Northbuild Construction Pty Ltd v McGrath Corporation Pty Ltd
[2002] QDC 202
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- Unreported Judgment
- Northbuild Construction Pty Ltd v McGrath Corporation Pty Ltd[2002] QDC 202
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Northbuild Construction Pty Ltd v McGrath Corporation Pty Ltd[2002] QDC 202
Northbuild Construction Pty Ltd v McGrath Corporation Pty Ltd[2002] QDC 202
DISTRICT COURT OF QUEENSLAND
CITATION: | Northbuild Construction P/L v McGrath Corporation P/L [2002] QDC 202 |
PARTIES: | NORTHBUILD CONSTRUCTION PTY LTD Appellant v McGRATH CORPORATION PTY LTD Respondent |
FILE NO/S: | 242/02 |
DIVISION: | Appeal |
PROCEEDING: | Notice of Appeal |
ORIGINATING COURT: | Brisbane |
DELIVERED ON: | 25 July 2002 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 17 July 2002 |
JUDGE: | Alan Wilson SC, DCJ |
ORDER: | Appeal dismissed |
CATCHWORDS: | APPEAL – Appeal from Queensland Building Tribunal – whether Member erred in analysis of content – appellant claiming variations in contract in reliance on its own pre-contractual calculations – no error by Member Queensland Building Tribunal Act Queensland Building Tribunal Act 2000 Queensland Building Services Authority Act Bank of Australasia v Palmer (1897) AC 540 at 545 Pointon v Redcliffe Demolitions Pty Ltd (2002) QDC 131 |
COUNSEL: | Mr R S Jones for the appellant Mr F G Forde for the respondent |
SOLICITORS: | Lambert & Ho for the appellant Nicol Robinson Halletts for the respondent |
- [1]This is an appeal from a decision of Mr P. Lohrisch, a Member of the Queensland Building Tribunal delivered after a hearing over five days in September, 2001. It is brought to this court under s. 92 of the Queensland Building Tribunal Act. The nature of an appeal under that section was considered by McGill SC, DCJ in Pointon v Redcliffe Demolitions Pty Ltd (2002) QDC 131, his Honour saying at para. 48:
“Consideration of the various authorities to which I have referred, however, and in particular the terms of s. 92 as a whole, finally leads me to the conclusion that it is really an appeal by way of rehearing in the usual sense. Accordingly the onus is on the appellant to show that there was something wrong in the decision. And further, assessment of credibility of witnesses, the appellant will face the particular difficulty identified by the High Court in overcoming the advantage of the Tribunal which has seen and heard the witnesses. In this respect the applicable approach in the present case in that in Warren v Coombes (supra).”
- [2]The hearing before the Member involved this appellant’s claims, some 22 in all, for additional payments for various items, and a counter claim, by the respondent, for liquidated damages, and a refund. The Member summarized his findings in respect of these claims in a Schedule at pp 23 and 24 of his Decision, which is attached to the Notice of Appeal filed in this court on 21 January 2002.
- [3]The appeal concerns only two of the appellant’s original claims: the first, described by the parties in their submissions as “variation 64” concerned a claim for additional foundation work in the sums of $23,777.58, which the member dismissed; and the second, a claim for $13,676 for “basement ventilation” which the parties called “variation 10”.
- [4]The parties filed outlines of argument before the hearing and the respondent filed an amended outline, and supplementary submissions (without objection) during it. Counsel for each (Mr Jones for the appellant, and Mr Forde for the respondent) made oral submissions in support of those outlines.
Background
- [5]In 1998 the respondent intended developing property at Brunswick Street, New Farm and put the construction of the development out to tender. The appellant initially delivered a tender, under a lump sum contract, at $3.6 million. Further discussions and negotiations took part between their representatives as a consequence of which, relevantly here, RL levels were raised by 500 millimetres and the appellant’s tender figure was reduced to $3.12 million. The parties signed the contract at that figure on 18 November 1998 and it is comprised of a number of documents including a lump sum contract for building works with administration by a proprietor, special conditions, revised drawings, specifications, notices to tenderers, and a report prepared by Soil Surveys.
- [6]Special conditions inserted into the contract before signing confirmed the levels were to be raised by 500 millimetres (clause 9) and rock excavation was shown as PC item in the sum of $10,000 (clause 13).
- [7]Initial works involved excavation of the site on 25 November 1998, after the contract had been signed. That work was performed by the appellant’s sub-contractor, L & D Contracting which had quoted to perform excavation work “other than rock” for the sum of $39,151, and to provide services for “in rock” excavations. That contractor provided a further quote in the sum of $85,000 on 27 November 1998 for excavations including rock, but excluding back filling, or additional concreting resulting from “overbreak”. It was based on excavations going down to the levels specified in the original plans. A further quote, in an amount $9,000 less, was delivered by that contractor on the basis the RL levels were raised by 500 millimetres. The appellant instructed the respondent to accept that quote in the sum of $76,000, and it did so.
- [8]The appellant’s claim of $23,777.58 concerns the quote from that subcontractor, and the associated work including filling and additional concrete resulting from overbreak but the respondent does not, now, challenge the Tribunal’s assessment of quantum of that claim at $21,806.58. The Member determined that these works formed part of the original scope of the contracted works and did not amount to a variation. The appellant claims this is wrong.
- [9]As to Variation 10 the appellant claimed that pre-contract discussions and negotiations identified savings which would arise in respect of a ventilation system which were instrumental in the reduction of the appellant’s tender from $3.6 million to $3.12 million; but, that during the work itself it became apparent that the raising of the building by 500 millimetres was insufficient to achieve savings (by the installation of ventilation voids, and the use of natural ventilation) which were originally envisaged. The ventilation system was, then, revised, at additional cost to the appellant, which it was properly entitled to claim .
Variation 64
- [10]The Member’s findings touch, relevantly, upon this matter at paras. 3-18:
“3. These costs relate to additional works in the form of rendering, extension of stairs, provision of waterproofing, additional foam works and concreting made necessary by the raising of the construction by 500mm.
- It is clear that the works of the type described were already part of the scope of works envisaged by the Applicant’s quotations, and were not PC or PS items.
- There were significant negotiations both before the Applicant’s first quotation, and between the Applicant’s first and second quotations, the latter period being with a view to reducing the Applicant’s price to meet the Respondent’s restraints. That is not an unusual situation and, in normal circumstances, one would expect matters discussed and agreed during such negotiations to merge in the resulting contract.
- Indeed, many of such matters discussed and agreed during the period between the Applicant’s two quotations were specifically provided for in the contract (the special conditions).
- In my view, it would have been consistent to have similarly provided for this matter in the contract if indeed, as Mr Boddington suggested, Mr Spark, the Respondent’s general manager, agreed that any such additional costs would form part of the PC dealing with rock excavation. Frankly, if the item was to be specifically included in the contract, I would have thought it entitled to either a separate short clause (similar to the manner in which other like matters are addressed in the contract), or some comment in clause 9 dealing with the raising of the premises. It is hardly a matter incidental, in my view, to the rock excavation. In the circumstances I am not satisfied that there was any such concluded agreement as suggested by Mr Boddington.
- In any event, I agree with the Respondent’s submission that there is no inherent ambiguity in the contract in respect of this matter, such as might exclude the application of the parol evidence rule. Indeed, the application of the rule is reinforced by the fact that this is effectively a commercial transaction between two experienced commercial entities dealing at arm’s length. Further, the Respondent should have been entitled to assume for budgetary purposes that the written contract contained the costing of all matters (other than the PC/PS items) necessary to complete the structure. To embark upon an exercise as what has, and has not, been included, and what should, and should not, have been included, in a contract which, on its face, is very detailed, particularly with respect to its special conditions, appears to me to involve an exercise, in all the circumstances, completely at odds with the parol evidence rule and its rationale.
- In the circumstances then, there is no contractual basis for this claim, as the works must be regarded as having been included in the scope of works under the lump sum contract amount of $3,120,000.
Excavation in rock – variation 64 – additional
- The Applicant says that the quantum of this claim is in fact $21,806.58, which represents the above mentioned figure of $23,777.58, less an amount of $1,971 on account of six (6) pump visits.
- In any event, the claim relates to backfilling or additional concreting arising from what is called “overbreak” which occurs during the excavation of rock such as was on this site. As explained in evidence, the overbreak results from the rock, when excavated, breaking off unevenly, so to speak, causing areas in which the excavation is greater than what is necessary for the purposes of construction. Before the construction can proceed then, the unnecessary voids in the excavation need to be backfilled and/or concreted. The evidence is that this is a normal occurrence when excavating into rock.
- Mr Pearse, a witness for the Applicant, agreed that, upon proper examination of the survey report, the raising of the levels by 500 mm meant that the foundations would still be in rock rather than on rock. I accept Mr Pearse’s evidence on this matter, as it was clearly consistent with the evidence of all witnesses (save perhaps that of Mr McGrath) namely that, by raising the building 500mm, this would reduce, rather than eliminate, the need for rock excavation. Indeed, this is recognised by the specific PC allowance for rock excavation in the contract’s special conditions.
- Accordingly, it must always have been in the contemplation of the Applicant that there would be expense associated with overbreak. Indeed, that is contemplated in the specification (Exhibit 12) at paragraph 302J (page 26) which is in the following terms:
“302. Excavations generally
J. Where excavation exceeds the required depth, fill back to correct depth with material as follows:
- - below slabs on ground; hard core
- - below fittings, beams and other structural elements, concrete of strength equal to the structural element, minimum 15Mpa.
- - In service trenches; 1; 2; 4 concrete/approved compacted pipe bedding material.”
- Further, Mr Boddington agreed in evidence that, when assessing the effect upon the excavation of raising the construction 500mm, he did not need to make any allowance for overbreak. The inference is that this was on the basis that it was expected that these works were always needed, regardless of the amount of rock that needed to be excavated.
- Indeed, paragraph 302J of the specifications itself starts with the words “where excavation exceeds the required depth ...” Two comments can be made about this:
- The obligation is, on the face of the paragraph, extra to the excavation, in the sense that work is contemplated after the “rock” excavation has been completed and not as part of the excavation works.
- Assuming that paragraph 302J includes “overbreak”, the obligation in paragraph 302J clearly extends not only to overbreak, but any other circumstance where, for example, the subcontractor may have excavated more than the required depth. It could not be suggested that the Respondent could be liable for any such “over-excavation”. That would be a matter between the Applicant and its subcontractor.
- I should comment on two further matters:
- This item was originally claimed and pleaded as a variation, although the Applicant now seeks to include it in the PC item for rock excavation. The claim then falls to be determined in accordance with the interpretation of the form in which that PC item appears in the special conditions to the contract. A proper interpretation of that special condition then, taken with the specifications (item 302J) is, in my view, that the works the subject of the Applicant’s claim under this item are within the Applicant’s scope of works under the contract, as it is defined in the specifications, and are not included in the works envisaged in the subject special condition, namely rock excavation.
- The fact that the subcontractor excluded the matter of overbreak from his subcontract with the Applicant cannot affect what is the proper interpretation of the contract between the Applicant and Respondent. This is the more so when the Respondent specifically approved (pursuant to clause 10.7 of the general conditions to contract) the qualified quotation of the subcontractor concerned with the excavation. In any event, on one view, the subcontractor in his quotation (by excluding these works) might well have been saying, very specifically, that the works were not part of the work, in the form of excavation, that he was undertaking.
- For reasons noted, I accept the Respondent’s submission that the works have been separately identified in the contractual documents (the specifications) as different to the excavation of rock subject of the PC allowance in the special conditions.
- In those circumstances, the additional foundation work in respect of which the Applicant claims is not claimable as part of the PC allowance for rock excavation, nor is there any other specific basis upon which it can be claimed over and above the lump sum contract amount of $3,120,000.”
- [11]The appellant says, and it is not disputed, that the excavation work carried out by its subcontractor L & D Contracting caused “overbreak” which had to be treated. In its own calculations leading to its tender of $3.12 million the appellant had allowed itself $50,000 for the costs of excavation and all associated work. That figure was less than the cost, to the appellant, of its subcontract with L & D and the cost it incurred, later, treating the overbreak. The excess, the appellant contends, is properly charged to the respondent because it directed the appellant to accept L & D’s quote, an act which constituted a variation to the earlier contract and, therefore, superseded Item 302J of the specification. Hence, the appellant argues, the Member erred in the conclusion set out in his Reasons at paras. 15-18.
- [12]It is clear that before the appellant and the respondent entered into their contract it had been agreed the height of the building would be raised 500 millimetres. This appeared in the contract as Special Condition No. 9. The contract also included the specifications: Affidavit Beecroft para. 20 and Annexure “AMB 6”. In the contract itself the scope of the works to be undertaken in respect of site preparation and excavation appears at p. 24:
“101 Scope
The work of this section comprises but is not limited to excavation, disposal of surface excavated material both on and off the site, supply of compaction and filling material and the preparation necessary to bring the areas to correct shape and level prior to building construction. Remove any existing slabs and other structures not required to prepare the work.”
Clause 302J contains, as the Member noted, the following:
“302 Excavations generally
...
J Where excavation exceeds the required depth, fill back to correct depth with material as follows:
- [13]The respondent contends that in light of these terms, and the condition in the sub-contract with L & D that it did not include “overbreak” work, the appellant always knew its own internal calculations might be exceeded and, if it did nothing, must bear that cost as part of its lump sum contract charge of $3.12 million. In addition, the respondent contends, Clauses 5.3.1 and 5.3.3 require any instructions from the proprietor (respondent) to the builder (appellant) be in writing and within the general scope of the works contemplated by the agreement and, if the respondent considers any such instruction involves an adjustment to the contract, it must give written notice of the “contract sum adjustment”. In the further alternative, the respondent contends there was no consideration for the variation alleged by the appellant.
- [14]As the respondent’s oral and written submissions (paras. 24-30) show, the appellants claim appears to have its basis in an error made by one or more of its representatives concerning the effects of raising the RL levels by 500 millimetres which led to a belief on their part that foundations would be on, rather than in rock and no problems like overbreak could arise; but, as the respondent’s references to the evidence of those representatives show, the error did not involve any misrepresentation or deception or other inappropriate conduct on the part of the respondent, or its representatives. Indeed, the contract itself contained a PC allowance for rock excavation, in Special Condition 13; and, that expectation is also addressed in Item 302J (supra).
- [15]I am not persuaded the Member was wrong, for these reasons:
- (a)That the analysis of the contractual terms including, in particular, paragraph 302J of the specifications at paragraphs 15-18 of the Reasons is, with respect, clearly correct;
- (b)The respondent’s direction to accept a subcontractor’s quote does not amount to a variation of the scope of the works, as defined in the building contract; and, could only do so if the appellant had acted in accordance with Clause 5.3.3., which it failed to do;
- (c)The “consideration” upon which the appellant purports to rely for the alleged variation is illusory and, in effect unilateral; i.e., it relies upon an alleged “credit” to the respondent which occurred, however, only in the appellant’s own calculations for excavation costs which it made in the course of its determination to reduce its tender price from $3.6 million to $3.12 million. In truth, this is neither consideration nor benefit flowing to the respondent which remained liable to pay the contract price.
Variation 10
- [16]The learned Member’s determination is as follows:
“38. The Applicant’s first tender was unsuccessful. Discussions then took place involving the Applicant’s estimator, Mr Beecroft, and the Respondent. Areas in which savings could be achieved to meet the Respondent’s budgetary con straints were discussed.
- In particular, what was discussed was:
1.
- Raising the construction 500 mm.
- Reducing the PC allowance for rock excavation to $10,000.
- Revising and altering the designed ventilation system to the basement –
- (a)to incorporate a greater amount of natural ventilation through large voids in the basement walls; and
- (b)reduce the resultant necessary ventilation system.
- For the purposes of paragraph 3, the Applicant would, through its mechanical ventilation subcontractor, attempt to provide the Respondent with cost savings in the vicinity of $10,000.
- For the purposes of paragraph 3 the Applicant would attempt to provide cost savings on account of the reduction in block work (because of the need for large voids) of $6,893.
- A prime cost of $168,000 was allocated to the windows.
- The Applicant ostensibly went away to rework its tender, no doubt with the assistance of its mechanical ventilation subcontractor.
- The revised tender lists some eight items where savings could be made and, relevantly, included the following:
‘2. The FFL of the basement is raised 500 mm in an effort to reduce rock excavation and mechanical ventilation.
- We have redesigned the mechanical ventilation to the basement based on larger clear air openings being provided in the external walls ...
- The Rock PC allowance is reduced to $10,000.”
- The revised tender amount was $3,120,000.
- The contract was entered into on the basis of this revised tender amount of $3,120,000. The contract documents:
- In the special conditions provided – a PC allowance for rock excavation of $10,000.
- In the specifications provided:
(i) at page 117 clause 1.01 -
“1.01 – Scope
Design, fabricate, supply, install and test a complete air distribution and associated exhaust system duct work consisting of but not limited to:
...
Mechanical exhaust system to carpark level”
- (ii)Under ‘mechanical services” specification -
(a) ‘1.01 EXTENT OF WORK
Provide airconditioning and mechanical ventilation to the proposed apartment building as shown on the drawings and described herein.
The contract includes the supply, delivery, installation, testing, commissioning, servicing, routine maintenance, defects rectification and provision of As installed drawings and operation and maintenance manuals of all work and equipment to the intent of the specification and to the approval of the superintendent and as follows:
...
(c) the following ventilation systems
Lift, motor room ventilation
Carpark ventilation (four systems)’
(b)Later in the ‘mechanical services specification’, specifying certain matters in respect of carpark exhaust systems.
- make no specific reference to other items subject of the savings referred to in the Applicant’s second tender.
- On the face of the contract:
- (i)The Applicant’s scope of works clearly includes provision of a mechanical ventilation system to the carpark.
- (ii)Reduces the contract sum to $3,120,000 from the original tender of $3,600,000.
- (iii)Presumptively, and by inference, takes account of the other savings reducing the tender.
- The Applicant’s case is that, notwithstanding the above, it was agreed, but never reduced to written form by the parties:
- (a)to delete the requirement for mechanical ventilation;
- (b)to install voids in the basement wall; and
- (c)the risk of not being able to install voids, and therefore the deletion of the need for mechanical ventilation, lay with the Respondent.
- The Applicant’s claim then reflects the cost of the mechanical ventilation system actually installed.
- The Respondent’s case is that the agreement was per the written contract, and that both parties anticipated further savings in respect of the ventilation system.
- I must say that, without the parol evidence rule, an objective view of the
documents and available evidence, to which I have referred, appears to me to favour the Respondent’s position.
- Nonetheless, the contract in its terms is unambiguous and complete. The
Applicant’s scope of works includes the installation of a mechanical ventilation system. That is not subject of a PC or PS allowance in the contract. Such a system was installed by the Applicant. There is no writing to suggest that this obligation was not the Applicant’s. The Applicant in fact makes specific reference in its revised tender to redesigning the mechanical ventilation system to the basement based on larger openings and external walls.
- In my view, the Applicant’s stated position finds no logical support in
the documentation. In my view, this is the situation where the parol evidence rule applies. Moreover, there are no circumstances, with which I am satisfied, which might suggest that there is any obvious injustice to the Applicant, such as might justify the application of my power pursuant to section 93(2)(e). In the circumstances the claim is dismissed.”
- [17]The appellant contends the pre-contractual discussions and negotiations between the parties identified potential cost savings associated, in particular, with mechanical ventilation and connected works. Again, the appellant’s own views about these matters were instrumental, it is said, in its decision to reduce its tender price to $3.12 million and “by necessary implication” some reduction in those ventilation costs was properly anticipated. During excavation works, however, it became clear that some costs which it was believed would flow from the use of natural ventilation would not, in truth, be available. This information was passed on to the respondent and all parties and consultants conducted a review resulting in a revision of the ventilation system. The consequence, the appellant alleges, is that it incurred further costs of $13,676.
- [18]Much the same issues arise here as occurred in respect of Variation 64. The appellant’s assessor Mr Beecroft relates post-contract discussions involving potential savings to the respondent flowing from a re-design of mechanical ventilation and, in truth, that system was smaller and less costly than was originally envisaged. If, however, the builder had not been obliged to install any system of mechanical ventilation there would have been an adjustment to the contract sum, to the respondent’s benefit: Clause 10.6.1. As the appellant did in fact install mechanical ventilation, the respondent was not entitled to advance a claim of that kind. At the same time, however, nothing in the contract entitled the appellant to recover an amount in addition to the contract sum when, as appears, it simply complied with the terms of the contract itself – Clause 101, s. 1700 on p. 117 of the Specifications (Mr Beecroft’s affidavit, Annexure “AMB 6” clearly establishes the appellant’s responsibility for the design, fabrication, supply and installation of a complete air distribution and associated exhaust system duct work consisting of but not limited to ... mechanical exhaust systems to carpark level.) Further, the contracting drawings clearly specify a system of mechanical ventilation to the basement area. The costs of that ventilation were neither a prime cost, nor a provisional sum but, rather, form part of the $3.12 million lump sum payable under the contract.
- [19]Section 0700, Clause 3, contains the usual stipulation requiring (and assuming) that the tenderer has informed itself and its sub-contractors of all information necessary to tender accurately and:
“B Examined information relevant to the risks, contingencies and other circumstances having an effect on his tender and which is obtainable by the making of enquiries;
C Satisfied himself as to the correctness and sufficiency of his tender and that his tender covers the cost of complying with the obligations of the tender documents and of matters and things necessary for the due and proper performance and completion of the work described in the tender documents.”
- [20]Again, as with Variation 64, the appellant’s contention that the respondent was the beneficiary of costs savings in respect of the contract price is, on examination, illusory. The appellant’s representatives calculated the cost for the design, installation etc. of ventilation including the basement ventilation system and it is included in the contract price of $3.12 million, and not as a PC or PS item. The fact the appellant’s internal calculations contained an under-estimate of the final cost (or an over-estimate of the savings it believed might flow from a smaller and less expensive mechanical ventilation system) do not create a benefit to the respondent, or consideration for a variation in the contract.
- [21]It was also contended, albeit faintly that in the circumstances surrounding this claim the Member ought to have exercised his power under s. 95(4)(d) of the Queensland Building Services Authority Act to avoid an “unjust contractual term, or otherwise to vary the contract to avoid injustice”. That legislation applied although, in para. 50 of his Reasons, the Member referred to the different wording, although for similar relief, appearing in s. 93(2)(e) of the Queensland Building Tribunal Act 2000. The misdirection is not, in my opinion, germane. Nor, in my view, would either attract relief for the benefit of the appellant. There is no suggestion the respondent led the appellant into error in any way. The appellant has not attempted to establish some injustice by, e.g., advancing evidence as to the financial circumstances of the whole contract including its profit derived from it (if any). An attack was also mounted upon the Member’s reference to the parol evidence rule, as this claim purported to rely upon conversations alleged to lead to variations in the contract after it was executed which were not, themselves, in writing: Bank of Australasia v Palmer (1897) AC 540 at 545. The application of that rule would, in its face, be appropriate in the face of this claim but in any event the Member did not, apparently, exclude any evidence from the hearing and, as para. 48 of his Reasons show, he would have reached the same conclusion without the application of the rule.
- [22]The appeal is dismissed.
- [23]I will hear further submissions about costs.