Select Plant Hire Pty Ltd v John Holland Construction & Engineering Pty Ltd [1998] VSC 102

37(f) Where a variation has been valued otherwise than by agreement for the purposes of the Head Contract then in no case shall this clause be construed so as to allow a greater value of the variation taking into consideration the relevant value that in one way or another shall be established as between the Contractor and the Superintendent.

98. The corresponding provision in the head contract between John Holland and VicRoads is clause 40.3 which reads:

A variation shall be valued in accordance with the rates or prices included in any Schedule included in the Contract if and in so far as the Superintendent determines that those rates or prices are applicable to the variation. Where the Superintendent determines that the rates or prices do not apply to a variation, the rate or price payable for the variation shall be determined by agreement between the Contractor and the Superintendent, but if the Contractor and the Superintendent fail to agree on the rate or price the Superintendent shall determine such rate or price as the Superintendent considers reasonable or the Superintendent may direct that the variation shall be carried out as Daywork.

102. Sub-clause 37(e) of the sub-contract provides that, if, as here, "no Bill or Schedule rate or price is applicable", then "the rate or price shall be determined by agreement". I have found that there was an agreement as to the rates and prices. That being so, the proviso to sub-clause 37(e) must be considered. The drafting of that proviso is far from clear, but it appears to me to be intended to mean:

if, as between the Contractor (John Holland) and the Superintendent (Mr Liddle),

(a) a rate or price has been agreed with the concurrence of the Sub-Contractor (Select); or

(b) a rate or price has been determined otherwise than by agreement; then

that rate or price shall be the basis of valuation as between the Contractor (John Holland) and the Sub-Constractor (Select).

109. It is not in issue that no rate or price has been agreed between John Holland and the Superintendent with the concurrence of Select. The question which then arises is whether, "as between the Contractor and the Superintendent", a rate or price has been "determined otherwise than by agreement".

112. "Superintendent" is defined in the sub-contract as:

the person appointed to the position named or described in the Second Schedule as the Superintendent or in his absence such other person acting in that position or such other person for the time being or from time to time during the currency of the Head Contract appointed by [VicRoads]

and in the head contract in similar terms; that is, as a specified individual.

117. John Holland's claim No. 4 under the head contract in respect of the tip relocation was evaluated by Mr Mullett, Section Manager, Eastern Projects of VicRoads, in a 12 page internal memorandum dated 12 June 1997. In that evaluation, most of John Holland's submitted rates and prices were accepted. However, the claimed price for standby costs was reduced, and the claimed rate for the credit to be allowed to VicRoads in respect of the allowance for the tip relocation included in John Holland's original tender for the head contract was increased. In a letter to VicRoads of 30 May 1997 Mr Morralee stated that while John Holland had agreed to the total figure later included in the memorandum of 12 June, it did not agree with the way the amount had been calculated by VicRoads, but that "given the agreement, there is no need for [John Holland] to explore this issue further".

120. The memorandum of 12 June concludes with the recommendation that the claim of John Holland be approved. Mr Liddle endorsed on the memorandum "Agree with recommendation Gary Liddle 12/6/97". Mr Liddle said in evidence that that was the procedure for all the variations. On 27 June 1997 a Schedule of Contract Variations in respect of contract variation order number 7 ("CVO 7") was signed by the Minister for Roads and Ports, on the recommendation of the Chief Executive of VicRoads. The document signed by the Minister is also signed by the Manager - Contract Services, the Director - Finance, the Director - Major Projects, and the Deputy Secretary - Department of Infrastructure. CVO 7 issued on the same day.

123. The submission of Mr Golvan is that, by the endorsement of his agreement with the recommendation, Mr Liddle, as Superintendent, "determined" the rates and prices for the variation.

126. As to the meaning of "determined", Mr Golvan relied on the ex tempore judgment of O'Bryan J in City of Heidelberg v McPherson [1964] VicRp 102; [1964] VR 783 at 785, where His Honour held that the word "determines" in section 588 of the Local Government Act 1958 "means no more than decides or forms the opinion". His Honour found that a resolution of the Council to the effect that "the Council is of the opinion that the following works are necessary . . ." satisfied the requirement of the section that the Council "determines" that the works are necessary. His Honour referred to the fact that the Council had expressed its opinion "by resolution through its councillors". That formality of expression was clearly relevant to his decision.

129. While accepting the conclusion reached by His Honour on the question before him, I would, with respect, be of the view that the word "determines", in the relevant sense, connotes something more formal than "decides" and significantly more formal than "forms the opinion". A decision of a municipal council by resolution of its councillors is formal in that way. My view is buttressed by the relevant definition of "determine" in Butterworth's Australian Legal Dictionary, which reads:

To make an order, direction, decision, or determination by a court or tribunal, or other authority vested with the power to so make a determination in relation to some matter.

133. And, in the present case, it is clear that the determination of the rates and prices was made by the Minister. The approval of a recommendation, where the final decision is made by the Minister, cannot constitute a "determination". Accordingly, the rates and prices have not been "determined" "as between the Contractor and the Superintendent", whether by agreement or otherwise. That being so, the proviso to sub-clause 37(e) of the sub-contract has no application to this matter.

136. Turning to consider sub-clause 37(f) of the sub-contract, Mr Derham submitted that, were I to find, as I have done, that there was an agreement as to the rates and prices for the variation, the effect of sub-clause 37(f) was that Select was not to be allowed a greater value for the variation than was allowed between VicRoads and John Holland under the head contract. Mr Golvan's submission was otherwise.

139. It will be seen that sub-clause 37(f) operates "where a variation has been valued otherwise than by agreement for the purposes of the Head Contract" and does not depend on the existence of a determination. Further, sub-clause 37(f) is concerned with the value of the variation and not, like sub-clause 37(e), with the prices and rates on which the value of the variation is based. The Ministerial Briefing Note seeking the Minister's approval to the variation states:

8. Holland has indicated that its total costs for the additional tip works are in the order of $4.9M, however VicRoads has assessed the total value of the additional works to be $4,217,744.81 . . .

9. Holland is currently in dispute with [Select] . . .

10. Despite this, Holland has advised that it will accept VicRoads' assessment in settlement of all its claims associated with the tip.

145. It seems to me that the effect of this information, taken in conjunction with the passage cited in paragraph 30 above from Mr Morralee's letter of 30 May, is that the variation was valued by agreement, and accordingly that sub-clause 37(f) has no application to this matter. While the rates and prices applicable to the variation were not all agreed for the purposes of the Head Contract, John Holland did agree to the value which VicRoads proposed to place on the variation, which is the relevant matter for the purposes of clause 37(f). It is common ground that the issue of CVO 7 followed from discussions over a considerable period between Mr Liddle and representatives of John Holland.

149. For the reasons which I publish, I find that:

(i) a binding agreement was reached between the parties to the effect that the rates and prices to be paid for the variation of the sub-contract between them in relation to the tip relocation works, were the rates and prices set out in the 29 April memorandum;

(ii) if that agreement was conditional on the approval of VicRoads, John Holland waived the benefit of that condition; and

(iii) sub-clauses 37(e) and (f) of the sub-contract have no application to this matter.

155. Counsel may wish to make further submissions as to the orders to be made as a result of these findings in respect of the claim and the counterclaim.