CITATION: | Built Qld Pty Limited v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [2022] QCA 266 |
PARTIES: | BUILT QLD PTY LIMITED ACN 108 064 099 (appellant) v PRO-INVEST AUSTRALIAN HOSPITALITY OPPORTUNITY (ST) PTY LIMITED (FORMERLY KNOWN AS AUSTRALIAN HOSPITALITY OPPORTUNITY (ST) PTY LTD) AS TRUSTEE FOR THE PRO-INVEST AUSTRALIAN HOSPITALITY OPPORTUNITY (BRS SPRING HILL) TRUST ACN 163 479 221 (respondent) |
FILE NO/S: | Appeal No 14730 of 2021 SC No 5426 of 2017 |
DIVISION: | Court of Appeal |
PROCEEDING: | General Civil Appeal |
ORIGINATING COURT: | Supreme Court at Brisbane – [2021] QSC 224 (Williams J) |
DELIVERED ON: | 20 December 2022 |
DELIVERED AT: | Brisbane |
HEARING DATES: | 12 and 13 September 2022; further written submissions received on 27 September 2022, 17 October 2022 and 14 November 2022 |
JUDGES: | Morrison and Dalton JJA and Bradley J |
ORDERS: |
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CATCHWORDS: | CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – THE CONTRACT – CONSTRUCTION OF PARTICULAR CONTRACTS AND IMPLIED CONDITIONS – where the respondent issued an invitation to tender to design and construct a hotel – where the invitation to tender required that tenders comply with the respondent’s specifications and drawings (the Thwaite Documents) – where the appellant submitted a tender on an alternative basis for air conditioning (the Alternative Proposal) – where the appellant and respondent entered into a contract based on the acceptance of the appellant’s Alternative Proposal, provided it met the performance requirements of the Thwaite Documents – where the respondent issued a defects notice to the appellant (the 11 August notice) – where the 11 August notice asserted that the air conditioning system which was partly installed by the appellant was defective because it did not allow mode control in individual rooms – whether extrinsic evidence could be used to interpret the meaning of the Alternative Proposal – the meaning of “performance requirement” – whether the Thwaite Documents contained a performance requirement as to mode control in individual rooms – whether the air conditioning system which was partly installed by the appellant was defective CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – THE CONTRACT – CONSTRUCTION OF PARTICULAR CONTRACTS AND IMPLIED CONDITIONS – VARIATIONS – where the 11 August notice directed a variation to the contract – where the 11 August notice was a “qualifying cause of delay” under the contract – where the contract required the appellant to give the respondent a written claim for an extension of time (EOT) within 14 days of when the appellant should reasonably have become aware of the qualifying cause of delay – whether the primary judge erred in finding that the appellant’s claim for an EOT was delivered outside the 14 day period – when the appellant became reasonably aware of the qualifying cause of delay CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – THE CONTRACT – CONSTRUCTION OF PARTICULAR CONTRACTS AND IMPLIED CONDITIONS – where the contract provided that the appellant was not entitled to an EOT if it contributed to the qualifying cause of delay – whether the appellant contributed to the qualifying cause of delay by failing to provide shop drawings when required to do so by the contract – where the shop drawings would have revealed the lack of mode control in individual rooms – where, prior to the contractual date to provide shop drawings, the appellant provided schematics to the respondent which indicated that the system would not have mode control – whether the appellant contributed to the qualifying cause of delay or to the delay in practical completion CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – THE CONTRACT – CONSTRUCTION OF PARTICULAR CONTRACTS AND IMPLIED CONDITIONS – where the contract provided that the appellant was entitled to an EOT if the appellant has taken all reasonable steps to mitigate the effect of the delay – where the appellant required equipment to install the new air conditioning system as directed by the 11 August notice – where, despite the appellant’s enquiries, the respondent did not confirm whether it approved of the equipment the appellant required – whether the appellant took all reasonable steps to mitigate the delay caused by the need to order new equipment CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – THE CONTRACT – CONSTRUCTION OF PARTICULAR CONTRACTS AND IMPLIED CONDITIONS – where the appellant was entitled to an EOT – where the primary judge did not make findings as to the EOT to which the appellant was entitled – where the primary judge did not give reasons – whether the contract permitted a retrospective or prospective approach to assess the delay to practical completion – whether the Court must determine the EOT only on the material which was available to the superintendent at the time the EOT was assessed – assessment of the EOT CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – THE CONTRACT – CONSTRUCTION OF PARTICULAR CONTRACTS AND IMPLIED CONDITIONS – where the contract provided that the appellant was entitled to a claim for delay damages reasonably and necessarily incurred by the appellant by reason of a variation – whether the appellant was entitled to delay damages consisting of time-related on-site overheads incurred during the period of critical delay – what is the time period over which the delay damages were suffered – whether the costs claimed by the appellant were necessarily and reasonably incurred – whether the overhead costs were included in the value of the variation under the contract Akot Pty Ltd v Rathmines Investments Pty Ltd [1984] 1 Qd R 302, applied Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd (1999) 66 Con LR 119, cited Bank of New Zealand v Simpson [1900] AC 182; [1900] UKLawRpAC 6, cited Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430, cited Beaufort Developments (NI) Ltd v Gilbert-Ash NI Ltd [1999] 1 AC 266; [1998] 2 All ER 778; [1998] UKHL 19, considered Bwllfa v Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks Co [1903] AC 426; [1903] UKLawRpAC 46, applied Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd [2017] QSC 85, considered CMB No. 1 Pty Ltd v Cairns City Council [1999] 1 Qd R 1; [1997] QCA 456, cited Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; [1982] HCA 24, applied Daysea P/L v Watpac Aust P/L [2001] QCA 49, cited DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; [1978] HCA 12, applied Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2013) 41 VR 636; [2013] VSCA 179, considered Elliott v Lawrence [1966] Qd R 440, cited Euronav NV v Repsol Trading SA The MT MARIA [2022] 2 All ER (Comm) 65; [2021] EWHC 2565 (Comm), cited Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348; [1937] HCA 90, applied House of Peace Pty Ltd v Bankstown City Council (2000) 48 NSWLR 498; [2000] NSWCA 44, cited HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54, cited Johnson Controls Australia Pty Ltd v Webb Australia Group (NSW) Pty Ltd (2003) 96 ACSR 640; [2013] NSWSC 1511, applied Keays v JP Morgan Administrative Services Australia Ltd (2012) 224 IR 406; [2012] FCAFC 100, applied Kembla Coal & Coke Pty Ltd v Select Civil Pty Ltd [2004] NSWSC 628, cited King & Ors v Australian Securities and Investments Commission [2018] QCA 352, cited Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281; [1995] HCA 4, cited Macdonald v Longbottom (1859) 1 El & El 977; 120 ER 1177; [1859] EngR 635, considered Macdonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152; [1998] QCA 53, considered Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, applied Prenn v Simmonds [1971] 1 WLR 1381; [1971] 3 All ER 237, applied Proctor v Chahl [2008] NSWSC 1252, cited Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541, applied Republic of Turkey v Mackie Pty Ltd & Anor [2019] VSC 103, cited Rightside Properties Ltd v Gray [1975] Ch 72; [1974] 2 All ER 1169, cited Schelde Delta Shipping BV v Astarte Shipping Ltd (The Pamela) [1995] CLC 1011, cited SDA v Corporation of the Synod of the Diocese of Rockhampton (2021) 8 QR 440; [2021] QCA 172, citedSSC Plenty Road Pty Ltd v Construction Engineering (Aust) Pty Ltd & Anor [2016] VSCA 119, cited Stockland Property Management Pty Ltd v Cairns City Council [2011] 1 Qd R 77; [2009] QCA 311, cited TAL Life Ltd v Shuetrim; Metlife Insurance Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68, cited Thiess Watkins White Construction Ltd v Commonwealth (1998) 14 BCL 61, cited V601 Developments Pty Ltd v Probuild Constructions (Aust) Pty Ltd [2021] VSC 849, cited Walton v Illawarra [2011] NSWSC 1188, cited Wesfarmers Kleenheat Gas Pty Ltd v Elgammal [2006] NSWSC 1248, cited |
COUNSEL: | P L O'Shea KC, with M Steele and B A Reading, for the appellant T P Sullivan KC, with M Doyle, for the respondent |
SOLICITORS: | Clayton Utz for the appellant Thomson Geer for the respondent |
The tender process
“The Tenderer may also submit alternative tenders containing qualifying conditions or exceptions and the sums of money which are directly attributable to such conditions or exceptions set out in an Alternative Tender Qualifications Form contained in Schedule 2. The acceptance of any alternative tender subject to qualifying conditions or exceptions is entirely at the discretion of the Principal.”
“Built in conjunction with our preferred subcontractors have reviewed the documented design criteria and have offered an alternative Air Conditioning system based on VRF type arrangement.
The system proposed provides a more efficient solution in terms of the running costs due to the equipment operates on a variable power supply and without the need for stand alone controls and variable speed drives which inherently are costly and complex to program and operate. Additionally, the proposal also adopts a revised pipe and duct configuration, thus reducing the initial cost of these components.”
The contract
“The Contractor’s alternative proposal for structural and mechanical systems on the basis that the Contractor meets the performance requirement of the tender drawings and specifications.”
The description “mechanical systems” can be read as meaning air conditioning, at least for the purpose of this judgment.
“(ag) Refer VE items listed below:
…”
Types of air conditioning systems
CHARACTERISATION OF THE 11 AUGUST NOTICE
“10. 9.4.2 Chiller Sequencing … This specification allowed fan coil units in individual rooms to provide either cooling or heating independently across all individual hotel guest rooms. The Alternative VRV system offered by the contractor does not comply with the Contract.
11. 9.4.5 CHW/HHW FCUS FOH+BOH areas … This specification allowed different coils in rooms to have different cooling or heating demands – this has not been satisfied with the installed alternative.”
Extrinsic evidence
“Please see attached the proposed AC layout and piping configuration … for your acceptance prior to documenting the design.
We note that A/C zones will be divided into two zones to cater for different heat loads on the building façade and units will be combined vertically over a number of floors off the same condenser …
…
Could you please provide your approval/acceptance so we can commence design documentation.”
The attached schematic drawing showed a 2 pipe VRF system and bore, in red, the proprietary brand name Toshiba next to the depiction of the condenser.
“Our proposal utilises reverse cycle 2 pipe configuration. All FCU’s will be located as per original design and all condensers will be located on mechanical plant deck on roof”.
The reply discloses the use of Toshiba equipment.
The appellant ended this email, “Please let me know if further clarification or a meeting is required to discuss”.
Thwaite went on to say:
“The meeting proposed is to dot the iiiiis over what is the actual scope of work of the mechanical services contract which you believe that you have signed up for and to look at where it differs from the specified/tender documents. The hotel operator also has particular requirements which will need to be addressed as line items and presented to them so that any non-compliances with their standard brief are itemised and explained.
…
Regardless I think it is encumber on you to provide a signed off ‘contract document’ that clearly explains where you differ from the tender documents so that it is recorded and leaves no doubt on the scope.”
“We have not been provided with a [hotel operator] Brief other than the Tender Drawings and specification, and as such this is all we have to work with in terms of criteria (despite the conforming being a Chilled Water System which is obviously different in many ways). The offer of a conforming and alternative were provided at Tender with the Client electing to adopt the alternative at a significantly reduced price.
…
… We will certainly be providing an Engineered Certified system, Form 15 with drawings. Prior to documenting we are seeking acceptance of the system in terms of meeting the performance requirements stipulated by the tender documents and its ability to satisfy the clients requirements. Once agreed we will formalise the design by way of Engineered drawings and a Form 15 design certificate.
...”
“See attached below and attached our Mechanical Consultants comments regarding the proposed design as well as their comments in relation to the [hotel operator] standards.
Please note that largely the [hotel operator] Standard and Thwaite design is based on Chilled Water therefore large sections of the design are not applicable hence we have not marked up the specification but rather commented separately.
…
We therefore seek your urgent approval of the proposed so we can move forward on Design.”
The attached letter from the appellant’s mechanical consultants included the following:
“Air conditioning for the building is proposed to be of the Variable Refrigerant Flow (VRF) type, in lieu of chilled water systems, with condensing units located on Level 1 podium and roof (refer attached sketches).
The VRF systems will be of the 2-pipe heat-pump type, and zoned such that areas with different solar loads are served by separate plant.
…
In general, the remainder of the current building mechanical services design (documented by Thwaite Consulting Group) will not be altered in principle.”
“It is well established that parol evidence is admissible to identify the subject matter of a written contract. A recent example, which in some ways resembles the present, is Akot … in that instance, and in the decisions discussed in it, the written contract was, as regards subject matter, expressed in an uncertain or ambiguous fashion.”
Performance requirement – meaning
“… it is a statement of the standard of performance that the works are to meet or to achieve. In essence, such a specification would tell potential tenderers what it is that the works to be done and equipment to be supplied are required to do, whilst leaving it up to the tenderers as to the precise means by which they would achieve the specified result.
… The essential feature is that the new generator set must be capable of working in parallel with the existing generator sets (in this case, with their neutral terminals interconnected). That was what the tenderers were required to achieve. It was up to them to work out how to achieve it.” (underlining added).
Performance requirements in the Thwaite Documents
“3. DESIGN CRITERIA
3.1 DESIGN CRITERIA
• Design criteria presented herein form the basis for the design of the works and for any alternative proposals submitted.
Item | Design Criteria |
External ambient conditions (for air conditioning plant full load performance)
Based on Brisbane (AIRAH)
Internal conditions (for conditioning plant full load performance) general
Controls tolerance for air conditioning system
Outside Air
Exhaust Air
Occupancy
Hours of Operation
| Summer
33.1°C dry bulb maximum
24.8°C wet bulb maximum
Winter
6.0°C dry bulb minimum
Summer
23°C dry bulb maximum at point of control
Winter
21.5°C dry bulb at the point of control
+/-2.0°C dry bulb at point of control (+/-1.0°C dead band)
In accordance with AS 1668.2 2013 requirements
In accordance with AS 1668.2 2013 requirements
Refer Table A
Continuous
|
…” (underlining added).
“[158] While the drawings and the Specification were prepared on the basis that the mechanical services system to be installed was a ‘four pipe chiller (heat recovery type)’, there are several aspects of the drawings and the Specification which support a construction that the Independent Heating/Cooling Function was a requirement applicable to an alternative proposal based on a VRF air conditioning system. These include:
[159] The particular wording in clause 2.2.3 of the Specification provides ‘[e]ach guest room shall be individually air conditioned … which supply conditioned air to the room …’. This reference to each room being individually air conditioned and to conditioned air being supplied, tends to support the construction as contended for by the defendant.
[160] The plaintiff argues that in effect, guests in individual rooms are able to obtain temperature control with the two-pipe heat pump system that was partially installed, by in effect, moderating the zone temperature by switching off the conditioned air and introducing ventilation. The use of the ventilation was a means by which the guests could achieve temperature control within the practical temperature range allowed. However, this is not achieved by way of supply of ‘conditioned air to the room’, but rather it is the use of ‘unconditioned air’ to the room in order to achieve the temperature moderation.
[161] A reasonable businessperson in the position of the parties at the time the Contract was entered into would understand that the reference to ‘conditioned air’, either as heated or cooled, was what was to be provided, not merely using ventilation to moderate or control temperature in an individual guest room.
[162] Further, the Specification uses specific language to describe when ventilation was to be provided as opposed to ‘conditioned air’. For example, the requirements for mechanical ventilation in clauses 2.2.13 to 2.2.19.”
“9.8.2 CHW/HHW FAN COIL UNITS GUEST ROOMS
The following mandatory items and control functions shall be provided for each FCU system:
(b) Start Stop Control and Indication
- Wall mounted combined FCU controller with ON-OFF switch
- Interface with guest room energy management system provided by the electrical trade
(c) Temperature Control
- Space temperature sensor integral to ON-OFF switch
- Chilled water and heating hot water control valve modulation to satisfy cooling and heating load
- Each fan coil unit (and associated fans as applicable) shall be started individually according to a pre-set schedule of daily operation
- Control dead band to be +/-1.0°C from set point” (underlining added).
Conclusions as to characterisation of 11 August 2016 notice
VARIATION
“36 Variations
36.1 Directing variations
The Contractor shall not vary WUC except as directed in writing.
The Superintendent, before the date of practical completion, may direct the Contractor to vary WUC by any one or more of the following which is nevertheless of a character and extent contemplated by, and capable of being carried out under, the provisions of the Contract (including being within the warranties in subclause 2.2):
The Principal shall only be liable to the Contractor for the price of a variation calculated in accordance with subclause 36.4 or for an EOT for a variation where either:
EXTENSION OF TIME
“34.3 Claim
The Contractor shall be entitled to such EOT for carrying out WUC (including reaching practical completion) as the Superintendent assesses, if:
…” (underlining added).
Time for written claim, cl 34.3(b)
“Whether or not you started drafting that, I take it there was discussion on the evening of the 11th of August that you had to send the various notices which you ultimately send on the 12th?--- Not necessarily. I think the first step was just understanding exactly what they were requesting from this notice, rather than, you know, quickly trying to reply.
No, I don’t think – sorry. Please finish?--- No, I just – I think the first steps were just to understand exactly what the notice provided and the information as part of the notice.” (t 2-7).
Contractor’s contribution to qualifying cause of delay
“…
● Room heating and cooling – Each room must have the ability to call for heating or cooling independently of other Guestrooms. Again this is non negotiable and is in accordance with the original design intent.
It should be noted that I believe the preparation and issuing of workshop drawings for review prior to ordering or commencing fabrication in accordance with Item 2.1.1.5 of the mechanical specification would have assisted in identifying and resolving these issues earlier.”
“I am firmly of the belief that the issues identified in Thwaite Consulting Groups mechanical contractor’s submissions tracking document would have been identified a lot sooner and before any mechanical work had commenced on site.”
Failure to mitigate
“Please also note the following:
● This design takes into consideration minimal impact and cost implications to change over from 2 pipe system.
● Currently the condensing units selected are available in Australia and New Zealand, which have a lead time of 9 days.
● The condensers selected within the proposed design are currently set up for approx. 60% load as these condensers have a lead time that suits the project. If alternative condensers are required the lead time on these items would be between 8‑10 weeks.
● There are 24 flow selector boxes available immediately, with the remainder 4 weeks away with a supply from the Toshiba workshop in Japan.
● The Branch boxes will be installed utilising the access panels within each room thus reducing the impact on the finishes.
Could you please provide a response on the above proposal or alternatively we are happy to arrange a meeting or teleconference to further discuss.”
“The [11 August notice] was issued in accordance with the Contract and is current.
There is no qualifying cause of delay to warrant an EOT. The EOT is assessed as 0 days.”
“Thank you for providing this information.
We are assessing this final information for compliance with the Contract, with discussions to progress on a Without Prejudice basis between the representatives of the Contractor and Principal.
We advise that the notice issued under sub clause 29.3 for Defective Works remains valid and current.
We look forward to resolution of the situation and progression of the works.” (underlining added)
“…
We await your clear direction as to the Principal’s requirements.”
“Thanks for your below response.
We are assessing your responses for compliance with the Contract.
We confirm that no direction has been given to proceed with any pre‑conditioning option or any other element of the mechanical system that is outside of that required under the Contract.”
“Upon receipt of the above clarification, Built will proceed with implementation of the material elements of the Principal’s requirements outlined within the ‘Defective Works’ notice, specifically that ‘fan coil units in individual rooms [are to] to provide either cooling or heating independently across all individual hotel guest rooms’. Built acknowledges that it is the opinion of the Superintendent that this requirement forms part of the Contract scope.”
“In relation to the notice received on 30 September 2016 pursuant to CA57 – Mechanical 3 Pipe Alterations and the 30 September 2016 Letter requesting Clarification contained therein, the Superintendent advises the Contractor the communication has been issued under an incorrect Acconex thread.
The correct thread for the subject notice from the Contractor relates to the Defective Works Notice pursuant to Sub Clause 29.3 of the Contract and issued under Acconex thread ID Tactical-GCOR-000371 by the Superintendent on 11 August 2016. The Contractor is requested to reissue the clarification notice under the correct thread to which it relates.
The Superintendent also explicitly confirms the following:
“Just to confirm that we have not in our request for clarification, requested ‘approval’ for Toshiba. We simply requested clarification of your 11 August 2016 direction – the clarification request was simply: ‘Can you please confirm whether the Superintendent has any objection to Toshiba as an equipment manufacturer if the equipment complies with the performance requirements set out in the direction dated 11 August 2016 and the Contract.’ This question is capable of response now and continued delay [in] answering this is further delaying the project. …”
“It is clear that you will not respond to our specific request for clarification of your direction dated 11 August 2016 issued under cover of Tactical-GCOR-000371 (‘Direction’) and instead require Built to submit certain information in order to facilitate ‘approval’ of the equipment manufacturer.
In the absence of the requested clarification, Built will implement the Direction, on the assumption there is no objection to Toshiba as equipment manufacturer. As advised in previous correspondence and notices, Built considers that the Direction involves a Variation and will cause delay.
In relation to the equipment manufacturer, Built does not consider that ‘approval’ is required for Toshiba as equipment manufacturer but will nevertheless endeavour to provide the information requested. If following the provision of information the Superintendent subsequently directs that Toshiba is not an approved manufacturer, Built will consider that a further variation will have been directed.”
“[1081] From [the time of delivery of the 11 August notice] onwards, the plaintiff acting reasonably would have been aware that the delay would increase if steps were not taken to order the necessary equipment.
[1082] The [appellant’s] design for the three-pipe mechanical system was finalised on 23 August 2016, which included the number and type of condensers and branch boxes.
[1083] Accordingly, a contractor acting reasonably would have taken steps to mitigate the delay at least by 23 August 2016 when the design was finalised.
[1084] Whilst the plaintiff says the use of Toshiba was still uncertain, that did not mean that the plaintiff was entitled to take no steps. Reasonable steps would include considering arrangements to reserve condensers so they were available. This is particularly so given the awareness that the condensers were time sensitive.
[1085] It is clearly open that the plaintiff should have taken reasonable steps to mitigate the effect of delay from 11 August 2016 when the [11 August notice] was received. It was clear that the procurement time for the necessary equipment was a key factor in the delay. Pursuant to clause 34.3(f), this would result in the plaintiff not being entitled to an extension of time for the whole period claimed.
[1086] However, I accept that until the design was finalised, arguably it was not reasonable to be required to place orders for equipment as the number of branch boxes and condensers was not known.
[1087] If it is necessary to consider the operation of clause 34.3(f) of the Contract, I find that the plaintiff should have placed the order for the condensers no later than 23 August 2016. Placing the order for the condensers after that was a failure to take all reasonable steps to mitigate the effect of the delay.”
Conclusions as to extension of time
QUALIFICATION OF DELAY CAUSED BY 11 AUGUST NOTICE
The judgment below
“[1168] If it is necessary to consider the plaintiff’s claim for an extension of time and it is necessary to consider the expert reports in respect of the analysis of the delay. I make the following findings:
Approaches to assessment of delay under the contract
“[657] The issue is whether the Contract permits both a prospective and retrospective delay analysis. WICET submits that Mr King’s retrospective delay analysis in respect of Delay Event 9 using an ‘as planned’ v ‘as built’ analysis is not permitted by clause 35.5 of the Contract.
[658] In my opinion the better view is that the Contract permits both a prospective and retrospective delay analysis.
[659] Paragraph 3 of clause 35.5 provides that:
‘If the Contractor is or will be delayed in reaching Practical Completion … and within 28 days after the delay occurs the Contractor gives the Principal’s Representative a written claim … the Contractor shall be entitled to an extension of time for Practical Completion.’
Clause 35.5 further provides:
‘The Contractor will only be entitled to an extension of time for Practical Completion pursuant to this Clause if –
[660] The use of the disjunctive ‘or’ gives the Contractor a choice to demonstrate that either it has been actually delayed or it will be actually delayed in achieving Practical Completion. The past tense ‘has been’ as CMC submits, contemplates looking backwards, after the delay event has expired, to demonstrate that (with knowledge of hindsight) the Contractor has actually been delayed in achieving Practical Completion. CMC further submits that the retrospective approach is particularly appropriate if the activity delayed occurs towards the end of the project, such that the time at which the claim for the extension comes to be assessed is after Practical Completion has been achieved.
[661] WICET makes the following submission:
‘Whilst the word “has” (much like the word “is”) might, viewed in isolation, suggest a retrospective analysis, the word is immediately followed the critical words by “or will be”. The phrase “has or will be actually delayed” should have the same meaning as “is or will be delayed”. Further the insertion of the word “actually” does not require a retrospective analysis. If that were intended, the word “actually” would not have been proceeded by “will be”. On a proper construction, the word “actually” simply emphasises that CMC is only entitled to a EOT if Practical Completion is affected.’
[662] I do not accept this construction. The use of the words ‘has been … actually delayed’ addresses past delay permitting or indeed inviting retrospective analysis. A Contractor would be entitled to an extension of time for Practical Completion if it demonstrates either a past or future delay. Further as CMC correctly submits, WICET’s construction does not give the word ‘actually’ any work to do.
[663] My interpretation of clause 35.5 as permitting both a prospective and retrospective delay analysis rest on the ordinary meaning of the term ‘has been or will be actually delayed’. …”
“Notwithstanding that the Contractor is not entitled to or has not claimed an EOT, the Superintendent may at any time and from time to time before issuing the final certificate direct an EOT. The Superintendent is under no obligation to exercise this discretion reasonably, fairly or for the benefit of the Contractor.”
Assessment of delay by a court or arbitrator
“Derek Crouch was a decision of the Court of Appeal in the United Kingdom which involved a construction contract which provided for reference to arbitration in the event of any dispute or difference arising between the parties. The arbitration clause expressly empowered the arbitrator ‘to open up, review and revise the architect’s certificates, opinions, decisions, requirements or notices’.
Disputes arose concerning decisions of the architect extending time. … The Principal under the contract sought and failed to obtain injunctions restraining the Contractor from proceeding to arbitration. The appeal was dismissed.
In the course of argument a submission was made that unless the court did have power to do all the things the arbitrator could do, it would be unfair to deprive a party of the right to arbitrate. Although it was not necessary to rule on that argument to dispose of the appeal, the Court expressed the view that whilst the arbitrator had powers to open up, review or revise the architect’s certificates, the Court did not. That conclusion was founded upon the contractual intention revealed by the conferral of the express open up and review power on the arbitrator but not on the Court.”[39]
“The effect of the decision of the House of Lords is correctly summarised by the headnote:
‘The arbitration clause was intended to confer on the arbitrator the plenitude of powers possessed by the court to determine the rights of the parties; … it was necessary to spell out those powers in the case of the arbitrator but not in the case of the court since his powers were derived from the contract under which he was appointed, whereas the court’s jurisdiction was unlimited; … therefore, the fact that power to open up, review and revise was expressly conferred upon the arbitrator but not upon the court could not be construed as removing the court’s power; … .’”[40]
“If the question goes to arbitration, the arbitrator’s duty is to determine the amount of compensation payable. In order to enable him to come to a just and true conclusion it is his duty, I think, to avail himself of all information at hand at the time of making his award which may be laid before him. Why should he listen to conjecture on a matter which has become an accomplished fact? Why should he guess when he can calculate? With the light before him, why should he shut his eyes and grope in the dark?”
Assessment of the programming evidence in this case
(1) Starting date for calculation of delay
“(a) A mobilisation period of 1 week for design and ordering of plant and equipment. There would be two separate crews working on the corridor works impacted by the Mechanical Variation; one team from Levels 1 to 6 and another from Levels 7 to 12;
Mr Bell’s analysis
“So do you accept that one – that is, the retrospective as-planned as‑built – captures the actual delay and the other only captures the hypothetical possible likely delay?---Well, an as-planned versus as‑built, if it’s properly done or done at all, will capture – it will rely on the events as they actually unfolded and requires judgment of the analyst to work out why or what was going on or – or what the cause of those events was. The prospective approach, if not corrected for actual dates, will be a theoretical forecast of what was expected at that time, but, in this instance, it’s been corrected for the actual date of delivery.” – t 10-38.
Mr King’s analysis
“… the ongoing mechanical design issues started to impact the progress of works on site. Next to no mechanical work was being done, and the word had got out to many other trades about what was likely to happen - that is, work that had been completed, or was being carried out, would probably need to be demolished and re-done.
As a result, the motivation of the workers on site was low and productivity began to be impacted. I remember that during this period, many subcontractors were ringing me asking what was going on but I could not tell them as Built did not know ourselves.”
“… All mechanical works had stopped, as Batec’s[59] workers had all walked off site due to the ongoing uncertainty and would not come back. All other trades were moving very slowly up the building; their numbers were down and there was little momentum.”
(2) Further reduction to 81 days
(3) Christmas shutdown
DELAY DAMAGES
“34.9 Delay damages
For every day the subject of an EOT for a compensable cause, the Contractor shall be entitled to give the Superintendent a claim for delay damages reasonably and necessarily incurred by the Contractor by reason of that compensable cause. The Principal must pay the amount of the delay damages certified by the Superintendent pursuant to this subclause 34.9.
The maximum amount payable by the Principal to the Contractor for every day the subject of an EOT for a compensable cause is the actual cost incurred by the Contractor up to the maximum specified in Item 31A.
Nothing in this subclause 34.9 shall oblige the Principal to pay delay damages for:
On-site overheads
1. Incurred
2. Necessary by reason of 11 August notice
“6.2.37 In my opinion, on-site overheads comprise both fixed costs (i.e. costs that do not have a relationship to time at site such as setting up site offices, installation of temporary telephones) and time‑related costs. On-site overheads are distinct from the cost of the resources (production resources) that create revenue by working at site.”
“6.2.39 However, a delay to construction work does not automatically produce a commensurate retention of all site overhead resources throughout a period of prolongation.
…
6.2.42 To determine whether the ‘time related site overheads’ identified represent actual costs which were reasonably and necessarily incurred by reason of the [11 August notice] under clause 34.9, I have considered whether there is any documentation or other evidence to show that each item of time‑related overhead resource was on site during the Assessment Period because of the [11 August notice], and that such time-related overhead resource would not have been on site at that time if the [11 August notice] had not occurred.” (underlining added).
“6.2.44 Based on the documents provided to me, it is not possible to identify that any of the ‘time-related site overheads’ were necessarily retained on site during the assessment period because of the [11 August notice] rather than because of other work. …
6.2.45 Based on my review of Mr Bell’s report, he also has not identified documents or other evidence showing that the costs he identifies would not have been expended in any event, if the compensable cause of delay had not occurred.
6.2.46 For these reasons, I am unable to conclude that [the appellant] actually incurred additional time-related overhead resources during the Assessment Period. Accordingly, I have assessed [the appellant’s] claim for time‑related site overhead costs at $NIL.”
“The measure of inclusion is not that [the persons concerned] are directly working on the mechanical variation, but that they are working during the period of time which arises due to the mechanical variation, and they are entirely different things”. – t 10-20.
“So time-related overheads costs are by definition not attributable to particular pieces of work. If they were attributable to particular pieces of work they would simply not be in the overhead category at all; they would be in the façade category or the, you know, plasterwork category. So what we’re really saying is that we have to have a certain level of time-related resources which are on-site for a given month whether façade works are going on or whether they’re not or whether mechanical works is going on or whether they’re not. The – the linkage I have drawn between these costs and the mechanical variation is that the period of time that arises due to the mechanical variation is a period of time that would otherwise not be incurred on-site by the [indistinct] and, therefore, it is additional for that reason.
… There would be all sorts of work, I would expect, going on between the dates of October and January which would need to be carried out and would need supervision or management. The whole concept is that but for the [11 August notice] those things would have been carried out and the resources would have been incurred in a different time.” – tt 10-15-16.
3. Reasonably incurred
“[1220] The difficulty with the plaintiff’s proposition is highlighted by the consideration of the onsite labour costs claimed in respect of Mr Meredyth. There is no consideration of what Mr Meredyth was doing on site during this period. He may have been doing work totally unrelated to the Mechanical Variation. He may have been doing a mixture of work and some component may have related to the Mechanical Variation. The plaintiff would only be entitled to the costs in respect of Mr Meredyth if they were reasonably and necessarily incurred by reason of the Mechanical Variation. On the evidence, it is established that he was on site during the period of critical delay. But it is not established that the costs for his labour were “by reason of the Mechanical Variation”.
[1221] On the evidence it is not possible to be satisfied that the onsite overhead costs claimed were reasonably and necessarily incurred by reason of the Mechanical Variation as required by clause 34.9. The plaintiff has not established an entitlement to the costs under clause 34.9 of the Contract. Accordingly, if it is necessary to consider the claim in respect of delay damages, this part of the plaintiff’s claim must fail.”
Overhead costs included in value of variation
Appropriate orders
[1] Under the building contract the superintendent was the principal’s agent, cl 20.
[2] This was apparently by way of a subcontract; Thwaite’s contract was with the respondent’s project manager.
[3] Definition of preliminary design in cl 1 means “the documents stated in Annexure Part K”. In Part K items M00 - M12 are the Thwaite drawings; the Thwaite Mechanical Services Specification October 2014 is a separate item in Annexure K.
[4] (2015) 256 CLR 104.
[5] Complaint 2.1.2, “The alternate VRV system offered by the Contractor is required to meet the performance requirements of the Chilled Water (CW) system”.
[6] For example, complaints 2.2.1 and 2.2.2.
[7] See complaints 2.2.1 and 4.2.
[8] (1859) 1 El & El 977; 120 ER 1177.
[9] (1982) 149 CLR 337, 352.
[10] Above.
[11] (2012) 224 IR 406, 422, [69].
[12] (1937) 59 CLR 348, 356.
[13] [1971] 1 WLR 1381, 1384; [1971] 3 All ER 237, 240.
[14] (1978) 138 CLR 423, 429.
[15] Above, pp 349 and 351.
[16] [1984] 1 Qd R 302.
[17] [1900] AC 182.
[18] [1999] 2 Qd R 152, 154.
[19] There are numerous authorities to the effect that in interpreting either legislation, or a contract, resort to dictionaries is generally unhelpful in a “mature and developed jurisprudence”: SDA v Corporation of the Synod of the Diocese of Rockhampton (2021) 8 QR 440, 449, [10] and [11]; TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim (2016) 91 NSWLR 439, 457, [80] and the authorities there cited; House of Peace Pty Ltd v Bankstown City Council (2000) 48 NSWLR 498, 505, [28].
[20] “Dictionaries are not a substitute for the judicial determination of the interpretation and then construction of statutes and other documents: Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60 at 78 per Isaacs J. The meaning of the words used in a statute or document is not merely the sum of the individual meanings of the words used, ascertained from dictionaries.” – per Mahoney JA in Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541, 560.
[21] We also note that witnesses expert in various aspects of construction gave evidence at the trial as to what they understood by the term performance requirement, and that there was considerable cross-examination of them about this. In our view, that evidence was inadmissible. The words used in the contract ought to have been interpreted in accordance with recognised legal canons. We note that although considerable time was spent, inadmissibly, discussing these matters with expert engineers, the primary judge did not rely upon their views in construing the contract.
[22] (2003) 96 ACSR 640, 663-664, [145]-[146].
[23] Tt 1-43, 2-41. And indeed the 11 August notice relied upon the specification not the drawings.
[24] No others were relied upon by the respondent on appeal.
[25] There are at least some English cases which suggest that notices sent outside business hours are not taken to be received until the next day: Euronav NV v Repsol Trading SA The MT MARIA [2022] 2 All ER (Comm) 65, 74, [28]; Rightside Properties Ltd v Gray [1975] 1 Ch 72, 80; Schelde Delta Shipping BV v Astarte Shipping Ltd (The Pamela) [1995] CLC 1011, 1014-1015.
[26] Wesfarmers Kleenheat Gas Pty Ltd v Elgammal [2006] NSWSC 1248, [8]; Proctor v Chahl [2008] NSWSC 1252, [32]; Kembla Coal & Coke Pty Ltd v Select Civil Pty Ltd [2004] NSWSC 628, [53]ff.
[27] We note that the contract was neither to build the air conditioning system to the Thwaite specification, nor the hotel operator guidelines.
[28] This was an implication from the fact that it was described as a 2 pipe VRF system and that the system would be divided into zones to cater for different heat loads on the building façade.
[29] There is an issue lurking behind this finding. In fact, a finding that an equivalent notice to the 11 August notice would have been issued was necessary in order to make the respondent’s case. It was submitted on appeal that there was no evidence on behalf of the respondent to support a finding that such a notice would have been issued. The question was what inferences from the available evidence could safely be drawn by the primary judge on the balance of probabilities. There was evidence that the respondent called for shop drawings in respect of the air conditioning system on 2 December 2015, 10 December 2015 and 7 June 2016. There is an available inference on the evidence that from December 2015 the respondent would have had Thwaites make a thorough check of the shop drawings and the lack of mode control would have been revealed. If that were the judge’s factual finding it ought to be expressed in the judgment and reasons for it ought to have been given.
[30] Why the short form was used at cl 34.3(d), but not at cl 34.3(f) (a conceptually similar sub-clause) is not readily explicable, except by poor drafting.
[31] See witness statement of Thomas Cook, paragraph 306, and paragraphs 303 and 304 of the appellant’s submissions below.
[32] Elliott v Lawrence [1966] Qd R 440, 444-445; Stockland Property Management Pty Ltd v Cairns City Council [2011] 1 Qd R 77, 99, [55], per Keane JA.
[33] Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430, 442 and 444, and the authorities cited there.
[34] King & Ors v Australian Securities and Investments Commission [2018] QCA 352, [39]ff.
[35] [2017] QSC 85, [657]ff.
[36] For example, Daysea Pty Ltd v Watpac Aust Pty Ltd [2001] QCA 49, [18]-[21].
[37] [1999] 1 AC 266.
[38] [1984] QB 644.
[39] John Bond QC, ‘Has Derek Crouch Risen from the Dead?’ (2014) 33 (1) Arbitrator & Mediator, p 111, 114-115.
[40] Above, p 115.
[41] Above, p 288.
[42] Walton v Illawarra [2011] NSWSC 1188; Republic of Turkey v Mackie Pty Ltd & Anor [2019] VSC 103; SSC Plenty Road Pty Ltd v Construction Engineering (Aust) Pty Ltd & Anor [2016] VSCA 119. Particularly having regard to [75] of that later decision, we do not see that the earlier decision of Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2013) 41 VR 636 has any application to this case, or should be understood as compelling any reasoning contrary to Beaufort Developments.
[43] [1903] AC 426.
[44] [1999] 1 Qd R 1, 13 and 20-21.
[45] (1995) 184 CLR 281, 293.
[46] (2004) 217 CLR 640, 658, [39].
[47] [2021] VSC 849, [623] and [627].
[48] Both parties and both the expert programmers were content to work on the basis that all the revised programs relevant to this issue had been approved by the superintendent.
[49] T 10-18 per Mr Bell. The exact date upon which practical completion might have been achieved as at, say 10 August 2016 was somewhat controversial between the programming experts, but in general terms this proposition was not.
[50] Paragraphs 46-53 of his report, and t 10-35.
[51] Paragraph 48, “The product of this method of analysis is a conclusion as to the likely delay of the modelled delay events on the program/critical path that is most reflective of the contemporaneous position when the delay events arose. This method usually does not capture the eventual actual delay caused by the delay events as subsequent project progress is not considered”; paragraph 49, “Where an EOT application is assessed after completion of the works, or significantly after the effect of an Employer Risk Event, then the prospective analysis of delay referred to in the guidance to Core Principle 4 may no longer be appropriate.” (his emphasis).
[52] Tt 10-35-36, where he acknowledges that it is a “recognised drawback of a prospective approach” that it “does not capture the eventual delay”.
[53] WICET above, [643]. That was the approach taken by the preferred programmer in that case (Mr King, as it happened).
[54] Critical delay is delay to an activity on the critical path, that is, it is delay which will affect the date for practical completion.
[55] Air conditioning was not on the critical path to practical completion on the 18 October program, or those which preceded it.
[56] Mr King was asked to address a hypothetical scenario in which the activity required by the 11 August notice was inserted into the 1 August 2016 program. That scenario showed that air conditioning became critical.
[57] When 32 days is added to Mr King’s 81 days, it yields the figure of 113 days, delay which the appellant was prepared to accept as accurate for the purpose of this appeal.
[58] See the cross-examination at t 10-66 to t 10-74.
[59] The appellant’s air conditioning subcontractors.
[60] Above, at [810] and [812].
[61] “Where the Contractor has been granted an extension of time under Clause 35.5 for any delay caused by an event listed in clause 35.5(b)(i), the Principal shall pay to the Contractor such extra Direct Costs as are necessarily incurred by the Contractor by reason of the delay and for on-Site overheads attributable to the delay valued by the Principal’s Representative under Clause 40.5. The Principal’s Representative’s valuation shall exclude any off-Site overheads or profit.” (underlining added).
[62] See the statement of Peter Lincoln and part 4.2.2 of Mr Bell’s report.
[63] There were other items deducted by Mr Bell, but they were not contentious and it is not necessary to mention the details of them.
[64] See Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd (1999) 66 Con LR 119, 134, [42].
[65] Pages 14 and 15 of the joint report.
[66] Pages 15 and 16 of the joint report.
[67] Page 10 of the joint report.
[68] The appellant’s original claim, based on Mr Bell’s 117 day EOT, was for delay damages from 4 October 2017 to 28 January 2018. In contrast Mr Hardiman’s report identifies the period of delay identified in Mr King’s report, which was 81 days “ending on either 16 January 2017 (assuming an adjusted date for practical completion of 27 October 2016) or 30 January 2017 (assuming an adjusted date for practical completion of 10 November 2017)” – paragraph 6.2.41.
[69] Thiess Watkins White Construction Ltd v Commonwealth (1998) 14 BCL 61, 67, per Giles J cited at [807] of WICET, above; Ascon Contracting (above), [43]. When there was authority on the point, it is a shame that Mr Hardiman was instructed otherwise. It is also undesirable that he would be given an instruction as to this matter, rather than simply be asked to express a view within his expertise.
[70] Tt 10-14-15.
[71] Robert J Gemmell, Quantification of Delay and Disruption in Construction and Engineering Projects Lawbook, 2nd ed, 2021, p 558.
[72] We assume these documents were disclosed. Perhaps some of them such as work diaries, timesheets, invoices etc may not have been disclosed because they were primary, or source, documents and thus excluded by a disclosure protocol adopted by the parties. Even if that were so initially, if an expert reported to his instructing solicitors that he required the documents, one would hope that they would have been disclosed by the appellant’s solicitors. They certainly would have been ordered to be disclosed on an application, had there been a real demonstrated need for them.
[73] Page 8 of the joint report.
[74] In saying this we would not expect Mr Hardiman to give a view as to the construction of the contract. He might however have expressed a view as to the factual overlap, or otherwise, between items allowed in the 8 per cent uplift and the items which the appellant claimed as delay damages.
[75] Mr Watson’s report; t 10 – 29, and the respondent’s submissions on trial, paragraph 271.
[76] tt 10 – 30 – 32.
