Super Pty Ltd v SJP Formwork - [2001] NSWSC 283 - NSWSC 2001 case summary — Zoe

NSWNSWSC

Super Pty Ltd v SJP Formwork

[2001] NSWSC 283

Supreme Court of NSW|2001-04-20|Before: Hunter J

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Source facts

Court

Supreme Court of NSW

Decision date

2001-04-20

Before

Hunter J

Source

Original judgment source is linked above.

Judgment (87 paragraphs)

[1]

The application of these principles leads to the conclusion that the time stipulation in cl 9.1 was not essential, and Roadshow's assumed breaches on 31 October and 30 November did not confer on CEL/Vision an immediate right to rescind." (at 477-479) 183 Apart from the fact that this construction of the termination clause was not essential to the judgment, I do not think that it can be seriously contended that the decision is authority for the proposition that any provision of a right to terminate for breach after notice "excludes any right to terminate without notice". 184 In Roadshow the court regarded the termination clause, on the proper construction of a contract analogous to a contract for the sale of goods, as excluding the right to terminate without notice. However, the reasoning of the court by which it reached that construction of the subject termination clause is not expressed in the judgment beyond the passage I have quoted. 185 I think the approach to construction of the termination clause adopted by the court in Roadshow should be viewed in the context in which the termination clause was considered, namely that time was not of the essence in relation to the obligation of Roadshow to make payments under the subject contract. Viewed in that way, it is not surprising that the court would have regarded the termination clause as precluding a right to rescind, without notice under the termination clause, on the basis of Roadshow's non-payment in a contract "analogous" to a contract for the sale of goods. 186 In Amann the judge at first instance held that the termination clause exhaustively regulated the Commonwealth's right to terminate the subject agreement. In that case, the Commonwealth had purported to terminate without notice for alleged repudiation of that agreement. While on appeal it was found that Amann had not been guilty of repudiation of the agreement, Davies J (at 532) agreed with the trial judge's construction of the termination clause. Since there had been no repudiation of the agreement by Amann, termination could only have been effected by notice under the termination clause. Sheppard J agreed with the reasons and conclusions of Davies J (at 540). Burchett J, although differing from the trial judge as to the ambit of the termination clause, nevertheless was of the view that it should be construed as "regulating comprehensively the Commonwealth's right to terminate the agreement for breach …" (at 555). Burchett J further held that the conduct of Amann did not amount to repudiation and upon his construction of the termination clause, that clause would not have permitted the Commonwealth to have terminated the agreement. 187 In Amann the termination clause was part of a comparatively complex web of provisions dealing with inter alia, liquidated damages, default, termination and "Break Clauses": the last mentioned being a provision entitling the Commonwealth on notice to cancel the agreement and for the payment of compensation to Amann "in respect of the loss or damage sustained … by reason of such cancellation." The default provision (cl 2.23) provided for payment to the Commonwealth of expenses in having the subject defaults made good. It was significant in the default clause that it had a saving provision, namely, that it was "without prejudice to any other remedy" of the Commonwealth in relation to the subject default. The termination clause had no such saving provision and it was of a very special kind, as appears from the following:

[5]

189 In my view, the nature of the subject agreement in Amann and the web of provisions surrounding its termination clause are significant distinguishing features from the provisions of the contract calling for construction in this case. 190 WCL also sought support for its position from Switz Pty Ltd v Globind Pty Ltd (2000) 33 ACSR 723 at 737, pars 69 -73, and Huskisson RSL Sub-branch Club Ltd v Sullivan (1990) 20 NSWLR 332 at 246. In my view, neither of the passages relied upon assist WCL's construction of the termination provisions. 191 Switz was concerned with statutory construction and, in the passages cited, Spigelman CJ cited with approval cases explaining the application of the principle expressu facit cessare tacitum in statutory construction. Huskisson was to like effect, each authority referring to the passage in Dixon J's judgment in R v Wallis; ex parte Employers Association of Wool Selling brokers (1949) 78 CLR 529 at 549-550. 192 In my view, the termination provisions of the contract are not ones upon which that rule of construction has any operation. 193 In the case of contractor's default under the contract, cl 13.01 entitles WCL's Administration Manager to give written notice to the contractor of WCL's intention to "determine the engagement of the Contractor …" for specified events, namely, the contractor's suspension of progress; failing to proceed with due diligence or in a competent manner; failing to commence the project without reasonable cause; failing to comply with the Administration Manager's instructions or committing "any other breach of the provisions of the "contract", being a substantial breach. Failure to comply with the Administration Manager's notice entitled WCL "without prejudice to any other rights or remedies" to determine the employment of CCG (cl 13.02). 194 Clause 13.03 concerned the contractor's insolvency and cl 13.04 set out the consequences of determination of CCG's employment under cll 13.02 and 13.03. 195 It is clear from those provisions that the contract itself was not determined by WCL's exercise of power to determine CCG's employment. In contrast, cl 13.05 entitled CCG to give notice of intention to "determine" the contract for "substantial breach of any provisions" of the contract by WCL. Clause 13.06 entitled CCG to determine the contract in the event that WCL's breach was not remedied. Those clauses are set out in par 279 of the report. The consequences of the contractors determination of the contract was set out in cl 13.07, the terms of which may be found in par 280 of the report. 196 In substance, I am in agreement with the reasoning of the referee and in his construction of the termination clause of the contract. The referee does not deal expressly with the reasoning of the court in Amann in the report. However, argument in the reference concerning Amann was in evidence before me and it is apparent, that the referee saw features in the construction of the termination clause in Amann which distingiush it from the default provisions of the contract. 197 My principal point of departure from the reasoning of the referee lies in his adoption of a presumption against an exclusive regime in default provisions of construction agreements. I have preferred not to express that view, essentially, because I think the correct construction of the termination clause, without recourse to such a presumption, is that it is not an exclusive regime. However, it is important, in my view, to recognise that the nature of the contract is significantly different from the nature of the agreements considered in Roadshow and Amann. 198 I think the reasoning of the referee in pars 284, 287 save for the adoption of the presumption, 289, again save for the presumption, 290, 292, 293, and 294 is correct and justifies the construction that the termination provisions were not an exclusive code such as to deny CCG the right to terminate for repudiation without notice. 199 Moreover, I have some considerable difficulty in seeing how the termination clause has any application to conduct, examined later in these reasons, which amounted to a total disregard by WCL of its obligations to CCG under the varied contract. In general terms, WCL's conduct may be characterised as repudiating its obligations in relation to the certification processes under the contract with the objective of preventing certification of practical completion, with the serious consequences to CCG flowing from that interference.

[7]

The referee's findings in relation to WCL's (a) resort to the liquidated damages provisions of the contract; (b) interference with the certifying role of the Administration Manager ; and (c) requiring a standard of defect-free practical completion 204 Earlier in these reasons I set out the four elements of WCL's conduct as found by the referee, each of which, alone, and "especially in conjunction with each other" in the referee's opinion, constituted repudiatory conduct. It was in that context that I observed that WCL was presented with a considerable task where one is concerned with a finding of repudiation of a technical construction contract which requires an understanding of the materiality of the alleged breach. I made that observation in the context of the referee's insight into the commercial and technical subject matter of the contract resulting from his considerable expertise in the field. 205 The applicable repudiation principles are dealt with by the referee at pars 383 and 384 and I do not understand there to be any dispute about that matter. 206 The referee's finding of repudiation in par 300 of the report based upon WCL's resort to the liquidated damages provisions of the contract as varied by the February agreement is best examined by looking at the wider conduct of WCL between March and June 1998. That is so, because that breach by WCL, as found by the referee, may be seen as part of a strategy adopted by WCL in relation to the administration of the contract during that period. 207 One starts with the proposition expressed in par 50 of the report that the "contractual date for Practical Completion [is an] important background factor never to be overlooked." The referee summarised that aspect of the contract in par 304 of the report as follows: "304. The issue of whether there was imposed a requirement for the achievement of Practical Completion different to, or additional to, that required by the Agreement is a matter of obvious importance to the contractor. That is because the achievement of Practical Completion as defined in the Agreement was the trigger for the payment of the last $10 million of the contract sum, was the terminating date for the imposition of any liquidated damages, was the trigger for the release of undertakings and performance bonds, and was the date for commencement of the Defects Liability Period, on the expiration of which the remaining bank undertaking is released. Thus imposition of a requirement for the achievement of Practical Completion additional to that required by the Contract rendering the achievement of Practical Completion more difficult goes to the heart of the contractor's capacity to conclude the works under the construction contract, to receive significant monetary sums and to be released from major financial obligations."

[8]

208 The importance of that contractual element was expressed in the evidence of Delahunty, which the referee accepted, as quoted in pars 305 and 306 of the report in the following terms: "305. …. At no time during the construction of the Works up until Centre opening on 31 March 1998 did anyone from WCL or Baker & McKenzie say that "practical completion" in the Building Contract required that the works be entirely complete, free from any omissions and free from any defects. I would not knowingly have agreed to Practical Completion requiring that the project be complete in all regards and defect free. That is particularly so in circumstances where the last $10 million payable to CCG and return of three unconditional Bank Guarantees depended on the achievement of Practical Completion. Nor would I have knowingly agreed a date for Practical Completion of 17 March 1998 if Practical Completion required that the works be complete in all respects and defect free at Practical Completion." 306. He further said: " Had anyone from WCL communicated to me at any time prior to CCG handing over possession of the site to WCL for opening of the Centre handover [sic] on 31 March 1998, that WCL intended to administer the Contract on the basis that Practical Completion required that the works be complete in all respects and entirely free from defects I would not have allowed Walker Corporation Ltd to go into possession of the Shopping Centre on 31 March and to open the Shopping Centre for trading. Rather, I would have retained the possession of the site which CCG had up until 31 March 1998 so that CCG could have completed the incomplete and defective work then present in the shortest possible time and been paid the last $10 million due under the Contract and had its three Bank Guarantees returned." 209 As at March 1998, the contract date for practical completion was 17 March 1998 - no extensions of time having been granted, although there had been an undisputed variation, known as the Hoyts variation, and a conditional agreement for the payment to CCG of an acceleration compensation in relation to that variation. Issues concerning the Hoyts variations are examined later in these reasons. 210 Paragraphs 52 to 54 of the report contain a succinct description of the achievement by CCG of the contractual dates for substantial completion and hand-over of the supermarket section of the project and of the nature of the works being performed on the cinemas and specialty shops in the first two months of 1998. 211 Aspects of particular importance to CCG in achieving practical completion under the contract were outlined by the referee in pars 57 to 60 of the report, adverting, in particular, to the dependence on practical completion of final payment to CCG of $10,000,000, the release of substantial performance security bonds and avoidance of liquidated damages. 212 The importance to WCL of the opening of the shopping centre in terms of its commitment to financiers for the project and the obtaining of a cash flow was referred to in pars 61-66 of the report, in which it was noted that full rental payments by tenants in the shopping centre depended upon up to 80% of the specialty shops having commenced trading. 213 That was the commercial background to the events which culminated in the February agreement in terms as set out in par 224 of the report and which have been examined earlier in these reasons.

[12]

219 The referee's principal findings of the nature of the Administration Manager's obligations are found in pars 408 and 409 as follows: "408. I respectfully adopt the expressions of opinion in the passages quoted from the judgments by the Court of Appeal of New Zealand in Hatrick and Canterbury Pipe Lines Ltd . They do not, I think, conflict with anything written by Macfarlan J, in Perini Corporation which rather addressed the nature of contractual terms to be implied in a contract between a proprietor and a contractor. As the defendant's submissions make plain, from Perini is to be drawn the obligations of an administration manager acting as a certifier to act "independently", "fairly and justly and with skill to both parties to the contract", and that his "overriding duty …is to give his own decision having regard to the rights and interests of the parties…such rights and interests being measured both by the rights and obligations of each party as it appears from all the provisions of the contract." 409. It must follow if a certifier is obliged to act "honestly", "independently", "fairly" and "impartially", that in exercising his functions as certifier he must act without partiality or bias. There is no authority of which I am aware which suggests the contrary. The defendants have relied upon a passage in the judgment of Macfarlan, J in Perini to suggest the contrary. That passage states: "The essence of such a relationship in my opinion is that the parties by the contract have agreed that this officer shall hold these dual functions and they have agreed to accept his opinion or certificate on the matters which he is required to decide. It has also been said, and in my opinion correctly said, that the agreement of the parties is that they have referred the decision of these matters to a person who by reason of his employment and who by reasons of his other duties in supervising the execution of the contract is a person who has both bias and partiality. It is now in my opinion too late to hold that an appointment of this kind is not one for which the parties to a contract cannot provide. I have reached the conclusion that although the Director of Works as an officer of the Commonwealth may well have been the servant of the Commonwealth, the general nature of the duties imposed upon him by cl.35 was such that at the same time he fulfilled this biased and partial role of a certifier when he was required to consider an application by the plaintiff for an extension of that completion date. This conclusion is quite unaffected by the consideration that in relation to other provisions of this agreement, (cf. cl.21) the Director of Works was acting in a purely administrative role and only as an officer and servant of the Commonwealth."

[15]

On the 18th March 1998 there was a meeting attended by Mr Lionel Cruise, Mr McGilvery, Mr Hendry, Mr Reed, Mr Armour and Mr Slender. Mr Cruise was a senior representative of BT Management Services Pty Limited or Bankers Trust Australia Limited, Walker's financiers. Mr McGilvery was, subject to Mr Walker's overriding position, the senior Walker representative, concerned with the project. Mr Hendry was a Walker Corporation representative, presently being the Executive Manager, Contracts and Administration. Although his statement states that "on 16 April 1998 I became involved in the Broadway project on Walker's behalf" assisting Mr Lawes and the project team with a backlog of paperwork and correspondence, it is plain that he had an involvement from at least 18 March. From early May 1998 he took a major role in contract administration. Mr Reed was WCL's solicitor. Mr Armour and Mr Slender were representatives of Farrell Management Pty Ltd, who were overseeing the Project on behalf of the financiers, and reporting to them. 361. Only Mr McGilvery and Mr Hendry gave evidence. Neither gave evidence regarding the purpose of the meeting, or its substance. At various times I was informed that Mr Reed was to give evidence and statements from him were being prepared. Ultimately I was informed of a considered decision not to call him. There are however two diary entries regarding the meeting. It is to be noted that the meeting occurred on the day after the contractual date for Practical Completion." 224 The referee examined the administration of the contract, with particular reference to Lawes' role as Administration Manager during the following periods: "(a) prior to 9 April 1998, the date Mr Lawes went on holidays; (b) 9 to 18 April 1998, being the period when Mr Lawes was on holidays; (c) 19 April 1998 to 4 May 1998, being the period after Mr Lawes returned from holidays and before a management re-structure; and (d) after 4 May 1998, being the post management re-structure period." (par 423 of the report) 225 The first of the letters drafted by WCL's solicitor (Reed) for Lawes to sign was that of 20 March 1998.

[19]

230 It is apparent from the evidence relied upon by the referee that it was open to him to make those findings. 231 Of the Reed drafted letter of 26 March, the referee regarded it as an "instance of …Lawes being pressured to sign a letter with which he did not agree at the behest of his employers or their lawyers". It was open to the referee to reach such a finding on the evidence cited and accepted by him. 232 Par 246 of the report, quoted above, is a good example of the interweaving of the interference by WCL in the performance by Lawes of his function as Administration Manager and of the resort by WCL to the liquidated damages provision of the contract. 233 In respect of the first period the referee found that WCL "interfered with the exercise by the Administration Manager of his independent functions as certifier …" (par 430). For the reasons stated, I think that conclusion was open to the referee on the evidence. 234 In the second period selected by the referee, two letters were sent to CCG, dated respectively 14 and 16 April which had been drafted by Reed for the Administration Manager. The first contained the statement that "the Contract Agreement requires that any defects and omissions in all premises…must be rectified prior to Practical Completion…" (emphasis added). The second letter was in the following terms: "16th April 1998 … Broadway Shopping Centre Application for Issue of Notice of Practical Completion We refer to your letter dated 31 March 1998 stating that in the opinion of the Contractor the Project has reached Practical Completion. The Project has not reached Practical Completion and, accordingly, pursuant to clause 10.09.02(b) of the Contract Agreement, we hereby issue to you notice of matters and things required to be done before the Project shall reach Practical Completion. The matters and things which are required to be done are described in the Schedules to this notice which forms part of this notice. We note that the schedules include a number of items which were identified as having been attached to your letter dated 31 March 1998 but were not provided with that letter. Your careful attention is requested to the accuracy of any further notice under clause 10.09.03 of the Contract Agreement. As the Date for Practical Completion has now passed without Practical Completion of the Project having been achieved, you are directed to attend to the matters and things referred to in this notice with due diligence and expedition in order to achieve Practical Completion at the earliest possible time after the date of this notice." ( par 431 of the report) 235 The schedules, there referred to, comprised some one hundred and ninety six pages and contained several thousand items. 236 The referee's findings in relation to the content of those letters and the circumstances in which they were forwarded to CCG are set out in pars 432 to 434. 237 It is not without significance in the context of the referee's findings in pars 432 to 434 of the report that, during this period of Lawes' absence from the project the referee found that "there was a series of other letters signed… by Saba, each letter having been drafted by WCL's solicitors" dealing with contractual entitlements and requirements. The referee made the following finding in relation to those letters: "The sending of these letters, all drafted by the solicitors, over the name of Mr Lawes but signed by others, Mr Lawes being on holidays and having no input into them, are indicative of the scope to which the functions of Administration Manager had been removed from the personal determination of Mr Lawes and placed in the hands of WCL's solicitors, although to some extent they reflected Mr Lawes' instruction to "bat back over the line" certain requests for extensions of time". (par 435 of the report )

[20]

238 The referee concluded that "during the second period, WCL, through its solicitors assumed the role of Administration Manager during the absence of Lawes on holidays". 239 Although it is not my function to redetermine the issue, I think it would be difficult to reach a conclusion contrary to that of the referee based on the extent of the involvement of Reed and the sending of letters under the name of the Administration Manager who was absent from the site on holidays. That conclusion was fortified by what took place in the third period. 240 As was the case in respect of the first period, the evidence and the findings of the referee in respect of the second period illustrate the intertwining of strands in the conduct of WCL which are the subject of adverse findings by the referee: in this case, the extent of WCL's interference with the functions of the Administration Manager and the attempted imposition of a defect-free standard of practical completion. The absurdity of the contents of the 16 April letter lies in the volume of claimed defects and the inclusion within them of defects of the most trivial kind. 241 The third period was marked by Lawes removal from the project site to take up the position of "Manager, Residential Development" at WCL's Botany office. Significantly, of the ensuing period, the referee had the evidence of Lawes that "From about this point on I don't initiate much at all" (par 438). Not particularly surprising when the evidence disclosed that shortly after his return from holidays, a "Project Team Management Plan" was implemented from 4 May 1998, the commencement of the fourth period considered by the referee, and which was described by the referee, along with the effect of its implementation, in the following terms: " The Fourth Period 450. I have previously referred to the evidence of Mr Lawes regarding him being "prompted to put in train the new regime of early May." A new "Project Team Management Plan" was implemented from 4 May 1998. It provided that: "The overall day to day management of the Broadway Shopping Centre will be by Neil Johnson, with input from Gary McGilvery and Kirk Lawes as required". It divided work into four categories, the first of which was "Legals/Practical Completion/Contract-Mark Hendry/Daryl O'Brien". The Plan stated: "All legal issues, Practical Completion and the finalisation of Concrete Constructions Group (CCGL) contract will be dealt with by Mark Hendry and Daryl O'Brien. Issues resulting in works being taken over by Walker Corporation will be identified to Neil Johnston with all legal correspondence in place. Duties will include: • Assessment of Progress Claims by CCGL. • Assessment and approval of all outstanding variations including tenancy variations. • Co-ordination and response to CCGL in regards to Legal issues.ie.EOT claims, variation requests etc • Review of Practical Completion prerequisites and issuing of PC Notice. • A summary of outstanding PC issues and variations to be issued weekly. • Liaising with Bankers Trust/Farrell Management for any outstanding issues."

[22]

243 I would add that the mere removal of Lawes from the project site, the taking over of project management by the "Project Team Management", the conferring on Lawes of the duties of "Manager, Residential Development' at Botany and the active role of Reed in the administration of the contract would, in my view, be sufficient to justify the referee's findings in relation to the stripping of Lawes' independence as Administration Manager. 244 However, the referee had more evidence to support his findings from the evidence of Lawes (see eg pars 438-440, 443, 445, 452-455 covering the third and fourth periods). 245 In relation to the third period the referee made the following findings: "449. In my opinion the evidences [sic] establishes in relation to the instances to which I have referred that in the third period certain functions of the Administration Manager were exercised by other employees of WCL, although Mr Lawes was available to exercise those functions, and in the instances where he signed the section 5.04 notices, this was done as a result of those notices being instituted by others in the Walker organisation being senior to Mr Lawes, prepared by WCL's lawyers and forwarded to Mr Lawes for signature. They were not the exercise of his independent judgement [sic]. It follows that WCL interfered in the exercise by the Administration Manager of his powers and discretions, and to an extent usurped them." (par 449) 246 In that period there were "four letters of importance [in the mind of the referee] involving the exercise of the certifier function by the Administration Manager" (par 438). The first was a letter of 23 April 1998 signed by Saba "restating the requirement for defect- free Practical Completion" (par 439). Of that letter the referee made the following finding: "Notwithstanding Mr Lawes' return from holidays, the letter was signed by Mr Saba. It does not reflect Mr Lawes' opinion regarding work necessary to be done to achieve Practical Completion. It was drafted by the lawyers, signed by Mr Saba and sent. As Mr Lawes said, he "eventually" saw the letter." (par 439 of the report) 247 There were two further letters of 24 April 1998 signed by Lawes purporting to act under cl 5.04 of the contract which empowers the Administration Manager to issue a notice requiring compliance by the contractor with a previous direction or instruction of the Administration Manager. 248 Of the first notice, the evidence before the referee was that it had not been initiated by Lawes and, at least in part, not a product of his independent judgment (par 443). The second cl 5.04 notice of that date was the subject of evidence, which, I think, compelled the finding of the referee that it was not the product of Lawes' independent judgment ( see pars 444, 445 and 446). 249 The fourth document was a progress certificate signed by Saba "although…Lawes was available". 250 As with the evidence in respect of the previous two periods, the findings of the referee underline the relationship between WCL's interference in the administration of the contract, and its unjustified attempt to impose a 'defect-free' standard for practical completion under the contract. 251 The findings of the referee in respect of the fourth period were as follows: "456. The reality was, from at least 4 May 1998, that the role of Administration Manager was being exercised by Mr Hendry with guidance from WCL's solicitors, and with formal signature being obtained, in most part, from Mr Lawes after he had been informed of the legal rights of Walkers. That position is satisfactory when the Administration Manager is exercising a function under the contract which us not that of a certifier or assessor. However it is contrary to the obligations on to (sic) Administration Manager when he was called upon to exercise the functions of assessor or certifier. In truth, however, no different procedure or process of mind, was exercised by Mr Lawes when he ought to have been exercising the independent functions of an assessor or certifier. …..

[24]

Hendry had been appointed to the project by WCL with responsibility for contract administration (par 451). 252 One of the letters signed by Lawes during the fourth period was that of 12 May 1998 which had been drafted by WCL's solicitors. It insisted on defect-free practical completion in the following terms: " BROADWAY APPLICATION FOR ISSUE OF NOTICE OF PRACTICAL COMPLETION We refer to your letters dated 27 April 1998 and 8 May 1998. As you are aware, clause 1.05.09 of the Contract defines Practical Completion and lists all those matters which must be carried out by CCG in order for the Administration Manager to be in a position to award Practical Completion. We disagree with your interpretation of clause 1.05.09(a ). That clause clearly requires the Project to be complete . Our interpretation of that requirement, there being no exclusion of minor omissions and defects, means complete in all respects . The Project is defined specifically under clause 1.05.10A. In my opinion, the matters referred to by Walker in its letters dated 16 April 1998 and further issues which have arisen since which have been communicated to CCG, must be carried out by CCG before Practical Completion is achieved. Your reference to the existence of a defects liability period in respect of the Project Works is not, in my opinion, determinative of the issue. Clause 6.12 does not refer, as you assert, to "minor omissions and defects" but requires the rectification by CCG of any faults, omissions, shrinkages or other defects in the Project which are apparent during the Defects Liability Period. Many matters remain to be performed by CCG under the Contract prior to it being in a position to request that Practical Completion be awarded. In fact, as you are aware, you have recently commenced the compilation of an exhaustive list of defects which are required to be performed by CCG. Murray Gregory has indicated that there are between 5,000 and 7,000 such defects. In addition, there are a number of other significant incomplete works issues which need to be dealt with by CCG, as well as the obtaining of necessary approvals and certifications. Further, it is disappointing that CCG has sought to once again make an application for a notice of Practical Completion without having dealt with the issues raised in our letter of 16 April 1998, nor with many of the other issues which remain outstanding. We make the following general comments in relation to the particular issues you raise in your letter dated 27 April 1998 which is not exhaustive:…" (emphasis added) (par 458 of the report)

[25]

253 The letter was drafted by the solicitors for Lawes to sign. The referee found that it did not represent Lawes's opinion. On the evidence cited and accepted by the referee, it clearly didn't. However, it is sufficient for me to find that it was open to the referee to reach that finding. 254 There were two further letters, each dated 15 May 1998, signed by Lawes, but, on the referee's finding, were not letters of his making. 255 The first purported to be a notice pursuant to cl 6.05.04 which empowered WCL to require a "Cure Plan" when the contractor fell behind in performance of an approved construction programme. The referee found the notice to be misconceived as it did not relate to an approved construction programme (par 460). 256 The second letter purported to be a notice by the Administration Manager pursuant to cl 11.11 of the contract in the following terms: "The Date for Practical Completion (being 17 March 1998) having passed without the Project having been brought to Practical Completion, the Administration Manager hereby notifies the Contractor pursuant to clause 11.11 of the Contract that in future the Contractor's liability in respect of liquidated damages pursuant to the Contract will be reflected by way of provisional assessment in Progress Certificates issued by the Administration Manager." (par 462 of report) 257 The referee found that the letter was initiated by persons within WCL, other than Lawes, and by WCL's solicitors. The referee found that Lawes signed the letter even though he regarded the provisional withholdings of liquidated damages as unfair and commercially unjustifiable. The referee had evidence of that from the cross examination of Lawes (pars 464 to 466 of the report) and that finding was, in my view, open to the referee. 258 The circumstances, as found by the referee, in which that letter was sent out under the signature of Lawes as Administration Manager are a further example of the intermingling in the findings of the referee of breach by WCL of its February agreement, in resorting to the liquidated damages provisions of the contract, and of WCL's interference in the performance by Lawes of his role as Administration Manager. 259 The referee, correctly, in my view, found that the giving of a cl 11 notice under the contract required the Administration Manager to exercise an independent assessment of the contractor's performance under the contract and to form an opinion as to the date upon which practical completion under the contract ought to have been achieved (pars 468-469). 260 The referee found that Lawes had not exercised that independent assessment (pars 469, 470). It followed that the progress certificate No 16 served on 15 May 1998, signed by Lawes was not a justified resort to cl 11 of the contract. On the evidence accepted by the referee (eg pars 463-466) those findings were open to him and, although unnecessary for me so to decide, in my opinion, the referee was correct in reaching those findings. 261 Lawes signed a further letter to CCG of 9 June 1998 which was in the following terms: "The Administration Manager is of the opinion that the Project has not reached Practical Completion at this stage. Walker wishes to communicate its disappointment that the Contractor has again sought to make an application for the issue of the notice of Practical Completion without having dealt with the issues raised in our letters of 16 April 1998 or 12 May 1998, nor with many of the other issues which remain outstanding. Indeed, many matters remain to be performed by CCG under the Contract prior to it being in a position to request that Practical Completion be awarded. The Contractor is again reminded of the provisions of clause 1.05.09 of the Contract which defines Practical Completion and which lists all those matters which must be carried out by the Contractor in order for the Administration Manager to be in a position to award Practical Completion. The Administration Manager is of the opinion that the Project is so far from Practical Completion that it is not practicable to issue a notice under the provisions of Clause 10.09.02(a) or (b). The Contractor is therefore required to continue with the execution of the Project in accordance with the Contract. Notwithstanding this, the Administration Manager is keen to assess a proper claim by the Contractor for Practical Completion which demonstrates the Contractor's compliance with each of the matters referred to in Clause 1.05.09. Set out below is the Administration Manager's opinion with respect to the status of each of the items referred in to Clause 1.05.09. This list is not intended to be an exhaustive list, nor written notice of matters and things required to be done before the Project shall reach Practical Completion as describe (sic) under Clause 10.09.02(b)." (par 474 of the report)

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265 Not only was the evidence as accepted by the referee sufficient to justify such findings, it is my view that the findings were correct. 266 The referee's ultimate findings of the nature of WCL's conduct in demanding a defect-free standard for the certification of practical completion under the contract are set out in pars 381 to 386 of the report, as follows: "381. In my view it has been established that defect-free Practical Completion was required by the first defendant and the Administration Manager, and that such requirement was beyond the contractual obligation, and imposed a requirement for performance under the contract which was not contractually required nor practically capable of achievement. The consequence necessarily was that the contractor could not achieve Practical Completion, and would not receive the final contractual payment, or the discharge of the performance bonds, and would be subject to the imposition of liquidated damages. In fact Practical Completion has never been certified under the Agreement. Nor, if the position adopted by WCL between 14 April and 19 June 1998 was correct, and if the Agreement had remained on foot, could it now be certified, although the Centre has been trading for almost two years, because WCL maintains that there remains outstanding unrectified defects or omissions. 382. It follows that, although I am not prepared to make the positive finding, absent evidence from Mr Reed, that he did not bona fide hold the view that the contract required there to be defect free Practical Completion, I do find that the position when advanced by or on behalf of the Administration Manager, or WCL, was not a position bona fide held by Mr Lawes as Administration Manager, or WCL. Mr Lawes was of the view that was not the correct interpretation of the Agreement, a position the legal advisers to WCL now accept. Applicable Repudiation Principles 383. A party repudiates a contract if the party evinces an intention to no longer be bound by the contract, or indicates that it intends to fulfil the contract in a manner substantially inconsistent with its obligations and not in any other way. WCL made it clear that it would make the residual payment of $10 million, would cease imposing at least provisional liquidated damages, and would release performance bonds only on achievement of Practical Completion. That was its contractual entitlement, subject to the February agreement. However, by imposing a requirement for Practical Completion beyond that required by the contract, it breached the contract. And it breached an essential term if the contract because it was critical to the contractor to be able to obtain Practical Completion on performance of the contractual requirements in that regard and thus obtain the residual contract monies, release of performance bonds and termination of any liquidated damages. It is obvious that a contractor will not enter into a construction contract unless it knows what it must do to complete its primary obligations under that contract and thus receive practical completion certification with its attendant rights. 384. WCL insisted upon defect-free Practical Completion although that was beyond its contractual entitlement, as is now accepted. It maintained its position notwithstanding the contrary view being put. It did not bona fide hold the view that the interpretation being advanced was correct. By insisting upon performance of the contract beyond the contractual entitlement it indicated an intention not to be bound by the terms of the contract and repudiated it. By breaching an essential term of the contract it repudiated it. As Jordan CJ said in Tramways Advertising Pty Limited :

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(d) there was no evidence to support the referee's finding (pars 376, 379, 380, 382 and 384 of the report) that WCL or Lawes did not bona fide hold the view that defect-free practical completion was required by the contract : that there was evidence that Lawes accepted the advice of WCL's solicitor and there was no finding by the referee that "Lawes was untruthful in this evidence". It was contended that the referee "misconstrued" this evidence. 273 As to (a): the submission that the referee did not identify any particular condition of the contract which had been repudiated by WCL does not expose any error of fact or law by the referee and pays no heed to the referee's findings, particularly those in par 354 of the report, which described the material importance of achieving practical completion under the contract and of the effect upon that performance of WCL's imposition of a defect-free standard before practical completion could be certified. 274 WCL's repudiatory conduct as found by the referee could be described as evidencing contempt by WCL of its obligation to co-operate with CCG in bringing the project to practical completion and of its obligations to adhere to the due processes of the contract for the issuing of the certificate of practical completion: a matter of fundamental importance under the contract. 275 As to (b) : this submission is essentially a submission as to the weight of the evidence and what, in WCL's submissions, was referred to as a "fair reading" of Lawes' letter of 19 June 1998. It was submitted that, on a "fair reading" of the letter, Lawes had abandoned any unreasonable requirements for achieving practical completion. 276 The findings of the referee were clearly open to him, based upon the evidence accepted by him and to which reference has been made in these reasons. The submission on behalf of WCL in relation to the 19 June letter amounts to a 'weight of evidence' argument as to which, the reference back in the 19 June letter to the defect-free requirements letters of 16 April and 12 May was sufficient basis, in the context of WCL's conduct in the preceding weeks, to support the referee's finding in relation to the 19 June letter. 277 In my view, there was ample evidence for the finding of the referee in par 339 of the report that WCL/Lawes had imposed a requirement of defect-free practical completion between March and June 1998. 278 As to (c): this submission related to a number of references in the report to a defects list of five to seven thousand items: one such reference being par 328 of the report, which was in the following terms: "CCG applied for Practical Completion on 31 March 1998, the date the shopping centre opened. It sought the issue of the Notice of Practical Completion within 10 days and, on such issue, return of bank guarantees. It forwarded boxes of documentation said to be documents satisfying the requirements for Practical Completion in clause 1.05.09. Mr Lawes and Mr O'Brien began a review of that documentation and sought consideration of it by consultants. On 14 April 1998 Mr Saba (WCL) signed a letter over Mr Lawes name as Administration Manager, Mr Lawes being on holidays advising: "in the meantime, however, the Contract Agreement requires that any defects and omissions in all premises (including the Hoyts premises) must be rectified prior to Practical Completion of the Project." That letter was drafted by Messrs. Baker & McKenzie. Consistent with it was the confirmatory advice given on 15 April which I have quoted. On 16 April, in a further letter drafted by the Walker defendants solicitors, the following was stated: The Project has not reached Practical Completion and, accordingly, pursuant to clause 10.09.02(b) of the Contract Agreement, we hereby issue to you notice of matters and things required to be done before the Project shall reach Practical Completion. The matters and things which are required to be done are described in the Schedules to this notice which form part of this notice. …………………………… As the Date for Practical Completion has now passed without Practical Completion of the Project having been achieved, you are directed to attend to the matters and things referred to in this notice with due diligence and expedition in order to achieve Practical Completion at the earliest possible time after the date of this notice." The letter was signed by Mr Dransfield. Attached to the letter were 196 pages listing asserted defects and omissions. Estimates of the numbers of items listed range between five and seven thousand ." (emphasis added)

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282 It is not difficult to identify the evidence referred to by the referee. The letter of WCL (Lawes) to CCG of 8 May, quoted earlier in these reasons identified the number of defects as being "between 5000 and 7000" in addition to "a number of other incomplete works issues". The 12 May letter relied upon the defects notified in the 16 April letter with its 196 pages of attachments. 283 Moreover, in Lawes' statement of evidence of 3 May 1999 (Ex 4B tab 3 par 504), in relation to the 16 April 1998 schedule, he stated that the "A3 marked up drawings [identified] several thousand items of omitted and defective work". 284 I have not found it necessary to analyse the accuracy of WCL's calculations, mainly because I think WCL's submissions miss the point of the referee's findings in relation to WCL's approach to defect-free practical completion. It is not suggested that the referee had not been given estimates of the range of defects of the order referred to in the report. 285 The significance to the referee of the letter of 16 April 1998 is to be found in pars 329 to 332 of the report. WCL's letter of 16 April requiring performance of the numerous items listed in the accompanying schedules before Practical completion could be achieved was regarded by Lawes as "nonsense". He thought that "maybe five hundred would be important". 286 Whatever the correct number of defects may have been that WCL required to be rectified before practical completion could be certified, it is plain, on the evidence before the referee, that the defect-free standard, which WCL sought to impose, involved some thousands of items. 287 As to (d): there are some general observations that, I think, are pertinent to the referee's findings. 288 The evidence before the referee included the notes of meetings in mid March, involving WCL's representatives, notably not Lawes, representatives of WCL's consultants and financiers and Reed. The referee's findings in relation to those meetings which preceded the 20 March letter are set out in pars 358 to 364 of the report and are referred to earlier in these reasons. 289 With that background to the imposition of a defect-free standard of practical completion, it would not take much evidence, in my view, to justify the referee coming to a conclusion that the imposition of such a standard for practical completion was not a bona fide view held by WCL/Lawes as to WCL's entitlement under the contract. 290 Especially is that so where WCL did not attempt to justify such a construction of the contract before the referee, conceded that it was not the true construction of the contract, and called no one to assert that it was a bona fide, although erroneous, view of WCL. The simplest way of establishing that would have been to tender the evidence of Reed concerning his advice on that subject. The referee adverted to that aspect in par 361 of the report, noting that at various times he had been informed that Reed was to be called as a witness and, at one stage, that a statement of evidence was being prepared. 291 The submissions in my view are, in substance, weight of evidence arguments. In particular, it was submitted that the evidence revealed that Lawes "signed the … letters [requiring a defect-free standard of practical completion] after he reviewed them to satisfy himself at least as to the legal rights of the parties". That submission was based on passages from the transcript of Lawes' evidence in cross examination (T 1317-T 1320). 292 In my view, that evidence is equivocal. Still, assuming that it is evidence which could support a finding that Lawes brought an independent mind to the task of Administration Manager in requiring a defect-free standard of practical completion, it is clear, from the reasons earlier, stated that the referee was satisfied on the totality of the evidence that Lawes did not, in fact, bring an independent mind to this task. As earlier stated, I think that there was ample evidence upon which the referee could have reasonably reached the conclusions as expressed in pars 376 and 379-382 of the report. 293 The untenability of this challenge by WCL to the adoption of the referee's report is emphasised by the fact that at pars 376-379 the referee considered the evidence said to support a finding contrary to that reached by the referee. Of that evidence, I think the referee correctly said that the "evidence to support [WCL's] submission [was] thin indeed"(377). 294 In addition to finding that Lawes did not bring an independent mind to the exercise of his responsibilities of Administration Manager by "simply [doing] as he was told by his employer, its financiers and its lawyers", the referee expressed a further concern, as appears in the following extract of his report: "375. It is a matter of concern that a solicitor should draft a letter (20 March 1998) said to express the opinion of a certifier when plainly it did not, and a further matter of concern that a letter (26 March 1998) should be drafted making assertions of fact designed to ground an action for misrepresentation when there was no basis for such factual assertions. Nonetheless, and even though Walkers solicitors and counsel are not now prepared to support the correctness of Mr Reed's advice regarding the construction of the Agreement concerning defect-free Practical Completion, I am not prepared to hold that Mr Reed did not bona fide hold the view of the construction of the Agreement regarding defect free practical completion contained in his advice, and conveyed to the Contractor in the letters of 16th April and 12 May." 295 The submission that the referee "did not find that Mr Lawes was untruthful in his evidence", I think overlooks the manner in which the referee approached the evidence of Lawes. A similar submission was made in relation to the 'February agreement' issue and I have examined that. In relation to this issue, the referee rejected WCL's contention that the evidence called for a finding that Lawes accepted legal advice that the contract called for defect-free practical completion. In pars 347 to 352 of the report it may be seen that the referee did not accept particular aspects of Lawes' evidence, which he found on occasion to be inconsistent in relation to this issue. 296 It was argued before the referee and before me that WCL's conduct in resorting to the liquidated damages provisions of the contract did not amount to a repudiation, rather it simply reflected an incorrect understanding of the legal position under the February agreement, with WCL erroneously regarding it as one relating to practical completion and not one directed to the opening of the centre, adopting what was said in DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 432. 297 It is unrealistic, in my view, to look at that issue in isolation, as against seeing that conduct in the context of WCL/Lawes' insistence on an untenable and impossible requirement of a defect-free standard of practical completion, stripping Lawes of his independence as Administration Manager in the process, as found by the referee. WCL can hardly be heard to complain if the referee looked with particular interest at the record of meetings attended by WCL representatives, notably other than Lawes, WCL's consultants, financiers and solicitor in mid-March as the setting in which the conduct of WCL in the ensuing months should be viewed. That is the way in which I understand the referee approached the contents of those records of meetings and in particular, considered the platform upon which the letter of 20 March was drafted for Lawes to sign. 298 It would have been open to the referee on that evidence to conclude that, commencing with the 20 March letter, and up to the 19 June letter, WCL embarked on a strategy of gaining occupation of the shopping centre at a time when it was not contractually entitled to occupation and, then, having gained occupation, ensuring that certification of practical completion should be put off as long as possible, (a) by imposing an absurd standard of completion; (b) by dictating to Lawes what WCL required in that respect; (c) by eventually side-lining Lawes, and (d) by resorting to the liquidated damages provisions of the contract. In adopting that strategy WCL would have ensured that payment to CCG of the "last $10M withheld until 10 days after PC" was withheld indefinitely. 299 In my view, it was open to the referee on the evidence accepted by him to find that the conduct of WCL/Lawes should not be explained by an erroneous, although honestly held, belief that the February Agreement related to practical completion and that practical completion under the contract required a defect-free standard. 300 It was submitted on behalf of WCL that the withholding of provisional liquidated damages "had no discernible effect on cash flow", in support of a more general submission that the conduct of WCL, in resorting to the liquidated damages provisions of the contract, could not be characterised, reasonably, as repudiatory. 301 Certificate 16, issued on 15 May 1998, was accompanied by the statement signed by Lawes as Administration Manager, that CCG's liability in respect of liquidated damages would be reflected by way of provisional assessment in progress certificates ( exhibit 2, vol 2, tab 24). The calculation accompanying the certificate showed a debit and overpayment to CCG of $3,128,994, while the allowance for provisional liquidated damages as at that date amounted to $3,104,639. On that basis, if the amount of provisional liquidated damages was excluded there would still have been an overpayment of approximately $24,0000 302 CCG submitted that the imposition of provisional liquidated damages produced "a negative balance on the current progress certificate". I do not think that is correct. 303 However, assuming it to be correct that there was no immediate effect on cashflow at the date of termination of the contract, in my view, that is of little significance in considering the referee's finding that WCL repudiated the contract by resorting to the liquidated damages provision of the contract. 304 The real vice, in WCL's conduct as found by the referee, lay in WCL accepting the benefit of the February agreement and immediately embarking upon a strategy aimed at thwarting the due administration of the contract by depriving the Administration Manager of any effective certifying role under the contract and by resorting to an impossible requirement for the achievement of practical completion by CCG. Embedded in that strategy was recourse to the liquidated damages provisions of the contract, despite the terms of the February agreement. 305 It was submitted on behalf of WCL that the referee's finding in par 478 of the report that WCL "interfered with the independent functions of the Administration Manager in relation to certification…", was a finding that was "unclear". It was said that it could not mean that "Lawes ceased to carry out any of the functions as administration manager." For my part, I do not share that difficulty in light of the finding of the referee that, in effect, Lawes did as he was instructed by WCL, its financiers and solicitors, of which there was ample evidence as cited by the referee. 306 The finding may be put into context in the light of the findings at par 450 to 456 of the report, in which the referee found that the role of Administration Manager had been taken over by WCL's establishment of a "Project Team Management Plan" on 4 May 1998, which the referee found had the effect of removing any independent function as assessor or certifier from Lawes' role. I think that finding was clearly open to the referee on the evidence before him. 307 It was further submitted on behalf of WCL that the evidence, established that Lawes continued to carry out the functions of an Administration Manager in the period between March and June 1998. It was said that the evidence established that there were five areas in which he so acted, namely: (a) attendance at defects meetings with CCG: (b) Lawes' intimation to CCG that it did not have to complete minor defects: (c) the subject matter of a telephone conversation between him and Webster of CCG on 20 June 1998 relating to practical completion: (d) the acceptance by Lawes of responsibility for signing off work that was complete and (e) the role played by Lawes during April, May and June of 1998 in "[working] through outstanding variations". 308 Those matters were the subject of submissions to the referee. On those evidentiary matters, the referee was unconvinced that Lawes exercised his independent judgement in his certification role as Administration Manager. 309 Of the letter of 20 March 1998, the evidence before the referee which is referred to in pars 365 et seq of the report, in my view, is powerful evidence to support the referee's findings that Lawes' acted under direction in performing the role of Administration Manager. 310 It was submitted that Lawes' unwillingness to send the letter of 20 March only stemmed from the fact that Lawes considered the issuing of the letter as premature, consistent with a willingness to send it after, at least 24 March 1998, by which time the February agreement, on Lawes' version, would have been spent. 311 However, that is not the importance of the letter, in the context in which the referee considered it. Rather, it is but one instance amongst many in which the referee found that Lawes simply did as he was told by WCL or its solicitors. 312 It is necessary to recount some of those matters to address a further submission on behalf of WCL relating to the communication of legal advice to Lawes. While Lawes was on holidays two letters were sent by WCL to CCG over his name, dated, respectively 14 April and 16 April 1998. The referee addressed those letters in pars 328 to 330, 431 and 432 of the report. I have examined earlier in these reasons the referee's findings in relation to those letters. 313 In the course of those findings, the referee, in par 434, rejected Lawes' evidence that the April letters, were the consequence of instructions by Lawes to O'Brien. In so rejecting that evidence, the referee found that Reed's advice as to defect-free practical completion (set out in par 311 of the report) was not communicated to Lawes before he left on holidays. 314 It is submitted on behalf of WCL that that finding was in error, as the letter of the solicitor to WCL of 15 April 1998, on the face of it, was a confirmation of advice as to practical completion; relying upon the words "As advised", which preceded the advice in that letter. 315 In my view WCL has not made good that submission. In par 436 of the report the referee considered the question whether Reed's advice was given to Lawes before he departed on holidays. In the course of that examination of the evidence, the referee stated that "as previously indicated there was no satisfactory evidence that Mr Reed's advice regarding defect-free practical completion was communicated to Mr Lawes before he went on holidays". (my emphasis) 316 It should be inferred from the finding that the referee did not consider the evidence relied upon by WCL as satisfactory evidence that Reed's advice had been conveyed to Lawes. 317 Whether that is a correct analysis of the referee's reasoning is, in any event, beside the point. The point of the referee's reasoning was that Lawes simply did not hold the views expressed in the April letters. The timing of Lawes' knowledge of the solicitor's advice is, in my view, irrelevant, as appears from the findings of the referee in respect of the period in April after Lawes returned from holidays (see pars 438-449). 318 That was a period in which Lawes was transferred from the Broadway site and put into a new position of "Manager, Residential Development" (par 438), from which point he didn't "initiate much at all" and letters were sent, purporting to be letters of the Administration Manager, signed in one instance by another employee. That section of the report, I think, contains damning findings in relation to the interference by WCL in the administration of the contract by Lawes and in respect of which, I think, the evidence referred to by the referee provided an ample basis for those findings. 319 I return to the general observation that it is not practicable to dissociate the referee's findings in relation to the interference by WCL in the performance by Lawes of his role as Administration Manager from the referee's findings in relation to the imposition of a defect-free standard of practical completion. In turn, those findings should be viewed, I think, in the broader context of WCL's "strategy" revealed in the records of meetings in mid March 1998, as found by the referee. 320 For those reasons, I think the submissions on behalf of WCL are reduced, essentially, to a weight of evidence argument and invite an impermissible approach to the report. 321 WCL has presented submissions in respect of the several communications that issued from WCL/Lawes in the period March to June 1998, contending that the referee was in error in relation to his findings concerning those communications: that the transgressions as found by the referee were not serious: that the communications were not part of the Administration Manager's function of certification or assessment under the contract: that any transgression as to the requirement for practical completion had been cured by the letter of 19 June 1998: that the letters of 16 April, 12 May and 19 June, so far as they conveyed the Administration Manager's contention that the project had not reached practical completion, reflected a matter that was not in dispute. It is necessary to examine WCL's contentions in relation to each of the communications. 322 The letter of 20 March 1998: I have examined sufficiently the referee's findings that this letter was not the expression of Lawes' opinion and was one which he sent simply because he was instructed so to do. It was submitted that if there was interference of the kind found by the referee in relation to this letter, then it wasn't so serious as to justify repudiation. I do not think it is suggested otherwise. The question is whether in totality the evidence of WCL's conduct in relation to this issue warranted the finding of the referee. This communication was certainly a significant factor in the issues relating to WCL's resort to the liquidated damages provisions of the contract and its interference in Lawes' administration of the contract. 323 The letters of 14 and 16 April 1998: again, I think the subject matter of these letters has been sufficiently canvassed in these reasons. In my view, the findings of the referee in relation to them were open to the referee on the evidence relied upon by him. 324 That conclusion, I think, holds good, regardless of whether the referee accepted or rejected evidence upon which a finding could have been made that the letter of 16 April was in accordance with advice received by Lawes prior to his departure on holidays. 325 It was submitted that in relation to the 16 April letter that it had been "superseded" by the 19 June letter. That is a matter of weight of evidence, in respect of which the referee found against WCL: a finding that, I think, was open to the referee. 326 The letter of 23 April 1998: I note that the letter of 23 April was signed by an employee of WCL who was not the Administration Manager, notwithstanding the fact that Lawes had returned from holidays. That, in itself, was a significant piece of evidence available to the referee upon which a finding could be made as to the usurping of Lawes' responsibilities by WCL (see pars 439 and 440). 327 24 April 1998 notices (2): these notices were considered by the referee at pars 441-446. In respect of each of them the referee made findings that they did not represent the independent judgment of the Administration Manager nor the exercise of Lawes' discretion. The evidence relied upon by the referee clearly supported those findings. 328 It was submitted that the referee was in error in assuming that notices under cl 5.04 of the contract were part of the Administration Manager's certifying function, whereas it was "ancillary to the power granted to the Administration Manager to issue directions that work be done". 329 The referee's findings concerning these notices are to be found in pars 446 and 449 of the report and the findings there set out were open to the referee on the evidence relied upon in pars 443 and 445. Further, it could not be suggested that the issuing of cl 5.04 notices did not form an important part of the Administration Manager's responsibilities under the contract. 330 Both notices referred back to the letter of 16 April, notwithstanding the real views of Lawes about the requirements in that letter. 331 It was submitted that these notices did not "have a substantial impact" and did not go to the root of the contract. Again it would be difficult to disagree with that submission if these notices stood in isolation. That is not the reality. 332 Notice 15 May 1998: this notice purported to resort to the liquidated damages provisions of the contract. The referee dealt with this subject at par 454-472 and within those paragraphs the referee set out the evidence that directly touched upon this issue. In my view, it was open to the referee to make those findings on that evidence (see pars 467-472). However, I think it is important to view those findings of the referee in the context of his findings as to WCL's "strategy" in relation to the administration of the contract in its concluding weeks. 333 It was submitted that the referee should have found that Lawes believed that WCL was legally entitled to liquidated damages and that his "personal feelings" on the subject matter were matters of irrelevance. For the most part the submissions of WCL in relation to this matter are a repeat of the submissions before the referee (exhibit 1, vol1, tab 4), which underscores what I think is the essential sub-stratum of WCL's submissions, namely that they are submissions going to the weight of evidence and inviting an exercise of a review of the report, which, in my view, is impermissible.

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334 12 May letter : this letter is addressed by the referee at pars 458 and 459 in which he found that the letter did not state Lawes' opinion, but rather the opinion of WCL or its lawyers. It was submitted on behalf of WCL that that finding was not supportable so far as the letter expressed Lawes' opinion that the project had not reached practical completion. 335 The letter, which is set out in par 458 of the report, is a regurgitation of the 16 April 1998 letter with its schedule of 196 pages. I note that in this letter the assessment of outstanding defects was "between 5000 and 7000". 336 The evidence of Lawes in cross examination on the letter of 16 April 1998, which the referee relied upon, was evidence upon which it was open to the referee to find that the 16 April 1998 requirements were unjustified in Lawes' mind and that this letter of 12 May 1998 was not the product of Lawes' views on the subject. 337 Letter 19 June 1998 : this is dealt with in the report for the second time in pars 473 to 476 with the findings in pars 476 and 477 that the letter was not the product of Lawes' proper exercise of his responsibilities as Administration Manager. 338 I have addressed the challenge to the referee's findings in relation to this 19 June letter earlier in these reasons and little needs to be added, beyond emphasising that the submissions of WCL are essentially contentions going to the weight of the evidence, and ones inviting an analysis of the evidence which is not called for. 339 WCL presented a separate defects submission in exhibits 4A and 4B which were said to be a history of the state of the work, both before and after 1 June 1998. I have not found it necessary to analyse that material beyond what has been addressed in these reasons, principally, because it is my view that the real mischief in WCL's conduct did not lie in a simple denial that the works had reached a stage of practical completion. That was not CCG's case. 340 The real debate concerned the overturning of the contract by WCL, particularly through the imposition of a defect-free standard for practical completion, an impossible requirement that could only have the effect of postponing the issuing of a certificate of practical completion and, at the same time, disrupting the orderly direction of work required for practical completion. Hand in hand with that, WCL reneged on the February agreement, and "usurped" the role of the Administration Manager, thus ensuring that WCL could have the benefit of the opening of the shopping centre and defer, indefinitely, any obligation to make a final payment of $10,000,000 to CCG. In the background was the potential for WCL to gain access to the substantial bank guarantees provided by CCG as security under the contract.

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The referee's finding of WCL's interference with Buchans' duties under the contract 343 It was submitted on behalf of WCL that the referee was in error in imposing upon Buchans the obligation to act independently by reason of the architect's contractual obligations to WCL. That submission in my view is untenable. 344 The contractual position of Buchans, as consultants, in relation to the project is set out in par 487 of the report. It follows that Buchans had consultancy obligations both to CCG and WCL. 345 In submissions on behalf of WCL no reliance is placed upon any special feature of the consultancy agreement which would require the reading down of Buchans' duty to act independently as certifier under the contract. WCL simply asserted that the fact that Buchans had consultancy obligations to WCL removed the need for an absence of bias by Buchans. 346 I think the referee was correct in finding that the consultant's duties as certifier under the contract were unaffected by the consideration "…of whether the fee for that work was being paid by the proprietor or the contractor…" (par 486). 347 It was further submitted that the subject of the referee's findings were "trivial incidents" and could not constitute repudiatory conduct. I think that submission involves the error of examining WCL's conduct in isolation. The nature of the conduct was captured in the evidence that Buchans were instructed by WCL not to issue certification under the contract "..until Walker said so…" (par 534 of the report). 348 In my view, it is unrealistic to ignore the context in which that instruction was given. It occurred on the same day as the 16 April 1998 letter was sent which required a defect-free standard of practical completion: carrying the connotations of WCL's strategy, examined earlier in these reasons. 349 Further, that conduct of WCL should not, in my view, be disassociated from WCL's conduct in instructing Buchans not to deal directly with CCG (pars 521-528 of the report). The referee referred to that aspect as the "complimentary evidence" in relation to the conduct of WCL in instructing Buchans not to issue a certificate until it said so (par 535 of the report). 350 It was submitted that the findings in par 535 of the report were inconsistent with the referee's findings in par 533. I do not agree. Par 533 is concerned with an evaluation of Buchan's evidence in failing to indicate to CCG prior to 1 June 1998 what defects required rectification before Buchans could certify completion in accordance with the contract design. The referee found that he should not infer that the failure was due to WCL's interference with the certification process by instructing Buchans not to deal with CCG. 351 Par 535 is part of the "Conclusion" section of the report concerned with the issue of WCL's interference in the certifying process by Buchans under the contract. In my view, it states the obvious in finding, on the undisputed evidence set out in the report, that, in the face of WCL's instruction not to deal with CCG, that CCG "was unable, prior to 1 June 1998, to find out what work the architect really required to be performed before they would issue the certificate". 352 Again, I am of the view that the submissions on behalf of WCL in relation to this issue, for the most part, involve weight of evidence arguments which invite an impermissible approach to the consideration of the report.

[41]

356 That was not a certificate of practical completion, but a design compliance certificate. That was well understood by the referee (pars 536 -541). It was this certificate that Floth was directed to "pull" by McGilvery (pars 542-546), noting the referee's adverse finding in relation to the evidence of Floth (par 546). 357 It was submitted on behalf of WCL that, although this was a design compliance certificate, the referee, at par 547, treated the Floth certificate as a certificate of practical completion. That is not the way I read that paragraph. In my view, the referee's findings should be adopted in respect of this element of interference with the performance of the consultant's responsibilities under the contract. 358 Standing alone one might hesitate to characterise WCL's conduct in relation to Buchans and Floth as repudiatory. By putting it in the context of the conduct of WCL in reneging on the February agreement: in usurping the role of Administration Manager: in resorting to the liquidated damages provisions of the contract and in imposing a requirement, an impossible one, for a defect-free practical completion, which interfered with CCG's ability to order its works to achieve practical completion under the contract; to obtain the release of substantial security bonds and to establish an entitlement to payment of $10,000,000, I think the referee was entitled to reach the conclusion that this conduct was repudiatory of WCL's obligations under the contract. 359 I commenced the reasons addressing the challenge by WCL to the findings of repudiatory conduct by observing that the task undertaken by WCL was an extremely difficult one. Nothing, in the course of the foregoing reasons has caused me to qualify that view. I think the conduct of WCL, as found by the referee, constituted a cynical approach to the obligations of WCL under the contract, to the point where, I think, one should see it as conduct of a party to a contract who was not prepared to be bound by it and only prepared to have recourse to it as it suited its purpose. 360 For those reasons, I think the referee's findings on the issue of repudiation should be accepted, save where I have expressly refrained from doing so 361 There were other bases relied upon by CCG in its case of repudiation dealt with by the referee under the title of "Oppressive Use of Contract". That section of the report so far as it concerns repudiation is not under challenge by WCL. The ultimate findings of the referee on repudiation are set out in pars 565 to 570 of the report, and in my view, those findings should be adopted.

[55]

Subject to the section 5.04.02 notice point the sum recoverable is thus $229,353.00." 375 After considering the "5.04.02 notice point" the referee disallowed those two items as damages recoverable under the contract by WCL (pars 1281-1289 of the report). The way in which the referee dealt with the effect of his findings on these two costs in determining CCG's quantum meruit and alternative contract claim, is set out in par 1291 of the report as follows: "1291. The position I have stated in relation to the ceiling replacement and testing relates to the cross claim by WCL for those sums. However, when determining the reasonable cost of work for the purposes of a quantum meruit there is to be deducted from the cost of the work the cost of rectification. No question of technical entitlement to recover by way of cross claim the rectification costs arises. The task is to determine the value of the work performed with the defect, and thus the rectification cost must be deducted. This principle does not apply to the testing costs, but it does to the rectification cost of $76,619. The amount to be considered for quantum meruit purposes is thus $216,677." 376 In other words, CCG's quantum meruit claim was adjusted for the rectification costs of $76,619 leaving the testing cost of $12,676 to the account of WCL. In my view, the findings of the referee are correct in that the cost of rectification has been properly taken from the valuation of CCG's entitlement to a quantum meruit, leaving WCL with no contractual basis for claiming the cost of testing, notwithstanding the referee's finding that, subject to the notice point, the cost of testing would ordinarily have been recoverable by WCL under the contract (see par 1279 of the report). 377 In relation to the contract point considered by the referee at pars 1282-1288, I think, the referee's reasoning is correct and should be adopted. In brief, the referee found that the purported notices pursuant to cl 5.04.02 of the contract were ineffective to take replacement of the failed ceiling out of the hands of CCG. 378 That failure by the Administration Manager to properly exercise his powers under the contract as Administration Manager was the direct result of WCL's implementation of the project management team on 4 May 1998, which, de facto, took over Lawes' powers as Administration Manager in bringing the project to practical completion. 379 In the absence of a validly exercised contractual basis for recovery of the certification costs, WCL's contractual claim must fail as found by the referee in par 1289 of the report. 380 However, as found by the referee in par 1291 of the report, that failure of WCL's contract claim did not preclude the referee from excluding the cost of rectification of the ceiling in his estimation of CCG's quantum meruit entitlement. 381 I prefer not to base my adoption of the referee's conclusion on the application of Turner Corporation Limited (Receiver and Manager appointed) v Austotel Pty Ltd (1994) 13 BCL 378 as I think it is unnecessary to the adoption of the report in relation to the treatment of both the rectification of ceiling four and the testing costs in the manner in which the referee calculated the entitlement of CCG to a quantum meruit.

[57]

Rejection of WCL's claim to recover monies paid under settlement between it and Hoyts 384 The matter is addressed by the referee in pars 974-1041. The subject matter of that portion of the report concerns a claim by WCL to recover $786,443, being monies paid out by a related corporation (Broadway) under an agreement resolving a dispute with Hoyts. The sum was made up of values placed beside some thirty numbered items of costs in addition to a claim for economic loss of $100,000 (par 974). In substance, the claim failed, the referee awarding only the amount of $3,867 (par 1041). Item D17 is the relevant claim number. 385 The challenge by WCL is to the whole of this section of the report and, in my view, for the most part, consists of submissions going only to the weight of evidence. 386 The issue, as it was presented to the referee, is set out in par 976 of the report as follows: " 976. With the exception of the $100,000 for economic loss claimed by Hoyts, the other figures have been agreed between Hoyts and WCL. Nonetheless CCG contended that, in many instances, there was no evidence to support the sums, and second that there was no evidence to support any finding that such sums were attributable to defective or omitted work under CCG's Agreement with WCL. It is thus necessary to consider each item. The material supporting WCL's claim is found in the statement of Mr Hendry of 2 March 2000. It compiles the totality of the evidence upon which WCL relied, when read with the material in PD1 being annexures to the Statement of Mr Dransfield dated 30 September 1999." 387 The material relied upon by WCL before the referee, as identified by him, is set out in the evidence before me in exhibit C, volume 2, tab 103-105. 388 Before the referee, CCG put WCL to proof that the settlement as between Hoyts and Broadway was reasonable to pass on to WCL, and, in turn, on to CCG. That is reflected in par 976 of the report. 389 The rejection by the referee of the various items of claim under this heading was based upon the failure of WCL to establish the link between the sum claimed and default by CCG under the contract. That is the approach identified by the referee in par 978 of the report which was in the following terms: "978. The claim made by Hoyts was against Broadway. To establish that the settlement proposed was reasonable, in discussion it was accepted that it was necessary for it to be shown that, first, as between Broadway and Hoyts the sums claimed and agreed to be paid were reasonable, second, that as between Broadway and Walker, the sum was reasonably payable by Walker to Broadway, and third, that as between Walker and CCG the sums, being reasonable, were attributable to default by CCG. This third aspect was said to be satisfied because essentially the work claimed for was said to be rectification of base building works performed by CCG, notwithstanding that Mr Lawes had certified on 24 January 1998 that the base building works were substantially complete. Substantial Completion in relation to the Hoyts premises means: "that the Premises have been completed in accordance with the specifications relating to the relevant Premises to the stage where in the opinion of the Administration Manager the tenant may reasonably commence its fitout works."" 390 On that basis the referee found that WCL had failed to satisfy him that the items of cost, the subject of the settlement, were recoverable against CCG (see pars 980, 982, 984, 986, 988, 990, 991, 994, 995, 996, 998, 1000, 1002, 1003, 1005, 1008, 1011, 1022, in part 1023, 1024, 1026 and 1028). 391 It was submitted on behalf of WCL that the referee had the evidence of Dransfield, Hendry and a Mr Koster, although no reference is made specifically to Koster's evidence in this section of the referee's report. 392 From the evidence placed before me, Koster's evidence was to the effect that : "All Mr Koster's statement says… is that these items are not included in the moneys that …were expended in relation to top value defect number 6" (Exhibit C, volume 2, tab 102). 393 In my view, the referee addressed the only evidence of significance relied upon by WCL in relation to this issue. Notwithstanding, it was submitted by WCL before me: "Beyond that material, as is evident from the report, there was a substantial body of evidence adduced before the Referee and relating to the Hoyts premises and the progress of works in respect of them." 394 Given the way the matter was conducted before the referee, I think that submission is of little assistance and, in any event, does not admit of any legitimate exercise of review of the report. 395 It was also submitted that, in the finding referred to above, the referee: "…gave substantial weight to the fact that, before Hoyts entered into the premises and subsequently incurred any of the amounts included in its claim, the administration manager had certified the Hoyts premises as having reached substantial completion [and] the weight given by the referee to that fact was not warranted." 396 That is an unadorned question of weight of evidence. In any event, it is very difficult to elicit from it a legitimate criticism of the referee's findings, having regard to the obvious importance of the issuing of such a certificate under the contract. The starting point chosen by the referee, in that respect, is one with which I would agree. 397 It was further submitted that there were "substantial defects in the base building works for the Hoyts premises as at the date of substantial completion". In support of that, reference was made to notices of 24 April 1998 said to have been issued under clause 5.04.01 of the contract. The material offered in support of that submission made no attempt at all, in my view, to link any one of the items, the subject of the settlement agreement with Hoyts and Broadway, with the subject matter of those notices in a way that would permit an evaluation of the WCL claim in respect of the payments made under the Hoyts' agreement. 398 The same observation applies to the submission that the referee in another section of the report, made allowances for defects in the Hoyts section of the project. 399 It was also submitted on behalf of WCL that the referee, in par 1039 of the report, had overstated the effect of the evidence : referring to the phrase used in that paragraph " that the base building works were complete." That was not the finding of the referee. The finding of the referee was that it had been agreed at the meeting referred to in that paragraph of the report that the base building works were complete. That, incidentally, was a meeting attended by WCL representatives, representatives of its consultants and of CCG. This submission only goes to a question of weight of evidence. 400 Of the many findings of the referee where he found that WCL had failed to link the Hoyts payment to CCG's performance of the contract it was submitted that the referee "was in error rejecting any item" on that basis: relying on the evidence of Hendry, in particular. 401 I think that submission misses the point of the referee's reasoning which, reflected a conclusion in most instances that WCL had failed to satisfy the steps outlined by the referee in par 973 of the report. 402 It could not be said that the approach adopted by the referee came as a surprise, since that was the basis upon which the major part of this element of claim was resisted by CCG. 403 It was submitted that CCG and WCL had reached agreement on the quantum of the items involved in these elements of claim, other than the delay claim. The evidence before me demonstrated that not to be so. 404 There has been no attempt to identify for me how, in any particular item of claim, the Hendry evidence provided the nexus that the referee sought in order to link the settlement payment with any particular item of claim against CCG. The submission was expressed as follows: "[Hendry] gave uncontroverted evidence that he assessed each of the items in the claim including by site inspections. As a result of that process, the amount of the Hoyts claim was reduced from $1,592,978 to the final figure of $786,443. He underwent the process for the purpose of determining which elements of the Hoyts claim were properly treated as recoverable from WCL and this, of necessity, involved a determination of which of the items was a loss caused by the state of the base building works and the conduct of CCG as distinct from the cost associated with the fit-out properly to the account of Hoyts. His evidence in the context of the broader evidence of defects in the Hoyts premises … makes inescapable an inference that each item was a loss caused by CCG's breaches of the Building Contract." 405 In my view, that submission amounts to little more than a general invitation to have regard to the fact that there were defects in the Hoyts' section of the project : that Hendry had undergone a process of whittling down the Hoyts' claim in a manner that he thought left a residual of a claim against WCL. I do not think it follows that the referee was in error in addressing each item of claim in order to ascertain whether there was evidence upon which he could be satisfied that the amount paid out to Hoyts by Broadway was in respect of a subject matter for which CCG was responsible. At best, the submission is one simply going to the weight of evidence. 406 A separate set of submissions was presented in relation to the several items of claim which related to the air conditioning installation within the Hoyt's premises. It can be seen from par 974 of the report that there were several such items which represented the major portion of this area of claim by WCL. 407 WCL disputed the finding of the referee in rejecting those claims on the basis that the referee erred in failing to distinguish between two obligations of CCG under the contract in respect of the installation of the subject air conditioning system. They were identified as one to design and install an air-conditioning system which was, in fact, fit for its purpose and the second was to supply a certificate from the [designing engineer] as an element of practical completion. 408 It was submitted that the issuing of the certificate did not discharge CCG from its underlying obligation to design and install a suitable system. It was submitted that the referee "proceeded on the wrong basis that CCG's delivery of the certificate concluded the question as to whether or not the air-conditioning system was defective". 409 While par 1018 of the report read alone might give some superficial support for that contention on behalf of WCL, a reading of the referee's findings commencing at 1012 demonstrates that the submission of WCL is an oversimplification and obscures the fact that the referee was not satisfied that WCL had satisfied the onus of showing the amounts paid by Broadway to Hoyts in relation to air-conditioning represented payments for defective design, defective work or omissions on the part of CCG. Of special importance in that context is the finding in par 1019 as follows: "1019. Regarding category 2 items, there is no material before the Reference to suggest that the work performed by CCG in relation to airconditioning and associated systems was other than required by its contract with WCL. If the agreement between Hoyts and Broadway requires the provision of a larger or different service, it is of no concern to CCG. CCG was obliged to do only that which was the subject of its agreement with WCL." 410 It is also clear from par 1021 of the report that the referee did not misconstrue the obligations of CCG under the contract. That paragraph finding was as follows: "1021. In my view there is no basis upon which any such sum as may be expended on upgrading or amending the air conditioning, and smoke exhaust systems to accommodate safety or comfort issues, can be said to be the responsibility of CCG. That is because it has not been shown that the work performed by CCG was other that that required by its agreement with WCL. Indeed it has been certified that the work complied with the terms of that agreement, and WCL, the Council, and Hoyts have acted on that." 411 There has been nothing put before me to substantiate a case that the referee either overlooked or misconstrued evidence or that his findings were manifestly wrong. On the contrary, the referee found that WCL had failed to satisfy its onus of establishing that the settlement with Hoyts related to contractual shortcomings of CCG. 412 Accordingly, the referee's findings in relation to top value defects should be adopted. The parties raise no further issue on the referee's findings as to defective work. 413 As a consequence of the referee's findings on repudiation, the sum due to CCG was calculated in the report as follows: "667. The resulting reasonable cost of construction of the Project is thus as follows: Tozer's revised assessment of reasonable direct costs: $86,831,000 Plus: Delay to the Project February 1997 to December 1998 $771,000 Acceleration to Project February/ March 1998 Nil Costs Incurred before February 1998 Attributable to Delays Nil Unreasonable Premium Paid in Undertaking the Project $80,000 Additional Costs Resulting from Dalma Nil Residual Value of Assets Nil Backcharges not Recovered from Dalma Nil Other Backcharges not Recovered Nil Loss of or Damage to Hired Equipment Nil Cost of Rectification of Damage to Works Recovered by Nil Insurance Other Amounts Considered Unreasonable Nil Cost of Rectification of Damage to Works not Covered Nil by Insurance Contingent Sums: (Dalma) $392,513 (Buchan) 110,000 TOTAL: $88,184,513

[67]

Other Variations $1,831,601.00 Hoyts Variation $3,376,048.00 Loss of margin claims Nil Acceleration costs Nil Delay costs $1,037,953.00 Total $90,343,102.00 Less: Cost of incomplete and defective work $4,368,068.00 Paid to date: $74,957,443.00 Balance Due $11,017,591.00 Plus Interest: 69 days $208,277.75 571 days $1,637,395.11 Total Interest $1,845,672.86 $1,845,672.00 TOTAL SUM DUE $ 12,851,794.00 " 418 However, there are two areas in which WCL maintained the referee was in error and which, I think, have some bearing on the conduct of WCL which I have found to be repudiatory of the contract in adopting the report. I refer to issues described in the reference as the "Hoyts Variation" and "Delay Costs" which were related to the Hoyts Variation. 419 I think the delay occasioned to the works, as found by the referee, do provide a further dimension to the matrix of facts in which WCL's repudiation took place. 420 The Hoyts Variation was, in substance, the additional cost of constructing a twelve cinema complex instead of the eight cinema complex which originally formed part of the project and in respect of which a variation notice was issued on 24 February 1997 (pars 691 and 841 of the report). 421 That change in the works became the subject of an agreement between the parties which provided for payment by WCL of $2,225,000 which included an acceleration sum of $400,000. That agreement was subject to a condition which was not fulfilled (pars 691, 849). The relevance of this area of the report, in my view, is to be found in the conclusion of the referee as to the Delay Costs issue as follows: " Delay Costs 751. I have found in relation to the Hoyts variation that the plaintiff is entitled to extension of time until at least 23 June 1998. CCG has claimed for time related costs in respect of that period. The Hoyts variation claim was submitted in accordance with the Agreement but neither the price, nor the time was agreed. I have determined the value of that variation. However, because of the fitout not being complete prior to 23 June 1998, CCG could not complete its works prior to that date. CCG had complied with the requirements of clause 9.02.02 to that date. Clause 9.05.02 applies and CCG is entitled to time related costs in accordance with clause 9.06.01. However entitlement to time related costs pursuant to that clause arise only if "the Contractor's costs are not included in the value of any variation". In submitting its price CCG stated "we note that the maximum daily allowance has been used in calculating time related costs for the purposes of this budget price." The price so submitted however, was not accepted. The pricing of the variation which I have determined includes an acceleration cost of $400,000, but makes no allowance for the cost of being on site between 17 March 1998 and 23 June 1998 which was necessary in order to carry out the following works once the fitout works were complete. Accordingly, in my view CCG is entitled to time related costs in respect of that period."

[72]

427 If those findings by the referee were sound, then, in my view they only add to the seriousness of WCL's conduct in resorting to the liquidated damages provisions of the contract and what that entailed, while imposing impossible and unjustified requirements upon CCG in its efforts to achieve practical completion. 428 WCL does not challenge the finding of the referee that the Hoyts Variation was on the critical path of CCG's Construction Program. 429 The argument advanced on behalf of WCL is not the most meritorious case advanced in these proceedings. 430 It is acknowledged by WCL that the original scope of works, so far as they included the cinema area, provided for construction of a building to house eight cinema areas to be substantially completed by 24 January 1998 and to reach practical completion by 17 March 1998. 431 It is common ground that those works were varied by requiring the construction of a building to encompass twelve cinemas. The works being on the critical path, it could not be seriously suggested that such a variation would not delay "the construction of [a] critical activity noted on the critical path of the Construction Programme". It is not disputed that CCG, in effect, responded to WCL's 'request' to accelerate the works in achieving substantial completion of the Hoyts Centre by the time stipulated in the contract. 432 WCL challenges the referee's finding that CCG was entitled to an extension of time for practical completion "until at least 23 June 1998", on the basis that CCG had failed to comply with the contractual provisions entitling it to an extension of time. 433 WCL also contended that the referee was in error in finding that CCG was entitled to delay costs related to this variation on the basis that CCG had failed to comply with the contractual provisions entitling it to delay costs. 434 These contractual provisions required CCG to give prescribed notices of claims for extension of time and delay costs. The rationale for those provisions lies in affording the Administration Manager the opportunity of considering the effect of a claimed variation on contract time and costs at the time of performance of the subject work and to give such instructions as are deemed appropriate to avoid or minimise those impacts. 435 In this case the parties entered into an agreement in relation to the variation which provided for payment to CCG of $2,225,000. That sum included the amount of $400,000 as acceleration costs. 436 Although the agreement was subject to a condition subsequent which was unfulfilled, namely, reaching agreement in relation to an unrelated variation, it could not be said that the Administration Manager and WCL were not fully informed of the nature of the variation and as to its related effect on time and costs of performance. In fact the referee found as follows: "852. The work to be performed by CCG with respect to the Hoyts theatres involved base building works excluding fitout. The base building work was Substantially Complete before 17 March 1998, namely on 24 January 1998. No question of non-compliance with the contractual provisions for application for an extension of time arises because WCL accepted that there was an entitlement to a time extension and agreed to pay the sum of $400,000 in lieu of granting that extension of time. CCG agreed to accept that sum in lieu of time."

[73]

437 I think that reasoning is correct. Even if WCL's challenge to that paragraph, based on legal arguments was a valid one, the paragraph is beyond criticism. 438 It was argued on behalf of WCL that the notice provisions of the contract could not be waived or "dispensed with", relying upon cl 1.09 of the contract, a provision against modification of the contract other than by deed and "except with the prior written consent of [WCL]"…. WCL could not and did not waive the requirement in the case of the clause 9.05.02 notice because CCG had immediately started work on the [Hoyts] variation". Cl 9.05.02 required the giving of notice of a variation that was likely to cause delay "prior to commencing the execution of that Variation". 439 As stated, I think the referee was correct in finding waiver of notice in respect of time and delay costs related to the Hoyts variation. Further, I would strain to avoid the consequence inherent in applying WCL's construction of the contract to the facts of this case, in the face of the undisputed facts relating to the Hoyts variation. I would not regard that task as a particularly difficult one on the evidence before the referee tendered by CCG in the proceedings before me. 440 It was further argued on behalf of WCL that the referee, in finding CCG to be entitled to an extension of time to "at least 23 June 1998", had failed to distinguish between the effect of the Hoyts variation, which related to the increase in theatre areas from eight to twelve, and the effect of the fitout on achieving practical completion of the Hoyts centre under the contract. 441 That submission is based primarily upon par 839 of the report which identified one of five matters to be considered in relation to CCG's claims for extensions of time as being "Hoyts Cinema Variation, including fit-out". In my view, that argument is simplistic and mis-states the reasoning of the referee at pars 840 et seq of the report (see in particular pars 852, 853, 864 and 866). 442 The remainder of the submissions advanced on behalf of WCL in challenging the referee's finding that CCG was entitled to an extension of time under the contract are, essentially, weight of evidence contentions that do not justify a finding that the referee misunderstood the evidence or was manifestly wrong in evaluating the evidence. 443 One starts with the referee's finding that the evidence was "overwhelming that there remained work to be done under the [Hoyts] variation" which could not be performed until after completion of the fitout by Hoyt's fitout contractor". The referee's findings as to the time of performance of the fitout are not in dispute, in particular, that the fitout contractors did not complete that work prior to 23 June 1998, the theatres being opened on 2 July 1998 (pars 863 and 865 of the report). 444 The submissions on behalf of WCL are summarised in the written submissions as follows: "51. The only available conclusion is that, until late March 1998, the fact was, as the parties well knew, that had CCG performed its obligations under the Contract its works would not have included any follow-on works in the Hoyts Premises. That is reinforced by a consideration of the letter from CCG to WCL of 11 May 1998. In it CCG asserts (in the third paragraph) that the Hoyts Variation involved removing the tenancy fit-out for the cinemas from the scope of its works. That was false and a reflection of the fact that in writing the letter which terminated the Hoyts Variation agreement CCG was searching for a basis (which did not exist in fact) to assert the Hoyts Variation had involved a change which necessitated for the first time follow-on works." 445 The reference to the letter of CCG of 11 May 1998, is a reference to the letter set out in par 855 of the report. 446 The submissions on behalf of WCL are, in substance, a repetition of the arguments and a reliance upon the same evidence as was the subject of WCL's submissions which failed before the referee (see Ex 1, vol 1, tab 7). That case was met by CCG in the submissions presented to the referee on its behalf (see Ex 1 vol 2, tab 4 particularly pars 15-22). 447 I think it is sufficient to note, from the findings of the referee that he accepted the evidence relied upon by CCG in those submissions in reaching the conclusion that the Hoyts variation could not be completed until the fitout was completed (see in particular par 853 of the report and the evidence noted in foot note 591). It was that evidence that the referee referred to as "overwhelming" (par 864 of the report). 448 It follows that the referee's findings as to delay occasioned to CCG by the Hoyts variation should be adopted, in particular that CCG was delayed in the performance of critical activities until "at least 23 June 1998". 449 There was advanced an argument before me on behalf of WCL that CCG's case in repudiation should be approached on the basis that the contract was a losing contract for CCG and that its conduct leading up to its purported termination of the contract was contrived. 450 This aspect of the case did not receive any particular attention by WCL until a series of supplementary submissions with related evidentiary material was presented between 29 August and 14 September 2000. 451 In WCL's principal submissions of 19 August, reliance was placed upon Ex 8 of the evidence before the referee which included CCG's project reports for the months of March to June 1998 which referred to projected losses increasing from $4,826,476 in March to $15,432,578 in May and slipping back to $13,772,095 in June 1998. 452 There was evidence of Irving that there was a "considerable cost overrun", although not of the magnitude of 'projected' losses referred to in the monthly reports. 453 It was submitted that CCG's motivation in "engineering" a case of repudiation was to enable it to recover on a quantum meruit basis and so avoid the consequences of a losing contract. 454 While not discounting that factor as one which could be taken into account in assessing conduct of a principal said, by a contractor to be repudiatory, it is far from a significant factor and one frequently, in my view, associated with disputes involving termination of a contract for repudiation. 455 Ultimately, the judicial exercise is one of evaluating the conduct alleged to be repudiatory, regardless of the motivation of the party rescinding for repudiation. It is difficult to envisage a case where a party rescinding elects to claim on a quantum meruit basis where prospects of a losing contract are not hovering around. 456 Further, one of the difficulties in paying too much attention to such a factor as projected losses by a contractor during the course of performance of a contract, is that such projections usually do not take into account the damages occasioned by breaches of the principal. 457 It is apparent from the projected income in CCG's monthly reports that CCG had not taken into account the full measure of income represented by the referee's finding in relation to CCG's contractual claim in these proceedings. 458 Further, the difference between the sums found to be due to CCG, respectively, on a quantum meruit basis and under the contract, was not that significant. Before interest, the referee found that, in quantum meruit, CCG was entitled to $13,970,177, while, in contract, he found the entitlement to be $11,017,591. 459 In WCL's further submissions of 14 September 2000 the "motivation" issue was expressed as follows: "3. The question of the plaintiff's motive for its actions in the critical period leading up to the termination of the contract was therefore an issue before the referee, yet he has failed to deal with it. This circumstance can only reinforce that the Court would not have the required degree of comfortable satisfaction in adopting the report at least in relation to the repudiation issues. A failure to deal with an important issue is a circumstance which must be taken into account in deciding whether to adopt or reject the report." 460 I would have considerable hesitation in attributing to the referee, with his experience in the field, an oversight such as that ascribed to the referee's reasons on the issue of repudiation. 461 It was submitted on behalf of CCG that: "Nowhere (in WCL's submissions before the referee) did [WCL] submit that the Broadway contract's profitability motivated [CCG's] actions up to 23 June 1998, nor was any submission made as to how such a fact would affect a finding that the contract was repudiated by [WCL]". 462 It was further submitted that the "motive point had dropped off [WCL's] agenda by the end of the reference and the referee was not asked by [WCL] to make any finding about it." 463 In reviewing WCL's submissions before the referee, I think, it is sufficient to observe that those submissions do not justify WCL in now attributing to CCG's financial position under the contract the characteristic of an "important issue" before the referee. 464 In any event, in the face of the findings of the referee on repudiation which should be adopted, I would place such an issue in a very low level of relevance to the ultimate findings of the referee on repudiation. 465 Accordingly, in relation to the quantum meruit case of CCG and its claim of delay in relation to the Hoyts variation, I am of the view that the referee's report should be adopted save where I have expressly refrained from adopting particular findings or reasoning. 466 Where I have not directly addressed particular paragraphs in the quantum meruit case comprised within the report, those paragraphs have been, nevertheless, adopted by me in assessing CCG's quantum meruit case. 467 In relation to the alternative contract case, I have limited any express consideration of the report to findings that I regarded as having some bearing on the quantum meruit case. Those findings of the referee are adopted. 468 It has been unnecessary to consider further findings of the referee on CCG's alternative contract case. However, I think it may be of assistance to observe that I have examined that section of the report and agree with its reasoning and conclusions, on the assumption that the evidence cited by the referee has been correctly stated. 469 The dispute between the parties as to the valuation of the Hoyts variation (pars 691-723) rests in contentions by WCL that the referee misunderstood the outcome of joint conferences involving the parties' respective experts and wrongly favoured CCG's expert over the opinion expressed by WCL's expert. 470 Even if one accepted that the referee misunderstood that outcome, what is plain from a reading of the report is that the referee (a) favoured a principle of quantification which had actually been employed on site during performance of the work, (b) rejected the opinion of WCL's expert that such an approach was "impossible", (c) did not favour the approach of WCL's expert. 471 The referee regarded the assessment of WCL's expert as disproportionate to the likely value of the variation and preferred the opinion evidence advanced on behalf of CCG. 472 When regard is had to the expertise of the referee in this field, I think his conclusions in this section of the report should be adopted: viewing the submissions on behalf of WCL when reduced to essentials, as amounting to a weight of evidence argument. 473 By a further amendment to the summons, CCG sought an additional form of relief, namely: "A declaration that the First Defendant is liable to indemnify the Plaintiff in respect of the Goods and Services Tax, if any, which may be payable by the Plaintiff on any amount paid to it by the First Defendant pursuant to the orders of the Court herein." 474 The relief relates to the provisions of the legislation referred to as A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the Act) which took effect from 1 July 2000. The tax (GST) is payable on a "supply" within the meaning of s 9.10(2) of the Act which includes the following: "(2) Without limiting subsection (1), supply includes any of these: (a) a supply of goods; (b) a supply of services; (c) a supply of advice or information; (d) a grant, assignment or surrender of real property; (e) a creation, grant, transfer, assignment or surrender of any right; (f) a financial supply; (g) an entry into, or release from, an obligation: (i) to do anything; or (ii) to refrain from any act; or (ii) to tolerate an act or situation; (h) any combination of any 2 or more of the matters referred to in paragraphs (a) to (g).'" 475 CCG bases its claim for this relief on the "real possibility" that GST will be payable upon a judgment of the Court delivered after 1 July 2000. For this contention, reliance has been placed upon the affidavit of Alison Chappell sworn 22 August 2000 in which she deposes to the expectation that a draft and final ruling on this matter will be published by the Australian Taxation Office and evidences some views expressed within the Taxation Office on the subject. The test of there being a 'real possibility' of the imposition of the GST comes from the approach of the South Australian Supreme Court in Duke Group Ltd (In Liq.) v Pilmer (1999) 73 SASR 64. 476 I am not prepared to approach consideration of the relief sought on that basis. The Court is seized of the relevant facts. I regard the task as one requiring me to decide whether GST is payable in respect of the judgment given in these proceedings. 477 In my view, it is not. 478 Section 9-5 of the Act defines a taxable supply as follows: "You make a taxable supply if: (a) you make the supply for consideration ; and (b) the supply is made in the course or furtherance of an enterprise that you carry on; and (c) the supply is connected with Australia ; and (d) you are registered, or required to be registered However, the supply is not a taxable supply to the extent that it is GST-free or input taxed ." 479 In my view, the imposition by the Court upon WCL to pay the judgment debt as ordered in these proceedings does not constitute a supply by CCG in the form of a supply of goods or services, of advice or information, of a grant, assignment, surrender or release of any kind, nor is it a financial supply. 480 Further, in order to make the supply a "taxable supply", it must be one which "you make….for consideration". I have been unable to see any room for 'consideration' in the supply said to be, or arise out of, the judgment in these proceedings. 481 To the extent that there has been a merger in the judgment of CCG's causes of action relating to the project, that does not involve any release grant, assignment, surrender, transfer or creation of a right by CCG. It is a merger by operation of law. Payment of the judgment debt is in no different category. It operates to satisfy the Court's judgment, without creation of a right, release, assignment or the like by CCG. 482 For those reasons, I decline to make the declaration sought. 483 In summary, save where I have expressly refrained from doing so, I have adopted the report of the referee in the substantive sections indicated in the report as follows:

[75]

484 Since the hearing of these proceedings, a draft ruling has issued from the Australian Taxation Office relating to the possible application of GST to judgments. I have not had regard to that ruling, nor have the parties applied to address me further on the issue as a consequence of that publication. 485 Accordingly, the entitlement of CCG to be paid as on a quantum meruit is calculated as set out in the following paragraphs: 486 As calculated by the referee, the total reasonable cost of the work performed by CCG was $88,927,621 of which it had been paid $74,957,444 leaving a balance of $13,970,177 (pars 675, 676 and preceding pars). 487 The parties agreed before the referee that interest payable under the schedules published pursuant to the Supreme Court Act 1970 was 10% from 23 June 1998 to 30 August 1998 and 9.5% to 24 March 2000 (in fact, for the latter part of March it was 10%). 488 Interest, accordingly, was calculated by the referee up to and including 24 March in the sum of $2,340,291.82 (par 678). I have calculated interest from 25 March 2000 to 31 August 2000 at 10% and then at 11% from 1 September 2000 to 19 April 2001 in accordance with the schedule rates for those periods. 489 So calculated, the further interest payable amounts to $1,584,945 making the total sum payable by way of quantum meruit, including interest, $17,895,413. 490 Against that sum must be allowed $294,034 as payable to WCL by way of unliquidated damages (pars 1186-1188). Those findings are not in dispute. The referee calculated interest on that sum to and including 24 March 2000 in the same manner as interest was calculated on CCG's quantum meruit. Interest on those damages amounted to $53,500. I have calculated interest from 25 March to 19 April 2001 at Supreme Court schedule rates as in the case of the quantum meruit amount. That additional interest amounts to $33,358 so that the total of unliquidated damages and interest that is to be allowed against the quantum meruit claim is $380,892. 491 The amount payable to CCG after allowing for that unliquidated damages claim is $17,514,521. 492 Accordingly, I give judgment and make the orders and declarations as follows:

Parties

Applicant/Plaintiff:

Super Pty Ltd

Respondent/Defendant:

SJP Formwork

Legislation Cited (1)

A New Tax System (Goods and Services Tax) Act 1999(Cth)

Cases Cited (26)

(2001) 47 ATR 48 Reported Decision : [2001] NSWSC 283 [2001] ACL Rep 110 NSW 30 [2001] ACL Rep 65 NSW 4

COUNSEL : Plaintiff: M A Pembroke SC, P F Liney, S Goldstein Defendant: G A Palmer QC, M G Rudge SC, N Manoursaridis SOLICITORS : Plaintiff: Corrs Chambers Westgarth Defendant: Baker McKenzie CATCHWORDS : Construction contract - reference of all issues under Pt 72 - report of referee - referee's findings of fact and law disputed - principles applicable - construction deed varied orally - waiver of common law and contractual limitations on oral variation of deed - deed varied to waive liquidated damages - repudiation of varied deed by principal - interference in certification - insistence on impossible standard of practical completion - no bona fide belief in that standard - rescinding for repudiation without recourse to termination provisions of deed - contractor entitled to quantum meruit - incidence of GST on judgment. Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 Chloride Batteries Australia Ltd v Glendale Chemical Products (1988) 17 NSWLR 60 Foxman Holdings Pty Ltd v NMBE Pty Ltd (1994) 38 NSWLR 615 Leighton Contractors Pty Ltd v C E Heath Underwriting Services & Others; Leighton Contractors Pty Ltd v Kinhill Engineers (1995) 8 ANZ Insurance Cases 61-231 Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 Freeman & Lockyer (A Firm) v Buckhurst Park Properties (Mangal) Ltd (1964) 2 QB 480 Breen v Williams (1996) 186 CLR 71 Maguire v Makaronis (1996-7) 188 CLR 449 Beach Petroleum NL v Abbott Tout (1999) 33 ACSR 1 Bray v Ford [1896] AC 44 Re Goldcorp Exchange Ltd (In Receivership) [1995] 1 AC 74 Keogh v Dalgety & Co Ltd (1916) 22 CLR 402 CASES CITED : Panama & South Pacific Telegraph Company v India Rubber, Gutta Percha & Telegraph Works Co (1875) LR 10 Ch App 515 Parker v McKenna [1874] LR 10 Ch App 96 Boston Deep Sea Fishing & Ice Co v Ansell (1888) 39 CH D 339 Commonwealth v Verwayen (1990) 170 CLR 394 Waltons Stores (Interstate) Ltd v Maher (1987-99) 164 CLR 387 Amann Aviation Pty Ltd v Commonwealth of Australia (1990) 22 FCR 527 Roadshow Entertainment Pty Ltd v ACN 053006269 Pty Ltd (1997) 42 NSWLR 462 Switz Pty Ltd v Globind Pty Ltd (2000) 33 ACSR 723 Huskisson RSL Sub-branch Club Ltd v Sullivan (1990) 20 NSWLR 332 R v Wallis; ex parte Employers Association of Wool Selling brokers (1949) 78 CLR 529 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 Turner Corporation Limited (Receiver and Manager appointed) v Austotel Pty Ltd (1994) 13 BCL 378 Duke Group Ltd (In Liq) v Pilmer (1999) 73 SASR 64 DECISION : Judgment for the Plaintiff and orders in terms of par 492 of these reasons.

119 The authorities relied upon, principally, by WCL were Keogh v Dalgety & Co Ltd (1916) 22 CLR 402 at 418, Panama & South Pacific Telegraph Company v India Rubber, Gutta Percha & Telegraph Works Co (1875) LR 10 Ch. App 515 at 526, and Parker v McKenna [1874] LR 10 Ch. App 96 at 124-125. 120 However, these cases are no exception to the line of authorities, that, in my view, require some nexus between the fact situation, said to constitute a bribe or commission and the fiduciary relationship, such that a potential for a conflict of interest arises. That potential must be founded on stronger bases than fanciful considerations. 121 In Keogh the agent negotiating a mortgage for its principal accepted a commission from the mortgagee in obtaining a guarantor of the mortgage debt. It was in that context that the observation was made in Keogh, adopting what was said by Bowen LJ in Boston Deep Sea Fishing & Icco v Ansell (1888) 39 CH D 339, that the "learned Lord Justice … distinctly dissipated the idea that it makes any difference whether the surreptitious profit was gained as a pure gift or for services rendered or for any other reason" (at 418). It is in that context that the passage in Finn at par 502, citing Keogh, should be understood. 122 Parker's case I think adds little to discussion on the subject, it being a case of a clear conflict of interest of directors, involved in the raising of fresh capital, entering into arrangements involving shares not taken up by shareholders. They were required to account to the company for the profits derived on disposal of the shares. 123 Panama was cited by WCL as a similar facts case to that the subject of these proceedings. WCL relied principally upon the following passage from the judgment of James LJ: "According to my view of the law of this Court, I take it to be clear that any surreptitious dealing between one principal and the agent of the other principal is a fraud on such other principal, cognizable in this Court. That I take to be a clear proposition, and I take it, according to my view, to be equally clear that the defrauded principal, if he comes in time, is entitled, at his option, to have the contract rescinded, or, if he elects not to have it rescinded, to have such other adequate relief as the Court may think right to give him." (at 526) 124 That statement of the law must be understood in the context of the facts in Panama which give colour to the expression "surreptitious dealing", as used by the learned Lord Justice. What their lordships were concerned with was an unhealthily close connection between the "surreptitious transaction" and the subject fiduciary relationship. 125 The relationship in Panama was that created by the appointment of an engineer by a principal to a cable laying contract to act as certifying engineer for payments under the contract to the contractor. The "surreptitious transaction" was an agreement by the engineer with the contractor by way of subcontract to the cable laying contract to provide services for which the engineer was to be paid by instalments, geared to certification of instalments due to the contractor under the cable laying contract : the contract in which he was the certifying agent of the principal. 126 Of that connection between the "surreptitious transaction" and the fiduciary relationship James LJ observed as follows: "Although the parties may not have thought that they were doing anything wrong, yet, when I put together the two contracts -the contract between the Plaintiff company and the Defendant company, and the contract between the Defendant company, and Sir Charles Bright, the engineer on the other side, and see that the money to be paid to Sir Charles Bright is not money to be paid when he has completed, or is completing, the sub-contract as a reward for work or labour, but is money to be paid out to him time after time, exactly when and as he shall have certified money to have been due and payable by one company to the other, then I say that this is a contract as to which res ipsa loquitur, and of which I am bound to express my strongest disapprobation and reprehension." (at 527)

(1992) 29 NSWLR 549

(1988) 17 NSWLR 60

(1994) 38 NSWLR 615

(1953) 89 CLR 327

(1996) 186 CLR 71

(1916) 22 CLR 402

(1990) 170 CLR 394

(1990) 22 FCR 527

(1997) 42 NSWLR 462

(1990) 20 NSWLR 332

(1949) 78 CLR 529

(1978) 138 CLR 423

(1992) 26 NSWLR 234

(1999) 73 SASR 64

(1974) 131 CLR 634

(1964) 111 CLR 41

(1935) 52 CLR 723

(1984) 165 CLR 622

(1933) 49 CLR 507

(1937) 59 CLR 641

(1988) 164 CLR 387

(1986) 1 Qd R 431

(1940) 64 CLR 221