Parkview Constructions Pty Ltd v Futuroscop Enterprises Pty Ltd

RECTIFICATION CONTINUES

1. As expert reports were served in these proceedings, the Contractor accessed the site from time to time to remedy the matters raised by the experts. The Principal permitted access for this purpose whilst reserving its rights. The Contractor, on the other hand, advised that the works were being undertaken on a commercial basis "as it will cost less to do the works than to argue with you about it and to put it well beyond doubt that you have no entitlement at all to hold Parkview's bank guarantee." The Principal later complained that the Contractor was not rectifying defects or incomplete works but "trying to determine which contractor is at fault to pass [on] liability [and] avoid utilising its own monetary resources." Some of the correspondence was unhelpful.
2. On 8 March 2019, the Contractor wrote to the Superintendent and the Principal in respect of an issue with fresh air to the hotel rooms. The Contractor stated that the original design for mechanical services provided fresh air to the hotel rooms by openable windows, which the Contractor had implemented. On a 'without admissions' basis, and simply to "put this to bed", the Contactor offered to implement an alternative proposal to install a fire damper to each room through the wall in the ceiling void above the hotel room door, so that fresh air could come from the end of the corridors. Mr Baltovski said the proposal adopted the methodology proposed by the Principal's consultant, Credwell Consulting Pty Ltd.
3. On 23 May 2019, the Superintendent advised the Contractor that a car had crashed into a barrier at the carpark, causing louvres to shoot off the building and land in the neighbour's property. The Superintendent maintained that the crash barriers were not as per the original design and no approval had been given to change them. The Contractor replied that the crash rail system had performed as it was supposed to. The Superintendent was asked to administer the Contract rather than simply forward the Principal's requests.
4. On 15 April 2020, the Principal lodged an application with the Council to modify the development consent by "the addition of roof top deck area". The estimated cost of works was $60,000. The Council issued consent on 22 October 2020. Mr Andary said the work referred to in the consent has not been undertaken.
5. In January 2021, the Contractor commenced works at the Travelodge to improve the fire rating of the hotel rooms and fire stairs. This work took longer than expected and it is apparent from the numerous emails that passed between the parties that tempers were fraying by this time.
6. On 31 May 2021, Mr Baltovski arranged for contractors to carry out works in the carpark, patching concrete beams at the tower crane infill on the ground level and levels 2, 3 and 4 and removing small formwork pieces left on level 2 and level 4.
7. On 10 September 2021, Mr Baltovski attended the site to investigate a number of items raised by the report of Credwell Consulting. Mr Baltovski measured the treads and risers of each of the fire stairs said to be defective and observed no non-compliance on various items. On 13 September 2021, Mr Baltovski arranged for contractors to carry out rectification works in respect of other items in the report, being items 333, 393, 394, 407, 411 and 414.
8. The Contractor was continuing to attend the site and rectify defects during the course of the hearing. This had the consequence that the scope of defects which ultimately called for a decision on my part were significantly reduced in number. Further, the experts were able, by and large, to agree on a large number of defects, and also that many of those defects had since been rectified. I express my gratitude to the parties in this regard.

ROOFTOP TERRACE

1. The first issue is whether the manner in which the Contractor constructed the rooftop terrace of Building A prevented - and continues to prevent - the achievement of practical completion. It will be recalled that the definition of practical completion provides: Practical completion is that stage in the carrying out and completion of WUC when: a) the Works are complete except for minor defects: (i) which do not prevent the Works from being reasonably capable of being used for their stated purpose; … (d) the Contractor has done all things that it is required to do under the Contract to enable the Principal to obtain a certificate of occupation from the applicable Authority;
2. As earlier mentioned, I infer that the development consent in force at the time of the Contract and construction did not permit commercial tenants to use the rooftop area. Notwithstanding this, the Principal pointed to several features in the drawings that would only be necessary if the roof terrace was intended to be accessible to such tenants: 1. the drawings show separate stairs providing roof access for each of the eastern and western sides of the building, allowing level 12 to be divided into separate tenancies, each with a stair access to the roof; 2. access to the roof on the north-western side was provided by stairs located within the commercial office space on level 12, rather than located within a common area; 3. parts of the roof deck in the north-western and north-eastern corners were to be segregated from the southern half of the roof by screens, to shield mechanical plant from view; 4. a cutaway section was to be cut in the roof parapet to permit views of the city; and 5. the roof slab accessed by the glass hatch was to have a trafficable membrane, although there was no plant or equipment located in that area that would require maintenance personnel to walk there.
3. Against this, based on his review of the plans, Mr Baltovski could not identify anything to suggest that the roof area was intended to be used by the general public. Mr Tabet said he did not believe that the roof was to be used for public access, but for maintenance only. Mr Tabet maintained that the Contractor had constructed these works correctly, "If there's a different use for the rooftop and that's what this is addressing that's got nothing to do with our contractual obligation."
4. The Principal submitted that the development approval did not preclude the construction of the physical works in a way that would permit access by tenants of the commercial tenancies. Regulation 145(1)(a) of the Environmental Planning and Assessment Regulation 2000 provided that a certifying authority must not issue a construction certificate for building work unless "the design and construction of the building (as depicted in the plans and specifications and as described in any other information furnished to the certifying authority under clause 140) are not inconsistent with the development consent". Had the proposed works been inconsistent with the development approval, the PCA could not have approved them. Assuming that to be so, the question remains whether the Contractor was obliged under the Contract, viewed objectively, to the build the rooftop in accordance with that use.

Principles

1. The meaning of the contract is determined objectively by reference to what a reasonable person would have understood the contract to mean having regard not only to the text of the document but to the surrounding circumstances known to the parties and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461; [2004] HCA 35 at [22] (per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ). The context includes the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at 116; [2015] HCA 37 at [46] (per French CJ, Nettle and Gordon JJ). The Court interprets commercial contracts objectively "by what a reasonable businessperson would have understood [the] terms to mean": Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 656; [2014] HCA 7 at [35] (per French CJ, Hayne, Crennan and Kiefel JJ). The actual subjective intentions of the parties are irrelevant: Mount Bruce at [50].
2. A contract is interpreted as at the date on which it was entered into: Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544 at 551; [2017] HCA 12 at [16] (per Kiefel, Bell and Gordon JJ), [77] (per Nettle J). Generally, it is not legitimate to use as an aid in the construction of a contract anything which the parties said or did after it was made: Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at 482; [2008] HCA 57 at [35] (per Gummow, Hayne and Kiefel JJ), citing Whitworth Street Estates Ltd v Miller [1970] AC 583 at 603 (per Lord Reid); Administration of Papua and New Guinea v Daera Guba (1973) 130 CLR 353 at 446; [1973] HCA (Gibbs J).
3. Post-contractual conduct may, however, be relied on to prove what the terms of the contract were, albeit not what the terms mean: Lym International Pty Limited v Marcolongo [2011] NSWCA 303 at [124] (per Campbell JA with whom Basten JA and Sackar J agreed). By such conduct, a party may make an admission against interest as to the terms of the contract: JR Consulting & Drafting Pty Ltd v Cummings (2016) 239 ALR 625 at 637; [2016] FCAFC 20 at [54] (per Bennett, Greenwood and Besanko JJ). Subsequent conduct may also indicate what was important or essential to the transaction and indicate the parties' contractual intention: Queensland Phosphate Pty Limited v Korda (as joint and several liquidators of Legend International Holdings Inc (in liq)) [2017] VSCA 269 at [37] (Per Tate and Beach JJA, Sifris AJA).

Consideration

1. It does appear that the Principal wished to further develop or use the site beyond what was initially approved by the Council. I note that the carpark was constructed to support the future addition of two further levels: see [67]. Over the various iterations of the fire engineering report, the Principal's ambition to use the rooftop of Building A as an entertainment area for commercial tenants became clear and would have been clear to the Contractor, even if it was not clear from the plans: see [50]. Less clear is the contractual obligation on the Contractor to construct the rooftop terrace to fulfill that intended use.
2. The Contractor was obliged to complete WUC in accordance with the design documents so that the Works were "fit for their stated purpose": clause 2.2(a)(iv). As to what was the "stated purpose" of the rooftop, the Contractual Documents in Schedule 1 to the Contract and the design documents, including the various drawings, shed no light on the matter, save that various plant and machinery was to be installed there.
3. It may well be that the features of the drawing referred to by the Principal point to the Principal wishing to make the rooftop available for the use of its commercial tenants, but the drawings do not make this plain. Nor was I taken to any particular detail or specifications which required access to the rooftop to address such a use. To use the language of the Contract, the drawings do not specify that this was the "stated purpose". The parties' subjective intentions as to how the rooftop may be used are irrelevant to the interpretation of the Contract and the parties' obligations.
4. The Principal relied on three instances post-contractual conduct in support of its position that the contract required the rooftop to be developed for public use. As already observed, post-contractual conduct cannot be relied on to aid in the interpretation of a contract. However, such conduct may amount to an admission against interest as to what the terms of the contract were: JR Consulting at [54].
5. First, it was said that the Contractor produced a further fire engineering report in June 2018 because the Contractor plainly understood that the works would need to be consistent with access to the rooftop for the commercial tenants. I note, however, that the report states that it was "commissioned by Futuroscop". Mr Baltovski's email providing the report was careful not to accept any obligation beyond that imposed by the Contract: see [146].
6. Second, the Principal relied on Mr Baltovski's email of 10 July 2018 as evidencing the Contractor's understanding that the roof terrace was for public use: at [148]. The Principal submitted that, if access to the roof by commercial tenants was not required by the Contract, the Contractor would have said so and there would have been no need to make further changes to the fire engineering report. I do not read Mr Baltovski's email to acknowledge such an understanding. Rather, Mr Baltovski was drawing attention to the fact that the matters which Fire & Rescue NSW had sought to be addressed in September 2017 had been attended to at the time: see [88]-[89]. In any event, as Mr Baltovski did not join the Contractor until two years after the Contract was entered into, when construction was nearing practical completion, his understanding is of little moment.
7. Third, the Principal relied on photographs of the finished stairs from the Level 12 commercial tenancy to the rooftop, which indicate that the Contractor intended that the stairs would be used by the public. I agree that the level of finish of the stairs exceeded that needed by maintenance staff. This may be regarded as an admission against interest, being evidence that the Contractor thought it was obliged to provide public access to the rooftop in order to perform its contractual obligations.
8. The admission against interest, however, is not dispositive. It is evidence to be considered together with the Contract, the documents referred to in the Contract, the surrounding circumstances known to the parties and the purpose and object of the transaction. Where there was no variation of the Contract in respect of the rooftop terrace, the focus is on the circumstances when the Contract was entered into on 4 September 2015 rather than how the parties may have perceived their obligations two years' later. In the intervening two years, the Principal's plans to use the rooftop terrace for its commercial tenants had evolved through various fire engineering reports. The Contractor may well have come to think it was obliged to build to that standard.
9. The Contract incorporated, by reference, the development approval. It will be recalled that Special Condition 52 obliged the Contractor to "ensure that the WUC is executed in such a way as not to breach the Development Approval". I consider that a reasonable person would have understood the Contract to mean that the Contractor was to construct the works in accordance with the development approval, and not to go beyond what had been approved, noting that doing so may have exposed the Contractor to criminal prosecution: sections 4.2 and 4.3 and Division 9.6, Environmental Planning & Assessment Act 1979 (NSW).
10. Having regard to the terms of the Contract, in particular, clause 2.2(a)(iv), the design documents including the drawings, Special Condition 52 and the fact that the development approval in force at the time of entry into the Contract and during the build did not permit the rooftop terrace to be used by commercial tenants, I do not consider that a reasonable person would have understood that the Contractor was obliged to construct this part of the building in accordance with the Principal's wish to use the rooftop in this manner in the absence of clear drawings and specifications. The plans and specifications do not make this clear.
11. In the result, I consider that construction of the rooftop terrace sufficient to enable maintenance staff to access the rooftop sufficed to enable the Works to be "reasonably capable of being used for their stated purpose" and to enable the Principal to obtain a certificate of occupation consistent with the terms of the development approval which applied during the build. Practical completion was not deferred until an amended development approval was obtained for an enhanced use.

EFFECT OF 'CONDITIONAL' NOTICES

1. The second issue is whether the "conditional" notices issued by the Superintendent comprised a certificate of practical completion, as required by clause 34.6 of the Contract.

Principles

1. Unless a contract specifically provides for a certifier to issue a "conditional" certificate, the issue of such a certificate may be ineffective. For example, in Official Assignee of Hutson v The New Zealand Antimony Company (Ltd) (1890) 10 NZLR 143, payment for the erection of furnaces was to be made on the presentation of an inspector's certificate. The inspector was to certify that, after 12 days of operation, the furnaces were "in good working order, and to the full satisfaction of the … inspector". The inspector certified that the furnaces were working satisfactorily but had cracked and required a repair. The Court of Appeal held that the certificate could not be treated as a final certificate, as "it expresses not the satisfaction of the inspector but the absence of that satisfaction:" at 148 (per Denniston J, Conolly J agreeing).
2. In Kenneth McMahon & Partners Pty Ltd v Domain Investments Pty Ltd (1973) 47 ALJR 240, the contract provided that the architect, if reasonably satisfied that the works were practically complete, should issue a notice of practical completion fixing the time on which the works were practically complete. The architect issued a notice that the work had reached the stage of practical completion but added that it was subject to the completion of a number of listed defects and the completion of certain work. Barwick CJ queried whether the notice was an unqualified notice of practical completion for the purposes of the contract, where it was expressed to be subject to performance of additional work, albeit that the work was said to be of a minor nature; "The notice might well be regarded as conditional and not unqualified": at 243. A like view was expressed in Re Arbitration between CME Contractors Pty Ltd and Redcliffe City Council (Unreported, Supreme Court of Queensland, Dowsett J, 8 September 1987), when considering whether the Superintendent had granted an extension of time where the extension was subject to conditions, including that no further requests for extensions be made or granted: at page 10.
3. Similarly, in Ian Delbridge Pty Ltd v Warrandyte High School Council [1991] 2 VR 545, the Court considered this problem where an architect issued a final certificate certifying the amount payable to or by the builder. The certificate was accompanied by a letter stating that adjustments to the final balance would be paid when the builder had submitted various information. The letter also referred to the completion of rectification works which had not yet occurred. A contract summary accompanying the certificate also contained various statements indicating that the architect contemplated a further review of the builder's claim for payment. Murphy J noted, "The finality and consequences of a final certificate are such that it is not possible to have a reviewable or variable balance stated in such a certificate": at 550. Whilst the document, on its face, purported to be a final certificate, it was clear that the architect did not intend it to have the effect of a final certificate under the contract; the document was not in fact a final certificate as contemplated by the contract: at 553.
4. As will be apparent from these cases, much turns on the particular contractual provisions and the content of the certificates. The principles concerning the construction of commercial contracts have already been stated, and apply in like fashion to notices issued under a contract: Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, 771; followed in MLW Technology v May [2005] VSCA 29 at [78]-[82] (per Gilliard AJA). As Lord Steyn concluded in Mannai Investment at 771: In determining the meaning of the language of commercial contract, and unilateral contractual notices, the law therefore generally favours a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language. … After all, there is no reason whatever why such a document must be drafted by a lawyer. … Such notices, even if they entail the exercise of important options, are habitually drafted by commercial men rather than lawyers. It would be a disservice to commercial practice to classify such notices as technical documents and to require them to be interpreted as such. …
5. Similarly, in National Roads & Motorists' Association v Whitlam (2007) 25 ACLC 688; [2007] NSWCA 81, Campbell JA observed, "The principle of construction whereby a commercial document that is elliptical or ambiguous should not be given a construction that is commercially unlikely is well established": at [58].

Consideration

1. Turning to the "conditional" notices in this case, on receiving a request from the Contractor for a certificate of practical completion, "the superintendent has two options [under clause 34.6], either to issue a certificate or to give written reasons for not doing so. One or other of those steps must be taken …": Abergeldie Contractors Pty Ltd v Fairfield City Council [2017] NSWCA 113 at [32] (per Basten JA, when considering an identical clause 34.6).
2. I do not consider either "conditional" notice to be "written reasons" for not giving a certificate of practical completion as requested by the Contractor. Both notices were quite unlike the "written reasons" issued on 5 September 2017: see [84]. Neither notice sought to engage with the date of practical completion proffered by the Contractor, nor to identify items of work which prevented practical completion being achieved on that date. Nor did the Superintendent ask the contractor to provide an alternative date on when practical completion would be reached. Rather, each "conditional" notice tantalisingly suggested that practical completion would soon be reached or had already been reached.
3. Each "conditional" notice gave a retrospective date for practical completion in the event that the conditions were satisfied. Whilst a certificate can specify a date prior to its issue as being the date of practical completion, much turns on the definition of practical completion in the contract: Metro Edgley Pty Limited v MK & JA Roche Pty Limited [2007] NSWCA 160 at [81]-[82] (per Hodgson JA). In Abergeldie, Basten JA construed an identical clause 34.6 and concluded that the issue of the certificate records practical completion and, therefore, provides the date on which practical completion is achieved: at [34]-[36]. Further, the certificate of practical completion cannot be backdated, where a number of contractual provisions depend upon the date of practical completion. Backdating the certificate would give rise to commercial uncertainty and place the parties in breach of other contractual obligations: at [41]-[46]; see likewise Meagher JA at [69].
4. In Abergeldie, Basten JA treated the specification of an earlier date as ineffective, where the certificate was otherwise consistent with an understanding that the Superintendent had satisfied himself that practical completion had been reached on the date that the certificate was issued: [54]. If that were the only problem with these notices, then the retrospective date could be treated as ineffective such that the date of practical completion would be the date on which the notices were issued. But that is not the only problem.
5. The first "conditional" notice in respect of Building A can be readily dispensed with. Clause 1 defined practical completion as that stage in the carrying out and completion of WUC when the Works are complete except for minor defects. WUC meant the work which the Contractor is required to carry out and complete under the Contract. The Works meant the whole of the work to be carried out and completed in accordance with the Contract. Building A and Building B were not "separable portions" such that the Superintendent might issue a certificate of practical completion in respect of one building or the other, rather than the Works as a whole. Rather, the Works were not complete until both buildings were completed in accordance with the Contract.
6. Whatever may be said about the first "conditional" notice in respect of Building A, the Superintendent was perfectly plain as to the state of completion of Building B: "For clarity, this is not Notice of Practical Completion for Building B (conditional or otherwise). The tenant for Building B has not taken possession … due to major unfinished construction items and safety concerns." Where the Works comprised both Building A and Building B, on no view was the first "conditional" notice a certificate of practical completion of the Works.
7. The items and list of defects in the second "conditional" notice were, by and large, minor and would not prevent Wilson Parking using the carpark for its stated purpose: small items were missing, paint touch ups and cleaning were needed. Indeed, Wilson Parking had been operating the carpark for two weeks when the second "conditional" notice was issued. More significant were the ongoing issues about crash rails and concrete finish. But neither of these issues prevented the carpark being used as such. There was no suggestion that the crash rails installed were unsafe but rather that the crash rails did not realise the architect's aesthetic vision. Whether the concrete finish was "Class 2" or "Class 3" did not prevent people parking their cars there.
8. The second "conditional" notice, however, did not advance matters where it made no reference to Building A at all. Whether the Superintendent then held an opinion as to whether the list of "Outstanding Matters Affecting PC" attached to the first "conditional" notice had been remedied such that the Superintendent then regarded Building A as practically complete is unstated. All that is known is that the Superintendent considered that there were "many items outstanding to achieve full completion for Building B", where I take "full completion" to mean something other than "practical completion". No opinion was expressed about the state of completion of Building A.
9. I do not consider that the two notices can be construed together in order to arrive at a 'composite' certificate of practical completion within the meaning of clause 34.6 the Contract. Where the Contract did not identify "separable portions", clause 34.6 - and the other contractual provisions which turned on practical completion - were premised on practical completion being achieved on one date. Here, the Superintendent issued two notices, each of which specified a different and retrospective date, and neither of which expressed the contemporaneous satisfaction of the Superintendent as to the elements of the defined term, practical completion: Abergeldie at [48] (Basten JA). In the result, I consider the "conditional" notices to be without contractual effect.

DATE OF PRACTICAL COMPLETION

1. Having concluded that the "conditional" notices were neither a certificate of practical completion, nor written reasons for not issuing such a certificate, the third question is what the Court can, and should, do given the Superintendent's failure to perform a critical function under the Contract.
2. The date of practical completion means (clause 1): (a) the date evidenced in a certificate of practical completion as the date upon which practical completion was reached; or (b) where another date is determined in any arbitration or litigation as the date upon which practical completion was reached, that other date
3. When construing relevantly identical clauses in Abergeldie, Basten JA concluded that the definition of practical completion called for the opinion of the superintendent in respect of each of the requirements of the definition: at [37]-[40]. In forming this view, Basten JA drew an analogy with administrative law principles. Where a jurisdictional fact is the formation of an opinion of the original decision-maker, the Court is limited to determining whether that opinion was formed. The Court may then be asked to conclude that the opinion so formed was not an opinion of the kind required by law as it was arbitrary, capricious or manifestly unreasonable: at [38]. Contrary to the Principal's submissions, however, Basten JA was not stating that the Court must always treat the opinion of a party vested with contractual decision-making authority as determinative unless it is "arbitrary, capricious or manifestly unreasonable." Rather, the starting point of any analysis must be the language of the contract: Walton v Illawarra [2011] NSWSC 1188 at [39] (per McDougall J).
4. Clause 20 provides guidance as to the way in which the parties to the Contract expected the Superintendent to carry out its obligations and whether, in carrying out those obligations, the contracting parties got what they were entitled to receive: Walton v Illawarra at [40], [42]; Republic of Turkey v Mackie Pty Ltd [2019] VSC 103 at [75] (per Bell J). The parties were entitled to expect that "the Superintendent fulfils all aspects of the role and functions reasonably and in good faith".
5. Here, the Superintendent failed to perform its function under clause 34.6 at all. The "conditional" notices were neither a certificate of practical completion nor written reasons for not issuing such a certificate. No certificate of practical completion has been issued in the ensuing five years. Where the moment of practical completion is of great significance under a building contract, the Superintendent has failed to identify that moment with precision, or at all. I do not consider that the Superintendent acted reasonably when discharging its role and function in certifying practical completion.
6. Subparagraph (b) of the definition of date of practical completion makes clear that the parties did not intend the Superintendent's decision to be the sole means by which the date would be determined. The definition does not accord primacy to the date in the Superintendent's certificate, nor does it make the Court's determination of the date dependent on the Superintendent having first issued a certificate. Instead, where the date of practical competition is subject to litigation or arbitration, the Contract provides a mechanism for the Court to determine "another" date on which practical competition was reached. In the circumstances at hand, it falls to the Court to determine the date of practical completion.
7. As earlier described at [71]-[151], by 7 August 2017, the Contractor had submitted a notice of final inspection to the Superintendent under clause 35 of the Contract, at least in respect of Building A. By 14 August 2017, the 'hand over' documents were being assembled. The Contractor advised that it anticipated achieving practical completion by 28 August 2017, but moved that date back to 5 September 2017 and then 8 September 2017. On 7 September 2017, Fire & Rescue NSW inspected the site.
8. On 12 September 2017, an interim occupation certificate was issued and the hotel began operations; the Contractor handed over As Built drawings, certificates, manuals and warranties. On 22 September 2017, the Superintendent accepted the quantity surveyor's recommendation to pay the Contractor's progress claim of 12 September 2017 on the basis that the defects preventing practical completion were "minor". Wilson Parking commenced operations on 25 September 2017.
9. On 11 October 2017, the day after the second "conditional' notice, the Superintendent calculated liquidated damages on the basis of "Full LDs" from 5 September 2017 until 12 September 2017, when the interim occupation certificate was received. Thereafter, liquidated damages were calculated for the roof terrace portion of Building A only, together with liquidated damages for Building B, until 25 September 2017, when Wilson Parking commenced operations. Thereafter, liquidated damages were only charged for the rooftop terrace. What these calculations reveal is the Superintendent's opinion that Building A reached practical completion on 12 September 2017 (save for the roof terrace, which I have concluded also reached practical completion on that date) and that Building B reached practical completion on 25 September 2017.
10. Considering each element of the definition of practical completion, I consider that the Works were complete save for minor defects on 25 September 2017. Having reviewed each of the defects identified in the two "conditional" notices, I do not consider that these items prevented the hotel or car park from being reasonably capable of being used for their stated purpose, as evidenced by the fact that Travelodge and Wilson Parking were doing just that. I accept that the definition of practical completion did not depend upon occupation of the building: Stuart Pty Ltd v Feteni Pty Ltd; Coogee Sands Apartments Pty Ltd v Stuart Pty Ltd [2004] NSWSC 237 at [276]-[279], [298] (McDougall J) cf Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWSC 1302, where the contract provided that practical completion could be deemed to have been reached through occupation and/or use of the building works. But the fact that experienced commercial operators saw fit to commence operations in Building A and Building B is evidence that the defects which then existed were "minor [and did] not prevent the Works from being reasonably capable of being used for their stated purpose" and rectification of defects would not prejudice the convenient use of the Works.
11. The Superintendent does not appear to have turned its mind to whether the Contractor had reasonable grounds for not properly rectifying the defects listed in the "conditional" notices. So far as the evidence reveals, the Contractor was in the process of attending to the specified defects. To the extent that the Superintendent had raised substantive matters in respect of rooftop access, crash rails and concrete finishes, the Contractor did not consider that it was obliged to remedy those defects in order to discharge its contractual obligations. As it turns out, the Contractor was correct in respect of at least some of those matters.
12. The evidence does not suggest that rectification of the defects prejudiced the convenient use of the hotel or car park. The requirements of subparagraphs (b), (c), (e) and (f) were satisfied by 25 September 2017. As to subparagraph (d), the Contractor was required to have done all that it was required to do under the Contract to enable the Principal to obtain a certificate of occupation from the Council. When the Principal obtained an interim occupation certificate which permitted maintenance staff to use the rooftop terrace, this discharged the Contractor's obligation where development approval did not then permit use of the terrace by the public. In the result, I determine that practical completion was reached on 25 September 2017.

LIQUIDATED DAMAGES

1. The fourth question is whether the Court can ascertain liquidated damages based on the date of practical completion determined in these proceedings. Clause 34.7 provides: 34.7 Liquidated damages If WUC does not reach practical completion by the date for practical completion, the Superintendent shall certify, as due and payable to the Principal, [$12,100] for every day after the date for practical completion to and including the earliest of the date of practical completion or termination of the Contract or the Principal taking WUC out of the hands of the Contractor. …
2. As earlier described, the Superintendent provided various calculations of liquidated damages in October 2017. As I understand those calculations, the daily amount of $12,100 was apportioned by reference to both the square meterage of the roof terrace (5.46% of Building A) and the income expected to be generated by the respective tenancies (the carpark contributed 39% of total income). Of course, this methodology had no basis in the Contract. Presumably, the Superintendent was trying to be fair to the Contractor where the Superintendent was then satisfied that some, but not all, of the Works had achieved practical completion.
3. The Superintendent provided an updated calculation of liquidated damages to the quantity surveyor in November 2017, apparently applying the same methodology. The Superintendent provided an updated calculation to the Contractor in September 2018, with the figure now totalling $297,458.
4. On 6 November 2018, the calculation of liquidated damages became further removed from the Contract, where the calculation was not even prepared by the Superintendent, but by the Principal's solicitor "To be issued by the Superintendent." Further, while the calculation of liquidated damages for Building A and the rooftop terrace largely followed the apportionment applied by the Superintendent to that point, liquidated damages for Building B now continued beyond 25 September 2017 to date, 'blowing out' the liquidated damages to $2,015,013. It was this amount which was 'certified'.
5. In these proceedings, the Principal sought liquidated damages based on the Contract rather than the amounts previously calculated by the Superintendent, but on the basis that the Works had yet to reach practical completion. The amount sought was demurely described as $2,235,940 as at 5 November 2018 and continuing. By my calculations, this was some $20 million.
6. The Contractor submitted that the Contract provided no mechanism for the Court to step into the shoes of the Superintendent to calculate liquidated damages payable by the Contractor, unlike the determination of the date of practical completion. To this, the Principal submitted that certification is a contractual power of the Superintendent under a contract that remains on foot. If the certification is invalid, the Principal can ask (and, if necessary, compel) the Superintendent to certify the correct amount according to law.
7. There is some authority in support of the proposition advanced by the Contractor. In RCR O'Donnell Griffin Pty Ltd [2015] QSC 186, a subcontract in relevantly identical terms had no Superintendent in place and thus no certificate in respect of liquidated damages. Byrne SJA concluded that liquidated damages were not payable without the Superintendent's certificate. The language chosen to describe the source of the obligation - "the Superintendent shall certify, as due and payable …" - accorded with the idea that certification was essential to the liability to pay: at [38]. Where the Superintendent was empowered elsewhere in the Contract, in its absolute discretion, to direct an EOT before issuing a final certificate, an exercise of that power would reduce or negate liquidated damages otherwise payable for delay, "So the assessment is not inevitably a mere mathematical exercise based on the number of days of delay after the date for practical completion fixed by the subcontract:" at [39]-[40]. His Honour's reasoning was upheld by the Court of Appeal: RCR O'Donnell Griffin Pty Ltd v Forge Group Power Pty Ltd [2016] QCA 214 at [103] (per McMurdo JA, with whom Applegarth J agreed); at [14] (per Morrison JA).
8. Here, of course, the Superintendent has certified liquidated damages, but in a manner that bears no relation to the Contract, nor the date of practical completion as I have found it to be, nor for that matter without the figures being first prepared by the Principal. Put simply, the Superintendent's certification does not comply with the terms of the contract: Legal & General Life Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 at 336 (per McHugh JA).
9. The Court is also able to look at the product of the Superintendent's labours to see whether the task was performed in accordance with the parties' contractual entitlement, being prepared reasonably and in good faith: Clause 20. As McDougall J explained in Walton v Illawarra at [57]: … it is open to the court to look at the challenged assessments (for extensions of time and valuation of variations and the like), to determine whether or not they equate to the contractual standard of reasonableness, and to substitute its own determination of what should reasonably have been allowed if they do not.
10. The Contractor's proposed construction of clause 34.7 also leads to disharmony with other terms of the Contract: Australian Broadcasting Commission v Australasian Performing Right Assn Ltd (1973) 129 CLR 99 at 109; [1973] HCA 36 at 7 (per Gibbs J). An input in the calculation of liquidated damages is the date of practical completion. The parties have conferred on the Court a power to determine "another" date of practical completion than the date determined by the Superintendent. Clause 34.7 would produce an absurd result if the Court could adjust the date of practical completion but not the liquidated damages referrable to that date. It is improbable that the parties intended to bring about such a result; such a construction of clause 34.7 should be avoided.
11. Rather, in a situation such as this, the Courts have differentiated between contractual tasks to be carried out by the exercise of a broad discretion and those which are simply mechanical. For the former, a certifier's judgment will not be open to challenge as long as the contractual limits of the discretion entrusted to the certifier were not exceeded. Where a contract provides detailed, fixed and objective criteria as to how the amount to be certified is to be determined, and the certifier arrives at the incorrect amount, the Court will set aside the certificate and order the correct amount to be paid. In doing so, the Court will come to a judgment as to the correct amount owing and make an order accordingly. As Ipp JA explained in WMC Resources Ltd v Leighton Contractors Pty Ltd (1999) 20 WAR 489 at 495; [1999] WASCA 10 at [18]: Ordinarily, in cases of this kind, … there will be only one uniquely correct value. If the certifying valuer, in these circumstances, arrives at the incorrect value, the valuation will be in breach of the contract. It is for that reason than an incorrect certificate will also be set aside. The court will then have the jurisdiction to determine the correct amount owing in terms of the contract.
12. Clause 34.7 sets out an objective criterion for the calculation of liquidated damages, being $12,100 per calendar day for every day after the date for practical completion until (relevantly), the date of practical completion. Once the relevant dates are determined, the calculation of liquidated damages is a straightforward, mathematical exercise. As the Superintendent has incorrectly calculated liquidated damages, it is open to the Court to determine the correct sum of liquidated damages due to the Principal in accordance with the terms of clause 34.7. The amount is $254,100.

DAMAGES: RETURN OF SECURITY

1. As earlier noted, on 16 October 2017, the Contractor requested return of 50% of the security. The first bank guarantee was not returned at the time. On 14 February 2020, by consent, Hammerschlag J ordered the Principal to deliver up the first guarantee. The Principal's solicitor explained that his client agreed to deliver up the first bank guarantee in return for the Contractor's agreement to an extension of time for the Principal's evidence in chief. The Principal did not thereby admit that practical completion had been reached by agreeing to the return of the bank guarantee. The Contractor did not suggest otherwise. The Contractor confirmed receipt of the bank guarantee on 25 February 2020.
2. Clause 5.4 of the Contract provided, "Upon the issue of the certificate of practical completion a party's entitlement to security … shall be reduced by [50% of amount held], and the reduction shall be released and returned within 14 days to the other party." Here, the Superintendent did not issue a certificate of practical completion at all. I have also found that, in failing to issue a certificate of practical completion, either on 25 September 2017 or in the ensuing five years, the Superintendent did not fulfill all aspects of its role and functions reasonably, as the parties were entitled to expect under clause 20. It was the Principal's obligation to ensure that the Superintendent acted in this manner: clause 20. The Principal was thereby in breach of clause 20, entitling the Contractor to damages equivalent to place the Contractor in the position it would have been if the Principal had caused the Superintendent to issue a certificate of practical completion in a timely manner. If the Principal had attended to its task, then the first guarantee would have been returned in a timely manner as well.
3. The bank charged fees for each bank guarantee at a rate of 1.15% per annum. The fees were charged in advance every six months, in May and November, at $5,405 on each occasion for each guarantee. If the Principal had performed its obligations under Clause 20, the first guarantee would have been returned before the next round of bank fees were charged in November 2017. The Contractor continued to incur bank fees, charged in advance and every six months, until the bank guarantee was released in February 2020. The bank fees incurred between when the first bank guarantee should have been returned and when it was returned totalled $27,025. The Contractor is entitled to damages for bank fees incurred from November 2017 to date, being $27,025.
4. Clause 5.4 of the Contract provided, "A party's entitlement otherwise to security shall cease 14 days after final certificate." Where practical completion was achieved on 25 September 2017, the final certificate produced by the Superintendent on 6 November 2018 (at Schedule 3) was valid as a final certificate served in accordance with clause 37.4 of the Contract. As such, the Principal was required to return the second bank guarantee 14 days later, on 20 November 2018.
5. The Contractor is entitled to the return of the second bank guarantee with interest under clause 37.5 of the Contract, together with the associated costs incurred in maintaining the bank guarantee where it was not returned as required under the Contract. The bank fees paid between when the second bank guarantee should have been returned until now totalled $43,240.

DAMAGES: DEFECTS CLAIM

1. The fifth question is whether the Contract ousts common law damages for defective building work. The starting point was explained by Lord Diplock in Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 at 718: … one starts with the presumption that neither party intends to abandon any remedies for its breach arising by operation of law, and clear express words must be used in order to rebut this presumption. … So when one is concerned with a building contract one starts with the presumption that each party is to be entitled to all those remedies for its breach as would arise by operation of law … To rebut that presumption one must be able to find in the contract clear unequivocal words in which the parties have expressed their agreement that this remedy shall not be available in respect of breaches of that particular contract. Followed in Concut Pty Ltd v Worrell (2000) 176 ALR 693 at 699; [2000] HCA 64 at [23] (per Gleeson CJ, Gaudron and Gummow JJ).
2. In Turner Corporation Pty Ltd v Austotel Pty Ltd (1994) 13 BCL 378, Cole J (as his Honour then was) reviewed a standard form of building contract - not dissimilar to the Contract at hand - and concluded that the contract provided a code which established the rights, obligations and liabilities of the parties, and mechanisms by which completion of the Works was to be achieved to practical completion and during the defects liability period: at 394. Further, at 395: There is, in my view, no room for a 'wider common law right' in the Proprietor to treat non-compliance with the contractual obligation by the Builder as a separate basis for claiming damages … That is because the contract specifies and it confers upon the Proprietor its rights flowing from such a breach; that is, the parties have, by contract, agreed upon the consequences to each of the Proprietor and the Builder, both as to the rights and powers flowing from and the consequences of, such breach.
3. His Honour acknowledged that whether a contract codified the rights and liabilities of the parties depended on the construction of each individual contract, "If a party's common law right to sue for damages for breach of contract is to be contractually removed, it must be done by clear words. … However, it does not mean that express words are required. If on the proper construction of the contract as a whole, it can be said that a party has surrendered its common law right to damages, that construction must be given effect to, notwithstanding absence of express words surrendering the common law right to damages:" at 395.
4. Turner was followed in Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWSC 1302, where White J (as his Honour then was) observed that Cole J's decision had then stood for 15 years "without adverse comment": at [74]. Further, White J agreed with Cole J's reasoning: at [77]. More recently in Bedrock Construction and Development Pty Ltd v Crea [2021] SASCA 66, Doyle JA (with whom Livesey and Bleby JJA agreed) followed Turner and Bitannia: at [127]-[128]. Doyle JA observed at [130]: I do not think there is any room, in the face of the express contractual provisions for addressing defects, for the existence of some wider common law right to recover damages of that nature. Such a right would cut across the contractual regime agreed between the parties.
5. Turner was recently distinguished in Hacer Group Pty Ltd v Euro Façade Tech Export Sdn Bhd [2022] VSC 373, where the subcontract contained broad indemnities that were not qualified by reference to the defect rectification provisions: at [42]. Stynes J concluded at [43]: In light of such indemnity, and absent clear words excluding [the subcontractor's] liability in damages, a more harmonious construction of the Subcontract as a whole is one that permits [the builder] to rely on its common law right to damages even where it has not complied with the contractual provisions governing the notification and rectification of defects.
6. Her Honour did not, however, doubt the correctness of Turner and considered that the concerns expressed by Cole J could be addressed by the principles of mitigation of loss. If the builder failed to give the subcontractor notice of a defect or otherwise failed to provide the subcontractor with an opportunity to rectify the defect, the builder should not be able to recover more in damages than the amount that it would have cost the subcontractor to attend to rectification: at [45].
7. Accordingly, the issue is whether the provisions of the Contract which dealt with defective work, in particular, clauses 29.3, 35 and 37.4, created a code governing the rights, obligations and liabilities of the parties, such that the Principal may be taken to have abandoned its entitlement to common law damages.
8. Clause 29.3 of the Contract enabled the Superintendent to give a direction to the Contractor in respect of defective work both before and after practical completion: 29.3 Defective work If the Superintendent becomes aware of work done … by the Contractor which does not comply with the Contract, the Superintendent shall as soon as practicable give the Contractor written details thereof. If the subject work has not been rectified, the Superintendent may direct the Contractor to do any one or more of the following (including times for commencement and completion): … (c) redesign, reconstruct, replace or correct the work ... If: (a) the Contractor fails to comply with such a direction; and (b) that failure has not been made good within 8 days after the Contractor receives written notice from the Superintendent that the Principal intends to have the subject work rectified by others, The Principal may have that work so rectified and the Superintendent shall certify the cost incurred as moneys due from the Contractor to the Principal. … 29.5 Timing The Superintendent may give a direction pursuant to this clause at any time before the expiry of the last defects liability period.
9. It will be recalled that clause 35 prescribed a procedure for rectifying defective work immediately prior to practical completion, so as not to affect the date for practical completion: see [30]. After practical completion, clause 35 obliged the Contractor to rectify all defects existing at the date of practical completion as soon as possible. Further, during the defects liability period, the Superintendent was entitled to give the Contractor a direction to rectify defects and also specify whether there would be a separate defects liability period - not exceeding 12 months - commencing when the rectification was completed. Further: If the rectification is not commenced or completed by the stated dates, the Principal may have the rectification carried out by others but without prejudice to any other rights and remedies the Principal may have. The cost thereby incurred shall be certified by the Superintendent as moneys due and payable to the Principal.
10. Further, clause 37.4 provided: 37.4 Final payment claim and certificate … Within 42 days after the expiry of the last defects liability period, the Superintendent shall issue to both the Contractor and the Principal a final certificate evidencing the moneys finally due and payable between the Contractor and the Principal on any account whatsoever in connection with the subject matter of the Contract. … The final certificate shall be conclusive evidence of accord and satisfaction, and in discharge of each party's obligations in connection with the subject matter of the Contract except for: … (b) defect or omission in the Works or any part thereof which was not apparent at the end of the last defects liability period, or which would not have been disclosed upon reasonable inspection at the time of the issue of the final certificate; … (d) unresolved issues the subject of any notice of dispute pursuant to clause 42, served before the 7th day after the issue of the final certificate.
11. I consider that, by these clauses, the Contract established a regime indistinguishable from those analysed in Turner and Bitannia. I note that, in clause 35, the Principal was entitled to have rectification works carried out by others if the Contractor did not rectify a defect by the date directed by the Superintendent, "without prejudice to any other rights and remedies the Principal may have". However, the Contract envisaged that a final certificate would be later issued, evidencing the moneys finally due and payable "on any account whatsoever in connection with the subject matter of the Contract": clause 37.4. Any other rights and remedies which the Principal may have against the Contractor for failing to rectify defects in accordance with the Superintendent's direction would surely fall within this description.
12. Unlike Hacer, the Contract does not contain detailed indemnities which suggest that the Principal was permitted to rely on its common law right to damages even if it had not complied with the contractual regime governing the notification and rectification of defects.
13. As such, I conclude that, by clear words, the parties to the Contract have surrendered their common law right to damages. Where practical completion was achieved on 25 September 2017, the final certificate produced by the Superintendent on 6 November 2018 (at Schedule 3) was served in accordance with clause 37.4 of the Contract. It follows, pursuant to clause 37.4, that the final certificate constituted "conclusive evidence" regarding defects, subject to the exceptions described in that clause.

Reasonable inspection

1. Save for defects referred to in the notices of dispute "served before the 7th day after issue of the final certificate", clause 37.4 provides that the Contractor is discharged from any liability under the Contract except for any defect "which was not apparent at the end of the last defects liability period, or which would not have been disclosed upon reasonable inspection at the time of the issue of the final certificate". Reasonable inspection does not involve having to undertake invasive procedures or access areas that are not readily visible, absent some reason to suspect the existence of a defect: Owners Corporation Strata Plan 61288 v Brookfield Multiplex [2012] NSWSC 1219 at [70]-[71] (per McDougall J).
2. The only expert evidence as to whether the alleged defects were apparent at the end of the last defects liability period, or which would have been disclosed upon reasonable inspection at the time of the issue of the final certificate, was that of the Contractor's experts, who opined that all of the defects would have then been apparent. Other than the use of a ladder, the experts were able to identify the alleged defects with relative ease.
3. The Principal submitted that the expert evidence on this topic was bare assertion and the Court would pay it no regard: Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588 at 604; [2011] HCA 21 at [37] (per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ). Rather, extensive inspections and investigations of the building were undertaken in 2017 and 2018, which did not reveal the defects identified after the commencement of the proceedings. Therefore, the Court ought conclude that such defects "would not have been disclosed upon reasonable inspection" prior to the commencement of the proceedings in December 2018.
4. I agree that the expert evidence of the Contractor's witnesses was simply stated, but so was the question posed: would this defect have been apparent to you upon reasonable inspection? By and large, the Principal's expert witnesses also agreed that the defects would have been apparent at the relevant time.
5. Further, whilst it is evident that, by the hearing, the Principal and its experts had gone over the buildings with a 'fine tooth comb', the extent to which the buildings were inspected for defects in the defects liability period - between September 2017 and October 2018 - is not entirely clear. Mr Worthington inspected the carpark in August 2017, referred to at [73]. This was before practical completion, when the Contractor's engineer accepted that further works were required. Where 'handover' of the project was then to occur on 1 September 2017, Mr Worthington recommended that he reinspect the completed works and provide a second report. No second report is in evidence. Mr Worthington's report was obviously preliminary in nature and not intended to capture defects in the work as completed.
6. The Superintendent and the architect inspected the buildings at about the date of practical completion - on 4, 8 and 15 September 2017 and 4 October 2017 - presumably for the purpose of ascertaining whether practical completion had been achieved. Their reports did identify a number of defects, presumably to be attended to either before practical completion was considered to have been achieved or during the defects liability period.
7. Ten months later, in June 2018, the Principal obtained an engineering report in respect of the carpark only, concerning concrete finish and construction joints. It was then not until four months later - and after the Contractor had issued its final payment claim - that the Principal proceeded to obtain a flurry of expert reports on the building.
8. That is, as far as the evidence reveals, there was no careful or detailed inspection of Building A and Building B for defects after Travelodge and Wilson Parking commenced operations in September 2017, save for a report obtained on the carpark in June 2018, which focused on particular concerns. The apparently fairly limited investigations undertaken by the Principal at the time do not lead me to infer that the defects for which damages are now sought were not apparent at the time on reasonable inspection. Rather, I infer that the Principal and the Superintendent may have been proceeding on the assumption that practical completion had not been achieved, and would not be achieved, until the rooftop terrace was approved for public use. Consequently, they may have been unprepared for the final payment claim when it came and undertook what inspections they could in the limited time they had to respond to the claim. Given time constraints, or a conviction that the final payment claim was invalid, it appears that only a limited inspection was done at the time. The contractual regime for the notification and rectification of defects applied nonetheless.
9. The schedule of defects served by the Principal on 6 November 2018 listed 150 items. The Principal's Scott Schedule served in June 2020 comprised 382 items. On the basis of the expert evidence adduced by the Contractor, I am satisfied that the defects in the Scott Schedule were apparent at the end of the defects liability period, being 25 September 2018, or would have been disclosed upon reasonable inspection at the time of the issue of the final certificate on 6 November 2018. To the extent that the defects in the Scott Schedule go beyond the schedule of defects served on 6 November 2018, the Principal is not entitled to seek the cost of rectifying such defects, where the contractual regime for the notification and rectification of the defects was not deployed.

Remaining defects

1. Many items in the Scott Schedule had been rectified by the conclusion of the hearing or were not pressed, leaving about 100 items. Ultimately, the Principal sought $1,691,403.90 for acoustic, concrete, fire, hydraulic, mechanical and general defects.
2. The Contractor accepted 25 items. The parties agreed that $21,872.17 was payable in respect of these items. The parties recorded their remaining disagreement in a Scott Schedule. Most of the remaining items were not included in the schedule of defects served by the Principal on 6 November 2018. I did not understand the Principal to cavil with the Contractor's categorisation of defects as to those which were included in the 6 November 2018 schedule and those which were not. I have removed the items which were not notified in accordance with the Contract and recorded my conclusions in relation to the remaining items under a further heading "Decision" in the Scott Schedule, a copy of which is attached to these reasons. The major items in the Scott Schedule are explained further below.
3. In considering the remaining items, I have applied the principle that, where building works are defective because they are not in conformity with contractual requirements, the court will award damages by reference to the costs of rectification, where this is reasonable and necessary: Bellgrove v Eldridge (1954) 90 CLR 613 at 617-618; [1954] HCA 36 (per Dixon CJ, Webb and Taylor JJ); Owners - Strata Plan No 74602 v Brookfield Australia Investments Ltd [2015] NSWSC 1916, [38]-[40] (Stevenson J). The Court may draw an inference about the existence of defects generally based on the presence of defects in samples, particularly where the evidence points to the existence of a design issue rather than an issue of poor workmanship: The Owners Strata Plan 62930 v Kell & Rigby Holdings Pty Ltd [2010] NSWSC 612 at [185]-[191] (per Ward J).

Item 30: Face plates on ceiling in every guest room need to be replaced, patched and painted

1. Mr Abbott was instructed that the smoke alarm had been installed in 180 hotel rooms on the lower ceiling in the incorrect location. The smoke alarm was moved and a blank face plate installed in its place. Mr Abbott did not physically count the number of times he saw the face plate, but stated "there was lots of them." Mr Abbott considered that the use of a face plate was unsatisfactory; rectification had not been completed in an acceptable tradesmanlike manner and to an accepted industry standard. The cost of rectifying this visual defect was estimated at $28,662.40. Mr Abbott agreed that there was no code or specification that prevented blanks being used for this purpose, "only good workmanship", where experts may differ on what they consider to be good workmanship.
2. Mr Iskowicz observed that the smoke alarm had not been moved in several rooms and remained in the location identified on the design plans. Where the smoke alarms had been relocated from the bulkhead to the room ceiling, he considered that the work had been carried out in a tradesmanlike manner and any defect was aesthetic only. Mr Iskowicz agreed that, "In a perfect world", a hole in the gyprock ceiling would be plastered, sanded and painted so that the previous hole could not be seen, "that would depend on the nature of the discussions that took place".
3. As far as the contemporaneous records reveal, there was a problem with false fire alarms. On 12 January 2018, the Superintendent complained that the hotel had multiple false alarms and associated charges from the fire brigade, and suggested that the Contractor was obliged to pay these charges. On 16 January 2018, the Superintendent gave approval to the Contractor to commence rectification of the smoke detector issue by moving the smoke detectors, "This approval is not an instruction on how to rectify the issue, only that [the Contractor] may proceed with the option they see fit." Mr Baltovski said that, while the Contractor was not responsible for the fire alarms being falsely activated, it relocated the fire alarms and placed blank plates over their original locations, to assist Travelodge. The Contractor also assisted Travelodge to submit a waiver application for reimbursement of the invoices.
4. On 22 January 2018, the Superintendent advised the Contractor that the repair to the hole following the relocation of the smoke detectors was "NOT acceptable. A cover plate was never relayed nor approved by Travelodge. The hole must be repaired, patched and painted." On 13 March 2018, the Superintendent requested the Contractor to remove the face plates that had been installed where smoke detectors had been relocated, and to patch and paint the area to ensure a uniform finish across the ceiling, at no cost to the Principal; "This methodology was never approved by the client nor Travelodge."
5. As I understand Mr Iskowicz's evidence, the smoke alarms were installed in the correct location according to the plans. However, this location led to a series of false fire alarms, apparently due to steam from the bathroom or a nearby kettle. While the Principal has not established that the smoke alarm was installed in the wrong location, the fact that the location specified on the plans proved unworkable points to a defect, where the Contractor warranted that the drawings, including those provided by the Principal, were suitable for the Works: clause 2.2(a)(ii.a).
6. It is clear from the contemporaneous records that there was no discussion between the Superintendent and the Contractor as to how the hole left in the gyprock ceiling following the removal of the smoke alarm would be treated. Instead, the Superintendent left it to the Contractor to "proceed with the option they see fit". Presumably, installing a blank over the hole was quicker and cheaper.
7. I accept that the blank is less aesthetically pleasing than the treatment now sought by the Principal. The question is whether the blank is inconsistent with the Contractor's obligations under the Contract. Clause 29.1 obliged the Contractor to "use suitable new materials and proper and tradesmanlike workmanship". On balance, I consider that using a blank to cover the hole, rather than plaster and paint did not "use suitable new materials and proper and tradesmanlike workmanship" in the absence of the Superintendent or Principal agreeing that the quick, cheap solution was acceptable.
8. Ultimately, the Principal said the defect was present in 193 guest rooms. Extrapolating from Mr Abbott's calculations based on 180 rooms, the Principal submitted that the cost of fixing the defect in 193 rooms was $30,067.72. Mr Madden accepted Mr Abbot's calculations (based on 180 rooms) and thus I have accepted the extrapolated calculations put forward by the Principal.

Item 35: carpet at doorway not level with corridor

1. Mr Andary said he had inspected the carpets of each room and observed that the carpet inside the room is higher than the entry threshold below the door. Mr Abbott did not inspect every room and produced photographs of one room. Mr Abbott added that the fire seal on the bottom of the door was inconsistent in that some dragged on the carpet and some sat above the threshold. He considered this to be a visual defect which also damaged carpet and was a potential trip hazard. On the basis that the defect existed in every room, Mr Abbott estimated that the cost to rectify this was $16,385.60.
2. Mr Madden agreed with the estimated cost but disagreed as to the existence and scope of the defect. Mr Iskowicz noted that the specifications for the carpet in the room were different to those in the hallways. Underlay was specified for the rooms but not the hallways. The threshold for each room and the hallways was required to have a fire compliant transition, being a gap not greater than 10mm between the floor and the bottom of the door. Mr Iskowicz observed the required clearance had been provided and did not observe evidence of damaged carpet or trip hazards. He considered that the transition between the hallway surface and the room surface was consistent and compliant and there was no defect.
3. Mr Abbott said that it was typical in any development where different carpets were being used "to humour one or the other by way of another topping … to bring the two together … It's usually a quick swipe of … another topping that does that, it's not a big deal when a carpet goes down." A screen of a cement-based product was used to build one level up to match the two carpet heights. Mr Iskowicz disagreed as cut cement-based products were not used up against the carpet to lay the next carpet. The difference between the carpet heights was within a millimetre or two, "It's not really something I think that the people would have worried about when they were building."
4. Whilst I accept the Principal's submission that it may be reasonable to infer that the difference in carpet heights observed by Mr Abbott and Mr Andary was present for all hotel rooms, the evidence does not establish that any difference in the carpet heights at the door threshold is a defect, a trip hazard, or was caused by any breach by the Contractor of its obligations under the Contract. In particular, there was no evidence as to what the difference in height between the two carpets was and whether this posed any particular problem to hotel guests or staff. This defect is not established.

Item 149: The green external barricades were not approved by the client

1. Returning to the carpark crash rails, the Principal submitted that the plans and details consistently showed the crash barrier extending to cover the slab edge. The crash rail system as a whole was required to meet the architectural intent of the contract drawings. The crash rail supplied and installed by the Contractor is fixed to the top of the slab with the slab edge exposed. There is no evidence that any variation was sought by the Contractor, or directed or approved, in order to carry out these works in the manner it did. The Contractor's response to the Principal's complaint was to paint the slab edge green. The appropriate method of rectification is the replacement of the existing crash rails with a compliant system, at an estimated cost of $97,238.
2. The Contractor submitted that there was no expert evidence to establish a breach of contract. The scope of works mentioned nothing of the screens or façade. The complaint made by the Principal was said to be new. The Scott Schedule was said to relate to a different defect.
3. The history of the development of the plans in respect of the carpark crash rails is earlier described at [52]-[61]. The design for the crash rails moved from a crash rail with a separate façade structure to a combined structure following the "value engineering" process. However, the revised plans and details continued to refer to crash rails "combined with cantilevered balustrade with perforated & corrugated metal panels". The details continued to depict the panels extending over the slab edge.
4. I agree that what has been installed does not comply with this detail and, whilst the architect appears to have been consulted as to the crash rails to be installed, the Contractor does not appear to have sought, or obtained, a variation from the Superintendent, as required by the Contract. Clause 36.1 of the Contract provided that the Contractor was not to vary the works except as directed (including, approved) in writing. Installation of the crash rails drew the immediate protest of the architect and the Superintendent. I am satisfied that the Contractor breached the Contract.
5. More difficult is what damages, if any, should be awarded. The Scott Schedule in respect of this item claimed, "The green external barricades were not approved by the client". Mr Abbott requested more information from the Principal as to the suggested breach. Mr Iskowicz agreed that more information was required in order to assess this item.
6. Mr Abbott's costing for this item involved removal of the existing green barricades and replacement by Rhinostop Elite type 1 system and the installation of a new hand rail. However, the Principal's complaint is not that the crash rail does not comply with the Contract but that the external façade was not installed in accordance with the plans and details. Mr Abbott has not costed the installation of this façade. Rectification in the manner costed by Mr Abbott would not accord with the plans and details either and, presumably, would be less satisfactory than the current structure. Thus, the costings provided do not assist.
7. Further, from the photographs of the crash rails as installed (see [57]), it appears that the crash rails protrude beyond the slab edge such that it may not be possible to install corrugated metal panels on the outer edge of the crash rail to align with the slab edge.
8. Whilst I accept that the crash rails installed may not meet the architectural intent of the contract drawings, the costs of entirely removing the crash rail system and re-installing a structure which precisely accords with the drawings and plans may be difficult to justify, that is, the cost of rectification may not be reasonable or necessary. In any event, there is no evidence as to what that cost may be where Mr Abbott has estimated the cost of rectification in a manner which is not, in fact, what the Principal wants to occur.

Preliminaries and Builder's Margin

1. Mr Abbott allowed 15% for preliminaries. Mr Madden agreed with that figure if the defects were found to exist and were as extensive as suggested. However, if the defects were limited in quantum to $170,000, then it would not be reasonable to allow a cost for a contractor to undertake all these works. The works would most likely be undertaken by contractors already engaged for maintenance works. In that event, Mr Madden allowed $18,000 for a facilities manager to manage the works, being approximately 200 hours. This represented preliminaries of about 10.5%.
2. The Principal submitted that it was not a builder nor was it involved in the construction industry. It would have to appoint a building or project manager to administer the work necessary to rectify the defects. Nor was it reasonable to expect a facilities manager to undertake the role of builder or project manager. I agree and will allow preliminaries at the percentage suggested by Mr Abbott.
3. Mr Abbott also allowed 15% for the builder's margin. Mr Madden suggested 10% as, based upon his recent review of tenders, the normal builder's margins were now in the vicinity of 3% to 6%.
4. The Principal submitted that Mr Madden's view appeared to be heavily influenced by his experience with greenfield projects, something that Mr Abbott identified as a distinguishing feature in the present case. In the circumstances, the allowance by Mr Abbott should be accepted. Where Mr Abbott had no formal qualifications as a quantity surveyor, the Contractor submitted that the evidence of Mr Madden would be preferred by the Court. I generally preferred the evidence of Mr Madden and will adopt his figure of 10%, noting that it exceeds the figure he is presently seeing by a healthy margin in any event.
5. The total of the agreed defects and the defects which I have found to be established in the attached Scott Schedule total $164,445. Adding preliminaries and builder's margin, this becomes $208,023.

ORDERS AND COSTS

1. Whilst the Contractor is entitled to judgment and orders in respect of unpaid GST and the bank guarantees, the Contractor invited the Court to deduct any sums which the Court determined were payable for building defects. I request the parties to confer and provide final orders to reflect the set-off between the Contractor's claim and the Principal's cross-claim, noting (without including interest calculations): 1. the Contractor is entitled to $188,000 for unpaid GST, damages of $27,025 in respect of the first bank guarantee, damages of $43,240 in respect of the second bank guarantee and an order that the Principal release and deliver up second bank guarantee; and 2. the Principal is entitled to liquidated damages of $254,100 and rectification costs of $208,023.
2. As to costs, the Contractor submitted that the Principal has had the benefit of the use of the site since 12 September 2017, more than 5 years ago, leasing the premises to lessees including Travelodge and Wilson Parking. Notwithstanding this, the Principal refused to concede that practical completion of the works had been achieved. The Principal maintained a cross-claim for a significant award of damages for defective works, initially said to be $8.85 million but ultimately reduced to $1.7 million. The Contractor contended that the Principal was only entitled to a modest award of $72,503. Whilst the Contractor had returned to perform further works at the premises over the past five years, this was done without admission and on a commercial basis. The Contractor was entitled to the return of its bank guarantee and damages. Overall, the Contractor submitted that it was entitled to its costs of the proceedings.
3. The Principal submitted that many of the defects about which it complained were only rectified after the commencement of proceedings in December 2018 or after the bringing of a cross-claim in March 2019. While no damages were claimed for rectification of such defects, the scope of the dispute between the parties would have been substantially narrower if these defective works had been performed in accordance with the Contract. Further, the existence of these (now remedied) defects was said to demonstrate that it was reasonable for the Principal to commission experts to undertake relevant investigations. Irrespective of the final quantum of the unremedied defects, the Principal should have the costs of its expert evidence, including in relation to the hydraulic defects.
4. The Contractor has substantially succeeded in respect of the relief which it sought. The Principal succeeded on its cross-claim, although the degree of success may be described as modest indeed. To some extent, that is because the Contractor has already rectified defective building work during the pendency of these proceedings. However, there is a limit to which I should treat this rectification as an acceptance by the Contractor that the building works were defective and its responsibility. First, the rectification was expressly undertaken on a commercial and without admission basis. Second, as these defects were not the subject of contest at trial, I have not considered the expert evidence in relation to these defects nor made any findings. Third, a party should not be discouraged from rectifying suggested defects on a without admissions basis. If the court was to proceed to take such rectification work as evidence that the defect in fact existed, including by awarding costs in favour of the other party, there would be little reason to resolve complaints in this manner.
5. As to the suggestion that the Principal should, at least, have its costs in respect of its expert reports, it does appear that the Contractor reviewed these reports and proceeded to propose solutions to fix the problems identified by the experts and to undertake rectification works. However, if the Principal had used the contractual regime for notification and rectification of defects by informing the Contractor of these defects in the defects liability period, then the extent of defects to be determined in these proceedings may have been far less or these proceedings may have proved unnecessary.
6. Further, the expert reports also considered a wide range of defects which were not identified in the schedule of defects provided by the Principal on 6 November 2018 and thus were not actionable in these proceedings where the defects were apparent, or would have been apparent on reasonable inspection, on that date. The Contractor was put to the expense of meeting that evidence, including by commissioning a large number of experts itself. A large portion of the hearing was devoted to defects which ultimately do not form part of this judgement.
7. Overall, I consider that the Contractor is entitled to the costs of its claim whilst the Principal should receive a portion of its costs of the cross-claim commensurate with its degree of success. Where the Contractor's costs of its claim are likely far less than the Principal's costs of the cross-claim, a portion of the latter commensurate with the Principal's degree of success is probably roughly equivalent to the Contractor's costs of its claim. In the result, I consider it appropriate in the circumstances to make no order as to costs.
8. For these reasons, I make the following orders: 1. Direct the parties to confer and, within 14 days, provide short minutes of order, preferably agreed, which reflect these reasons for judgment. 2. Direct the parties to notify any errors or omissions within 14 days.

Amendments 06 March 2023 - Correction of date on coversheet. 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: 06 March 2023