Street Consulting Pty Ltd t/as Streetbuild v Hard Bakka Pty Ltd t/as Hard Bakka Steel Fabrication

The Issues

1. The case boils down to the following questions: 1. What are the express terms of the Contract? 2. In light of those express terms, can a term be implied into the Contract along the lines suggested by the Defendant? 3. If the answer to question (2) is "yes", has the Defendant proved that such a term was breached by the Plaintiff and that breach caused the Defendants to be unable to perform its part of the Contract? 4. What is the quantum of damages if the Plaintiff succeeds? 5. What is the quantum of damages on the Defendant's cross‑claim?
2. Dealing with each question in turn.

The Contract

1. The following are what I consider to be the relevant provisions of the Contract. The underlining is some emphasis added by me, to which I will return when dealing with the competing contentions. "The parties agree that: (a) The Trade-Contractor will execute and complete the work set out in Schedule 1; AND (b) The Builder will pay the Contract Price referred to in Schedule 2, or such other sums which become payable under the Contract Terms and Conditions, at the times and in the manner stated: AND (C) It the works are not completed by the end of the Construction Period referred to in Schedule 3, or other such time as approved by the Builder pursuant to Clause 2 of the Contract, the Trade-Contractor will be liable to the Builder for liquidated damages as referred to in Schedule 2 item (iii). … SCHEDULE I - CONTRACT WORKS (i) Site Address: 10 Digitaria Drive GLEDSWOOD HILLS (ii) Description of work to be completed by the Trade-Contractor: Structural Steel & Precast - See Scope In Attachments (ii) Documents relevant to the Trade Contractor's work: Plans: Refer to Appendix B-document control register 14-Mar-2022 Specification: Refer to Appendix B-document control register 14 -Mar-2022 Program: Construction Program Rev D, Refer Appendix A Scope of Works: Signed SOW, Refer Appendix C (Galvanise Markup Refer Appendix D SCHEDULE 2- CONTRACT PRICE The Contract Price is: (i) Lump Sum: $415,500.00 Excluding GST A deposit of 10% on commencement Is payable to the Trade-Contractor The Contract Price supersedes all quotes, previous communications and correspondence between all Parties… … (iii) Liquidated Damages (refer to Clause 2 (c)) Are calculated at $1300.00 per work day capped at 10% of the contract value… … SCHEDULE 3 CONSTRUCTION PERIOD (i) Commencement: as direct by site Completion date: EOM May 2022 If work by the Trade-Contractor is to be done in stages, then details will be provided in the Construction Program attached at Appendix A… … CONTRACT TERMS AND CONDITIONS 1. CONDITIONS OF CONTRACT (a) The Trade-Contractor will complete the works described In Schedule 1 (ii) ("Contract Works") by the date for completion as set out in Schedule 3 and subject to Clause 2, in a workmanlike manner and in accordance with relevant Documents identified in Schedule I (iii) ("the Documents"). (b) If the Trade-Contractor discovers or believes there is a discrepancy between or in the Documents, he/she/it must immediately refer the same to the Builder for inspection via a formal RFI process in Procore. (c) The work of the Trade-Contractor is to comply with the objectives and requirements of the Building Code of Australia as relevant to the work. (d) A signed contract must be returned in duplicate to the Contract Administrator prior to commencement of Contract Works Commencing works onsite without a signed contract demonstrates the Trade-Contractor's full acceptance of this Contract and all Contract terms and conditions, available at any time in the Builder's office or on the Builders website. (e) The Trade-Contractor acknowledges the use of project management software (Procore) is a requirement for both management and site staff. All drawings, RFIs and site instructions are to be lodged via Procore. It is the Trade-Contractors responsibility to ensure they have access to all current documents. (f) The Trade-Contractor acknowledges that this contract supersedes all quotes, previous communications and correspondence. The builder accepts for the Trade-Contractor to pursue PPSR registration. (g) The Trade-Contractor is deemed to have inspected site conditions, access, traffic management plan, council and authority restrictions and special conditions. (h) Any proposed substitutions to any Contract Document must be submitted in writing to the Builder and only proceeded on with the express written permission of the Builder. (I) Bill of Quantities (BOQ), if supplied, is for reference purposes only and it is the Trade-Contractors responsibility to check all quantities from the documentation supplied and site inspection. (j) All trade set-out from Builders provided grid tines and datum points is the sole responsibility of the Trade-Contractor. 2. COMPLETION (a) The construction period and date for completion of the works is set out in Schedule 3 (i). If so indicated the Trade-Contractor will complete the works in stages by the dates respectively slated for each stage as identified in the Construction Program. (b) The Trade-Contractor has satisfied itself that it is practicable to complete the Contract Works in a workmanlike manner within the Construction Period set out in Schedule 3. If the Trade -Contractor does not find the Construction Program achievable, they must notify the Builder in writing 5 days prior to the commencement of the Contract Works to resolve concerns and to come to a mutually agreed Amended Construction Program, Failure to notify the Builder will mean the Trade-Contractor accepts the Construction Program set out in Schedule 3 and Appendix A. (c) If the Trade-Contractor falls to complete the Contract Works or any stage by the date specified in Schedule 3 or within any extended time approved in writing by the Builder then the Trade-Contractor must pay or allow by way of liquidated damages the sum stated in Schedule 2 for the period during which the works or relevant stage remains incomplete. The trade-contractor acknowledges that the amount of liquidated damages specified in Schedule 2 is a genuine pre-estimate of the toss or damage the Builder may incur in the event the works are not completed by the dale for completion. … 18. DEFAULT If the Trade-Contractor becomes bankrupt or goes into liquidation or makes default in any of the following respects: (a) wrongfully suspends the work before completion, or (b) fails to proceed with the works with reasonable diligence or in a competent manner, or (c) fails to comply with a notice from the Builder requiring him to remove and replace defective woror improper materials, or (d) commits a breach of the contract; THEN the Builder may by notice in writing determine this Contract. Such determination will not prejudice any right of the Builder to recover from the Trade-Contractor damages for any breach.
2. The Contract had a number of appendixes, the first being a contract program, the second being a document control register, the third being a scope of works, and the fourth being a galvanised markup.
3. The Scope of Works document (Appendix C to the Contract) is, in my opinion, an important component of the Contract. It was actually signed by the Defendant prior to the Contract as part of the tendering process, but also forms part of the Contract itself.
4. It contained 53 statements and/or questions, each of which was expressly initialled by Aladdin Bakka on behalf of the Defendant prior to executing the Scope of Works document itself, and prior to the execution of the Contract, and, as I have said, in any event it forms part of the Contract. The provisions of the Scope of Works document which I consider relevant are the following: 15 Contractor to provide shop drawings in PDF for inspection and approval prior to commencing fabrication. [signed] AB. 38 Architectural drawings take precedence over service drawings for all set out requirements. Ensure that both documents are use in conjunction with each other and that you advise Streetbuild of any discrepancies prior to final contract being signed. [signed] AB. 40 The contract drawings and specification outline the intent of the project and subcontractors are to include for miscellaneous detail resolution related to the completed project. [signed] AB.
5. The entire document is signed on behalf of the Defendant by Aladdin Bakka and against each numbered paragraph there are his initials.

An implied term - Some law

1. Although in opening submissions the Defendant sought aid from cases such as BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at [26] and Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 ("Codelfa") at [345]-[347], in closing submissions the Defendant, whilst not abandoning its reliance on what I might call the "Codelfa principle", also sought support from Lord Blackburn's famous speech in Mackay v. Dick (1881), 6 App. Cas. 251 at p.263 ("Mackay"), as explained by Griffith CJ in Butt v. M'Donald (1896), 7 QLJ 68 at pp. 70-71 ("Butt") and endorsed by the High Court of Australia in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596.
2. The general rule explained in those cases is easy enough to articulate. That is: " … as a general rule … where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.": Mackay at p. 263.
3. Or as Griffith CJ put it in Butt at pp. 70-71: "It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract."
4. It is, in my judgment, axiomatic that this "general rule" will not apply in circumstances where such a term, in the specific circumstances under consideration, is contrary to the express terms of the Contract properly construed. The same can be said about any term said to be implied by reference to the "Codelfa" principle.

Some principles of construction of commercial contracts

1. The Defendant relies on conduct by the Plaintiff after execution of the Contract, and indeed after that Contract came to an end and the Plaintiff was dealing with a new steel fabricator, in part, to support its arguments as to the construction of the Contract.
2. This approach is wrong. As the Contract is entirely in writing, it is clear, post‑contractual conduct cannot assist in the task of construction: Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 at [142].
3. As a matter of principle, I need to put to one side any evidence before me as to either of the parties' subjective belief as to what the Contract was intended to mean and approach the matter objectively: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at p. 40.
4. To construe a written contract, one must read the contract as a whole and ascertain from the entire document the meaning it conveys to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of contract: Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at p. 188.
5. In a commercial contract, unless the words are so clear that they are susceptible to only one meaning, in which case the court must give effect to those words, if a clause is open to more than one construction, the Court will tend to construe it so as to avoid consequences which appear capricious, unreasonable, inconvenient, or unjust. This is because the Court assumes that commercial parties do not generally intend such a result: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at p. 109; Australian Casualty Co Ltd v Federico (1986) 160 CLR 513 at p. 520.
6. Surrounding circumstances known to both parties at the time the Contract was entered into can be taken into account to resolve any ambiguity within the Contract: Codelfa at pp. 352-353.
7. In relation to commercial contracts, the Court should not adopt a narrow, technical, or artificial interpretation of words used without being too astute in finding defects, and the question of construction is to be answered in a practical and realistic way, not one which adopts an overly final theoretical approach that is alien to commercial agreements. What this means is that the Court is to strive to find an interpretation which appears commercially sensible and accords with commercial reality or common sense: Gollin & Co Ltd v Karenlee Nominees Pty Ltd (1983) 153 CLR 455 at p.464.
8. To sum all that up, the essential question to be answered in this case is what a reasonable businessperson would understand the written terms of the Contract to mean in context. That context is the commercial setting known to both parties at the time of the Contract, which ordinarily can be gleaned from the words of the Contract itself. Working out what a reasonable businessperson would have understood at the time requires consideration of the language used by the parties, the surrounding circumstances known to them in the commercial purpose are objects to be secured by the Contract. Context includes: "the entire text of the contract, as well as any other document, contract, or law referred to in the text of the contract": Lawrence v Ciantar [2020] NSWCA 89 at [98].

The proper construction of the Contract

1. Turning first to the words of the Contract.
2. The following observations can, in my opinion, be fairly made: 1. The fundamental obligation of the Defendant is found in the preamble - "the Trade Contractor will execute and complete the works set out in Schedule one". 2. The description of the work to be completed by the Trade Contractor is "the structural steel and pre-cast - see scope in the attachments" and includes the plan specifications program and scope of works which form part of the Contract, they are described in the Contract as "documents relevant to the Trade Contractor's work". 3. The price is fixed. 4. There is a liquidated damages provision. 5. There is a completion date of end May 2022. 6. Clause 1(a) provides that the Trade Contractor will complete the works, now defined as "Contract works", by the date for completion in a workmanlike manner and in accordance with relevant documents identified in Schedule one ("the Documents"). 7. Clause 1(b) provides, if the Trade Contractor discovers or believes there is a discrepancy between or in the documents, he/she/it must immediately refer the same to the builder for inspection via a particular process. 8. Clause 2(b) contains this statement: "The Trade Contractor has satisfied itself that it is practical to complete the Contract work in a workmanlike manner within the construction period…". 1. Clause 2(b) then goes on to provide that if the Trade Contractor does not find the construction program achievable, it must notify the builder in writing five days prior to the commencement of the Contract works, to resolve concerns and to come to a mutually agreed amended construction program. Failure to notify the builder will mean the Trade Contractor accepts the construction program identified in the Contract. 2. Clause 18 provides for termination on default, which is defined to include "fails to proceed with the works with reasonable diligence or in a competent manner" and "commits a breach of the Contract in which circumstances the builder is entitled to terminate the Contract". 3. Within the Scope of Works component of the Contract, there is a statement that the contractor is to provide shop drawings in PDF for inspection and approval prior to commencing fabrication, if there is a discrepancy between architectural and other drawings, architectural drawings are to take precedence, and that the Defendant, for the purpose of its quote, was to allow for any miscellaneous detail resolution relating to the project.
3. Turning then to the parties' submissions.
4. The Plaintiff's submission, which I accept, is that the fundamental context and commercial objective of the parties is found in the Contract itself. The job was to design, fabricate, and install steel works in a time-sensitive, multi-faceted project.
5. The Plaintiff contends that the combined effect of Clauses 1(a), 2(b), and C-40 of the Scope of Works, when read together in the context of the entire document, compels the conclusion that it was the Defendant who took the responsibility and risk of not being able to design, fabricate, and install steel based on the architectural and structural drawings that it had in its possession.
6. Those documents had been in the possession of the Defendant for more than a month prior to signing the Contract and are incorporated into the Contract. Clause 2(b) contains a clear and unequivocal acknowledgment by the Defendant that it has satisfied itself that it was practicable to perform the works in the time prescribed. That acknowledgement, in context, must have been based on its review of at least those documents.
7. Clause 2(b) sets out a strict regime for circumstances where, within a very short window after execution of the Contract, the Defendant determines that it cannot achieve completion within the construction period. The Plaintiff contends there is no tension between Clause 2(b) and Clause 1(b), which provides that if in other circumstances there is a discrepancy noticed in any of the documents, there is a requirement to notify the Plaintiff of that discrepancy. Unlike Clause 2(b), upon notification there is no express provision as to negotiations dealing with an extension of that time.
8. Such extensions are dealt with under the variation provision in Clause 4, which I have not set out, but are in what might be described as ordinary terms.
9. The Plaintiff's submission boils down to this. In a time-sensitive Contract, where the promise by the Defendant included design work based on architectural and other drawings which were available to and known to the Defendant at the time of execution of the Contract, it was the Defendant's risk whether, because of some later identified or asserted deficiency in those drawings it could not perform its obligations under the Contract.
10. Thus, the Plaintiff contends that there is no room for the imposition of a Mackay type term of cooperation, because such a term would be inconsistent, in the circumstances of alleged deficiencies in the architectural and other drawings provided with the actual agreement, because the express terms of the Contract, properly construed, deals with the situation and allocates the commercial risk to the Defendant.
11. On the other hand, the Defendant points to the express requirement that it performed the works in a "workmanlike manner". The submission is that this means it is obliged to produce designs which actually work and allow steel to be fabricated and installed, that would hold up the building, and be consistent with the balance of its design.
12. The Defendant further submits that, if it was not possible for it to do to produce such designs based on the information at hand, it could not perform its part of the bargain without getting further information from the Plaintiff. The Defendant also submits that the provision in Clause 1(b) for the notification of discrepancies for the builder's inspection should be construed as having effectively the same effect as Clause 2(b), being the result of such a notification being a requirement on the Plaintiff to provide such missing information.

Resolution

1. It needs to be stated at the outset that the Contract is not well drafted. There is no direct express term dealing with the situation that has arisen. Rather, the question needs to be resolved by a process of construction of the Contract as a whole to determine its terms.
2. I have come to the conclusion that the Plaintiff's construction of the Contract is to be preferred. I think when reading the Contract as a whole, and especially leaving work for both Clauses 1(b) and 2(b) to work harmoniously, with each having its own separate work to do, combined with the context that the plans and specifications, which the Defendant now contends were inaccurate, were "signed off on" by the Defendant both before the Contract and in the Contract itself. It was in that context that the Defendant entered into a Contract stating that it was satisfied that it was practicable to complete all of the works within the stipulated time (Clause 2(b)). These matters all point to the conclusion that, objectively, the parties struck a bargain whereby (subject only to the operation of Clause 2(b)), if it turned out that those plans and specifications were not adequate to allow the Defendant to do the work it promised to do under the Contract, then the risk associated with that lay with the Defendant. There was no contractual obligation on the Plaintiff to provide further information.
3. In my judgement, Clauses 1(b) and 2(b) can be reconciled so as to operate harmoniously. Clause 1(b) is no more than a requirement that the Defendant notify the Plaintiff of discrepancies etc. The purpose of that notification is to allow the Plaintiff to arrange its affairs in light of that notification in relation to the entire project. Of course, it would be open to the Plaintiff in those circumstances to liaise with the Defendant to sort out whatever the issue is, but there is no contractual obligation to do so. On the other hand, Clause 2(b) operates within a very short window of opportunity and commences with effectively the same notification requirement, but then expressly deals with what is to occur, being a requirement that the parties work towards a mutually agreed amended construction program.
4. The lack of that second component in Clause 1(b) demonstrates, reasonably clearly to my mind, that the parties intended the contractual consequences of a Clause 1(b) notification to be different than a Clause 2(b) notification. The construction contended for by the Defendant, if accepted, would leave no work at all for Clause 2(b), as every situation would be dealt with by Clause 1(b).
5. Therefore, as a matter of construction of the express terms of the Contract, what the parties intended was that, once the window of opportunity provided for by Clause 2(b) had come and gone, the Defendant was contractually bound to perform its part of the bargain by reference to the information that it had available to it at that time. Conversely, there was no contractual obligation on the Plaintiff to provide further information to assist the Defendant in its task.
6. On that construction of the Contract, there can be no implied term as contended for by the Defendant, because it would be inconsistent with the express terms of the Contract as recorded in the document. The answer to the first two questions I have posed is 'no'.

Was there a breach?

1. Against the possibility that I am wrong as a matter of construction and proceeding upon the basis that the Contract does contain an implied term along the lines contended for by the Defendant, there then is the factual question as to whether such a term was breached, and if it was, whether that breach caused the Defendant to be unable to perform.
2. There is voluminous documentary evidence. What it demonstrates is that there were a series of designers working for the Defendants during the life of the Contract. There is no doubt that there were communications from the Defendant to the Plaintiff asserting discrepancies and the like in the plans and asking a series of questions which, at least in the early period of the Contract, the Plaintiff does appear to have been somewhat dilatory in responding to. However, none of those requests were made within the time provided for in Clause 2(b), rather, contractually, they fall within Clause 1(b). Leaving that to one side, by August 2022, when the parties were in dispute, there being claims for liquidated damages and the like by the Plaintiff, the document trail demonstrates the following: 1. By at the latest 15th of August 2022, there does not seem to have been any suggestion by the Defendant that any requests for information were outstanding. 2. On 15 August 2022, the Defendant confirmed, without qualification, that shop drawings for both buildings would be issued by 16 August. 3. On 23 August 2022, there is some evidence in documents that strongly suggests that issued for construction (IFC) drawings had in fact been issued by the draftspeople for the South building, although it seems clear enough that they had not been provided by the Defendant to the Plaintiff. 4. On 23 August 2022, the Defendant confirmed in writing to the Plaintiff that it did not intend to complete the Contract works unless the Contract was varied in ways that suited it commercially. 5. On 24 August 2022, the Defendant refused to issue any shop drawings until the dispute was resolved. That refusal subsisted until 2 September 2022, notwithstanding written requests made by the Plaintiff to the Defendant to provide shop drawings on both 25 August and 30 August 2022.
3. From that, I find; whatever the position had been up to around the start of August 2022, by that time the Defendant had procured from the Plaintiff or obtained elsewhere such information as it required to produce the shop drawings. I find those drawings had in fact been completed. True it is that the Defendant was in breach of the time for completion already, but almost a month then went by wherein the Defendant, not as a result of any breach by the Plaintiff of any implied term, but as a consequence of its own desire to renegotiate the Contract, simply refused to perform its part of the bargain.
4. I appreciate that this finding is at odds with the oral evidence of Mr Bakka, however, I found his evidence vague, unpersuasive, and he seemed surprised when shown the contemporaneous documents. I prefer the story told by those documents. I think they are more reliable than his opinion evidence given after the event.
5. I am satisfied that, if there ever was any breach by the Plaintiff of the alleged implied term, and I am by no means persuaded that there was because the evidence, such as it is, is of little weight and it was open to the Defendant to prove the matter in a much more direct and persuasive manner by calling designers (see Blatch v Archer 98 E.R. 969; (1774) 1 Cowp. 63; [1774] 5 WLUK 9), that breach did not cause the ultimate loss of the Contract on 2 September 2022, because as at that date the Defendant was in a position to perform its part of the bargain, but simply refused to do so. To put it another way, as at the date of termination, the Plaintiff itself was not in breach of the Contract and was therefore entitled to do so.
6. If I am wrong as to my construction of the Contract, and if there is an implied term in the Contract as contended for by the Defendant, I am not satisfied that the Defendant, who must bear the onus of proving breach of such a term, has made out any breach. That means that the answer to the third question I have posed is 'no'.

Damages

1. The matter was argued very efficiently by both Counsel over a two-day period.
2. At the conclusion of submissions, the Plaintiff handed up a detailed schedule of damages itemising its claim with detailed reference to evidence (MFI-8).
3. As a matter of legal theory, the claim is for the difference between the actual costs incurred by the Plaintiff when it engaged a third-party replacement to complete the Contract works, and the balance Contract price (taking into account a partial refund of deposit). That is, in my opinion, the appropriate and proper measure of damages: Hyder Consulting (Australia) P/L v Wilh Wilhelmsen Agency P/L & Anor [2001] NSWCA 313 at [19].
4. In the circumstances, I do not think it was fair on the Defendant or its counsel to deal with the detailed submissions contained in that schedule as to calculation of damages on the run.
5. I have reviewed that schedule (being conscious that I have not heard from the Defendant) and compared it to the evidence referred to. It seems to me, at least at a prima facie level, that it does make good the Plaintiff's claim for damages of $185,113.59 (which includes a small amount for liquidated damages), but I have an open mind and will hear the Defendant, if it desires.
6. In the circumstances, I do not propose to make any ultimate findings as to damages without giving the Defendant a proper opportunity to be heard as to quantification.

The cross-claim

1. It follows from all the above, that the Defendants cross-claim must be dismissed.
2. However again, if I am wrong, and ultimately it be concluded that the Plaintiff's termination was wrongful and therefore it was the Defendant who validly terminated the Contract, I am not satisfied that the Defendant has made good its claim for damages because, as a matter of evidence, I am not satisfied as to its proof.
3. The Defendant is seeking to establish its lost profit from the Contract. The Defendant has put forward what is no more than a bare assertion without underlying information that it stood to make a gross profit of 15% of the Contract price. Even if one accepts that assertion, and it was not challenged, the Plaintiff's answer is that there is no evidence of the Defendant's actual overheads, which is an essential element required for it to prove what its net (as opposed to gross) profit lost would have been.
4. As the Plaintiff reminds me, this is not a case where "precise evidence was not available". The Defendant would have been able to produce evidence of what its overheads were. It has failed to do so and accordingly, even if entitled to judgment on the cross-claim, the Defendant has, in my opinion, failed to prove any loss of profit - see for example Construction & Design Australia Pty Ltd v Robinson (No 2) [2024] NSWSC 376 at [350]-[361].

Orders

1. I will not make any orders as to costs at this stage, pending any application to adduce evidence and/or make submissions for a variation of what would be the expected costs order of the Defendant paying the Plaintiff's costs of both the claim and the cross-claim.
2. The orders I propose are as follows: 1. Judgment for the Plaintiff in an amount to be agreed by the parties or determined by me. 2. Dismiss the cross-claim. 3. Stand the matter over for directions or hearing on a date convenient to the parties, for the purpose of making final orders and/or hearing the parties further as to quantum of damages and/or costs.

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: 13 September 2024