Built NSW Pty Ltd v Politic Pty Ltd

The strength of the claims

1. I accept Built NSW's submission that the Additional Terms Claim is not reasonably arguable. An insuperable difficulty with that claim lies in the terms of the Design and Construct Contract. The terms of that agreement are set out in a document entitled "Formal Instrument of Agreement". Clause 4 of that document states that the "Contract" comprises a number of documents including the General Conditions of Contract. Clause 5 contains an entire agreement clause in the following terms: To the extent permitted by law, the Contract: (a) embodies the entire agreement between, and understanding of, the parties, and constitutes the entire terms agreed by the parties; and (b) supersedes any prior written or other agreement of the parties; relating to the subject matter of the Contract.
2. In addition, cl 46.7 of the General Conditions of Contract states: To the extent permitted by law, the parties agree that: (a) in relation to its subject matter, this Contract: (i) embodies the entire understanding of the parties, and constitutes the entire terms agreed by the parties; and (ii) supersedes any prior written or other agreement of the parties; (b) all previous negotiations, understandings, representations, warranties, memoranda or commitments in relation to, or in any way affecting, the subject matter of this Contract are merged in and superseded by this Contract and will be of no force or effect and no party will be liable to any other party in respect of those matters; and (c) no oral explanation or information provided by any party to another will affect the meaning or interpretation of this Contract or constitute any collateral agreement, warranty or understanding between any of the parties.
3. Whatever the precise effect of these clauses, they must be interpreted as an agreement between the parties that the terms of their contract are embodied only in the documents identified in cl 4 of the Formal Instrument of Agreement. There is no reason why that agreement should not take effect according to its terms: see, eg, Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348 at 357-8 per Latham CJ; Retirement Services Australia (RSA) Pty Ltd v 3143 Victoria St Doncaster Pty Ltd [2012] VSCA 134; (2012) 37 VR 486 at [108]ff. For discussion, see E Peden and JW Carter, "Entire Agreement - and Similar - Clauses" (2006) 22 JCL 1.
4. As pleaded, the Rectification Claim depends entirely on the conversation between Mr Comino and Mr Rossi (the Conversation) and the email dated 21 December 2009 from Mr Comino to Mr Whittingham (the Email). There are a number of difficulties with the Rectification Claim. First, even assuming that Mr Comino's account of the Conversation is accepted, it is not obvious that it or the Email amounts to an agreement on a term to be included in the Design and Construct Contract. It may, for example, simply be an agreement on one of the goals that the parties should aim to achieve as part of the design process, leaving the final FSA to be resolved through that process. Second, the allegation that the parties reached an agreement on the inclusion of the FSA Term is undermined by cl 46.7 of the General Conditions of Contract. Third, the Design and Construct Contract was actually signed by Mr Rossi and Mr Mason, another director of Built NSW, on behalf of Built NSW. There is no evidence that, at the time Mr Mason signed the contract, he intended the contract to include the FSA Term or that he even considered the inclusion of such a term. Fourth, if the parties had really intended to include the FSA Term as a term of the contract, it is to be expected that Mr Comino would have raised the issue as soon as he found out that the completed building did not achieve the maximum FSA. However, it appears that Mr Comino forgot about the Conversation until his attention was drawn to the Email. Having regard to the terms of the Conversation, which is supported by the Email, it may not be possible to say that the Rectification Claim is not reasonably arguable. However, accepting that it does not fail the General Steel test, it seems to me to be weak.

Explanation for the delay

1. Politic has given an explanation of sorts for the delay in raising the claims sought to be raised by the amendments. Each of the amendments to a greater or lesser degree depends on the Email and the Conversation. On 12 December 2014, the Court ordered Politic to discover various categories of documents sought by Built NSW by 11 February 2015. Discovery was due by 11 February 2015 and the matter was next before the Court on 13 February 2015. In the process of giving discovery, Politic's solicitors found the Email and raised it with Mr Comino whose recollection of the Conversation was apparently prompted by it. It is not clear from the evidence precisely when Politic's solicitors came across the Email or when it was first discussed with Mr Comino. However, Mr Comino's affidavit in which he deposes to the Conversation was sworn on 23 March 2015 and served on the same day. The application to amend was filed on 20 March 2015. It may be assumed that Politic or its solicitors were aware of the significance of the Email at least by the time it gave discovery. There was a delay of approximately 5 weeks before it gave notice of the proposed amendment. That delay is not significant in the scheme of the proceedings although it is of some significance given the hearing date.

Vacation of the hearing date

1. Politic contends that if the amendments are allowed it would not be necessary to vacate the hearing date. It submits that the Additional Terms Claim and the Rectification Claim depend on the Conversation and Email and that it would not be time consuming for Built NSW to obtain instructions on the Conversation and search for other documents that came into existence between, for example, the date of the Email or a date shortly before then and the date the Design and Construct Contract was signed. It does not suggest that it needs any additional discovery from Built NSW.
2. Politic accepts that the Implied Term Claim raises the question whether Built NSW failed to inform the Superintendent of the likely final FSA of the building prior to the construction of the works being completed or substantially completed. However, it submits that Built NSW must already have investigated that issue because of the terms of the current pleadings. In para 28 of the Defence to Cross Claim, Built NSW pleads that Politic was aware "prior to the issue of the Certificate of Practical Completion, that the FSA for the Building as constructed was 78m2 less than the maximum FSA". It gives as particulars of that allegation the following: i. As early as at 10 November 2010, the Building exceeded the maximum FSA by variations instructed by the Superintendent, including but not limited to: A. deletion of retail escalator penetration B. adjustments to the internal layout of Level 9 C. fitout of the mezzanine level over the commercial lobby; ii. By emails dated 11 November 2010 and 22 November 2010 the Superintendent directed the cross‑defendant to have the survey of the FSA deferred until such time as the works relating to Variation 72 - Louis Vuitton Fitout Early Works - were completed which would result in the total FSA falling within the maximum FSA; iii. Letter from Lawrence Group Surveyors dated 17 February 2011. Politic takes issue with that allegation in its Reply.
3. Politic submits that, in order for Built NSW to make the allegation it does in its defence to cross-claim, it must have investigated what information it had given to Politic concerning the FSA.
4. On the other hand, Mr Fabian, Built NSW's solicitor, identifies a number of persons who he says will need to be interviewed in connection with the Rectification Claim. Those persons include Mr Rossi, Mr Mason, Mr Futcher, the General Manager Construction, who was involved in the tender process and negotiations of the contract, Mr Con Tsaltas, a project engineer involved in contract negotiations and Mr Nick Williams, a construction manager, who was also involved in the negotiation of the contract. Mr Fabian says it will also be necessary for Built NSW to seek additional discovery from Politic relating to the formation of the contract. Mr Fabian estimates that it will take a total of 6 weeks to undertake those tasks, without making allowance for Easter and school holidays. He also says that it will be necessary to give Politic an opportunity to serve evidence in reply.
5. In relation to the Implied Term Claim, Mr Fabian says that it will be necessary to examine the full history of communications between Built NSW and the Superintendent over the life of the project with a view to testing Politic's allegation that Built NSW failed to warn the Superintendent of the changes in FSA over the period of the project. Mr Fabian gives details of those investigations, which he estimates will take 7 weeks. In cross‑examination, Mr Fabian accepted that some of those investigations had been undertaken for the purpose of Built NSW filing its defence to cross‑claim. However, he expressed the view that that work would need to be reconsidered in the light of the new allegations.
6. In my opinion, the position taken by each party on this question is somewhat exaggerated. The fact Politic's rectification case is confined to the Conversation and the Email does not mean that the defence to that claim will be confined in that way. At an abstract level, Mr Fabian is right when he says that to investigate fully Built NSW's defence to the Rectification Claim it may be necessary to speak to each of the witnesses he identifies and consider the documents in Built NSW's possession and possibly seek additional discovery from Politic. However, from a practical point of view the task is unlikely to be that great. It seems clear that Mr Comino was the directing mind of Politic and the likelihood is that any rectification case will depend on communications with him in relation to the FSA. It may become evident very quickly that there were very few or, on Built NSW's account, no conversations with Mr Comino on that topic and that it is a simple task to put on evidence that addresses Politic's rectification case. I have already pointed out that Politic does not suggest that it needs any additional discovery. The Email was sent on the day the contract was signed and the conversation is alleged to have occurred on 17 or 18 December 2009. Although it is understandable that Built NSW may want to investigate what happened at around the time of the Conversation, it is hard to believe that what occurred much before the Conversation can affect its significance. No doubt, Built NSW will want to investigate whether Mr Rossi accepts that the Conversation occurred, whether any documents at around that time are consistent with Mr Rossi's recollection and whether Mr Rossi said anything to Mr Mason concerning the alleged term. In the normal course of events, Built NSW should be entitled to discovery from Politic of documents recording or evidencing any discussion concerning the FSA before the contract was entered into. But on the material currently available, it is difficult to see why that cannot be accommodated in the time remaining before the hearing commences. At the time this application was heard, Built NSW had not even asked Mr Rossi whether he could recall the conversation with Mr Comino concerning the FSA or whether, for example, there were any other emails passing between Mr Comino on the one hand and Mr Rossi or the Superintendent on the other, although it appears there was sufficient time to make those enquiries. Having said that, I accept that it is possible that further investigations may reveal that substantial additional work may need to be done. As things stand, then, it is unclear whether the hearing date really needs to be vacated, although in my opinion on the available evidence that seems unlikely.
7. The position is different in the case of the Implied Term Claim. The resolution of that claim may depend on documents that have already been considered by Built NSW. However, I accept that Built NSW would need to reconsider those documents having regard to the new allegations. It seems to me that the issues raised by the allegation that Built NSW breached its obligations under the contract by failing to inform the Superintendent of the likely final FSA would require a detailed investigation of changes to the FSA over the period of the contract, Built NSW's knowledge of those changes and the communications that occurred between Built NSW and the Superintendent in relation to them. I do not think that it is reasonable to expect Built NSW to undertake those investigations, and put on any additional evidence that those investigations might produce, in sufficient time before 18 May 2015 to permit Politic to respond to that evidence before the hearing commences. Consequently, if the amendments raising the Implied Term Claim are permitted, that will necessitate vacation of the hearing date.

The question of prejudice

1. I accept that significant prejudice will be caused if the hearing date is vacated. The case was set down for hearing some months ago. No doubt, Built NSW has planned on that basis. Generally, in non-urgent cases, the Court takes the view that parties should be entitled to use counsel of their choice and cases are set down for hearing on that basis. Even if Built NSW were to change counsel, it would not be possible to fix the case for hearing until late this year. Parties are entitled to expect their cases to be dealt with reasonably promptly; and significant delay is likely to cause a party to incur additional costs and inconvenience for which the party is unlikely to be fully compensated by a costs order.

Should the amendments be allowed?

1. It follows from what I have said that the amendments seeking to raise the Additional Terms Claim should not be permitted. The case based on those amendments is not reasonably arguable.
2. In my opinion, the amendments seeking to raise the Rectification Claim should not be permitted if the effect of allowing the amendment is the vacation of the hearing date. Although I do not think it can be said that the claim is not reasonably arguable, for the reasons I have given, it strikes me as weak. Moreover, although the defendant has given an explanation for why the claim was not raised earlier, that explanation itself suggests that far more significance is now attached to the conversation on which it depends than was attached to it at the time. Built NSW has been seeking to recover the amount it claims since 2013. A further delay of what is likely to be in the order of ten months to permit Politic to raise a claim that depends on a conversation about which Mr Comino says he had forgotten until reminded of it by the Email does not seem to me to be consistent with the interests of justice.
3. On the other hand, if the Rectification Claim has merit, I accept that it could be important or even critical to Politic's claim. Moreover, as the evidence stands, I am not satisfied that an adjournment is necessary if the amendment is allowed. The likelihood it seems to me is that it will become apparent reasonably quickly that the scope of the enquiries that need to be undertaken and the evidence that needs to be put on are limited and can be undertaken and prepared within the remaining time. In those circumstances, in my opinion, the appropriate course to take is to give leave to Politic to make the amendment. However, that should be on the basis that Built NSW should be given leave to make an application for revocation of that leave if it proves that despite its best endeavours it is not possible for it to comply with the directions I propose to give for the filing of additional evidence relevant to the Rectification Claim or if any evidence filed in reply causes it irremediable prejudice.
4. In my opinion, the amendments sought to be made to raise the Implied Term Claim should not be permitted. The Implied Term Claim depends on Politic establishing that it was an express term of the contract (as it is or as rectified) that Built NSW would design and construct the works so as to maximise the FSA. It is not easy to see how Politic could fail in a case based on the express term but succeed in a case based on an allegation that Built NSW failed to comply with an implied term that it would monitor the FSA and inform the Superintendent concerning that matter. That could only happen if Politic established the express term but failed to prove a breach of it. But if it did not fail to maximise the FSA, it is difficult to see what directions the Superintendent could have given which would have caused it to do something that it did not fail to do - that is, maximise the FSA. It is not in the interests of justice to permit an amendment that appears to add little to Politic's case but which would necessitate vacation of the hearing date.

Orders and directions

1. There should be orders in terms of paragraphs 2 and 3 of the Amended Notice of Motion.
2. Politic should be permitted to file an Amended Statement of Cross-Claim insofar as the amended claim pleads that the FSA Term was an express or implied term of the Design and Construct Contract and the Rectification Claim.
3. Leave is given to Built NSW to make an application to revoke the leave given to file the Amended Statement of Cross-Claim insofar as it pleads the Rectification Claim on 48 hours' notice.
4. The parties should bring in short minutes of order that give effect to this judgment and that set out a timetable for the filing of any additional evidence and discovery by Politic in relation to the Rectification Claim. If the parties can agree on the orders and directions, I will make them in chambers. If they cannot agree, the matter should be relisted by contacting my Associate.
5. I will hear the parties in relation to the costs of the motion.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 April 2015