SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO/S: | |
Trial Division | |
PROCEEDING: | Application |
ORIGINATING COURT: | |
DELIVERED ON: | 24 February 2003 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 7 February 2003 |
JUDGE: | Holmes J |
ORDER: | I order that the following parts of the counter-claim be struck out: sub-paragraph 8(a), paragraph 9 insofar as it is expressed to rely on sub-paragraph 8(a), sub-paragraph 15(b), sub-paragraph 17(a) and paragraph 18 insofar as it is expressed to rely on sub-paragraph 17(a). |
CATCHWORDS: | PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PRACTICE UNDER RULES OF COURT – PLEADING – DEFENCE AND COUNTERCLAIM – whether part of counterclaim should be struck out –whether pleading could be supported by reference to particulars – whether abuse of process CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – OTHER MATTERS – meaning of express term – whether “resolve conflicts between brief and budget” obliged plaintiff to resolve conflict between design and cost |
COUNSEL: | Mr Couper SC for the applicant |
SOLICITORS: | Minter Ellison for the applicant |
The application
[1] As part of a larger application the applicant (the plaintiff in the proceedings) seeks the striking out of parts of the respondent defendant’s counter-claim, arguing that a number of the allegations in it are not supported, and indeed are contradicted, by the documents the latter has particularised as containing the agreements between it and the applicant.
The pleadings
[2] The applicant is in the business of providing architectural services. It pleads that under four successive contracts (entered in December 1997, November 1998, February 1999 and June 1999) it was engaged to provide such services in relation to the respondent’s refurbishment of its Mt Isa clubhouse. It claims damages of $278,529 for breach of the last such contract, which it describes as the “contract for additional works”, and makes alternative claims on a quantum meruit and an unjust enrichment basis. The respondent in its defence denies the existence of the contract for additional works and says that the applicant was required to perform additional work under the parties’ earlier agreements, which included an implied term that it would undertake any revision resulting from inadequate design by it. The defence pleads a further implied term that the applicant “would provide services to the standard of competent architects and project managers with particular expertise in the club industry”.
[3] The respondent also brings a counter-claim in which it alleges, inter alia, that its initial agreement (“the design agreement”) made between it and the applicant in December 1997 and a following agreement (“the redesign agreement”) made in February 1999, both contained express terms requiring the applicant to ensure that the design brief met the respondent’s budget; or alternatively, that in each case the applicant’s duty of care to the respondent imposed such obligations on it. The applicant’s breach of the express term in the design agreement requiring it to reconcile the design brief with the budget for the work, or its breach of the implied term as to its competence or its negligence, led, it is pleaded, to damage of $226,595.00 representing the fees paid to consultants, including the applicant, for revised design documentation. It is alleged that a similar failure by the applicant to reconcile the brief for the redesign agreement with the budget led to a cost over-run of some $2.9 million. It is the paragraphs supporting those allegations which the applicant seeks to have struck out.
The design agreement
[4] The respondent pleads that the design agreement contained an express term that “the plaintiff would develop the design of the club house by … resolving conflicts between the brief and the budget of the Redevelopment”. The design agreement is particularised in the counter-claim, and in further and better particulars of it, as contained in the following documents:
[5] The first of the documents, the April outline, is described in its introduction as a “submission” which outlines the applicant’s “professional approach to club design and construction”. Its professional services are described as including “project management” and “cost planning and control”. In an appendix relied on by the respondent, under the heading “Project Management”, the various functions of project management are outlined. In relation to “develop design”, in details of services to be provided, appear, inter alia, the words “resolve conflicts between brief and budget (if necessary)” and “Review Budgets and Scopes of Work and direct project team.” A separate section of the appendix, headed “Cost Planning and Control”, deals with the monitoring of expenditure against budget during each stage of the project. It notes that the applicant can employ quantity surveyors to meet this responsibility.
[6] The design brief, it is pleaded and particularised, is to be found in design criteria set out in the “Proposed Clubhouse Redevelopment” document of August 1997 and a sketch plan annexed to it. The design criteria are, as one would expect of a brief, a list of the respondent’s requirements:
- coffee shop
- bistro
- buffet
- a-la-carte restaurant
The “sketch plan” is actually a set of drawings – a site plan and floor plans - showing the existing building and the proposed extensions, together with some illustrations depicting various perspectives of the redeveloped clubhouse.
[7] The only budget referred to in the April outline is the respondent’s “target project budget” of $6,000,000. The counter-claim, however, while not referring to the target budget, pleads a budget arrived at by 16 October 1998, of $9.4 million, with a construction component of $8.1 million. That was a budget, it is apparent from the material, consisting of APD’s estimates of the project’s costs.
[8] The undertaking in the April outline to “resolve conflicts between brief and budget”, Mr Morris QC for the respondent argued, indicated that project management involved the obligation pleaded. The respondent’s letter of 11 December 1997 confirmed the engagement of the applicant to proceed with “Development Design and Construct Documentation” as per an attached schedule, which included project management as a service to be provided. Thus there was an onus on the applicant to ensure that its design could be achieved within the respondent’s budget. That was in the first instance the respondent’s target budget of $6 million, which after later cost planning was expanded to a budget of $9.4 million, with an $8.1 million construction component. But tenders for the construction component came in at amounts between $10 million and $11 million; it follows, the respondent pleads, that the applicant failed to reconcile the design brief with the budget.
[9] Mr Couper SC for the applicant, on the other hand, emphasised the words “if necessary” in the passage relied on, and pointed to subsequent documents which, he said, demonstrated that budget matters had been placed by the respondent under the control of a separate entity, APD Partnership. The first of those documents, entitled “Mt Isa Irish Association Proposed Club House Redevelopment”, prepared in August 1997, notes in its introduction the contributions of various professional consultants, including the applicant, whose work is summarised as “project management, architecture and interior design” and APD Partnership, whose involvement is listed as “Cost Planning”. Later in the same document in a section entitled “Budget Estimates” there is a reference to the budget’s being based on items including “Construction Budgets provided by APD Partnership” and “Project Leaders Australia fees as previously agreed with the club and reduced for cost planning now being undertaken by APD Partnership”.
[10] Appendix “A” to the document consists of the construction budgets compiled by APD Partnership. It sets out a list of cost estimates for various features of the refurbishment. A further appendix to the document, entitled “Project Leaders Australia Professional Fees”, notes that the applicant would normally undertake project management, architecture, interior design cost planning/cost control and furniture co-ordination; but goes on to point out that there will be a
“reduction of services as APD Partnerships will now be engaged independently by the club in respect of cost planning and control”. Part of the appendix is an annexure headed “Fee Comparison For Project August 1997” setting out the value of services to be provided. Against the words “Cost Planning/Cost Control” under the heading “Value” appear the words “not included”.
[11] Mr Couper also referred to a letter of 20 May 1997 from the respondent to the applicant, which did not form part of the particularised documents. It advised the applicant that the respondent’s committee had appointed APD Partnership as independent cost managers for the development project.
[12] Mr Morris, on the other hand, relied on what appeared to be a file draft of an undated letter of 1997 from the respondent to the applicant. It did not form part of the particularised documents. It advised of the appointment of APD Partnership as independent cost managers but went on to say:
“It is not intended that APD’s cost management role should affect Project Leaders Role in the management, design and contract administration of the project. However, on all matters relating to costs on the project the APD Partnership are to be consulted prior to any decisions being taken.”
[13] It is plain from the material to which the parties drew my attention that APD Partnership was given control of cost planning. (Paragraph 3 of the counter-claim, which alleges the respondent’s reliance on the applicant for advice and services is, to the extent it includes cost planning as such an area, in conflict with the particularised documents.) The question is whether there existed, or whether it is at least arguable that there existed, as the respondent contended, an independent obligation in the applicant to ensure its design was within budget. Mr Couper argued that the consequence of assignment of costing responsibilities to APD Partnership was that the applicant no longer had any role in respect of the budget; it was the function of APD to cost accurately so as to ensure that the design fell within budget. Mr Morris, on the other hand, said that the project management of the redevelopment, described in the applicant’s April outline as including resolution of conflicts between the brief and budget where necessary and the review of budgets, was to be regarded as distinct from cost planning and control, dealt with separately in that outline.
The redesign agreement
[14] The redesign agreement is said by the counter-claim to be evidenced by documents described as:
Those documents are also relied on in the further and better particulars as containing the express terms of the redesign agreement.
[15] The first of those documents, the April outline, contains the already-discussed reference to resolution of conflicts between brief and budget, if necessary. The next document, “The Mt Isa Irish Association – Alterations to Club Premises Tender Report and Recommendations” of January 1999, was relied on by Mr Morris as demonstrating that the applicant undertook to review tenders for the project to ensure that the design could be achieved by a tender process within budget. The document in its first section undertakes a comparison of the tenders received. A second section, headed “Review of Budgets”, explores the differences between the tenders and the APD construction budget As Mr Couper pointed out, it commences:
“APD Partnership have prepared cost plans and budget estimates throughout the design process”.
It goes on to deal with a discrepancy between “the construction budget as established by APD in October 1998” and the lowest tender of 1.66 million. The page concludes:
“The club may chose [sic] to address these matters with their cost planners, especially in view of the fact that considerable redesign costs are now required to be expended in order to advance the project.”
An attachment to that document is a letter of 12 October 1998 from APD Partnership to the respondent. It refers to the firm’s July cost plan showing a project budget of $9.8 million, which is to be updated on the imminent issue of a Bill of Quantities, and refers to a number of features emerging during design documentation likely to add to cost. The letter concludes:
“We shall proceed to update our Cost Plan as soon as the Bill of Quantities is complete and the design issues are resolved.”
[16] A third section of the document records proposed amendments to the design in order to “bring costs down to an acceptable level”. The fourth section, “Negotiations With Tenderers” sets out the detail of revised tenders received. It refers to revised tenders, including the lowest set of revised costings, from Hutchinson Builders, information which has “been forwarded to APD Partnership for their review”. Section 5, headed “Next Steps” proposes that Hutchinson Builders be negotiated with
“to ensure that their final price is acceptable – this can be independently confirmed by APD Partnership”.
[17] The last document particularised by the respondent, the letter from the respondent to the defendant of 11 February 1999 refers to the over-run in tenders and confirms “the establishment of a firm budget price” for the project at 9.5 million. It does not refer to any particular role taken by the applicant. However, Mr Couper said, another document, a letter of 23 February 1999 from APD Partnership to the applicant made it clear that APD was responsible for bringing the project within budget. That letter described APD as providing “pre-construction services” which were:
And “construction services” consisting of:
The letter goes on to confirm that “the project will not go to construction until it is fully documented with a fully priced Bill of Quantities”.
[18] In addition to the particularised documents, Mr Morris relied on a letter dated 17 March 2000 from the applicant, under the hand of a Mr Helmold. The letter expresses the view, after a review of the available documentation, that while APD initially had responsibility for cost control, the applicant had the major responsibility for cost control in respect of the redesign design development. That view seems to be based on apparently different procedures during that period: the writer had seen no further estimate documents produced by APD during the redesign, while revised estimates by Hutchinson Builders were reviewed by the applicant before being sent to APD. Those observations may well be accurate; but I doubt that the letter-writer’s conclusion, which is patently no more than his analysis of the available documentation is admissible.
The applicant’s obligation on the original design
[19] The starting point for the pleaded duty to resolve conflicts is the April outline. The respondent pleads an express term in the design agreement that
“the plaintiff would develop the design of the Clubhouse by:
A.resolving conflicts between the brief and the budget of the Redevelopment”.
That does not, in my view, accurately represent what is undertaken in the outline. When one takes the reference to resolution of conflict in context, it is apparent that what the applicant was setting out were the project management tasks to be performed at the design development stage, rather than the means by which the design would be developed. And it is to be emphasised that the conflicts to be resolved were those between the design brief -that is, the respondent’s design criteria, and the applicant’s sketch plan which incorporated them, not the designs ultimately produced - and the budget, not the actual costs of the project. (The applicant did not, it must also be noted, undertake to identify potential conflicts or to avoid them).
[20] The obvious meaning of the word “budget” as used by the Applicant in the outline the “target project budget” of $6,000,000 to which it specifically refers. Thus, if on costing it proved that the respondent’s design brief could not be achieved within that budget, the applicant would solve the problem of the disparity. That might be done by persuading the respondent to omit some of its design requirements, or by adjusting the budget to meet the existing requirements. That in fact happened: the budget was enlarged to reflect APD’s costings of the design requirements. On that reading, the applicant’s obligation to reconcile brief and budget was met when the respondent accepted the adjustment of its target budget so that the design brief could be met.
[21] But even if one instead takes the relevant budget the subject of the applicant’s obligation to be, as pleaded, the “budget for the Redevelopment”, in an amount of $9.4 million with a construction component of $8.1 million, matters do not improve for the respondent. That was a budget, it is clear, developed from cost plans and estimates prepared by APD Partnership. It must have been based either on the design brief or the design documentation as developed by the applicant to meet the brief. In either case, it follows that it reflected the design brief rather than conflicting with it.
[22] The conflict which did become apparent was a conflict between the budget estimates and the real costs of the project as they emerged from the tendering process. That was not a conflict which the applicant had undertaken to resolve. The respondent seeks to suggest a responsibility in the applicant to address that conflict by pleading that it should have known that the design it had prepared could not be realised within the budget; but no promise or duty to ensure that the actual costs of the design did not exceed the budget is identified. And the pleaded failure to reconcile the design brief with the budget does not logically follow from the allegations that the applicant should have known that the design would cost more than the budgeted amount and that the tenders in fact exceeded the budgeted amount.
The applicant’s obligation on the re-design
[23] What was next undertaken by the applicant was a revision of the design brief as a result not of any conflict between it and the budget, but the already mentioned conflict between the costs of the project as estimated in the budget and its probable real cost as demonstrated by the tenders. It is pleaded that it was a term of the redesign agreement that the applicant “would revise the services required by the Design Agreement so that the total cost of the Redevelopment was less than the revised budget.” That does not seem an entirely accurate reflection of what is contained in the “Tender Report and Recommendations”. What the applicant said it had done was to identify options for the respondent to consider “in order to bring costs down to an acceptable level.” In line with the consequent changes to the design, the applicant produced a revised set of estimates, leading to the respondent’s approval of a new budget of $9.5 million. That can be characterised as a reconciliation of budget and brief.
[24] But the actual cost of the redesign proved (according to the pleading) to be $11,883,115.56. The respondent pleads three propositions: that the cost of implementing the design exceeded the budget, that the fact that the brief and the budget for the redevelopment had not been reconciled should have been apparent to a reasonably competent architect, and that the applicant therefore failed to reconcile the brief and the budget, in breach of its obligation to do so. But the third proposition cannot be drawn from the first, which involves different elements (actual cost of design and budget, not brief and budget) or the second, which is in fact dependent on the establishment of the third proposition. The budget in this instance was the amount approved by the respondent on the basis of an estimate, not borne out in the event, of what would be required to put the design brief as revised into effect. The conflict arose not between brief and budget, but between budget and reality.
Conclusions
[25] Because, as I have observed, the conflicts identified in the counter-claim are conflicts between the budgeted costs of the project and its actual costs, it is imperative for the respondent to contend that it was for the applicant to resolve that conflict by altering its design. But the documents relied on by the respondent do not support such an obligation as forming any part of the design or redesign agreements; and the attempt in the counter-claim to equate that obligation with the identified obligation, to resolve conflicts between the design brief and the budget, is without logical basis. Accordingly sub-paragraph 8(a), that part of paragraph 9 which relies on 8(a), sub-paragraph 15(b), sub-paragraph 17(a) and that part of paragraph 18 which relies on 17(a) should be struck out as an abuse of process.
[26] I have concluded that the particularised documents do not admit of an express term requiring the applicant to ensure that the designs it produced did not result in costs exceeding the budgeted amount. It is conceivable that the respondent might wish, in order to support such an obligation, to rely on its allegations of an implied term that the applicant would provide services to the standard of competent architects and project manager, and of a duty of care owed by the applicant to the respondent in providing services and advices in the areas of architecture and project management. But both the existence of such an obligation by reference to implied term or duty and the manner of its breach would require proper particularisation. I will hear the parties as to the appropriate orders in this regard.
