Plaintiff v Defendants

4 For the purposes of recapitulation, I will begin by outlining some of the findings in my reasons for judgment which are especially pertinent to determining the orders to be made in this matter.

5 Fundamentally, I was satisfied that the first defendant breached the agreement by failing to pay progress certificate 14 in breach of clause 42.1. I found that no new or different obligations arose under the agreement arising from a variation to that agreement, as alleged by the defendants. I further found that the defendants failed with respect to their allegations of waiver, acquiescence and estoppel said to arise from the conduct of the plaintiff in relation to progress claim 14. In addition, I found that the obligations of the parties - in particular, those of the first defendant - to pay the plaintiff under payment certificate 14, were not superseded by payment certificate 15. In addition, I found that the submissions of the defendants with respect to the application of the Domestic Buildings Contracts Act 1995 (Vic) were not made out.

6 With regard to the defendants' claim for liquidated damages arising from the delays and, in particular, the failure to complete by the contract date; I was satisfied that at the date that the builder left the site, the building works were complete to the extent of 90 per cent, leaving 10 per cent of the works to be completed. In the relevant context, I further found that a portion of the extension of time claims ("EOTs") claimed by the plaintiff should be allowed, to the extent of 56 days and four hours. With respect to the defendants' claim that the plaintiff was overpaid, I found that the EOTs claimed by the plaintiff were to be allowed in part only. As a consequence, I indicated that some adjustment of the amounts paid by the defendants to the plaintiff may be required.

7 It is appropriate to consider the arithmetical error identified by the defendants with regard to the EOT 4 claim and the consequent effect that may have on the total EOT amount. The defendants submit that the appropriate figure for the EOT 4 claim should be 49 days and that the discrepancy is the result of that particular claim being miscalculated. In my reasons,[5] 32 days was allowed for the EOT 4 claim. The defendants submit that the total assessed for the EOT 4 claim should more properly be 24 days and four hours: consisting of 8 days and four hours for the gallery face shop drawings,[6] 12 days for the stepdowns,[7] and 4 days for the level 3 columns and roof beams.[8] The plaintiff did not squarely address this arithmetical question as per the items identified in my reasons. Instead, the plaintiff submitted that it had originally claimed 45 days with respect to the EOT 4 claim, and that the Court, in its calculation, was "making a judgment about what the overall temporal effect was, on the balance of probabilities".[9] Consequently, the plaintiff submitted that the Court's finding need not be reviewed.[10] While the plaintiff's argument is creative, I nevertheless accept the defendants' submissions that an obvious arithmetical error was made and consequently determine that the calculation for the EOT 4 claim should be 24 days and four hours. As a result, the total EOT claim should be 49 days (rather than 56 days and 4 hours).[11] Furthermore, this revision will have a consequential effect on the adjusted date of practical completion which will now be 3 March 2000.[12]

8 Turning to the critical issue of the repudiation of the contract by the defendants, in my reasons, I found that the conduct of the defendants in serving the show cause notice and subsequently drawing down the builder's guarantee constituted repudiation of the contract and that the plaintiff was entitled to terminate the contract as it did. I also found that the defendants failed in their claim for costs to complete. Upon termination of the contract, the plaintiff, having indicated its election, became entitled to recover on the basis of a quantum meruit, including allowance for the EOTs and the other amounts claimed, which require adjustment with respect to the variations and extra costs. So far as the remaining 10 per cent costs to complete are relevant, the defendants lost such entitlement when they wrongfully repudiated the contract and gave rise to the right of termination by the plaintiff. The obligations of the plaintiff ceased at that point, save with respect to the deduction variations. The claims of the plaintiff and the defendants in relation to the variation and the deduction variations were, by agreement, dealt with separately under the Scott Schedule. These are matters that will be dealt with now in final orders.

9 I further found that the claim of the plaintiff of undue influence, with respect to the superintendent, and the consequential claim for damages were not made out. In light of my overall findings, it was also unnecessary for any declaratory relief to be granted in favour of the plaintiff, in particular with respect to the application of the Domestic Building Contracts Act 1995. It was further unnecessary for there to be any consideration of the plaintiff's claim of misleading and deceptive conduct, namely, that the defendants would pay for the work performed. Finally, the defendants made claims for the costs of defective work and breach of warranties. Again, the parties agreed that these items should be subject to a Scott Schedule approach. The items allowed therein will therefore be adjusted and reflected in final orders. This adjustment will, in effect, dispose of the counterclaim.

10 It followed then that, subject to the adjustments to be made arising from the Scott Schedule items - namely, the variations, deduction variations, the works and warranties matters - the plaintiff was entitled to recover against the defendants on the basis of a quantum meruit upon formally making its election. The defendants succeeded on their counterclaim, albeit to a limited extent, with respect to the deductions variations, the works and warranties.

Overview of the Parties' Submissions on Final Orders

11 The plaintiff sought judgment in its favour of $3,078,482.00, excluding GST.

12 The plaintiff submitted that it was entitled to recover on a quantum meruit (including a margin of 10 per cent which it submitted was a mixture of overhead costs and profit), less those amounts where the defendants had succeeded on their claims and which ought properly be deducted from the quantum meruit.

13 The quantum meruit claim made by the plaintiff totalled $4,746,911.83. The defendants had already paid the plaintiff $2,769,350.00. The plaintiff submitted that the only deductions that the defendants could properly make from the quantum meruit claim were those with respect to defective works ($70,065.00), liquidated damages ($220,000.00) and certain deduction variations ($81,284.00).

14 In addition, the plaintiff submitted that it was entitled to an indemnity, or alternatively a payment from the defendants, for any sum that it was liable to pay in GST in respect of amounts recovered from the defendants pursuant to judgment in these proceedings.

15 Further, the plaintiff submitted that interest should be recovered at a rate of eight per cent per annum (as agreed by the parties) from the date upon which the costs were incurred by the plaintiff up until the date upon which the contract was terminated. The plaintiff's preferred method of calculating this interest was for it to be compounded at six monthly intervals. Interest calculated according to those parameters would amount to $992,914.

16 The defendants submitted that they owe the plaintiff $130,958.86. This figure is the net effect of the defendants' submissions that there be judgment for the plaintiff on its claim in the sum of $549,785.11 and judgment for the defendants on its counterclaim in the sum of $454,861.00. The difference between the claim and counterclaim would thereby amount to the sum of $94,921.11. Added to that, the defendants submit that there should be interest of $36,034.75, calculated at the rate of eight per cent per annum.

17 The defendants submitted that the plaintiff was not entitled to any margin on its quantum meruit. The defendants further submitted that they were entitled to properly deduct delay costs of $583,271.96 from the plaintiff's quantum meruit claim.

18 Additionally, the defendants submitted that they were entitled to deduct variations of $278,574.91 pursuant to what had been agreed between the parties in the Scott Schedule. They also submitted that the plaintiff could not resile from was set out in the Scott Schedule, in respect of the deduction variations to be deducted, and that a total of $216,611.00 should therefore be deducted from the plaintiff's quantum meruit, as opposed to the amount of $81,284.00 that was submitted by the plaintiff.

19 In anticipation of a proposed revision of the EOT 4 claim, the defendants submitted that there should be a deduction of $238,250.00 for liquidated damages, that amount being slightly higher than that of $220,000.00 conceded by the plaintiff. The defendants also sought a deduction of $469,864.85 for amounts paid by the plaintiff on behalf of MTK Plastering, and a further $26,000.00 in other deductions for rectification works separate to the $70,065.00 already agreed between the parties as an appropriate amount to be deducted from the plaintiff's quantum meruit for defective works.

20 As to the question of interest, the defendants submitted that interest should be calculated at the rate of eight per cent per annum, on a simple basis, from the date when the claim was first made, that being when proceedings were issued by the plaintiff in the Victorian Civil and Administrative Tribunal on 16 November 2000.

21 The plaintiff, as the innocent party who has accepted repudiation for breach of contract, has elected to sue on a quantum meruit. However, in so electing, the plaintiff still remains bound by the findings of fact. Moreover, the reasons for judgment contain several express statements relevant to the arguments now put forward by the plaintiff in consideration of the appropriate orders that they urge this Court to make and, in particular, the suggestion that there should be an allowance for profit as part of this Court's fair and reasonable assessment of the plaintiff's claim on a quantum meruit.

22 In my reasons, I specifically determined that no allowance was to be included in the assessment on the quantum meruit for a profit margin as claimed by the plaintiff.[13] I indicated that the plaintiff can recover on the basis of a quantum meruit by way of an assessment of the fair and reasonable value of the work.[14] However, in assessing what is the fair and reasonable value of the work, the Court should be cognisant, albeit not exclusively, of the parties' entitlements under the contract, since these entitlements must properly form part of the measure.

23 In Brenner v First Artists' Management Pty Ltd, Byrne, J. observed that:

"[W]here the parties have agreed upon a price for certain services to be performed and those services have in fact been performed, but for some reason their agreement is ineffective or is no longer on foot, the agreed price is evidence of the value that the parties themselves put on the services performed and may be received as evidence of the appropriate remuneration, but is not determinative of it".[15]

24 Thus, while influential, the terms of the contract may not be completely determinative in consideration of a claim on a quantum meruit. However, counsel for the plaintiff, Mr Digby, appeared to take that proviso further and imply, if not state explicitly, that once the election for a quantum meruit had been made by the plaintiff, then in fact the contract should be put to one side altogether;[16] or at least, that the contractual claims become irrelevant.[17] I do not accept such a proposition. To do so would distort the proper conceptual understanding of a claim on a quantum meruit in these circumstances and its relation to contract and to the law of restitution as is now contemporarily understood.

25 As Mason, P. said in Trimis v Mina:[18]

"Restitution respects the sanctity of the transaction, and the subsisting contractual regime chosen by the parties as the framework for settling disputes. This ensures that the law does not countenance two conflicting sets of legal obligations subsisting concurrently".

More recently, in ASIC v Edwards, Barrett, J. said that:[19]

"The parties shared intentions and the remuneration basis they contemplate are a clear indicator of what, as between them, is reasonable remuneration. This is so not only in cases where a contract is silent and there is implied a promise that reasonable remuneration will be paid but also in a quantum meruit case where reasonable remuneration is the essence of the restitutionary right".

It follows then from such a framework, as Professor Beatson[20] has observed in his learned article, Restitution and Contract: Non-Cumul?, that:

"The terms of the contract and its nature are of vital importance to the existence and extent of any restitutionary claim".[21]

26 Furthermore, while I accept that by the innocent party electing, as a remedy, to sue on a quantum meruit, as opposed to suing for damages for breach of contract, a different result may emerge;[22] I nevertheless do not consider that restitutionary remedies should be seen as subverting the bargains made between contracting parties and thereby overthrowing the contractual allocation of risk.[23] To do so, in my view, represents a backward step and misconstrues the real purpose of restitutionary remedies.[24]

27 Doubtless, many litigators regard suing on a quantum meruit as an attractive option for contractors. Indeed, it has been expressly referred to by some commentators as being a useful "threat" and as representing a "nightmare" for principals.[25] This is, undoubtedly, since it is envisaged that a successful claim on a quantum meruit may offer additional scope which could result in a greater amount being awarded than would have been attained by suing for damages for breach of contract. Essential, it would seem, to such an approach is the need to dispose of the contract entirely. This approach may take comfort in Lord Dunedin's words from early last century that:

"As regards quantum meruit where there are two parties who are under contract [sic] quantum meruit must be a new contract, and in order to have a new contract you must get rid of the old contract".[26]

28 However, as Mason, P. observed in Trimis, "restitution respects the sanctity of the transaction".[27] Indeed, in my reasons, I noted that the availability of a party to elect to sue on a quantum meruit when it already has available the option of suing for damages for breach of contract is itself controversial.[28] In any event, even if the contemporary authorities are properly interpreted as still countenancing the availability of such an election;[29] the influence of the contract cannot disappear entirely, even if the contract itself no longer exists.

29 Consequently, it is against the background of this understanding of the nexus between contractual and restitutionary concepts that I disallowed the plaintiff's claim for a profit margin. There is no reason for me now to disturb or recall the findings made in my judgment. Indeed, I would regard it quite inappropriate to do so.

30 Notwithstanding these observations, the plaintiff submits that the quantum meruit that it is entitled to recover includes what it calls a "margin" and that this margin consists not merely of "profit" but of "overhead costs" as well. In support of that contention, the plaintiff referred to the affidavit of its Finance Director, Sidney Robert Lucas, sworn on 3 August 2005. Mr Lucas stated that the term "margin" was "used to refer to 'overhead costs' which were also known as indirect costs and profit" and that "the Plaintiff [had] calculated margin to include 'overhead costs and profit' which [were] part of the Plaintiff's indirect costs in relation to the Boilerhouse Project".[30]

31 By way of interpolation, I would note that, in arguing its case as to what were the appropriate orders for the Court to make in these matters, the plaintiff stated that it also referred to the Lucas affidavit to support its arguments with respect to GST. Further, the plaintiff additionally referred to two further affidavits, namely, the affidavit of the plaintiff's Project Manager, Gary Charles Tivendale, sworn on 3 August 2005, and the affidavit of the plaintiff's Director, Antony Peter Grant Isaacson, also sworn on 3 August 2005. Mr Digby said that the Isaacson affidavit was principally concerned with the calculation of interest and that the Tivendale affidavit sought to assist the Court in the examination of the deduction variations. With respect to the Tivendale affidavit, Mr Digby submitted that the plaintiff was not seeking to re-ventilate the evidence but merely to state for the purposes of the quantum meruit claim what the set-off or accounting exercise would conclude. Counsel for the defendants, Mr Magee, formally objected to the receipt of the three affidavits. Mr Digby, while initially seeking to rely on the affidavits, later sought to withdraw any reliance in light of Mr Magee's objection so that it could not be said that the matter was being "reopened in some inappropriate way".[31] Mr Magee, in turn, objected to Mr Digby's proposal to withdraw the affidavits. In considering the appropriate orders, I have read the affidavits submitted by the plaintiffs and I have taken account of the arguments made by counsel with respect to them. I have also noted Mr Magee's objection to, firstly, their receipt, and secondly, to Mr Digby's withdrawal of them. However, as will become clear, I do not believe that my consideration of these affidavits has prejudiced the defendants' case.

32 Returning to the issue of the margin, the percentage claimed by the plaintiff is 10 per cent. Further, the plaintiff submitted that if I found against it on the question of it being entitled to any profit, then it should still be entitled to "at least such part of its 10 per cent margin claim that represents overhead costs".[32] I do not accept the submission. The distinction between "overhead costs" and "profit" is unclear. Moreover, I do not believe that the authorities compel me to include or exclude such considerations in determining the quantum meruit claim.

33 In further support of its contention, the plaintiff stressed Einstein, J.'s view in ABB Engineering Construction Pty Ltd v Abigroup Contractors Pty Ltd wherein his Honour said that it was "an incorrect statement of principle [to say] that on a claim for quantum meruit a claimant can only receive costs bare of profit".[33] In Abigroup, Einstein J was referring to the argument made by the plaintiff in that case that Renard Constructions (ME) Pty Ltd v Minister for Public Works[34] was not authority for the proposition that profit should be excluded. The relevant passage in Renard is that of Meagher, J.A. (with whom Priestley and Handley, JJ.A. agreed) and could well be interpreted as excluding "profit". Specifically, Meagher, J.A. held that_:_

"The law is clear enough that an innocent party who accepts the defaulting party's repudiation of a contract has the option of either suing for damages for breach of contract or suing on a quantum meruit for work done. An election presupposes a choice between different remedies, which presumably may lead to different results. The nature of these different remedies renders it highly likely that the results will be different. If the former remedy is chosen the innocent party is entitled to damages amounting to the loss of profit which he would have made if the contract had been performed rather than repudiated; it has nothing to do with reasonableness. If the latter remedy is chosen, he is entitled to a verdict representing the reasonable cost of the work he has done and the money he has expended; the profit he might have made does not enter into that exercise" [my emphasis].[35]

34 The plaintiff's interpretation of Einstein, J.'s view of what the proposition in Renard stands for may well be correct. It may be that the remarks of Meagher, J.A. in Renard are more properly considered, as the plaintiff suggests, in the context of an argument of whether or not profit under a contract in that case created a ceiling for recovery under a quantum meruit. However, I remain unconvinced that, even if I accepted the plaintiff's interpretation, that I should find in favour of the plaintiff on its point in this case; notwithstanding that I have already made clear findings in my reasons with regard to the exclusion of a profit margin. Conceptually, the argument may be made both ways. Nevertheless, even if I was to accept the plaintiff's submission that a margin should, prima facie, not be excluded; it does not follow that it must of necessity be included. Instead, as already stated, the correct approach in determination of a claim based on a quantum meruit is to assess an amount on the basis of work actually done and on the basis that it is fair and reasonable in the circumstances.[36] In the event, my judgment was that, in light of all the circumstances that I considered in this case, it was not fair and reasonable to award the plaintiff the 10 per cent margin that it claims. It is not appropriate to disturb that finding.

35 As stated previously, the quantum meruit claim made by the plaintiff totalled $4,746,911.83. The Jobpac reports were critical to this claim, since they provided information relating to the total costs and payments made by the plaintiff. These reports were produced as part of the evidence of Le Hy Ta. As I stated in my reasons, the defendants did not cross examine Le Hy Ta on his evidence with respect to whether the costs incurred by the plaintiff were fair and reasonable. They remained unchallenged.[37]

36 I stated in my reasons that I was satisfied that the works were performed and the amounts claimed proved by the plaintiff. However, in determining whether the costs claimed were fair and reasonable, the questions of the delays and rectification claimed by the defendants and, also, the matter of liquidated damages needs to be taken into account.

37 The defendants submitted that the plaintiff's quantum meruit claim should be reduced by the sum of $583,271.96, that figure being the difference between the amount of $769,583.08 being the delay claim made by the plaintiff in its pleading dated 31 August 2001 less "the amount awarded by the Court being $186,311.10".[38] In calculating the amount awarded by the Court, the defendants have adjusted the amount to correlate with the EOT 4 claim being revised to 24 days and four hours. As observed earlier, I accept this revision as consequent to an arithmetical slip.

38 The plaintiff submitted that no reduction for delays should be awarded, arguing that any finding by the Court in relation to delay costs would have been with regard to the plaintiff's contractual entitlements and that such entitlements were not "relevant" to its claim on a quantum meruit.[39] However, counsel for the plaintiff, Mr Digby, conceded that it was "hypothetically possible" to set-off delay against the quantum meruit, maintaining that the "jurisprudence was far from clear" on the point.[40] Specifically, Mr Digby highlighted two English cases, British Steel Corporation v Cleveland Bridge & Engineering Co Ltd[41] and Crown House Engineering Ltd v AMEC Projects Ltd.[42] However, it is not clear to me how these cases advance the plaintiff's argument, other than to reiterate that the jurisprudence on this matter appears unclear.

39 Additionally, Mr Digby contended that the defendants had not specifically pleaded the delay point or adduced evidence of what was a reasonable time for the builder to finish the work in the context of what was fair and reasonable (as he maintained was required on the quantum meruit claim), as an alternative to the contractual timeframe.[43] Counsel for the defendants, Mr Magee, disputed Mr Digby's assertion, stating that the defendants had put all of the matters of the quantum meruit in issue and that at all times the onus was on the plaintiff to establish its claim.[44]

40 I would also note the plaintiff's submission that it is not in the nature of an accrued right under the contract for the wrongful party to assert a set-off against the innocent party's quantum meruit claim.[45] I do not agree. While it may not be construed as a "right", as I outlined in my reasons,[46] in determining whether the costs claimed are fair and reasonable, the amount to which a plaintiff is entitled on the making out of a quantum meruit claim may properly take account of matters such as delays, rectification and liquidated damages, if any.

41 As already stated, I consider that contractual entitlements are relevant in determining the plaintiff's claim on a quantum meruit. In this instance, and in considering what is fair and reasonable in the circumstances, I determine that the reduction of $583,271.96 for delays, as sought by the defendants,[47] should be allowed.

42 Prior to any revision effected by a change to the calculation of the EOT 4 claim, as discussed above, both the plaintiff and the defendants agreed that the liquidated damages deduction totalled $220,000.00. In light of the revision to the EOT 4 claim and the consequent change to the adjusted date for practical completion, I calculate that there are 217 calendar days between the adjusted date of practical completion of 3 March 2000 and the date of termination of 6 October 2000. Liquidated damages are calculated at the rate of $1,100 per calendar day. Therefore the total amount to be deducted in liquidated damages is $238,700.00.

43 Both parties agreed that the sum of $70,065.00 should be deducted from the plaintiff's quantum meruit claim on account of defective works.

44 The defendants further claimed that a deduction of $469,864.85 should be made to the plaintiff's quantum meruit amount by reason of amounts paid on behalf of MTK Plastering. The defendants also claim that a deduction of $26,000.00 should be made for further rectification costs, specifically to the gallery entrance stairs ($14,000.00) and for fire rated ceilings ($12,000.00).

45 In the latter case of the two deductions sought for rectification costs, I accept the plaintiff's submission that it is not appropriate to re-visit the evidence, which in this instance, as the plaintiffs correctly contend, was essentially unchallenged by the defendants. I further agree with the plaintiff's submission that paragraph [203] of my reasons do not support any further deduction as urged by the defendants. Therefore, I do not allow this deduction.

46 As to the defendants' submission to deduct $469,864.85 from the plaintiff's quantum meruit amount by reason of amounts paid on behalf of MTK Plastering, I accept the plaintiff's submission that the paragraphs of my reasons upon which the defendants rely[48] should not be construed as representing the entire basis upon which I determined the fair and reasonable costs of the quantum meruit claim; rather, they form part of the summary of the evidence of the Project Manager, Mr Tivendale. Further, as the plaintiffs highlight,[49] (albeit, noting that I do not necessarily consider it critical), the defendants did not plead that the costs incurred by the plaintiff were not fair or reasonable. In any event, in light of all the circumstances that I have considered in this case, I do not accept the defendants' submission to make a further deduction from the plaintiff's quantum meruit amount by reason of amounts paid on behalf of MTK Plastering.

47 In the consideration of the proposed orders to be made by the Court, the plaintiff submitted that it was entitled to an indemnity, or alternatively, a payment from the defendants with respect to any sum that it is liable to pay in GST in respect of amounts recovered from the defendants pursuant to judgment in these proceedings.

48 At paragraph [778] of my reasons, I held that GST "was a matter of the contractual obligation under the contract and [that] obligations flowed there from", and further, that I was "not satisfied that the acts surrounding GST obligations were sufficient to amount to a variation of the contract". The plaintiff's argument is misdirected. The claim for GST was disallowed and must remain so.

49 I now turn to the claims of the plaintiff and the defendants in relation to the variations and the deduction variations. These claims were, by agreement, dealt with separately under the Scott Schedule; although I note that, the plaintiff, in particular, now seeks to question what was actually agreed and, further, how the agreement should be viewed by the Court in light of its election to sue on a quantum meruit. I am of the view that the parties submitted to the Scott Schedule approach. It is not appropriate to disturb the Schedule as the plaintiff seeks to do.

50 As to the variations, the defendants submitted that there should be a total deduction awarded of $278,574.91. That figure was arrived at by subtracting the amount of $162,148.40 awarded by the Court under the Scott Schedule from the total amount of $440,723.31 claimed by the defendants in its pleading dated 31 August 2001.

51 The plaintiff submitted that the defendants' submission failed to recognise the distinction between a claim in contract and a claim for recovery upon a quantum meruit. However, for the reasons that I have reiterated above, the distinction is not to be so inflexibly drawn when considering what is fair and reasonable in the circumstances.

52 I will therefore allow the deduction to the variations of $278,574.91 as submitted by the defendants.

53 With respect to the deduction variations, this was also to be determined by way of a Scott Schedule approach. In my reasons, I stated that I accepted the submissions on behalf of the defendants with respect to the deduction variations.[50] The defendants submit that, on the basis of the Court's determination, there should be allowed $216,611.00 in deduction variations.[51]

54 The plaintiffs have suggested a much lower amount. They submitted that the amount should be $81,284.00, comprised of the $40,000.00 that was previously agreed between the parties[52] and $41,284.00 which the plaintiff submits should be appropriately deducted from its quantum meruit claim.[53] The plaintiff submits that the difference of $135,327.00 refers to either work not performed by the plaintiff; or represents a charge for what was required by the contract rather than being just for the item of work "as installed".[54]

55 Mr Digby argued that the Scott Schedule of deduction variations was grounded in the context of the contract and that it would be unfair to include in the deduction from a quantum meruit claim items that were never included in the costs of the work. Of course, this raises the vexed issue of whether, having agreed to a Scott Schedule approach, a party can later return to the Court and seek to reopen certain matters. Neither the plaintiff nor the defendants were able to assist the Court with any authorities indicating how such matters have been dealt with before.

56 The utility of Scott Schedule approaches in building cases is well recognised as a means of resolving many contentious issues.[55] In my reasons,[56] I observed that the parties resolved to adopt the Scott Schedule approach following extensive discussions between them and their representatives during the course of the trial, and indeed, various adjournments were allowed to facilitate those discussions. Therefore, I do not see how either party can now properly resile from such an agreement unless there are exceptional and valid grounds.

57 Be that as it may, the plaintiff nevertheless further contended that its Scott Schedule submissions expressly stated that "in the event the plaintiff recovers on a quantum meruit, the plaintiff contends that the defendants are not entitled to have deduction variations set-off against the plaintiff's entitlements".[57]

58 Given this reservation, I would accept that items referring to work not performed cannot properly be considered within the context of a quantum meruit claim in this case. To do so would appear incongruous. However, the second category of items can be considered, despite the plaintiff's view that they are in some way contaminated by contractual considerations; since as previously stated, the influence of the contract cannot disappear entirely, even if the contract itself no longer exists.

59 Therefore, I will not deduct those items that represent work not performed, they being items 2.1, 3.2, 5.7, 7.11, 8.1, 8.2, 9.1, 9.7, 10.3, 10.4, 17.3, 17.11, 17.18, 19.15, 20.11, 20.13, 21.12, 22.14 and 23.2. The total of these items is $51,632.00. Consequently, the total deduction allowed will be $164,979.00.[58]

60 I turn, finally, to how interest on this amount is to be calculated. The parties agreed that the plaintiff should recover interest at the rate of eight per cent on its quantum meruit entitlement. The plaintiff suggested that interest could be calculated on a compound basis, however, I accept the defendants' submission that a simple interest calculation is to be preferred in the absence of the sort of claim envisaged by the High Court in Hungerfords v Walker.[59]

61 As to the date from which the recovery of interest should take place, the plaintiff suggested that it should be either the date upon which it incurred the costs, or alternatively, the date upon which the contract was terminated. The defendants meanwhile submitted that, consistent with s.60(1) of the Supreme Court Act 1986, the appropriate date for interest to commence was when the claim was first made,[60] that being the proceeding issued by the plaintiff in the Victorian Civil and Administrative Tribunal on 16 November 2000.

62 In my view, the defendants' submission is correct. Accordingly, interest will be calculated on a simple basis from 16 November 2000 until 30 June 2005, the latter date being the date of judgment.

63 It is necessary to address the matter of the defendants succeeding on the counterclaim, in part, and how that is to be treated for the purposes of the judgment. Rule 10.09 contemplates that where a plaintiff succeeds on a claim and the defendant succeeds on the counterclaim and a balance favouring one results, the Court may give judgment for the balance. It was suggested in argument for the plaintiff that it should have judgment for its amount of the successful claim - it following that there be a separate order for judgment on the counterclaim. Apparently, the outcome would affect costs.

64 In this respect, with regard to costs, the plaintiff submits that it is the successful party and that therefore the defendants should pay the costs of the proceeding. The plaintiff highlighted the following passage from the 10_th_ edition of Hudson's Building and Engineering Contracts:

"Only in the case of wildly exaggerated claims, or separate and costly issues on which the successful party has failed and which it was wholly unreasonable for him to raise, can there be, it is submitted, any justification for departing from the rule that the party ultimately successful on a final balance of claim and counterclaim should be paid his costs".[61]

65 The plaintiff further noted that the above passage had been cited with approval by Crockett J in the Full Court of this Court in Rival Nominees Pty Ltd v Craig Davis Constructions.[62]

66 In the passage in Hudson's, the learned author continues (although not cited by the plaintiff):

"There are cases in other situations where separate orders for costs on claim and counterclaim are appropriate, but counterclaims on building and engineering contracts arise out of the same transaction and are equitable set-offs, and the basic commercial realities, in the vast majority of cases argue very strongly, it is submitted, for a single award of costs in favour of the party ultimately successful on balance, unless the balance is so small as to justify the view that a party responsible for initiating the litigation and obtaining such a balance can be regarded as having been effectively unsuccessful."

67 I note that there is some irony in the plaintiff's reliance on this passage which clearly recognises the difficulty of maintaining a strict separation between contractual obligations and what the author terms "equitable set-offs".

68 It seems to me that the position in Hudson's is the correct one. Furthermore, no compelling reason has been put to me by the parties as to why Rule 10.09 ought not apply. I will apply the rule and make final orders with respect to the balance owed to the plaintiff.

69 I will require the parties to prepare orders reflecting these reasons. I will hear the parties as to appropriate orders for costs.

[1] Kane Constructions Pty Ltd v Cole Sopov and ors [2005] VSC 237.

[2] Indeed, there is a difference of nearly $3,000,000.00 between the amount sought by the plaintiff and

[3] The judgment ran to over 300 pages. In addition, there were some 200 pages of appendices. Evidence in the trial was substantial, complex and technical. The documents before the Court and the transcript ran to thousands of pages. The documentary evidence consisted of 72 court book volumes, over 100 volumes of lever arch folders and numerous sets of plans and specifications.

[4] This concession was made despite paragraph 3 of the Amended Submissions of the Plaintiff Relating to the Reasons for Judgment and Appropriate Orders dated 26 July 2005, wherein the plaintiff referred to the Court's reasons as "draft" and sought to persuade it to, as it put it, "clarify", "amend" or "add" to its reasons.

[6] See paragraph [652] of the reasons.

[7] See paragraph [654] of the reasons.

[8] See paragraph [656] of the reasons.

[9] See Plaintiff's Reply Submission to the Submissions of the Defendants dated 1 August 2005 (4 August 2005)

[10] See Plaintiff's Reply Submission to the Submissions of the Defendants dated 1 August 2005 (4 August 2005)

[11] Accordingly, and pursuant to the slip rule, the judgment will be revised and the appropriate

[12] This is the date suggested by the defendants. The plaintiff calculates the date as 6 March 2000; however, I accept the defendants' calculation, since, using the plaintiff's working day calendar, 3 March 2000 appears to be the date achieved by adding 49 days to the date of practical completion which was 10 December 1999.

[13] See paragraph [878] of the reasons.

[14] See paragraph [865] of the reasons.

[15] [1993] VicRp 71; [1993] 2 VR 221 at 263. See also Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, especially at 257.

[16] See, eg, Transcript, 4 and 8 August 2005, page 132.

[17] See, eg, Transcript, 4 and 8 August 2005, pages 93-4.

[18] [1999] NSWCA 140 (Unreported, Mason P., Priestley and Handley JJ.A., 16 July 1999) at [54]. See also

GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited [2003] FCA 50; (2003) 128 FCR 1 at [655] (per Finn, J.). See paragraph [860] of my reasons.

[19] [2005] NSWSC 831; (2005) 220 ALR 148 at [84].

[20] Now a Justice of the High Court, Queen's Bench Division.

[21] Jack Beatson, 'Restitution and Contract: Non-Cumul? (2000) 1 Theoretical Inquiries in Law 83, 114.

[22] See, eg, Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 277

[23] See, eg, K Mason and J W Carter, Restitution Law in Australia (1995) 563-6, 577-581; Douglas Jones and Rosslyn Varghese, 'Quantum Meruit in Australia - How the Rules Calculati Value for Work Done are Changing' (1992) 8 Building and Construction Law 101, 114-16.

[24] Albeit, it has been appropriately observed that, despite its well-established recognition by the High Court, the law of resititution "is still at an early stage of its development in Australia [and] continues to spawn a sizeable body of commentary, much of it of a theoretical nature": see N C Seddon and M P Ellinghaus, Cheshire and Fifoot's Law of Contract (8th ed, 2002), [26.1].

[25] See, eg, John Dorter & John Sharkey, Building and Construction Contracts in Australia, (2nd ed, 1990),

[26] The Olanda [1919] 2 KB 728 at 730.

[28] See paragraphs [856]-[865] of the reasons.

[29] I determined in my reasons that they were, while not necessarily being conceptually attracted to such

[30] Affidavit of Sidney Robert Lucas sworn 3 August 2005 at paragraph [10.1].

[31] Transcript, 4 and 8 August 2005, pages 106-7.

[32] See Amended Submissions of the Plaintiff Relating to the Reasons for Judgment and Appropriate Orders dated

[33] [2003] NSWSC 665 at [196].

[34] (1992) 26 NSWLR 234.

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

[37] See paragraph [868] of the reasons.

[38] See Defendants' Submission in Relation to Final Orders (1 August 2005) at paragraph [3.8].

[39] See Plaintiff's Reply Submission to the Submissions of the Defendants dated 1 August 2005 (4 August 2005)

[40] Transcript, 4 and 8 August 2005, page 115.

[41] (1981) 24 BLR 94.

[42] (1989) 48 BLR 32.

[43] Transcript, 4 and 8 August 2005, pages 132-3.

[44] Transcript, 4 and 8 August 2005, page 144.

[45] See Plaintiff's Reply Submission to the Submissions of the Defendants dated 1 August 2005 (4 August 2005)

[46] See especially paragraphs 876 and 877 of the reasons.

[47] The defendants submit that this amount represents the difference between the total deduction applicable to the plaintiff's quantum meruit claim (that component being $769,583.08) and the amount awarded by the Court ($186,311.10) as adjusted to reflect the revised EOT 4 claim as referred to earlier: see part 3 and appendices B1 and B2 of the Defendants' Submission in Relation to Final Orders (1 August 2005).

[49] Plaintiff's Reply Submission to the Submissions of the Defendants dated 1 August 2005 (4 August 2005)

[50] See paragraph [836] of the reasons.

[51] See Defendants' Submission in Relation to Final Orders (1 August 2005) at paragraph [4].

[52] See paragraph [833] of the reasons.

[53] Amended Submissions of the Plaintiff Relating to the Reasons for Judgment and Appropriate Orders (26 July

[54] Amended Submissions of the Plaintiff Relating to the Reasons for Judgment and Appropriate Orders (26 July

[55] See, eg, Keith Pickavance, Delay and Disruption in Construction Contracts (2nd ed, 2000) 412-14.

[57] See Further Submission of the Plaintiff Relating to Deduction Variations dated 4 August at paragraph [2].

[58] This amount is the total of the defendants' claim ($216,611.00) minus the excluded items ($51,632.00).

[59] [1989] HCA 8; (1989) 171 CLR 125.

[60] See, eg, David Leahey (Aust) Pty Ltd v McPherson's Ltd [1991] VicRp 77; [1991] 2 V.R. 367; Saunders v Nash [1991] 2

[61] I.N. Duncan Wallace, Hudson's Building and Engineering Contracts (10th ed, 1970) at 870.

[62] Rival Nominees Pty Ltd v Craig Davis Constructions (Unreported, Supreme Court of Victoria, Starke,

A.C.J., Crockett and McGarvie, JJ., 26 June 1981).