Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd

Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd - [2012] VSC 99 - VSC 2012 case summary — Zoe

[260]

206 Hue also based its claim on photographs and videos, many of which Mr Wong took, and proved in evidence. Mr Wong was Hue's project manager. There were many photographs taken, and tendered in evidence, during the project. Dura submitted that I should exercise care to establish when, and where, photographs were taken counselling caution in using the photographs as evidence of contractual breach by it. I have accepted that warning. Nonetheless, I am satisfied that in many cases the purposes of the photographs is to document an example of a defect type, particularly when used by a consultant in a report. Hue, or its consultants, did not usually intend that any particular set of photos provide a complete record of defects at any one time. On other occasions, such as the audits, Hue intended to document a state of affairs. In all cases, witnesses have given evidence of their observations, and have used photos to illustrate or explain conditions on site for the benefit of those not there at the time. Mr Wong took most of the photos, with either Mr Chu and/or Mr Alexander also present. In evaluating the evidence of defects, I have not just relied on photos. Each of Mr Wong, Mr Chu, and Mr Alexander gave evidence that they saw the defects illustrated in photos. The consultants engaged by Hue during the project who gave evidence stated that they saw defective work. The consultant's contemporaneous reports were also illustrated with photographs demonstrating categories or types of defects. Site meeting minutes and other documents also refer to defects. It is from all of these sources that I draw evidence for the findings I will later express. Experts also used the photographs and videos to illustrate their reports. I accept the evidence of Mr Wong, Mr Chu, and Mr Alexander, and of the various consultants that Hue called, that their personal contemporaneous observations are illustrated by photographs. I prefer the evidence of personal observations to the debates that occurred between the experts, when later examining photographs, as to exactly what was depicted in a photograph. Dura's cross examination of witnesses, such as Mr Borgia, Mr Edwards, Mr Hanlon, and Mr Garagounis, did not persuade me that there was inaccuracy, or exaggeration, in their observations or their contemporaneous reports to Hue.

[295]

33 PROGRESS AND PROGRAMMING OF THE WORKS

33.1 Rate of Progress

The Contractor shall proceed with the work under the Contract with due expedition and without delay .... The Contractor shall give the Superintendent reasonable advance notice of when the Contractor requires any information, materials, documents or instructions from the Superintendent or the Principal ... The Superintendent may direct in what order and at what time the various stages or parts of the work under the Contract shall be performed. If the Contractor can reasonably comply with the direction, the Contractor shall do so. If the Contractor cannot reasonably comply, the Contractor shall notify the Superintendent in writing, giving reasons ...

33.2 Construction Program

(a) Within fourteen days of the Date of Acceptance of Tender or the granting by the Principal to the Contractor of possession of the Site to commence the Works, the Contractor shall submit to the Superintendent for his approval a comprehensive construction program, such approval not to be unreasonably withheld. The construction program shall show the sequence of activities which constitute the critical path.

(b) If the Superintendent considers that any part of the construction program is unsatisfactory or requires amendment the Contractor must provide an amended construction program within seven days of being requested to do so by the Superintendent or such additional time as the Superintendent may allow.

(c) The furnishing of the construction program or of a revised construction program or any approval of same shall not relieve the Contractor of any obligation under the Contract, including the obligation to refrain from, departing from any earlier Approved Program without reasonable cause.

(d) Notwithstanding this Clause 33 and the review or approval of any construction program or part thereof submitted to the Superintendent, the Contractor remains responsible for all construction means, methods, techniques, sequences and procedures employed in and about the execution of the Works.

(e) If the Contractor fails to submit and obtain the approval of the Superintendent such approval not to be unreasonably withheld to a construction program whether pursuant to Clause 33.2(a) or 33.2(b) and the failure continues for a continuous period exceeding 21 days after request by the Principal or Superintendent pursuant to this Clause 33 to provide or revise the construction program, the Principal shall be entitled to withhold payment of monies which but for this clause would have been due and payable until the approval has been obtained.

(f) The Works are to be executed according to the latest Approved Program. The Contractor shall be entitled to advance execution but shall notify the Superintendent in writing of any proposed change to the Approved Program.

(g) The Contractor shall provide a calendar relating work day numbers to calendar dates after accounting for holidays and work days per week.

[320]

257 The requirements of the clause are flexible, affected by the nature of the project. The three specific requirements are that the program is comprehensive, shows the sequences of activities that constitute the critical path, and is approved by the superintendent. The specific requirement of a demonstrable critical path adds little, beyond clarity of contractual intent, to the requirement that the program be, in the reasonable opinion of the superintendent, comprehensive. There is an evident contractual intention that the program is to serve not just the objectives and uses of the contractor. When evaluating extensions of time for practical completion, the superintendent under cl 35.5(d) may inquire into causes of delay that might permit extension of the date for practical completion. For that purpose, the superintendent could reasonably regard the identification of the sequence of activities that constitute the critical path as a necessary requirement of a comprehensive construction program. So too the capacity to assess the status of the works at a given time might be required. The parties have contemplated any reasonable use of a construction program in the furtherance of the management and administration of the contract and the project by the superintendent for the principal, not just by the contractor in the traditional way. I am also satisfied that the language of cl 33.2 does not constrain the superintendent to pen and paper. It is perfectly reasonable for the superintendent to refuse approval for a program, generated on industry standard software, that he cannot himself use on a computer. Nothing in the language of the contract shows that the parties intended to so confine the nature of the approved program in its use by the parties. I have arrived at this position from the language of the contract. I am not surprised to see that it accords with the substance of Mr Andrews' description of construction industry practice that I will come to in due course.

[371]

(a) intermittent gaps between the bondek sheeting and the form block walls at each end of the concrete slabs in some areas in units 1, 2, 4-7, 15, 16, and 26. Rectification grouting was recommended;

(b) steel reinforcing protruding through the concrete slab was also noticed in units 1 and 9;

(c) a steel beam was protruding through the form block wall of the foyer and into unit 4, which affected fire rating;

(d) there was a gap between the base of the steel beam which supports the concrete slab and the form blocks in units 5, 9, 10 and 16;

(e) in units 8 and 9 the steel floor beam supported the bondek sheeting through a timber packing plate. This is not a recommended installation procedure;

(f) there were penetrations through the slabs in units 1, 5, 6, 9, 15, 16 and 29 that were not filled with epoxy grout filler to ensure all sound and fire requirements are satisfied;

(g) at the transition point between the bondek concrete and the off-form concrete in units 2, 4, 6, 11, 16 and 18 there was spalling concrete. This required rectification by injecting a suitable non-shrink grout or epoxy mixture to the affected areas;

(h) the set down area of the concrete slab in unit 2 had not been set out in accordance with the drawings;

(i) the bottom reinforcement to the slab in unit 18 was visible from beneath;

(j) the steel plate which should support the bondek sheeting had not been provided in units 18-21 and 29 resulting in a gap between the bottom flange of the steel beam and the bondek;

(k) in unit 29 there was a section of bondek sheeting running parallel to the steel beam that was bowing considerably;

(l) the concrete slab had been unevenly scabbled/trowel finished in some areas in units 1, 10, 13, 14 and 17 requiring a suitable epoxy grout resin to achieve a level finish;

(m) the concrete slab terminating at the form block had not been finished with a flat and level soffit in line with the form block above and below, requiring a suitable non-shrink grout or similar epoxy mortar to be applied.

[601]

444 All that Hue must establish is that the breach is substantial, a question of fact that involves objective considerations like those identified as applying in the first stage inquiry. It is not enough for a contractor to show that the circumstances that caused the want of due expedition or delay were beyond his control. The contractor must also show that the risk of that outcome does not lie at its feet under the contract. In this sense, other aspects of the contract may become relevant. The requirements of cl 33.2 are particularly significant and distinguish the circumstances of Hometown from those of Dura. The contractor is required to execute the works according to the latest approved program. The construction program must show the sequence of activities on the critical path. Failure to have an approved program is not, per se, proof of a want of due expedition. The focus is on the construction activities at a relevant time. A construction activity that is not on the critical path and is not proceeding with due expedition, delayed by the contractor, may not constitute a substantial breach of cl 33.1. Even an assumed extended period of delay may not be material or important. Conversely, if such activity is on the critical path, a short delay, or want of due expedition may result in important time consequences and be a substantial breach. Thus, if the works are not progressing with due expedition and without delay because the critical path is extending in circumstances where the reasons for the want of due expedition lie contractually at the risk of the contractor, the breach will be substantial. In context, the obvious example is where the critical path is extending because the contractor has become obliged, whether for want of adequate quality control or proper on-site supervision of the work of trades, to undertake significant rectification of defective or non-compliant work the contractor's inability to proceed with due expedition and without delay will be, prima facie, a substantial breach.

[602]

445 Where the contractor is entitled to extensions of time, unclaimed or inappropriately rejected by the superintendent, a further consideration may arise. Such circumstance may explain an inference arising from the contractor's inability to meet the date for practical completion as administrative and not determinative of the progress of the works. The proper inference depends on the circumstances of the contractor's claimed entitlement. The present relevance of the issue is its effect on the burden of proof. Does the principal have to disprove that such entitlement exists to establish the contractors default by a want of due expedition? I do not think that it does. In each situation, other provisions of the contract are relevant. Where a contractor wishes to claim an EOT, under cl 35.5 the contractor must give written notice to the superintendent within 10 days after the cause of the delay arises. Likewise, the contractor may dispute[93] the rejection of an EOT claim by the superintendent. If a rejection of an EOT claim is apparently accepted by the contractor, the EOT claim is not a matter that the principal need take into account in determining for the purposes of cl 44.2 whether there has been default by the contractor. The obligation on the contractor, under cl 33.2(f) to construct to the latest approved program, primarily defines how the works must proceed. Due to the relevance of critical path analysis for assessment of responsibility for delay events, there is good reason for the time limits agreed for such claims. An obligation to take into account EOT entitlements of this character is not contractually imposed on the principal at the cl 44.2 stage. Such considerations may surface later, at the cl 44.4 stage, when the principal is considering whether the contractor has failed to show reasonable cause why it should not exercise a right under cl 44.4. Whether unclaimed or disallowed EOT claims then become relevant depends on the manner in which the contractor shows cause to the cl 44.2 notice.[94]

[653]

492 Of considerable significance in proving substantial breach is the joint report of Messrs Holman and Barber on services defects. In respect of the 111 items on which they agreed in the joint conclave, their agreement was that 88 items represented defects, seven of the items were not defects, and for 16 of the items there was insufficient information to determine whether there was a defect in the works. Seven items in relation to fire protection were categorised as 'insufficient information to determine' and in each case the experts could not determine from the photographs that they were examining precisely what was being represented and where it was located. Thus, a poorly sealed penetration of a service through a slab was only a defect if it could be determined that on each side of the slab was a separate sole occupancy unit. The experts accepted another three items relating to pipes being in contact with sprayed fire protection material as defects after reviewing further photos. They agreed that there were 55 defects in the hydraulics services. In many cases, the services would be removed and re-installed to rectify the defect. A failure to adequately clip or support water and waste pipe work could not be rectified without removal of plasterboard. Another agreed defect was inadequate packing under bath bases. Despite agreement between services engineers, the item was a topic of disagreement between building consultants in their conclave. The services experts agreed that several instances of inadequate installation of refrigerant pipe work were not defects because the airconditioning units were yet to be installed. Some instances of damage to airconditioning coils and to flexible duct was indeterminate as to whether it occurred on installation or, later, during Hue's demolition. In other instances, the experts disagreed as Mr Holman maintained, in my view correctly, that if pipe work was adequately restrained and supported, damage during the opening up process was unlikely.

[726]

551 Mr Pozzebon reported to the meeting that Dura had failed to make sufficient progress on defects. He considered Dura had still not complied with all of his instructions, many of which had been outstanding for some months. He had seen no real change or improvement in the quality or management of the works or in Dura's rate of progress. He considered Dura was being reactionary to site instructions rather than ensuring contract compliant works. Mr Pozzebon estimated that Dura had rectified approximately 20% of the defects identified in those notices but that approximately 80% remained unrectified. He formed this assessment using the memorandum he prepared on 8 September, from his own observations, and after considering Dura's claim that 90% of the alleged defects had in fact been rectified and confirmed by the superintendent's representative and others. Mr Pozzebon commented that Dura had not provided an often-sought plan for rectification works either during the works or in response to the notices to show cause. Mr Pozzebon expressed no confidence in Dura complying with the contract requirements. The diligence of Mr Alexander was, he thought, responsible for the rectification that Dura had achieved to date. Mr Pozzebon informed the meeting that the defects related to all facets of the project and were likely, if not properly rectified, to affect significantly and detrimentally the quality of the finished project. Asked by Mr Chu for his views on whether Dura's resources, supervision, and commitment had varied, Mr Pozzebon accepted that there had been an increase in resources but the allocation of resources was well below what a project of this size required. However, he considered Dura's increase in resources being applied to be reactive to the extent of the defects being identified by Hue's consultants. Mr Pozzebon remained concerned about poor communications between Dura and its subcontractors, no system of quality control, and the ongoing lack of attention to defects and instructions. In Mr Pozzebon's view, these matters demonstrated poor on-site management, poor co-ordination between sub-trades and poor construction management supervision.

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