//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2010] WADC 74
District Court of WA
2010-05-20
Original judgment source is linked above.
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
CITATION : LANDTEC PROJECTS CORPORATION PTY LTD -v- SPIERS EARTHWORKS PTY LTD [2010] WADC 74
BETWEEN : LANDTEC PROJECTS CORPORATION PTY LTD (ACN 110 704 875)
Breach of contractual duties - Date of practical completion - Liquidated damages clause not a penalty - Inclusion of GST - Duty of care - Counterclaim - Proof of sums outstanding
Defendant pay liquidated damages of $67,537.48 to the plaintiff plus interest at a rate of 10per cent per annum from 26 July 2005 being $100,084.00
Defendant pay the sum of $44,229.75 to plaintiff plus interest at a rate of 6 per cent per annum from 17 June 2005 until the date of judgment being $57,302.00 in relation to allowed change of James Eden Drive
Defendant pay the sum of $11,906.40 to the plaintiff plus interest at a rate of 6 per cent per annum from 17 June 2005 until the date of judgment being $15,425.00 in relation to repair to Telstra conduits
Plaintiff pay the sum of $131,704.85 to defendant plus interest at a rate of 6 per cent per annum commencing on a date of dates to be determined until the date of judgment
Esanda Finance Corporation Ltd v Plessnig [1989] HCA 7; (1989) 166 CLR 131
Michael Kelloway International Pty Ltd v Shark Bay Airport Pty Ltd, unreported; SCt of WA; Library No 970604; 13 November 1997
Multiplex Constructions v Abgarus Pty Ltd (1992) 33 NSWLR 504
Peninsular Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211
Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 at 1447; [1966] 3 All ER 128 at 142
Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd [2010] WASCA 43
Waltons Stores (Interstate) v Maher [1988] HCA 7; (1988) 164 CLR 387
Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491
West Boat Builders Pty Ltd v Cull Holdings Pty Ltd [1999] WASCA 72
1 WAGER DCJ: By contract dated 21 February 2005 the plaintiff engaged the defendant to carry out earthworks, drainage, road works and bridle path construction for a land subdivision in Pinjarra in the Shire of Murray (the first contract).
2 The parties subsequently entered into another contract for road construction of Curtis Lane adjacent to the land subdivision and up to the next intersecting road along Curtis Lane (the second contract).
3 The plaintiff's claims to be determined are that:
4 The defendant denies each of these allegations and counterclaims that:
(a) Anthony Palermo, director of the plaintiff company who managed the first contract and the second contract.
(b) Peter Bowyer, civil engineer and director of Dennis Price & Miller Engineers (DPM) now known as the Civil Group and the superintendent appointed in relation to the first and second contracts orally and or by letter from the plaintiff on 14 October 2005. Notification of Mr Bowyer's appointment as superintendent was provided to the defendant by letter dated 3 November 2006.
(c) Dr Stephen Emery, an expert witness who holds a PhD in the field of civil engineering with expertise in pavement materials and road structural design. Dr Emery provided opinion evidence in relation to James Eden Drive.
(d) Craig Risbey, director and construction manager of Unified Contracting, the company that contracted to install the water, power and Telstra conduits for the plaintiff at the same time that the defendant carried out the first contract.
(e) Peter McKenzie, construction manager of Downer EDI, the engineer who supervised quotation in relation to remedial works at James Eden Drive.
(f) Steven James, project manager of Siemens & Thiess Communications Joint Venture (STCJV), who conducted the management of the costing out and repairs to damaged Telstra conduits relevant to the first contract.
(g) Kyle Wilson, project engineer for Downer EDI, who supervised the quotation that included asphalting of the whole of James Eden Drive relevant to the defendant's breach or failure to fulfil its duty of care as alleged in relation to the first contract.
(h) Glen Smythe, field supervisor for STCJV who supervised the provision of the Telstra network installed by Unified Contracting relevant to the first contract and who identified and organised the repairs to damaged conduits relevant to the first contract.
(i) Jonathon Brown, senior engineering technician employed by Western Geotechnics in May 2007 who gave evidence about the falling weight deflector (FWD) tests and the California Bearing Ratio (CBR) measurements in respect of James Eden Drive relevant to the defects noted in James Eden Drive alleged in relation to the first contract.
(a) Bradley Spiers, co-director of the defendant who managed works on the site for both the first contract and the second contract and who has approximately 30 years experience in road construction.
(b) Helen Spiers, co-director of the defendant and office administrator for the defendant who compiled the tender documents and invoicing relevant to both contracts and who mailed invoices to the plaintiff.
(c) Kim Begelhole, compliance manager SGS formerly Western Geotechnics Group who gave evidence about the compliance of dry density and layer thickness tests replacing the tests of 5.8.1 of AS1289 in respect of road works.
(d) Anthony Wilkie, project engineer for the plaintiff and the superintendent of the first contract from the date of the invitation to tender until 11 October 2005.
(e) Alan Smith, manager engineering services, Shire of Murray, the relevant shire for the Pinjarra subdivisional area.
7 Although bundles of documents were prepared and provided to the Court by each of the parties, objection was taken to the contents of the bundles being tendered. The obligation to tender the documents once referred to primarily fell on the court. The majority of documents put to a witness during the course of the evidence were conceded by Counsel as "speaking for themselves". A general concession was made by the plaintiff's counsel that the words of the documents were not objectionable however the factual foundation for each of the documents was not conceded. I will refer to documents that were put to witnesses in evidence that from the foundation of a witness's evidence but that were not formally tendered by bundle document number.
8 The plaintiff obtained Western Australian Planning Commission approval for subdivision in the Pinjarra area that is described as Curtis Lane Stage 1. The Shire of Murray approved the subdivision. Mr Wilkie, the plaintiff's superintendent, was advised by letter dated 3 December 2004 of the conditions of planning approval including:
"23. The full construction of Curtis Lane is to be undertaken in the first stage of development being Stage 1A to enable a sealed road to extend to the development."
9 The plaintiff invited tenders for the first contract. The original invitation to tender related to Curtis Lane Stage 1, however it only included the portion of Curtis Lane that bordered Stage 1 being 313 metres being approximately one quarter of the full construction of Curtis Lane. The original invitation to tender was for both the earthworks and the installation of services. The defendant tendered for the full contract, however the plaintiff chose to split the contract and to award the contract in relation to the installation of water, power and Telstra conduits to Unified Contracting. Mr Spiers then suggested to Mr Wilkie and Mr Palermo that the defendant would carry out the remaining portion of the contract in relation to the road works, bridle paths and drainage for the sum of $498,164.36 and the plaintiff agreed.
10 The specifications of the invitation to tender that incorporated AS2124-1986 relevant to these proceedings include:
"General condition 1.9, Goods and services tax
The contract sum shall include all payments for State and Federal taxes where applicable.
AS2124-1986, 23 Superintendent
The Principal shall ensure that at all times there is a Superintendent and that in the exercise of the functions of the Superintendent under the contract, the Superintendent -
(b) acts within the time prescribed under the contract or where no time is prescribed, within a reasonable time; and
(c) arrives at a reasonable measure or value of work, quantities or time.
If pursuant to a provision of the Contract enabling the Superintendent to give directions the Superintendent gives a direction, the Contractor shall comply with the direction.
In Clause 23 'direction' includes agreement, approval, authorization, certificate, decision, demand, determination, explanation, instruction, notice, order, permission, rejection, request or requirement.
Except where the Contract otherwise provides a direction may be given orally, but the Superintendent shall as soon as practicable confirm it in writing.
If the Contractor in writing requests the Superintendent to confirm an oral decision, the Contractor shall not be bound to comply with the direction until the superintendent confirms it in writing.
AS2124-1985, 35 Times for commencement and practical completion
...
35.5 Extension of Time for Practical Completion
When it becomes evident to the Contractor that anything, including an act or omission of the Principal, the Superintendent or the Principal's employees, consultants, other contractors or agents, may delay the work under the Contract, the Contractor shall promptly notify the Superintendent in writing with details of the possible delay and the cause.
When it becomes evident to the Principal that anything which the Principal is obliged to do or provide under the Contract may be delayed, the Principal shall give notice to the Superintendent who shall notify the Contractor in writing of the extent of the likely delay.
If the Contractor is or will be delayed in reaching Practical Completion by a cause described in the next paragraph and within 28 days after the delay occurs the Contractor gives the Superintendent a written claim for an extension of time for Practical Completion, setting out the facts on which the claim is based, the Contractor shall be entitled to an extension of time for Practical Completion.
The causes are -
(a) events occurring on or before the Date for Practical Completion which are beyond the reasonable control of the Contractor including but not limited to:
(b) any of the following events whether occurring before, on or after the Date for Practical Completion -
(ii) actual quantities of work being greater than the quantities in the Bill of Quantities or the quantities determined by reference to the upper limit of accuracy stated in the Annexure (otherwise than by reason of a variation directed under Clause 40.1);
35.6 Liquidated Damages for Delay in Reaching Practical Completion
If the Contractor fails to reach Practical Completion by the Date for Practical Completion, the Contractor shall be indebted to the Principal for liquidated damages at the rate stated in the Annexure for every day after the Date for Practical Completion to and including the Date of Practical Completion or the date that the Contract is terminated under Clause 44, whichever first occurs.
The Contractor's liability under Clause 35.6 is limited to the amount stated in the Annexure.
If the time for Practical Completion is extended by the Superintendent under Clause 35.5 on account of a cause of delay for which the Annexure provides compensation, the Principal shall pay the Contractor the compensation stated in the Annexure and that compensation shall be the limit of the Principal's liability in respect of the delay.
If the Principal is in breach of contract, nothing in Clause 36 shall limit the Principal's liability for damages for breach of contract.
The Defects Liability Period stated in the Annexure shall commence on the Date of Practical Completion.
As soon as possible after Practical Completion, the Contractor shall rectify any defects or omissions in the work under the Contract existing at Practical Completion.
At any time prior to the 14th day after the expiration of the Defects Liability Period, the Superintendent may direct the Contractor to rectify any omission or defect in the work under the Contract which exists at Practical completion or becomes apparent prior to the expiration of the Defects Liability Period. The direction shall identify the omission or defect and state a date by which the Contractor shall complete rectification. The direction may provide that in respect of the work of rectification there shall be a separate Defects Liability Period of a stated duration not exceeding the period stated in the Annexure. The separate Defects Liability Period shall commence on the date the Contractor completes the work of rectification. Clause 37 shall apply in respect of the work of rectification and the Defects Liability Period for that work.
If it is necessary for the Contractor to carry out rectification, the Contractor shall do so at times and in a manner which cause as little inconvenience to the occupants of the Works as is reasonably possible.
...
44.2 Default by the Contractor
If the Contractor commits a substantial breach of contract and the Principal considers that damages may not be adequate remedy, the Principal may give the Contractor a written notice to show cause.
Substantial breaches include but are not limited to -
(a) suspension of work, in breach of Clause 33.1;
(b) failing to proceed with due expedition and without delay, in breach of Clause 33.1;
(c) failing to use the materials or standards of workmanship required by the Contract, in breach of Clause 30.1;
(d) failing to comply with a direction of the Superintendent under Clause 30.2, in breach of Clause 23;
(e) failing to provide evidence of insurance, in breach of Clause 21.1.
44.3 Requirements of a Notice by the Principal to Show Cause
(a) state that it is a notice under Clause 44 of the General Conditions of Contract;
(b) specify the alleged substantial breach;
(c) require the Contractor to show cause in writing why the Principal should not exercise a right referred to in Clause 44.4;
(d) specify the time and date by which the Contractor must show cause (which time shall not be less than 7 clear days after the notice is given to the Contractor);
(e) specify the place at which cause must be shown.
44.4 Rights of the Principal
If by the time specified in a notice under Clause 44.2 the Contractor fails to show reasonable cause why the Principal should not exercise a right referred to in Clause 44.4, the Principal may by notice in writing to the Contractor -
(a) take out of the hands of the Contractor the whole or part of the work remaining to be completed; or
(b) terminate the Contract.
Upon giving a notice under Clause 44.2 the Principal may suspend payments to the Contractor until the expiration of the earlier of -
(i) the date upon which the Contractor shows reasonable cause;
(ii) the date upon which the Principal takes action under Clause 44.4(a) or (b);
(iii) the date which is 7 days after the last day for showing cause in the notice under Clause 44.2.
If the Principal exercises the right under Clause 44.4(a), the Contractor shall not be entitled to any further payment in respect of the work taken out of the hands of the Contractor unless a payment becomes due to the Contractor under Clause 44.6.
44.5 Procedure when the Principal Takes Over Work
If the Principal takes work out of the hands of the Contractor under Clause 44.4(a) the Principal shall complete that work and the Principal may without payment of compensation take possession of such of the Constructional Plant and other things on or in the vicinity of the Site as are owned by the Contractor and are reasonably required by the Principal to facilitate completion of the work.
If the Principal takes possession of Constructional Plant or other things, the Principal shall maintain the Constructional Plant and, subject to Clause 44.6, on completion of the work the Principal shall return to the Contractor the Constructional Plant and any things taken under this Clause which are surplus.
Part A attached to the General Conditions of Contract:
# The time for Practical Completion (Clause 35.2) 10 weeks
# Liquidated Damages per day (Clause 35.6) $13,846 per week or part thereof
# Limit of Liquidated Damages (Clause 35.7) no limit
# The defects liability period (Clause 37) 12 months."
11 Clause 37 states the defects liability period shall commence on the date of practical completion.
12 The plaintiff was entitled to retain a sum of the moneys owed to the defendant pending completion of the contract.
13 The first contract also included the defendant's Bill of Quantities dated 21 February 2005 and the defendant's letter dated 24 January 2005, together with letters and plans relevant to the first contract from Mr Wilkie as superintendent.
14 It is agreed that the defendant commenced work on site on 24 February 2005 and reached practical completion on 26 July 2005 being 81 days after the agreed anticipated completion date of 6 May 2005. The defects liability period ran from 26 July 2005 until 26 July 2006.
15 Mr Palermo's evidence is that he personally cannot recall the details of the start-up meeting or meetings but that once the work commenced the defendant was required to complete the work in line with the first contract. Mr Palermo does not recall any agreement in relation to the areas in which contractors would commence work or in relation to the order in which work would be performed.
16 In contrast Mr Spiers' evidence is that at the site start-up meeting held prior to 24 February 2005 Mr Palermo on behalf of the plaintiff, Mr Risbey of Unified Contracting, Mr Wilkie as superintendent and he, on behalf of the defendant, agreed that Unified Contracting would start work at one end of the site (being the Moores Road end) and the defendant would start at the other end of the site so that the two contractors could work without interfering with each other.
17 Mr Spiers' evidence is that this agreement was not complied with. Because of difficulties with access to site from the Moores Road end both contractors were forced to commence work in the same areas and this immediately led to problems, delays and to a potential compromise of the quality of the work performed by both contractors. The service trenches that were the responsibility of Unified Contracting ran along the side of the proposed roads and, at a number of locations, crossed the roads being constructed by the defendant. Usually, Mr Spiers says, it is his experience that the digging of service trenches and the building of roads is a complimentary process so that the fill removed from the trenches can be used on road surfaces as part of the bulk earthworks however given the way in which construction proceeded the fill could not be used from the service trenches and material had to be brought in and carted out. This caused a delay to the construction of the roads and resulted in variations and additional time being taken in relation to the contract.
18 Mr Wilkie does not specify a date but says that there was a start-up meeting and that the defendant's contract and Unified Contracting's contract were awarded at about the same time with the contracts to be completed at about the same time. When work commenced on site Unified Contracting were advised to start on the east of the site and the defendant was to commence road works on the west so that Unified Contracting would be off-site until the defendant had done the earthworks. This did not eventuate because the plaintiff could not obtain access to the site from the eastern side. Accordingly, Unified Contracting followed the defendant as it performed its work "road for road". Mr Wilkie says that this caused conflict between the parties because the contractors were getting in each other's way. Mr Wilkie considers that the contractors were unable to work in a satisfactory manner until Unified Contracting went to the east of the road. Mr Wilkie assesses that this occurred approximately one month to six weeks after the commencement of the contract.
19 Although neither Mr Palermo nor Mr Risbey of Unified Contracting recalls an agreement that the contractors would start at opposite ends of the subdivisional site, Mr Risbey does recall problems with access from the Moores Road end of the site and problems relating to the access to water. Mr Risbey denies, however, that these problems in themselves caused delay or disruption.
20 Mr Spiers also says that it was only after the contract commenced that he learnt that the plaintiff had agreed to one inspection only of water services to be held approximately two to three weeks before the finalisation of work by Unified Contracting in relation to water services installed in the service trenches. Although no expert evidence was called in relation to the issue of water service inspection and no other evidence was led that the practice was unusual it is Mr Spiers' evidence that in his experience it was unusual to have only one water test because it meant that the service trenches had to remain open or uncovered until the test could occur. The late single water test delayed the closure of the service trenches and it also delayed the compaction of the service trenches both adjacent to and crossing under the roads that the defendant was required to construct.
21 The delay and the quality of the ultimate compaction of the service trenches, in Mr Spiers' view, affected the timing of the construction and the quality of the roads that the defendant ultimately constructed on the subdivision.
22 The defendant's performance of the first contract was also delayed by inclement weather. From March to July 2005 the subdivisional site was affected by very wet weather conditions that disrupted not only the defendant but also Unified Contracting. Mr Risbey's evidence is that, as at May 2005, there was a real problem with water in the service trenches and everywhere else on site. Mr Risbey agrees in cross-examination that the problem with water on site was serious and he recalls pipes floating in the service trenches at one stage. As a result of the weather conditions Unified Contracting could not complete the service trenches until July 2005. Mr Spiers' unchallenged evidence is that a creek within the subdivisional area flooded as a result of the rain. The flooding led to drainage problems on some of the blocks to be prepared for earthworks and construction and further delayed the construction of the road.
23 A further difficulty was encountered by the defendant in relation to the presence of clay on site. Clay had to be removed and appropriate materials brought onto the site before road construction could occur. Mr Spiers says that a significant period of time was spent by the defendant in removing clay so that the roads could be properly constructed. In evidence Mr Spiers says that he had encountered problems with clay in the Pinjarra area previously when working on other contracts. He had 18 years experience as an earth worker in the Pinjarra area and the potentiality of clay being present on the subdivisional site was known to him at the time when he tendered for the first contract. No evidence was given by the defendant as to whether the potentiality of clay and the related delays and additional costs due to the presence of clay were matters that the defendant took into account when calculating the tender sum for the first contract.
The first contract - the defendant's claim for additional days
24 Mr Spiers also gave evidence about a number of variations that the plaintiff requested the defendant to perform arising from factors that included faulty design, variations of design, access to water and other problems on site that have already been identified.
25 The defendant claims that as a result of the difficulties on site including Unified Contracting's interference, and the variations requested by the plaintiff, the first contract could not be completed within the 10 weeks agreed for practical completion and Mr Spiers particularises the reasons why the defendant was prevented from reaching practical completion on time. Although the plaintiff accepts that contract variations were requested and performed by the defendant, that the weather was poor and that some difficulties with clay and water arose, the plaintiff's position is that Mr Palermo made it very clear to the defendant at the outset of the contract that work must be finished on time.
26 Mr Palermo was aware that the defendant had prepared letters of notification of weather conditions and purported delays during the course of the first contract.
27 Mr Palermo himself did not do anything about the correspondence because he considered that notification of matters of this type and any subsequent action in relation to the contract were matters wholly for Mr Wilkie as superintendant of the contract consistent with the terms of the contract. Mr Palermo was unaware of any extension in relation to the completion date being allowed by the superintendant in line with the terms of the first contract. Accordingly the plaintiff submits that the first contract and the variations should have been completed in the 10 week period and that the contract was not the subject of an extension of time.
28 It is accepted that the contents of letters from Mr Spiers to Mr Wilkie (document 2.60, 18 July 2005 referred to in evidence but not tendered) summarising rainfall received on site during the 10 week period is different from the formal rainfall records ultimately referred to in evidence. (Documents 2.115 - 2.119) but Mr Palermo generally accepts that the site was wet and that this made aspects of the contract difficult for contractors on site. Mr Palermo's evidence is, however, that the work on site came to a halt for reasons other than rain. The plaintiff says that those reasons include that the defendant's machinery "disappeared" and that "no-one was on site" (T127), the inference being that manpower and resources had been redirected by the defendant to other contracts not related to the first contract. During the period of the first contract the defendant was also supervising four or five other sites including a contract in Broome. Mr Spiers generally denies taking manpower and resources from the subdivisional site, however no evidence is led by the defendant in relation to the manpower or resources that were on the subdivisional site at any specific time.
29 Mr Palermo also states that if any difficulties or delays arose because the two contractors who were working on site were in the same subdivisional area then that was a matter for the contractors to sort out with the assistance of the superintendent. In Mr Palermo's view a problem with some aspects of the contract is not of itself a reason for delay because even when the site was wet there were other areas on site and there was other work on site that could have been proceeded with by the defendant but that the machinery and the manpower was not available to take up the tasks.
30 In Mr Palermo's view none of the reasons the defendant raised for delays was insurmountable nor did any matters arise from problems on site that were brought to his attention as requiring an extension of time in a form consistent with the first contract, cl 35.5 of AS2124-1985, Extension of time for practical completion, that is, that were in written form to the superintendent setting out the details as required and received by the superintendent within the time limit set by the contract.
31 Mr Palermo's evidence is that, although as project manager he kept a tight rein on the first contract Mr Wilkie was the project engineer and the supervisor for the contract and therefore any decision about the defendant in relation to an extension of time for work to be performed on site had to be made by Mr Wilkie. Mr Palermo agrees that although he may not have liked time being extended on the contract he understood that the claims for an extension of time were a matter for Mr Wilkie and not a decision to be made by him. It is his understanding that Mr Wilkie did not approve any extensions of time in accordance with cl 35.5.
32 The plaintiff submits that not only were no requests for extension of time made in the required form but that there is no evidence that the variations and conditions peculiar to the subdivisional site caused delays that could not have been made up with an efficient workforce or organisation on site and the appropriate quantity of equipment and workers.
33 Mr Wilkie's evidence is that requests for variations to the contract were sent to Mr Palermo and not to Mr Wilkie. As superintendent Mr Wilkie says he was given specific instructions not to approve an extension of time request until he received advice from Mr Palermo. Mr Wilkie did not clarify the form in which requests for extension of time were made either to him or to Mr Palermo.
34 Mr Spiers' evidence is that the additional work days were required because of the plaintiff's demands and the design faults in relation to the first contract. Mr Spiers has calculated the additional work that was required and the days' delay on the site from his 30 years experience in the road construction business and from the details of the invoices forwarded to the plaintiff by the defendant together with information contained in a number of letters, memos and faxes sent by the defendant to Mr Wilkie and/or Mr Palermo. However Mr Spiers did not supervise all of the work on site and the defendant's foremen, Mr Lang and Mr Gallop were responsible for the day-to-day responsibilities on the subdivisional site. Mr Spiers refers in evidence to Mr Gallop keeping a site diary setting out on a daily basis the hours worked, the equipment used and matters of that type. Neither Mr Lang nor Mr Gallop was called to give evidence nor did the defendant produce the site diary referred to by Mr Spiers at trial.
35 No evidence was led by the defendant in relation to the number of workmen on the subdivisional site, the equipment on site, the man hours required for the work to be completed within 10 weeks or how the calculations had been made in relation to the invitation to tender for the first contract.
36 In line with the defendant's amended defence set-off and counterclaim by order made 5 March 2009 Mr Spiers particularises the reasons why the defendant pleads it was prevented from reaching practical completion in the 10 week period. The variations and delays are submitted by the defendant to have been requested by the plaintiff and to be the reason for the delays in completion of the first contract. The additional days sought are as follows:
10A. There was insufficient material available to create fill for the roads on James Eden Drive. Delay in finding material.
37 Mr Palermo approved the provision of fill on 30 March 2005. Four days delay is estimated by Mr Spiers.
38 A hole had to be dug to store water from the old bore hole. Correspondence from Mr Spiers to Mr Wilkie dated 29 March 2005 seeks approval to build a dam on the east block at a price of $3,000. No extra time on the contract is sought by Mr Spiers. Mr Spiers' evidence is that the defendant had to wait for water in order to proceed on site and that no work would proceed until that had occurred. There is no supporting evidence in relation to this claim. An estimate of one day's delay is made by Mr Spiers.
10C Class 2 culverts were installed on James Eden Drive that were not suitable and had to be replaced by Class 4 culverts.
39 By correspondence dated 22 March 2005 Mr Spiers states that the defendant has stopped laying culverts until the claim is resolved. Mr Palermo by correspondence dated 24 March 2005 authorises the culvert variation but states that no extra contract time is allowed. Mr Spiers estimates a delay of seven days in relation to culverts comprised of three days with no correspondence, three days replacing the unsuitable culverts and one day relaying culverts because a wrong building level had been provided. A summary of the correspondence in my view indicates that the three days with no correspondence was not allowed, however the four days in relation to the relaying of culverts was known by the plaintiff.
10D There was too much clay on James Eden Drive at chainage 520 to 540 to construct a road.
40 The unsuitable material was excavated and replaced with suitable material. Mr Spiers states consistent with correspondence dated 30 March 2005 that the excavation required sand cartage from a pit to water. He states that orally he contacted the superintendent Mr Wilkie and received permission from him, however Mr Wilkie did not give specific evidence in relation to this. Mr Spiers calculated three delayed days.
10E Three additional cross-over culverts were installed.
41 Mr Wilkie approved the culvert price and back fill in correspondence to Mr Spiers dated 31 March 2005. Mr Spiers states that no extension of time was formally sought, but the superintendent was aware of the reference to extra culverts. One day's delay is claimed.
42 One day's delay is estimated by Mr Spiers. There was no other evidence.
43 Unified Contracting had open trenches on James Eden Drive, Zaruma Way and San Simeon Way being roads on the subdivisional site before bulk earthworks for drains had been completed. The trenches were not backfilled as the plaintiff agreed to one test on completion and therefore backfill could not occur until after testing. The water in the trenches prevented work for a period estimated to be five days. Mr Spiers states that the effect of a big downfall of rain is that it may delay work for days after the event. Meteorological records note rain commencing 31 March 2005. Mr Spiers estimates a delay of five days.
10H Clearing and drain work to drain subdivision due to flooding to permit upgrading of Curtis Lane shire road.
44 The variation was approved by the plaintiff, however additional contract time was not formally sought. A five day delay is estimated by Mr Spiers.
10I Rain during May 2005 as stated in letters to the superintendent Mr Wilkie dated 2, 4, 19 May 2005 and 7 June 2005.
45 In correspondence dated 2 May 2005 Mr Spiers noted:
"Inclement weather 110 millimetres of rain on 2 May 2005. No work on site for at least three days. Clean up set back because no compaction on service trenches. No responsibility getting involved in trenches."
46 In correspondence dated 4 May 2005 Mr Spiers stated:
"3 May 2005 defendant had trouble draining site of water due to:
47 In correspondence dated 6 May 2005 and 11 May 2005 Mr Palermo stated: "Ensure all drains reinstated in the event of fresh rains."
48 Mr Wilkie confirms that drains were reinstated before further rains started. In correspondence from Mr Spiers to Mr Wilkie dated 9 May 2005 Mr Spiers stated:
"At this stage no work has been happening on site because weather does not allow this. Some batters need filling."
49 In correspondence dated 7 June 2005 Mr Spiers advised Mr Wilkie:
"Service pits open. Non-compaction inaccessible. Grader bogged in Curtis Lane. Inaccessible and more rains. Groundwater level above culverts still to be completed.
Due to my years of experience we would like to note it will take more than a couple of days of fine weather to rectify this. If we continue to work we will go backwards."
50 In evidence Mr Spiers states that 15 days delay claimed is not guesswork. He notes that he had photos and "stuff with dates. There might have been some records". No records were produced during the course of his evidence.
10J The design of the road drainage on San Simeon Way did not work and had to be changed three times. The culvert and drains changed direction and depth and had to be filled from a cut in the paddock on the west side of Lots 162 and 163. The drains on James Eden Drive and San Simeon Way would not fit in the road verge and the batter angles required correction.
51 Mr Wilkie advised Mr Lang on behalf of the defendants on 5 April 2005:
"Mick, these are the new levels for the culvert chainage 589.2A 4th Road ..."
52 The details were provided to the defendant by the superintendent.
53 Mr Spiers confirms that there was no claim to the superintendent for an extension of time in relation to 10J, however the superintendent's correspondence of 5 April 2005 indicates that he was aware of the need for additional work. Delay of seven days is claimed.
10K The material excavated from the trenches was unsuitable for road making and was left on the road verges
54 Mr Spiers states that 10K was charged as a variation to the plaintiff. Undertaking 10K impeded work on the first contract for three days. There is no formal claim nor other evidence in relation to three days' delay claimed.
10L The Class 2 culverts installed on San Simeon Way at chainage 160 had to be replaced with Class 4 culverts
55 Mr Spiers estimates that it took one day to put the Class 4 culverts in. He clarifies in evidence "I wasn't there to know whether it stopped work or not" (T 625). One day's delay is claimed.
10M Spoil material was placed over demolition material from house on Lots 108 and 109
56 Mr Spiers states that this was maybe the same clay as was required to be taken out of trenches. He notes it was charged as a variation on an hourly rate and therefore did not show on a variation progress payment provided to the plaintiff. One day's delay is claimed. There is no other evidence in relation to this claim.
57 Mr Spiers states this was probably a different time to 10L. It is unclear which trenches are referred to. One day's delay is claimed. There was no other evidence to support this claim.
58 Mr Spiers' evidence is that some top soil was brought in, but he did not know how much was brought in. He saw the job and estimated the time it took to be one day. One day's delay is claimed.
10P Dig out and reinstate culverts on Lot 102 and 208 and place extra pipe in crossover to Lot 207
59 No evidence was specifically led to support 10P. Mr Spiers states in evidence:
"Unless I've brought extra machinery in any extras cost me time on the contract." (T 629)
60 There is no evidence as to whether or not extra machinery was brought in or machinery was specifically allocated to 10P. Two day's delay is claimed.
10Q Backlog of water on Curtis Lane was not draining. Blocked outlet drain on Lot 99 and clean out drain at back of Lots 99, 100 and 101. Remove single culvert on Curtis Lane and replace with double culvert
61 In correspondence from Mr Spiers to Mr Wilkie dated 20 June 2005 this variation is particularised and Mr Wilkie's approval of it is noted. Two days' delay is claimed. Mr Spiers recalls that the work was a variation, however it is not listed on a variation claim and he assumes it was probably performed on an hourly basis. Invoices tendered at trial do not specifically note 10Q. No evidence was led in relation to why performance of the variation delayed the first contract. Two day's delay is claimed.
10R Extend James Eden Drive and place culverts over drain Lot 200 and block drain Lot 202
62 Mr Spiers states that he worked out that this would have taken 10 days. There is no other evidence to support this claim. 10 days' delay is sought.
10S Remove spoil from James Eden Drive intersection with Curtis Lane due to saturated clay.
63 Delay due to no decision from plaintiff. Crossovers installed on various low lying lots so they could be filled. Three days' delay is sought.
10T Build up pads for the electrical dome power boxes for Western Power which were underwater
64 Mr Spiers states that this was a variation and that a bucket was needed. There is no other evidence to substantiate the extension of days. Five days' delay is sought.
10U Cart top soil to fill in borrow pit used for fill for roads and service trenches because plaintiff did not have permit to excavate from Shire
65 Five days' delay is sought. There is no other evidence to support the claim.
10V Change of design in intersection of James Eden Drive and Zaruma Way
66 Mr Spiers states that there was probably not a claim for two days for change of design. It is his estimate that two days' delay is appropriate and is sought. In evidence Mr Wilkie confirms that drainage to Zaruma Way was approved for redesign consistent with correspondence from Mr Spiers to Mr Wilkie dated 22 June 2005.
10W Subgrade material was inadequate to construct roads resulting in laying of biddum cloth under limestone to prevent movement of the road
67 Mr Spiers provided a quote to Mr Wilkie for the removal of unsuitable subgrade. He notes it was not possible to work on site. By correspondence 3 June 2005 Mr Spiers confirms a delay in drainage and the need to box out spoil material and backfill. One day's delay is sought.
68 The culvert invert levels were too high resulting in the culvert protruding out of the subgrade. The levels of the drains had to be recut. In correspondence dated 11 March 2005 Mr Spiers advises Mr Wilkie:
"Culvert pipes and head walls Curtis Lane subdivision ... it has come to our attention from the plan that the culvert invert levels are too high and the culvert will protrude out of the subgrade.
... Please notify Spiers Earthworks Pty Ltd of a solution to rectify this situation ..."
69 In correspondence from Mr Wilkie to Mr Spiers dated 11 March 2005:
"... The culverts have been recalculated and they can be lowered by 155 millimetres as per attached culvert cross-section plans."
70 Mr Spiers' evidence was that there was a claim for extension of time in relation to the correspondence of 11 March 2005. A claim was not, however, tendered at trial. From his recollection Mr Spiers notes:
"I'm quite sure that I did send in a request for extension of time." (T 658)
10Y Two 450 millimetre culverts had to be cement stabilised and culvert on James Eden Drive had to be relaid to new level 31 March 2005
71 A pricing variation was provided to the plaintiff by the defendant in relation to 10Y, however there is no specific request for an extension of time. One day's delay is sought.
10Z Crossovers to Lots 104 and 105 changed as instructed by fax from plaintiff dated 1 April 2005
72 Correspondence from Mr Palermo to Mr Spiers on 1 April 2005 noted:
"Crossover had to be converted from double to 2 tonne single on Lots 104 and 105. If find others ... do not construct them ... notify immediately."
73 Although Mr Palermo was not the superintendent of the contract the correspondence is consistent with a notification to proceed with the identified crossover. One day's delay is sought. No additional evidence has been led in relation to why the conversion of the crossover led to delay on the first contract.
10AA Removal of trees as referred to in email from Anthony Palermo dated 23 March 2005.
74 The correspondence noted "Approval given last week when will they be removed?" Mr Spiers states that he remembers how long the job took to do that. The removal of trees is a variation, however no specific request was made for an extension of time.
10BB On 19 April 2005 defendant requested by A Palermo to halt work due to low level of road and risk of flooding at entry
75 Mr Spiers' evidence is that this was a verbal direction from Mr Palermo and that the delay was for a period of two days. No other evidence was led in relation to the two days' delay sought.
10CC Backfilling and compacting by Unified Contracting inadequate and prevented work
76 The defendant identifies this and other matters to Mr Wilkie by letter dated 7 June 2005 (Document 2.38 referred to in evidence but not tendered):
77 By email to the defendants on 10 June 2005 Mr Palermo wrote (Document 2.39):
"I'm not getting any response from Tony Wilkie.
Can you advise on the following:
(1) Original contract completion date.
(2) Approved extension days.
(3) Specify reason for extension.
(4) Forward authority for extension.
(5) EST new completion date, I need to know for marketing purposes. Some buyers also need an indication.
(6) Claim for wet days ... recently.
(7) My view is that the works could have been better planned. I warned all about the potential condition of the land in winter. By now I would have expected all works other than the seal to have been completed.
(8) Can you advise if you all have the manpower to fast track the works once the site permits."
78 Document 2. 39 was put to Mr Palermo in cross examination as being his document. In response the defendants faxed the following correspondence to Mr Palermo (Document 2.40):
"Tony Palermo
Item 1 - original contract completion date see contract.
Item 2 - approved extension days.
Item 3 - specify reason for extension; due to latent conditions of site, rainfall (approx 35 days), rise in ground water, insufficient compaction of trenches for services. If we were to proceed to establish drains in the soft and wet ground conditions there is a large risk that services will get damaged. Culvert Class 2 to 4 variation (7 days); culvert invert levels (2 days); unsuitable material chain 340 to 550 (2 days).
Item 4 - forward authority for extension.
Item 5 - estimate new completion date. No new completion date can be estimated due to the conditions stated in item 3. When conditions prevail we will recommence work.
Item 6 - claim for wet days (recently) claim for wet days for June until 10/6/05 is 7. The site will also need to dry out on top of this.
Item 7 - as previously notified work could not resume on drain due to services being installed. If backfilling of services had been completed in dry (e.g. compacted and completely backfilled, tested in sections) instead of one complete test the drains could have been completed. We had to try to fit culverts to design on plan not to chain levels of which some had to be changed. The contours on original drawings are wrong which makes it difficult on site.
Item 8 - is manpower available to fast track works once the site permits. We have the manpower to fast track the works when conditions permit. We currently have men and machines parked up and therefore it is also in our best interests to complete the work. This year's rainfall to this stage has been the highest in 50 years."
79 In a facsimile to Mr Wilkie dated 10 June 2005 Mr Palermo asked why pits are still open (Exhibit 2.41). In a facsimile dated 11 June 2005 to Mr Wilkie (Exhibit 2.41.4) Mr Palermo states:
I warned you that lack of minutes, conferences and other would lead to legalities. We are almost there. It appears Spiers will claim in excess of 35 days. Is that correct? Who pays? If I lose any sales someone will pay. I don't care who."
80 Mr Palermo's correspondence to Mr Wilkie dated 17 June 2005 confirms that the compaction of the Unified Contracting backfilling was not adequate at that time. Mr Palermo states (document 2.43):
"3. ... Again using the rain as an excuse is not acceptable. Given the time of the year and given the type of land involved in the subdivision, once winter sets in there are obvious reasons why certain works have to be completed by a certain time frame."
81 The correspondence relevant to the period 10 to 17 June 2005 refers generally to the two days' delay sought.
10DD Changes to drainage services and culverts authorised by plaintiff and Wilkie as per letter from defendant to Wilkie dated 21 June 2005, two days.
82 Mr Wilkie approved the redesign of drainage services. A reference to a claim for inclement weather (10 days, 3 to 15 June 2005) is included in the same claim, however the letter does not specifically refer to changes to drainage services. Two days' delay is sought.
10II 23 June 2005, 37.2 millimetres rain prevented work and water banked up 30 metres. Electrical trench to Lots 99/100 and 100/101 sunk and had to be rectified.
83 Although the defendant raises the need for rectification in relation to 10II with the superintendent in correspondence dated 24 June 2005, Mr Lang, on behalf of the defendant in the same correspondence states:
"Also due to rain Thursday, 23/6/05 there was no work on site, we have a small crew on site today cutting drains and laying culverts."
84 The correspondence would indicate that some work could proceed on site. There is no additional evidence to support the defendant's claim in relation to 10 days' delay.
10JJ Replaced unsuitable material at intersection of Curtis Lane and James Eden Drive as stated in letter from defendant to Wilkie dated 27 June 2005
85 An approximate price for additional work in relation to rectification of 10JJ is provided by the defendant. The correspondence does not refer to additional days required in respect of the first contract. One day's delay is sought.
10KK Raising level of Curtis Lane and James Eden Drive intersection by 100 millimetres as stated in letter from defendant to Wilkie dated 28 June 2005
86 The correspondence refers to the sum to be charged by the defendant in relation to the performance of 10KK. There is no specific request for an extension of time. One additional day is sought.
10LL 4 July 2005, 13 millimetres of rain, whole job is waterlogged.
87 Apart from rain records there is no other evidence in relation to this claim for one additional day.
10MM Anthony Palermo authorises construction of limestone road to Western Power transmitter and another culvert to Lot 207/208 by email dated 15 July 2005
88 Mr Palermo's email authorises the construction of 10MM, however Mr Palermo also notes "Proceed with the works without delay". There is no request nor additional evidence in relation to two days' delay sought in respect of the first contract.
The first contract - the defendant's claim for additional days - findings
89 The defendant entered into the first contract and agreed to the completion date before receiving any direction in relation to Unified Contracting and the location where work was to be commenced. Although I accept that the defendant struck difficulties in completion of the contract, Mr Wilkie's evidence is that Unified Contracting followed the defendant road for road. There is no evidence that the work on-site was so frustrated by the actions of Unified Contracting as to make the performance of the contract impossible. I accept that performance was difficult. But no more.
90 Although Mr Wilkie says he passed requests for extension of time onto Mr Palermo, Mr Wilkie continued to act as superintendent and did allow some requests. There is no evidence that Mr Wilkie could not have extended time as requested. Clearly a very difficult relationship had developed between Mr Palermo and Mr Wilkie however Mr Wilkie continued as superintendent until 11 October 2005 and held himself out as superintendent. I do not accept that while Mr Wilkie was employed by the plaintiff Mr Palermo acted as superintendent in lieu of Mr Wilkie.
91 However in the correspondence of 10 to 17 June 2005 Mr Palermo did not hold himself out as being the person to whom extension days should be communicated nor did he indicate to the superintendent or to the defendant that the contractual obligations did not apply. There is no evidence from Mr Wilkie that the plaintiff had instructed him not to comply with the conditions of the first contract nor has the defendant pleaded that the plaintiff waived the right or obligation of the defendant to make claims for the additional time in accordance with the contract. In any event there is no evidence that the plaintiff waived other contractual rights and therefore waived the requirement to claim additional time in accordance with cl 35.5.
92 The correspondence of 10 to 17 June 2005, specifically Document 2.40 from Mr Palermo to Mr Spiers sought details of extension of time days from the defendant. In reply to Mr Palermo's request Mr Spiers listed the days as extension of time days in correspondence (Document 2.41). Mr Palermo then communicated that he did not have confidence in Mr Wilkie in the role as project engineer/superintendent. Although Mr Palermo did not request details of extension of time days from Mr Spiers again the correspondence continued between Mr Palermo and Mr Spiers for the rest of 2005/beginning of 2006. At no time did Mr Palermo indicate to Mr Spiers either orally or by correspondence that he did not accept the 42 days set out in Document 2.41 as being extension days. I do not accept that the work represented by the 42 days refers to work performed by the defendant that the defendant was simply required to perform under the first contract. The work performed was either additional work or work that required additional time because of inclement weather. The additional 42 days are comprised of 35 days due to rain (particulars 10G, 10I and part of 10II) and seven days for installation of culverts that were originally unsuitable (particular 10C).
93 It is clearly desirable for additional days to be calculated and assessed at the time when the days are sought so that the conditions on site are known to all parties and the appropriateness of the request can be assessed by all parties. I note that the correspondence, Documents 2.40 to 2.43 for 10 to 17 June 2005 was written at a time relevant for consideration of the 42 days sought and therefore the parties were not required to look back or to reconstruct the conditions on site in respect of the 42 days. Clearly, the request by Mr Palermo to clarify extension days and Mr Spiers' response for 42 days did not comply with cl 35.5 of AS2124-1985 however, given Mr Spiers' reliance on Mr Palermo's correspondence the issue is whether there is a factual foundation sufficient at law to ground an estoppel. It is not in dispute that the elements required for there to be estoppel in these circumstances are as set out in "Cheshire and Fifoot's Law of Contract" 8th Aust ed, par 2.2, p 62.
"The elements of estoppel exist when a promise, representation or conduct of one party leads another to assume that the first party will follow a certain course of action or that certain facts were established or that a certain legal relationship exists or will exist and the other acts on that assumption in some material way - relies on the promise, representation or conduct to his or her detriment - so that it would be unconscionable for the first party to go back on the promise or representation or to undermine the assumption generated by that party's conduct. This statement can be reduced to three elements:
(1) a party makes a statement, representation, promise or fosters an assumption;
(2) the other party relies to his or her detriment on the statement, representation, promise or assumption; and
(3) the first party wishes to act contrary to the statement, representation, promise or assumption and this would be unconscionable in the circumstances."
(See also Waltons Stores (Interstate) v Maher [1988] HCA 7; (1988) 164 CLR 387).
94 The correspondence, document 2.40 from Mr Palermo to Mr Spiers seeking extension of time days was followed by correspondence relating to a lack of confidence by the plaintiff in the superintendent. No other communication from Mr Palermo notified Mr Spiers that the extension of time days would not be allowed. I find that a representation fostering an assumption was made by requesting notification of days claimed and then remaining silent. The defendant had reason to rely on the assumption that the extension was allowed. For this reason the defendant did not consider that any further action was required on its part to notify the plaintiff of a request for extension in relation to the days. It cannot be said that failure to allow days would not be to the defendants' detriment because the defendant had an obligation to perform the contract in any event. Activation of the penalty clause would, in the circumstances, have been to the detriment of the defendant in relation to the relevant days.
95 I find that the plaintiff's actions were promissory in intent and that the 42 days should be allowed. Accordingly I consider that the plaintiff is now estopped from relying on cl 35.5 of AS2124-1985 in relation to the 42 days and that the date of completion of the first contract should be extended by 42 days to 17 June 2005.
96 Different considerations arise for the claim for extra days over and above the 42 days. Although I accept that all of the additional work was performed I do not accept that there was a formal agreement for Unified Contracting to commence at the other end of the site from the defendant leading to breach of contract. There may have been informal discussions about the desirability of the two contractors starting at different locations but neither Mr Risbey nor Mr Palermo recall an agreement. I accept that the defendant experienced difficulties because Unified Contracting were working in the same location as the defendant and because of the variations, changes to design, inclement weather, presence of clay and other matters. The fact that the work was performed and that the difficulties in performance were communicated by the defendant to the plaintiff does not of itself justify a claim for an extension of days on site. Evidence needs to be led to establish why the work could not have been completed at the same time that work was being performed on the first contract. This evidence is not led.
97 The plaintiff has not waived its right to claim liquidated damages because it failed to respond to the defendant's correspondence in relation to the days sought over and above the 42 days. None of the correspondence relevant to the additional days properly addressed the information required for an application for an extension of time to be considered pursuant to cl 35.
98 It is not pleaded by the defendant that cl 35.5 is waived and Mr Palermo's evidence is that the plaintiff did not consider any condition of the first contract had been waived. No evidence is led by the defendant in relation to the number of workmen on site, the equipment on site, manpower hours or why additional days as opposed to additional manpower was required.
99 Despite earlier correspondence in relation to a lack of confidence in Mr Wilkie the plaintiff retained Mr Wilkie as superintendent until 11 October 2005 and all of the additional days sought were prior to this date. There was no reason why the defendant would think that days over and above the 42 days should not have been cleared by the superintendent in line with the conditions of the first contract and the requirements of cl 35.5.
100 It is submitted by the defendant that consistent with the decision of Peninsular Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211 that estoppel would also apply to the additional days because of the plaintiff's failure to respond to the defendant's written requests that did not comply with cl 35.5. In my view the position in that case can be distinguished from the present position in that in the case of Peninsular Balmain Pty Ltd v Abigroup Contractors Pty Ltd (ibid) an application had been made within contractual time for the variations sought under the contract but the lodged claims had not yet been determined by the superintendent at the time of termination. In that case Hodgson JA (with whom Mason P and Stein JA agreed) held that the original referee's decision (which was the subject of the appeal) showed that the referee did not find all the facts which were necessary at law to ground an estoppel and that the primary Judge was in error insofar as he accepted the finding of estoppel (at [82]). I do not find that the decision of Peninsular Balmain Pty Ltd v Abigroup Contractors Pty Ltd (ibid) assists in the determination of the present case.
101 It is also submitted by the defendant that this is a case of estoppel by convention in that the parties proceeded on the first contract in an informal basis not in accordance with the first contract. The evidence does not support this submission. Mr Wilkie continued as superintendent until 14 October 2005. There was no request by the defendant specifically seeking additional days in accordance with cl 35.5. There was no further correspondence from Mr Palermo seeking clarification of extension days after 10 June 2005 nor did Mr Palermo request information of additional days sought from the defendant on any occasions other than 10 June 2005.
102 The defendant also submits that the plaintiff is attempting to "blow hot and cold" in that ultimately the plaintiff sought to bond the full extension of Curtis Lane with the Shire of Murray as a result of the wet weather conditions experienced in the road construction and therefore benefitted from its agreement with the Shire of Murray in a way that it would not allow the defendant to benefit in relation to its claim in respect of the first contract. Any agreement between the plaintiff and the Shire of Murray is not, in my view, relevant to cl 35.5.
103 I do not accept that Mr Palermo prevented the superintendent from approving extensions of time for inclement weather and contract variations. The fact that the plaintiff was aware of the work performed by the defendant is not the same as the defendant justifying a claim for additional days pursuant to the contract. Any failure by the plaintiff to meet its obligations under the contract (such as the issuing of a final certificate or the formal notification of the appointment of a new superintendent) occurred after the date relevant to the extensions of time sought. The plaintiff was under no obligation to bring the defendant's failure to comply with the first contract to the defendant's attention. The plaintiff by its conduct, actions and communication did not waive cl 35.5 of the first contract. Accordingly, a total of 42 additional days only applies bringing the date to 17 June 2005. No contractual extension is made for the remaining 34 days or 4.86 weeks.
104 The plaintiff undertook to the Shire of Murray to seal 1,200 metres of Curtis Lane as part of the subdivision. The plaintiff however did not contract the defendant nor any other contractor to complete this work at the time of the first contract. The Shire of Murray therefore bonded the completion of Curtis Lane by holding blocks that were part of the subdivision. Mr Palermo states that the plaintiff agreed to bonding because of the poor weather conditions and the delays relevant to the weather. Further, the plaintiff wanted to place the subdivided lots on the market and therefore agreed to bonding so that the blocks could be put up for sale (subject to the bonding). The defendant submits that the plaintiff's agreement with the Shire of Murray to bond the roadwork on Curtis Lane demonstrates that the plaintiff was aware that weather conditions were so poor that it was not feasible to finish the road works without delays however it is submitted by the plaintiff that given that the bonding occurred many months after the commencement of the first contract the plaintiff's assessment and decisions relevant to bonding are not relevant to the completion of the first contract by the defendant.
The first contract - liquidation damages for late completion
105 The first contract completion date was 10 May 2005 being 10 weeks after the agreed commencement on 24 February 2005. An additional 42 days extends the completion to 21 June 2005. Practical completion is agreed to have actually occurred on 26 July 2005 being 34 days
(4.86 weeks) after the contracted date. The defendant pleads that the liquidated damages sum claimed is a penalty and is not an appropriate sum for liquidated damages. Mr Palermo's evidence in relation to the setting of the liquidated damages sum is that the sum was calculated on the sale of all 32 lots in the subdivision at $225,000 to $250,000 each being multiplied by the bank interest rate being charged at the time for monies borrowed and divided back to give a weekly rate. Mr Wilkie made a similar calculation. In the initial draft tender document Mr Wilkie restricted the liquidated damages sum to 10 per cent of the sum calculated by Mr Palermo because he considered that a high liquidated damages sum in an invitation to tender would only lead to an increase in the prices of the tenders submitted. Ultimately, however, Mr Wilkie entered the sum of $13,184.60 per week into the tender document being 100 per cent of the sum calculated by Mr Palermo. The defendant pleads that the sum of $13,184.60 is not set as a genuine attempt to estimate the plaintiff's loss made in good faith and that it greatly exceeds the greatest loss that could result from a breach of the contract. It is argued that the sum is not an appropriate sum for liquidated damages but that it is a penalty inserted to benefit the plaintiff. In Esanda Finance Corporation Ltd v Plessnig [1989] HCA 7; (1989) 166 CLR 131 at 143 Brennan J said:
One of the tests stated by Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1914] UKHL 1; [1915] AC 79 at p 87, to assist in ascertaining whether a stipulated sum is a penalty is whether the sum 'is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach'. To apply this test, it is necessary to identify the breach prescribed by the clause which imposes the supposed penalty and to ascertain the measure of loss which might follow from that breach. If the stipulated sum is payable on the occurrence of any breach of the contract, whether serious or trifling in its consequences, there is a presumption that the sum is a penalty: ibid."
106 I therefore need to determine whether I am satisfied on balance of probabilities that the sum set is extravagant and unconscionable and whether, in the circumstances, the breach of the contract is trifling.
(a) The plaintiff's failure to comply with the direction of the Shire of Murray to seal all 1,200 metres of Curtis Lane as part of the first contract meant that the Shire would not give approval to the subdivisional lots until the whole of Curtis Lane was completed and therefore certificates of title could not issue until the plaintiff had complied with the requirements of the Shire of Murray.
(b) By later bonding the sealing of 1,200 metres of Curtis Lane with the Shire of Murray all lots were not immediately available for sale and remained unavailable until the bond was lifted.
(c) The services installed by Unified Contracting were not approved until after the date of practical completion (Document 2.69, 29 July 2005 and Exhibit 2.88, 5 September 2005) and therefore the lots were not available for sale at the contracted date for practical completion regardless of the actions of the defendant.
(d) The delay in sales benefited the plaintiff as the price rose in the market.
108 It is however also submitted by the defendant that the evidence led by the plaintiff is consistent with the fact that the plaintiff intended to sell the subdivisional lots off the plans prior to the issue of the certificates of title (Exhibit 2.52.1).
109 The plaintiff had organised several lot buyers prior to obtaining approval from the Shire of Murray for titles for the lots as evidenced by correspondence document 2.74 dated 4 August 2005 and document 2.93.1 dated 21 October 2005.
110 The correspondence (document 2.74 and Exhibit 1.317) supports the inference that at the time of drafting the liquidated damages clause of the first contract the plaintiff intended to sell lots off the plans prior to the issue of certificates of title. Any delay by the Shire of Murray and any late release for sales as a result of bonding is therefore not relevant because it was the plaintiff's intention to sell the lots regardless of bonding and it had the ability to sell the lots without titles but after the date of practical completion. I therefore do not consider it relevant to the issue of the availability of the lots that they were bonded.
111 I do however need to consider whether the breach was trifling given that the lots could be sold before completion and given the delayed dates of approval of the services installed by Unified Contracting and the related delay to the defendants' completion date.
112 I accept that throughout the first contract the plaintiff made it clear to the defendant that it did not want delays from the defendant in relation to the completion of the first contract. The defendant was contracted to install roads and bridal paths. The installation of roads and bridle paths would have formed the lots and given prospective purchasers an idea of the area and what the lots would look like. I accept that completion of the roads and bridal paths was therefore important for the plaintiff in relation to showing prospective purchasers what the lots would look like. The delays did not just relate to work to be performed by Unified Contracting. The completion of roads and bridle paths was important because prospective purchasers needed to see the lots in order to make a decision in respect of purchase. I am not satisfied that the breach was trifling.
113 I accept that on the evidence led by the plaintiff it would be open to the plaintiff to have sought to have the roads and bridle paths within the subdivision constructed in line with completion of the first contract by the defendant so that the lots and their surroundings were apparent to prospective buyers prior to the completion of work by other contractors and prior to the issue of certificates of title.
114 Mr Spiers is experienced in the tendering process. It is open to a tenderor to factor in a high sum of liquidated damages and to increase the tender price accordingly. There is no evidence as to whether or not the defendant factored the liquidated damages sum into its tender price. No evidence was led by the defendant that the liquidated damages sum was unreasonable or that it was not in accordance with the usual construction contractual practices. In Multiplex Constructions v Abgarus Pty Ltd (1992) 33 NSWLR 504 at 526 Cole J refers to the judgment of Diplock LJ in Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 at 1447; [1966] 3 All ER 128 at 142 in the context of the calculation of holding charges in respect of a genuine pre-estimate of damage.
"In Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 at 1447; [1966] 3 All ER 128 at 142 Diplock LJ in an illuminating judgment said:
'Nevertheless the courts would be doing an ill turn to those whom the rule about 'penalty clauses' is designed to protect if they were to apply it so as to make it impractical for parties to agree at the time when they enter into a contract upon a fair and easily ascertainable sum to become payable by one party to another as compensation for the loss which the latter will sustain as a consequence of its breach. It is good business sense that parties to a contract should know what will be the financial consequences to them of a breach on their part, for circumstances may arise when further performance of the contract may involve them in loss. And the more difficult it is likely to be to prove and assess the loss which a party will suffer in the event of a breach, the greater the advantages to both parties of fixing by the terms of the contract itself an easily ascertainable sum to be paid in that event. Not only does it enable the parties to know in advance what their position will be if a breach occurs and so avoid litigation at all, but if litigation cannot be avoided, it eliminates what may be the very heavy legal costs of proving the loss actually sustained which would have to be paid by the unsuccessful party. The court should not be astute to descry a 'penalty clause' in every provision of a contract which stipulates a sum to be payable by one party to the other in the event of a breach by the former'.
The onus of showing that such a stipulation is a 'penalty clause' lies upon the party who is sued upon it."
116 I find that the evidence is consistent with the plaintiff setting the liquidated damages sum at a percentage of 100 per cent of the sale of lots because the plaintiff intended to offer the lots for sale as soon as practicable. There is no evidence before me to indicate that a commitment for sale required the issuing of certificates of title. The plaintiff's desire to complete the first contract was a decision made on economic grounds. The defendant's tender for the work to be performed was made by a man experienced in the tender process who should have factored the liquidated damages sum into the overall tender price.
117 Although the sum of $13,896.60 per week is a high sum it is not an extravagant nor an unconscionable amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach of the first contract being delayed sales on the lots that were valued at $225,000 or more each. I am not satisfied that the defendant has proved that the liquidated damages sum is a penalty clause. The liquidated damages sum of $13,896.60 applies to the period of 4.86 weeks delay being $67,537.48. Interest at the contracted rate of 10 per cent per annum from 16 June 2005 until the date of judgment applies.
118 I also note that I do not consider the fact that the property market grew stronger so that ultimately better prices were achieved than those originally forecast is relevant to the issue of liquidated damages for late completion.
119 The specifications of the invitation to tender incorporated AS2124-1986 and also included:
"General condition 1.9, Goods and services tax
The contract sum shall include all payments for State and Federal taxes where applicable."
120 The defendant's original tender form for the whole of the works in relation to the first contract referred to GST as being additional to the tender price. Specifically the defendant's tender form included a bill of quantities showing the cost of items plus GST. The reference to additional GST was crossed out and endorsed "refer to contract" by the plaintiff. As endorsed the first contract was signed on 21 February 2005 by Mr Wilkie on behalf of the plaintiff and by Mr Spiers on behalf of the defendant. However, despite the general condition of contract the defendant's progress payment invoices, the first invoice being dated 28 February 2005, added GST to the amount claimed from the plaintiff. The invoices were approved by the superintendent in full and were paid by the plaintiff in full.
121 Mr Palermo's evidence is that he was aware that the contract between the plaintiff and defendant was inclusive of GST however when he received the defendant's first progress payment he approved the payment and did not raise the discrepancy in relation to the defendants' addition of GST with the defendant because progress claims are made in arrears. Mr Palermo therefore did not have any concerns about paying a sum greater than that relevant to the contract price for the progress payment because by the time payment was made more money would be due to the defendant because another progress payment period had commenced. Mr Palermo denies any suggestion that he waived the condition of the contract in relation to the GST by making the full progress payment claimed by the defendant. He states that it was open to Mr Wilkie as superintendent to raise the inaccuracy of the progress payment with the defendant however he did not see it as his role as contract manager to raise the issue of GST with the defendant. So as far as Mr Palermo is concerned the terms of the contract were clear and he was not required to reiterate those terms.
122 Mr Palermo's evidence is that he did not intend to waive the condition of contract in relation to GST and there is no evidence that the plaintiff waived the condition. There is no evidence that the defendant was under any misapprehension or confusion at the time of signing the contract. Mr Spiers gives evidence of his experience in earthworks construction and in tender process. He is aware that the conditions of a signed contract will usually prevail.
123 The defendant asserts that by paying the progress payments in full the plaintiff represented to the defendant that the contract was not inclusive of GST, a representation on which the defendant then relied. The defendant also submits that because the proceedings were commenced by the plaintiff without a pleading in relation to GST being included and the plaintiff did not amend its pleadings until 23 February 2009 that the plaintiff has always proceeded on the basis that the contract was exclusive of GST and is estopped from changing its position.
124 I do not accept that the plaintiff represented that the contract excluded GST by his words or his conduct and even if it did that it would be bound by its payments or failure to plead inclusion of GST. The defendant signed the contract inclusive of GST and was therefore required to perform the contract as signed. There is no suggestion on the evidence of an estoppel arising. This is because the defendant was required to perform the contract in accordance with the contract that the parties had signed. There is no detriment to the defendant because the defendant was required to carry out the contract as agreed and that agreement included the GST was included in the agreed contract price.
125 The plaintiff pleads that pursuant to cl 30.1, 44.2 and 44.3 of the conditions of the first contract the defendant failed to use the materials and standard of workmanship required by the first contract insofar as, in the construction of the road James Eden Drive, a road within the subdivision, the defendant failed to properly compact the sub-base and/or used poor materials at chainages 120 to 270 of the road. The plaintiff pleads that this is a substantial breach of the contract. It is also pleaded that the defendant had a duty to exercise reasonable care in the performance of the first contract.
126 The defendant denies any failure in relation to materials and standard of workmanship and states that the main defect that was located at chainage 150 of the road was as a result of a service trench constructed by Unified Contracting.
127 The defendant experienced a number of problems in the construction of James Eden Drive because of encountering clay, design problems, problems with excess water, a requirement to bring in extra materials and delays because of the late closure and compaction of service trenches by Unified Contracting. Although a number of problems on site and alleged road defects were originally the subject of pleadings they are not matters that remain for determination. The conditions generally experienced on the site (the evidence of the conditions having previously been referred to) do, however, form the background to the difficulties and tension that clearly arose amongst the parties during the course of construction.
128 After practical completion the defendant was provided with a defects list by Mr Wilkie who was at that time the superintendent. Item 18 of the list relates to the defect at approximately chainage 150 of James Eden Drive. Although the defendant received the defects list the defendant did not rectify the problem at chainage 150 at that time. The defendant viewed a number of the problems identified on the defects list to be related to design defects and he wanted the plaintiff to re-design the road before the defendant proceeded further. By letter referred to in evidence dated 2 May 2005 to Mr Wilkie, superintendent, Mr Lang on behalf of the defendant also advised the plaintiff as follows:
"Attention Tony
Dear Tony
Re Inclement Weather
Due to the 1100 mm (sic) of rain early Monday morning on 2/5/05, there will be no work on site for at least 3/three days.
Also due to no compaction on surface trenches before rain, clean up will be set back if at all. We will hold no responsibility for damages caused to surfaces by machines working on clean up and getting bogged in trenches.
Should you have any queries in this regard please do not hesitate to contact myself at our office or mobile number 0427197064.
Regards
Nick Lang
Spiers Earthworks Pty Ltd"
(document 2.27)
129 Given the notification to the plaintiff of the defendant's position that the defendant would not be responsible for any difficulties in the service trenches that arose at the time of compaction or of road construction the defendant pleads it was not required to address problems encountered on James Eden Drive.
130 In any event Mr Spiers states that one of the main defects alleged being the "rough patch" at chainage 150 of James Eden Drive was actually a service trench that had been installed by Unified Contracting on the site of the road before the defendant compacted the road surface or the base course sub-grade for the road. Mr Spiers' evidence is that because the service trench contained a conduit and was very wet when Unified Contracting filled it that it was very hard for the defendant to achieve the same or equal compaction with the rest of the road surface over the top of the service trench. At T590:
"It was my understanding of the contract that if Unified put a conduit through, it's up to them to compact. It's up to them to compact it back to its original condition, and the same for the trenches that run alongside the road."
131 Mr Spiers agrees however that if the surface of a road is not up to standard then it would be for the defendant who had contracted to construct the roads to perform the additional work to raise the surface to the correct standard and to then claim for the variation in relation to the original contract. He agrees that this did not occur in relation to James Eden Drive in line with the defendant's position that it would not be responsible (document 2.27).
132 The plaintiff called Dr Emery as a witness in support of its claim that the defendant was responsible for the defects located on James Eden Drive at chainages 120 to 270. Evidence was led that Dr Emery was engaged by the plaintiff on the recommendation of Mr Bowyer of DPM to determine the extent of the defects to the subdivisional roads that included James Eden Drive.
133 Dr Emery has qualifications as a civil engineer and has a Doctorate of Philosophy in the field of civil engineering that includes the study of pavement materials and road structural design. He has 30 years experience as a civil engineer and he has expertise in relation to the assessment of road defects. I accept his evidence as expert evidence in relation to the issue of road defects. A report prepared by Dr Emery at the request of the plaintiff and dated 1 June 2007 is Exhibit 1.377.
134 It is common ground that a constructed road is comprised of a top two coat seal underneath which is a base course comprised of gravel. Under the base course is a sub-base of limestone. Beneath the sub-base is the base course or sub-grade which is natural ground (Exhibit 14).
135 Dr Emery's assessment related to testing of the sub-base and the base course.
136 One week prior to trial Dr Emery was provided with 36 certificates obtained by the defendant relating to maximum density or reference density tests (as compared with field density tests) to determine the compaction in relation to the subdivisional roads for the first contract (Exhibit 16). Although the test certificates demonstrated a different Australian standard to the specifications for the subdivisional contract Dr Emery confirms that the Australian standard tests had been superseded by the tests reported in the certificates (Exhibit 16) and this was also confirmed by Mr Begelhole.
137 On examination of the certificates Dr Emery found that the variability of density on James Eden Drive was quite low. In Dr Emery's view this indicated that the defendant had worked out percentage compaction for James Eden Drive reasonably well.
138 Dr Emery then assessed the materials used in the sub-base. He tested the sub-base in relation to grading specifications, that is, the grading of the material, the number of large stones, middle sized stones, small stones and the like. The specification required 50 per cent to 75 per cent of the material to pass through a 19 millimetre sieve.
139 On testing the relevant chainages of the James Eden Drive location the tests showed that only 20 per cent rather than the required 25 per cent of the material stayed on top of the sieve meaning that the limestone was too small to clump appropriately and thereby form a secure sub-base.
140 Dr Emery attributes this to weak limestone which he identified as being a poor material.
141 Dr Emery also tested the gravel base course. 100 per cent of the gravel base course material is required to pass through the 19 millimetre sieve in order to be small enough to avoid clumping. The results included areas of 3, 4 and 6 per cent failure to pass through the sieve. Dr Emery considers the failure to meet the standard to be a defect. Two rough "scuff" spots and a pothole were identified by Dr Emery on James Eden Drive. Dr Emery notes weakness at chainages 200 and 270 and he notes a concern in relation to chainage 290. Chainage 150 was also a location identified by Dr Emery and highlighted in his report.
142 Falling weight deflectometer (FWD) test results for James Eden Drive (obtained by Douglas Partners from Western Geotechnics Pty Ltd) assisted Dr Emery to make a strength assessment at fairly close intervals along James Eden Drive. The tests indicated a weakness in the base course at the areas already identified (being chainages 120 to 270).
143 Dr Emery did not dig holes in James Eden Drive as part of his testing process however he concluded that the two test results on which he relied were sufficient for him to reach a conclusion in relation to defects in the road.
144 Specifically, Dr Emery did not consider that the rough or weak spots on James Eden Drive were consistent with a trench being dug across the road. In cross-examination a photograph of James Eden Drive at chainage 150 was put to Dr Emery, together with the proposition that the weak spot was on top of a service trench: Dr Emery says:
"It's not a service trench because they would have had to have dug it all the way to the left, to the edge of the bitumen. If I look across at the right hand side, if I compare the very edge between the bitumen and gravel between the grey and the brown, it is not a straight line, there is some unevenness ... It is not logically explicable by means of the construction process. ... To me in my expert opinion, there was something unusual untoward happening beneath the surface." (T429 and T430)
145 Dr Emery carried out the road tests in the summer approximately 10 months after the expiry of the 12 month defects liability period however he did not consider that the season nor the time delay affected his results. In Dr Emery's opinion water ingress would not have caused the defects and he considered that the drains on site were deep and would tend to keep water away.
146 Dr Emery did not agree that approximately 100 trucks using the road would be indicative of heavy usage because he considers that Shire requirements would require a design to allow for about 150,000 vehicles during the life of the road.
147 Although Mr Wilkie and Mr Risbey gave evidence at trial neither was specifically cross-examined in relation to the findings of Dr Emery. The defendant did not call any expert evidence in relation to the defects nor did it call independent evidence in relation to the existence of a service trench at chainage 150. Dr Emery was not vigorously challenged on his expert findings and assessment.
148 Mr Spiers' evidence is that the defendant only used quality materials in the construction of James Eden Drive. The defendant purchased the limestone used to construct James Eden Drive from a quality assured supplier. He used a multi-roller in finishing the surface to ensure against compaction flaws.
149 It may be that the defendant has concerns in relation to the quality of the material provided contrary to the quality assurances given by its supplier, however this is not a matter to be determined in this trial. Dr Emery's evidence is essentially unchallenged and I find him to be a credible witness. I find that the defects to James Eden Drive occurred in breach of the defendant's obligation to use the materials and the standard of workmanship required by the first contract.
The plaintiff's claim for remedial works - is the breach a substantial breach?
150 The plaintiff notified the defendant of the defects by sending Mr Spiers the defects list dated 27 July 2005 (Exhibit 1.273). Further requests to undertake rectification work were communicated by the defendant by:
(a) email from the plaintiff's engineer, Mr Grispos, dated 19 January 2006 (Exhibit 1.349);
(b) email from Mr Grispos dated 15 May 2006 (Exhibit 1.368);
(c) letter from DPM to the defendant dated 20 December 2005 (Exhibit 1.333).
151 By notice to show cause from the plaintiff to the defendant dated 22 September 2006 (Exhibit 1.376) the defendant required the plaintiff to show cause why the plaintiff should not exercise the plaintiff's right under cl 44.2 of the first contract. The defendant did not show cause in response to the notice however the defects liability period expired one year after the date of practical completion being 26 July 2006. The notice to show cause was not received within the 12 month period. The repercussions of a fundamental breach and the plaintiff's rights pursuant to cl 44 therefore do not apply.
152 The defendant claims that given that the Shire of Murray had not identified the defects in James Eden Drive and that repairs were undertaken without reference to the defendant that the plaintiff's claim for the cost of repairs should not be allowed because of the plaintiff's prior breach of contract and the defendant's notification to the plaintiff that the defendant would not take responsibility (Document 2.27).
153 Although the plaintiff had not paid all of the defendant's invoices when the defect list was first sent to the defendant and the defendant had notified the plaintiff that it would not take responsibility for the relevant defects to James Eden Drive, those defects were due to the defendant's poor standard of materials and workmanship. Regardless of cl 44 I find that the defendant had a duty to perform its contract with reasonable care and that it has breached that duty. Accordingly, the defendant was required to rectify its defects.
154 The defendant by correspondence and actions was not prepared to rectify James Eden Drive and the plaintiff therefore arranged for rectification. The reasonableness of the extent and type of rectification work performed on James Eden Drive remains an issue to be determined.
155 The plaintiff pleads that all of the rectification work performed was necessary and that the sums charged were appropriate.
156 The defendant pleads that the plaintiff failed to mitigate its loss because it overlayed the whole length of James Eden Drive with asphalt which was not reasonably required by the contract. In cross-examination Dr Emery confirms that his recommendation in relation to rectification of the defects on James Eden Drive was only to asphalt the length of James Eden Drive containing the chainages of concern. Dr Emery confirms, however, that he is an engineering expert and could not comment on aesthetic requirements. Given that the whole length of James Eden drive did not have to be asphalted because of defects I therefore need to determine whether it was reasonable to asphalt the whole of the road for aesthetic reasons and therefore whether the asphalting of the whole of the road is a cost that should be borne by the defendant.
157 Mr Bowyer of DPM was engaged by the plaintiff in around August 2005. His evidence is that he determined that rectification of the defects in James Eden Drive required the covering of the whole of James Eden Drive from chainages 00 to 800 by re-sheeting 30 millimetres thick being placed on top of the road surface. In his opinion the full length of James Eden Drive had to be re-sheeted because:
158 I accept that complete reconstruction of 150 metres of James Eden Drive would have been a more expensive alternative. There is however no evidence over and above that of Mr Bowyer that partial re-sheeting would have led to problems in the future for James Eden Drive and Dr Emery's evidence does not support this proposition.
159 Dr Emery gave evidence of variation of surfaces (in relation to red hot mix rather than in relation to James Eden Drive) around roundabouts installed in the subdivision. There was no suggestion in any evidence led by the plaintiff that the starting and finishing of different surfaces near roundabouts would lead to a patchwork effect that was aesthetically displeasing nor that the starting of one surface and the finishing of another would cause a variation of the surfaces on the roads that would lead to any weakness or future difficulties in relation to the quality of the roads. I do not accept Mr Bowyer's evidence that the finish would be weak because the evidence is not supported by the evidence of other witnesses including Dr Emery. Further I do not accept that the surface would be so aesthetically displeasing, given the use of red hot-mix around roundabouts that it would be reasonable for the defendant to pay the cost of asphalting the whole of the road.
160 I find that it was reasonable that only chainages 120 to 270 of James Eden Drive needed to be resurfaced with asphalt and I do not accept the evidence in relation to the aesthetic concerns of the plaintiff.
161 I accept the evidence of Mr McKenzie of Downer EDI in relation to the work performed on James Eden Drive. I also accept that the rates for the work performed as set out by Mr Wilson, project engineer Downer EDI, and the rates and time required for supervision by Mr Bowyer were reasonable. The sums charged were also reasonable for the whole of the chainage 00-800 however, in light of my findings I reduce the sum to reflect asphalting of a chainage of 150 only, being 20 per cent of the length claimed by the plaintiff.
162 I therefore accept that the sum set out by the plaintiff in the plaintiff's substituted schedule of damages dated 5 March 2009 is reasonable for chainages 00-800 however I have reduced the sum of Item 3, Annexure A and related GST and Item 1.1, Annexure B to 20 per cent of the sum claimed for the resurfacing. I therefore allow $30,616 plus $3,062 GST being a total of $33,678.
163 The claim for contract administration fees regarding the remedial works is more difficult in that I accept that administration in relation to the assessment of the problem and the supervision of the repairs required more than 20 per cent of the sum claimed. Although the documents in Annexure C of the plaintiff's substituted schedule of damages dated 5 March 2009 are led as evidence that payments were made, it is not possible to glean which aspects of supervision have been referred to in relation to each invoice. I have therefore allowed 75 per cent of $14,069 being $10,551.75 for contract administration fees (inclusive GST). The total sum is $44,229.75 with interest at 6 per cent per annum from 16 June 2005 until the date of judgment.
The first contract - the plaintiff's claim for repairing the Telstra conduits
164 The plaintiff pleads that the defendant failed to use the standard of workmanship required by the first contract pursuant to cl 30.1, cl 44.2 and cl 44.3 of the conditions of contract insofar as the defendant damaged and/or broke Telstra conduits previously laid by Unified Contracting by running over the Telstra conduits with its earthmoving equipment at various locations. The plaintiff relies on the particulars of STCJV's letter and the attached subdivision map of Dennis Price Miller identifying the areas of damage alleged. The documents include the invoice for repairs, being $11,906.43 (Exhibit 1.339), conduit map showing 2,806 metres (Exhibit 1.340) and supporting photographs relevant to the damage alleged (Exhibit 1.341 - 1.348 inclusive). By facsimile dated 20 December 2005 Mr Grispos wrote to the defendant (copy to Mr Palermo) in the following terms:
"Subject: LOTS 188, 189 AND 222 CURTIS LANE - PINJARRA
DAMAGE TO TELSTRA CONDUITS
We were advised on Friday 16 December 2005 by Glen Smythe of Siemens Thiess (STCJV) that the Telstra conduits for the above project that were laid by Unified Contracting were damaged at several locations. The full extent of the damaged conduits within the entire subdivision was, at that point in time, not possible to quantify (as only a portion of the network had been investigated) and STCJV would be undertaking 'proving' of the entire conduit network to confirm the total extent of damaged conduits.
STCJV commenced the 'proving' on Monday, 19 December and are continuing with this work today. STCJV will also be repairing/replacing damaged conduit as it is identified. STCJV has advised that the additional costs for the above will be $1,300.00 per day for 'proving' plus $120.00 per metre for repair of damaged conduit and then plus the GST. The STCJV will be logging and photographing the damaged conduit.
We discussed the damaged conduits with yourself and Mick Lang on the 19th December. Your Mr Lang stated that Spiers had been responsible for some damage during the reworking of the open drains and adjustment of lot levels and this had been immediately repaired. You had stated that Spiers had previously raised the issue of possible damage to the conduits due to the rework and wet ground conditions. Regardless of these comments, the Contractor remains responsible for all aspects of its work including taking steps to locate any existing services and then protecting them before any work commences.
Notwithstanding the above, Spiers Earthworks was and is responsible for undertaking all due care during any rework that could potentially have damaged the conduits. Hence we consider that all costs associated with the identification and repair and/or replacement of damaged Telstra conduits should be borne by Spiers.
Spiers is provided the opportunity to undertake the repairs itself now as identified by STCJV. Failing this the cost of repair and 'proving' work undertaken and to be continued by STCJV will be back charged to Spiers. If you choose to arrange the proving and repairs then you must do so immediately, otherwise and in accordance with the contract, the principal can exercise its right to arrange the proving and repairs at your cost.
Regards
John Grispos
Senior Engineer"
165 Unified Contracting accepted no liability. Exhibit 1.351 is a facsimile to Mr Palermo dated 27 January 2006 that states:
"Tony, in response to your fax dated the 26-1-06 Telstra breaks. We except (sic) no liability for the damage. I have added some extra breaks that we also repaired. We normally have one broken pipe every four contracts. Apart from the ones shown on your plan I have marked a further Eight located and fixed by ourselves. This would have to be a world record. This does not include Water main damage When we attempted to pressure test the water mains we also found two sections torn out. And prior to the Water Corporation excepting (sic) handover there was two or three damaged sections had to be repaired that were hit after pressure test. Some valve and hydrant furniture also had to be replaced as it also had been smashed. This suggested a total disregard by other contractors for works on the site.
In conclusion you can see why we would accept so liability for the cost that has been incurred to date.
Regards
166 The defendant's position is that because Unified Contracting were unable to start work at the Moores Road end of the subdivision both contractors were attempting to work in the same area on site. This led to considerable delay and compromised the quality of the work performed because the defendant could not properly access the areas to complete the earthworks. Mr Spiers states that the defendant needed to form up the roads and cut the drains and intended to use the material from the drains for the bulk earthworks and that, as a result of the actions of Unified Contracting this could not occur. The inspection of water services installation occurred two to three weeks before the finalisation of work by Unified Contracting and therefore the compaction of the relevant service trenches (both adjacent to and crossing the subdivisional roads) did not occur until after inspection thereby delaying the defendant's completion of earthworks and road construction. The substantial difficulties experienced by the defendant as the result of inclement weather in March to July 2005 also caused difficulties and delay for Unified Contracting.
167 In cross-examination Mr Risbey confirms that Unified Contracting was substantially disrupted in its work on the subdivisional site due to the very wet weather conditions and that in May 2005 there was a real problem with water in the service trenches and everywhere else. Mr Risbey recalls pipes floating in the service trenches at one stage. As a result of the weather conditions Unified Contracting could not complete the service trenches until July 2005.
168 The defendant submits that given the difficulties Unified Contracting experienced in relation to the installation of the services into the trenches the finish ultimately achieved on the service trenches by Unified Contracting compromised the finish on the roads that were installed by the defendant. The defendant further pleads that given its correspondence to the plaintiff, Exhibit 2.27 dated 2 May 2005 stating that it would take no responsibility for damage caused to services by machines working on clean up and getting bogged in trenches, that any damage to conduits was not the responsibility of the defendant.
169 Although Mr Spiers refers to the defendant's equipment becoming bogged in service trenches and the difficulties in performing surface work in light of the location of the open service trenches there is no direct evidence that the defendant caused the damage to the Telstra conduits as a result of its failure to comply with the first contract or with its contractual and tortious obligations generally.
170 The plaintiff however submits that the weight of the evidence supports that the inference should be drawn that the defendant is responsible for the damage as alleged. It is submitted that the facts upon which the inference should be based are that there were only two contractors on site being the defendant and Unified Contracting. There was no suggestion that any intervening acts occurred or that other contractors may have damaged the conduits. Unified Contracting had a system in place on the subdivisional site whereby its employees were required to report damage including plant damage and machine damage. There was no recorded reporting of any damage by Unified employees in relation to the Telstra conduits.
171 The defendant did not give any evidence of having a reporting system in place in respect of damage on site while working on the first contract. Mr Spiers was the only representative of the defendant on the first contract site to give evidence at trial. Mr Spiers concedes that he was not present at the site on a full-time basis and that work was performed in relation to the first contract in his absence. Mr Spiers does not dispute that Mr Lang, an employee of the defendant, advised Mr Grispos of DPM on 19 December 2005 that the defendant had been responsible for some damage caused in the service trenches nor does Mr Spiers dispute that one of the defendant's employees had previously apologised to Unified Contracting for tearing a water main out from a trench.
172 The plaintiff submits that the damage caused by Mr Lang and the apologies by the defendant's employees are consistent with the type of damage that occurred. The plaintiff submits that the damage occurred as a result of the defendant's machinery being used in the location of the service trenches and the type of physical damage caused. Although it is conceded by the plaintiff that Unified Contracting repaired and replaced some broken pipes or conduits it is submitted that this work was performed simply to "get on with the job" and not as the result of any liability or obligation on the part of Unified Contracting.
173 The defendant submits that it admitted responsibility for some damage during the reworking of the open drains and the adjustment of lot levels. The defendant asserts that if any damage was caused the defendant immediately repaired the damage either themselves or through agreement with Unified Contracting so that broken conduits or damage would have been addressed at the relevant time. The defendant denies that the reworking of the trench areas could potentially have damaged the conduits but no evidence is given as to why the defendant makes this assertion. The defendant submits that the evidence is unclear as to how the conduits came to be damaged and that it would be speculation only to find that the defendant was responsible.
174 The defendant submits that the inference is equally open that the damage noted by Mr Grispos in December 2005 was caused by Unified Contracting because although Unified Contracting did not record any damage to conduits under its reporting system Unified Contracting were delayed by the ingress of water and Mr Risbey described pipes floating in the open service trenches. Unified Contracting were working in the service trenches on a daily basis and could have caused some or all of the damage to the conduits.
175 A large number of conduits from varying locations were damaged. No analysis of the damage occurred until well after the two contractors had completed their work in or near the service trenches.
176 I am satisfied that the inference that the damage was caused by the defendant is more likely than that the damage was caused by Unified Contracting. I am satisfied on the balance of probabilities that the defendant caused the damage to the conduits. The damage caused is in breach of the defendant's duty to perform work relevant to the contract to the required standard. The defendant is liable to pay the sum claimed in relation to rectification of the damage to the conduit.
177 I make the following comments in relation to the reasonableness of the assessment of damages and the reasonableness of the work performed by STCJV.
178 Mr Smythe gives evidence that STCJV provided the Telstra network that Unified Contracting installed at the subdivisional site. Following installation and identification of broken conduits through the subdivision Mr Smythe alerted the plaintiff that the broken conduits had to be fixed in accordance with the relevant Telstra agreements. Mr James of STCJV supervised the costing out and performance of the repairs to the conduits that were noted by Mr Smythe. The uncontested evidence (Exhibit 1.338, T46 by consent dated 16 January 2006) notes:
"Repair 43 ducts.
Replace broken ducts $11,906.40."
179 A daily rate for the subcontractor and the metreage rate of $120 was charged. A total of 2,720 conduits being all conduits on the subdivisional site were checked. It is not disputed that the work was performed by STCJV and that the work was performed on a schedule of rates supplied by Telstra. I accept the evidence given by Mr James in relation to the reasonableness of the rates charged and the work performed being consistent with the sum of $11,906.40. The total sum allowed is $11,906.40 plus interest at a rate of 6 per cent per annum from 16 June 2005 until the date of judgment.
180 The defendant entered into a second contract with the plaintiff on 11 September 2005 in the sum of $214,992 exclusive of GST for the completion of the full length of Curtis Lane. AS2124-1992 was incorporated into the second contract and the contract specified the standard of workmanship required. The sum of $214,992 included $14,250 for traffic control and $15,750 for road closure. These sums were to be deducted if not required however Mr Spiers says that he was required to implement both traffic control and road closure. GST is payable on the total sum relevant to the second contract. A retention component could be held by the plaintiff in relation to the satisfactory completion of the second contract.
181 Although the defendant completed the work on Curtis Lane including variations as directed by the plaintiff and its representatives, the defendant pleads that sums due and owing in relation to both the first contract and the second contract and variations thereto remain outstanding.
182 In summary, the defendant's counterclaim is for the sums of:
$32,526.72 outstanding for the first contract being a retention percentage plus GST held by the plaintiff in relation to the first contract
Invoice V612 for work performed on the first contract Invoice 1023 inclusive GST
Second contract Invoice 489 31 October 2005 supply and delivery of base course (payment certificate approved Grispos) 22 November 2005
Invoice 600 30 September 2005 traffic control drains, sub-grade, sub-base base course, seal, primer inclusive GST
Extra works for second contract and first contract V 612 28 February 2006
183 However, in par 12 the defendant pleads that on 22 September 2006 the plaintiff was indebted to the defendant in the sum of $328,563.17. It is pleaded that the defendant paid $50,000 in part satisfaction of the debt in or about October 2006. The defendant counterclaimed that:
184 The trial has proceeded on the basis that the first contract was for a sum of $498,164.36 inclusive of GST and that the second contract was for $214,992 exclusive of GST less sums that were to be withheld for partial completion of Curtis Lane under the first contract and variable upon whether or not the road was closed during construction. Given the sums that the parties agreed had already been paid by the plaintiff the sum sought by the defendant appeared to exceed the full value of the total price for the two contracts plus the sum charged for variations.
185 The plaintiff does not admit that the sums claimed by the defendant are due and owing however the plaintiff prepared and annexed to its Re-amended Reply and Defence to Set-Off and Counterclaim dated 23 February 2009 a document headed "A" (now exhibit 4) setting out the invoices the plaintiff received and the amounts the plaintiff has approved and has paid.
186 All relevant invoices were exhibits in the trial. All invoices were received as exhibits by consent as being true copies of the defendant's invoices but were not received as evidence of the truth of the documents' contents.
187 In cross-examination relevant to the counterclaim Mr Spiers says that Ms Helen Spiers was responsible for the defendant's invoices and book keeping. Mr Spiers agrees that there were variations in some of the invoices prepared for the plaintiff however he could not clarify the details. Mr Spiers says that Ms Helen Spiers is the witness on whom the defendant relies in relation to the compilation of the invoices the subject of the counterclaim.
188 Ms Spiers evidence is that she was the defendant's office manager for both the first contract and for the second contract. Ms Spiers had prepared or overseen the preparation of all of the documentation sent to the plaintiff in relation to invoices for the first contract, the second contract and variations.
189 Ms Spiers says in evidence that she met with Mr Bowyer on behalf of the plaintiff at the commencement of the trial in order to try to resolve some of the discrepancies in the positions between the plaintiff and defendant in relation to the outstanding sums claimed in respect of the counterclaim. It was during the course of the discussions that Mr Bowyer advised her that the defendant's claim exceeded the total amount relevant to the contract sums. Although the meeting occurred at the start of the trial the defendant did not apply to amend its pleadings as a result of Ms Spiers' discussion with Mr Bowyer and the defendant did not give the plaintiff any notice that Ms Spiers' evidence would suggest a variation of the counterclaim or the particulars. During the course of Ms Spiers' evidence Exhibit 4.1 was tendered which is alleged to set out the sums that should be added to the sum of $120,842.85 from Exhibit 4 as representing the total outstanding sum relevant to the defendant's counterclaim. In substance Exhibit 4.1 sets out:
Shortfall carried across on tally sheet (84929.39/68335.98)
add 14250/15750 + gst (cancel inv 600 & 489 & replace)
gst on sub - gst on $37970.8 (49816.44 - 3787.08)
inv 407 included 20755.9 of extras (not part of contract)
190 After identifying the documents that Ms Spiers says relate to the claim set out in exhibit 4.1 the cross-examination of Ms Spiers was halted by counsel for the plaintiff. The plaintiff's counsel submitted that he had not had an opportunity to take instructions in relation to the document Exhibit 4.1 nor was the breakdown of the various invoices described by Ms Spiers clear. It became apparent that it would be a very laborious process to go through each entry on every invoice so that counsel could familiarise himself with the figures referred to by Ms Spiers in the witness-box. It was envisaged that the basis for the figures in Exhibit 4.1 could be clarified informally and, if required, evidence could then continue. The defendant closed its case. It did not indicate that it wished to recall Ms Spiers as a witness. Closing submissions were then filed. It was only after the filing of closing submissions by both parties that the defendant applied to amend its pleadings in relation to the sums relevant to the counterclaim in light of Ms Spiers' evidence on the contents of Exhibit 4 and Exhibit 4.1.
191 On 9 July 2009 I dealt with the defendant's interlocutory application to amend its pleadings. I refused leave to amend the pleadings for the reasons that were delivered by extempore judgment on 11 July 2009. My extempore interlocutory decision was the subject of appeal (Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd [2010] WASCA 43). Although the decision was delivered on 2 February 2010, the reasons for decision were not published until March 2010. The court file, including exhibits relevant to this trial, were returned to this jurisdiction on 20 April 2010.
Determination of the sums alleged to be outstanding relevant to the counterclaim
192 Ms Spiers confirms that $190,000 that was particularised in pleadings was wrongly claimed. She says that that sum should be deducted from the counterclaim but that the sums that she particularised in evidence and summarised in Exhibit 4.1 should be substituted and included.
193 The defendant has always alleged a shortfall in payment in respect of the two contracts and the variations. Although the particulars of the shortfall alleged and the ultimate quantum claimed vary significantly from the figures originally pleaded, the documents referred to by Ms Spiers in her evidence are invoices and related documents that have been tendered as part of either the plaintiff's bundle of documents or the defendant's bundle of documents.
194 The plaintiff therefore had possession of the documents relevant to Exhibit 4.1 (further evidenced by the plaintiff's early preparation of Exhibit 4 and the discussions between Ms Spiers and Mr Bowyer at the commencement of the trial).
195 Counsel for the plaintiff asked Ms Spiers to clarify her assertions as part of the cross-examination. Counsel for the plaintiff did not challenge Ms Spiers assessment of the sums the subject of her evidence-in-chief.
196 I accept that according to her assessment of the invoices, the sums Ms Spiers gives evidence of appear to be outstanding. The figures set out in Exhibit 4 and Exhibit 4.1 are the sums in issue.
197 The defendant has always asserted through its counterclaim that sums due and owing by the plaintiff remain outstanding. Given the manner in which the trial proceeded it would be unreasonable and unjust for me to ignore the defendant's evidence solely because it is inconsistent with the particulars pleaded in the counterclaim.: see Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491 at 497. I will therefore consider the evidence in relation to the issue of the sums alleged to be outstanding.
198 The plaintiff however has never admitted that any of the sums either pleaded by the defendant or the subject of Ms Spiers' evidence alone are due and owing.
199 The obligation is on the party bringing the claim to prove that the sum outstanding is not just a sum recorded as due, but is, legally, a sum that the plaintiff is required to pay. The parties burden to prove a sum claimed was discussed by Kennedy J in the decision of Michael Kelloway International Pty Ltd v Shark Bay Airport Pty Ltd, unreported; SCt of WA; Library No 970604; 13 November 1997. In that case at p 12, his Honour said:
"In Bonham-Carter v Hyde Park Hotel Limited (1948) 64 TLR 177, at 178, Lord Goddard CJ said:
'Plaintiffs must understand the fact that if they bring actions for damages it is for them to prove their damage; it is not enough to write down the particulars, and, so to speak, throw them at the head of the Court saying: "This is what I have lost; I ask you to give me these damages". They have to prove it. The evidence in this case with regard to damages is extremely unsatisfactory.
Unfortunately, the present case is, in my opinion, just such a case ... The evidence is not such as to prove the respondent's damage. There is no evidence as to any verification of invoices, as to the verification of quantities, or as to the reasonableness of the charges'."
200 The plaintiff submits in this case that the defendant's evidence in relation to the sums alleged as due and owing falls into a similar category and submits that the evidence led has failed to prove the sums claimed.
201 In the case of West Boat Builders Pty Ltd v Cull Holdings Pty Ltd [1999] WASCA 72, the respondent at trial at first instance had led no evidence to support invoices claimed as due and owing by the respondent. In that case the issue of reasonableness of the sums claimed had been a contested pleading. On appeal Ipp J with whom Malcolm CJ and Steytler J agreed, said at [15]:
"In my opinion, however, in the absence of other evidence tending to prove the hours worked, the rate charged for the work, the materials provided, the cost of the materials and the overall reasonableness of the work done, the qualified promise to pay made by the respondent falls a long way short of establishing that [the amount claimed] ... represented the reasonable cost of the work."
202 The plaintiff submits that the records that Ms Spiers refers to fall short of establishing the reasonable costs that are claimed.
203 Ms Spiers had prepared the defendant's tender documents and invoice documents for 22 years. The tender for the first contract was created by preparing a Bill of Quantities and writing "plus GST" on the top. When work had been performed relevant to the contract Ms Spiers prepared the invoice for payment by running off a Bill of Quantities that was fully itemised on an excel spreadsheet. The particular claim that was submitted would be for the section of the contract that the defendant was performing or had performed at the time. That page, together with a page setting out extras for additional work performed was printed off by Ms Spiers and sent to Mr Wilkie, the plaintiff's superintendent.
204 Mr Wilkie would verify that the work was done and send a progress certificate. Ms Spiers said that after the progress certificate had been issued, often the engineer just wanted an invoice that had only a dollar value on it and not the breakdown. On occasion the extras or the variation sum was included in a single figure so that the plaintiff only needed to issue one cheque. This was the practice that Ms Spiers followed for both the first and for the second contracts.
205 In order to provide the invoices to the plaintiff Ms Spiers prepared the invoices and then put them in an envelope and posted them the next morning. The defendant did not have a system recording mail in or mail out. In addition, no checks were made that the item was actually sent or received, however Ms Spiers evidence is that she was personally responsible for putting items in the mail.
206 In cross-examination Ms Spiers says that in 2005 details of daily time records were kept by the defendant's employees. She says that she might collate them once a week and pay fortnightly. Every employee had a daily docket book recorded in quadruplicate and a copy of the daily docket was provided to the defendant. Ms Spiers says that she was struggling to find these records however she does not dispute that the records exist. Ms Spiers had 100 per cent faith in the daily documents although she herself did not regularly attend site nor did she examine the work performed on the defendant's behalf.
207 Ms Spiers states that Exhibit 4 correctly records that $120,842.85 is outstanding. Exhibit 4 shows:
208 Ms Spiers also claims that Exhibit 4 records only part of the discrepancy. Ms Spiers' evidence relevant to Exhibit 4.1 in relation to the remaining sums alleged by her as outstanding is as follows:
"CURTIS LANE
Progress payment as per payment certificate number 1 $102,994.45
Plus GST $ 10,299.45
$113,293.90"
A cheque in the sum of $113,293.90 from the plaintiff to the defendant dated 13 October 2005 is attached to Exhibit 1.296.
Document 2.78 referred to in evidence is the quotation for the second contract of Curtis Lane. The total sums contained on progress payment 1 are consistent with the contract however there is no reference at all to a sum of $20,755.90 for extras.
210 Ms Spiers has given unchallenged evidence that she prepared each invoice by running off a Bill of Quantities. The defendant then issued a progress payment certificate. The progress payment certificates contained authorisation in relation to payment. Each of the sums set out in Exhibit 4 has been the subject of a process of review by the plaintiff's superintendent or by Mr Grispos in the position of superintendent. Given that Mr Grispos passed away prior to trial, there has been no evidence in relation to his assessment of the invoices, however the notation on the invoices is consistent with full approving being given by the superintendent. Given that I have documentary evidence in relation to these sums, I do not consider that evidence relating to manpower,
materials and reasonableness of the sums claimed is required in relation to the $120,842.85. I find that the sum of $120,842.85 is due and owing by the plaintiff to the defendant.
211 The plaintiff, consistent with its records, denies ever receiving invoice 1023 and accordingly states that it did not authorise the variation sum claimed. Given that the onus is on the defendant, I am not satisfied that Ms Spiers evidence proves that invoice 1023 was actually posted to the plaintiff. The defendant has not led any evidence in relation to the manpower, the materials or the reasonableness of the sums contained in invoice 1023. I find that the defendant has not discharged its evidentiary burden in relation to the sum of $8,267.05.
Invoice fee 612 - shortfall on tally sheet $16,593.41
212 The evidence in relation to V612 is consistent with the defendant's claim that $84,929.39 remained unpaid. Ms Spiers gives evidence of the sum of $16,593.41 actually being the shortfall. Although consideration of the relevant documentation shows that this is a possibility, I am not satisfied that the defendant has discharged its burden of proving that the sum of $16,593.41 remains outstanding.
213 Although the GST component relates to a portion of the sealing of Curtis Lane, the work was performed pursuant to the first contract and not the second contract. The first contract is inclusive of GST. The defendant's claim for $3,787.08 is not made out.
214 For the reasons I have outlined, this sum is not allowed.
215 Invoice 407 shows a total of $113,293. The sum of $20,755.90 is alleged by Ms Spiers to relate to extras that remain outstanding. There is no documentation specifically setting out an approval of the sum of $20,755.90 by the plaintiff nor of a failure to pay by the defendant. Although the figures referred to by Ms Spiers in her evidence suggest that there may be a shortfall, I am not satisfied that the defendant has discharged its burden of proving that the sum is due and owing.
$10,862 being 5 per cent retention of $124,155.90 from the Curtis Lane second contract
216 The plaintiff was entitled to retain 5 per cent of the sum due and owing to the defendant. I find that the sum was retained by the plaintiff. There is no documentary evidence that indicates that the sum was ultimately paid by the plaintiff to the defendant. I am satisfied that the plaintiff owes the defendant the sum of $10,862.
217 I find that the defendant has proven that the sum of $131,704.85 is due and owing. The counterclaim is otherwise dismissed.
218 I will hear further from the parties in relation to the terms of the final orders to be made in this matter particularly in relation to the dates from which interest should be ordered in respect of the counterclaim and in relation to the form that the orders should take. In summary my factual findings are:
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
CITATION : LANDTEC PROJECTS CORPORATION PTY LTD -v- SPIERS EARTHWORKS PTY LTD [2010] WADC 74 (S)
BETWEEN : LANDTEC PROJECTS CORPORATION PTY LTD (ACN 110 704 875)
Interest on counterclaim - Costs - Partly successful claim
Defendant to pay the plaintiff's costs of the claim to be taxed
Cretazzo and Lombardi (1975) 13 SASR 4
Mannex v Laumbos Pty Ltd [2000] NSWCA 32
Miles & Anor v Palm Bridge Pty Ltd [2001] WASC 42
Ritter v Godfrey [1920] 2 KB 47
1 WAGER DCJ: On 20 May 2010 I handed down my reasons for decision in this action. I reserved three issues, namely the relevant dates from which interest would accrue in respect of the partly successful counterclaim, the form of the costs order and the form of the final orders. Although it is not a matter that I reserved the defendant submits that I should recalculate the interest in relation to the plaintiff's claim. Specifically the defendant submits that the remedial work for James Eden Drive was not paid for prior to 31 March 2008 and the rectification of the Telstra conduits was not paid for prior to 16 January 2006. I do not accept that I should vary the dates upon which interest has been originally calculated in respect of these two heads of damages. I do not vary my findings from 20 May 2010.
2 In my reasons for decision I found that the sum of $131,704.85 was due and owing to the defendant. The counterclaim was otherwise dismissed.
3 It is submitted by the plaintiff that no interest on this sum was due and owing until 31 March 2008 because the first contract and the second contract both incorporated the AS 2124-1992 General Conditions and the counterclaim consisted of sums arising under both the first contract and the second contract.
4 Pursuant to condition of the first contract the principal (plaintiff) may deduct from any monies due to the contractor (defendant) any monies owed by the contract.
5 Pursuant to cl 44.6 of the first contract cl 42.10 the defendant was not entitled to any further payments unless a payment became due under cl 44.6 of the contract. No payment became due under cl 44.6 of the first contract. There is no evidence that the Superintendent certified an amount for such a payment. The Superintendent could have issued a certificate following the rectification works on James Eden Drive that were completed by 31 March 2008. It is submitted that interest should therefore accrue from 31 March 2008.
6 The defendant submits that its entitlement to interest should run from the date of the last payment certificate, namely 17 May 2006, Exhibit 1.69. I do not accept this as being the correct date because it ignores cl 44.6. The plaintiff's submissions in relation to the date when interest becomes due and owing are in accordance with both my findings of fact and the terms of the first contract. I accept the plaintiff's calculation. Interest on $120,842.85 is due and owing from 31 March 2008 until 20 May 2010. The defendant submits that the interest should be at a rate of 10 per cent consistent with cl 42.9 of the first contract. I accept that the rate of 10 per cent applies. Interest for a period of 780 days at $33.10 being $25,824 applies. The combined counterclaim and interest in respect of the first contract is $157,529.
7 The outstanding sum in relation to the second contract is $10,862. I accept that a rate of 10 per cent should apply for a period of four years and 140 days being $4,760. The total sum in respect of the second contract is $15,085. Given my assessment the combined counterclaim and interest is $173,151. The plaintiff's claim including interest is for a sum of $188,236. $15,085 is the sum to flow from the defendant to the plaintiff.
8 Given my assessment of the plaintiff's claim including interest, the sum to flow from the defendant to the plaintiff is $24,219.18.
9 The plaintiff submits that, as the successful party the defendant should pay the plaintiff's costs (however the defendant submits that the plaintiff should pay the costs of the counterclaim). The plaintiff submits that generally the whole of the costs should be awarded in its favour. Reference is made to Miles & Anor v Palm Bridge Pty Ltd [2001] WASC 42 Hasluck J at [51]:
"It emerges from this review of the authorities that in circumstances where the Arbitrator has been dealing with various claims and cross-claims under a building contract, the general rule is that the successful party is the party who secures a judgment for the balance, that is to say, the party to whom there is a final flow of money. The party identified as the successful party upon that basis will generally be awarded the whole of the costs, unless there are special circumstances which justify a ruling to the contrary. If the Arbitrator acknowledges the general rule in favour of the successful party, but is then able to identify special circumstances to the contrary referable to the conduct of the dispute, or the outcome, and his reasoning in that regard appears on the face of the award, then a Court will not normally interfere with the exercise of his discretion."
10 The plaintiff submits that although the Court has discretion to order a successful party to pay the other party's costs, such an order would only be made if the successful party had done something wrong connected with the institution or the conduct of the action or has done a wrongful act in the course of the transaction the subject of the suit (see Cretazzo and Lombardi (1975) 13 SASR 4 at 11); Ritter v Godfrey [1920] 2 KB 47 at 60, 61; Mannex v Laumbos Pty Ltd [2000] NSWCA 32; Rules of the Supreme Court 1971, O 66, r 2. It is submitted that there is no misconduct on the part of the plaintiff in this case and I accept that there has been no misconduct. The plaintiff therefore submits that the unsuccessful litigant should pay the costs of the successful litigant in full.
11 The plaintiff further submits that a chronology shows that by 31 March 2008 the remedial works to James Eden Drive had been completed, however it was only one week prior to trial that the defendant disclosed test certificates relevant to the construction of James Eden Drive and that the certificates were only produced for the plaintiff's inspection on 5 March 2009.
12 The plaintiff also submits that although Registrar Kingsley had ordered on 6 March 2009 that amended papers for the Judge were to be prepared by the defendant, this order was not complied with by the date required. The defendant sought to amend its pleadings at the commencement of trial and again during the course of the trial on 12 March 2009 and 16 March 2009. The defendant would not consent to the tender of the plaintiff's bundle of documents causing the unnecessary and time consuming process of tendering each document page by page.
13 Further, it is submitted that on 17 March 2009, being eight days into the trial, the defendant's counsel opened its case consistent with the sums pleaded in the counterclaim, however he then sought to amend the counterclaim two days later on 19 March 2009 and again on 11 June 2009 after the case had closed.
14 The plaintiff submits that the plaintiff was successful or partly successful on each head of damages whereas the defendant was unsuccessful on five of its claims and that the defendant relied almost entirely on the plaintiff's documentation relevant to its counterclaim to support that part of the claim that was successful.
15 It is also submitted by the plaintiff (and supported by the affidavit of Mr Palermo sworn on 27 May 2010) that an informal offer was put by Mr Palermo to Mr Spiers during the first day of the trial for a sum in excess of the counterclaim order ultimately made on the basis that each party bear their own costs and that the defendant rejected the offer and the matter proceeded to trial. The defendant submits that because the offer was not in the form of a Calderbank offer and no leave for the affidavit of Mr Palermo was sought that any informal offer cannot be the subject of consideration in relation to an application for costs. Putting aside the usual considerations in respect of costs in a Calderbank situation that I do not take into account the fact that the informal discussions of some type occurred at a very early time of the trial yet there was no disclosure or application to amend the counterclaim at that time is a matter that I will take into account.
16 I accept that the defendant properly defended its claim leading to a reduction of the claim allowed to the plaintiff and the partly successful counterclaim. Nevertheless the plaintiff's case occupied five days of trial and the defendant's case occupied two and a half days of trial. The presentation of the counterclaim and the failure by the defendant to advise the plaintiff of the nature of Mrs Spiers' evidence by applying to amend or providing a summary at the earliest opportunity lengthened the trial process. Ultimately the defendant's counterclaim was based substantially on the figures calculated by the plaintiff as set out in Sch A of the plaintiff's re-amended reply filed 23 January 2009.
17 It would not be doing justice to make an order for costs in respect of the counterclaim. For the reasons I have outlined, no order is made as to the costs of the counterclaim. The defendant is however to pay the plaintiff's costs of the claim to be taxed.
18 I adopt my factual findings and the orders from [218] of the reasons delivered on 20 May 2010 and publish my reasons for judgment.
Esanda Finance Corporation Ltd
Plessnig
(1989) 166 CLR 131
(1992) 33 NSWLR 504
(1988) 164 CLR 387
(1988) 180 CLR 491
(1975) 13 SASR 4