- Notable Unreported Decision
SUPREME COURT OF QUEENSLAND
Supreme Court, Cairns
5 March, 2002
5 February 2002
CONTRACT – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION OF CONTRACTS – BUILDING CONTRACT – CONSTRUCTION ONLY – VARIATION OF CONTRACT – BREACH OF CONTRACT - where, during construction, defendant failed to take certain anti-corrosive measures – whether there had been a variation to the contract - whether on proper construction of the contract the defendant was in breach.
Mr. A. Philp for the plaintiff
Mr. G. Bates for the defendant
Williams Graham & Carman for the plaintiff
McCullough Robertson for the defendant
 James Cook University (JCU) sues the defendant Walter Construction Group (formerly known as Concrete Constructions (Queensland) a division of Concrete Constructions Group Pty Ltd) for damages for breach of contract. The contract provided for the construction only of three buildings on JCU’s campus at Cairns, at a cost of approximately $11,000,000. The buildings were constructed between 17 May 1994 and 14 June 1995.
 The problem which gives rise to this dispute is that, within 18 months of the buildings being completed, evidence of rust and corrosion appeared on the steel framing which supported sunscreens and sunhoods as well as on external balustrades and banisters which supported the handrails. Despite the cause of the rust being a matter in issue on the pleadings, there can be little doubt it was due to inadequate anti-corrosive measures taken in the preparation of the steel components.
 The crucial issue is whether the contract required the defendant to have these steel components hot-dipped galvanised prior to their being powder-coated.
 The amended Defence raises the following issues:-
(i) The specifications did not require the steel framing to be hot-dipped galvanised prior to powder-coating;
(ii) Alternatively, the plaintiff’s approval on 18 October 1994 for the use of a surface treatment Novacoat 800 together with Class 2 ½ sandblasting, and its approval of certain shop drawings which did not specify hot-dipped galvanising, constituted a direction that the steel framing did not require hot-dipped galvanising;
(iii) Whether the powder-coating was performed in accordance with applicable Australian standards.
 The final issue relating to powder-coating was not pursued at the hearing because it was not possible to measure the thickness of the powder-coating which had been applied. In any event the determination of the issues concerning the hot-dipped galvanising would ultimately result in the standard of the powder-coating becoming a non-issue.
 On the first issue the defendant contends that, on the proper construction of the specifications, there was no requirement to hot-dip galvanise the steelwork and therefore it is not in breach of the contract. In the alternative, it contends that the contractual terms as to whether galvanising was required were so uncertain as to render them unenforceable against the defendant. The second issue depends upon the defendant establishing that there was a variation of the contract.
 The contractual terms are contained in a number of documents principally –
(i) The contract;
(ii) General conditions of contract (AS 2124-1992);
(iv) Architectural and Engineering Drawings.
 Associated with these documents is a Bill of Quantities (BoQ). It is common ground that the BoQ did not form part of the contractual arrangements but, as a bolster to its arguments, reference was made by the defendant to the fact that no provision is made in the BoQ for hot-dipped galvanising.
 The contractual terms to which specific reference is necessary for the determination of these issues are:-
Specifications – Volume 1 Section 260
Volume 2 Section 250
Engineering DrawingsGDH Nos. 1697-20; 16977-42
 The relationship between these documents and the manner in which the various contractors interact with them is explained in the evidence of Mr. Graham. Section 250 of the Specifications (Vol.2) deals with Structural Steel. The finishes and the painting requirements for structural steel are provided for in subsections 500-01 and 500-02 in the following terms:-
SUBSECTION 500 FINISHES
01 HOT-DIP COATINGS – STEELWORK
FABRICATION: Complete welding, cutting, drilling and other fabrications before coating.
COATINGS: Unless otherwise specified, zinc coatings shall be by the hot-dip method as follows:
Ferrous articles generally: To AS 1650
02 PAINTING STRUCTURAL STEEL – STEELWORK
SURFACE PREPARATION: Steel surfaces generally: (Including surfaces not otherwise treated): To AS 4100 Appendix C.
Surface Preparation: Use suitable methods of preparation and sandblast to Class 2 to AS 1627.
Primer: Zincanode 320 or equivalent primer shall be applied immediately after sandblasting to 0.075mm DFT to all structural steelwork unless noted otherwise.
Final Coat: Refer Section 570 PAINTING.
PAINTING: Where painting is specified (including both decorative and protective coatings) apply the specified primer after fabrication and before delivery to the Works. After erection, repair damaged priming and complete the coverage of unprimed surfaces.
 Section 260 of the Specifications (Volume 1) deals with Metalwork. By subsection 450-02 and 450-03 the preparation requirements for sunscreens and sunhoods respectively are set out. It is important to note that whilst the mesh was required to be hot-dipped galvanised the sunhoods did not require this treatment. In both instances the structural steel framing was to be prepared in accordance with the structural drawings for that item of work.
 Other contractual documents whose terms must be considered, are the Engineering Drawings which set out requirements for steelworks in notes endorsed on the relevant drawing. In respect of Buildings 1 and 2 the Note appears on drawing No. 16977-20 and is in the following terms:-
“NOTES: (Buildings 1 and 2)
7.Painting of all steelwork shall be as follows
(a) Sandblast to Class 2 as per A.S. 1627
(b) Zincanode 320 or equivalent primer shall be applied immediately after sandblasting to 0.075mm D.F.T.
(c) Top Coating shall be to architect’s specification.
8.Exposed steel to be hot-dip galvanised.
9.Three copies of shop drawings to be submitted and approved prior to commencement of fabrication.”
 In relation to Building 3 a similar endorsement on drawing No. 16997-42 reads as follows:
7. Painting of steelwork shall be as follows
(a) Sandblast to Class 2 as per A.S. 1627
(b) Zincanode 320 or equivalent primer shall be applied immediately after sandblasting to 0.075mm D.F.T.
(c) All exterior steelwork to be hot-dipped galvanised. Top Coating shall be to architect’s specification.
8.Five copies of shop drawings to be submitted and approved prior to commencement of fabrication.”
 The differences in form and expression between those two endorsements does not, in my view, indicate any difference in intent and purpose. The fact that “exposed steel” is referred to in a separate paragraph in Drawings (as annotated) No. 1697-20 does not suggest that it was something different to “exterior steelwork” in Drawing No. 16977-42. The ordinary meaning of both those expressions would certainly include the sunshades and the associated structural framing. Neither party directed my attention to any reference in the specifications or other documents which made necessary the making of any distinction between those two terms.
 The plaintiff’s case is that these Specifications and the notes endorsed on the Drawings identified a system of anti-corrosion preparation for exposed and exterior structural steel framing. These required –
2. Hot-dip galvanising;
3. Conversion coating (Zincanode 320 or equivalent)
 By facsimile dated 13 October 1994, well after the contract work had commenced, the defendant requested that it be permitted to use Novacoat 800 in the anti-corrosion treatment. The facsimile identified the subject matter as JCU Sunhoods which, as I have noted, did not require hot-dip galvanising nor powder-coating. All parties, however, appear to have interpreted that request as relating to structural steel framing associated with sunscreens and sunhoods. The request was accompanied by product literature which described Novacoat 800 as a “conversion coating”.
 The plaintiff’s response to that request was to consent to the variation by adopting the opinion of its consultant engineer, Gutteridge Haskin and Davey Pty Ltd (GHD). The response dated 18 October 1994 was in the following terms:-
“Surface treatment prior to powdercoat:
We have no objection to the requested preparation provided that (i) the surface receives a class 2 ½ or equiv preparation and (ii) the preparation is compatible with the powder-coat.”
 The reference to a “class 2 ½ preparation” relates to the degree of sandblasting required. The change from sandblasting class 2, as provided for in the specification, to sandblasting class 2 ½ would have the result of removing millscale, rust and foreign particles to the extent that only traces would remain in the form of spots or strips. The purpose of sandblasting and the need for the standard to be specified in the contractual documents is referred to in the evidence of Mr. Hegge. His opinion is disputed by Mr. Kilmister but this is relevant only to the scope of this variation. Where there is a difference, I accept the evidence of Mr. Hegge who has experience of the demands of a tropical environment whereas Mr. Kilmister has no such experience in Far North Queensland.
 On 17 January 1995 the plaintiff (through its superintendent architects) sent to the defendant a facsimile enclosing details of sunscreen and sunshade framing for building no. 3. The facsimile refers to “sunshades” which is the generic term for the two different types of shades, namely sunscreens and sunhoods. The subject matter of the facsimile was the design of the sunscreens for Building 3. The facsimile however contains the statement – “finishes of sunshades as per B1, B2 hot-dip and powdercoat,” This statement appears to be simply an affirmation of what the architects considered was required by the contract. In fact at this time the hot-dip galvanising had not been applied to the relevant steel framings which were to be provided to Buildings 1 and 2. The communication, at least, points to the continuing belief in the minds of the plaintiff’s superintendent of what was required. It is not clear on the material whether the sunshades including their structural framing had by this stage been attached to Buildings 1 and 2.
 The defendant draws attention to the fact that there is no reference to hot-dip galvanising in shop drawings which were approved by the consulting engineers. The shop drawings are prepared for the benefit of subcontractors. The approval of shop drawings has a limited purpose as explained by Mr. Hegge namely “a design concept review for structural member sizes and essentially connection details”. The shop drawings are not contractual documents and the consulting engineer’s approval of them does not in any way qualify the contractual obligations of the parties.
 The clue as to when the decision was made by the defendants not to hot-dip the steel is found in a facsimile sent to the defendant by a subcontractor, Cairns Steel Fabricators Pty Ltd, dated 19 December 1994 in which appears the following terms:-
“…Spec and BoQ indicates frames to be primed and powdercoated and not galv and powdercoated as indicated please advise”.
 The reference to the BoQ draws attention to inconsistency between the specifications, drawings and the BoQ. In the latter document there is a section which provides for surface treatments. It is in the following terms:-
H. Prices for surface treatments shall be deemed to include for touching up on site any damaged areas and field applied bolts and connections.
Powder-coating comprising preparation, cleaning, applying one coat of iron phosphate and powder-coating to approved colour all as specified.”
 That query made by the subcontractor would have, or ought to have, highlighted the discrepancy in the documents for the defendant. On the evidence before me the defendant made no inquiry of JCU or of the superintendent. The fact that such a query was made does, however, suggest that no coatings had been applied to the structural steel frames as at 19 December 1994 which, of course, postdates the communication from the engineer on 18 October 1994. The query also suggests that the subcontractor was erroneously placing some reliance upon the terms of the BoQ. But the defendant certainly was aware that the BoQ was of no contractual significance.
 The first question then is whether the original contractual terms required the subject steelwork to be hot-dip galvanised. For the defendant, Mr. Bates argues –
(i) It is not clear whether the steel framing constitutes “metalwork” or “steelwork” under the Specifications and it is therefore uncertain whether s 250 and s 260 governs the surface preparation of steel framing. “Steelwork” is presumably a reference to the section Structural Steel.
(ii) The contractual documents apart from their internal inconsistencies are inconsistent with provisions of the Bill of Quantities which expressly require hot-dip galvanising for certain structures but not for sunscreen frames and sunshade framing.
(iii) That the surface preparation requirements in the notes to the Drawings are mutually inconsistent because the proper treatment is either to hot-dip galvanise or to sandblast but not both.
 The difference in the terminology used the referred in subparagraph (i) above was discussed in the evidence of Mr. Graham who compendiously described the function of contractual documents in the following passage (at transcript 58/25):-
“Can you just explain a bit more clearly what you mean by that in the set up of the contractual documents, the specifications and drawings? – Okay. The way the contract documents are prepared on this job is that there’s a set of architectural drawings; they’re supplemented with engineering drawings from varying disciplines – civil engineers, structural engineers, hydraulic engineers, mechanical and electrical and so on. Also two volumes of this specification, Volume 1 deals with mostly architectural trades the architect is responsible for. Volume 2 incorporates most of the engineering trades, such as steel work, concrete and so on. There’s also a bill of quantities, which is used only for the alternative that’s provided for in the conditions of contract. In this case, that’s clearly stated in the appendix to the condition and the bill has no contractual purpose other than for its intended use. When you get to the structural drawings, the specification – the specification for the structural steel trade, and we’re talking about the frames that support the sunshades, you read the section in the specification. It’s fairly general – it’s more a general performance description. It doesn’t call up the member size, it doesn’t show the builder how to build it; for that information you have to go to the engineering drawings. On those engineering drawings there are notes and they’re generally put on the front of the drawings so that – at the front of the set of drawings, I should say, so that when the builder gets them, he reads that and those notes that relate to the specific trade they describe are to be read in conjunction with the drawings that detail the steel work or the block work or the concrete. So if you wanted to know how to build a sunshade frame, you would go to the structural drawings, look at the detail on how to build it. But in association with that, you would also read those notes that tell you what the procedure is to treat that structural steel work.”
And further (at transcript 69/15):-
“And when, then, do you get to the specifications that the architect has put in, the two volumes of specifications?—Okay. Normally the role of the steel work or the engineer in this contract, say for the sunshades, stops once the engineering treatments are completed. In other words, if it’s got to be hot-dipped, it’s treated, it’s sandblasted, it’s hot-dipped and then you go the architectural specs to find out what the top coating is, and that’s actually drawn to your attention on those notes on the structural engineering’s drawings. Look at drawing number 42 you’ll find that note there.
All right, So when you go to the architect’s specification, what does that deal with? – Okay. These frames were to be powder coated. You look up the relevant section in the metal work trade specification, not the structural steel – this an architectural finish now – you go to section 250, I think it is, metal work, and you’ll come across a clause there that deals with thermostat powder-coatings.
So that’s an architectural ----? – That’s a finish.
That’s an architectural specification in relation ---? – The architectural works on the finish. I’m talking about the end result, not the preparation prior to finish.”
 That evidence of Mr. Graham was not challenged in any direct way. The defendant did not call any witness who was involved in the contract work. It did, however, call Mr. Kilmister as an expert but his evidence was limited to the circumstances in which it was appropriate to specify sandblasting and to the suggestion that it was inappropriate to specify galvanising when requiring sandblasting to Class 2 ½ followed by an iron phosphate coating. It is not necessary to consider the appropriateness of the sandblasting. It was specified and it was done. Similarly, if hot-dip galvanising was prescribed it is not for the contractor on the grounds of its opinion about the appropriateness of the specified treatment to ignore the specification. The opinion expressed by Mr. Kilmister was not shared by Mr. Hegge. For the reasons I have indicated, I prefer the evidence of Mr. Hegge whose opinion is supported by the evidence of Mr. Mendel, an industrial chemist with expertise in chemical finishes. Mr. Mendel opined that the Novacoat preparation together with 40 micron powder-coating would not provide sufficient protection in the tropical environment but that hot-dip galvanising would provide “long term protection”.
 I accept the evidence of Mr. Graham as to the way in which the contractual documents would be considered by a person engaged in contract work of this kind. The types of inconsistencies which might catch the eye of a lawyer looking for ambiguity would not necessarily register in the mind of a contractor concerned with what has to be done. My reading of the express words of the contractual documents leaves me in no doubt that their terms called for the relevant structural steel framing to be hot-dipped galvanised.
 The next question is whether the GHD facsimile of 18 October 1994 varied the contract to the extent of no longer requiring the galvanising. The argument that it did so depends not on express words but on an acceptance that sandblasting plus the Novacoat provided equivalent anti-corrosion protection. That position was not accepted by the consultants advising the plaintiff nor indeed by Mr. Mendel. If the proposal for the defendant to use Novacoat was intended as a substitute for galvanising, a significant step in the anti-corrosion process, it should have expressly stated so. As a consequence I find that this variation of the Specifications did not relieve the defendant of the obligation to hot-dip galvanise the relevant steel framing. Novacoat is a conversion coating and I construe its acceptance by GHD was as no more than a substitute for the specified conversion coating, Zincanode.
 The second point raised in argument by the defendant relies upon reference to external documents to demonstrate uncertainty based on differences between those external documents and the terms of the contract. The external document is the Bill of Quantities which, as has been mentioned, did not form part of the contractual documents. In reading the contractual documents on their own I am not able to detect any uncertainty on the issue of whether hot-dip galvanising was required. The documents clearly state that it was required by its own terms. Limiting my inquiry to the terms of the contract, recorded as it is in the number of documents, there is not, in my opinion, any ambiguity which would give rise to the contra proferentem rule.
 The fact that doubt was raised in the mind of a subcontractor, Cairns Steel Fabricators Pty Ltd, causing that company to send the facsimile of 19 December 1994 is the result of that organisation not correctly identifying the contractual documents. But even allowing for that, the contract provided by clause 8 of the General Conditions the procedure for dealing with such discrepancies. It is sufficient to take the following extract from clause 8.1 –
“If either party discovers any ambiguity or discrepancy in any document prepared for the purpose of executing the work under the contract, that party shall notify the superintendent in writing of the ambiguity or discrepancy. In the event of an ambiguity or discrepancy being discovered and brought to the attention of the superintendent, or discovered by the superintendent, the superintendent shall direct the contractor as to the interpretation to be followed by the contractor in carrying out the work.”
 That term of the contract imposes an obligation on all parties to have some interaction if a discrepancy is discovered. I am satisfied that the subcontractor brought what to its mind was an ambiguity to the attention of the defendant. I am further satisfied that the defendant did not bring that ambiguity or discrepancy to the notice of the superintendent. I am satisfied that had the defendant so done, the superintendent would have resolved the ambiguity by directing that hot-dip galvanising be undertaken in accordance with the specifications. In essence the ambiguities, upon which the defendant now seeks to rely to argue that the contract is unenforceable, were known to it before the relevant contract work was undertaken. In such circumstances it was its own breach of the provisions of clause 8.1 which resulted in the contract not being performed in accordance with the specifications as I have found them to be. As a consequence I find that by failing to provide hot-dip galvanising to the steel framework in question the defendant is in breach of the contract. I find also that it was this breach that has resulted in the corrosion which is evident in the steel framing referred to in the pleadings.
1.I declare that the defendant is in breach of the contract.
2.I order that the defendant is liable to the plaintiff for damages to be assessed for such breach of contract.
3.I order that the defendants pay the plaintiff’s costs to be assessed on the standard basis.
 Drawings approved on 5 December 1994 (for Buildings 1 and 2) and on 30 January 1995 (for Building 3).
 Part A annexure to General Conditions determined the purpose of BoQ as –
“A Bill of Quantities forms part of the contract only to the extent provided in the Contract”.
 Transcript 58/30-59/50; 60/40-61/60
 See report of Mr. B.J. Heggie 1 February 2002 enclosing Australian Standard 1627.4 - 1989
 Transcript pp 48-49.
 Transcript p 66/18 and ex. 20
 Transcript 50/50.
 Transcript 70/5-20
 Transcript 70/30
- Published Case Name:
James Cook University v Walter Construction Group Ltd
- Shortened Case Name:
James Cook University v Walter Construction Group Ltd
 QSC 47
05 Mar 2002
- White Star Case:
No Litigation History