred in holding that the admission on the pleadings was decisive.
Keane JA gave the principal judgment. McMurdo P agreed with his Honour, although giving brief additional reasons, and Mackenzie AJA agreed with Keane JA.
McMurdo P dealt with the point at [5]. Her Honour said that an admission on the pleadings will usually narrow the issues in dispute between the parties, and restrict the calling of contrary evidence. However, her Honour observed: … in the present case, despite the pleaded admission, the parties called evidence on that issue at trial without objection. The question whether the estate was distributed… was, despite the admission, a contested issue between the parties at trial. A court is not bound to act upon an admission where persuasive contradictory evidence called at trial demonstrates that the admission is wrong…
Keane JA dealt with the point at [60] and following. His Honour started by noting the purposes to be served by pleadings, including giving proper notice of the case to be made, and defining the issues. He cited Gould v The Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490 and Banque Commerciale SA v Akhil Holdings Ltd (1990) 169 CLR 279.
His Honour then noted that both parties had called evidence on the proper characterisation of the transfers, and that the plaintiff (who had the benefit of the admission) "did not seek to suggest… that further evidence might have been called on this issue…". In those circumstances, his Honour said at [62]: … insofar as the purpose of a party's pleading is to notify the other side of the case it has to meet so that any evidence relevant to that case can be addressed, that purpose would not be disserved by giving effect to the findings made by the learned trial judge on the evidence.
Further, his Honour said at [63], on the way both sides had conducted the trial, the proper characterisation of the duty was "a matter presented by the parties for determination by the learned trial judge". Keane JA noted that the plaintiff "did not rest content with the position which it now says was established on the pleadings" but "sought to prove that the pieces of real property had been distributed". Thus, his Honour said (again at [63]): Insofar as the purpose of pleadings is to confine the issues to be decided by the judge at trial, that purpose would not be disserved by giving effect to the findings made by the learned trial judge on the evidence adduced by both plaintiff and defendant on the issue.
His Honour then said at [64], [65] (I omit footnoted citations): [64] If an allegation of fact is admitted in a pleading, there is no issue as to the truth of the fact and evidence to prove the fact is unnecessary and, indeed, irrelevant. But if the parties, by their conduct of the trial, open the issue up by calling evidence upon it, then the admission does not become entirely irrelevant. It affords a basis on which the court may conclude the issue in favour of the party which has the benefit of the admission. Thus, an admission of an allegation of fact by a party in a pleading will usually suffice to establish that fact against the party making the admission; but an admission of a matter of law or of mixed fact and law will not necessarily be decisive if other evidence in the case shows that the admission was made in error and the circumstances are such that the party who made the error can advance the true position consistently with procedural fairness to the other party. Indeed, on one view, the defendant's implied admission was of no probative value at all. In Grey v Australian Motorists & General Insurance Co, Glass JA said that: … in point of principle … a party cannot be asked to admit a conclusion depending upon a legal standard. By extorting from a party an admission that he was negligent, or that he was not provoked, or that his grandfather possessed testamentary capacity, there is added to the record something which is, not merely of dubious value, but by definition valueless, owing to the witness' unfamiliarity with the standard governing his answer. If this absolutist view is rejected, and the admission of a matter of law or of mixed fact and law is accorded probative value, its probative value may vary: it may or may not be sufficient to support a conclusion on matters such as an entitlement to property; whether it is sufficient will depend on the circumstances of the case. [65] Subject to the requirements of natural justice, if evidence admitted without objection demonstrates that an admission of mixed fact and law is erroneous, then the admission will not be decisive against the party making it. Usually, of course, if an allegation has been admitted, evidence tendered to prove or disprove that allegation will be irrelevant and will, upon objection being taken, be excluded on that ground. But, in this case, evidence was admitted, both to prove and to disprove, the due distribution of the two pieces of land; and that occurred without objection. Once that occurred, the question for the learned trial judge was whether the proposition that the two pieces of real estate had been duly distributed was established or not. In deciding that question, the admission was relevant but it could no longer be decisive. It is clear, though, that his Honour treated the admission as decisive. In this regard, his Honour erred in that he had come to the conclusion, applying the law to the facts as he found them to be, that, in truth, the two pieces of land had not been distributed by the transfers on 25 July 2003. (emphasis in original)
That outcome of that case depends very much on its facts. It does not establish any general rule that a party who has admitted a particular state of affairs (whether an admission of fact, or of law, or of a mixed question of fact and law) should be held entitled to resile from the admission and to grasp at evidentiary straws that might seem to support a finding, whether of fact or fact and law, contrary to the admitted state of affairs.
In this case, Resolve was given no notice, until Mr Gration's closing submissions on the last two days of the trial, that Broadlex wished to contend that the contract had not been concluded in the manner admitted on the pleadings. If that matter had been fairly in issue during the trial, and if Resolve, having been given some notice of Broadlex's position, had dealt with the issue as though it were one to be resolved on the evidence adduced, the position might be different. But here, the evidence on which Mr Gration relied was evidence that was properly admissible on Broadlex's conventional estoppel case. As the pleadings stood, it was not relevant to the question of contract formation, because that question had been resolved on the pleadings. Raising the point at the end of the case, after the evidence has closed, is not consistent with the interests of justice as between the parties.
I proceed on the basis that the decision in Holdway does no more than confirm that a trial judge has a discretion to permit a party to depart from pleaded issues where it is apparent that the other party has acquiesced in this happening, and where the parties have fought the issue out on the facts. I do not accept that it goes further, and requires a trial judge to decide an issue on the facts, and contrary to a pleaded admission, in all circumstances; and, a fortiori, where to do so would (as I think is the case here) work substantial injustice to the detriment of the other party. I add that since the evidence was admissible on a pleaded issue, there can be no question of acquiescence based on irrelevant evidence being adduced without protest. On the contrary, objection was taken (see at [31], [49] above).
Further, in the present case, the evidence in support of the conclusion for which Broadlex wished (contrary to its pleading) to contend can hardly be said to be "persuasive", let alone compelling. That may reflect in part the fact that Resolve in particular had no prior notice that the admitted state of affairs was to be disputed. Nor is there any obvious inconsistency (in a factual sense, or with established principles as to contract formation) in dealing with this question on the basis of the admission in the pleadings. The position for which Broadlex would contend is hardly so obvious that to give effect to the pleaded admission would lead to a conclusion, as to contract formation, that is manifestly absurd.

[24]

What were the terms of the contract?

It was not contentious that the "tender submission" referred to in the purchase orders comprised: 1. Mr Saltirov's email to Mr Biddiscombe of 22 February 2010, forwarding Mr Lupeski's email to Mr Biddiscombe of the same date and the attachments to that email; and 2. some at least of Resolve's general terms, as to which, it was said, a copy "may be obtained from the issuer".
Mr Gration's submissions in relation to the general terms were a little difficult to follow. He accepted that at least some of them would form part of the terms of the contract that was made, simply because the general terms had been referred to expressly in the offer that was accepted. However, he submitted, not everything in the general terms would be so incorporated. Specifically, he submitted, excluding or limiting terms such as cls 7.5 and 7.6 would not form part of the contract, because Broadlex had not been given reasonable notice of them. I shall return to this question.
The parties appeared to accept that Serco's Part 4 scope would also form part of the contract. It was, I think, common ground that Broadlex had been given that scope for the purpose of preparing its quotation in 2007, and that it also had it, and utilised it, for the purpose of preparing its quotation in 2010. It is clear that Mr Lupeski had that scope, and that he paid attention to it when he prepared his estimate. That is because the specific exclusions that he lists (for example, "remove strip and seal vinyl floors MONTHLY") are drawn from, and expressly cross-referenced to, the Part 4 scope.
Thus, I think, to the extent that it was not excluded on the proper construction of the quotation, the Part 4 scope must form part of the contract.
The Part 4 scope incorporates Serco's Part 7 standards. I have found at [41] that the Part 7 standards were not given to Broadlex at any relevant time. Nonetheless, someone reading the Part 4 standards carefully (as Mr Lupeski must have done, to satisfy himself as to services that should be excluded from the estimate) should have realised that there was another document that bore on either the scope or the quality of the services to be performed.
Broadlex was given the Departmental specification in 2007, for the purpose of quoting. It is apparent that Mr Lupeski paid attention to the Departmental specification in preparing his estimate. That is because one of the documents attached to his estimate, and thus to the quotations submitted to Resolve, specifically excluded services (a) to (d) and (f) referred to in the Departmental specification. And as I have said, he later costed them, and that costing was given to Resolve.
Looking at the matter objectively, it is clear, and I am satisfied, that Broadlex's quotation of 22 February 2010 was intended to address, and should be read as addressing, the requirements of the Part 4 scope and the Departmental specification. Thus, I am satisfied that the offer comprised in that quotation should be read as an offer made upon the terms of those documents (to the extent that they can be reconciled). The position is less clear in respect of the Part 7 standards. However, since little if anything appears to turn on those standards, it is probably not necessary to pursue this point.
Returning to the actual quotation, the documents that it comprised included: 1. Mr Lupeski's email to Mr Saltirov of 22 February 2010, forwarded by Mr Saltirov to Mr Biddiscombe; 2. the Pricing Schedule Summary which broke up the prices into quotations for VIDC and VIRH, which were cross-referenced to attached documents described as "detailed breakdown of the total cost" and "detailed labour deployment chart", and which specifically stated that "Periodical Cleaning Services" were "not applicable"; 3. another breakdown of the quotation, into labour and on-costs, fixed costs, administration and profit, which stated as one of the "Pricing Assumptions" on which it was based, "Periodical tasks are NOT including in the total cost" (one each for VIDC and VIRH); 4. a summary of "Labour Resources" which indicated the hours at which cleaners and others would be available to perform duties and which indicated clearly (particularly by silence, when compared with the equivalent documents in the 2007 quotation) that no labour allowance was made for what were called "Periodical Cleaning Services" but were specifically described by reference to paras (a) to (d) and (f) of the Departmental scope; and 5. a labour deployment chart which broke down the hours of labour to be provided over the various tasks; it covered services provided daily and on lesser frequencies up to weekly, but not at less than weekly frequencies.
Whatever terms may be spelled out of the various documents to which I have referred are to be regarded as terms of the contract. Further (and in connection with the second aspect of this issue), it is legitimate to have regard to those documents for whatever light they may throw on the proper construction of the terms that were in dispute: specifically, the content of the undoubted exclusion of "Periodical Cleaning Services".
I turn to Resolve's general terms. It might be thought that there is a simple answer to the question of whether they were incorporated into the contract: namely, "yes"; and a simple reason why this is so. The simple reason is that, since the purchase orders are admitted to have been offers available for acceptance, and that were accepted by conduct, the offers were made on the terms stated in them, including specifically that they incorporated the terms.
As I have noted, Mr Gration's submissions accepted that some of the general terms would be incorporated, but that others would not be. He relied on what had been said by the High Court of Australia in Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197, and by the Court of Appeal of this State in Baltic Shipping Company v Dillon, "the Mikhail Lermontov" (1991) 22 NSWLR 1. Mr Gration referred specifically to observations by Brennan J in Fay at 229, to the effect that where there is no writing binding a passenger to the terms of carriage, the carrier cannot rely on an exemption clause in its standard terms of carriage unless it had done all that was reasonably necessary to bring that clause to the passenger's notice. Kirby P expressed himself to similar effect in Dillon at 25 (although Mr Gration did not refer expressly to this section of his Honour's reasons).
I have some difficulty in accepting the proposition that, in circumstances such as those under consideration, some parts of standard terms and conditions of contract, referred to but not expressly set out in an offer to contract (and not accepted by signature), can be incorporated into a contract made by acceptance of that offer, but that other parts may not be. The ultimate issue is whether a contract has arisen on the proved dealings of the parties. Where those dealings comprise the making of an offer by the tender of a printed form of agreement and conduct said to amount to acceptance of that offer, the test is whether an objective bystander, considering those facts, would conclude that there had been acceptance of the terms stated in the printed document.
That analysis is consistent with the view taken by Kirby P in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 531. In the same case, McHugh JA (with whom Samuels JA agreed) said at 535: … where an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted according to its terms. … The ultimate issue is whether a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted.
The test stated by McHugh JA in Empirnall Holdings was applied by Heydon JA in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [82]. His Honour made the point that "it is the reaction of reasonable parties, not the actual parties, which must be analysed". His Honour then said: The defendant, as offeree, had a reasonable opportunity to reject the offer: indeed, initially, it did reject the offer. However, it soon took advantage of the benefit offered. It knew that the only basis on which the Council was prepared to permit the higher prices to be charged and the 1.1 cents retained as a matter of contractual right was the basis stated in the 19 September 1991 letter. The charging of the higher prices by the defendant could convey one of two possibilities, that it was acting in breach of the condition on which the benefit was being conferred, or that the defendant was accepting that condition. A reasonable bystander, and in particular a reasonable bystander in the position of the Council, would prefer the latter possibility.
The question in this case is: what would the reasonable or objective bystander make of the parties' dealings? Would he or she conclude that they had contracted on the terms of the purchase orders and contained in the documents to which they referred? It is difficult to understand how, based purely on the facts (and terms) of the offer and the facts said to amount to acceptance in this case, such a bystander could conclude that some of the terms comprised in the offer were accepted, but that others were not. Indeed, on the orthodox or classical analysis of contract formation, if the conduct said to amount to acceptance amounted to acceptance of some only of the terms, and rejection of others, then it could not amount to acceptance at all. It could be, at most, a counter-offer.
The state of affairs admitted on the pleadings, that the offer is to be found in the purchase orders, and was accepted by conduct, makes the position for which Mr Gration argued untenable. At least, it makes it untenable when, as Mr Gration conceded, the terms of the offer expressly drew attention to, and incorporated at least some of, Resolve's general terms.
However, there are the statements of principle in the two decisions on which Mr Gration relied. Those statements cannot be overlooked, or set aside, on the basis of what some might think to be broad-brush analysis. Accordingly, I turn to those decisions.
The ultimate question for decision in Fay was whether an action commenced by the respondent Dr Fay in this Court, for damages for injuries sustained whilst on a cruise of the Greek Islands on a vessel operated by the appellant Oceanic, should be stayed. Along the way, a question arose as to where the contract had been made, and what were its terms. Of necessity, as all members of the Court appeared to accept, there could be no final decision on that point, because the appeal was an interlocutory appeal from an interlocutory judgment.
Oceanic contended that the terms of carriage set out in its tickets (including a term that the Courts of Greece should have exclusive jurisdiction) were incorporated into the contract. All the judges in the High Court held that: 1. the contract was made in New South Wales; and 2. the conditions set out in Oceanic's ticket were not incorporated into that contract.
The evidence was that the terms had been referred to in a brochure given to Dr Fay before he paid his money to the travel agent in Sydney. However, he did not receive a ticket in exchange for that payment. He received an invoice which identified the cruise that he and his wife were to take, and the cabin that would be allocated to them. He obtained also an "exchange order", which apparently could be exchanged for a ticket when he boarded the vessel. The tickets were not made available until the travel agent collected them at Oceanic's office in Athens. She gave them to the passengers (including Dr Fay) when they actually boarded the vessel.
Wilson and Toohey JJ (who dissented on the ultimate question, as to whether a stay should be ordered) held that the brochure given to Dr Fay was not contractual in nature and did not form any part of the contract of carriage. It was, their Honours said, basically advertising material designed to entice would-be travellers to Oceanic's cruises. Further, their Honours concluded, the ticket itself did not form any part of the contract. It was issued after the contract was made, and thus could not form part of it.
Deane J, who did form part of the majority on the ultimate question, generally agreed with the reasons of Wilson and Toohey JJ on the point that I have just dealt with.
Brennan J (who with Deane and Gaudron JJ formed the majority on the ultimate question) concluded that the contract was made in New South Wales, and that it required Oceanic to issue a ticket in exchange for the exchange order given to Dr Fay. That, his Honour said at 228, would be "performance of a contract of carriage already made". However, his Honour added, Oceanic "was given no right to introduce new conditions of carriage by printing them on the ticket".
The passage on which Mr Gration relied was taken from the following longer passage at 228-229 of his Honour's reasons (I omit citations). If a passenger signs and thereby binds himself to the terms of a contract of carriage containing a clause excepting the carrier from liability for loss arising out of the carriage, it is immaterial that the passenger did not trouble to discover the contents of the contract. But where an exemption clause is contained in a ticket or other document intended by the carrier to contain the terms of carriage, yet the other party is not in fact aware when the contract is made that an exemption clause is intended to be a term of the contract, the carrier cannot rely on that clause unless, at the time of the contract, the carrier had done all that was reasonably necessary to bring the exemption clause to the passenger's notice… . In differing circumstances, different steps may be needed to bring an exemption clause to a passenger's notice, especially if the clause is an unusual one.
Gaudron J did not in terms deal with the question of contract formation. I take from what her Honour said at 261 that she agreed with the reasons of Brennan J on this point.
The debate was picked up and continued in the decision in Dillon. In that case, as Gleeson CJ said at 7, the contract of carriage was not made until the ticket was issued by the appellant to Ms Dillon. His Honour said that this had two consequences (at 7; and again I omit citations): First, it renders inapplicable what has been called the "conventional analysis"… . Upon that analysis the issue of the ticket is only an offer, and the contract is formed when the passenger, having had an opportunity to consider the terms of the offer, accepts it. That analysis would be contrary to the terms of the appellant's own document. Equally, however, the stipulation removes the possibility of a conclusion, similar to that arrived at in [Fay] (where there was no such stipulation), that the contract of carriage was made when the booking form issued or the balance of fare was paid.
Gleeson CJ then looked at the consequences of holding that the contract was made on issue of the ticket. Referring back to the "conventional analysis", his Honour said (at 8): It is an important aspect of those ticket cases that yield to the conventional analysis that the corollary of the proposition that a contract of carriage comes into existence only when the passenger has received the ticket and been afforded an opportunity to consider its terms is that in such circumstances it is fair to treat the carrier as having done what was reasonably necessary to bring all the terms to the attention of the passenger and to treat the passenger as bound by those terms. The same does not apply, however, where it is the issue of the ticket by the carrier, rather than the passenger's uncomplaining acceptance of it after having had an opportunity to read it, that brings the contract into existence.
Kirby P said at 25 that he would apply what he took "to be the approach sanctioned by the High Court in [Fay]". On that approach, his Honour said: Once the contract was made [by delivery and acceptance of the ticket], it was not open, without fresh agreement, for further terms and conditions to be imposed by the unilateral action of one contracting party. Thus the mere presentation by the appellant to the respondent of the passenger ticket with its terms and conditions would not fix the respondent with acceptance of those terms and conditions, simply because thereafter she began the cruise. She was entitled, in law, to take the view that she would be issued with a ticket which would contain no unusual provisions, specifically no provisions of which she was not on notice limiting the appellant's liability to her.
The facts of the present case are distinguishable from the facts of Fay. In Fay, the contract was concluded before any document purporting to incorporate contractual conditions was tendered to Dr Fay. Thus, as Wilson and Toohey JJ said, the conditions contained in the ticket could not form any part of that contract. Brennan J made the same point.
To my mind, the situation in the present case is closer to the "conventional analysis" to which Gleeson CJ referred in Dillon. As his Honour said, where a contract comes into existence by acceptance of an offer constituted by a ticket, which contains or refers to terms and conditions, the corollary is that the offeror is to be treated as having done what was necessary to bring those terms and conditions to the notice of the offeree.
In the present case (as in all cases), the offer must be taken to mean what, objectively according to its terms, it says. To put it another way, the effect of the offer is what it would convey to the reasonable or objective bystander: Life Insurance Co of Australia Limited v Phillips (1925) 36 CLR 60.
The purchase orders, read objectively, would convey to the reasonable objective bystander that Resolve was offering to contract on the basis of, among other things, its general terms, and was informing the offeree that it could obtain those terms on request. Thus, objectively, unqualified acceptance of the offer necessarily comprehends acceptance of those general terms. (Of course, if the purported acceptance were relevantly qualified it would amount to a counter-offer.) And once acceptance is established, it follows, as Gleeson CJ pointed out in Dillon, that the offeror (Resolve) is to be treated as having done what was necessary to bring those standard terms and conditions to the attention of the offeree (Broadlex). On that analysis, Resolve did what Brennan J said in Fay (see at [146] above) as necessary to bring its general terms - all of them - to the notice of Broadlex.
In this case, the offer was made by issue of the purchase orders on 23 April 2010. They were sent by email. Thus, they were available to Broadlex, for its consideration, at about 4 o'clock on that day (a Friday). The following weekend was a long weekend. Even if one were to assume that no one at Broadlex worked over the long weekend, those to whom the offer was addressed had four days (26 to 30 April) to consider the terms of the offer. They had ample time, if they wished, to obtain, read and negotiate on the standard terms and conditions of contract referred to in the offer. They did not do so. Instead, at the beginning of May, Broadlex's staff turned up at VIDC and commenced work. Thereby, Broadlex signalled its acceptance of the offer contained in the purchase orders.
In my view, two things follow. The first is that Resolve did give Broadlex adequate notice that it was making the offer on the basis of its general terms. It gave Broadlex an adequate opportunity to request and negotiate on those terms and conditions, or to engage in a battle of the forms. In those circumstances, Resolve should be held to have done all that was necessary to apprise Broadlex of the existence of those terms. It can hardly be said that, in a commercial contract, it would be surprising, or unusual, for standard terms and conditions to contain at least some provisions seeking to limit or exclude liability in certain circumstances.
The second consequence is that in my view, the reasonable objective bystander would conclude, looking at the matter with knowledge of the facts as I have set them out, that Broadlex had accepted the offer on the basis - including as to the general terms - on which it was made.
Accordingly, I find, the terms of the contract included all those set out in the general terms. In some cases, a question arises as to whether standard or the general terms and conditions prevail in the face of expressly stipulated terms or conditions that are inconsistent. No such question arose in this case.

[25]

What is the proper construction of the terms of the contract?

There are two questions of construction that require resolution. The first is as to the scope of the exclusion of "Periodical Cleaning Services". The second is as to the proper construction and application of cl 7.6 of the general terms (of course, read in context - including, specifically, cls 7.3 to 7.5). First question: what were the excluded services?
The term "Periodical Cleaning Services" is not clearly defined in any of the documents that form part of the contract, or to which legitimate recourse may be had as an aid to construction.
The Departmental specification provides some guidance. However, perhaps because the specification was written at a level of generality, intended for use across a wide range of facilities, it does not offer great guidance. As I have set it out above, section 1.4.1 states a definition of "Regular and Programmed cleaning", and section 1.4.2 states the purpose of "Regular Cleaning", presumably so defined (although one might wonder whether the exclusion of the words "and Programmed" is significant).
Then, and not in a particularly helpful way, the document moves in section 1.4.2.1 to a discussion of "Periodic Cleaning items". That subsection of the Departmental specification appears to make it tolerably clear that, in the view of DIAC at least, "periodic cleaning tasks" for the facilities under its control comprise items (a) to (d) and (f), but exclude item (e). The list is not entirely clear as to whether ceiling fans and high beams or ledges under 3 metres in height are included.
The flavour of the Departmental specification is that regular cleaning is to be undertaken continuously (although not perhaps on a daily basis), so as to ensure compliance with the Cleaning Performance Standards referenced in section 1.4.1, and so as to provide a comprehensive cleaning service with the attributes mentioned in section 1.4.2. By contrast, it might appear, periodic cleaning is to be undertaken according to some schedule that programmes the tasks "as listed at each facility". That could be taken to indicate that, in the contemplation of DIAC at least, there was to be a program in place for each facility which specified, among other things, the frequency at which each of those periodic cleaning tasks was to be undertaken.
The Part 7 standards (and as I have said, these were not given to Broadlex at the time it provided its quotation, although they are referenced in the Part 4 scope that was) effectively repeat, in section 2.1.3, those parts of the Departmental specification to which I have referred, including the list of periodic cleaning tasks (both included and excluded) set out in paras (a) to (f).
The Part 4 scope is not helpful. No doubt, that is why Mr Lupeski went through it to seek to extract those tasks that he intended to exclude from his estimate, as being services of a periodic nature.
The apparent verbal distinction between "regular" and "periodic" tasks is not of great assistance. As a matter of language, regular tasks could be said to be those that are done habitually or recurrently in a uniform, constant or orderly manner. Periodic tasks could be said to be those done at regular intervals. There is, at the very least, a substantial overlap between the connotations of the two words (and, for that matter, between their denotations). In short, no assistance is to be found in resort to "plain English meaning".
There is no evidence of any accepted industry definition of "periodic" services (whether as opposed to "regular" services, or in a vacuum). Mr Tarabe sought to suggest at one point in his evidence that there was some well-understood usage in the cleaning industry attaching to the concept of periodic cleaning, or periodical cleaning tasks. To the extent that he did seek to maintain this, it is an aspect of his evidence that I do not regard as acceptable. Indeed, he was forced to concede that, in one contract that Broadlex had made, the definition of periodical cleaning services was quite different to that which, he suggested, should apply in the present case (and which according to him, would generally apply).
Mr Price said that in his experience, the term had no fixed or regular meaning, accepted throughout the cleaning industry. I accept that aspect of his evidence (as, indeed, I accept his evidence generally).
The evidence rose nowhere near high enough to suggest that there was some term implied by custom or usage in the cleaning industry (compare Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226 at 236 - 238).
Mr Breakspear submitted that the concept of periodical cleaning items was defined in Mr Lupeski's email, by reference to the specific matters that he listed. This followed, Mr Breakspear submitted, from the language used. Further, Mr Breakspear submitted, it was made crystal-clear when one looked at the other documents that the excluded periodical tasks were those comprised in items (a) to (d) and (f) of the Departmental specification. (Everyone accepted that the excluded item, (e), was indeed excluded.)
Mr Gration submitted that periodical tasks were those to be performed at intervals longer than weekly, or fortnightly (his submissions appeared to move from one to the other). He submitted that the list of exclusions was intended to be illustrative of what was excluded from the estimate, but not definitive.
To my mind, the only way to make sense of the estimate is to construe it as specifying that certain tasks, described as "periodical", are excluded, and that the tasks so excluded are (and are only) those then listed. With only a slight degree of contortion of language, the tasks listed in the email can be accommodated to items (a) to (d) of the Departmental specification. Although there is no equivalent for item (f), that does appear to be excluded, by reasons of the breakdown of labour resources forming part of the estimate (and hence the quotation) which, as I have said, is explicitly cross-referenced to the Departmental specification.
That reading of the estimate (and thus, the quotation) is consistent with the Departmental specification (and, if it matters, with the Part 7 standards which repeated it). It is conformable with the earlier quotation, in which the five tasks (a) to (d) and (f), although included, were given the same description. It is consistent with the offer supplied a few days later (and before the purchase orders were issued) to perform the excluded tasks for the annual consideration of $30,910.56.
All those matters seem to me to show that the excluded tasks, which were described as "periodical", comprised (and comprised only) those listed in Mr Lupeski's estimate, with the addition of item (e) from the labour chart. That construction finds support in the language used in Mr Lupeski's email. To my mind, the clause commencing "hence" is intended to be descriptive of the scope of the immediately preceding exclusion. That is to say, I conclude as a matter of language that the "clauses" that must be "removed", being those that follow the word "hence", are definitive of the "periodical tasks" that were "excluded".
Adopting that construction has the added attraction that it enables meaning to be attributed to the contract that, undoubtedly, the parties intended to make incorporating the terms of the quotation. If it were not possible to construe some meaning out of its words for the excluded tasks, there would be a very significant problem with uncertainty. No one contended for that outcome.
It is not possible to give any sensible meaning to the exclusion of periodical tasks if one does not adopt that construction. If the description of periodic services were illustrative only and not exhaustive, how would one give further content to the exclusion? As I have said, there is little if any clear linguistic distinction between "regular" and "periodic" (as applied to tasks).
The Part 4 scope offers nothing by way of contextual guidance. The Departmental specification does, because it appears to restrict the concept of periodic tasks to those specified in paras (a) to (f). If it were permissible to approach the task of construction by looking at the words in isolation (and of course, it is not) no relevant meaning could be distilled from them. Once the task is approached (as it should be) by putting the words in context, the meaning for which Resolve contended emerges.
In my view, the excluded "periodical tasks" are limited to those specified in Mr Lupeski's estimate of 22 February 2010.
The only documents that tell explicitly against this conclusion are the Broadlex cleaning plans to which I have referred. They show that there were numerous tasks that Broadlex would not perform as part of the regular cleaning services, for the contractual fee, but would perform only for additional remuneration.
Those documents do not form part of the contract. They were brought into existence after the contract was made, and in the course of its performance. They cannot bear on its construction. Nor, on the pleadings, can they be relevant to the question of acceptance. They might have been relevant if there were some suggestion that the contract had been varied so as to diminish the scope of the regular cleaning tasks to be performed, but no such case was pleaded or argued. They are, of course, relevant to (indeed, I think, one of the foundations of) the conventional estoppel case.
The documents to which I have referred at [44], [45] above are not so easy to reconcile with the view that the excluded periodical tasks are those specified as such in the email of 22 February 2010.
If there were textual or other reasons for construing the quotation in the way for which Broadlex contended, the document referred to at [44] would be consistent with, and perhaps lend support to, that construction. However, as the matter stands, I do not think that the absence of any allocation of labour for tasks of a lesser than weekly frequency can be decisive, or even of significant weight, against what in my view is the better construction of the quotation. It is not really possible, simply as a matter of language, to say that tasks performed at stated intervals which are less than weekly are anything other than "periodical".
As to the document referred to at [45], the handwritten annotation cannot be of any significance given that it is not known who made that annotation, or when. As to the balance of the document, given that (as I have said) the excluded periodical tasks defined in Mr Lupeski's email of 22 February 2010 can be related (with the complexity noted at [172] above) to the Departmental specification, the document does not seem to me to be antithetical to the construction that in my view is correct. The interest question
Mr Breakspear submitted that, on the proper construction of cl 7.6 of the general terms, Broadlex was not entitled to interest on the unpaid invoices, even if it were to be held that Broadlex had made out its claim for payment and Resolve had failed to make out any of its defences (and its cross-claim).
Clause 7 of the general terms deals with "pricing and payment". Clause 7.1 specifies that the contract is one for a fixed price. Clause 7.2 makes it clear that Resolve is obliged to pay only the fixed price, subject to any approved variations. Clause 7.3 provides for the provision, review and payment of invoices. Clauses 7.4 to 7.6 deal with the consequences of disputes as to invoices. I set out 7.3 to 7.6: 7.3 The Contractor will provide invoices to Resolve FM as set out in Item 7, 8 and 9 of the Annexure. Payment will be made on the following basis: (a) the Contractor submits an invoice to Resolve FM at the place specified in Item 9 of the Annexure and in the form Notified by Resolve FM; (b) Resolve FM will review the invoice, and if Resolve FM is satisfied that the Services referred to in that invoice have been Provided in accordance with the Contract, Resolve FM will pay the Contract Price for those Services within 30 days from the actual or due date of the invoice, whichever is the later; (c) if Resolve FM is not satisfied: (i) that all or part of the Services referred to in the invoice have been Provided at all, or in accordance with the Contract; or (ii) that the invoice is accurate or correctly submitted, Resolve FM will Notify the Contractor within 10 days; (d) if Resolve FM notifies the Contractor in accordance with clause 7.3 (c) (i), the Contractor must immediately consult with Resolve FM and agree on what Services have not been Provided and/or what rectification of Services Provided must occur so that they are in accordance with the Contract, and must then correct and re-submit the invoice when those Services have been Provided or rectified; and (e) if Resolve FM notifies the Contractor in accordance with clause 7.3(c)(ii), the Contractor must correct and re-submit the invoice as soon as possible and, subject to Resolve FM's rights in clause 7.3(b), Resolve FM will pay the Contract Price claimed by the Contractor in the corrected invoice within 30 days or receiving it. 7.4 If Resolve FM disputes anything contained in an invoice submitted by the Contractor, the Parties must try and Resolve FM [sic] the dispute. If the dispute is not resolved within the Preliminary Resolution Period, the dispute must be resolved in accordance with the procedures set out in clause 18. 7.5 While a dispute exists concerning any amount claimed by the Contractor in an invoice, Resolve FM will only pay the Contractor that part of the Contract Price claimed by the Contractor in its invoice which Resolve FM considers is due and payable by Resolve FM. Resolve FM will retain and only pay the remaining amount claimed in the invoice once the dispute concerning its payment has been resolved. 7.6 If Resolve FM fails to make a payment to the Contractor on time, the Contractor is entitled to be paid interest on the rate noted in Item 10 of the Annexure, based on the amount of the payment outstanding from the day after the payment was due until the date payment is made. The Contractor's right to damages in connection with a late payment are limited to the interest payable under this provision. Interest shall not apply to payments which are in dispute.
Mr Gration submitted that clause 7.6 did not have the operation for which Mr Breakspear contended. He submitted that it applied only when there was a dispute which was the subject of protest (for want of a better word) under cl 7.3 and resolution in accordance with cl 7.4 (incorporating, as it did, cl 18). If this were not so, Mr Gration submitted, it would be open to Resolve to manufacture a dispute way outside the cl 7.3 timeframe, and draw it out for as long as possible, safe in the knowledge that it would not be required (should it lose) to compensate Broadlex for being out of its money.
In any event, Mr Gration submitted, the discretion of the Court to order interest up to judgment, under s 100 of the Civil Procedure Act, prevailed over the terms of cl 7.6, if it had the effect for which Mr Breakspear contended.
Mr Breakspear submitted that the Court should not exercise its discretion so as to rewrite the contract that the parties had made. He referred, in particular, to subs (3)(b). He submitted that, just as s 100 did not authorise the giving of interest where it was payable by right, so too, by analogy, it should not be exercised to award interest where the right to it was specifically excluded.
To my mind, the construction of cl 7.6 for which Mr Gration contended is correct. Although I have not set out cl 7 as a whole, its structure is reasonably clear. Specifically, cl 7.3 provides for a process of submission and review of invoices, and for them to be dealt with according to the outcome of that review. If Resolve is satisfied with an invoice that has been submitted, it is to pay it within 30 days. If Resolve is not satisfied, it is to notify Broadlex within 10 days. Once that notification is given, the processes of consultation and (if applicable) correction and resubmission follow. If the dispute is not resolved, the dispute resolution procedure is engaged, as cl 7.4 makes clear.
Against that background, cls 7.5 and 7.6 deal with the consequences of "dispute". In doing so, in my view, they refer clearly to a dispute of the kind referred to in cl 7.4, which in turn means a dispute notified in accordance with cl 7.3(c). Although the word "dispute" is not expressly used in cl 7.3(c), in my view it is clearly intended to comprehend the consequences that must follow if the process of consultation, correction and resubmission for which paras (d) and (e) provide is not successful in resolving whatever concerns Resolve notified to Broadlex.
Put shortly, if concerns notified pursuant to cl 7.3(c) are not dealt with by the process of consultation, agreement, correction and resubmission, there exists a dispute, and it is that dispute that is the subject of cls 7.4 to 7.6.
In this case, there has never been a dispute as to the quantity or quality of the services the subject of the unpaid invoices, or as to their accuracy (or "correct submission", whatever that might mean). The only dispute is that raised by the cross-claim. That dispute has nothing to do with the particular services the subject of those invoices.
There is no suggestion that Resolve had notified Broadlex of any dissatisfaction, in terms of cl 7.3(c). Thus, there was no opportunity for the dispute resolution process set out in paras (d) and (e), and followed up in cls 7.3 to 7.6, to have been engaged.
To my mind, it is artificial to construe cl 7.6 as suggesting that a dispute can be conjured up some years after the services were rendered, and used retrospectively to deny what would otherwise be a legitimate claim to interest. The clauses in question emphasise swift notification and resolution of any dispute as to an invoice. It is manifestly inconsistent to say, as well, that a dispute arising many months or some years later, not hitherto notified, could equally disentitle Broadlex to interest, even if the dispute were resolved in its favour. That is an uncommercial construction, and hence one that should be avoided unless the language permits of no alternative. For the reasons I have given, I do not think that the language is, in that sense, intractable.
Had I come to the view for which Mr Breakspear contended, the s 100 point would require decision. Since it is moot, I see no reason to engage in unnecessary analysis.

[26]

The relevant principles

The relevant principles were not in dispute. Accordingly, I can state them relatively briefly, and without extensive citation of authority: When parties make a statement of fact or of mixed fact and law the conventional basis of their transaction, within giving cross warranties, both are estopped from questioning its truth for the purposes of that transaction. Estoppels by convention can be created ad hoc, expressly, by a course of dealing, or by other acts and declarations.
I take that definition of estoppel by convention from Handley, Estoppel by Conduct and Election (Sweet & Maxwell, 2006) at 115. It is a sufficient statement both of the nature of the conventional estoppel asserted by Broadlex in this case and of the ways in which such estoppels may arise.
There was once thought to be a question as to whether an estoppel by convention could arise where the assumed state of affairs was an assumption of law rather than an assumption of fact. In its decision in Con-Stan (on which Mr Gration relied in support of his submissions on estoppel by convention) the High Court (Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ) said at 244 - 245 that "estoppel by convention requires the assumed state of affairs to be an assumed state of fact".
That proposition was examined closely by Samuels JA (with whom Kirby P agreed) in Eslea Holdings Ltd v Butts (1986) 6 NSWLR 175 at 185 - 189. His Honour concluded: 1. (at 186) that the passage that I have quoted was "not an alternative basis for the Court's conclusion but an obiter dictum"; 2. (at 188) that the authorities cited by the High Court were "not inconsistent with the proposition that a conventional estoppel might rest upon a foundation of assumed law as well as of assumed fact"; and 3. (also at 188) that the decision in Con-Stan should not be taken as precluding the finding of a conventional estoppel where the assumed state of affairs was one that concerned the legal rights of the parties to the transaction.
It is not necessary that the assumed state of affairs be factually or legally correct. Thus, it is not necessary that one party should have induced the other to believe in the truth of a represented state of affairs. What is required is that, regardless of the truth of the assumed state of affairs, the parties mutually adopt it as the basis on which they deal with each other.
As Handley points out in Estoppel by Conduct and Election at 118, a conventional estoppel may arise out of a contract. He gives the example of contracts that give conclusive effect to certificates of certain kinds. However, as he points out at 120, an estoppel by convention may come into existence after a contract has been made. Thus, "a post-contractual convention could support an estoppel which trumped the text" of the contract. That is the form of convention on which Broadlex relies in this case.
For an estoppel by convention to arise, it is necessary, as Handley states at 115, that there should be some mutually manifested conduct by the parties which they intend to affect their legal relationship. That is to say: 1. each party must assume the existence of the conventional state of affairs; 2. each party must intend to perform its part of the transaction on the basis that the conventional state of affairs applies; and 3. each party must know of the corresponding intention and assumption on the part of the other party.
As Handley says at 115, "a distinctive feature of this form of estoppel is its mutuality". However, despite that distinctive feature, estoppel by convention shares one characteristic common to all forms of estoppel by conduct, election and representation. There must be some change of position in reliance upon the assumed estate of affairs, and the party asserting the estoppel must be able to show that it would suffer detriment if the other party were permitted to withdraw from the position that the assumed state of affairs is the basis of the transaction.
Finally, in this context, the estoppel may not be permanent. As with other estoppels, it may be permissible for one party, upon notice, to withdraw from the assumed state of affairs, and thereby (or at some reasonable time in the future) bring it to an end as the conventional basis of its dealings with the other party.

[27]

The pleaded estoppel

Broadlex pleaded the conventional estoppel at [14] to [20] of its reply. Those paragraphs, and their particulars (except for [17], where the particulars do not need to be set out) read as follows: 14. At all material times since February 2010, Broadlex and Resolve FM proceeded on the basis of a mutual assumption that the Contract price did not include the supply by Broadlex of periodical cleaning services, and that any periodical cleaning services requested by Resolve FM and supplied by Broadlex would incur an additional fee (Assumption). Particulars (a) Quote (as that term is defined in the particulars to paragraph 7 of the statement of claim). (b) Email referred to in the particulars to paragraph 10 of the statement of claim stating 'Note - All periodical tasks are excluded from the quotation'. (c) Email from Joe Tarabe on behalf of Broadlex to Mark Carroll and Steve Whitford of Resolve FM dated 7 July 2010 attaching a 'Periodical Planner' and stating that Broadlex would send a quotation for each individual work request. (d) Email from Joe Tarabe on behalf of Broadlex to Mark Carroll and Steve Whitford of Resolve FM dated 12 July 2010 attaching 'Task and Prices' for the periodical planner in response to a request for same from Mark Carroll. (e) Email from Joe Tarabe on behalf of Broadlex to Steve Whitford and Mark Carroll of Resolve FM dated 14 July 2010 attaching maintenance program and periodical program. (f) Email from Joe Tarabe on behalf of Broadlex to Mark Carroll and Greg Hull of Resolve FM dated 22 September 2010 attaching a pricing breakdown for Villawood Immigration and Housing Residential Centre showing 'Periodical Work as per Initial Estimation'. (g) Email from Daniel Vargas on behalf of Broadlex to Reynold Fasavalu on behalf of Resolve FM dated 5 July 2012 attaching periodical cleaning program. (h) During daily inspections of cleaning conducted by Mark Carroll on behalf of Resolve FM from 1 May 2010 until about 19 March 2011, and about twice per week by 'Chris' on behalf of Resolve FM from 19 March 2011 onwards, in company with Daniel Vargas on behalf of Broadlex from June 2010 until about March 2012 and from March 2012 in company with Reynaldo Paredes on behalf of Broadlex, Resolve FM never told Broadlex that it had not performed any periodical cleaning service that Resolve FM considered was required to be performed under the Contract as part of the Contract price. (i) Whenever Resolve FM considered that a particular periodical cleaning service was required in respect of a particular area, Resolve FM issued a separate work order for that work. Copies of the work orders are available for inspection at Broadlex's offices during working hours. (j) Broadlex issued invoices for the work that was the subject of separate work orders for payment in addition to the amount otherwise due and payable under the Contract. (k) Resolve FM paid invoices issued by Broadlex in respect of periodic cleaning services performed pursuant to separate work orders. 15. Broadlex and Resolve FM each, to the knowledge of the other, accepted the Assumption as being true for the purposes of the Contract. Particulars Broadlex repeats the particulars at paragraphs 14(c) to 14(k) above. 16. Broadlex and Resolve FM intended that the Assumption would govern the legal position between them in relation to the performance of periodical cleaning services and payment for those services. Particulars Broadlex repeats the particulars at paragraphs 14(c) to 14(k) above. 17. Broadlex was entitled to act and has, as Resolve FM knew or intended, acted in reliance upon the Assumption being regarded as true and binding. … 18. Broadlex would suffer detriment if Resolve FM were allowed to resile or depart from the Assumption. Particulars The amount claimed by Resolve FM in the cross-claim in respect of periodical cleaning services. 19. In the premises, it would be unconscionable to allow Resolve FM to resile or depart from the Assumption. 20. In the premises in paragraphs 14 to 19 above, Resolve FM is estopped from resiling or departing from the Assumption.
The reference to "periodical cleaning services" in the formulation of the pleaded mutual assumption is a little unclear. However, I think, either the better view or, at least, a case that is open is that those "periodical cleaning services" are the "extra charge" services referred to in the "periodical planners" referred to in para (c) and elsewhere in the particulars to [14] - i.e., the Broadlex cleaning plans. In my view, that reading gains force from [15], where the mutual (and mutually known) adoption of the assumption is particularised by reference to para (c) and following of the particulars to [14].

[28]

The parties' submissions

Mr Gration submitted that Broadlex and Resolve had assumed that periodical cleaning tasks, as Broadlex insisted that term should be understood, were outside the scope of the cleaning that Broadlex was required to perform for the fixed remuneration for which the contract provided. Referring to "periodical cleaning tasks" really does no more than restate the problem. However, Mr Gration's submissions made it clear that when he used this phrase, he intended to refer to all the work which, consistently at least up until July 2012, Broadlex performed only on direction and for additional remuneration, and Resolve required to be performed only for additional remuneration, pursuant to work orders. In substance, the periodical cleaning tasks to which Mr Gration referred were those extra charge services, as I have paraphrased them at [58] above.
Mr Breakspear submitted, correctly, that it was necessary for Broadlex to show that it as a corporation had adopted the alleged convention. As he said, equally correctly, that directed attention to Broadlex's corporate state of mind, which in turn required consideration of the persons most closely and relevantly connected to Broadlex for the purposes of this transaction.
In this case, Mr Breakspear submitted, the person most closely connected to the transaction was Mr Lupeski. He submitted that Mr Lupeski's understanding was clear: namely, that "periodicals", or the excluded tasks, were the five listed items (corresponding to paras (a) to (d) and (f) of the Departmental scope) that he priced separately.
Mr Gration disagreed that the relevant mind was Mr Lupeski's. He pointed out that Mr Lupeski was a contract estimator, employed ad hoc to price cleaning jobs for which Broadlex was tendering. He submitted that Mr Tarabe and Mr Vargas were the relevant officers of Broadlex who had the relevant close connection with the transaction. Their state of mind, he submitted, was that the extra charge services were outside the scope of works.

[29]

Decision

Stepping back for a moment from the detail of the evidence, it might be thought that the clearest statement of the basis on which the parties actually and consistently transacted their relationship under the contract is to be found in the Broadlex cleaning plans to which Mr Vargas referred. On the evidence, those documents were sent by Broadlex to Resolve from time to time. The evidence of, in particular, Mr Vargas (whom I accept in general as an accurate and reliable witness) is that, with very limited exceptions in the office areas: 1. Broadlex did not perform the extra charge services as part of its routine cleaning work; 2. Broadlex would perform the extra charge services only for additional remuneration, and on receipt of a specific instruction from Resolve (in the form of a work order); 3. Resolve was aware of Broadlex's attitude; and 4. When Resolve wanted any of those extra charge services to be performed, it would give Broadlex a work order for them and undertake, expressly or by implication, to pay additional remuneration for their performance.
Again stepping back from the detail for a moment, it is tolerably clear that: 1. the practice just described was in force when Mr Vargas started to work at VIDC in June 2010; 2. Mr Vargas' supervisor at the time, Mr Gutierrez, told Mr Vargas that this had been the practice from the start; and 3. to Mr Vargas' observation, Messrs Carroll and Hull (and later Mr Fasavalu), who represented Resolve at VIDC, acquiesced in this method of transacting business.
I accept that the question of intention is fundamental to conventional estoppel. Specifically, it must be shown that each party to the alleged convention intended that it and the other party would transact their business in accordance with the assumed state of affairs. In a case such as this, where the parties had contracted for the provision of services, the intention so mutually held (and understood by each to be mutually held) must be that the parties intended to transact their business not in accordance with their rights and obligations as spelled out in the contract, but in accordance with the assumed state of affairs. It is in that sense that, as observed by Handley (see at [201] above), a conventional estoppel established after the contract was made may trump contractual rights (as they appear from "the text").
I have held that, on the proper construction of the contract, the only items excluded were the nine items identified in Mr Lupeski's email of 22 February 2010. It follows, as a matter of construction of the contract, that in return for the fixed remuneration, Resolve was entitled to have all cleaning services performed except for those nine items, and Broadlex was obliged correspondingly to provide all those cleaning services, except for the nine items. Apart from those items, the scope of the cleaning services is governed by Serco's Part 4 scope, which is the document from which Mr Lupeski stripped out the nine items that he identified (including by page reference).
The conventional estoppel case inquires whether, despite the scope of the contract properly construed, the parties tendered and accepted performance on the mutually understood basis that regardless of its terms, some specific items of cleaning were not to be performed as part of the consideration for the agreed remuneration, but were only to be performed upon specific direction and upon the payment (or promise of payment) of additional remuneration. Those items are the extra charge items identified in the Broadlex cleaning plans. Accordingly, the question as to intention is whether the relevant officers of Broadlex and Resolve adopted, as the conventional basis on which the contract was to be performed, that none of the extra charge items would be performed except for additional remuneration.
When the issue is analysed in this way, the answer seems to me to be clear. The officers of Broadlex who were closely connected with the performance of cleaning services at VIDC were Mr Tarabe, Mr Gutierrez and Mr Vargas. The relevant officers of Resolve were Mr Carroll, Mr Hull, Mr Fasavalu and (although in a more senior position, at a later time, and not on site) Mr Price from some time in 2011.
Messrs Tarabe and Vargas have given evidence that the contract was administered from the start (Mr Tarabe) or June 2010 (a month after the start: Mr Vargas) on the basis that: 1. at all relevant times, the work that Broadlex would do for the fixed remuneration and the work that it would only do on payment of additional remuneration were clearly described in the Broadlex cleaning plans as they stood from time to time; 2. those documents as they stood from time to time were sent to Resolve, and were displayed on the wall of the staff lunchroom at VIDC; 3. Resolve's representatives (specifically, Messrs Carroll and Hull) consulted those documents from time to time; 4. when Resolve's representatives wanted extra charge services performed, they would direct Broadlex to do it, procure the issue of a work order, and thereby engage to pay additional remuneration; and 5. Broadlex would not perform that extra charge services unless so directed, on receipt of a work order, and in exchange for the promise of additional remuneration.
Mr Gutierrez did not give evidence. His absence was unexplained. However, there is no reason to think that the system which operated continuously from June 2010 for many months had not operated from the beginning of work under the contract. Certainly, it was Mr Vargas' understanding, based on what Mr Gutierrez told him, that this was so.
No objection was taken to that aspect of Mr Vargas' evidence on the basis that it was hearsay. Clearly, that evidence was admissible for a non-hearsay purpose: namely, as a communication of an asserted fact which (regardless of the truth of the asserted fact) helped to inform Mr Vargas' understanding, and thus his state of mind, in relation to the subject matter of the asserted conventional estoppel. If the evidence is relevant for that non-hearsay purpose then, since no order was sought or made under s 136 of the Evidence Act 1995 (NSW), it is admissible also to prove the truth of the communicated fact (see s 60(1) of the Evidence Act).
I accept Mr Vargas' evidence as to what Mr Gutierrez had told him. Further, in my view, it is inherently likely that Mr Gutierrez spoke truly. There is no reason to think that he would have misrepresented the position to Mr Vargas. On the contrary, given that Mr Gutierrez was passing responsibility for performance of the works on to Mr Vargas, it is inherently likely that Mr Gutierrez would have sought to be accurate in telling Mr Vargas how it was that the works were to be performed.
Turning to Resolve, the only one of the four witnesses I have identified who gave evidence was Mr Price. Mr Price was not involved with the performance of the cleaning work on site, on a daily basis. Undoubtedly, he sought to inform himself of what was happening. Undoubtedly, he formed a view as to what it was, on the proper construction of the contract, that Broadlex was obliged to do and Resolve was entitled to receive, in exchange for the agreed remuneration. But since Mr Price was not involved with the day to day administration of the contract on site, it is not surprising that his evidence did not go directly to the point of what happened on site from 1 May 2010 in the performance of the contract.
In an email of 17 July 2012 to Mr Tarabe, Mr Price wrote concerning, among other things, the "out of scope" or extra charge services. He referred also to a number of other issues, including concerns expressed by DIAC and Serco. The email concluded: Joe, due to the current cleaning issues and the clear direction and requirements from Serco and DIAC, I have approved Resolve to raise WO's to clean the areas of concern - however, I am not convinced that these works are 1. Out of scope, and 2. Requiring extra charges. These are some of the points I will need to review.
I have said above that the Broadlex cleaning plan (as it stood from time to time) was displayed at VIDC. However, Broadlex from time to time made it (and other documents) available to Resolve.
On 14 July 2010, Mr Tarabe sent an email to Mr Whitford of Resolve (or its parent company) which attached a "Maintenance program and periodical". The attached documents included the Broadlex cleaning plan for the months of January to December 2010, showing when it was that the various services described in it were to be performed. Those plans (there were different ones for different areas of the complex) showed, as all the other plans did, the "extra charge" items by that very description.
The documents sent to Mr Whitford on 14 July 2010 also included a costing for eleven of those items. The list does not correspond exactly to the list of extra charge items, which comprises some 17 items; but all the items for which a price is quoted appear to be taken from, or to correspond to items on, the list of extra charge items.
On 20 July 2010, Mr Tarabe forwarded to Mr Carroll a copy of the email that had been sent six days earlier to Mr Whitford. It too included the cleaning plan (or at least some of the spreadsheets constituting it) and the quotation for extra charge items.
There is no evidence that Mr Whitford or Mr Carroll took issue with the emails or their attachments. There is no evidence that they controverted the assertion that the extra charge items were not to be performed as part of the routine cleaning services done for the agreed fixed charge. On the contrary, from the fact that thereafter Resolve administered (or continued to administer) the contract on the basis that those items were extra charge items, not to be done for the fixed remuneration, suggests that neither of them disagreed with the suggestion.
Consistent with what I have just said, Resolve at no time availed itself of the provisions of cl 7.3 of the general terms to query any invoice that had been submitted for the extra charge work. Nor did it dispute any such invoice and invoke the procedures laid out in cls 7.4 and 7.5. Mr Price was cross-examined about that. He gave the following evidence (T49.6-50.15): Q. So then under clause 7.3(b), Resolve FM was obliged to pay invoices that were correctly provided within 30 days from the actual or due date of the invoice, whichever was the later. Do you see that at the end of clause 7.3(b)? A. Yes. I can see that. Q. In your experience, while you were the national operational manager, were invoices that were in relation to services that had been provided in accordance with the contract, paid within 30 days? A. If we had any issue with any invoice, it wouldn't be paid immediately, no. If it was - if it was fully compliant and all the documents lined up, it would go through for processing. Q. I think you said if it wasn't fully compliant it wouldn't be paid A. Mm. Q. --would Resolve FM then have followed the procedure in clause 7.3(c); that is, it would notify the contractor within ten days? That's at the end of 7.3(c)(ii). A. I'm not sure if that - that clause in point would be applied because, as I said, the invoices went to the accounts department directly, so I don't know if they were informing people with issues within ten days. Q. So for the - I will just ask you to accept that this is the number - the 2,532 invoices that were submitted by Broadlex under this contract and paid, it would be a reasonable assumption that the process you've just described had been followed and that someone in head office had determined that those invoices were due and payable would it not? A. It's a difficult question. Most invoices are okay and most invoices are paid, but when you have issues, you look at information and data retrospectively, and also to the accounts people, look at it from the financial point of view and tick the boxes for payment rather than having an operational eye, that they might see that something is not right. Q. It's the case, isn't it, even after July of 2012, when you had been tasked to quote thoroughly the view of the situation, Resolve FM continued to pay Broadlex's invoices that came in after that period, didn't you? A. Invoiced continued to be paid regardless of the concerns or issues that were about to present themselves. Q. Well, isn't it the case that if you had a concern or an issue, you would have issued the notice referred to in clause 7.3(c)(ii) and notified the contractor within ten days that there was a problem with the invoice. Isn't that what you would have done? A. If I determined - if I was confident that I determined the issue or the gap or the issue in an invoice, I would definitely notify them, but sometimes reviewing contractual obligations takes much longer than ten days. Q. So it would be reasonable for his Honour to assume that if no such notices were issued during the entire term of the contract, there was never a point at which you determined during the term of the contract that the services hadn't been provided in accordance with the contract. That would be a fair conclusion, wouldn't it? A. No. No, I wouldn't agree with that, sorry. Q. I will ask again: if you had believed there had been an issue at any stage in the contract, if you determined - as to put it, that there was a gap in the services A. Yep. Q. --you would have exercised the notice provisions under clause 7.3(c), wouldn't you? A. Not necessarily. No.
In the course of his cross-examination, Mr Price said also that when he carried out his review of Resolve's documents, he did not find anything that "challenged or otherwise queried the extra charges that you see listed against the various items on" the Broadlex cleaning plan.
Mr Price was then asked about his understanding of the assumed basis on which those extra charge services were performed (T51.1-.38): Q. So the best of your knowledge then as the national operations manager from July 2010 onwards, both Resolve FM and Broadlex operated on the assumption that the tasks listed in this spreadsheet were - as extra charge - were tasked for which a work order would be issued and an extra charge would be applicable? A. I believe that's what - that's how Broadlex was operating. That's I believe - that's how Broadlex was operating during that time. Q. But it's also how Resolve FM was operating, wasn't it? A. No. Q. You would agree that Resolve FM was, in fact, issuing work orders for all of those tasks, wasn't it? I apologise that the print is quite small. A. Yeah. Yeah. Sure. That's okay. It's just Q. So washing and disinfecting telephones, monthly; cleaning kitchen hoods free of oil, monthly; clean of Venetian blinds, monthly and so forth. You would agree that Resolve FM was issuing work orders for all of the tasks listed in this document. A. It's a difficult question. Logically my belief would be that they were issuing work orders or accepting work orders for those tasks Q. I guess you accept also that it follows HIS HONOUR: Well, just a moment, Mr Gration. GRATION: Sorry, your Honour. HIS HONOUR Q. I had the impression that you were going to add something to that comment. A. Yes. Well, as I said, this - this was a document that Broadlex were operating from, and the facility manager - the facility manager and I see on this document here that there are many items here that belong on the exclusion list, so Broadlex raising work orders for some of these tasks may have bypassed the facility maker presuming that Broadlex were raising work orders from the exclusion list.
It is apparent, from what followed, that the reference to "Broadlex… raising work orders" was a mistake. Mr Price appeared to mean that Broadlex requested a work order which was raised in Resolve's head office and presented on site. He then said that the facility manager would have thought that this was appropriate (T52.8-.19): Q. I apologise. I'm confused. The work orders on Resolve FM's stationery A. Yep. Q. --with a Resolve FM work order number, are you telling his Honour that Broadlex had the ability to raise those work orders themselves? A. "Raises" maybe not the right word. Request. I mean, they could request a work order, it would be raised in head office and presented on site. Q. So is his Honour then safe to assume that if Resolve FM did, in fact, issue a work order in response to a request from Broadlex, that Resolve FM believed that that work order was appropriate? A. The facility manager would have believed it was appropriate.
Mr Price was asked about the email sent to Mr Whitford on 14 July 2010. He said that his first priority had been to work out the contractual consequences of the fires and the extra work that they caused, and that once that was resolved, he looked at other aspects of the cleaning contract. However, there was is no clear indication in this part of his evidence that he actually saw the email and its attachments (T50.29-.40): Q. When you conducted your review of the Broadlex contract in the first few months in which you were the national operations manager, did you review this document that was sent to Steve Whitford on 14 July 2010? A. No. In the first few months, probably in the first - at least till December, I wouldn't have had a - I wouldn't have seen this document or reviewed it in any great detail whatsoever, and, in fact, I believe that I would have seen this document after December 11, so well into 2012, and just for the - for clarity, the reason I say that is because my first task at Resolve - with Villawood was to determine the variation that surrounded the fires in April 11. There was certain variations that needed to be sorted out and that was my first major project, and after that was completed in December 11, I then moved on to looking at other aspects of the cleaning contract.
On the evidence as a whole, I conclude that the conventional estoppel has been made out, from the commencement of performance of work under the contract until July 2012. I accept that in July 2012, Mr Price had doubts as to whether the extra charge works were in truth properly so described (see his email to Mr Tarabe of 17 July 2012, referred to at [222] above).
Certainly, by 12 October 2012, Mr Price had formed the clear view that the only services contractually excluded from Broadlex's scope were the items listed as exclusions in Mr Lupeski's email of 22 February 2010. That point appears to have been both made and agreed at the meeting on that date (see at [89] above).
Thus, although the parties' submissions did not expressly address this point, it would be proper to assume that the conventional basis on which the parties dealt continued up until October 2012 at the latest. To put it another way, the proper view of the facts would seem to be that, in October 2012, Resolve notified Broadlex that it would no longer accept the tender of performance under the contract only on the conventional basis.
There can be no doubt that it was open to Resolve to withdraw from the conventional assumption, and to notify Broadlex of that. There might be a question as to how much notice should be given. The answer, presumably, would be: sufficient notice to enable Broadlex to withdraw from the site and redeploy, or otherwise deal with, its resources of labour that had been employed on site. Since the submissions did not touch on this point, and the evidence (if there is any) is not something to which I was taken in the course of submissions, I do not propose to assess what might have been a reasonable period of notice, in the circumstances then prevailing. There is no reason to think that the four months that ensued, at the end of which the contract terminated, were either inadequate or excessive.

[33]

The "supervisor" claim

Resolve claimed that from February 2011 to February 2013, Broadlex was obliged to supply, but did not supply, the services of a site supervisor. That obligation was said to arise from Resolve's acceptance of Broadlex's quotation of 22 September 2010 (see at [62], [64] above). Broadlex said that it had provided the services of a site supervisor at all relevant times.
The conventional assumption that I have found governed the way in which the parties performed and accepted performance of obligations under the contract is no answer to this claim. The facts that in my view grounded the conventional estoppel occurred well before Resolve accepted Broadlex's quotation for the provision of the services of a supervisor. The conventional estoppel arises from the way in which the parties tendered and accepted performance of the extra charge services, something quite distinct to the supervisor claim.
The principal acceptable evidence on this point came from Mr Vargas. In his affidavit sworn 12 September 2014, Mr Vargas said that: 1. in July 2010, he started working as a leading hand; 2. in that position, he was responsible for cleaning, and for supervising his own section of about three cleaners; 3. he was supervised by Mr Canas, and in fact assisted Mr Canas in general supervision; 4. when Mr Canas left, Mr Vargas "was promoted from leading hand to cleaning supervisor at Villawood"; 5. in his capacity as supervisor, Mr Vargas was "responsible for directing Broadlex's cleaning staff in what work they were to perform and ensuring that the quality of their cleaning was up to the required standard"; and 6. sometimes, if work were urgent and no cleaning staff were available, he would do it himself.
When Mr Vargas started work at VIDC, Mr Gutierrez was Broadlex's Regional Manager, Operations Division. He reported to Mr Tarabe.
Mr Vargas said at [27], [28] of his affidavit sworn 12 September 2014: 27. In November 2010, I was appointed by Broadlex to a newly created position of 'Site Manager' for Villawood, a position that I held until March 2012. The Site Manager's office was next to Mark Carroll and Greg Hull. 28. The role was similar to what I had been doing as the cleaning supervisor, but I pretty much spent my whole working day with Mark Carroll. Mark and I both still started at 6 am and my tasks still included doing a walk through the site at 7.30am each day with Mark.
Mr Vargas was cross-examined on this topic. He said (T112.17-113.9): Q. How long did you remain the cleaning supervisor at Villawood for? A. For my recollection, from - up to November when I promoted to site manager. Q. Was there a site manager before you? A. No. Q. Was there any change to your day to day roles when you became site manager? A. Yes. Q. What were those changes? A. I was working more closely with Resolve FM, and working closely with my Mike Carroll in day to day inspections. Q. Prior to your appointment as site manager in November 2010, you were the person from Broadlex based on site responsible for managing the cleaning; correct? A. Yes. Q. At that time that you were appointed site manager, you remained the person from Broadlex on site responsible for managing the cleaning. A. Yes. Q. Did anyone replace you as supervisor when you became site manager? A. Only leading hands in certain areas. Not strictly a supervisor. Leading hands in different areas. Q. So just to be clear, from the time you started on site there were leading hands, and, in fact, that was your first role. A. Yes. Q. And then you were promoted to supervisor and you had leading hands under you? A. Yes. Q. And then you were promoted to site manager and still had leading hands under you? A. Yes. Q. There was not another layer of management between yourself and the leading hands? A. No.
It is clear from this evidence that the "promotion" was a change in title, without any real change in duties. Although Mr Vargas said that he "was working more closely with Resolve FM… with Mike Carroll…", it is apparent from his evidence overall that this was what he had done both before and after that promotion. I shall return to this.
It is equally clear from Mr Vargas' evidence that, when he was appointed the position of "Site Manager", the cleaning crews remained the same, and no one was appointed to fill his previous position of supervisor.
Mr Tarabe gave evidence on this point. He suggested in cross-examination that "Daniel [Vargas] was upgraded and another supervisor took his place" (T195.37-.38). That evidence is inconsistent with the evidence of Mr Vargas. I prefer the evidence of Mr Vargas on this point.
Mr Tarabe agreed that Mr Vargas got a new office and a new title, but added "somebody else took his position" (T196.11-.13). He then gave the following evidence (T196.49-197.16): Q. Mr Vargas performed exactly the same functioning [sic] before 5 January as he did afterwards; correct? A. Yeah. But no. No. He was promoted as a site supervisor. Q. He was given a new title; correct? A. Exactly. Q. But his day to day duties and functions were the same. A. Yes. But with the with the better responsibility - more responsibility on the job, yes. Q. But there was nobody performing the role that he performed before 5 January because he was still doing it? A. No. No. We had two - we had one supervisor and two leading hands. Q. In fact, what happened is that you continued to collect $90,000 without employing any additional individual after 5 January. A. No. I employ - I just said I employed a person.
To the extent that Mr Tarabe sought to suggest, in this somewhat confused passage of cross-examination, that someone was employed specifically to replace Mr Vargas in his previous role of supervisor, I do not accept it.

[35]

Decision

Mr Vargas' evidence, if accepted, would establish that: 1. when he started work on site in June 2010 as a leading hand, there was a supervisor for the cleaning staff, namely Mr Canas; 2. Mr Canas left in June or July 2010, a few weeks after Mr Vargas had started work; 3. Mr Vargas then took Mr Canas' position as cleaning supervisor; 4. in November 2010, Mr Vargas was promoted to the position of Site Manager (there had been no Site Manager before); and 5. when this change occurred, his responsibilities changed because "I was working more closely with Resolve FM, and working closely with… Mike Carroll in day to day inspections" (T112.29-.30).
Although in general I accept Mr Vargas as a witness of truth, this last aspect of his evidence is difficult to follow. He had made it very clear in his affidavit that Messrs Carroll and Hull "were very "hands on" in controlling exactly what cleaning they wanted to be performed… and strictly directed what was to occur" (at [11]). Mr Vargas said that Mr Canas worked very closely with Messrs Hull and Carroll, and that when he became the cleaning supervisor, the same thing happened. He walked through VIDC with Mr Carroll almost every day (and sometimes with Mr Hull as well) "to inspect the cleaning and see if anything needed to be fixed, actioned or attended to" (at [19]).
Further, Mr Vargas said, Mr Carroll "was a very demanding and strict boss" who would give directions "in very robust terms" to fix anything that he did not think was right.
Then, Mr Vargas said, when he was appointed to the position of Site Manager, his "role was similar to what I had been doing as the cleaning supervisor, but I pretty much spent my whole working day with Mark Carroll".
The difficulty I have is in seeing what if any change there was, apart from the change in title, in November 2010. Before then (and since Mr Canas had left), Mr Vargas' role was, essentially, to manage the provision of cleaning services, and to do so at the direction and to the satisfaction of Resolve, in particular personified by Mr Carroll. That remained his function after he was given the title of Site Manager. He said that he spent more time with Mr Carroll. However, he did not explain how this changed things. If Mr Vargas spent pretty much the whole of the working day with Mr Carroll, then it might follow that he could no longer conduct the walkarounds that he had undertaken to check on the state of cleanliness and to direct if necessary that urgent cleaning be undertaken. But that could not be considered to be the responsibility of a Site Manager, because that was the work that Mr Vargas was doing before 23 September 2010.
In short, I am not satisfied, on the evidence of Mr Vargas, that there was any real change in what he was doing before and after the change in his title.
Mr Tarabe appeared to recognise that this was a weakness in Broadlex's case. He said that he understood that acceptance of the quotation required Broadlex to provide additional personnel to provide the service of a site manager (T156.36-.38), and to provide an additional service that was not being provided as at 23 September 2010 (T156.40-.42). Mr Tarabe was adamant that in fact, when "Daniel was upgraded… another supervisor took his place" (T195.32-.33). I do not accept this aspect of his evidence. It is inconsistent with Mr Vargas' evidence. Mr Vargas was on site daily; Mr Tarabe was not. And this is another one of the areas of Mr Tarabe's evidence that I found to be concerning (see at [51] above).
Of course, the proper construction of the contract is a matter for the Court, not for Mr Tarabe. But, nonetheless, his evidence gives the understanding of the individual within Broadlex who provided the quotation for the services of a Site Manager. It gives some idea of what a Site Manager might do, that had not hitherto been done. It seems to suggest that such a person would do something different to what Mr Vargas had been doing: because someone else had to be appointed to fill Mr Vargas' previous role.
The quotation was to provide the services of a Site Manager. The email accepting the quotation signified acceptance of "the supervisor position here at Villawood", and set out the responsibilities that the supervisor would have. I have set that email at [64]. Mr Vargas did not give evidence that he had performed the responsibilities of the "supervisor" as described in that email.
The starting point is: what was offered, and what was accepted? Clearly, it seems to me, if one looks at the matter objectively, the parties could not have intended that someone already working on the site would be retitled "Site Manager", and continue to perform the same duties as hitherto, in satisfaction of the promise to pay $90,000.00 per annum for the services of a "supervisor". Clearly, so it seems to me, the parties intended either that someone be brought in as Site Manager, with specific responsibilities not already performed on site as part of the administration of the contract, or that someone on site be appointed to that role to perform those responsibilities.
What happened was simply that Mr Vargas was given a new job description. Thereafter, as I find (despite his evidence to the contrary), he continued to perform essentially the same functions as he had for some months hitherto.
I think it is significant that no one is brought in to replace Mr Vargas. The quotation and its acceptance clearly contemplated that there would be a full time employee with functions and responsibilities that were not already performed on site. If it were not so, Resolve would simply be paying extra to Broadlex for Broadlex to do no more than it had been doing. The parties may have been less than business-like in failing to define precisely the functions, responsibilities and duties of the proposed Site Manager. Nonetheless, they agreed that such a functionary would be provided, and that Broadlex would be paid an additional $90,000.00 per annum accordingly.
To my mind, the fact that no one was appointed to fulfil the functions that, before November 2010 (or January 2011) Mr Vargas had performed, is telling. It suggests very much that Broadlex had decided to pocket the additional remuneration, and to put Mr Vargas forward as the person to fulfil the role, without doing anything additional to justify the payment.
I conclude that Resolve has made good this aspect of its claim.
There was no fundamental challenge to the quantification of this aspect of the claim. It is for failure to provide the agreed services for the 25 months in question from February 2011 to February 2013 (the contract came to an end at the conclusion of the latter month).
The claim was for $8,250.00 per month. That reflects the monthly value of the annual charge, together with GST. Mr Gration submitted that GST should not be allowed, because Resolve had suffered no loss in respect of GST.
The quotation was for $90,000.00 per annum plus GST. Presumably, Resolve paid $90,000.00 per annum plus GST. On that basis, the amount paid away was, as was submitted, $8,250.00 per month. However, Resolve would have received input tax credits for the amounts of GST so paid by it. Accordingly, from Resolve's perspective, the GST is revenue-neutral.
Mr Breakspear's submissions did not specifically address the question of GST. There was no evidence to suggest that the way in which I have just characterised the revenue effects of the GST was inappropriate or inapplicable. Accordingly, I conclude, the damages should be assessed on a basis that is exclusive of GST.
I assess damages for this breach at $187,500.00.

[36]

Fourth issue: damages in respect of the omitted services

On my findings as to conventional estoppel, this issue does not require decision. However, I should deal with it in case this matter goes further.
For the omitted services other than the provision of a supervisor, there was a question of principle that divided the parties. Resolve said that damages were to be assessed as the value to it of having the relevant services performed. It relied on the decision of the High Court in Clark v Macourt (2013) 253 CLR 1.
Broadlex submitted that if damages fell to be assessed, they should be assessed so as to put Resolve in the position, so far as money could, in the situation that it would have been in had the promise been performed ("the ruling principle"). In this case, since the services had been performed, Broadlex submitted that the only loss was the extra amount that Resolve had paid Broadlex to perform those services.
Mr Breakspear submitted that the assessment of damages should have been undertaken on the basis stated by Crennan and Bell JJ in Clark at [25]: … the assessment of damages undertaken by the primary judge required assessment of the value of what should have been delivered in accordance with the vendor's contractual promise to the appellant.
Keane J, with whom Crennan and Bell JJ agreed, emphasised the ruling principle at [106]. His Honour said (omitting citations) Damages for breach of contract: the ruling principle [106] The principle according to which damages for breach of contract are awarded is that the damages should put the promisee in the same situation with respect to damages, so far as money can do it, as it would have been in had the broken promise been performed. The appellant was entitled to claim this measure, rather than a measure based, either on the difference between what she paid for the sperm straws and what they were worth, or on the expense "of undoing harm which [her] reliance on the defendant's promise has caused [her]". …
His Honour explained this at [107] by saying that "the principle is always applied with a view to assuring to the purchaser the monetary value of faithful performance by the vendor of the bargain".
Clark was not a case where services were performed, but remuneration in addition to that contractually payable was charged. It was a case where records were to be delivered by the vendor to the purchaser of a business, which would have ensured that the purchaser could use, for the purposes of the business, assets that were also sold and delivered. Because the records were not delivered, the purchaser could not use those assets in the business.
In this case, by contrast, the services were performed. The complaint is, that they were performed not (as, but for the conventional estoppel, they should have been) as part of Broadlex's general obligations under the contract, but only upon Resolve's agreement to a demand for additional remuneration.
Were there no conventional estoppel preventing Resolve from insisting on the terms of the contract, it would have been entitled to have the omitted services performed for no additional remuneration. Instead, it has had to pay additional remuneration to procure their performance. The amount of money that is required to put it in the position that it would have been in had the contract been performed according to its terms is the total amount of the additional remuneration that it paid to have those services performed.
Resolve did not attempt to prove how much it had paid for the extra services pursuant to the work orders. There is not one scrap of evidence that would enable the Court to make even an ill-informed guesstimate of the amount. That evidentiary deficit is a direct consequence of the decision by Resolve (the party having the means of proof) to put its case on entirely different basis.
Resolve sought to overcome this difficulty by claiming the cost of performance of the services, as quoted in the attachments to Mr Tarabe's email to Mr Whitford (later copied to Mr Carroll) of 14 July 2010 (see at [224] above). I do not accept that this is an appropriate measure of damages. That was clearly a quotation for provision of the services on an "ad hoc" basis. To my mind, it is quite clear that, had the extra charge services been priced as part of the routine cleaning services to be performed by Broadlex, the figure would have been very different.
In my view, the figures quoted by Broadlex for a different purpose form no basis for making an estimate of the damages that, on the hypothesis presently under consideration, must be assessed.
I conclude that Broadlex has not made good its claim to damages in respect of the additional services.

[37]

Fifth and sixth issues: standard of performance; loss

This issue relates to the period from March to September 2012. Resolve says that Broadlex failed to perform cleaning services to the required standard. In part, Resolve says, that was related to the failure to perform the extra charge services (presumably, when they were not requested, and hence were not done). In part, Resolve says, it resulted from the failure to provide a supervisor, or the failure to provide a supervisor who performed his duties to an appropriate standard of diligence. And in part, Resolve says, it resulted simply from repeated failures by Broadlex to do what it did to an appropriate standard of diligence. It is Resolve's case that the failures that it alleges, to clean to the appropriate standards, were an effective (although not necessarily sole) cause of the issue of the abatement notice.
There is an obvious difficulty with the way in which Resolve puts its case on this issue. I have found that, because of the conventional assumption which formed the basis of the parties' approach to Broadlex's duties under the contract, Resolve is estopped from asserting that Broadlex was required to perform the extra charge services, even in the absence of a request or direction accompanied by a work order. Thus, to the extent that the complaints of inadequate performance relate to failure to perform the extra charge services, there can be no causal connection unless Resolve demonstrates that, in respect of the particular failure, Broadlex had been given a work order to do the work but had failed to do so either adequately or at all. Resolve made no attempt to demonstrate this.
As to the asserted failure to provide a supervisor, or a supervisor who performed his work diligently, I have found that the obligation to provide a supervisor was breached. Thus, in the first way that this complaint is put, it should succeed. However, on that approach, it would be necessary for Resolve to prove, on the balance of probabilities, that the failure to provide supervision was a material cause of the proven inadequacies in cleaning performance. Resolve's evidence did not descend to this level of detail. It relied instead on a process of inference: namely, that the demonstrated (as Resolve would have it) failure to clean to the appropriate standard must reflect, among other things, a want of supervision. On that analysis, the second way of putting the case, based on want of supervision, is coextensive with the case on breach itself. Thus, if breach is proved, it is unnecessary to consider the question of supervision. And if breach is not proved, the want of supervision goes nowhere.
Accordingly, I turn to what, on my findings and in my view, is the only way that the case can be argued. That is, that on the evidence as a whole relating to the period March to September 2012, there is a demonstrable case of inadequacy of performance of cleaning services, and there is a demonstrated causal link between that inadequacy and the abatement.
Resolve relied on a series of audit reports (or summaries of such reports), relating to audits carried out by DIAC and Serco from March to September 2012. Those reports were detailed records of inspections carried out by representatives of DIAC and representatives of Serco. In many cases, particularly towards the end of the seven month period in question, they were sent to Broadlex for comment and action.
Individually, no doubt, the failures in the reports could be explained away. For example, as Mr Vargas and Mr Tarabe pointed out, a cleaning service required to be performed once daily might be performed at a particular time each day. The inspection might be carried out some hours later. If the particular area being inspected had been used between the time of cleaning and the time of inspection, it was not necessarily surprising that the state of cleanliness might have deteriorated.
That analysis is less than convincing where (for example) areas such as mess halls were required to be cleaned three times daily, and more convincing where the frequencies of cleaning was less than daily. More importantly, however, it cannot provide a complete answer to the complaint, for reasons that I will give.
Broadlex submitted that some at least of the deficiencies in cleaning that were highlighted related to extra charge services. It submitted that, if either its case on the proper construction of the scope of works or its case on conventional estoppel were made good, it would be necessary for Resolve to prove not only the deficiencies but also a direction (with work order) to perform the particular extra charge work. Since the conventional estoppel case has been made out, it follows that I accept this analysis, so far as it is relevant.
One of the problems that has arisen is that representatives of Broadlex were normally not present, except adventitiously, when the majority of the inspections were carried out. Broadlex had made requests for its representatives to participate in inspections. It had also made a request for the results to be recorded in some way. There is no evidence that either of these requests was accepted.
There is a record of one inspection, apparently performed in September 2012, when Mr Vargas was present. The records of that inspection contain comments by Broadlex on the defects that were noted. A number of those comments point out that the item is an "extra charge" service. Others point out that the item is "not for Broadlex" - which I take to mean, outside the scope. Another answer given in some cases is "clients' area - extra charge" (or words to that effect). Absent any controversy, I am prepared to accept that these were sufficient answers to the particular complaints.
However, there were many items where Broadlex agreed that work was required. There were also many items where Broadlex commented "completed by Broadlex". Mr Vargas agreed that this meant that, the defective work having been brought to the attention of Broadlex, it was subsequently rectified (T136.1-.6). As Mr Breakspear submitted , the fact that the defective work was subsequently rectified does not negate the initial breach. At most, it makes good its consequences, in terms of cleanliness.
There is however an important limitation on what I have just said. The only example put to Mr Vargas of a "completed by Broadlex" item was one which referred to overflowing garbage. It is easy enough to understand that this is likely to have been something that was not attended to earlier, and was only attended to by way of rectification. However, it is at least possible that other "completed by Broadlex" items relate to matters that were cleaned, and through subsequent use before the inspection became dirty again. Since Mr Vargas was not questioned in detail on these responses, it is not possible to do anything more than recognise the qualification. Recognising it unfortunately does not enable its impact to be assessed.
At a more general level, the submissions that Broadlex put cannot of their nature deal with complaints that reflect chronic rather than accidental lack of cleanliness: for example, complaints as to mould in bathrooms, or inground dirt on floors or fabrics. It is obvious that a condition such as mould requires time to develop. It is obvious that dirt cannot become inground unless it is left on the surface into which it was ground. In cases such as those, I do not think that it can be said that the particular defect is merely accidental, or something that might have arisen after the initial cleaning work was carried out.
This issue was approached at a level of some abstraction. Resolve relied substantially on the audit records. And Broadlex advanced answers at a level of generality. Neither side descended into the detail (this should not be taken as a criticism). Thus, resolution of this issue cannot really be undertaken by any process of fine or detailed analysis.
Looking at the audit records as a whole, I have the strong impression that, over the period in question, there were recurrent failures to clean to the appropriate standard. And that impression remains, even when extra charge items are disregarded (as, in my view of my conclusions on conventional estoppel, they must be). Thus, on the evidence as a whole, I am satisfied that, over the period March to September 2012, Broadlex did fail in some respects to clean according to the specified standard of thoroughness.
However, that is not the end of this issue. Serco's right to "abate" depends on the terms of its contract with Resolve. That contract, dated 30 November 2010 dealt with the topic of KPIs in cl 35. That expression referred the reader to Schedule 4. If Schedule 4 was in the version of the contract that was tendered, it was difficult to find. It may be (I do not know) that it was the Schedule apparently introduced by a letter of 16 November 2010.
Regardless of the niceties, cl 35.2 provided: 35.2 If the Contractor fails to meet the Key Performance Indicators in respect of any of the Services, Serco may (without limiting its other rights under Contract or at law), apply Abatements as set out in Schedule 4.
On the assumption that Schedule 4 was the document referred to at [303], there was an item, 4.5, which dealt with "facility cleanliness". That apparently required measurement of the "level at which the buildings are cleaned and presented compared to the cleaning benchmarks". Those cleaning benchmarks were said to be "the scope of cleaning as outlined in the Resolve FM scope of Works" - perhaps, the Serco Part 4 scope. The target was 100% compliance, as measured by Serco and was to be achieved at a frequency of every "reporting period". It apparently applied to "routine, reactive and special request cleaning of all buildings".
There was then an "abatement scale" which provided: 0% degradation = 0% 2% degradation = 20% 4% degradation = 40% 6% degradation = 60% 8% degradation = 80% 10% degradation = 100%
That was apparently to be given an overall weighting of 16%, among the various other KPIs that were described.
None of that was explained. There is no way in which the Court can assess what I might call the "degradation scale". There is no way that the degradation scale can be assessed against the defects indicated in the audit reports (to the extent that these were capable of characterisation as breaches of contract on the part of Broadlex). There is no way of assessing what, if any, the 16% "weighting" has on all this.
In short, there is simply no way of assessing whether those of the defects that are properly to be attributed to Broadlex, as breaches of its contract with Resolve, would justify a conclusion of any degradation, let alone degradation lying on the scale of 0% to 10% which apparently will lead up to 100% abatement, under Resolve's contract with Serco.
The only evidence of the way in which Serco calculated the abatement came from the affidavit of a Ms Wilton, a senior commercial analyst employed by Serco. She had sworn an affidavit of 24 March 2015, obviously for use in the dispute between Resolve and Serco that was settled. She referred at [17] to [22] to performance measurement checklists that she received. At [23] to [27], she set out how she utilised the abatement scale set out in Schedule 4 to the Serco / Resolve contract. She said at [24] to [27]: 24. I considered that one item of non-compliance was equivalent to 2% degradation. So, if there were two items of non-compliance, this would amount to 4% degradation and 40% on the "abatement scale", for the purposes of the scale at Schedule 4. 25. For each of March, May, June, July, August and September 2012, the number of items of non-compliance was greater than 5. 26. Accordingly, the abatement applicable, according to Schedule 4 was 100%, in respect of facility cleanliness. 27. As set out in the final column of Schedule 4, each of the various categories contained a certain "weighting". The weighting in respect of facility cleanliness (shown in the final column of Schedule 4) was 16%.
With all respect to Ms Wilton, I do not find [27] particularly informative.
Ms Wilton then referred to "abatement calculation spreadsheets" that she completed, presumably to give effect to her assessment of abatement in the manner just set out.
Mr Price was cross-examined on this. His evidence was not illuminating (and that is not intended to be either an offensive or a critical comment).
After a number of skirmishes and objections, Mr Price gave the following evidence (T83.33-84.17): Q. I'm asking you in your capacity as the former national contracts manager, would you have taken the view that if a phone booth appeared to have mould at a single inspection on a particular date, that that item of non conformance was not equivalent to 2% degradation across the whole of the cleaning for the whole of Villawood for that month. A. I find that extremely difficult to answer. A phone booth with mould might, therefore, reflect all of the phone booths with mould, therefore, a significant portion of the cleaning scope, a significant portion of the cleaning day. It just depends how you roll that - roll that out mathematically. Q. If the evidence is that a single phone booth appeared to have mould, you would agree that a degradation of 2% across the whole of Villawood for the whole of that months would be a gross exaggeration of the effect of that non conformity, wouldn't it? A. I don't think my - my - my opinion in this matter matters. It's - it's what's in the contract. For instance, if a phone booth has mould in it, there's a good chance that it had mould in it last week, therefore, something that wasn't cleaned, again, for another week becomes exponentially more serious and more of a concern. So using the example of one thing not being done could actually be a big issue if it hasn't been done in three weeks in a row. For instance - and I would suggest that mould in a phone booth is an example of something that possibly hasn't been cleaned for some time, therefore, it gathers great weight as times goes on. This is a philosophical discussion, which I'm happy to have at another time, but not in terms of confirming whether something is unreasonable or not. Q. Did you ever challenge Serco about the calculation of the abatement? A. When we received the abatement notice with the documents attached I did challenge that and respond. Q. Is that a challenge, to your knowledge, made in writing? A. My challenge? Q. Yes. A. Yeah. My challenge to Serco I would have put it in writing.
Mr Price was not re-examined on the last answer. If there were in evidence any "challenge… in writing", no reference was made to it in submissions.
The overwhelming impression that I get from the evidence of Mr Price on this topic is that he was not satisfied that the calculations of abatement carried out by Ms Wilson for Serco represented what should have been done under the contract. Whilst of course, it is really a matter for the Court rather than a witness to say whether something is done in accordance with the provisions of the contract, nonetheless the fact is that Mr Price, an experienced and in my view competent manager who applied himself carefully and thoughtfully to his duties, appeared not to accept the validity of what Ms Wilton had done.
Where the subject matter has the degree of opacity that the topic of abatement possesses (opaque both in relation to its contractual expression and in relation to the purported utilisation of the contractual right), and in the absence of detailed analysis from the party relying on the abatement, I do not feel any sense of persuasion that the abatement was rightly calculated. In essence, Resolve's approach appeared to be that Serco applied the abatement and therefore it suffered loss. But that could only be correct, I think, if the abatement were correctly applied, both in relation to the defects that were observed and in relation to the abatement scale on its proper construction. And in the present case, that would only be relevant if the abatement were shown to be attributable to defects that in their turn were attributable to the imperfect work of Broadlex.
Ms Wilton's application of the abatement provisions may have been correct. But it cannot be said to be so, intuitively or obviously. To the contrary: it does not seem either intuitive or obvious that (as she appears to have considered), five isolated failures to clean properly in one month, across the entirety of the complex, could justify an abatement of 100% of the charge payable for that month. But if I understand her evidence correctly, that is the outcome for which she was contending. And it is the outcome produced by her calculations that, Resolve says in these proceedings, is a proper measure of its loss, by reference to defective cleaning on the part of Broadlex.
If it could be shown that defective performance by Broadlex of its cleaning duties did give rise to a right to abate, and that the right to abate was applied correctly as a result, then I would conclude that Resolve had made good this aspect of its cross-claim. But to my mind, Resolve has failed to prove either of those conditions. The consequence, in my view, is that although Resolve has proved deficiencies in the cleaning services performed by Broadlex, it has failed to prove any causal relationship between those deficiencies and the abatement of which it complains.
There are additional difficulties with the "abatement" claim. One complication arises from the settlement that was negotiated between Resolve and Serco. I have set out sufficient of the details of Resolve's claim, and of the compromise, at [6] to [8] above.
So far as the evidence goes, the settlement sum was not allocated between the various claims that Resolve and Serco had against each other. Mr Breakspear submitted that this did not matter; it was enough to show that, taking into account the settlement sum, Resolve had nonetheless suffered a loss in excess of the abated amount.
There was evidence of the way in which the sum in question had been treated in Resolve's accounts, and to the effect that it had been written off once the settlement between Resolve and Serco was effected. That evidence did not show that the writing-off occurred because, for example, the amount in question had been paid in full. Nor did it show anything else of present relevance.
Another difficulty arose, Mr Gration submitted, because Resolve had not shown that, objectively, the settlement was in all the circumstances reasonable. Mr Gration referred to the judgment of Hayne J (with whom on this point Brennan CJ agreed) in Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603 at [122], [123] (and see Brennan CJ at [8]). Mr Breakspear submitted that it was Broadlex, as the party asserting that the settlement was not reasonable, that bore the onus of so proving.
On the view to which I have come, it is not necessary to express a concluded view on those matters. They do not involve the resolution of any contested question of fact. In those circumstances, there seems little point in engaging in what is on my view unnecessary analysis.

At a glance

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Judgment (39 paragraphs)

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