Jabbcorp (NSW) Pty Limited v Strathfield Golf Club

1. Whether the Club is entitled to liquidated damages in the sum of $82,500. There is no dispute concerning the quantum of that amount. The question is whether Jabbcorp was entitled to an extension of time because the relevant delay was caused by the Private Certifying Authority (PCA).

Background

1. On 20 November 2015, Altis Architecture Pty Limited, the architects engaged by the Club, wrote to Mr Simon Jabbour, the sole director of Jabbcorp inviting him to submit a tender for the new clubhouse and associated works. Jabbcorp was a member of the SGC Group and much of the early correspondence was addressed to, or sent on the letterhead of, the SGC Group, including the invitation to tender. However, no point was made of that and it will be convenient in this judgment to use "Jabbcorp" to refer both to the plaintiff and to the SGC Group more generally.
2. The invitation to tender followed the sale of land on which the Club's existing clubhouse was constructed. It involved the design and construction in two stages of the new clubhouse and associated works in accordance with drawings prepared by Altis and by a number of other consultants engaged by the Club on one of the greens that formed part of the golf course. The proposed work included the demolition of the existing greenkeepers shed, which was located on a site adjacent to and to the west of the site of the new clubhouse, and the construction of a new greenkeepers facility as part of the clubhouse. It appears that at the time the work was put out for tender, the Club's committee had approved a budget for the work of $22.25 million. It had also approved budgets for other work to be undertaken by the Club in conjunction with the construction of the new clubhouse and for an upgrade to the golf course itself, which was to be undertaken at the same time.
3. The invitation to tender referred to a substantial number of drawings. On 20 November 2015, Mr Trevor Hugh, an employee of Altis, sent Mr Jabbour an email attaching the "tender documents", which included those drawings. It appears that not all those drawings are in evidence. However, it is apparent from the email that the drawings included an early version of CO3-P5, which related to storm-water drainage and CO9-P3 which contained diagrams showing the construction of drainage pits and the discharge of the stormwater into the Cooks River, which ran in front of (that is, to the south of) the new clubhouse.
4. Jabbcorp submitted a tender to Altis on or about 16 December 2015 to undertake the work the subject of the tender for a total price of $27.15 million.
5. The Strathfield Council gave development consent to the construction of the new clubhouse and associated work on the day before the tender was submitted. The approval was subject to a number of conditions. One condition was in the following terms: Condition 21 Stormwater runoff from all roof and paved surfaces shall be collected and discharged by means of a gravity pipe to Cooks River via the proposed trunk drainage system and as depicted on the stormwater drainage concept plans prepared by Harris George Page & Associates Pty Ltd Sheets No. 1-8 of 8 Project No. 5881 Revision A dated 27.08.2015. These plans relate to the internal stormwater drainage plans for the proposed development and are not part of the civil works.
6. In a letter dated 14 January 2016, Altis made a number of comments on Jabbcorp's tender and stated that final submissions would be received by close of business on 19 February 2016. The letter invited submissions to be made on two bases - one was for a basement carpark option; the other was for an "On-Grade Carpark Option". The letter stated: Note: The total anticipated project cost is of critical importance to the Club at this point. If there are any cost savings that your organisation can bring to the table at this time that does not compromise the design intent, you are encouraged to list those items separately with the appropriate the [sic] quantum of the savings.
7. The letter included a number of pro forma schedules to be completed by Jabbcorp (and other proposed tenderers) which set out a "trade breakdown" of costs. One item was described as "0224 Stormwater - site". There was no item covering the provision of utilities to the clubhouse. It appears from an email that Mr Mark Batger, who was the project manager employed by the Club and who became the Superintendent under the contract, sent Mr Jabbour on 15 September 2016 that the Club had intended that external sewer, gas and water connections would be outside the building contract because the designs for those had not been completed. A budget of $600,000 had been allocated from a separate fund to cover those costs. The Club's intentions in that regard were explained to Mr Jabbour by Mr Batger in a conversation they had in late January or early February 2016. The terms of the conversation in which Mr Batger gave that explanation are disputed. According to Mr Jabbour, they had a conversation to the following effect: MB: "Simon, when you are considering your second submission based on what Trevor is now showing in the new drawings, you can leave out all external utility services. I have separate budgets for these." SJ: "So you want me to only allow for all utility services such as the sewer, water, stormwater, telephone, gas, and electrical works within the building, up to the construction boundary, and all services outside of this you have covered?" MB "Yes, that's right."
8. Jabbcorp submitted a revised tender on 18 February 2016. The total price was $25,243,720 for the Basement Carpark Option and $24,468,454 for the On-Grade Carpark Option. The amount allowed in respect of "Stormwater - site" was said to be included in "Hydraulics". The amount allowed for Hydraulics was $448,952 for Stage 1 and $1,150,850 for Stage 2. The indicative cost plan for Stage 2 also allowed $130,500 for "Fire Protection".
9. The tender included a section setting out Qualifications to the tender, which described what the tender included and excluded and contained a number of notes. One item said to be included was: • ALL utility works required have been allowed for within the construction boundary only, with the exception of the electrical substation.
10. One item said to be excluded was: 21. Any works required on the golf course and outside the construction boundary that may be a requirement of the DA consent.
11. One of the notes was in the following terms: • Branches (chipped on site) and trunks of trees that are to be removed will be placed in an allowed area outside the construction boundary for future use in landscaping, done by the Golf Club, as per the requirements of the DA consent.
12. On 4 March 2016, Mr Batger sent an email to Mr Jabbour stating that the selection of the successful tenderer was down to two builders, including Jabbcorp. The email stated that the project budget was $22.25 million plus GST. It continued: Based on the above, SGC Group would need to find $1,750,000 in savings to bring the project back to budget which we envisage will be achieved through design changes, value engineering and finishes reductions. In order to take SGC Group forward with the project team, we need to be confident that together with the architect & consultants, the savings can be achieved. The contract price is fixed so the budget must be achieved before a builder is awarded the contract. You have already highlighted in your tender that savings (circa $1.020mill) are possible - we obviously need to achieve much more. In order for SGC Group to be considered (and a 'Letter of Offer' issued), we need SGC Group to identify the areas of potential savings and to quantify savings and to quantify those savings. We believe the builder will be able to identify the bulk of the savings and the architects will be responsible to find the balance of the savings (eg Builder identifies $1.2mill in savings & architects $550K in savings). To allow sufficient time to review the clubhouse design and to test the market, we ask that a final price and a breakup of savings be submitted for review by COB Friday 18th March.
13. In response to that letter, Jabbcorp submitted a second revised tender on 21 March 2016. The tender was based on the "Parking Along Roadway Option" and identified a number of potential costs reductions to arrive at a tender price of $22,250,000. The revised tender included the same Qualifications as those quoted above. It also stated that "Further Architectural and Buildability Reductions" of $985,000 were required to achieve that price.
14. In about mid-April 2016, Mr Batger informed Mr Jabbour that the Club had agreed to grant the other tenderer an exclusivity period to work on rationalising the design to meet the Club's budget.
15. On 4 July 2016, following a conversation between Mr Jabbour and Mr Batger, Mr Batger sent Mr Jabbour an email confirming that the exclusivity period with the other tenderer (Rohrig Constructions) was coming to an end without an agreement being reached. The email asked Mr Jabbour to confirm "That the current tender (GMP) [Guaranteed Maximum Price] for the S96 drawings at $22.25mill + GST is still valid". Mr Jabbour gave that confirmation and on 20 July 2016, the Club wrote to Jabbcorp granting it a four week period to negotiate on an exclusive basis.
16. Following that exchange, there were a number of meetings between Mr Jabbour, Mr Batger and representatives of Altis to discuss potential cost savings. The principal cost savings that were discussed came from a reduction in the size of the clubhouse buildings and the retention of the existing greenkeepers shed. On 29 July 2016, Mr Angel Crispin of Altis sent Mr Jabbour and Mr Batger a sketch plan of the lower ground that showed "a solution working around the existing Greenkeepers". The plan showed a driveway running along the western side of the shed (the new clubhouse was located on the eastern side) and ending in a turning area and loading bay on the southern side of the shed.
17. In his affidavit evidence, Mr Jabbour gives evidence of a number of the discussions he had with Mr Batger and representatives of Altis during the exclusivity period which were objected to by the Club, but which were admitted into evidence on the basis that their relevance would be dealt with in this judgment. It is not necessary to set Mr Jabbour's evidence of the conversations out. The thrust of the evidence was that Mr Jabbour indicated that the budget would be very tight and could only be met if the scope of the work was limited to the new clubhouse and associated access road. Mr Jabbour's account of the conversations is disputed by Mr Batger and Mr Hugh.
18. On 22 August 2016, Mr Batger sent an email to Mr Jabbour agreeing to a short extension of the exclusivity period and saying: The Club's expectation is that based on the documentation received you will either decline the offer to construct the new Clubhouse or provide an [sic] confirmation that your company will commit to a GMP [Guaranteed Maximum Price] $22.25mill + GST (excluding water, gas & sewer external services). …
19. At some stage, it appears that there was a discussion about the costs of the consultants, including Altis, going forward and the possibility of the contracts with the consultants being novated to Jabbcorp.
20. Jabbcorp prepared a draft tender, which Mr Jabbour sent to Mr Batger on 24 August 2016 for his comments. The tender price was stated to be $23,050,000. Schedule 1 contained a table showing a breakdown of that amount, which included $600,000 for "Service Mains (Gas, Water and Sewer)" and $200,000 for "Consultants (refer to qualifications for details)". It also included $1,730,000 for "Hydraulic & Fire services". Under the table was the following statement: The GMP of $22.25M has been achieved with the addition of "Service Mains" and "Consultants", as included above.
21. The Qualifications section of the tender listed the following as inclusions: 2. Service main build of gas, water, sewer and electricity. The sub-station is included with connection to the existing HV supply that is to be located within the immediate roadway. No allowance is made for upgrade to supply main. 3. Consultants: Structural, Hydraulic, Fire, Stormwater (internal), Electrical, Mechanical and Lighting. This includes their respective sites visit requirements.
22. It listed the following as exclusions: 1. Consultants: Civil (with drainage) and Landscape. This includes their respective sites visit requirements. … 20. Any works required on the golf course and outside the construction boundary that may be a requirement of the DA consent. … 25. Additional services added to the (remaining) greenkeepers shed.
23. The Qualifications section also retained the Note in relation to the storage of branches chipped on site that appeared in the second version of the tender.
24. Mr Batger provided his comments on that draft in an email dated 24 August 2016. His comments included the following: • In the Summary Table, delete the Service Main & Consultants line items and total the figures to $22.25mill. The Board needs to see this figure and sign off as per the approved construction budget • The Consultants will be treated as a variation (comes from a separate budget). However, replace the paragraph below the table with the following:- "SGC Group Pty Ltd will engage and take responsibility for the design consultants. These include the Structural Engineer, Hydraulic Engineer, Fire Engineer, Stormwater Engineer (internal), Electrical Engineer, Mechanical Engineer and Lighting Engineer. These will be invoiced separately for the lump sum of $199,230 + GST under the same General Contract payment terms". • The external services will be treated as a variation and the quantum will be determined after the design is completed. There is still a 'real risk' here as we are subject to Sydney Water 1:100 flood design implications and I don't want you to carry this risk in any way, shape or form. Similarly, the water main size needs to be confirmed. It is the only area I have some influence over the Board as it is outside the clubhouse build. • Thus change Point 2 on Page 3 to just cover the electricity connection.
25. After receiving Mr Batger's comments, Jabbcorp submitted a final tender on 26 August 2016, which was expressed to be "for a guaranteed maximum price of $22,250,000". It made the changes suggested by Mr Batger, although with some modifications. The Qualifications section was amended. The paragraph relating to the inclusion of services was deleted and the following paragraph under the heading "This tender includes the following items" was added: 3 Engaging and taking responsibility for the PCA and design consultants. These include the Structural Engineer, Hydraulic Engineer, Fire Engineer, Stormwater Engineer (internal), Electrical Engineer, Mechanical Engineer and Lighting Engineer. These will be invoiced separately for the lump sum of $199,230 + GST under the same General Contract payment terms.
26. Exclusions 20 and 25 were retained, as was the Note concerning branches chipped on site.
27. Jabbcorp's final tender was accepted by the Club on or about 29 August 2016.
28. On 15 September 2016, Mr Batger sent Mr Jabbour an email in relation to the external sewer, gas and water connections. The email pointed out that those services had always been outside the contract and that they would need to be undertaken in connection with work on the golf course. He pointed out that the Club president, Mr John Cozens, would prefer the builder to take over responsibility for that work, but had left it open. Mr Jabbour replied on the same day saying: [M]y clear understanding [was] that John would accept the builder to take on these risks ('at the budget of $600k'), our capability to build and the offer of providing a GMP for $22.25M + GST was based on taking into account these core factors ‑ 1) design rationalisation, 2) a D&C contract, 3) select consultants at Club's budget of $199,230 + GST, and 4) external service mains for gas/water/sewer at Club's budget of $600k + GST (excluding design consultants). These critical factors are what will allow us to do the GMP because we will be able to value engineer more costs effective solutions by the 'select consultants', leverage our negotiations with trades (in particular plumbing) with the additional external works, and potentially create further contingency if possible. This is truly the mechanics of providing the GMP within the Club's budget.
29. Work commenced in or about October 2016 after the Club issued a letter of intent and before the formal contract was signed.
30. As I have said, the formal contract was entered into on 23 December 2016. It was for a total price of $23,400,730 (excluding GST).
31. Strathfield City Council approved the s 96 application for the new clubhouse on 4 January 2017.
32. In the course of undertaking the work, Jabbcorp submitted Notices of Variation NOV014, NOV014A, NOV036 and NOV059. NOV014 was submitted on 19 April 2017. It related to "Drainage and pavement work surrounding greenkeepers shed". The estimated cost was described as "TBC". The Notice of Variation was approved by Mr Batger on 23 June 2017. In his affidavit evidence, Mr Batger explains that he approved the variation because he understood that the work involved the inclusion of additional stormwater pits adjacent to the greenkeepers shed and he thought that that work was excluded under the contract because the contract contained an exclusion for "additional services or added works to the greenkeepers shed" (see below). As I have said, Jabbcorp claims $53,836 plus GST in respect of this variation. Mr Batger declined to approve that amount on the basis that the work in respect of which the claim was made was covered by the contract.
33. NOV14A was submitted on 26 October 2018. Like NOV014, it related to "Drainage, pavement and other works surrounding greenkeepers shed to the southern and western sides". The variation was submitted as part of progress claim no 13 and was for a total amount of $278,065 plus GST. Again, Mr Batger refused to approve that claim on the basis that the work was covered by the contract.
34. NOV036 was submitted on 12 March 2018. It was a rebate of $40,180 in respect of work on pedestrian paths undertaken by the Club.
35. NOV059 was also submitted on 26 October 2018 as part of progress claim no 13. It was described as "Works on golf course and outside the construction boundary" and ultimately was for a total amount of $422,838 plus GST. It related to the construction of the stormwater drainage system which discharged into the Cooks River. Mr Batger declined to approve that claim on the basis that the work was covered by the contract.
36. Pursuant to approved extension of time claims, the date for practical completion under the contract was 16 August 2018. Practical completion was achieved on 7 September 2018, after the Club had occupied the clubhouse.

The contract

1. The contract comprises a Formal Instrument of Agreement, general conditions of contract based on Australian Standard AS 4902-2000 General Conditions of Contract for Design and Construct (the General Conditions) and a number of annexures.
2. Clause 1 of the Formal Instrument of Agreement provides: Documents The Contract Comprises: (a) Australian Standard AS 4902 - 2000 comprising: (i) General conditions of contract for design and construct (as amended); and (ii) Annexures Part A through to Part F. (b) Design and Construct Contract Documents as per attached list. In the event of a conflict or discrepancy between the Documents, the following order of precedence shall apply: A. Instrument of Agreement B. Conditions of the Contract C. The Principal's project requirements D. The Contractor's Tender (as annexed to the Contract) E. Construction Certificate Drawings F. Altis Costing Package, Finishes Schedule, Fixtures Schedule
3. Clause 3.2 provides: Entire Agreement The contents of this document constitute the entire agreement between the parties and supersede any prior negotiations, representations, understandings or arrangements made between the parties regarding the subject matter of this document, whether orally or in writing.
4. Clause 4 states that the Contract Sum was $23,400,730 (exclusive of GST). That amount includes the $22,250,000, plus a sum of $550,730 which was payable in accordance with para 1.2 of the Principal's Project Requirements. That paragraph relevantly provides: The Contractor is responsible for the novation of the design consultants as outlined below:- Architect: Altis Architects Civil Engineer: Thompson Taylor Whiting (TTW) A novation fee of $65,000 + GST will be paid to the Contractor (as part of the Contract Sum) to take on the responsibility for the clubhouse and access road design. Any further consultants, additional to those identified above, necessary to complete the design and construction of the works in accordance with the contract documentation is the responsibility and cost of the builder. A 'nominated amount' of $550,730 + GST (refer to breakup below) will be paid to the Contractor as part of the Contract Sum to engage External Consultants to complete the design works & Certification. Any costs associated in engaging these Consultants over and above the nominated amount will be the responsibility of the Contractor Architect $278,000 + GST Civil Engineer $ 8,500 + GST Structural Engineer $ 58,900 + GST Hydraulic & Fire Engineer $ 32,300 + GST Electrical Engineer $ 27,300 + GST Lighting Engineer $ 38,500 + GST Mechanical Engineer $ 31,600 + GST Private Certifier $ 10,630 + GST Novation Fee $ 65,000 + GST Total $550,730 + GST

1. The Contract Sum also included an amount of $600,000 payable in accordance with para 4.0 of the Principal's Project Requirements, which provides: External Services The Contractor will take full responsibility for the supply and installation of the external Gas, Water and Sewer Infrastructure. A fixed amount of $600,000 + GST will be paid to the Contractor as part of the contract GMP Sum.
2. Clause 2.1 of the General Conditions provides: The Contractor acknowledges that the Contractor takes full responsibility for, and must do everything necessary to design, construct and commission the Works in accordance with this Contract. The Principal must pay the Contractor the Contract Sum.
3. "The Works" is defined (except where the context otherwise requires) to mean "the whole of the work to be carried out and completed in accordance with the Contract, including variations provided for by the Contract, which by the Contract is to be handed over to the Principal".
4. "Contract sum" is defined to mean: [T]he sum set out in the Formal Instrument of Agreement but excluding: (a) any additions or deductions which may be required to be made under the Contract; (b) the cost of the Excluded Works and works associated with the Excluded Conditions; and (c) any other payments required to be made as stated elsewhere in this Contract.
5. "Excluded Conditions" is defined to mean a number of conditions set out in the Development Consent. It does not include condition 21. "Excluded Works" is defined in the following terms: Notwithstanding any other clause means the following works which do not form part of the Contract Sum and if required to be carried out, will constitute a variation under this Contract: (a) … … (t) Additional services and/or added works to the greenkeepers shed; (u) Any works required on the golf course and outside the construction boundary of the Site, including if those requirements are pursuant to the Development Consent; … (y) Provisions for the National Broadband Network beyond the area that is within the Site up to a pit within the clubhouse boundary; (z) Supply of turf for areas outside of the immediate Site and outside of the clubhouse boundaries; … (kk) Exclusions as noted in the Contractors Tender (annexed to the Contract). "Site" is defined to mean "the lands and other places to be made available and any other lands and places made available to the Contractor by the Principal for the purpose of the Contract".
6. Clause 2.1A of the General Conditions provides: Guaranteed Maximum Price The Contractor acknowledges and guarantees that the maximum amount that will be payable by the Principal to the Contractor pursuant to this Contract is the Contract Sum.
7. Curiously, the General Terms do not describe directly what work is to be undertaken by Jabbcorp. Rather, cl 2.2 sets out a number of representations and warranties given by it. They include a representation that Jabbcorp "shall execute and complete the Contractor's Design Obligations and produce the Design Documents to accord with the Principal's Project Requirements" (cl 2.2(h)) and a representation that it: I) shall execute and complete the work under the Contract in accordance with the Design Documents so that the Works, when completed, shall- (i) be fit for their stated purpose; and (ii) comply with all the requirements of the Contract, all Legislative Requirements and all relevant building codes
8. "Contractor's design obligations" is defined to mean "all tasks necessary to design and specify the Works required by the Contract, including preparation of the design documents …"
9. The scope of the work covered by the contract is set out in the Principal's Project Requirements. Paragraph 1.3 provides: General Responsibilities For the purpose of this Principal Project Requirements (PPR), "Contract Documents" means those documents listed in the Building Contract and may be amended in accordance with the terms of the contract.
10. Paragraph 3 relevantly states: 3.1 Project Description The development involves the demolition of an existing wash-down & fuel storage awning, removal of the associated concrete slab, the removal of underground fuel tanks, removal of trees as defined in the approved DA and the construction of a new golf Clubhouse and access road. The works also include the supply and installation of the external services including water, gas, sewer and electricity (incl substation). All surrounding landscape works as per tender set of Landscape Architect drawings, where applicable. Project excludes FF&E. 3.2 Inclusions All inclusions are noted on the architectural, Landscaping & engineering S96 drawings, the Altis Interiors Costing Package, the Altis Finishes Schedule, the Altis Fixtures Schedule. 3.3 Exclusions Exclusions include BMS System, Security Systems, AV Systems and any FF&E and as noted in the Contractor's Tender.
11. The s 96 drawings plainly show the construction of a ramp on the western side of the greenkeepers shed and turning bay and loading dock to the south of the shed and adjacent the new clubhouse and associated work and the installation of a stormwater drainage system discharging into the Cooks River.
12. Under cl 11.3 of the General Conditions, Jabbcorp acknowledged that it had been provided with the chance to review the development consent conditions and that "subject to any express provision to the contrary, has allowed in the Contract Sum for compliance with all such conditions except for the Excluded Conditions and those conditions which are set out in this Contract as being the Principal's responsibility".
13. Extensions of time are dealt with in cl 34 of the General Conditions. Clause 34.3 states that if Jabbcorp suffers a delay to the critical path resulting in Practical Completion being delayed by a specified clause and desires an extension of time, "then within 10 Business Days after the delay first arises, the Contractor shall give the Superintendent a written claim for an extension of time for Practical Completion". The clause goes on to state that Jabbcorp is entitled to an extension if the causes of the delay are any of the following but not otherwise: (i) delay caused whether partly or wholly by: A the Principal; B the Principal's employees, Separate Contractors, agents and/or invitees; C the Superintendent D the Superintendent's employees, agents and/or invitees; E any person acting with the authorisation of the Principal or the Superintendent; or F suspension due partly or wholly to an act or omission of the Principal, its agents, employees, Separate Contractors and/or invitees under clause 33.1(a)(i); … (viii) delay caused by inclement weather; (ix) Variations; … (xi) any work outside the scope of the Contract that is required to be carried out by the Contractor, that arises out of or is in relation to an occurrence that is beyond the Contractor's reasonable control. "Separate Contractors" is not defined in the contract. It is apparent that it means other contractors engaged by the Club.
14. Clause 34.3 also states: The Contractor acknowledges that it bears the risk for all causes of delay whatsoever, other than those listed in this clause 34.3 unless agreed otherwise in writing by the Superintendent.
15. Clause 34.5 provides: Extension of time (a) If the Contractor gives the Superintendent a written claim as referred to in clause 34.3, the Contractor shall set out full details on which the claim is based including the number of days claimed. Except in the case of a claim pursuant to clause 33A.5, the onus shall be on the Contractor to reasonably prove to the Superintendent that the activities alleged to have been delayed were on the then current critical path of the approved Program and the Contractor must also show that it could not reasonably reorganise (at no cost to the Principal) the uncompleted portion of the work in such a manner as to overcome the delay. (b) A failure by the Contractor to make a claim within the 10 Business Day period provided in clause 34.3 shall preclude the Contractor from seeking an extension of time and the Contractor shall be absolutely barred therefrom. (c) If the Superintendent reasonably assesses that the Contractor is entitled to an EOT for Practical Completion, the Superintendent shall within 10 Business days either grant a reasonable extension of time as so assessed or in writing reject the EOT and if the Superintendent does neither within 10 Business days then there shall be a deemed assessment and direction for an EOT as claimed. (d) The Superintendent may at any time and from time to time before the issue of the Final Certificate by notice in writing to the Contractor extend the time for Practical Completion for any reason. (e) A delay by the Superintendent or any failure of the Superintendent to assess a reasonable extension of time, does not cause any Date for Practical Completion to become an indeterminate date.
16. Variations are dealt with in cl 36 of the General Conditions. Clause 36.1 relevantly states that Jabbcorp "shall not vary WUC [work under contract] except as directed in writing". The balance of the clause permits the Superintendent to direct Jabbcorp to vary the work in a variety of ways. Clause 36.2 permits the Superintendent to give Jabbcorp written notice of a proposed variation and a detailed quotation for that variation. Clause 36.4 requires the Superintendent to price each variation in accordance with any prior agreement or applicable rates in the contract. It requires the Superintendent to apply a 15 percent margin for profit and overheads on all costs the subject of a variation. Finally, it provides that that price "shall be added to or deducted from the contract sum".

Relevant legal principles

1. The principles relevant to the interpretation of a commercial contract were set out by French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited (2015) 256 CLR 104; [2015] HCA 37 at [46]ff: [46] The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. [47] In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. [48] Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. [49] However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". It may be necessary in determining the proper construction where there is a constructional choice. … [50] Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations. [51] Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption "that the parties … intended to produce a commercial result". Put another way, a commercial contract should be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". [footnotes omitted]
2. It is plain from this statement of the relevant principles that the negotiations between the parties leading to the contract are not relevant to its correct construction except to the extent that they shed light on the objective facts known to both parties: see Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352 per Mason J. One exception to that principle is where the words used in the contract have a trade or technical meaning and it is apparent from the negotiations that that is the meaning the parties intended to adopt. In Partenreederei MS Karen Oltmann v Scarsdale Shipping Co Ltd (The Karen Oltmann) [1976] 2 Lloyd's Rep 708 at 712 Kerr J suggested that that exception extended to cases where the negotiations indicated that the parties intended to attribute a special meaning to any words used in the contract. That extension was cited with approval by Santow J in Spunwill Pty Ltd v BAB Pty Ltd (1994) 36 NSWLR 290 at 309. It was, however, disapproved of by the House of Lords in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101; [2009] UKHL 38 at [47] (Lord Hoffmann); [97] (Lord Walker).
3. There remains the vexed question whether ambiguity is a precondition to consideration of extrinsic circumstances. The passage quoted from Mount Bruce Mining Pty Limited above might suggest that it is. However, the New South Wales Court of Appeal, relying on more recent pronouncements and a number of earlier decisions of the High Court has concluded that it is not: see Cherry v Steele-Park [2017] NSWCA 295 at [76]ff per Leeming JA (with whom Gleeson JA agreed); [123]ff (per White J). That conclusion is binding on me.
4. There is a question concerning the extent to which these principles are modified by an entire agreement clause such as cl 3.2 of the Formal Instrument of Agreement. The answer to that question must turn on the correct construction of the entire agreement clause itself. It seems plain that a clearly worded clause (as cl 3.2 is) has the effect of answering the question whether the contract is contained wholly in the written terms: see Inntrepreneur Pub Co v East Crown Ltd [2000] 2 Lloyd's Rep 611 at 614 per Lightman J. It has also been suggested that such a clause may limit the use that can be made of extrinsic material in interpreting the contract. So, for example, Davies JA stated the effect of such a clause in these terms in MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152 at 156: The purpose … is to exclude any such evidence either to prove terms additional to or different from the written instrument or collateral contracts or to construe the instrument in a way different from the meaning to be inferred solely from its terms. Even accepting that statement of the effect of entire agreement clauses, it still leaves open the possibility of considering extrinsic material where the meaning of words in the contract cannot be inferred solely from its terms because those terms are ambiguous.
5. Although not mentioned in Mount Bruce Mining Pty Limited, it also appears to be accepted that post-contractual conduct is not admissible to interpret the words of a written contract: see Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at [35] per Gummow, Hayne and Kiefel JJ; Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407. Subsequent conduct may, however, be relevant in other ways, such as where it amounts to an admission on a question of fact: see Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 at [120]ff per Basten JA (with whom Gleeson JA agreed).

The correct construction of para (u) of the definition of Excluded Works

1. Jabbcorp submits that para (u) of the definition of "Excluded Works" must be understood as excluding all work outside the building footprint of the clubhouse and the access road. It is common ground that the work the subject of each of the contested variations and back-charges was outside the footprint of the clubhouse and access road. Consequently, it is common ground that, if Jabbcorp's interpretation of para (u) is correct, that work was not included in the Contract Sum.
2. The interpretation for which Jabbcorp contends is said to be consistent with the ordinary meaning of the phrase "the construction boundary of the Site". Unless that phrase is given that interpretation, the exclusion is otiose. The only other interpretation - advanced by the Club - is that it is a reference to every area of the Site made available to Jabbcorp in which to carry out the work required of it under the contract. But on that interpretation the words "the construction boundary of" are redundant. The exclusion could equally have read "Any works required on the golf course and outside the Site, including" etc. And if that is how the exclusion is to be read, then the whole exclusion is unnecessary, since it becomes circular. "Site" is defined in a way that includes any area where work under the contract is to be undertaken. Consequently, the effect of the exclusion is to exclude work not covered by the contract. By including the words "the construction boundary of" the parties must have intended the exclusion to operate by reference to some narrower area than the Site. And by including the exclusion, the parties must have intended that it have some substantive effect.
3. The conclusion of the previous paragraph is said to be supported by the surrounding circumstances. Jabbcorp submits that its first tender included works both within and outside of the construction boundary and, in particular, included gas, water, sewer and stormwater services. The second tender was prepared in response to a request from Mr Batger who it is said asked that the tender allow for utility services within the building only, on the basis that the Club had a separate budget for external services. According to Jabbcorp, that explains why the second tender stated that the tender included "ALL utility works required have been allowed for within the construction boundary only, with the exception of the electrical substation" and contained an exclusion in respect of work outside the construction boundary. The same qualifications were repeated in the revised second tender.
4. Following negotiations during the exclusivity period, Jabbcorp submitted what was described as a draft fourth tender on 23 August 2016. That tender reflected the need to keep the costs within the budget of $22.25 million and to that end retained the exclusion in respect of work outside the construction boundary. That is said to be consistent with the fact that Mr Jabbour had told Mr Batger that the guaranteed maximum price could only be achieved if the work covered by the price was limited to work within the construction boundary. The tender included amounts for consultants and external utilities, but on the basis that Jabbcorp would be paid additional amounts to cover those costs, which would be paid from separate budgets. According to Jabbcorp, Mr Batger in his email commenting on the draft specifically said that "The external services will be treated as a variation and the quantum will be determined after the design is completed" (emphasis added). On that basis, those items were removed from the cost breakdown that formed part of the final version of the tender, although that version of the tender stated that the work included taking responsibility for various consultants and that the Club would be invoiced separately for those. The exclusion in respect of work outside the construction boundary was included in the contract and should be understood as having the same meaning as it had in the tenders. In any event, the exclusions in the final tender were specifically included in the contract by para (kk) of the definition of Excluded Works.
5. I do not accept Jabbcorp's submissions. The appeal to the surrounding circumstances is largely misplaced, as is the focus on para (u) of the definition of Excluded Works to the exclusion of the other terms of the contract.
6. The exclusion needs to be read in the context of the contract as a whole.
7. Various terms of the contract make it plain that the work under the contract includes work outside the footprint of the clubhouse and access road. Clause 2.2 of the General Terms and cl 3 of the Principal's Project Requirements make it clear that the contract is for the demolition of certain existing structures and the design and construction of a new golf clubhouse and access road in accordance with the s 96 drawings. Those drawings include work outside the footprint of the clubhouse, including the access ramp and loading dock adjacent to the greenkeepers shed and associated work and the services required to drain stormwater into the Cooks River.
8. According to cl 1.3.2(3) of the Principal's Project Requirements, the work is to include "façade elements, paving, roofing, below ground works, finishes and services, and associated works (access road & services) outside the boundary of the site".
9. The storm water drainage system is required by condition 21 of the development approval given by the Strathfield City Council, which is not an excluded condition. Had the parties intended to exclude that work from the scope of the contract, it is to be expected that they would have included that condition in the definition of "Excluded Conditions". They did not do so. Moreover, by cl 11.3 of the General Conditions, Jabbcorp warranted that it had allowed for the cost of complying with that condition in the Contract Sum.
10. It is apparent from the drawings that the access ramp and loading dock is necessary to allow delivery trucks and the like to obtain access to the new clubhouse.
11. It follows that the principal work that is said to be excluded and remains the subject of the disputed variations - the installation of the stormwater system and the work around the greenkeepers shed - was part of the work which was necessary in order for the clubhouse to operate. The drainage work was necessary because it was a condition of the development consent. The ramp and loading dock were necessary because it was not practical for the clubhouse to operate without them. Under cl 2.2(i) of the General Conditions Jabbcorp represents and warrants that it "shall execute and complete the work under the Contract in accordance with the Design Documents so that the Works, when completed, shall … be fit for their stated purpose". How, it might be asked, could that representation and warranty be true if Jabbcorp was not required to construct the drainage system and carry out the work around the greenkeepers shed?
12. Jabbcorp does not seriously take issue with the points made in the previous paragraphs. Its point is that the work is simply excluded from the contract price by operation of the definition of "contract sum". But that answer raises the question whether Jabbcorp was required by the contract to carry out the work or not. If it was not, which appears to be Jabbcorp's preferred interpretation of the contract, then the points of the previous paragraphs remain valid. And if Jabbcorp was required to undertake the work but entitled to charge an additional amount for that work, it is difficult to see how that entitlement can sit with cl 2.1A of the General Conditions or the warranty contained in cl 11.3 of the General Conditions.
13. Against that background, a reasonable business person would not interpret para (u) as excluding all work outside the footprint of the clubhouse. Rather, the exclusion must be understood against the background in which the contract was entered into. That background included the fact that the Club was undertaking other work on the golf course at the same time as it was constructing the new clubhouse. In that context, the paragraph must be understood as making it clear that Jabbcorp was not responsible for carrying out other work on the golf course, even if that work was required as a condition of the development consent.
14. It is true that understood in that way, the exclusion contained in para (u) may have little or no work to do. The contract sets out the scope of the work to be undertaken by Jabbcorp. It also identifies the conditions to development consent with which it was unnecessary for Jabbcorp to comply. It was not suggested that para (u) as interpreted by the Club modified the work required to be done absent the exclusion. Consequently, it is correct that on the Club's construction there appears to be no real work for the exclusion to do. But the contract is a complicated one, consisting as it does of a number of documents that plainly contain some duplications and do not necessarily fit together seamlessly. The parties themselves recognised that fact by providing for an order of priority in the Formal Instrument of Agreement. No doubt, one concern of the parties was to ensure that the work required by the contract did not overlap with other work for which the Club was contracting separately. It is reasonable in those circumstances to treat the exclusion in para (u) as being included out of an abundance of caution so as to make that clear. That conclusion is reinforced by the fact that the exclusion applies to "[a]ny works required on the golf course and outside the construction boundary of the Site" (emphasis added).
15. The surrounding circumstances do not assist Jabbcorp. For the most part, the surrounding circumstances relied on by Jabbcorp consist of the negotiations between the parties. Jabbcorp relies on those negotiations to demonstrate that the parties intended originally to exclude the provision of all external services to the clubhouse and subsequently agreed to include the utilities in respect of which an additional price of $600,000 was allowed in the contract. But deployed in that way, the negotiations are not used as a means of identifying some objective fact known to both parties that is relevant to the construction of para (u) of the definition of Excluded Works. Rather, what Jabbcorp seeks to do is construe the exclusion by reference to the subjective intention of the parties and of Jabbcorp in particular or some common ground that it is said the parties reached before entering into the contract. However, evidence going to those matters is irrelevant to the correct construction of the contract and, in any event, is excluded by cl 3.2 of the Formal Instrument of Agreement.
16. There is a suggestion in Jabbcorp's submissions that the negotiations between the parties demonstrate that the parties intended the phrase "construction boundary" to have the meaning for which it contends and that the negotiations are relevant for that purpose.
17. The phrase "construction boundary" first appeared in the second tender in both the inclusion and exclusion sections of the Qualifications. One inclusion stated "ALL utility works required have been allowed for within the construction boundary only". Exclusion 21 stated that the work excludes "Any works required on the golf course and outside the construction boundary …". Jabbcorp's case is that the exclusion must be understood as a corollary of the inclusion and both must be understood as using the phrase "construction boundary" to mean the same thing. It is plain that the sense in which it was used was to describe the footprint of the clubhouse, since it is apparent from the discussions between Mr Jabbour and Mr Batger that Jabbcorp was expected to tender for the utilities works within the footprint of the clubhouse but the Club had a separate budget for utilities work outside the footprint of the clubhouse. The note in the tender relating to branches chipped on site which states that those branches are to "be placed in an allowed area outside the construction boundary" is said to reinforce that conclusion. By retaining the wording of the exclusion and incorporating it in the contract as para (u) of the definition of Excluded Works, the parties must have intended to retain the meaning they originally gave to the phrase "construction boundary".
18. I do not accept that submission.
19. It is difficult to see why a distinction should be drawn between technical and non-technical words. If the negotiations between the parties make it apparent that they intended to attribute a particular meaning to a word or phrase, it is unclear why those negotiations should be relevant if the word or phrase has a technical meaning but not otherwise.
20. However, I do not accept that the negotiations in this case establish that the parties intended the phrase "construction boundary" to have a particular meaning. Rather, the negotiations establish that Jabbcorp used the phrase loosely and imprecisely in its tenders and the Club payed little regard to it. Whatever the precise scope of the exception in favour of the admissibility of negotiations to establish that the parties intended to adopt a particular meaning of a word or phrase, the circumstances of this case fall well outside it.
21. As I have said, the phrase "construction boundary" first appeared in the second tender. When it is used in the inclusion section of the Qualifications it appears to be a reference to the footprint of the clubhouse building. But there is no reason to interpret it so narrowly on the other occasions it is used. Exclusion 21 is not a corollary of the inclusion. The subject of the inclusion is all utility works within the construction boundary. The subject of the exclusion is any works required on the golf course and outside the construction boundary that may be a requirement of the DA consent. The natural reading of the exclusion is that work must have two characteristics to be excluded. First, it must be on the golf course and outside the construction boundary. Second, it must be a requirement of the DA consent. Read in that way, the first limb contemplates that the work must be both on the golf course and outside the construction boundary. But if "construction boundary" was intended to have the narrow meaning contended for by Jabbcorp, the second conjunct would be redundant. Necessarily, if the works were on the golf course they would be outside the footprint of the clubhouse and therefore outside the construction boundary narrowly defined. Rather, what Jabbcorp appears to have intended is to exclude work on the golf course that was outside the area covered by the work the subject of the tender. There is no evidence that the Club adopted or rejected that interpretation.
22. Similarly, the note dealing with branches refers to an area outside the construction boundary. In that context, it makes more sense to interpret "construction boundary" to mean an area outside where work under the contract was to be performed (that is, outside the Site). The parties could not have contemplated that the chipped branches would be stored in an area where work that was necessary to complete the clubhouse and associated works would be carried out.
23. The parties specifically contemplated at the time of the second tender that Jabbcorp would be responsible for works described as "Stormwater - site", since the tender required Jabbcorp to specify an amount for that work. It is apparent from the description that they must have contemplated that that work would extend beyond the footprint of the clubhouse. Moreover, it became apparent that, contrary to the position in respect of the second tender, it was contemplated by the final tender that Jabbcorp would take responsibility for utility works outside the footprint of the clubhouse and would be paid an additional $600,000 from a separate budget for that work. It was for that reason that the limited inclusion in respect of utility works that was included in the qualifications to the second tender was dropped. Against that background, by retaining exclusion 21, Jabbcorp could not have intended "construction boundary" to have the narrow meaning for which it now contends.
24. Similarly, there is no basis for contending that some agreed narrow meaning was carried over into the exclusion contained in para (u) of the definition of Excluded Works.
25. Jabbcorp also points to examples where Jabbcorp performed work outside the footprint of the clubhouse and was paid separately for that work, such as variation NOV054 dated 27 August 2018 which was for an additional pedestrian and cart ramp. That is said to demonstrate that the parties intended "construction boundary" to have the narrow meaning for which it contends. However, it is difficult to see how that could be the case unless Jabbcorp established that the work was otherwise required by the contract. In any event, evidence of subsequent conduct is irrelevant to the correct construction of the contract.

Jabbcorp's claims in respect of variations and back-charges

1. It follows from what has been said that Jabbcorp's claims in respect of the remaining variations and back-charges must fail.
2. The Club also submits that, even if the Court had concluded that the work the subject of variations NOV014, NOV014A and NOV059 was not covered by the contract sum, Jabbcorp has failed to prove the amount that it claims. Having regard to the conclusions I have reached, it is not necessary to consider this issue. However, I should say something about it in the event that I am wrong.
3. In relation to NOV059, the Club's principal point was that Jabbcorp had not provided invoices from its subcontractor who undertook the relevant work. However, after the hearing was finished, Jabbcorp sought to reopen its case to tender relevant invoices. That leave was not opposed. The evidence is not entirely clear, but the invoices appear to support Jabbcorp's claim and on that basis I would have allowed it.
4. In relation to NOV014 for $53,836.10 and NOV014A for $277,919.75, Mr Jabbour gives affidavit evidence of the invoices that relate to the work covered by those variations. One of the documents relied on by Mr Jabbour was not an invoice, but a quotation. However, the relevant invoice was included in the tender made after the hearing finished. I accept Mr Jabbour's evidence that the invoices relate to the claimed variations and consequently would have accepted the amount claimed.

Liquidated damages

1. As the Club points out, the only pleaded case in relation to liquidated damages is that Jabbcorp was entitled to an extension of time because of delay by the PCA, who is said to be a person acting under the authority of the Club and/or Mr Batger.
2. I do not accept that submission. The contract quite clearly sets out the circumstances in which Jabbcorp is entitled to an extension of time. Delay by the PCA is not one of them. The PCA could not be regarded as someone acting for the Club or as a Separate Contractor of the Club. Paragraph 1.2 of the Principal's Project Requirements makes it clear that the engagement of the PCA was the responsibility of Jabbcorp, for which an allowance of $10,630 plus GST had been allowed. Clause 34.3 of the General Terms specifically states that Jabbcorp acknowledges that it bears the risks for all causes of delay whatsoever other than those specifically identified in the contract. Delay by the PCA is not a cause that is specifically identified. Consequently, Jabbcorp bears responsibility for any delay it caused by the PCA.

Conclusion and orders

1. It follows from what I have said that Jabbcorp's claim must be dismissed. There is no apparent reason why it should not bear the costs of the proceedings. However, the parties did not make submissions on costs at the time of the hearing and consequently should be given an opportunity to do so if they wish. The orders allow for that possibility.
2. The orders of the Court are: 1. The proceedings be dismissed; 2. The plaintiff pay the defendant's costs of the proceedings; 3. Liberty to either party to apply to vary order (2) within 14 days of the date of this judgment; 4. Liberty to either party to apply for orders to give effect to the agreement reached between the parties and noted by the Court on 17 September 2020.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 October 2020