Cook's Constructions P/L v Stork Food Systems Aust P/L [2008] QSC 179 | Case summary

Supreme Court of Queensland|2008-08-22|Before: Martin J

OTHER MATTERS -interpretation of a clause for measuring quantities - whether quantity of work claimed had been measured in accordance with the contract.

CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - THE CONTRACT - where a clause of the contract required a party to give notice of a claim for breach of the sub-contract within 14 days - where no notice was given - whether the provision of progress claims satisfied that clause.

CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - OTHER MATTERS - where Plaintiff did not hold a licence under the Queensland Building Services Authority Act 1991 - whether work completed by the plaintiff was 'building work' within the meaning of the Act - whether the 'building work' the defendant had paid for was paid by mistake.

where plaintiff is entitled to 'reasonable remuneration' under the Queensland Building Services Authority Act 1991 for work completed - appropriate methods for calculating reasonable remuneration - relevance of expert reports in determining reasonable remuneration.

CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - THE CONTRACT - whether the contract was a lump sum or schedule of rates contract.

AMOUNT - whether rates and quantities claimed for work were claimed in accordance with the subcontract.

EVIDENCE - miscellaneous matters - rule in Browne v Dunn - where party did not cross examine on conflicting evidence in expert reports where such reports had been provided to the opponent in advance of the trial.

EVIDENCE - miscellaneous matters - rule in Jones v Dunkel - whether adverse inferences could be drawn from a party not calling witnesses in relation to matters which only formed part of the background 'factual matrix' of the case.

Queensland Building Services Authority Regulation 1992, s 3A s 42(4**)**

B P Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266

Bartier v Kounza Investments Pty Ltd [2003] QSC 390

Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337

Cook's Construction Pty Ltd v Stork ICM Australia Pty Ltd [2004] QSC 066

Cook's Constructions Pty Ltd v Stork Food Systems Australia Pty Ltd [2008] QSC 186.

Decor Ceilings Pty Ltd v Cox Constructions Pty Ltd (No 2) (2007) 23 BCL 347; [2005] SASC 483

Flett v Deniliquin Publishing Co Ltd [1964-5] NSWR 383

Gino D'Alessandro Constructions Pty Ltd v Powis [1987] 2 Qd R 40

Hansen v Mayfair Trading Co Pty Ltd [1962] WAR 148

Iezzi Constructions Pty Ltd v Watkins Pacific (Qld) Pty Ltd [1994] QCA 49; [1995] 2 Qd R 350

In the matter of Stork ICM Australia Pty Ltd; Stork ICM Australia Pty Ltd v Stork Food Systems Australasia Pty Ltd [2006] FCA 1849

Interline Hydrocarbon Inc v Prenzil Pty Ltd [2005] QSC 109

Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705

Marshall v Marshall [1999] 1 Qd R. 173

Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221

Pownall v Conlan Management Pty Ltd [1995] WASC 117; (1995) 12 WAR 370

Price v John Holland (Constructions) Pty Ltd [1985] HCA 58; (1985) 59 ALJR 844

Re Allison, Johnson & Foster Ltd; ex parte Birkenshaw [1904] 2 KB 327

Smith v Commonwealth of Australia (2006) NSWSC 689

Trade Practices Commission v Arnotts Ltd (No. 5) (1990) 21 FCR 324

West v Mead [2003] NSWSC 161

Zullo Enterprises Pty Ltd v Sutton [1999] QCA 417; [2000] 2 Qd R. 196

D J Digby QC, with S R Grahame and J D Wilson, for the plaintiff

Clarke & Kann, as town agents for McPherson & Kelley, for the plaintiff

[1] In June 1998 Cook's Constructions Pty Ltd ("CCPL") and Stork ICM Australia Pty Ltd entered into an agreement ("the Subcontract") whereby CCPL agreed to undertake the construction of earthworks and concrete works ("the works") in relation to the construction of an ammonium nitrate plant at Moura in central Queensland.

[2] On 14 December 2006 Lindgren J ordered[1], among other things, that:

(a) the property of Stork ICM Australia Pty Ltd was to be transferred to and become the property of Stork Food Systems Australasia Pty Ltd ("Stork");

(b) all liabilities of Stork ICM were to be transferred to and become the liabilities of Stork; and

(c) Stork ICM was to be deregistered without winding up pursuant to s 413(1)(c) of the Corporations Act 2001 (Cth); and

(d) All legal proceedings pending by or against Stork ICM were to be continued by or against Stork.

[3] The ammonium nitrate plant, the subject of this action, is a processing plant that manufactures ammonium nitrate in prill form. Prill is the pellet form which is the end product manufactured by the plant. The plant reforms natural gas to produce hydrogen which reacts with nitrogen extracted from the air and forms ammonia. The ammonia is then combined with nitric acid, which is also produced by the plant, to form the ammonium nitrate prill. That prill is then used in the manufacture of fertilisers and explosives.

[4] The Subcontract as pleaded by CCPL is admitted by Stork. The Subcontract is constituted by the following documents:

(a) Instrument of Agreement for Civil Subcontract Number QNP-001;

(d) Exhibit E: Annexures to General Conditions of Subcontract including:

(i) Annexures to the General Conditions of Subcontract Part A;

(ii) Annexures to the General Conditions of Subcontract Part B, Quality system Requirements;

(iii) Annexures to the General Conditions of Subcontract Part C, Safe System of Work Statement;

(iv) Annexures to the General Conditions of Subcontract Part D Subcontractors Consent Deed;

[5] The plaintiff's claim is made up of 14 separate items identifying aspects of the works undertaken by it, the plaintiff says, at the request of Stork. Those claims can, in turn, be categorised under four general headings.

(a) Claims made pursuant to identified terms of the Subcontract:

(b) Claims made pursuant to variations under the Subcontract:

(d) Claims made under separate, albeit related agreements:

[6] CCPL brings further or alternative claims in respect of the Bulk Earthworks claim, the Road Reconstruction claim, the Quantity of Footings claim, the Pedestal claim, the Corrocem claim, the Suspended Slabs claim, the Prill Storage claim and the Crushed Rock to Sub Stations claim pursuant to clause 3.1 of Exhibit D of the Subcontract. Under that clause Stork was obliged to pay CCPL for the work undertaken an amount ascertained by: measurement and determination of actual quantities (determined in accordance with clause 3.2 of Exhibit D of the Subcontract), and multiplying the quantity so measured and determined by the rate accepted by Stork in accordance with clause 3.3(b) of Exhibit D of the Subcontract.

[7] Stork raises a number of issues related to the terms of the subcontract which, it pleads, demonstrate:

(a) That CCPL, not having given a prescribed notice under clause 51.1 of Exhibit D to the subcontract cannot recover any of the claims: paragraphs 6A-6D Fourth Further Amended Defence and Counterclaim ("FFADC").

(b) That CCPL cannot rely on errors in the bill of quantities and so Stork is not liable to pay certain claims: paragraph 6E-6I FFADC.

(c) That CCPL did not lodge a final payment claim and, therefore, is barred from making a claim for work done prior to December 1999: paragraphs 7-13 FFADC.

(a) that, as CCPL did not hold the relevant licence under the Queensland Building Services Authority Act 1991 ("QBSA Act"), it is not entitled to any monetary or other consideration for that part of the work said by Stork to be "building work" as that term is defined in the QBSA Act;

(b) that CCPL did not measure the work performed in accordance with the subcontract and, as a result Stork has no obligation to make any payment where the claim relies upon measurement being performed in accordance with the subcontract;

(d) that the proper construction of the subcontract has already been determined and that the plaintiff is estopped from arguing otherwise by the decision in Cook's Construction Pty Ltd v Stork ICM Australia Pty Ltd. [2]

(a) that certain of the work performed by the plaintiff was "building work" within the meaning of the QBSA Act; and

(b) that, as the plaintiff did not comply with the QBSA Act; then

(d) Stork, having mistakenly made payments to the plaintiff, is entitled to a refund of the amounts paid by it for the building work.

[10] Before dealing with various claims I need to determine the proper construction of that part of the Subcontract upon which some of the claims rely and, also, some of the evidentiary issues raised by CCPL.

[11] An issue which consumed a substantial part of the trial in both evidence and submissions was the proper construction of the Subcontract, in particular, clause 2 of Ex C. CCPL submitted[3] that it was "of critical importance". That may be an understatement. Interlocutory skirmishes between the parties prior to the trial frequently involved CCPL's pleadings (especially on this point) and Stork consistently expressed the view that those pleadings did not accord with the subcontract as properly construed.

[12] The final version of the statement of claim (the Fourth Further Amended Statement of Claim "FFASC") was not reached until about the fifth day of the trial. It will assist to understand the argument if an example of the pleading is set out.

[13] Under the heading "Bulk Earthworks, Raw Water/Evaporator Pond, Gravel Paved Areas and Site Roads" it is pleaded, in paragraph 7:

"In accordance with the terms set out at paragraph 6 above, and clause 3.2 of Exhibit D of the construction agreement, Cook's undertook the Bulk Earthworks, Raw Water/Evaporator Pond Gravel Paved Area and Site Roads works in the following quantities, as determined by reference to the method of measurement set out in clauses 2.0 and 2.1.3 of part A Subcontract Price Schedule and Bill of Quantities, Exhibit C to the construction agreement:

(a) 12,635m3 of Engineered Fill for Plant Site Bulk Earthworks to the final surface as defined in AS 1181-1982 as shown on for-construction drawing SU-CS-00-D-0050 rev 5; SU-CS-00-D-0051 rev 4 and SU-CS-00-D-0052 rev 0 from the commencing surface as defined in AS 1181-1982 as shown in electronic format on a Digital Terrain Model based Total Station data produced by Peter Robinson & Associates.

The profiles and dimensions of the final surface as defined in AS 1181-1982 relied on to calculate the quantity of 13,635 m3 of Engineered Fill for Plant Site Bulk Earthworks are shown on SU-CS-00-D-0050(5), SU-CS-00-D-0051(4) and SU-CS-00-D-0052(0) with the northerly marked in orange, the easterly marked in yellow, the batter slopes marked in pink, the reduced levels marked in blue and the dimensions marked in purple. The profiles and dimensions of the commencing surface as defined in AS 1181-1982 are as shown in electronic format on the Digital Terrain Model based Total Station data produced by Peter Robinson & Associates and provided to Stork in the course of the works."

[14] The clauses which are relevant to this discussion are:

The Subcontractor shall execute the work under the Subcontract and fulfil all Subcontractors obligations thereunder and Stork shall pay the Subcontractor for the measured quantity of each item of the work performed under the Subcontract as certified by Stork at the appropriate rate in the Subcontract Schedule Part A - "Subcontract Price Schedule and Bill of Quantities".

All items shall be measured nett in-situ to the profiles and dimensions shown on the Drawings or described in the Scope of Work and Specification and Subcontractor shall allow for wastage in the rates for the nett quantities given in the Subcontract Schedule Part A "Subcontract Price Schedule and Bill of Quantities".

Upon issue by Stork of the 'Approved for Construction' Drawings for the work and prior to construction of work covered by the Drawings, Stork and Subcontractor shall jointly review the Drawings and agree on the rate items applicable to the work shown on the Drawings.

Measurement of work shall be made in accordance with the conditions set out hereunder.

The Subcontractor shall execute and complete the work under the Subcontract.

(a) for work for which Stork accepted a lump sum, the lump sum;

(b) for work for which Stork accepted rates, the sum ascertained by measurement and determination of the quantities in accordance with Clause 3.2 and multiplying the quantity so measured and determined of each section or item of work carried out under the Subcontract by the rate accepted by Stork for the section or item,

Adjusted by any additions or deductions made pursuant to the Subcontract.

Quantities in a Bill of Quantities or Schedule of Rates are estimated quantities only.

A direction shall not be required to be given by Stork's Representative by reason of the actual quantity of an item required to perform the Subcontract being greater or less than the quantity shown in the Bill of Quantities or Schedule of Rates.

Unless otherwise stated within the Contract, 'actual quantities' shall mean those quantities measured in accordance with Australian Standard 1181-1982, as amended from time to time, from the lines, dimensions and limits shown on the relevant Contract plans and drawings.

Quantities over and above the actual quantities as a result of oversupply, over excavation or any other similar reason by the Subcontractor will not be included in the actual quantities and the Subcontractor agrees that Stork is not required to pay for these quantities over and above the actual quantities."

[15] The argument put on behalf of CCPL was that the purpose of clause 2 was to ensure that Stork only paid for the work that it contracted for; so that, if CCPL inadvertently over-excavated a particular area, then Stork would not be required to pay for that over-excavation - it would only pay "to" the dimensions and profiles on the plans. It was submitted that that was made clear from the definition of "actual quantities" contained in clause 3.2 of Ex D of the Subcontract.

[16] The basis of CCPL's argument on the construction point was put during Mr Digby's opening when he said:[4]

"Now, what we say about that clause is that read just on its language, even without the context which should assist our argument, it's simply saying that you have to - leave the word "nett in situ" out for the moment - you have to measure to the profiles and dimensions shown on the drawings. Now, that is an unexceptional stipulation. What it means is that when you're working out your measurements, the end point - and the word "to" is used - the end point is what's shown on the construction drawings and that's perfectly workable and perfectly logical because defines the extent to which you are entitled to be paid.

What it does not say, and we say would be impractical and unworkable - same thing, I suppose - and repugnant to the scheme of the contract to infer is that you only measure the profiles and dimensions shown on the drawings. That is, the for-construction drawings.

In our submission this clause clearly gives scope for the operation of what one would expect to be the practical situation, that is that you draw upon a survey, or perhaps another drawing if there was a drawing setting out the precise details or sufficiently precise details of where you started or where you stripped to, and then the profiles on the for-construction drawings to work out the quantities that were relevant. It does not preclude that, and, indeed, there's no inference, we think, can reasonably - no implication can reasonably be read into clause 2 to say this somehow confines you to having reference only in terms of a measurement to the for-construction drawings. We concede, of course, that the for-construction drawings are a crucial element of the measurement because they define the extent - they define what you have got to do but they also define the extent to which you can expect to be paid for any quantities."

[17] The process of reasoning employed by CCPL then proceeds in this way:

(a) As the Australian Standard 1181-1982 is referred to in clause 3.2 one needs to look at certain definitions. Those definitions are:

(i) Original surface: the surface before any work has been carried out under the contract;

(ii) Commencing surface: (in relation to an item in a Bill of Quantities) the surface before any work covered by the item has been carried out;

(iii) Final surface: the surface indicated on the drawings to which the work described in any item of the Bill of Quantities is carried.

(b) The reference to the "profiles and dimensions shown on the drawings" in clause 2 is a reference only to the "final surface".

(c) Clause 2 should be interpreted as meaning that the quantity is derived from measuring nett in-situ to the final surface.

(d) As a volume cannot be calculated without knowing three dimensions then one needs to measure from the "commencing surface" to the "final surface".

[18] The reference to measuring from the "commencing surface" was supported by CCPL by reference to the evidence of Peter Robinson whose firm was contracted in June 1998 to supply the survey management for CCPL's work on the project. That firm was also contracted by Stork to supply survey information (but not on these points[5]) for its relevant interest in the project. Mr Robinson gave evidence that, in his experience, earthworks are measured initially from the "original surface", referred to as the "natural surface" when the area has not been disturbed, to the "commencing surface" or the "strip surface". The earthworks quantities, he said, are then measured from the "commencing surface" to the "final surface".

CCPL is, then, arguing that the act of measurement referred to in clause 2 is to be performed by reference not only to the profiles and dimensions shown on the drawings but also to a measurement obtained through the use of an accepted procedure or industry standard. In other words, CCPL argues that clause 2 operates by the drawings providing the end point of a measurement while the beginning is provided by a measurement obtained elsewhere.

The example of the pleading which is set out above shows that CCPL relies upon the profiles and dimensions of the "final surface" which is shown on identified plans, but the "commencing surface" is identified as being drawn from data produced by Mr Robinson pursuant to a method he described.

[21] The method for measurement which he used can be summarised in the following way:

(a) He measured the irregular original surface and the commencing or strip surface by using surveying devices that measured the bearing, distance and vertical angle to a reflective target using an infrared beam. Such measurements were given unique names and stored in a computer.

(b) When all the measurements were completed they were downloaded into specialised surveying software which produced three-dimensional information for each point using the height and relative level of the total stations and combined that with the bearing, distance and vertical angle to each observed point. The software draws break lines between points with common names - break lines are lines that define changes of grade, eg, the top and bottom of a batter. Using that software the surveyor then creates a "digital terrain model" which is, apparently, better known as a "triangulated irregular network". That digital terrain model provides the original or commencing surface for the calculation of quantities.

(c) The surveyor then uses that digital terrain model which contains the representations of both the strip surface and the final earthworks surface to determine an accurate quantity.

[22] Mr Robinson said that the final earthworks surface was created using the dimensions and profiles shown on the drawings. The result of the calculation made by Mr Robinson, and upon which CCPL relies, was reached by the creation of virtual surfaces using the software - the beginning virtual surface created by actual measurement of the "commencing surface" and the end or "final" virtual surface created by transposing measurements from the drawings.

[23] CCPL argued that this method was not only available, but also the only method which complied with the sub-contract. This argument proceeded on the basis that the drawings did not contain enough information to allow the calculation to be made, viz., that the drawings did not contain the details of the levels from which the quantity should be measured. This was compared with what was said to be shown in the drawings - the final surface - which was the level to which the quantity could be measured.

[24] I do not accept that CCPL's argument demonstrates the correct construction of clause 2.

[25] Great weight is placed by CCPL on the use of the word "to" in clause 2 which indicates, in the plaintiff's construction, that the "profiles and dimensions shown on the drawings" are only those which can be identified as final surfaces. The plaintiff then draws from that an implication - an implication which was not pleaded - that one should then apply an industry practice as described by Mr Robinson in order to determine the measurement from which one would commence the calculation.

[26] Stork, on the other hand, says that one cannot draw from the use of the word "to" an entitlement to measure quantities by reference to survey data.

[27] Whenever construction of a clause in a contract has to be undertaken it is always sensible to construe such a clause in the light of the entire agreement.

[28] The documents which make up the Subcontract commence with the usual recitals about the nature of the contract and that the Subcontract constitutes the entire agreement. It also provides a means by which discrepancies or inconsistencies within the entire document may be resolved. Clause 2 of the formal instrument of agreement provides:

"The following Documents comprise the whole of the Subcontract between the Parties, and in the advent (sic) should there be a discrepancy or inconsistency between the Documents, the order of precedence in which they are listed may be relied upon to resolve the issue:

Exhibit E - Annexures to General Conditions of Subcontract ...

[29] Should there be a discrepancy or inconsistency in the documentation, it is appropriate to consider other parts of the contract which have been agreed to have precedence over identified parts of the contract.

[30] Exhibit D of the subcontract contains clause 3.2 (set out above) which provides, in part:

"Unless otherwise stated within the Contract, 'actual quantities' shall mean those quantities measured in accordance with Australian Standard 1181-1982, as amended from time to time, from the lines, dimensions and limits shown on the relevant Contract plans and drawings."

[31] As is obvious, there is no reference to survey measurements taken or any other measurements which do not appear on any of the drawings or plans. There is reference only to "quantities measured ... from the lines..." etc. As both clause 2 and clause 3.2 are referring to measurement of the same matters there is an inconsistency between the two clauses in that clause 2 does not refer to measurement "from the lines". Clause 3.2 is in Exhibit D which has precedence over Exhibit C, which contains clause 2.

[32] The quantities sought to be claimed by the plaintiff are actual quantities as determined by the contract. In the light of the provisions of clause 3.2, I consider it appropriate to read clause 2 of Ex C as meaning that one has reference to the drawings and the drawings only to determine the appropriate measurement.

[33] The plaintiff, though, says that it is not possible to assess the quantity of work undertaken by reference only to the drawings. That submission is not supported by the evidence.

[34] In cross-examination Mr Robinson agreed that it was possible to measure volume from contour lines on drawings. He said that it was an old method and not a very accurate method but that it could provide an answer depending upon the degree of accuracy required by the person seeking a calculation of volume.[6]

Rodney Alsop gave evidence for the plaintiff. In cross-examination he agreed that there were methods for measuring quantities apart from those used by Mr Robinson.[7] Gordon Worrell, a witness called by the defendant, said that one method of calculating volume was by reference to contours which appear on a drawing.[8]

Gordon Leck, also called by the defendant, described the manner in which it was possible, by reference to the drawings in this case to arrive at a calculation of quantity by reference to the contour lines and other dimensions on the drawings.[9]

It is likely that the method used by Mr Robinson would afford an accurate measure of the quantities which were to be removed and which were, in fact, removed. However, that is not a test which is applied anywhere in the subcontract. If it was impossible to arrive at an acceptable means of calculating quantity by reference only to the drawings, then the plaintiff might well have a case to argue for an implication of a particular term or terms relating to such a means of calculation. The fact that a calculation which is able to be performed may result in a less accurate conclusion is not, of itself, something which would cause me to arrive at a different construction of the relevant clauses. Parties are entitled to agree that a particular method shall be used to achieve a particular result. In doing so, they may have reasons which are not expressed in the contract for doing so.

[38] There are other factors which support the view I have reached:

(a) There is no reference in the subcontract or in the Australian Standard to any requirement for any of the surfaces the subject of a calculation to be measured by a surveyor apart from the measurements which appear on a drawing;

(b) There is nothing in the subcontract which requires that Stork is to pay in accordance with survey measurements taken by a surveyor;

(c) If it was the case that survey measurements were to be taken into account when calculating volume then one would expect to see in the contract a definition of the manner in which such survey measurements were to be taken.

[39] The plaintiff did not plead that any industry standard or practice should be implied into the contract. Had it done so, I would not have been minded to find any such implication. Justice Mason's observations in Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales[10] are apposite in these circumstances:

"For obvious reasons the courts are slow to imply a term. In many cases, what the parties have actually agreed upon represents the totality of their willingness to agree; each may be prepared to take his chance in relation to an eventuality for which no provision is made. The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue. And then there is the difficulty of identifying with any degree of certainty the term which the parties would have settled upon had they considered the question."

[40] Further, the implication of such a term would not have satisfied the conditions expressed in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council[11] and adopted in Codelfa.[12]

Stork submitted that I was bound to follow the decision of Moynihan SJA[13] on this question. I have dealt with that argument in Cook's Constructions Pty Ltd v Stork Food Systems Australia Pty Ltd [2008] QSC 178.

The proper construction of cl 2, then, is that it requires calculations to be done by reference to the profiles and dimensions on the relevant plan and does not allow reference to some other, unstated measure or means of measuring quantities. Thus, the evidence from Mr Robinson on this point is irrelevant.

[43] There are a number of occasions in CCPL's written submission where it notes that Stork did not cross-examine on matters contained in Mr Leck's report. The effect of this, it was argued, was that the part of Stork's case which was not put should not be accepted. The submission was based on the well known principle enunciated in Browne v Dunn.[14] The rule in Browne v Dunn is often expressed as being the requirement that a cross-examiner must put to a witness the nature of the case upon which it is proposed to rely in contradiction of the witness' evidence. While that is a correct statement of the rule as it is often applied it is not a complete statement of the fundamental principle upon which the rule operates.

The basis for the rule has been expressed in the following way:

"The underlying principles are that, in view of the rule against case splitting, which prohibits a party from calling fresh evidence after that party's case has closed, it is unfair to a witness to deny the opportunity of making any explanation open to the witness if a later invitation to disbelieve or criticise the witness is to be made; that it is unfair to the party calling the witness if the opportunity for the witness to proffer an available explanation is denied."[15]

[45] I respectfully adopt the analysis of the principles (in a manner relevant to this case) which is provided by Campbell J in his reasons in West v Mead,[16] where he says:

"[95] In Browne v Dunn at 70-71 Lord Herschell LC stated an obligation of procedural fairness which counsel has when cross-examining a witness who counsel intends to submit should not be accepted:

'If you intend to impeach a witness you are bound, whilst he is in the box, to give him an opportunity to make any explanation which is open to him; and, as it seems to me, that is not only a rule of professional practice in the conduct of a case, but is essential to fair play and fair dealing with witnesses.'

[96] However, Lord Herschell LC said that there was no obligation to raise such a matter in cross-examination where it is:

'... perfectly clear that [the witness] has had full notice beforehand that there is an intention to impeach the credibility of the story which he is telling ... All I am saying is that it will not do to impeach the credibility of a witness upon a matter on which he has not had any opportunity of giving an explanation by reason of there having been no suggestion whatever in the course of the case that his story is not accepted.'

[97] In Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation [1983] 1 NSWLR 1 Hunt J made a thorough review of later cases applying Browne v Dunn, and concluded (at 26):

'I remain of the opinion that, unless notice has already clearly been given of the cross-examiner's intention to rely upon such matters, it is necessary to put to an opponent's witness in cross-examination the nature of the case upon which it is proposed to rely in contradiction of his evidence, particularly where that case relies upon inferences to be drawn from other evidence in the proceedings.'

In the present case, the serving of Ms West's affidavit in chief gave notice to Ms Mead and her advisers that Ms West proposed to rely upon the matters contained in para181. Ms Mead took the opportunity, in her own affidavit in response, specifically to reply to that allegation. Documents exchanged between the parties to litigation before the commencement of the trial are able to give notice that a witness's account of events will be challenged in particular ways, so that there is no breach of Browne v Dunn if the witness' account is not challenged in cross-examination. - Marelic v Comcare [1993] FCA 599; (1993) 121 ALR 114 at 120 (pre trial exchange of medical reports gives adequate notice), Flower & Hart v White Industries (QLD) Pty Ltd [1999] FCA 773; (1999) 163 ALR 744 at [52] (statement of issues, stated case and service of documentary evidence can give adequate notice), Stern v National Australia Bank Ltd [2000] FCA 294; (2000) 171 ALR 192 at [44] (adequate notice given by pleadings), Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219 at 236 per Mahoney JA (adequate notice given by "the nature of the defendant's case and the particulars given, and otherwise the conduct of it"), In the Marriage of LC & TC [1998] FamCA 47; (1998) 23 Fam LR 75 at [39] (affidavits give adequate notice). Cross On Evidence, 6th Australian edition, para [17460] footnote 12 says:

'... the rule in Browne v Dunn did not apply where all parties were on notice of the evidentiary issues, eg by reason of affidavits having been exchanged ...'

[98] The consequence of these decisions is that the circumstances in which Browne v Dunn will require matter to be put to a witness in cross-examination will depend upon the nature of the pre-trial preparation there has been, and whether that pre-trial preparation has been sufficient to give notice to a witness of the submission ultimately intended to be put to the court. An aspect of this is that Browne v Dunn will require more extensive cross-examination in a case where all the evidence is given orally, than is necessary in a case where the substance of the evidence proposed to be given by each side is notified in advance by affidavit or statement.

[99] Even when there has been an exchange of affidavits or statements, the rule in Browne v Dunn will require a cross-examining counsel to put to a witness the implications which counsel proposes to submit can be drawn from the evidence, if those implications are not obvious from the evidence, or from other pre-trial procedures, or the course of the case. However, the submission which Ms Bateman seeks to put on the basis of paragraph 181 of Ms West's affidavit in chief involves no drawing together of strands of evidence to create some overall theory or inference of fact, but is a submission as to the legal consequence that should be drawn from the facts plainly asserted in para181. Nothing in the rule in Browne v Dunn prevents her from putting that submission." (emphasis added)

[46] Mr Leck's report (in its final form) was in CCPL's possession from August 2007. The opinions he expresses are clear and must have been well known to CCPL as two of its witnesses - Mr Robinson and Mr Alsop - were called to give evidence which commented upon Mr Leck's conclusions. It follows from the analysis above, that where Mr Leck expressed a view which was inconsistent with the case advanced by CCPL then the rule in Browne v Dunn did not oblige counsel for Stork to put that to the CCPL witnesses. Where the opposing side has notice of the evidence to be given, it is only those implications which are not obvious from that evidence which need to be put to the opponent's witnesses.

[47] Other objections were made to statements made by Mr Leck in his oral evidence which were otherwise not contained in his report. It was submitted that those statements should be disregarded where they had not been put to the plaintiff's witnesses. This is a brave submission from a party which was so ill prepared that it was still tendering reports, not having provided them before the trial, in the second week of the trial[17]. There were a few occasions when oral evidence was given by Mr Leck which had not been put to the plaintiff's witnesses. In most cases, it was responsive to earlier evidence which had been given without any notice or without the notice required by the Uniform Civil Procedure Rules. In any event, I have not found it necessary to base any findings on such evidence.

CCPL criticised Mr Leck's evidence in many respects. In particular, it pointed to the numerous occasions in his written report where he expressed his opinion on the efficacy of the plaintiff's pleadings and where he made statements which dealt with matters outside his areas of expertise. Those criticisms are not unfounded. Mr Leck often came perilously close to partisan statements and, on occasion, strayed into areas which would more properly be regarded as the province of submissions and arguments to be made by counsel. While I accept that his evidence was not pristine so far as total impartiality was concerned, I am confident that his technical observations were not coloured and I have ignored those parts of his report which represent opinion he was not qualified to give.

[49] CCPL submits that adverse inferences should be drawn from the fact that Stork did not call Messrs Clissold, Lindner or Mazur and only called limited evidence from Mr Jewell. It places reliance on the so-called rule in Jones v Dunkel[18]. I say "so-called" because the principle enunciated in that case is subject to many exceptions and variations. Nevertheless, the principle of general application is well-defined in Cross on Evidence as follows:

"[the]unexplained failure by a party to give evidence, to call witnesses, or to tender documents or other evidence or produce particular material to an expert witness may, not must, in appropriate circumstances lead to an inference that the uncalled evidence or missing material would not have assisted that party's case. The rule can operate against parties not bearing the burden of proof and parties which do bear it as well. The appropriate circumstances exist where it was within the power of the party to tender the evidence which was not tendered ..."[19]

[50] One of the exceptions to the general rule arises where there is a reasonable explanation for the omission to call a witness. It has been put this way:

"The significance to be attributed to the fact that a witness did not give evidence will in the end depend upon whether, in the circumstances, it is to be inferred that the reason why the witness was not called was because the party expected to call him feared to do so. But there are circumstances in which it has been recognised that such an inference is not available or, if available, is of little significance. The party may not be in a position to call the witness. He may not be sufficiently aware of what the witness would say to warrant the inference that, in the relevant sense, he feared to call him. The reason why the witness is not called may have no relevant relationship with the fact in issue: it may be related to, for example, the fact that the party simply does not know what the witness will say. A party is not, under pain of a detrimental inference, required to call a witness "blind".[20] (emphasis added)

[51] Most importantly, though, is that the rule only applies where there is an issue between the parties. The matters raised by CCPL as being subject to the rule are all matters which relate to evidence of oral directions, conversations, statements and so on. They relate to matters which were not pleaded in support of the plaintiff's cause of action. There is no need to call a witness because, for example, he is referred to in correspondence unless that correspondence is relevant to the pleaded issues. Similarly, simply because a document becomes an exhibit, it does not follow that a person referred to in it should be called unless the reference to that person is relevant to the issues as pleaded.

[52] CCPL called a reasonable amount of evidence from its witnesses about discussions held between those witnesses and employees of Stork or about documents not otherwise pleaded. That evidence was objected to on the basis that it did not relate to the pleadings. The general response was that the evidence was part of the "factual matrix" which allowed the court to understand the real issues. Parties are frequently allowed to give such evidence. It is often helpful. But it does not follow that, just because that evidence is given, the inference referred to in Jones v Dunkel can or should be drawn.

[53] Evidence was received from Stork's solicitor[21] in which he explained why he had not taken statements from the witnesses the subject of CCPL's submission on this point. He said, and it appears reasonable, that he had not thought that they could give relevant evidence because of the manner in which CCPL pleaded its case. That explanation is, in my view, strictly unnecessary as I consider that the inferences sought to be drawn cannot be so drawn as the evidence in question was not relevant to the pleaded issues.

[54] Stork pleaded three defences of a general nature. Each of them applied to more than one of the claims. The findings with respect to these defences dictate the extent to which further findings and calculations need be made with respect to some of the claims. I will deal, then, with those defences first, before proceeding to consider each of the claims.

[55] The bulk of CCPL's claim is in two parts: it seeks damages for breach of the Subcontract constituted by the alleged failure to pay the amount claimed, and, in the alternative, it seeks an order "pursuant to the Subcontract" (presumably cl 3.1 of Exhibit D) that those sums be paid.

[56] Clause 51.1 of Exhibit D relevantly provides:

"Stork shall not be liable upon any claim by the Subcontractor in respect of or arising out of a breach of the Subcontract unless within 14 days after the first day upon which the Subcontractor could reasonably have been aware of the breach, the Subcontractor has given to Stork's representative the prescribed notice.

The prescribed notice is a notice in writing which includes particulars of all the following;

(a) the breach, act, omission, direction, approval or circumstances on which the claim is or will be based;

(b) the provision of the Subcontract or other basis for the claim or proposed claim; and

This Clause 51.1 shall not have any application to;

(a) any claim for payment to the Subcontractor of any amount or amounts forming part of the Contract Sum;
(b) any claim for payment for a variation directed by Stork's Representative ..." (Emphasis added)

[57] It is admitted that no prescribed notice alleging a breach of the subcontract was served on Stork.

[58] Stork argued that cl 51.1 was mandatory and that a failure to observe its terms prevented CCPL from making a claim after the relevant period elapsed. CCPL countered by submitting that the non-damages claim was not affected by this clause and the claims were otherwise excluded from the provisions of cl 51.1.

[59] The word "claim: is defined in cl 2 of Schedule D as:

"... including any claim, demand, action, proceeding or suit which subcontractor (sic) may make or bring against Stork ... relating to the construction of the Subcontract or as to any fact, matter or thing arising out of or in connection with the Subcontract or the work under the Subcontract including (without limitation) any claim, demand, action, proceeding or suit seeking payment of money, or any costs, expenses, loss or damages on any ground whatsoever including (without limitation) pursuant to the Subcontract, on a quantum meruit, in quasi-contract, for unjust enrichment and insofar as is permitted by law pursuant to any other principle of law." (emphasis added)

[60] Clause 51.1 will apply when a claim is made which is in respect of, or arises out of, a breach of the Subcontract. To determine whether the clause applies requires the identification of the character of each of the claims. Each claim made by CCPL is premised on it having sought a progress payment and having only received a part payment from Stork. The FFASC categorises the money sought as damages for breach of contract or, alternatively, as payment in accordance with the Subcontract (or in the pedestal reconciliation claim - a separate agreement).

[61] It follows, then, that CCPL's claim for damages and its alternative claim for payment in accordance with the Subcontract come within that definition as the first (obviously) is a "claim ... seeking ... damages" and the second is a "claim ... seeking payment of money". Therefore, each claim will be barred unless the exemption applies.

[62] It is submitted, though, by CCPL that the purpose of a provision (like cl 51.1) requiring a contractor to give notice within a reasonable time of the occurrence of events that he considers may entitle him to claim additional payment under the terms of the contract "is to enable the owner to consider the position and its financial consequences ..." (Hudson's Building and Engineering Contracts 11th ed, Sweet & Maxwell, 1995, para 4.132; see also Giles CJ, Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd & Ors (1996) 12 BCL 317 at 338)". That is, no doubt, correct; but it is also intended to bring matters to an end should no notice be given by the appropriate date.

[63] A similar clause was considered by Philip McMurdo J in Bartier v Kounza Investments Pty Ltd[22] where his Honour concluded:

"I favour an interpretation which does require the builder to make a final payment claim as a condition precedent to payment. Clause 27.1 is in mandatory terms and there is a good commercial purpose in holding the parties to the timely performance of the steps set out in cl. 27 and 28, because it promotes an expeditious determination of their ultimate entitlements ..."[23]

[64] I respectfully agree with that approach. That a notice of the type required in cl. 51.1 is a prerequisite to recovery is supported by other authorities, dealing mainly with clauses which require a notice before an extension of time can be given, which were considered, and helpfully summarised, by Besanko J in Decor Ceilings Pty Ltd v Cox Constructions Pty Ltd (No 2)[24]. He said:

"[66] There is no doubt that parties can, if they wish, make compliance with a certain procedure a precondition to an extension of time by reason of delay or disruption or a claim for loss and damage resulting from delay or disruption. The question whether the parties have done that is to be determined as a matter of the construction of their contract. An intention to exclude the ordinary remedies arising on a breach of contract must be expressed in clear and unmistakable terms. (Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 per Lord Diplock at 717-718; Mancorp Pty Ltd v Baulderstone Pty Ltd (t/as Baulderstone Hornibrook) (No 2) (1992) 60 SASR 120)."

[65] Does the exemption apply? Clearly, it cannot apply to the claims for damages as it only applies to a "claim for payment".

[66] Are any of the claims made by CCPL claims for payment to the Subcontractor of any amount or amounts forming part of the "Contract Sum"? The term "Contract Sum" is not defined in the Subcontract. CCPL submitted that "the only sensible meaning that can be given to the words "Contract Sum" is that it refers to the total sum due to the subcontractor for undertaking the subcontract including any additions or deletions thereto."[25] No further argument was advanced to support that contention.

Stork referred to the definition (in cl 2 of Exhibit D) of "Subcontract sum" which provides that that term relevantly means:

"(a) where Stork accepted a lump sum, the lump sum;

(b) where Stork accepted rates, the sum ascertained by calculating the products of the rates and the corresponding quantities in the Bill of Quantities or Schedule of Rates;

including provisional sums but excluding any additions or deductions which may be required to be made under the Subcontract."

[68] The entire document governing the relationship between the plaintiff and the defendant is the "Subcontract". While it bears that name it is, of course, in ordinary parlance the contract between them. The Formal Instrument of Agreement (which is the first part of the document) also provides that:

"The Subcontract Sum is the lump sum of eight million seven hundred and fifty three thousand three hundred and eighty nine dollars and eighty three cents ($8,753,389.83) and excludes any additions or deductions which may be required to be made under the Subcontract."

[69] In the absence of a definition I think that the term "Contract sum" should be read as the sum arrived at by the calculations set out in the definition of "Subcontract sum" which is the figure referred to in the paragraph above and which is set out on page 13 of Part A of Exhibit C of the Subcontract. It follows, then, that the term excludes any additions or deductions contrary to the submission of CCPL. As CCPL is not suing for any amount contained within that sum (given that its claim is based on extra work) its claim (subject to what is said below) is not excluded from the effect of cl. 51.1.

"Clause 51 is a notice provision only. Its purpose is to ensure that Stork has proper notice of claims or potential claims in respect of or arising out of a breach of the Subcontract within a reasonable time of such claims arising. Provision of progress claims for work undertaken under the Subcontract by Cooks satisfies that purpose; and is the very reason for the exclusion contained in clause 51 relating to claims for breaches for non-payment of amounts forming part of the contract sum."[26]

[71] The provision of progress claims does not satisfy clause 51 because that clause is concerned with notifications of breach of contract, not of demands made in the ordinary course of the contract.

[72] Are any of the claims for payment based on a variation directed by Stork's Representative and, thus, excluded from cl 51.1? Yes, the claims made by the plaintiff which are for payment for a variation are:

[73] It follows, then, that the claims, other than those referred to immediately above, the pedestal reconciliation claim and the ammonia spill standby claim, are caught by clause 51.

Defence relating to Alleged Errors in the Bill of Quantities

[74] Of the various heads under which CCPL makes claims, there are six in which the entitlement to payment is alleged to arise because of an error in the "Priced Bill of Quantities". They are the:

[75] The "Priced Bill of Quantities" is defined in cl 2 of Exhibit D as:

"... the Bill of Quantities priced and lodged by the Subcontractor with Stork's Representative and corrected where necessary from time to time under Clause 5.3."

Cook's Constructions P/L v Stork Food Systems Aust P/L

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (729 paragraphs)

(a) That CCPL, not having given a prescribed notice under clause 51.1 of Exhibit D to the subcontract cannot recover any of the claims: paragraphs 6A-6D Fourth Further Amended Defence and Counterclaim ("FFADC").

(a) that, as CCPL did not hold the relevant licence under the Queensland Building Services Authority Act 1991 ("QBSA Act"), it is not entitled to any monetary or other consideration for that part of the work said by Stork to be "building work" as that term is defined in the QBSA Act;

(a) that certain of the work performed by the plaintiff was "building work" within the meaning of the QBSA Act; and

(a) As the Australian Standard 1181-1982 is referred to in clause 3.2 one needs to look at certain definitions. Those definitions are:

(i) Original surface: the surface before any work has been carried out under the contract;

(b) The reference to the "profiles and dimensions shown on the drawings" in clause 2 is a reference only to the "final surface".

(a) He measured the irregular original surface and the commencing or strip surface by using surveying devices that measured the bearing, distance and vertical angle to a reflective target using an infrared beam. Such measurements were given unique names and stored in a computer.

(a) There is no reference in the subcontract or in the Australian Standard to any requirement for any of the surfaces the subject of a calculation to be measured by a surveyor apart from the measurements which appear on a drawing;

(i) in the case of Clause 5.4(a) where the item is deficient in quantity or in the case of Clause 5.4(c) upon application in writing to Stork's Representative by the Subcontractor;

Alternative 1: A Bill of Quantities forms part of the Subcontract only to the extent provided in the Subcontract.

(a) the for-construction drawings contained specifications different from the Bill of Quantities in that they required the construction of pedestals having an area on plan of one square metre or less[61],

(a) a number of the entries (for example: Steam Reformer Pedestal MF007) have, in the column "Stork For-Construction DRWG No.", the notation "No plan",

(a) The number of hours pleaded as being required to place the Corrocem concrete is not supported. No documentary evidence was provided to establish the hours asserted.

(a) Some of the documents upon which he relied were not in evidence, namely:

(i) Report of Simon Tormey & Associates, Chartered Quantity Surveyors, 16 August 2005;

(b) Mr Alsop relied upon measurements obtained using a digitiser but it was not established that the plans he used were those which were pleaded or in evidence.

(a) Is the "reasonable amount" more than actually charged? If so, it must, subject to any other reductions, be reduced to the amount charged.

(c) Is the "reasonable remuneration" more than an agreed price? If so, it must, subject to any other reductions, be reduced to the agreed price.

(a) the work which is the subject of the Counterclaim was "building work" within the meaning of the QBSA Act; and

(a) when he certified those payments, he expected the plaintiff to hold all licences it was required to hold do the contract works within Queensland[172];

Parties

Cases Cited (17)