Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [2021] QSC 224

SUPREME COURT OF QUEENSLAND CITATION: Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd [2021] QSC 224 PARTIES: BUILT QLD PTY LIMITED ACN 108 064 099 (plaintiff) 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 (defendant) FILE NO/S: BS No 5426 of 2017 DIVISION: Trial Division PROCEEDING: Claim ORIGINATING COURT: Supreme Court of Queensland DELIVERED ON: 3 September 2021 DELIVERED AT: Brisbane HEARING DATE: 28 September 2020 to 14 October 2020; 12 November 2020 to 13 November 2020 JUDGE: Williams J ORDER: 1. Once the parties have had an opportunity to consider these reasons, the parties are to confer to agree on a timetable for directions on the following: (a) the parties confer and agree on the headings and structure (agreed form) of further submissions to be provided as to the appropriate orders to be made in light of these reasons. (b) each party is to provide further written submissions in the agreed form, not more than 25 pages (including attachments). 2. The draft directions should be provided to my Associate. If draft directions cannot be agreed, then each party is to provide draft directions and a brief explanation for the disagreement. 3. If the parties consider that any additional findings of fact are required at this stage, these should be -- 1 of 210 -- 2 identified in the written submissions. The written submissions should also address interest and costs. CATCHWORDS: CONTRACTS – AUSTRALIA – BUILDING AND CONSTRUCTION CONTRACTS IN AUSTRALIA – THE CONTRACT DOCUMENTS – THE INTERPRETATION OF THE CONTRACT DOCUMENTS – where the parties entered into a Formal Instrument of Agreement on or about 29 April 2015 – where Schedule 1 outlines the documents which constitute the contract documents – where the contract documents include the Formal Instrument of Agreement, the General Conditions and Annexures Part A to P – where Annexure Part O contains clarifications – where clause 1(u) of Annexure Part O of the contract provides that work under the contract includes 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 – where the meaning of “performance requirement” is in dispute – where the plaintiff contends that not every aspect of the tender drawings and the specification amounts to a performance requirement – where the defendant submits that the performance requirements are to be found in the tender drawings and the specification – where the plaintiff contends that it is necessary to have regard to extrinsic evidence to identify the “alternative proposal” that the plaintiff was obligated to install – where the plaintiff contends that the words “alternative proposal” used in the contract is a reference to a two pipe VRF heat pump system, which cannot provide mode control to each guest room – whether extrinsic material is admissible to interpret the words “alternative proposal” contained in clause 1(u) of Annexure Part O of the Contract – whether, on the proper construction of clause 1(u) of Annexure Part O, mode control was a performance requirement of the tender drawings and the specification CONTRACTS – AUSTRALIA – BUILDING AND CONSTRUCTION CONTRACTS IN AUSTRALIA – VARIATIONS – GENERALLY – where the plaintiff and the defendant entered into a contract for the design and construction of a hotel in April 2015 for the sum of $33,366,027.00 – where the hotel includes guest rooms, food and beverage facilities, front of house facilities, back of house facilities, two basement level carparks and a guest gymnasium – where the plaintiff contends that the mechanical works, including the air conditioning and heating system, did not require the mechanical system installed by the plaintiff to provide for mode control in each individual room – where the plaintiff submits that the defendant’s requirement notified in correspondence dated 11 August 2016, 16 August 2016 and 17 September 2016 (individually or together the “Mechanical Direction”) that the mechanical system being installed be -- 2 of 210 -- 3 changed was a direction to undertake a variation under the contract – where the defendant disputes this and contends that the notices required that the plaintiff comply with its obligations under the contract and install an air conditioning system in accordance with the contractual requirements – whether the plaintiff was required to design and install an air- conditioning system allowing mode control in each room – whether the notices given in August and September 2016 were a direction to the plaintiff to undertake a variation or alternatively constituted a notice to rectify defective work CONTRACTS – AUSTRALIA – BUILDING AND CONSTRUCTION CONTRACTS IN AUSTRALIA – VARIATIONS – GENERALLY – where the plaintiff contends that by correspondence there was an express or implied direction for the plaintiff to supply and install certain bathroom fixtures and as a result, this amounted to a variation within the meaning of the contract – where the plaintiff contends that the plaintiff is entitled to an assessment of the costs of the variation – where, if there is no entitlement to the costs of the variation, the plaintiff contends that the defendant is estopped from relying on or has waived its right to insist upon satisfaction of clause 36.1 of the contract with respect to this variation – where the defendant contends that the plaintiff is not entitled to an increase in the contract sum in respect of the alleged bathroom variation – whether there was a change in the work to be undertaken within the scope of clauses 36.1(a) to (e) of the contract – whether there was a direction to perform the variation as required by clause 36.1(f) of the contract – whether the correspondence relied upon by the plaintiff amounts to a direction to perform a variation pursuant to clause 36.1(g) CONTRACTS – AUSTRALIA – BUILDING AND CONSTRUCTION CONTRACTS IN AUSTRALIA – VARIATIONS – LIABILITY TO PAY – where a number of variations have been approved and certified by the Superintendent – where it is accepted that the work has been carried out and the defendant has paid the plaintiff the amounts claimed, except for the amount identified as representing 7.5 per cent of the certified value of the variations – whether on a proper construction of clause 36.4(d), the plaintiff is entitled to an additional 7.5 per cent for preliminaries CONTRACTS – AUSTRALIA – BUILDING AND CONSTRUCTION CONTRACTS IN AUSTRALIA – TIME – LIQUIDATED DAMAGES – where the defendant seeks payment of the amount of $196,623.21 by way of additional liquidated damages calculated as a result of the correction of an error in calculating the date for practical completion – where the defendant contends that in calculating the adjusted date for practical completion a five day work week was used -- 3 of 210 -- 4 when a six day work week should have been used – where the plaintiff contends that the defendant is not entitled to the additional amount of liquidated damages – whether the defendant is entitled to the amount for liquidated damages CONTRACTS – AUSTRALIA – BUILDING AND CONSTRUCTION CONTRACTS IN AUSTRALIA – DEFECTS AND NEGLIGENCE – LIABILITY – whether the air conditioning system being installed by the plaintiff prior to the notices in August and September 2016 was defective because it did not meet the performance requirements of the contract, or alternatively, of the mechanical services specification and the mechanical services preliminary design drawings CONTRACTS – AUSTRALIA – BUILDING AND CONSTRUCTION CONTRACTS IN AUSTRALIA – DEFECTS AND NEGLIGENCE – LIABILITY – where the defendant claims the cost to rectify non-mechanical related defects and defects which have been identified in relation to the mechanical services system – whether the works are defective works – whether the defendant is entitled to recover any costs incurred to rectify the defective works Civil Proceedings Act 2011 (Qld), s 58 Queensland Building and Construction Commission Act 1991 (Qld), s 67P Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd (1996) 12 BCL 317, cited Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253, cited Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd [2017] QSC 85, considered CMA Assets Pty Ltd Formerly Known as CMA Contracting Pty Ltd v John Holland Pty Ltd (No 6) [2015] WASC 217, cited Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337, followed Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471, followed Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104, considered Opat Decorating Service (Aust) Pty Ltd v Hansen Yuncken (SA) Pty Ltd (1994) 11 BCL 360, cited Westpac Securities Administration Ltd v Australian Securities and Investments Commission [2021] HCA 3; (2021) 95 ALJR 149, cited COUNSEL: P L O’Shea QC with M Steele and B Reading for the plaintiff T P Sullivan QC with J Mitchensen for the defendant -- 4 of 210 -- 5 SOLICITORS: Clayton Utz for the plaintiff Thomson Geer for the defendant BACKGROUND .................................................................................................................. 8 THE MECHANICAL SERVICES SYSTEM ...................................................................... 9 Design and Construct Contract ....................................................................................... 10 Plaintiff’s contentions..................................................................................................... 23 Use of extrinsic material ............................................................................................. 24 Extrinsic evidence sought to be relied upon by the plaintiff ...................................... 27 Performance requirement of the tender drawings and the Specification ........................ 33 Defendant’s contentions ............................................................................................. 35 Consideration.............................................................................................................. 38 Construction of clause 1(u) Annexure Part O ................................................................ 43 Mechanical Direction / Variation ................................................................................... 48 JOINERY DELAY ............................................................................................................. 50 BATHROOM DESIGN VARIATION (VP32) ................................................................. 50 Alleged Direction ........................................................................................................... 52 What was required to be built under the Contract? .................................................... 53 Consideration.............................................................................................................. 57 Was there a change in the work to be undertaken within the scope of clauses 36.1(a) to (e)? Was there a direction within clause 36.1(f) or does it amount to a direction to perform a variation pursuant to clause 36.1(g)? ............................................................. 58 THE SCHEDULE 3 AND 4 VARIATIONS ..................................................................... 67 Schedule 3 - VP38 – “Ceilings and partition alterations in the Great Room” ............... 68 Schedule 3 - VP53 – “Back of House Corridor – second path of egress” ..................... 68 Schedule 3 – VP59 – “Admin and luggage change layout and joinery” ........................ 69 Schedule 3 – VP78 – “BWIC for boom gate” ................................................................ 69 Schedule 4 – VP58 – “BOH (back of house) ceiling” ................................................... 69 Schedule 4 – VP60 – “Bathroom light switch – off master switch” .............................. 70 Schedule 4 – VP64 – “Clipsal colour switchplates as per JPDC finishes schedule” ..... 75 Schedule 4 – VP66 – “Desk lamp hard wired” .............................................................. 79 Schedule 4 – VP67 – “Supply and installation of power sockets and wiring for LED lighting” .......................................................................................................................... 81 Schedule 4 – VP73 – “Paint stair soffits/colour contrasting nosings” ........................... 85 Schedule 4 – VP76 – “Additional corridor lighting given flip of rooms” ..................... 87 Schedule 4 – VP114 – “Joinery – Damage to walls by separate contractors” ............... 88 SCHEDULE 5 PROVISIONAL SUMS ............................................................................. 89 Provisional Sum No 2 – “Joinery to Greatroom” ........................................................... 90 -- 5 of 210 -- 6 Provisional Sum No 6 – “Landscaping, irrigation and paving including design, supply & installation of streetscape trees, grates, kerbing and public artwork” ........................ 90 Provisional Sum No 8 – “Make good of the Council footpath to Wharf and Henry Streets” ........................................................................................................................... 90 PRICING OF VARIATIONS SCHEDULE 6 - PRELIMINARIES .................................. 94 OTHER CLAIMS BY PLAINTIFF ................................................................................... 97 COUNTERCLAIM – ALLEGED NON-MECHANICAL DEFECTS .............................. 99 Defect Item One – “Crack in the basement level 2 slab” ............................................... 99 Defect Item Two – “The electrical penetration running through the mechanical services slab needs to be adequately sealed and protected” ....................................................... 102 Defect Item Three – “The storm water pipes, and each penetration through which they run, need to be adequately sealed and waterproofed” .................................................. 102 Defect Item Four – “The concrete structure around the basement staircase and communications hub wall needs to be adequately waterproofed” ............................... 103 COUNTERCLAIM – ALLEGED MECHANICAL SERVICES SYSTEM DEFECTS . 104 Defect 1.1 – “Duct bends & detail design” .................................................................. 105 Defect 2.1 – “Air conditioning – simultaneous heating and cooling” .......................... 108 Defect 2.2 – “Air conditioner – air commissioning” .................................................... 112 Defect 2.3 – “Substation air intake” ............................................................................. 114 Defect 2.4 – “Office – carpark ventilation noise” ........................................................ 115 Defect 4.2 – “Guest room & maids room exhausts” .................................................... 116 Defect 4.3 – “Level 1 to 12 outside air supply” ........................................................... 120 Defect 4.4 – “Guest room toilet exhaust risers – fire rating” ....................................... 121 Defect 4.5 – “Guest room fan coil unit – interface with occupancy controls” ............. 121 Defect 4.6 – “Guest floor lift lobbies – moisture damage to ceilings and dripping air conditioning grills” ....................................................................................................... 123 Defect 5.1 – “HX-1, HX-2 filter installation” .............................................................. 123 Defect 5.2 – “Roof mounted duct work – water pooling”............................................ 124 Defect 5.3 – “Insulation on roof duct work” ................................................................ 125 Defect 5.4 – “HX-1, HX-2 condensation traps omitted”.............................................. 126 Defect 5.5 – “Water in HX-1 isolating switch”............................................................ 127 Defect 5.6 – “HX-1, HX-2 filter gauges defective” ..................................................... 128 Defect 5.7 – “HX-2 – water pooling in outside air duct” ............................................. 129 Defect 6.1 – “As installed drawings (O&M manuals)” ................................................ 130 Defect 6.2 – “O&M manual content” ........................................................................... 131 DEFENDANT’S CLAIM FOR ADDITIONAL LIQUIDATED DAMAGES ................ 133 INTEREST ....................................................................................................................... 139 NEXT STEPS ................................................................................................................... 140 -- 6 of 210 -- 7 ANNEXURE A – MECHANICAL VARIATION, COSTS, DELAY, EXTENSION OF TIME AND LIQUIDATED DAMAGES ........................................................................ 141 Plaintiff’s claim for costs of carrying out the Mechanical Variation ........................... 141 Costs of the variation .................................................................................................... 144 Credit – contract works not required or incorporated due to Mechanical Variation 145 Additional works – three-pipe mechanical system ................................................... 146 Demolition ................................................................................................................ 148 Reinstatement works ................................................................................................ 149 Ceilings and partitions reinstatement .................................................................... 149 Tiling reinstatement ............................................................................................... 150 Electrical reinstatement ......................................................................................... 150 Fire ratings reinstatement ...................................................................................... 151 Hydraulics reinstatement ....................................................................................... 151 BWIC ..................................................................................................................... 151 Item 128 – “Core holes – 200mm through to 210mm post tension slab" .................... 152 Item 127 – “Core holes – 200mm through to 700mm post tension slab” .................... 152 Item 132 – “Road closure for craneage” ...................................................................... 152 Item 129 – “Craneage to lift plant to roof”................................................................... 152 Item 130 – “Mobilisation and de-mobilisation” ........................................................... 153 Item 131 – “Traffic control during crane days” ........................................................... 153 Item 126 – “X-ray scanning core holes” ...................................................................... 153 Summary .......................................................................................................................... 154 Delay and the Mechanical Variation ............................................................................ 155 Is the plaintiff entitled to an extension of time due to the Mechanical Variation? ...... 155 Delay analysis methodology ........................................................................................ 172 Reasonable steps to mitigate delay ............................................................................... 176 Contribution to cause of delay ...................................................................................... 181 Christmas shutdown ..................................................................................................... 187 Claim for EOT .............................................................................................................. 188 Delay Damages ............................................................................................................. 197 Liquidated damages .......................................................................................................... 209 -- 7 of 210 -- 8 BACKGROUND [1] On 29 April 2015, the plaintiff (Built) and the defendant (Pro-Invest) entered into a contract for the design and construction of a hotel located at 168-184 Wharf Street, Spring Hill (Spring Hill Hotel) for the sum of $33,366,027.00 (plus GST) (Contract).1 [2] The Spring Hill Hotel includes guest rooms over 12 levels, food and beverage facilities, front of house facilities, back of house facilities, two basement level carparks and a guest gymnasium located on level one. [3] The plaintiff commenced proceedings claiming the sum of $6,158,864.22. The defendant brought a counterclaim in respect of alleged defects, additional liquidated damages and alleged lost wages. [4] The proceedings include a number of issues which are in dispute between the parties including the entitlement to variations, costs of alleged variations, extensions of time and delay damages, the defendant’s entitlement to liquidated damages for late completion and also amounts in respect of rectification of alleged defective work. [5] The issues in dispute have been described under the following general headings: (a) the mechanical services system; (b) alleged joinery delay; (c) liquidated damages; (d) alleged bathroom design variation; (e) the Schedule 3 and 4 variations; (f) the Schedule 5 provisional sums; (g) pricing of previously certified variations; (h) alleged non-mechanical defects; (i) alleged mechanical services system defects; (j) wrongful set-off, deductions and withholding of payments; (k) the defendant’s claim for additional damages; and (l) interest. [6] Depending on the findings in respect of certain issues in dispute, some of the issues identified may not need to be determined. However, due to the nature of the proceedings, these issues will be addressed, to some degree, at this initial stage and relevant findings made. [7] The parties have also prepared a list of the issues of law in dispute between the parties to this proceeding. This has been broken down into liability and quantum. These issues will be considered under the headings identified above. 1 BUI.001.001.61820. -- 8 of 210 -- 9 THE MECHANICAL SERVICES SYSTEM [8] The most significant issue in dispute between the parties is in relation to the air conditioning system to be installed at the Spring Hill Hotel. The plaintiff contends that by notices given in August and September 2016 there was a variation to the air conditioning system required to be installed under the Contract (Mechanical Variation). The defendant disputes this and contends that the notices required that the plaintiff comply with its obligations under the Contract and install an air conditioning system in accordance with the contractual requirements. [9] The parties have agreed that the following facts and issues are not in contention in respect of the alleged Mechanical Variation: “1. In respect of the alleged Mechanical Variation: (a) that the Mechanical Direction (consisting of written notices given on 11 August 2016, 16 August 2016 and 17 September 2016 (together or individually)) was given to the plaintiff [SOC [6]; Def [7]]; (b) that the plaintiff performed the additional works required by the Mechanical Direction [SOC [8]; Def [9]].” [10] In respect of the substantial issues of law in dispute between the parties in relation to the Mechanical Variation, the parties have agreed the following: “1. In respect of the alleged Mechanical Variation: (a) whether, on a proper construction of the Contract, the plaintiff was required to design and install an air- conditioning system allowing mode control in each room [SOC [7]; Def [8]; R [7]; (b) whether the air-conditioning system being installed by the plaintiff prior to the Mechanical Direction (consisting of written notices given on 11 August 2016, 16 August 2016 and 17 September 2016 (together or individually)) was defective because it did not meet performance requirements [SOC [7]; Def [8(a)(ii)]; R [7](ab)]]: (i) of the Contracts; or alternatively (ii) of the Mechanical Services Specification and the Mechanical Services Preliminary Design Drawings; (c) whether, on a proper construction of the Contract, the Mechanical Direction: (i) was a direction to the plaintiff to undertake a variation in respect of the mechanical works, within the meaning of clause 1 and clause 36 of the Contract [SOC [7]; Def [8]; R [7]]; or instead -- 9 of 210 -- 10 (ii) constituted a notice of defective work pursuant to clause 29.3 or alternatively directions under clause 8.1 of the Contract [Def [7]-[8]; R [6]-[7]].” [11] The starting point is to consider the terms of the Contract. Design and Construct Contract [12] The parties entered into a Formal Instrument of Agreement on or about 29 April 2015. [13] Clause 2 states: “2. PERFORMANCE (a) The Contractor shall carry out the Works in accordance with the Contract. (b) The Principal shall pay the Contractor the contract sum at the times and in the manner provided for in the Contract. (c) Each of the parties shall perform the obligations imposed on it by the Contract.” [14] Further, clause 3 provides: “3. CONTRACT DOCUMENTS The Contract comprises the Contract Documents.” [15] Pursuant to clause 1, the defined terms in the Formal Instrument of Agreement have the same meaning as in clause 1 of the General Conditions. [16] Clause 4 states: “4. ENTIRE CONTRACT (a) The Contract Documents constitute the entire agreement between the parties in respect of the Works and the Contract supersedes all previous agreements. (b) The Contract may be varied only by written instrument executed by both parties.” [17] Schedule 1 outlines the documents which constitute the “Contract Documents”. The documents include the Formal Instrument of Agreement, the General Conditions and Annexures Part A to P. Relevantly to the current issue, Annexure Part K includes the preliminary design, Annexure Part L outlines the principal’s project requirements, Annexure Part O contains clarifications and Annexure Part P contains provisional sums. [18] The General Conditions are the Australian Standard General Conditions of Contract for Design and Construct (as Amended) AS4902-2000 (Incorporating Amendment No. 1). -- 10 of 210 -- 11 [19] Clause 1 of the General Conditions contains definitions where the words and phrases have that meaning unless the context requires otherwise. [20] The defined terms include as follows: (a) Contractor’s design obligations means: “all tasks necessary to design and specify the Works required by the Contract, including preparation of the design documents and, if the Principal’s project requirements include a preliminary design, developing the preliminary design.” (b) Preliminary design means: “the documents stated in Annexure Part K.” (c) Principal’s project requirements means: “the Principal’s written requirements for the Works described in the documents stated in Annexure Part L which: (a) shall include the purpose; (b) may include the Principal’s design, timing and cost objectives for the Works; and (c) shall include a preliminary design.” (d) WUC (from ‘Work under the Contract’) means: “the work which the Contractor is or may be required to carry out and complete under the Contract and includes variations, remedial work, construction plant and temporary works.” [21] Clause 2 sets out the Nature of Contract and provides as follows: “2.1 Performance and payment The Contractor shall carry out and complete WUC in accordance with the Contract and directions authorised by the Contract. Subject to the express provisions of the Contract and the performance by the Contractor of its obligations pursuant to the Contract, the Principal shall pay the Contractor the contract sum adjusted by any additions or deductions made pursuant to the Contract. 2.2 Contractor’s warranties Without limiting the generality of subclause 2.1, the Contractor warrants to the Principal that: (a) the Contractor: (i) at all times shall be suitably qualified and experienced, and shall exercise due skill, care and diligence in the carrying out and completion of WUC; -- 11 of 210 -- 12 (ii) has examined any preliminary design included in the Principal’s project requirements and that such preliminary design is suitable, appropriate and adequate for the purpose stated in the Principal’s project requirements; (iii) shall carry out and complete the Contractor’s design obligations to accord with the Principal’s project requirements and, if subclause 9.4 applies, accept the novation and retain the Principal’s consultants for any work the subject of a prior contract with the Principal; and (iv) shall carry out and complete WUC in accordance with the design documents so that the Works, when completed, shall: (A) be fit for their stated purpose; and (B) comply with all the requirements of the Contract; and (b) subject to clause 9, the consultants identified in the Contractor’s tender are suitably qualified and experienced. … 2.6 Performance specifications Where the Principal’s project requirements include performance specifications: (a) the Contractor shall ensure that the performance specifications are satisfied when: (i) completing the design, specification, documentation and construction of the Works; and (ii) making any selection of any materials, goods, plant or equipment for inclusion into the Works; and (b) the Contractor shall ensure that: (i) its obligations under this clause are carried out in accordance with the standard expected of a contractor competent in designing and constructing works of the kind the subject of the performance specification; and (ii) the works and materials the subject of the performance specification are fit for the purpose.” … -- 12 of 210 -- 13 2.10 Clarifications The parties agree that the clarifications apply to the Works or the contract sum.” [22] Clause 8 deals with the Contract documents and includes as follows: “8.1 Discrepancies When construing the Contract Documents the following rules of construction apply: (a) in the event of any inconsistency between the Contract Documents: (i) the formal instrument of agreement and these general conditions have precedence; and (ii) the clarifications have precedence over the preliminary design; (b) despite the previous subclause 8.1(a): (i) where inconsistent levels of quality are required, the higher level of quality shall apply; (ii) figured dimensions shall take precedence over scaled dimensions; and (iii) drawings made to larger scales shall take precedence over drawings made to smaller scales; (c) where the requirements of quality or any aspect of WUC is not expressly specified or depicted, the quality shall be consistent with the purpose; and (d) drawings showing particular parts of WUC shall take precedence over drawings for more general purposes; and (e) in all cases, the interpretation to be followed by the Contractor will be as reasonably determined by the Superintendent. Where the Contractor considers that there is any ambiguity or discrepancy between the Contract Documents, it shall promptly advise the Superintendent in writing, who shall, subject to this subclause 8.1, give the Contractor a direction as to the interpretation to be followed. The Contractor shall have no entitlement as a consequence of a direction given by the Superintendent under this subclause 8.1 which is consistent with the rules of construction in this clause 8.1. … -- 13 of 210 -- 14 8.4 Contractor’s obligations in relation to the Principal’s project requirements The Contractor shall: (a) ensure that the information provided by the Superintendent defines the Principal’s project requirements in sufficient detail for the Contractor to complete the design documents; (b) determine what additional information it needs from the Principal to clarify the Principal’s project requirements; and (c) make requests in writing to the Superintendent to provide that information and include with those requests whatever information the Principal may reasonably require in order to make a decision. If in the Superintendent’s opinion the information sought by the Contractor under this subclause is reasonably necessary to clarify the Principal’s project requirements, the Superintendent may refer the request to the Principal and obtain a response to such request. Neither the Superintendent nor the Principal shall be bound by any information provided to the Contractor in relation to the Principal’s project requirements unless it is in writing and signed by the Superintendent and expressly provides that the information forms part of the Principal’s project requirements. 8.5 Contractor’s design obligations The Contractor shall as part of the Contractor’s design obligations: (a) ensure that the design documents (including any design documents which were not produced by the Contractor or are Principal’s materials) satisfy the Principal’s project requirements; (b) ensure that the design documents contain sufficient detail to construct the Works so that the Works, when completed, satisfy the warranties in subclause 2.2; (c) ensure that the details contained in any design documents are co-ordinated with the details contained in all other design documents; (d) ensure that any approval that needs to be obtained, can be obtained from the relevant authority in relation to the design documents; (e) allow the Superintendent, the Principal or any person nominated by the Principal access to partially completed design documents at any time; -- 14 of 210 -- 15 (f) keep the Superintendent informed of the progress of the design documents; (g) conduct sufficient investigations to ascertain the existence and extent of any latent conditions which may have an effect on the Works.” [23] Clauses 29.3 and 29.4 deal with Defective work and provide as follows: “29.3 Defective work If the Superintendent becomes aware of work done (including material provided) by the Contractor which does not comply with the Contract, the Superintendent shall as soon as practicable give the Contractor written details thereof. If the subject work has not been rectified, the Superintendent may direct the Contractor to do any one or more of the following (including times for commencement and completion): (a) remove the material from the site; (b) demolish the work; (c) redesign, reconstruct, replace or correct the work; and (d) not deliver it to the site. If: (a) the Contractor fails to comply with such a direction; and (b) that failure has not been made good within 5 days after the Contractor receives written notice from the Superintendent that the Principal intends to have the subject work rectified by others, the Principal may have that work so rectified and the Superintendent shall certify the cost incurred as moneys due from the Contractor to the Principal. 29.4 Acceptance of defective work Instead of a direction pursuant to subclause 29.3, the Superintendent may direct the Contactor that the Principal elects to accept the subject work, whereupon there shall be a deemed variation.” [24] In addition to the entire contract clause in the Formal Instrument of Agreement, clause 44.5 of the General Conditions provides: “44.5 Entire understanding The Contract: (a) is the entire agreement and understanding between the parties on everything connected with the subject matter of the Contract; and -- 15 of 210 -- 16 (b) supersedes any prior agreement or understanding on anything connected with that subject matter. Each party has entered into the Contract without relying on any representation by any other party or any person purporting to represent that party.” [25] Annexure Part L sets out the Principal’s project requirements as follows: “Principal’s project requirements (Clause 1) The Principal’s project requirements: 1. include the purpose; 2. include the preliminary design; 3. include: (a) all work necessary for the development of the preliminary design; (b) all work necessary to comply with legislative requirements; (c) all work necessary for the design and construction of the Works; (d) all work to be completed pursuant to the Contract. 4. are: (a) the Contractor shall carry out and install all incidental services and works to achieve practical completion in accordance with the Contract whether or not those incidental services are specifically identified in the Contract; and (b) to the extent qualified within Annexure Part O, the Contractor is responsible pursuant to Annexure Part J to negotiate as required with all authorities having jurisdiction over WUC to obtain at the Contractor’s cost all necessary permits, consents, approvals, certificates and the like from authorities that have not already been obtained by the Principal prior to the date of the Contract in order to complete the whole of the Works by the date for practical completion.” [26] Annexure Part O sets out the clarifications and includes: “1. WUC includes: … (u) The Contractor’s alternative proposal for structural and mechanical systems on the basis that the Contractor -- 16 of 210 -- 17 meets the performance requirement of the tender drawings and specifications. … (ag) Refer VE items listed below: (i) Mechanical Services: The Contractor, in conjunction with its preferred subcontractors has reviewed the documented design criteria and has offered an alternative air conditioning system based on VRF type arrangement. The system operates on a variable power supply and without the need for standalone controls and variable speed drives. Additionally, the proposal also adopts a revised pipe and duct configuration. …” [27] The preliminary design documents include the Mechanical Services Specification reference 3235 dated October 2014 prepared by Thwaite Consulting Group (Specification).2 [28] The Specification contains a number of relevant provisions including: “1.2.2 SPECIFICATION OBJECTIVES • The intent of this Specification and the associated documents is: I. To provide a basis for competitive tendering II. To allow competent Contractors to price the works III. To provide documentation to demonstrate to the Client the scope and quality of the project IV. To define the expectations upon the installer, by the Consulting Engineer … 1.2.3 OBLIGATIONS OF THE MECHANICAL CONTRACTOR • In writing this Specification the Client expects and relies upon the tenderers’ possessing specialist trade expertise necessary to complete the works in accordance with the documentation • To raise in good time, issues requiring design input or clarification from the Consulting Engineer, particularly in respect to: I. interpretation of the Specification or drawings II. problems in complying with the Specification 2 BUI.001.002.34972. -- 17 of 210 -- 18 III. omissions from the tender documents IV. suggested alternatives/substitutions • To provide fully co-ordinated mechanical services shop drawings with adequate provision for access and maintenance • To certify compliance with Contract documents, including all variation instructions, at Practical Completion as required by this Specification … [29] 1.3 MECHANICAL CONTRACTOR’S DESIGN RESPONSIBILITY • The mechanical contractor shall be responsible for ensuring that the detailed design which they undertake is fully co-ordinated and compatible with the remainder of the project design • The mechanical contractor’s design obligation shall include all: I. Heat load calculations II. Equipment selections III. Duct work and pipe work distribution system design …” [30] Clause 2 of the Specification identifies the scope of work as follows: “2.1 SCOPE OF WORK 2.1.1 GENERAL SCOPE OF WORK • The general scope of work of the mechanical services shall comprise: 1. Detailed thermal and/or capacity calculations as required to size all plant and equipment 2. Detailed design and documentation of the mechanical services layout … 5. Preparation of work shop drawings for review prior to ordering or commencing fabrication of plant and duct work systems 6. Supply and installation of complete and operating mechanical systems and associated controls and electrical works … -- 18 of 210 -- 19 2.1.2 SPECIFIC SCOPE OF WORK • The specific scope of work of the mechanical services shall comprise the following: 1. Central air-cooled chilled water and heating hot water system serving the building 2. Air conditioning to guest room corridors L1-12 3. Air conditioning to guest rooms L1-12 4. Air conditioning to gym L1 5. Air conditioning to FOH areas GF 6. Air conditioning to BOH areas GF 7. Air conditioning to meeting rooms GF … 22. All associated controls works and BMCS to provide complete and operating mechanical systems … 2.1.3 DESIGN CALCULATIONS • The mechanical contractor shall provide all necessary heat load calculations, ventilation rate calculations, system operating pressures calculation, duct sizing and pipe sizing calculation etc. to support the selection of all plant and equipment used in the installation • The calculations shall be presented to the consultant who will check that they meet specification requirements. The mechanical contractor shall ensure that they are technically correct and in accordance with their or an appropriate quality assurance system. 2.1.4 PREPARATION OF DOCUMENTATION • The mechanical contractor shall prepare workshop drawings of their design layouts • All workshop drawings shall be submitted in accordance with program requirements for the approval of the Superintendent prior to installation. Approval, as appropriate, shall be granted by the Superintendent in principal only, such approval does not relieve the Contractor of their responsibility to comply with the requirements and intent of the specification and drawings. … -- 19 of 210 -- 20 • Provide details of all proposed equipment, including but not limited to equipment schedules and technical data, method of support, platforms. … 2.1.7 SAMPLES, PROTOTYPES AND APPROVED EQUIPMENT • Samples of materials and items required to be approved shall be delivered to site a minimum of 10 working days prior to approval being required. Sample fittings and accessories are required to be approved include but are not limited to: 1. Air diffusion equipment 2. Thermostats and sensors 3. Duct manufacturing method • A schedule of approved equipment manufacturers is detailed below. The contract is deemed to include equipment of this standard or ‘approved equal’ as approved by the Consultant. VRV plant Air-cooled chiller Fans – centrifugal Fans – axial Air filters Dampers Air Diffusion equipment Mitsubishi Electric, Daikin Aermec, Carrier Fantech, Richardson, Phoenix Fantech, Ziehl-Abegg Airpure, Email, and Camfil Farr Holyoake, Blendair Holyoake, Air Grilles [31] Section 2.2 outlines the Mechanical Systems Description. [32] Section 2.2.1 deals with the “central air-cooled heat recovery chiller CH-1, CH-2 CHW/HHW” and states as follows: “The entire hotel (excluding specialist areas which have stand-alone DX air conditioning systems) shall be provided with chilled water and heating hot water from a common air-cooled 4 pipe chiller (heat recovery type) located on the roof …” [33] Clause 2.2.3 deals with the “guest room air conditioning FCU’s”. “FCU” refers to Fan Coil Unit. This includes the following: “2.2.3 GUEST ROOM AIR CONDITIONING FCU’S • Each guest room shall be individually air conditioned by ceiling mounted FCU’s which supply conditioned air to the room served via acoustically insulated sheet metal -- 20 of 210 -- 21 duct work (discharge and suction sides) connecting to a wall mounted linear grille … • Provide electronic controls with a wall mounted temperature sensor/switching/adjustment to control the FCU and interface with the guest room energy management system provided as part of the electrical trades work.” [34] Clause 3 of the Specification deals with the design criteria. [35] Clause 3.1 states as follows: “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) Summer 33.1℃ dry bulb maximum 24.8℃ wet bulb maximum Winter 6.0℃ dry bulb maximum Internal conditions (for conditioning plant full load performance) general Summer 23℃ dry bulb maximum at point of control Winter 21.5℃ dry bulb at the point of control Controls tolerance for air conditioning system +/-2.0℃ dry bulb at point of control (+/- 1.0℃ dead band) Outside Air In accordance with AS 1668.2 2013 requirements Exhaust Air In accordance with AS 1668.2 2013 requirements Occupancy Refer Table A. Hours of operation Continuous -- 21 of 210 -- 22 Table A. Internal Loads Area People Outside Air Lighting Density W/m² Power Density W/m² Equip. KW Gym 8 10L/s/p 15 15 Guest rooms 2 25L/s/room 15 5 - General office areas 1/10m2 10L/s/p 15 10 - FOH lounge 1/3m2 10L/s/p 15 10 - FOH lobbies areas 1/3.5m2 10L/s/p 15 10 - Building Construction Details Refer to architectural drawings. Maximum External Noise Levels To meet the Local Authority requirements nominated in the Development Application conditions and Wilkinson Murray Acoustic Report Maximum Vibration Levels Tactile structure vibration levels due to plant not to exceed the lower end of the range specified in AS 2670.2. Equipment Balancing AS 2625 for rotating and reciprocating machines … 3.4 ACCEPTANCE CRITERIA • Acceptance of Practical Completion and of Final Completion will require at least the following: (a) Compliance Certification to the requirements of Statutory Authorities. (b) Signed off commissioning schedules to confirm that systems operate in a stable and automatic manner under all conditions of full and partial load – full commissioning data and operating and maintenance manuals. (c) Certification that capacities and efficiencies of equipment and systems satisfy specified requirements where specifically nominated to do so in the Specification.” [36] Relevantly, clause 9.8.2 deals with “CHW/HHW fan coil units guest rooms” and outlines certain mandatory items and control functions to be provided for each FCU system which includes: “(b) Start Stop Control and Indication -- 22 of 210 -- 23 - 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 ...” Plaintiff’s contentions [37] The plaintiff contends that on the proper construction of the Contract, the mechanical works, including the air conditioning and heating system, did not require the mechanical system installed by the plaintiff to provide for “mode control” (as opposed to temperature control) in each individual room. As a result, the defendant’s requirement notified in correspondence dated 11 August 2016, 16 August 2016 and 17 September 2016 (individually or together, the “Mechanical Direction”) that the mechanical system then being installed be changed was a direction to undertake a variation within the meaning of clauses 1 and 36 of the Contract, being the Mechanical Variation. [38] There is no dispute that the plaintiff performed the work required (subject to the defects which are alleged by the defendant). [39] The plaintiff also contends that the Mechanical Variation caused a delay to the date for practical completion of 117 days. [40] Overall, in respect of the Mechanical Variation, the plaintiff contends that the defendant is liable to the plaintiff in the amount of $2,076,392.25 (plus GST), being $1,074,577.25 (plus GST) for the WUC and $1,001,815 (plus GST) for delay damages. [41] The first step in the plaintiff’s case is to consider what the Contract required the plaintiff to build and install by way of the mechanical system. The plaintiff refers to clause 1(u) of Annexure Part O and also clause 1(ag) of Annexure Part O. [42] The plaintiff contends that these two clauses are insufficient to identify the alternative proposal and as the plaintiff had an obligation to install the alternative proposal (on a certain basis), the first step is to identify that proposal. [43] The plaintiff concludes that: “It is necessary, and entirely orthodox, to have regard to extrinsic evidence to answer [the question ‘what was that alternative proposal?’]. After examining the legal principles, the evidence is -- 23 of 210 -- 24 analysed, and the alternative proposal is identified as a two pipe VRF heat pump system.” [44] To reach this conclusion, the plaintiff in its closing submissions, undertakes the exercise of examining case law in relation to the use of extrinsic evidence identifying the subject matter of a contract, consideration of the relevant clauses in the Contract and also extrinsic evidence relevant to the alternative proposal consisting of a number of documents and emails exchanged as part of the precontractual negotiations leading up to the Contract being entered into. [45] It is necessary to consider each of these steps in turn. Use of extrinsic material [46] The plaintiff acknowledges that on the settled authorities in respect of the objective theory of contract, the following principles apply: (a) The meaning of a contract is to be decided in accordance with what the terms of the contract would convey to a reasonable person in the position of the parties, rather than by reference to the subjective intentions of one, or even both, parties to the contract. (b) In determining the meaning of the terms for a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. (c) Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption that the parties intended to produce a commercial result, and to avoid working “commercial inconvenience”. (d) Determining the meaning of a written contractual term, or words used in a contract, ordinarily occurs by reference to the contract alone, being the contractual text and contextual matters. (e) There are a number of recognised exceptions that allow reference to be made to contextual matters which are extrinsic to the language used in the contract to determine the meaning of words used in a contract. [47] The principal exception to the parol evidence rule is as framed by Mason J (as his Honour then was) in Codelfa Construction Pty Ltd v State Rail Authority (NSW):3 “The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning.” [48] After referring to this quote from Codelfa, the written submissions on behalf of the plaintiff go on to state: “Another exception to the parol evidence rule referred to by Mason J in Codelfa was extrinsic evidence which assists in the identification 3 (1982) 149 CLR 337 at 352. -- 24 of 210 -- 25 of the subject matter of the contract. At 349, his Honour cited with approval Lord Davey in Bank of New Zealand v Simpson4 who in turn quoted with approval the remarks of Lord Campbell in Macdonald v Longbottom5 as follows: ‘I am of opinion that, when there is a contract for the sale or [sic] a specific subject-matter, oral evidence may be received, for the purpose of shewing what that subject-matter was, of every fact within the knowledge of the parties before and at the time of the contract.’” [49] It is important to note that this reference to Macdonald v Longbottom occurs in the reasons of Mason J when he is undertaking a review of the then authorities in relation to recourse to extrinsic evidence. This occurs prior to his statement at page 352 that is referred to as “the true rule”. The plaintiff’s submissions suggest that Mason J identified the circumstances in Macdonald v Longbottom as a specific exception to the parol evidence rule. Rather, a reading of the reasons of Mason J tends to support that this needs to be considered in light of the statement of principle as set out in the “true rule”. [50] The statement of principle of the “true rule” by Mason J continues on after the quote that has been identified in the plaintiff’s submissions. It is necessary to consider the whole of the statement of principle which continues: “Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed. It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification. Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties’ presumed intention 4 [1900] AC 182 at 188–9. 5 (1859) 1 E & E 977 at 983, 120 ER at 1179. -- 25 of 210 -- 26 in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.”6 [51] The plaintiff’s submissions contend that the relevant principle is that “if the subject matter of a contract cannot be ascertained by reference to the terms of the contract itself, then extrinsic evidence may be referred to, and relied upon by the Court ‘to identify the meaning of a descriptive term’.”7 [52] The plaintiff refers to a number of relevant circumstances in the current matter: (a) The Contract does not define the words “alternative proposal”. (b) There were no drawings or specifications with respect to the alternative proposal. (c) The tender drawings and the Specification set out details of the mechanical system in accordance with the original tender proposal. [53] The plaintiff contends that the tender drawings and the Specification cannot be used to define the alternative proposal. [54] In relation to clause 1(u) and clause 1(ag) of Annexure Part O, the plaintiff submits: “Clause 1(u) does nothing to describe the alternative proposal, other than to refer to the fact that the alternative proposal exists. However, this clause does say, unambiguously, that the WUC which Built was obliged to perform included the installation of the alternative proposal. It is therefore critical that the alternative proposal be accurately identified in order for the Court to know what Built’s obligation to perform the WUC was with respect to the mechanical system.” [55] In relation to clause 1(ag) the plaintiff also submits that whilst this does provide some assistance, it does not provide enough information to make any concluded findings as to what the alternative proposal was. [56] The reference in clause 1(ag) to “VRF type arrangement” assists in showing that the obligation was to build a VRF type arrangement, and not a chilled water system which was originally in the tender proposal. However, the plaintiff submits that there are at least two different types of VRF systems and a generic reference does not assist in determining which of the two different systems was to be installed. [57] Evidence was led at trial in relation to the two different types of VRF system, namely: (a) A VRF heat pump system where all indoor units can either heat or cool, but not at the same time. This system requires two pipes to operate, where one pipe delivers either cooling or heating and the second pipe extracts air. 6 At 352. 7 Plaintiff’s written closing submissions at [26]. -- 26 of 210 -- 27 (b) A VRF heat recovery system where cooling and heating may be available to each indoor unit, independently, at the same time. This usually requires three pipes to operate, although the plaintiff recognises that Mitsubishi does manufacture a two-pipe heat recovery system. Under this system, the first pipe delivers cooling, the second pipe delivers heating and the third pipe is a return pipe. [58] The plaintiff submits that the other words in clause 1(ag) do little to assist the Court in identifying what was the alternative proposal other than the words “the proposal also adopts a revised pipe and duct configuration”. Whilst these words do not identify a specific pipe and duct configuration, they make it clear that the pipe and duct configuration was not to be the same as that set out for the mechanical system in the tender proposal. [59] The plaintiff also acknowledges that the words “has reviewed the documented design criteria and has offered an alternative air conditioning system” may also be of assistance in construing the words “performance requirement” in clause 1(u). [60] Ultimately, the plaintiff contends that: “Extrinsic evidence must be admitted in order to ascertain what the alternative proposal was. That is critical to understanding Built’s obligations, including assessing Built’s claim for a variation to the mechanical system”.8 [61] Prior to undertaking a review of the extrinsic evidence, the plaintiff also submits that when considering the extrinsic evidence it is important to “contemplate the caveat on the alternative proposal, that is, ‘… on the basis that the Contractor meets the performance requirement of the tender drawings and specification’.” [62] The plaintiff contends in this respect that: “Considered objectively and leaving aside any express requirement to the contrary, the ‘performance requirement of the tender drawings and specification’ could not include a ‘performance requirement’ that the alternative proposal could never achieve, or was, in fact, not designed to achieve – imposing such a requirement would be fundamentally inconsistent with the alternative proposal being part of the agreed WUC. Accordingly, identifying the alternative proposal is a critical first step before considering what the performance requirement of the tender drawings and specification was”.9 [63] This statement is relevant to what the plaintiff is attempting to achieve by resort to the extrinsic evidence. This will be further explored later in these reasons. Extrinsic evidence sought to be relied upon by the plaintiff [64] The plaintiff seeks to rely upon the following extrinsic evidence: (a) the invitation to tender response; and 8 Plaintiff’s written closing submissions at [35]. 9 Plaintiff’s written closing submissions at [36]. -- 27 of 210 -- 28 (b) correspondence evidencing negotiations between the submission of the plaintiff’s tender on 19 January 2015 and the execution of the Contract on 29 April 2015. [65] The documents relied upon in relation to the tender process establish that the invitation to tender allowed, and the plaintiff submitted, a conforming tender and also an alternative tender. The tender summary identified a cost difference between the conforming tender and the alternative tender with respect to the alternative mechanical system in the amount of $786,567.00. Further, reference is made to a statement under the heading “Schedule Two – Section One – Built Design & Construct Alternate Tender Clarifications” at page 62, where it states under subheading four “Mechanical Services”: “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 standalone 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.” [66] The language used is reflected (largely) in clause 1(ag) of Annexure Part O and clause 1(u) of the Contract. The plaintiff submits that this is relevant as “objectively, it may be inferred that the parties intended to adopt the alternative proposal envisaged by Built’s ‘non-conforming’ tender”. [67] The second category of extrinsic evidence sought to be relied upon by the plaintiff is the precontractual negations from the period between when the tender response was submitted and the Contract was signed. The plaintiff identifies that there are numerous meetings, discussions and extensive correspondence between the plaintiff and the defendant, including through the defendant’s agents: “(a) to clarify what was included in, and excluded from, Built’s tender; and (b) to negotiate the terms of the Contract, with a focus on the final scope of the WUC and the final Contract price.” [68] The plaintiff also seeks to rely on information in relation to its subcontractor, Batec, continuing to develop the design and provide further details of the alternative proposal. [69] This evidence includes: (a) An email on 6 March 2015 from Mr Collison of Tactical to Mr Thwaite stating “Pro Invest have agreed to proceed with a VRV system”10 and Mr Thwaite’s 10 PRO.020.001.2336. -- 28 of 210 -- 29 response “[h]ow interesting. After all the words from holiday inn about complying with their brief”.11 (b) Email dated 30 March 2015 at 2.35pm from Mr Meredyth of the plaintiff to Mr Collison of Tactical which attached a proposed air conditioning layout and piping configuration sample “for your acceptance prior to documenting the design”. The email states that the “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”. The email confirms the temperature set point will range between 22 and 24 degrees celsius and requests approval/acceptance.12 (c) An email dated 30 March 2015 at 5.30pm from Mr Collison of Tactical to Mr Meredyth of the plaintiff,13 which includes in the email chain as follows: (i) At 2.46pm Mr Collison forwarded Mr Meredyth’s email to Mr Thwaite asking for advice and stating that subject to that advice he would “issue appropriate instructions to Built”. (ii) At 4.54pm, Mr Thwaite responded to Mr Collison including as follows: “7. Are the VRV systems proposed to be heat recovery type or reverse cycle type? If the former are they 3 pipe or 2 pipe type? If the latter is the placement of FCUs proposed to be consistent with the façade they are mounted on (similar thermal zone).” (iii) At 5.30pm, Mr Collison forwarded Mr Thwaite’s comments to Mr Meredyth and requested clarification prior to confirming acceptance. (d) An email dated 31 March 2015 at 2.31pm from Mr Meredyth of the plaintiff to Mr Thwaite responding to the questions as follows: “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.”14 (e) The same email contained a further response from Mr Meredyth stating that “[m]aximum allowable refrigerant lift for Toshiba VRF system is 80metres”. (f) An email dated 31 March 2015 at 2.47pm from Mr Thwaite responding as follows: “… I note your other comments and they are OK with the exception of the ground floor AC systems. The location of any condensing units at low level would be a point of great concern for the architect …The meeting proposed is to dot the iiiis [sic.] over what is the actual scope of work of the mechanical services contract which you believe that you have signed up 11 PRO.020.001.2336. 12 BUI.001.002.27678. 13 BUI.001.004.23878. 14 BUI.100.002.6309. -- 29 of 210 -- 30 for … The hotel operator also has particular requirements which will need to be addressed …”15 (g) An email dated 31 March 2015 at 3.11pm from Mr Meredyth responding to Mr Thwaite’s comments as follows: “We have not been provided with a [sic] IHG 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.”16 (h) Meeting minutes dated 25 February 2015 between various personnel of Aurecon, Tactical and the defendant recorded under the heading “VRV – Chilled Water” which state as follows: “It was agreed that VRV is the solution for HIE, subject to the system being designed with belts and braces to ensure issues such as gas leakage are covered, as well as servicing. JR noted that VRV can and has been used successfully up to 30 stories and can be used in mixed-use however the metering issue needs to be addressed. JR will seek to meet with IHG in Singapore next week to outline the background to the proposal to use VRV as IHG have a preference for a traditional chilled water system. GC [Glenn Collison] noted the savings in Spring Hill were in the order of $700,000 (in mechanical and structure). The Ibis Adelaide has a VRV system and the Ibis Brisbane will have an [sic] VRV system.”17 (i) An email dated 9 April 2015 from Mr Meredyth of the plaintiff to Mr Collison of the defendant forwarding an email from Cushway Blackford.18 Mr Meredyth’s covering email refers to the email from Mr Brock of Cushway Blackford and stated: “Please note that largely the IHG 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.” (j) The email from Mr Brock of Cushway Blackford stated:19 “… please find attached concept sketch & supporting brief description of the proposed mech systems. 15 BUI.001.004.23883. 16 BUI.100.002.6329. 17 PRO.020.001.0070. 18 BUI.001.002.27682. 19 BUI.001.002.27682. -- 30 of 210 -- 31 Note there is only one (1) material change from the current mechanical design, which is VRF in lieu of chilled water. Detailed summary of current proposal (for reference): - 2-pipe heat pump VRF systems, zoned north/south over 2 floors each (total 12x systems + ground) …” (k) Attached to the email was also a letter from Cushway Blackford dated 9 April 2015,20 which stated: “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. The above proposal is based on our understanding of the IHG Engineering Standards (Asia Pacific) Section 9 (Holiday Inn Express Supplement), generally as follows: - Clause 9.2.1 nominates VRF as an option for air conditioning - Clause 9.2.3 allows the use of 2-pipe systems, with electric re-heat in temperate climates only (Brisbane is sub-tropical climate). In general, the remainder of the current building mechanical services design (documented by Thwaite Consulting Group) will not be altered in principle.” (l) An email dated 15 April 2015, from Mr Collison of Tactical responding to Mr Meredyth’s email of 9 April 2015 stating: “Grant As discussed, we have received confirmation from the Principal to proceed with the mechanical design development in accordance with information summarised in the email below…”21 [70] The plaintiff contends that based on this extrinsic evidence the words “alternative proposal” used in the Contract, is a reference to a two-pipe VRF heat pump system. Further, the plaintiff contends that it “is uncontroversial that this type of system [a two-pipe VRF heat pump system] cannot provide mode control to each individual guest room”.22 20 BUI.001.002.27683. 21 BUI.001.002.18824. 22 Plaintiff’s written closing submissions at [79]. -- 31 of 210 -- 32 [71] The submissions made by the plaintiff from paragraphs [50] to [79] of the plaintiff’s written closing submissions contain commentary based on each of the pieces of extrinsic evidence claimed to be admissible on the approach identified above. [72] Some of the submissions contain conclusions based on knowledge outside of what is stated on the face of the documents. For example, in paragraph [52] reference is made to the email of 6 March 2015 referring to a VRF system. Discussion then ensues as to the two different types of VRF system being the heat pump system where units can either heat or cool, but not at the same time, and heat recovery systems where cooling and heating are available independently, at the same time. [73] Further, at [55] in considering the email dated 30 March 2015 the inference is drawn from the reference to “A/C zones” and “two zones to cater for different heat loads on the building façade” as being a statement that “could only be a reference to a VRF heat pump system”. This seeks to infer a conclusion that the referenced words support a conclusion that the alternative proposal could not heat or cool at the same time. [74] At this point in the submissions, reference is also made to evidence from Mr Lord in his expert report dated 22 July 2019. This was obviously not material that was known to the parties as an independent objective fact prior to the Contract being entered into. Submissions occur in paragraphs [57] to [59] in relation to the operation of a two- pipe VRF heat pump system which is not apparent from the extrinsic material referred to above. [75] For example, paragraph [58] involves a discussion of how the occupants in rooms within the “zoned” areas do have temperature control under a two-pipe VRF heat pump system. An occupant is said to be able to adjust the temperature by regulating the amount of cooling received (if the system is in cooling mode) or the amount of heating received (if it is in heating mode). Further, it is identified that if the system was in cooling mode and an occupant wanted a warmer temperature, the occupant could select the temperature and the system would respond by providing ventilation, not chilled air. Thus, the temperature in the room would change as requested by the occupant. This also applies in the reverse scenario where the system is in heating mode and an occupant wants a cooler temperature. [76] At paragraph [60], it is expressly acknowledged that the subjective understanding of the parties is not relevant. Therefore, it does not matter whether or not Mr Collison understood that what was being proposed was a two-pipe VRF heat pump system. What is relevant is the objective position. [77] The submissions also refer to the piping schematic attached to the email dated 30 March 2015 as evidencing that:23 (a) the manufacturer would be Toshiba; (b) it was a two-pipe system; and (c) it did not have branch boxes. 23 BUI.001.002.27681. -- 32 of 210 -- 33 [78] The submissions again extrapolate from this evidence that the piping schematic could “only be depicting a VRF heat pump system” because that system uses two pipes and it could not be a heat recovery system, as that system uses three pipes. [79] Further, at paragraph [64] of the plaintiff’s written closing submissions, reference is made, in particular, to comments from Mr Thwaite by email dated 30 March 2015 at 4.54pm containing comment number seven. The submission is phrased as being that Mr Thwaite “was clearly mindful of the fact that if the system was a heat pump VRF system it would be designed such that there would be ‘zones’ and that those ‘zones’ would need to be ‘consistent with the façade they are mounted on’.” Again, it is extrapolated that the reason for the zoning is that it is a heat pump system and simultaneous heating and cooling would not be provided to the individual indoor units. [80] At paragraph [70] of the submissions, the plaintiff mixes what it is seeking to rely on from the extrinsic material with the current expert evidence. The plaintiff refers to the conclusion in Mr Dowden’s report24 that a reverse cycle system or heat pump system can only distribute heating or cooling at one time and not simultaneously to establish that “an inherent feature of a heat pump system is that it can only distribute heating or cooling at one time and not simultaneously”. This is not an objective fact established by the extrinsic material, but the plaintiff seeks to use it to bolster its case through an interpretation of the extrinsic material that it seeks to rely upon. Performance requirement of the tender drawings and the Specification [81] The second aspect to be considered is the phrase in clause 1(u) of Annexure Part O: “on the basis that the Contractor meets the performance requirement of the tender drawings and specifications”. [82] The meaning of “performance requirement” is in dispute. It is not defined in the Contract. [83] It is accepted by the plaintiff that the reference to “tender drawings and specifications” is a reference to the tender drawings and the Specification. [84] Whilst both parties have referred to expert evidence in relation to the meaning of “performance requirement”, the plaintiff’s primary position is that the question of interpretation of the Contract is a matter for the Court and not expert evidence. That is the correct approach. [85] The plaintiff contends that not every aspect of the tender drawings and the Specification amounts to a performance requirement. That is, it is relevantly a subset of statements within those documents where there is a requirement for performance of the mechanical system. The plaintiff also seeks to distinguish the method by which that performance is achieved. 24 EXP.001.001.0012. -- 33 of 210 -- 34 [86] This consideration leads to the contention as outlined in paragraph [89] of the plaintiff’s written closing submissions as follows: “Because Part O, clause 1(u) limits Built’s obligation to the performance requirement of the tender drawings and specification, the methods by which these systems achieve particular minimum and maximum temperatures is immaterial – what matters is whether the systems in fact achieve particular minimum and maximum temperatures because that is the performance requirement of the Thwaite specification.” [87] This contention is reliant upon the plaintiff’s focus on the design criteria set out in clause 3.1 of the Specification. The argument proceeds that the alternative proposal originally being installed by the plaintiff could have achieved the temperatures set out in the design criteria in clause 3.1 of the Specification and therefore the performance requirement of the Contract had been met. [88] The plaintiff also seeks to rely on the expert evidence in relation to the practical realities of an occupant of a room being able to control the temperature outside a designated temperature range. However, there is no articulation of the basis upon which it is contended that this extrinsic evidence can be relied upon to interpret the clause in the Contract. [89] This contention is expressed at paragraph [104] of the plaintiff’s written closing submissions as follows: “In Built’s submission the ability of the air conditioning system to achieve particular temperature ranges was the relevant performance required by the Thwaite Specification … The fact that the Thwaite specification offered a different method of achieving that same performance cannot mean that the particular method adopted in that case (i.e. mode control to each individual guestroom) was the relevant performance requirement. The requirement was to achieve a particular temperature range. Guests using the alternative proposal would have … been able to achieve that range of temperatures. That a different method was to be utilised is of no relevance.” [90] There is a difference between the plaintiff’s written closing submissions and the oral submissions made on 13 November 2020. At paragraph [106] of the written closing submissions it states “[a] reasonable person in the position of the parties at the time of contract would not consider clause 2.2.1 (and those that follow) of the Specification to have any relevance in circumstances where the alternative proposal was not an ‘air- cooled 4 pipe chiller (heat recovery type)’”. However, at the hearing it was conceded that there may be some performance requirements contained in the Specification and drawings that were not contained in clause 3.1 Design Criteria.25 However, this was not explored further but the concession was made and it was noted by Senior Counsel for the defendant.26 [91] Further, the plaintiff contends that hotel guests in individual rooms had the ability to heat or cool their rooms and that “the alternative proposal allowed individual guests 25 T15-5, L27; T15-5, L42-43. 26 T15-69, L34-37. -- 34 of 210 -- 35 to set their thermostat so as to achieve their desired temperature within those limits, by way of obtaining conditioned air or simply ventilation”.27 [92] The plaintiff also submits that the parties cannot have intended the Contract to mean that the requirements of virtually all parts of the Specification were performance requirements as this would in effect negative the obligation to install the alternative proposal. Further, it is contended the parties cannot have intended the Contract to mean that the alternative proposal should be installed on the basis that it meets a requirement of the Specification that the alternative proposal, of its very nature, could not meet. [93] Reference is made to the fact that clause 1(u) of Annexure Part O uses the singular “performance requirement”, rather than the plural “performance requirements”. While the Contract provides that words in the singular include the plural “according to the requirements of the context”, the plaintiff contends that the context here means that the use of the singular indicates the performance outcome set out in the design criteria in clause 3.1 of the Specification. The plaintiff says this is also reinforced in clause 1(ag) of Annexure Part O by the reference to “documented design criteria”. [94] Reliance is also placed on the introductory words to clause 3.1 of the Specification which state as follows: “Design criteria presented herein form the basis for the design of the works and for any alternative proposals submitted”. [95] The plaintiff points to the absence of similar words in relation to sections 2.2 and 2.3 of the Specification as the basis for the submission that they do not have any application to an alternative proposal. Defendant’s contentions [96] The defendant contends that the Contract required that the mechanical services system meet “the performance requirement of the tender drawings and specifications”. A key requirement was that the mechanical services system be capable of independently heating and cooling individual guest rooms. This meant that each guest could choose heating or cooling, independently from other guests. [97] The defendant’s position is that the Mechanical Direction was a notice to rectify defective work as the system being installed by the plaintiff did not perform the Independent Heating/Cooling Function. [98] Further, the defendant contends that whilst there was correspondence between the parties between the submission of the tender proposal (including the alternative proposal) and the Contract being executed, the Contract itself is what needs to be considered as being the agreement reached between the parties. [99] The defendant submits as follows: “Rather, what the parties did was the exact opposite. They chose to insert a ‘clarification’ in the Contract that specifically allocated the risk to Built that the alternative mechanical services system would 27 Plaintiff’s written closing submissions at [112]. -- 35 of 210 -- 36 meet the performance requirement of the Tender Drawings and Specification. There are two sophisticated commercial parties entering into a $32 million Contract for the design and construction of a hotel. This is how the parties chose to deal with any risk which existed in respect of this particular issue. The basis for this agreement of course is consistent with the entire understanding clause contained in clause 44.5 of the Contract …”28 [100] In respect of the approach to the proper construction of the Contract, including clause 1(u) of Annexure Part O, the defendant submits: (a) it is not permissible to use the functionality of the alternative proposal to dictate what the performance requirement is.29 (b) the knowledge or understanding of the defendant in respect of the two-pipe VRF system is not relevant to the operation of clause 1(u).30 (c) the evidence does not support a fact objectively known by the defendant that the alternative system did not provide the Independent Heating/Cooling Function.31 (d) the parties could have included particulars of the alternative proposal in the Contract. However, this was not done. Clause 1(u) was inserted, together with two entire agreement clauses in the Contract.32 (e) clause 1(u) refers to the performance requirements of the “tender drawings and specifications”. This is a compound expression, and the phrase must be read together. The words support reading “performance requirement” in the plural.33 (f) every word in clause 1(u) must be given effect to “so as to preserve the bargain reached between these two commercial parties”. The plaintiff’s construction does not do this.34 (g) the parties intended that the performance requirements be found in both the tender drawings and the Specification.35 (h) this construction is consistent with clause 1(u) being a risk allocation provision. That is: “It provides that in exchange for a $33 million contract, it is Built who assumes the risk that the mechanical services system it designs and constructs will meet the performance requirements of the tender drawings and specifications.”36 (i) clause 1(u) does not use the phrase “the documented design criteria” and the deliberate choice of words used tends to support a different meaning. This in 28 Defendant’s written closing submissions at [25]. 29 Defendant’s written reply submissions at [7]. 30 Defendant’s written reply submissions at [10]. 31 Defendant’s written reply submissions at [11]-[12]. 32 Defendant’s written reply submissions at [13]. 33 Defendant’s written reply submissions at [16]-[18]. 34 Defendant’s written reply submissions at [19]. 35 Defendant’s written reply submissions at [20]. 36 Defendant’s written reply submissions at [20]. -- 36 of 210 -- 37 turn, tends to support a construction that the performance requirements are to be found in both the tender drawings and Specification.37 [101] As to the approach to the construction of clause 1(u) of the Contract, the defendant contends: (a) it is not correct to undertake the exercise proposed by the plaintiff to identify the alternative proposal. (b) but, even if that is done, and the alternative proposal is a “VRF two pipe heat pump system”, it is still to meet the performance requirements in the tender drawings and the Specification.38 [102] Further, the defendant submits there is no ambiguity in clause 1(ag) of Annexure Part O – it says a VRF type arrangement. But even if it is assumed to be a two-pipe VRF system, the risk allocation remains in favour of the defendant.39 [103] The defendant acknowledges that parol evidence is admissible to identify the subject matter of a written contract but this is in circumstances where the subject matter is expressed in an uncertain or ambiguous fashion. That is not the case here.40 [104] In response to the plaintiff’s submission on the correct construction of the Contract, the defendant refers to and relies on MacDonald v Shinko Australia Pty Ltd.41 [105] In that case, McPherson JA stated:42 “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 Pty Ltd v. Rathmines Investments Pty Ltd [1984] 1 Qd.R. 302. But 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. Here there is no uncertainty or ambiguity in the contractual identification of the subject matter. The designation in the written contract of 29 August 1995 may have been the result of a mistake; but on its face it is perfectly plain. Parol evidence of pre-contractual statements is not needed in order to identify it from the description given in the written contract.” [106] Further, Davies JA stated:43 “… the appellant submits that because of cl. 28.1 of the instrument of contract between the parties the respondent cannot refer to evidence outside the instrument to prove a prior oral contract or a continuing common intention of the parties to buy and sell a unit different from 37 Defendant’s written reply submissions at [25]. 38 T14-11, L15-T14-12, L5. 39 T14-12, L7-26. 40 T15-66, L37-T15-67, L18. 41 [1999] 2 Qd R 152 (McPherson and Davies JJA and Moynihan J). 42 At 154. 43 At 156. -- 37 of 210 -- 38 that identified in the contract in order to seek rectification of that instrument. The clause is in the following terms: ‘ENTIRE AGREEMENT This Agreement constitutes the entire agreement of the parties as to its subject matter and supersedes and cancels all prior arrangements, understandings and negotiations in connection with it.’ The purpose of that clause, it seems to me, is to exclude any such evidence either to prove terms additional to or different from the written instrument or collateral contracts or to construe the instrument in a way different from the meaning to be inferred solely from its terms.” [107] As there is no uncertainty or ambiguity here, the defendant contends it is not permissible to undertake the task as proposed by the plaintiff of looking at the pre- contractual documents. [108] On the proper construction of the Contract, the defendant’s position is that the plaintiff was required to build a mechanical services system that satisfied the performance requirement of the Contract to provide the Independent Heating/Cooling Function. In these circumstances, the Mechanical Direction was not a variation but was a notice to rectify defective work. Consideration [109] Following consideration of the relevant authorities and submissions on behalf of both parties, I have reached the conclusion that extrinsic material is not admissible to interpret the words “alternative proposal” contained in clause 1(u) of Annexure Part O of the Contract. [110] This conclusion is reached on the following reasoning. [111] The “true rule” as identified by Mason J in Codelfa Construction Pty Ltd v State Rail Authority (NSW) remains binding authority in relation to this issue. [112] Often reference is made to the first two sentences of “the true rule” without consideration of the discussion which immediately follows that statement. It is necessary to consider the full statement of the rule. [113] Further, the decision of the High Court in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd,44 considered the applicable legal principles. French CJ, Nettle and Gordon JJ in joint reasons stated as follows:45 “The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. 44 (2015) 256 CLR 104. 45 At 116-7 [46]-[52]. -- 38 of 210 -- 39 In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals. Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations. Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption ‘that the parties … intended to produce a commercial result’. Put another way, a commercial contract should be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’. These observations are not intended to state any departure from the law as set out in Codelfa Construction Pty Ltd v State Rail Authority (NSW) and Electricity Generation Corporation v Woodside Energy Ltd.” (Footnotes omitted) -- 39 of 210 -- 40 [114] The reasons of Kiefel J (as the Chief Justice was then) and Keane J recognise that the “ambiguity” referred to in Codelfa arises when the words are “susceptible of more than one meaning”. However, their Honours noted: “His Honour did not say how such an ambiguity might be identified. His Honour’s reasons in Codelfa are directed to how an ambiguity might be resolved.”46 [115] Their Honours then considered the refusal of special leave to appeal in the matter of Western Export Services Inc v Jireh International Pty Ltd.47 In the reasons for refusal of special leave, reference was made to a requirement that it is essential to identify ambiguity in the language of the contract before the Court may have regard to the surrounding circumstances and the object of the transaction. Their Honours noted “[t]here may be differences of views about whether this requirement arises from what was said in Codelfa. This is not the occasion to resolve that question.”48 French CJ, Nettle and Gordon JJ in their joint reasons agreed with the observations of Kiefel and Keane JJ in respect of this issue.49 [116] The appeal in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd proceeded on the basis that any possible ambiguity as to the meaning of the words being considered in that case arose from the terms of the clause in the contract itself. Whether an ambiguity in the meaning of terms in a commercial contract may be identified by reference to matters external to the contract did not arise in that case.50 [117] This may be relevant to considerations in the current case as discussed further below. [118] While Codelfa remains binding authority, the question whether ambiguity must be shown before a Court interpreting a written contract can have regard to background circumstances has received differing applications. It could be said that the existence and scope of the ambiguity required is a matter of judicial controversy. A consideration of this controversy is summarised by Jackson J of this Court in a first instance decision in Aurizon Network Pty Ltd v Glencore Coal Queensland Pty Ltd & Ors.51 Whilst this matter was overturned on appeal, and the Court of Appeal reached a different construction of the contract, the summary of some of the relevant issues and differing views as to the approach to extrinsic evidence as set out in paragraphs five to 122 has not been disturbed. [119] One of the difficulties identified in the overview of the authorities and approaches is “drawing the line between admissible evidence of extrinsic facts that are raised in negotiations and inadmissible evidence of prior negotiations that would tend to reveal or prove the parties’ subjective intentions”.52 That line is also relevant here when consideration is given to the particular extrinsic material that the plaintiff has sought to rely on and also other material including the current expert reports and inferences sought from what appears to be a combination of the pre-contractual negotiations and the opinions contained in the expert reports. It is important to keep in mind that it is 46 At 132 [110]. 47 (2011) 86 ALJR 1 at 2 [2]. 48 At 132 [111]. 49 At 117 [52]. 50 At 133 [113]. 51 [2019] QSC 163. 52 At [62]. -- 40 of 210 -- 41 “objective facts” known to both parties that may be admissible if the ambiguity “gateway” is established. The consideration of extrinsic facts, being facts that were known to all relevant parties at the time of making the contract, is substantially different to attempts to find meaning of terms in pre-contractual negotiations and then to import them into terms used in the contract. [120] In these circumstances I consider that the extrinsic material sought to be relied upon is inadmissible on the basis that the plaintiff is seeking to rely on more than the objective facts known to the parties at the time the Contract was entered into. This is evidenced by consideration of the plaintiff’s submissions in respect of the individual extracts of the emails and other documents sought to be relied upon by the plaintiff. [121] Further, I am not satisfied that the ambiguity threshold has been made out. The reference to “alternative proposal” in clause 1(u) is informed by clause 1(ag) of Annexure Part O of the Contract. This clearly states: “The Contractor, in conjunction with its preferred subcontractors has reviewed the documented design criteria and has offered an alternative air conditioning system based on VRF type arrangement”. [122] There is no ambiguity as to what the alternative proposal is. It is a VRF air conditioning system. The second and third sentences in clause 1(ag) also add a level of detail to the “alternative proposal”. [123] In these circumstances I do not consider that the “gateway” has been satisfied so as to enable recourse to extrinsic material to interpret clause 1(u). [124] It is not expressly raised in submissions but it is open to be inferred from the plaintiff’s submissions that they are seeking to identify the ambiguity through the extrinsic material itself. This is the issue that was identified in the reasons of Kiefel and Keane JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd. The issue is therefore whether reference to matters external to the Contract can be relied on to identify the ambiguity. [125] This appears to be directly at odds with the parol evidence rule itself and also with the fact that there are two entire agreement clauses in the current Contract: one in the Formal Instrument of Agreement and one in the General Conditions. [126] The parol evidence rule remains a fundamental rule in relation to the construction of contracts. This was confirmed by the decision of the High Court in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd.53 In the joint judgment of Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ, their Honours stated: “The respondents each having executed a[n] … agreement, each is bound by it. Having executed the document, and not having been induced to do so by fraud, mistake, or misrepresentation, the respondents cannot now be heard to say that they are not bound by the agreement recorded in it. The parol evidence rule, the limited operation of the defence of non est factum and the development of the equitable remedy of rectification, all proceed from the premise that a party executing a written agreement is bound by it … 53 (2004) 218 CLR 471 at 483 [33]. -- 41 of 210 -- 42 There are reasons why the law adopts this position. First, it accords with the ‘general test of objectivity [that] is of pervasive influence in the law of contract’. The legal rights and obligations of the parties turn upon what their words and conduct would be reasonably understood to convey, not upon actual beliefs or intentions … Where parties enter into a written agreement, the Court will generally hold them to the obligations which they have assumed by that agreement. At least, it will do so unless relief is afforded by the operation of statute or some other legal or equitable principle applicable to the case … It is a time to maintain those rules. They are not unbending. They allow for exceptions. But the exceptions must be proved according to established categories. The obligations of written agreements between parties cannot simply be ignored or brushed aside.”54 (Footnotes omitted) [127] The parol evidence rule itself would operate to exclude extrinsic evidence for the purpose of interpretation. One of the issues to be considered, however, is whether the parties as a matter of fact, determined the whole of the Contract would be in writing. In this case where there are two entire agreement clauses this may be sufficient to satisfy that issue without further consideration. [128] The existence of the entire agreement clauses evidences express statements that the written Contract represents the whole of the agreement. [129] There is a view that where an entire agreement clause is included, the result may be that the parties have “contracted out of contextualism”. This may be an additional basis for excluding reference to extrinsic evidence for the purpose of contractual interpretation.55 [130] The High Court in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd clearly identified that the task involves an interpretation on the assumption that the parties intended to produce a commercial result. The plaintiff has made submissions that it is necessary to identify the subject matter with precision so that it can be known with certainty what the alternative proposal is and also that it would be a commercial absurdity if, in effect, the alternative proposal was incapable of complying with the “performance requirement of the tender drawings and specifications”. [131] Conversely, the defendant submits that the parties could have inserted particular details as reflected in the emails and documents sought to be relied on as extrinsic evidence. However, they chose not to do that. There is some force in the submission that the parties chose to insert the particular “clarification” that identified the alternative proposal at a more general level with a specific qualification allocating the risk to the plaintiff. [132] The defendant submits that this is consistent with the entire agreement and understanding clause and is a result of two sophisticated commercial parties entering into a design and construct contract. This will be considered further below in relation 54 At 483-4 [33]–[35]. 55 Hon JJ Spigelman AC, “Contractual Interpretation: A comparative perspective” (2011) 85 ALJ 412. -- 42 of 210 -- 43 to the interpretation of clause 1(u). However, this is also relevant to the consideration of the admissibility of the extrinsic material. [133] The maintenance of the parol evidence rule and the upholding of entire agreement clauses in contracts is consistent with recognising a commercial objective for certainty. This could be described as a “fundamental commercial objective for all parties … to know where they stand without undergoing the risks and uncertainties of litigation”.56 [134] Phrasing this a different way, at the time of contracting commercial parties may attribute significant value to certainty. Allowing extrinsic evidence to be introduced which may cut across that certainty and the allocation of risk would be contrary to a commercial result. Some go further and describe this as follows: “[T]he idea that an arbitrator or a judge would be called upon to determine the true intention of the parties by going beyond the written contract to encompass anything which disputing parties can relevantly imagine, would be regarded by most parties, at the time of formation of the contract, to constitute a commercial disaster.”57 [135] It is in these circumstances that an entire agreement clause being upheld and enforced provides a commercial result consistent with the express agreement by the parties that the written Contract forms the whole agreement between the parties and replaces all previous representations and drafts. [136] The allocation of risk between the parties is recognised as being a significant purpose of contract law but is particularly so in relation to construction contracts. This is a design and construct contract and the allocation of risk in relation to design is something that is considered further below. [137] In these circumstances I consider that the extrinsic material sought to be relied upon by the plaintiff is not admissible. Construction of clause 1(u) Annexure Part O [138] The task is then to consider more broadly what is meant by clause 1(u) of Annexure Part O. [139] In Byrnes v Kendle,58 Heydon and Crennan JJ observed in relation to contractual construction as follows: “The approach taken to statutory construction is matched by that which is taken to contractual construction. Contractual construction depends on finding the meaning of the language of the contract – the intention which the parties expressed, not the subjective intentions which they may have had, but did not express. A contract means what a reasonable person having all the background knowledge of the ‘surrounding circumstances’ available to the parties would have 56 Hon JJ Spigelman AC, “Contractual Interpretation: A comparative perspective” (2011) ALJ 412 at 429. 57 Ibid. 58 (2011) 243 CLR 253. -- 43 of 210 -- 44 understood them to be using the language in the contract to mean. But evidence of pre-contractual negotiations between the parties is inadmissible for the purpose of drawing inferences about what the contract meant unless it demonstrates knowledge of “surrounding circumstances”.59 [140] In the context of statutory construction, in the recent decision of Westpac Securities Administration Ltd v Australian Securities and Investments Commission,60 Gordon J commented: “[The clause] is to be read as a whole and given its ordinary meaning, in light of its context and purpose. It is not to be dissected into separate words or phrases, the meanings of which are then amalgamated into some composite meaning.”61 (Footnotes omitted) [141] There is a risk in this case of doing exactly what Gordon J warned about. The plaintiff has focused on two distinct aspects of clause 1(u) and then contended that they would be inherently inconsistent and therefore that could not be the meaning. However, if the clause is read as a whole and given its ordinary meaning, in light of its context and purpose, then the tension identified falls away. [142] As submitted by the defendant, clause 1(u) makes it clear that the alternative proposal was only being accepted on the basis that it met the performance requirement of the tender drawings and the Specification. It also clearly allocates the risk that the mechanical services system will meet the performance requirement set out in both the tender drawings and the Specification to the plaintiff. [143] The issue is then, on the proper construction of clause 1(u) of Annexure Part O whether independent heating and cooling (or referred to as mode control) was a performance requirement of the tender drawings and the Specification. [144] The preliminary design documents are contained in Annexure Part K and incorporate the drawings and Specification. It is not contentious that these are the documents that the original tender proceeded on.62 [145] The reference to “tender drawings and specifications” in clause 1(u) Annexure Part O is therefore to be interpreted as a reference to the drawings and specifications included in the Contract. [146] These documents also form part of the “Principal’s project requirements”. The express purpose of the Principal’s project requirements is the design and construction of the “project”, namely, the Spring Hill Hotel. [147] The relevant clauses of the Contract are set out in full above. These include: (a) Clause 2.2 of the Contract which requires the plaintiff to carry out and complete its design obligations in accordance with the “Principal’s Project Requirements” and to complete the WUC in accordance with the drawings and 59 At 284 [98]. 60 [2021] HCA 3. 61 At [54]. 62 Subject to one revision with the Roof Level Plan issued as series “A”, rather than “Rev.01”. -- 44 of 210 -- 45 specifications in Annexure Part K so that the works, when completed, would be fit for their stated purpose and comply with all requirements of the Contract. (b) Clause 2.6 of the Contract which provides that where the “Principal’s project requirements” include “performance specifications”, the plaintiff was required to ensure that the performance specifications were satisfied when completing the design and construction of the works and in making any selection of materials, plant or equipment for inclusion in the works so that the works would be fit for purpose. [148] The term “performance requirement” is not used in clause 2.6. [149] The critical issue for determination in this matter is whether or not the Independent Heating/Cooling Function was a performance requirement of the tender drawings and the Specification. [150] It is not a task before this Court to interpret all or any other performance requirement or performance requirements of the tender drawings and the Specification. [151] Applying the ordinary meaning, the term refers to a requirement relating to performance. In this case, a requirement relating to performance of a mechanical services system, being the air conditioning system. [152] The defendant refers to the Macquarie Dictionary definition of these terms as follows: “Performance: ‘the way in which something reacts under certain conditions or fulfils the purpose for which it was intended’. Requirement: ‘that which is required; a thing demanded or obligatory’.” [153] Reference is also made to the definition of “performance” in the Australian Oxford Dictionary to mean “the capabilities of a machine”. [154] The shorter Oxford English Dictionary defines “performance” as including: “The capabilities of a machine, esp. a motor vehicle or aircraft, measured under test.” [155] This definition identifies a capability of a machine which is measurable. This appears to be an apt definition for the current consideration. [156] The question may then be considered as whether independent heating or cooling was: (a) Required, obliged or demanded. (b) A capability of the air conditioning system. (c) Measurable. -- 45 of 210 -- 46 [157] The clause is also to be considered in the context of the Contract itself. There are several preliminary matters which are relevant to these considerations including: (a) The performance requirement is to be ascertained, identified or otherwise derived from the tender drawings and specifications. This task does not require a consideration of the alternative proposal. (b) The reference is to “tender drawings and specifications” and the reference to both would support a construction that draws on requirements from both sources. This is of particular significance given the plaintiff’s submission that clause 3.1 of the Specification sets out all of the relevant performance criteria which could constitute performance requirements for the purposes of clause 1(u). This cannot be the meaning intended by the language used. Otherwise, there would be no need for “drawings” to be included. (c) The term “performance requirement” is not used elsewhere in the Contract. It is to be contrasted with other terms such as “performance specification” (clause 2.6 of the Contract), “acceptance criteria” (clause 3.4 of the Specification) and “design criteria” (clause 3 of the Specification). Objectively, the use of a specific and different term supports a conclusion that it was intended to mean something different to those other terms and should not be limited to the meaning in those other terms. [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: (a) Clause 2.2.1 of the Specification provides for an “air-cooled four pipe chiller (heat recovery type)” system which has a specific function that it can perform independent heating/cooling. The requirement of an Independent Heating/Cooling Function is an inherent capability of that air conditioning system. (b) Clause 2.2.3 of the Specification stipulates that each guest room is to have its own indoor FCU with Chilled Water Coils (CHW) and Heated Hot Water Coils (HHW), together with wall mounted electronic controls. Inherently, this would enable each guest to adjust the heating and cooling in their room. (c) Clause 9.8.2 of the Specification provides details about the wall mounted controls to be installed in each room, including functions for temperature control specifically “[c]hilled water and heating hot water control valve modulation to satisfying [sic] cooling and heating load”. The wall mounted controller was to be capable of modulating the heating and cooling in the individual guest room by controlling the CHW and HHW coils in the FCU. Whilst under a VRF system CHW and HHW coils would not be relevant, this requirement to be able to modulate heating and cooling in an individual room tends to support a requirement that whatever system was actually installed, it was to be able to achieve this outcome. [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 -- 46 of 210 -- 47 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. [163] What the language in clause 1(u) does is to provide for a VRF air conditioning system to be designed which adapts and applies the performance requirements that were set out in the tender drawings and specifications in respect of the four-pipe chiller (heat recovery) air conditioning system. [164] The plaintiff’s argument that this renders nugatory the alternative proposal is incorrect. It is accepted that it is possible to design a VRF air conditioning system which does provide for independent heating and cooling. That is what has happened. The question to be determined is whether clause 1(u) of Annexure Part O required that or not. [165] It is also important to keep in mind that this a design and construct contract. The preliminary drawings that were included at the tender stage and were incorporated into the final Contract required further detailed design to be undertaken and a process followed by which compliance with the Specification was considered and further liaising with the defendant prior to construction as part of the contractual obligations. A contract of this nature requires design work to be undertaken and then an evaluation against the requirements and if there was any deviation or variation from that then further consultation with the principal needed to occur. [166] Accordingly, clause 8.4 (Contractor’s obligations in relation to the Principal’s project requirements) and 8.5 (Contractor’s design obligations) of the General Conditions are also important contextual considerations. These provisions are set out in full above. [167] Clause 8.1 also provides some context. The provision that the clarifications have precedence over the preliminary design recognises that changes by way of clarifications such as in the current case are foreseeable. However, the design obligations such as clause 8.5(a) tend to suggest that the extent that the clarifications override the preliminary design are to occur only to the extent necessary and the -- 47 of 210 -- 48 overall project requirements are to be kept in mind. This is captured by clauses 8.1(b)(i) and (c) where considerations of quality and purpose are maintained. [168] The plaintiff’s argument that clause 3.1 of the Specification contains the only performance requirements is not persuasive. As indicated previously, the language of “performance requirement” is different from “design criteria”, “acceptance criteria” and other terms used in the Contract. The incorporation of the phrase “tender drawings and specifications” indicates a wider and more comprehensive application. [169] If the parties had intended that “performance requirement” in clause 1(u) of Annexure Part O would be the same as clause 3.1 in the Specification then they could have easily specified that clearly. Instead, alternative language was used including an express reference to both the Specification and drawings. This alone tends to support a construction that the performance requirements in clause 1(u) of Annexure Part O are wider than those in clause 3.1 of the Specification. [170] The plaintiff’s obligation pursuant to clause 1(u) of Annexure Part O was that the plaintiff was required to install an air conditioning system based on a VRF type arrangement on the basis that the plaintiff met the performance requirement of the tender drawings and specifications. [171] The Independent Heating/Cooling Function is a performance requirement of the tender drawings and specifications. Accordingly, the mechanical system to be installed pursuant to the Contract by the plaintiff was to include the capability of independent heating and cooling in individual guest rooms. [172] Consequently, the first question on the list of issues (question 1(a)) is to be answered in the affirmative. That is, on a proper construction of the Contract, the plaintiff was required to design and install an air conditioning system allowing mode control in each guest room, with the ability for occupants of individual guest rooms to select temperatures utilising the heating system or cooling system independently of other guest rooms. Mechanical Direction / Variation [173] As a consequence of these findings, the next issue to be considered is whether the notice provided on 11 August 2016 was a notice to rectify defective work as it purported to be, or whether it constituted a direction for a variation. [174] By the time of the 11 August 2016 notice, an issue had arisen between the parties as a result of the two-pipe system that had been designed and partially installed by the plaintiff not being capable of performing the Independent Heating/Cooling Function. The two-pipe system which was in the process of being installed operated in either heating or cooling mode and also grouped multiple rooms together into single zones. [175] The plaintiff at that time and at the hearing, maintained that the two-pipe system it had designed and partially installed complied with the requirements of the Contract. [176] Given my finding above, this position has not been made out. -- 48 of 210 -- 49 [177] The notice given on 11 August 2016 was issued pursuant to clause 29.3 of the Contract as a notice to rectify defective work. In summary, the Mechanical Direction: (a) Notified the plaintiff that the mechanical services system being installed did not comply with clause 1(u) of Annexure Part O of the Contract because it did not meet the performance requirements of the Specification. (b) Set out the ways in which the mechanical services system did not meet the performance requirement of the Specification, including its inability to perform the Independent Heating/Cooling Function. (c) Directed the plaintiff to remove or redesign the mechanical services system and replace it with a mechanical services system that would meet the performance requirements of the Specification. [178] Subsequent notices on 16 August 2016 and 17 September 2016 were consistent with the original Mechanical Direction. The 16 August 2016 notice confirmed that the original Mechanical Direction had not been given in error, did not constitute a direction for a variation and further directed the plaintiff to comply with the original notice. The further notice given on 17 September 2016 again advised that the Mechanical Direction was valid and current. [179] The expert evidence at the trial established that the two-pipe VRF system that was being installed was incapable of performing the Independent Heating/Cooling Function.63 This was not contentious. [180] As a result of the language used in clause 1(u) of Annexure Part O, the risk in respect of the VRF air conditioning system meeting the performance requirement of the tender drawings and specifications was allocated to the plaintiff. In circumstances where the mechanical services system installed fell short of that requirement then the liability of any remedial action that needed to be taken was the responsibility of the plaintiff. [181] In these circumstances, the Mechanical Direction was a valid notice to rectify defective work and was not a direction to undertake a variation. Further, the plaintiff was required to rectify the defective mechanical services system at its own cost and is not entitled to the costs of carrying out that work, an extension of time, delay damages or the return of any liquidated damages set-off by the defendant. [182] Accordingly, question 1(b) is to be answered in the affirmative. [183] Question 1(c) of the list of issues is to be answered on the basis that subparagraph (ii) is the proper construction of the Mechanical Direction. [184] Given these findings, it is not relevant to consider questions six, 13 and 18 of the list of issues. These relate to the plaintiff’s claims in relation to the costs of undertaking the work, its claim for an extension of time and delay damages and the return of any liquidated damages. 63 See for example EXP.001.001.0012 at p 0033 [12.1]. -- 49 of 210 -- 50 [185] However, it is appropriate that I consider these issues and make the necessary findings in case I am in error in respect of the admissibility of the extrinsic material and the construction of the Contract. I deal with these issues at Annexure A. JOINERY DELAY [186] Overall, the plaintiff submits that the evidence establishes that the delay to practical completion arose by reason of the Mechanical Direction.64 [187] The defendant contends that the plaintiff or its contractors failed to undertake the timely installation and delivery of the joinery works. The defendant submits that there is no entitlement to an extension of time in respect of the alleged joinery delay as: (a) the plaintiff did not comply with the notice provisions in clause 34.3(b) of the Contract; and (b) the plaintiff was not delayed in reaching practical completion by reason of the alleged joinery delay.65 [188] Given my findings in these reasons, if this issue needs to be considered further, it should be addressed as proposed in the further submissions. BATHROOM DESIGN VARIATION (VP32) [189] Question two in the list of issues in dispute between the parties is relevant to this issue: “2. In respect of the alleged Bathroom Design Variation, whether [SOC [10], [11], [13]; DEF [11], [12], [13]; R [11], [12], [13], [14]] whether: (a) either on a proper construction of the contract or by operation of a waiver or estoppel, by correspondence dated 13 July 2015, 5 May 2016 and 12 May 2016 (together or individually), the plaintiff was directed to undertake a variation of the works in the bathrooms, within the meaning of clause 1 and clause 36 of the Contract; and (b) the plaintiff is entitled to payment for the alleged variation; or instead (c) the alleged Bathroom Design Variation resulted in a reduction to the plaintiff’s scope of works.” [190] The defendant identifies an additional issue which has not been agreed to by the plaintiff as follows: “(d) the plaintiff has complied with the notice provisions contained in clause 36.1 and clause 20.” 64 Plaintiff’s written closing submissions at [485]-[489]. 65 Defendant’s written closing submissions at [315]-[316]. -- 50 of 210 -- 51 [191] The relevant issue in respect of quantum is question 14: “In respect of the alleged Bathroom Design Variation, the price of the work performed by the plaintiff in carrying out the alleged Bathroom Design Variation [SOC [13]; Def [13]].” [192] The parties have also agreed that the following is not in dispute: “2. In respect of the alleged Bathroom Design Variation: (a) that the correspondence which is alleged to comprise the alleged Bathroom Design Direction (consisting of correspondence dated 13 July 2015, 5 May 2016 and 12 May 2016) was given to the plaintiff attaching drawings which were marked ‘for construction’ [SOC [10]; Def [11]]; (b) that the plaintiff performed the bathroom works required to be undertaken [SOC [11], [12]; Def [12]].” [193] This claim relates to the supply and installation of certain bathroom fixtures and fittings which the plaintiff alleges were not within the scope of the Contract. The plaintiff primarily claims that by correspondence dated 13 July 2015, 5 May 2016 and 12 May 2016, there was an expressed or implied direction for the plaintiff to supply and install those bathroom fixtures and as a result, this amounted to a variation within the meaning of the Contract. [194] The plaintiff claims an amount of $339,441.81 plus GST in respect of this variation. Mr Watson has provided an expert report on behalf of the plaintiff and values the claim at $274,314.53 plus GST. Mr Hardiman for the defendant has also prepared an expert report and values this claim at $289,800.47. [195] The plaintiff’s primary contention is that the Bathroom Design Variation was a variation under the Contract pursuant to clause 36.1, and that as a consequence, the plaintiff is entitled to an assessment of the costs of the variation pursuant to clause 36.4 of the Contract. [196] Alternatively, if there is no entitlement to the costs of the variation pursuant to clause 36.1, the plaintiff contends that the defendant is estopped from relying on, or has waived its right to insist upon satisfaction of clause 36.1 of the Contract with respect to this variation. [197] The defendant’s position is that the plaintiff is not entitled to an increase in the contract sum in respect of the alleged bathroom variation as the procedures in clause 36.1 have not been followed. The defendant contends that clause 36.1(f) is not applicable in the circumstances and that the relevant contractual provision is clause 36.1(g). This clause requires notice to be given within five business days of receiving a direction to perform the variation. Further, reliance is placed on clause 36.1(h) which provides that there is no entitlement as a consequence of complying with a direction for a variation, unless there is entitlement to make a claim under clause 36.1. -- 51 of 210 -- 52 [198] The defendant also relies upon clause 20 as providing a further bar to entitlement. The defendant contends that clause 20 is also applicable and it similarly contains a requirement for notice to be given no later than five business days after a direction. [199] The defendant’s ultimate position is that there is no entitlement as the preconditions in clause 36.1 and clause 20 have not been complied with. [200] In order to consider this claim, it is necessary to start with a consideration of what was required to be built under the Contract. Then, whether there was a change in the work to be undertaken within the scope of clauses 36.1(a) to (e). Next, it is necessary to consider whether there was a direction to perform the variation given by the Superintendent, Tactical, in writing as required by clause 36.1(f) or whether it amounts to a direction to perform a variation pursuant to clause 36.1(g). Lastly, it is also necessary to consider whether any relevant notices have been given in accordance with clause 36.1 and clause 20. [201] It is not disputed that the plaintiff undertook the work to build and complete the bathrooms in accordance with the “for construction” design documents. The issue is whether the plaintiff is entitled to the costs in respect of the alleged additional work that was required to be carried out. [202] The additional work claimed by the plaintiff is the additional work associated with the supply and installation of the additional bathroom fixtures and fittings (Additional Bathroom Work), including: (a) the guest room shower screen doors, hinges and towel/handrail; (b) the stainless steel capping to the bathroom door jamb; (c) an additional plasterboard wall underneath the vanity; and (d) extension of the bathroom wall, including the waterproofing, tiling, painting and skirting. [203] The claim in respect of this Additional Bathroom Work is the inevitable consequence of the fact that the design for the bathrooms was not complete at the time of tender and the Contract being executed. It is apparent from the documents in the Contract that the final design for the bathrooms was to be undertaken. At the time of tender and the Contract being executed, indicative preliminary interior design documentation was included, which was actually for another project, Macquarie Park. There was also a guest room datasheet specific to the Spring Hill Hotel. As a consequence of this, the submissions for both parties focus on what was obliged to be built under the Contract and how the Contract deals with what was actually constructed in accordance with the “for construction” drawings. Alleged Direction [204] The plaintiff points to four documents as the basis for its contention that it was directed to undertake additional work, including the Additional Bathroom Work. These four documents are as follows: -- 52 of 210 -- 53 (a) An Aconex transmittal from Joseph Pang Design Consultants (JPDC) to the plaintiff dated 13 July 2015 attaching “for construction” drawings. This included drawings relating to the guest room bathrooms.66 (b) An Aconex transmittal from JPDC to the plaintiff dated 5 May 2016 attaching various “for construction” drawings. These drawings included drawings relating to the guest room bathrooms.67 (c) Two Aconex transmittals from the defendant dated 12 May 2016 regarding the status of the “for construction” drawings.68 [205] In order to understand the significance of these documents, it is necessary to consider the relevant terms of the Contract and also to consider what it was that was required to be built under the Contract in respect of the guest room bathrooms. What was required to be built under the Contract? [206] Annexure Part K of the Contract contains preliminary design documents which include a number of documents relevant to the guest bathrooms. [207] Reid Campbell, the architect engaged on the Project, prepared architectural drawings as part of the preliminary design documents for the Spring Hill Hotel. Annexure Part K lists the preliminary design documents including, a number of the architectural drawings under the heading “ARCHITECTURAL – Reid Campbell”. Relevantly, document A4004 is a document headed “Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3”. This drawing,69 shows the architectural design for the queen and twin room guest room bathrooms, for the 216 guest rooms in this category. [208] The plaintiff refers to various parts of document A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3) including notations on the drawing which identify specific categories of items either to be supplied by the builder, by the client and installed by the builder or alternatively, supplied and installed by the client (the client being the plaintiff). [209] Based on the plaintiff’s analysis of the drawings it is submitted that it is “uncontroversial” that the defendant was to supply the following items: (a) the sliding door at the entrance to the bathroom; (b) the shower door within the bathroom; (c) the towel rail/handle to the shower door; and (d) other minor items, such as the toilet roll holder. [210] In addition to the architectural drawing, Annexure Part K of the Contract also lists documents under the heading “INTERIOR DESIGN – JOSEPH PANG DESIGN CONSULTANTS”. Listed are a number of documents with a document reference starting with “ID” and four documents without that document reference but with the number “113109”. 66 PRO.001.008.0919. 67 PRO.025.001.2813. 68 PRO.025.001.2978. 69 BUI.001.002.07647. -- 53 of 210 -- 54 [211] Document ID-01-BD is described as “Bathroom Twin Room Issue G”.70 The plaintiff has also analysed the drawing and submits that the bathroom design is “quite similar”, although not entirely identical to the design set out in architectural drawing A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3). [212] The plaintiff identifies that the document ID-01-BD does not contain the narration outlining the position in relation to the various categories of items to be supplied and installed. There is, however, a notation which states as follows: “THESE DRAWINGS ARE TO BE READ IN CONJUNCTION WITH ARCHITECTURAL BASE DRAWINGS & RELEVANT CONSULTANT DRAWINGS.”71 [213] On the basis of this notation, the plaintiff contends that the consequence of reading the JPDC document together with the architectural drawing in respect of the bathroom design would be that the items depicted by the broken lines on the JPDC document would be items that were to be supplied by the principal, that is, the defendant. [214] There is an added complication as the documents under the heading “INTERIOR DESIGN – JOSEPH PANG DESIGN CONSULTANTS” also includes the four documents which do not carry the reference commencing with “ID” but are all numbered “113109”. These include a document described as “Guest Room Data Sheet Rev. A”. The Guest Room Data Sheet lists various fixtures and fittings and then classifies the various fixtures and fittings by the use of a dot point into Category 1, Category 2 or Category 3.72 These categories then are designated whether they are to be supplied and installed by the plaintiff or defendant, or supplied by one and installed by the other. [215] The Guest Room Data Sheet contains a notation that it is “BASED ON JPDC INTERIOR DESIGN DRAWINGS”. [216] Immediately under the documents listed in Annexure K under the heading “INTERIOR DESIGN – JOSEPH PANG DESIGN CONSULTANTS” there is another category headed “SPECIALIST LIGHTING - ELECTROLITE”, and under the documents listed, there is an annotation as follows: “Note: Interior Design & Specialist lighting documentation included are for Holiday Inn Express Park but will be adopted for the Spring Hill Project.” [217] The plaintiff points to the differences between the categories identified in architectural drawing A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3) and the Guest Room Data Sheet. There is a direct conflict between these two documents as to who is to supply certain fixtures. For example, the shower door and bathroom sliding door are to be supplied by the defendant in accordance with A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3) but under the Guest Room Data Sheet, these are to be supplied and installed by the plaintiff. 70 PRO.020.001.2058. 71 PRO.020.001.2058. 72 PRO.020.001.2557. -- 54 of 210 -- 55 [218] Annexure Part O of the Contract is also relevant. Annexure Part O deals with “clarifications” in respect of the WUC. Relevantly, paragraph (x) states as follows: “It is noted that the ‘Interior Design – Joseph Pang Design Consultants documentation’ was provided for information and only forms part of the Contract where specifically and directly referred to within this Annexure Part O.” [219] Clause 8.1 of the General Conditions sets out the approach for construction of the contractual documents and states as follows: “8.1 Discrepancies When construing the Contract Documents the following rules of construction apply: (a) in the event of any inconsistency between the Contract Documents: (i) the formal instrument of agreement and these general conditions have precedence; and (ii) the clarifications have precedence over the preliminary design; (b) despite the previous subclause 8.1(a): (i) where inconsistent levels of quality are required, the higher level of quality shall apply; (ii) figured dimensions shall take precedence over scaled dimensions: and (iii) drawings made to larger scales shall take precedence over drawings made to smaller scales; (c) where the requirements of quality or any aspect of WUC is not expressly specified or depicted, the quality shall be consistent with the purpose; and (d) drawings showing particular parts of WUC shall take precedence over drawings for more general purposes; and (e) in all cases, the interpretation to be followed by the Contractor will be as reasonably determined by the Superintendent. Where the Contractor considers that there is any ambiguity or discrepancy between the Contract Documents, it shall promptly advise the Superintendent in writing, who shall, subject to this subclause 8.1, give the Contractor a direction as to the interpretation to be followed. Where the Principal or the Superintendent considers that there is any ambiguity or discrepancy between the Contract Documents, the Superintendent shall give the Contractor a direction as to the interpretation to be followed. -- 55 of 210 -- 56 The Contractor shall have no entitlement as a consequence of a direction given by the Superintendent under this subclause 8.1 which is consistent with the rules of construction in this clause 8.1.” [220] The reference to “clarifications” in this clause is a reference to the clarifications set out in Annexure Part O. [221] Given the inconsistency between A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3) and document ID-01-BD, the plaintiff points to this provision as resolving the inconsistency. The plaintiff contends that as a result of paragraph (x) in Part O of the Contract, it has the effect that documents classified as “INTERIOR DESIGN – JOSEPH PANG DESIGN CONSULTANTS” documentation only form part of the Contract where it is specifically and directly referred to in Annexure Part O. [222] Annexure Part O does contain some examples of this in paragraphs (y) and (z). These deal with tiles to be used in the guest room bathrooms. As a consequence, paragraphs (y) and (z) of Annexure Part O govern the tiles to be used and override document “ID-PFSH-001” described as “Finishes Schedule – Issue H”.73 [223] The plaintiff submits that the interior design ID-01-BD document and the Guest Room Data Sheet are not referred to in Annexure Part O and therefore they contend that they do not form part of the Contract and do not form part of the WUC. [224] The defendant contends that the Guest Room Data Sheet was prepared by Tactical, not JPDC and while it is listed under the heading “INTERIOR DESIGN – JOSEPH PANG DESIGN CONSULTANTS” it is not caught by “Interior Design – Joseph Pang Design Consultants documentation” as used in clause 1(x) Annexure Part O. [225] The defendant also seeks to refer to documents in relation to the tender process including a tender addendum identified as RFI-03.74 The defendant seeks to rely on the plaintiff’s tender submission and the evidence of Mr Cook that the Guest Room Data Sheet was used for the purposes of the plaintiff preparing its price for the tender.75 [226] There is no direct evidence as to the author of the Guest Room Data Sheet but it does have the defendant’s logo and states “[p]repared by Tactical Group”. [227] In response, the plaintiff contends that the Contract itself needs to be construed and what happened between the tender submission and the execution of the Contract cannot be used to define the WUC contrary to direct contractual provisions. [228] The defendant also points to the notation on A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3) which states: “GUEST ROOM DESIGN STILL PENDING CLIENT APPROVAL AND REFER TO INTERIOR DESIGN FOR SETOUT DETAILS.” 73 PRO.017.001.2122. 74 WIT.001.001.0224 at p 0238 [84]-[90]; PRO.020.001.2555; PRO.020.001.2556. 75 PRO.020.001.1559 at p 0011; T1-69, L7-11. -- 56 of 210 -- 57 [229] This contention appears to be a submission that in effect A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3) is to be interpreted by reference to the interior design documentation. Based on this argument, the documents listed under the heading “INTERIOR DESIGN – JOSEPH PANG DESIGN CONSULTANTS” would have a role not constrained by clause 1(x) of Annexure Part O. [230] Conversely, the plaintiff submits that the comment on A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3) does not assist in resolving this issue. In this respect, the plaintiff points to several factors that tend to support the conclusion contrary to that contended for by the defendant, including: (a) The JPDC interior design documents do not address which party was responsible for providing particular items; (b) While it is contended that the Guest Room Data Sheet is not part of the JPDC documents, Ms Fu of JPDC gave evidence under cross-examination that in effect the Guest Room Data Sheet would not be used on anything other than a JPDC interior design drawing;76 (c) The notation on the architectural drawing refers to “setout details” as opposed to furniture, fixtures and equipment details, category details or specifically who was to supply the item. [231] The plaintiff contends that “setout details” given its ordinary meaning would be a reference to layout and not a reference to the provision of items or in fact, the contractual obligation to provide particular items. Consideration [232] The bathroom design was not completed at the time of the tender and this was carried over into the final Contract. [233] Construing the Contract as a whole, A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3) is the primary document having contractual status that assists in identifying what was to be provided by the contractor in respect of the guest room bathrooms. [234] The JPDC interior design documents and the Guest Room Data Sheet can best be described as “indicative only” given the operation of clause 8.1 in respect of the hierarchy of documents for construction purposes and also the specific provision in clause 1(x) of Annexure Part O. They were subject to the interior design being finalised as applicable to the Spring Hill Hotel. [235] A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3) itself makes it clear that even the “layout” of the bathrooms was subject to final approval. However, that document has the status of a contractual document. [236] While I accept that the Guest Room Data Sheet is on its face not a JPDC document, that of itself does not assist in determining the scope of work in respect of the bathrooms. Clause 1(x) of Annexure Part O in effect deems the “Interior Design Joseph Pang Design Consultants documentation” referred to in Annexure Part K as 76 T5-58, L10. -- 57 of 210 -- 58 non-contractual documents if they are not specifically referred to in Annexure Part O. [237] The use of the word “documentation” is wider than a reference to the JPDC documents and would be wide enough to cover documents such as the Guest Room Data Sheet which categorises the information contained in the JPDC interior design documents. [238] While the Guest Room Data Sheet may have indicated obligations and liabilities, it can only have an operation and relevance in respect of its application specifically to the JPDC interior design documents which are listed in Annexure Part K. It becomes circular as it can only have significance and application if those documents are in effect part of the Contract. If they are for information only, while they may assist in understanding what the Guestroom Data Sheet is referring to, it does not have any contractual effect as those documents do not form part of the Contract. This tends to support the conclusion that the operation of the Guest Room Data Sheet is similarly constrained by clause 1(x) of Annexure Part O. [239] In these circumstances I make the following findings: (a) A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3) is the starting point for the WUC for the 216 guest room bathrooms. (b) If there was a change to the design as set out in A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3) such as to change the scope of work in accordance with paragraphs 36.1(a), (b), (c), (d) or (e), then that would be a variation to the WUC. (c) To the extent that A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3) identifies certain items to be supplied by one party, any change to the obligation to supply any particular item would be a variation to the WUC.77 (d) Document ID-01-BD “Bathroom Twin Room Issue G” and the Guest Room Data Sheet did not form part of the Contract and were provided for information only. [240] It is now necessary to consider whether the correspondence relied upon by the plaintiff as a direction is a direction within the provisions of the Contract and whether there is any corresponding entitlement to costs. Was there a change in the work to be undertaken within the scope of clauses 36.1(a) to (e)? Was there a direction within clause 36.1(f) or does it amount to a direction to perform a variation pursuant to clause 36.1(g)? [241] Clause 36 sets out the procedure to be followed in respect of variations to the WUC. The procedure is set out in the third paragraph under clause 36.1 in respect of 77 This would equally apply to work that was removed from the scope and to additional work that was added. -- 58 of 210 -- 59 subparagraphs (f) and (g) and also relevantly, subparagraph (h). The provision relevantly states as follows: “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: (f) the direction to perform the variation given by the Superintendent is in writing, expressly states that the direction constitutes a direction for a variation and identifies the work the subject of the direction; or (g) before performing the variation and in any event within 5 business days of receiving the direction to perform the variation, the Contractor has given the Superintendent a notice in writing which identifies: (i) the date the direction was given: (ii) whether the direction was given orally or in writing; (iii) the substance of the direction and, if it was in writing, a copy of the direction must be attached; (iv) the approximate cost of the variation including a detailed breakdown calculated in accordance with subclause 36.4; (v) whether a claim for an EOT will be made as a consequence of the variation and if so, an estimate of the period; and (vi) where the variation relates to the design documents or the Principal's project requirements, by identifying the relevant requirement and the change to that requirement. (h) Except where the Contractor is entitled to make a claim under this subclause 36.1, the Contractor shall have no entitlement as a consequence of complying with a direction for a variation.” [242] Clause 20 of the Contract relevantly states as follows: “20 Superintendent … Except where the Contract otherwise provides, the Superintendent may give a direction orally but shall as soon as practicable confirm it in writing. If the Contractor in writing requests the Superintendent to confirm an oral direction, the Contractor shall not be bound to comply with the direction until the Superintendent does so. If the Contractor considers that any direction given by the Superintendent is given in error or, although not stated to involve a variation, in fact involves a variation, the Contractor must, before complying with the direction (but in any event, not later than 5 business days after the direction) notify the Superintendent, in writing, of this. -- 59 of 210 -- 60 If the Contractor does not give the notice to the Superintendent within the time specified, the Contractor shall have no entitlement in respect of the direction and any claims will be absolutely barred.” [243] It is then necessary to look at the four documents relied upon by the plaintiff as constituting the direction. The first document relied upon is an email dated 5 May 2016 from Ms Fu of JPDC to Mr Cook of the plaintiff. The Aconex mail attached 45 amended “for construction” design documents.78 The Aconex mail was copied to representatives of the defendant and also the Superintendent, Tactical. [244] A number of the attached drawings are relevant to the bathroom design. The plaintiff identifies six specific documents: ID-01-BD, ID-DT-02, ID-HSH-003, ID-JD-05.3, ID-PFSH-001 and ID-SSH-002.79 [245] The actual design for the guest room bathrooms is set out in documents ID-01-BD (this is the “for construction” version) and ID-DT-02. The other documents are schedules which set out particular items to be installed in other rooms, including guest room bathrooms. These include more detail including hardware and finishes. [246] The plaintiff has undertaken a comparison between document ID-01-BD80 and A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3). The main differences identified by the plaintiff between these two drawings (and is dealt with in the witness statement of Mr Cook) is that the guest room shower screen door is also the bathroom door, which includes a towel/handrail on the outside of the door. The additional work that was required by this change includes: (a) an extension to the bathroom wall (including waterproofing, tiling, painting and skirting); (b) stainless steel capping on both sides of the bathroom door jamb;81 and (c) a plasterboard wall underneath the vanity, with the vanity to be installed by others.82 [247] Further, drawing ID-JD-05.3 – Doors83 shows the guest room shower screen door as item GL-01 and the shower door hinges as item H-01. The document marked “ID- PFSH-001 – Finishes Schedule” then identifies item GL-0184 and item H-01 is similarly identified in document “ID-HSH-003 – Hardware Schedule”.85 These documents show that item GL-01 is to be provided by the contractor. This is a change to what was shown in A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev 3) which provided that the shower door was a Category 3 item to be supplied by the defendant. 78 BUI.001.001.69541. 79 BUI.001.001.58481; BUI.001.001.58506; BUI.001.001.58508; BUI.001.001.58523; BUI.001.001.58524; BUI.001.001.58525. 80 BUI.001.001.58481. 81 WIT.001.004.001 Witness statement of Thomas Cook dated 31 August 2018 at p 0075 [439]. 82 BUI.001.001.58481. 83 BUI.001.001.58523. 84 BUI.001.001.58524. 85 BUI.001.001.58508. -- 60 of 210 -- 61 [248] The position in relation to the hinges is less clear. The “for construction” design documents do not expressly state who is to supply the hinges. The plaintiff supplied the hinges. The plaintiff claims that this was a variation because A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3) provided that the shower door was a Category 3 item to be supplied by the defendant. It is contended that this would include the hinges for the shower screen door. As a result, the plaintiff claims that the supply of the shower door and the hinges is a variation. [249] Additionally, the revised configuration of the shower screen door also required stainless steel capping to be installed to both sides of the bathroom door jamb. Document “ID-PFSH-001 – Finishes Schedule”86 identifies this capping as item MT- 01. The plaintiff supplied the capping. The plaintiff claims this is a variation as A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3) did not require this capping.87 [250] This work was undertaken in relation to 216 of the guest room bathrooms. Overall, the plaintiff claims in respect of the following work: (a) procurement of the shower screen glass; (b) engaging contractors to install the shower screens; (c) procurement and installation of required material such as shower rails, hinges, stainless steel door jambs and channels; (d) engaging contractors to install the nib walls; and (e) additional painting, tiling and waterproofing.88 [251] The differences between what was required by A4004 (Type 1 & 2 Room Bathroom (Twin & Queen) Rev. 3) and the “for construction” drawings would be a variation within clauses 36.1(a) to (e). [252] It is then necessary to consider whether the plaintiff is entitled to an assessment of its costs pursuant to clause 36.4 of the Contract. The plaintiff does not seek to rely on clause 36.1(g) of the Contract. The plaintiff does not contend that it complied with clause 36.1(g) of the Contract. Rather, the plaintiff’s primary position is an entitlement to an assessment of costs on the basis of clause 36.1(f) of the Contract. [253] Subparagraphs (f) and (g) of clause 36.1 are alternatives. If either clause 36.1(f) or clause 36.1(g) is complied with then the principal’s liability for the price of a variation is enlivened. [254] However, the circumstances relied upon by the plaintiff do not naturally sit within the language of clause 36.1(f). The plaintiff submits that the documents “taken together or individually, were a direction to undertake a variation within the meaning of clause 1 and clause 36 of the Contract”.89 86 BUI.001.001.58524. 87 See also WIT.001.004.0001 Witness statement of Thomas Cook dated 31 August 2018 at p 0076 [439]. 88 See WIT.001.004.0001 Witness Statement of Thomas Cook dated 31 August 2018 at p 0082 [470]. 89 Plaintiff’s written closing submissions at [547]. -- 61 of 210 -- 62 [255] The plaintiff points to the broad definition of “direction” in clause 1 of the Contract, where direction is defined to mean: “includes agreement, approval, assessment, authorisation, certificate, decision, demand, determination, explanation, instruction, notice, order, permission, rejection, request or requirement.” [256] The plaintiff also refers to emails on 11 and 12 May 2016 in respect of the status of the “for construction” documents. These emails are between Mr Carlin of the plaintiff and Mr McBirnie of the defendant. The first email states:90 “Jim, Are you in a position to fully endorse all JPDC documentation ‘for construction’?” [257] The 12 May 2016 response from Mr McBirnie states as follows:91 “With the exception of the recent changes to the great room and public amenities, which are still being priced I believe all other drawings issued should be ok. I would however need to defer to Amie pending list of outstanding items to be certain …” [258] Mr Carlin, in a further response to Mr McBirnie, states as follows: “Can you please confirm if documents that have been issued are ‘for construction’ or are still on hold?”92 [259] Mr McBirnie of the defendant responded to Mr Carlin of the plaintiff as follows:93 “Is there genuine confusion or are you trying to make a point that drawings to be priced shouldn’t be considered for construction? Guestroom, signage and corridor drawings have been issued for construction and are not on hold …” [260] These emails were copied to Mr Collison of the Superintendent. [261] The plaintiff contends that read together this amounted to a direction for it to proceed with the works described in the “for construction” drawings and that this amounted to a direction within the meaning of clause 1. [262] Even if it is accepted that given the broad definition of “direction” and reading these documents together this was a direction to perform a variation to the extent that the drawings changed the scope of WUC, the “direction” could not be said to be “given by the Superintendent”, did not expressly state that the “direction” constituted a direction for a variation and did not identify the work the subject of the direction as required by clause 36.1(f). 90 BUI.001.001.69951. 91 BUI.001.001.69951. 92 BUI.001.001.69952. 93 BUI.001.001.69952. -- 62 of 210 -- 63 [263] In these circumstances, the defendant contends that clause 36.1(f) has not been made out and there is no entitlement to the additional costs of the variation. [264] Clause 36.1(g) of the Contract provides a mechanism that could have been followed by the plaintiff in the current circumstances in order for it to protect its interests and enliven its ability to claim and be paid for the costs of the variation. The defendant submits that clause 36.1(g) which could have applied in these circumstances was not complied with and accordingly no liability for the costs of a variation arises. [265] The plaintiff makes a number of arguments as to how or why the provisions in clause 36.1(f) have been satisfied. It is submitted that the Superintendent was copied into all of the emails and while the emails did not expressly identify the work the subject of the direction, that work was apparent to any person with knowledge of the relevant drawings. It is in these circumstances that the plaintiff urges a construction of the Contract adopting “business commonsense”.94 [266] However, I do not consider that this position is persuasive. Firstly, the plaintiff and the defendant are sophisticated and experienced parties and agreed to be bound by the terms of the Contract. The Contract is a standard form contract and the terms of the Contract are not highly unusual or unique in respect of these clauses. The parties agreed to be bound by clause 36.1 and the consequences set out therein. [267] Mr Cook on behalf of the plaintiff understood the importance of complying with clause 36.1 and evidence was given consistent with that.95 [268] Clause 36.1(f) is quite clear in its terms. The construction contended for by the plaintiff ignores, to a significant extent, the language of clause 36.1(f). [269] To the extent that there was any confusion which arose by the provision of the “for construction” drawings and the correspondence between the plaintiff and the defendant in relation to that, the Contract provided a mechanism which was directly applicable to those circumstances. The provision in clause 36.1(g) provides an express mechanism to determine whether a direction has been given to perform a variation and to obtain certainty from the Superintendent in respect of that work and to give rise to an entitlement to the price of that variation. [270] Further, clause 20 also assists with a mechanism for clarification in circumstances such as that currently being considered. Pursuant to clause 20, if there is an oral direction or the contractor considers that a direction has been given by the Superintendent and that it may have been an error, then the contractor is to provide a notice no later than five business days after the direction and notify certain matters. [271] The Contract makes it clear that no entitlement arises in respect of the price of a variation (to be calculated in accordance with clause 36.4) unless it is within clauses 36.1(f) or (g). The words in the chapeau to (f), (g) and (h) state this expressly. [272] The procedure in clause 20 is subject to the same qualification. 94 Aura Enterprises Pty Ltd v Frontline Retail Pty Ltd (2006) 202 FLR 435 at [40] per Brereton J. 95 T2-51, L25-40. -- 63 of 210 -- 64 [273] To allow for the construction contended for by the plaintiff would make the words in the chapeau to clauses 36.1(f), (g) and (h) and clause 20 have no effect. Clearly this could not be what was intended by the parties to the Contract. [274] The plaintiff also submits that despite there not being compliance with the precise language of clause 36.1, if viewed from the perspective of a “reasonable recipient” with knowledge of the terms of the Contract96 and the surrounding circumstances, it could be found that the requirements of clause 36.1(f) of the Contract had in effect been met. [275] These submissions focus on the failure to express that the direction constitutes a direction for a variation. However, that only addresses part of the deficiencies in respect of compliance with clause 36.1(f). [276] Separate to the alternative argument based on estoppel and waiver (dealt with further below), in respect of clause 36.1(f) the plaintiff seeks to mount an argument that other variations arose as a consequence of the receipt of “for construction” drawings which were subsequently approved as variations by the Superintendent notwithstanding that there was not compliance with the precise language in clause 36.1 of the Contract. In this respect reliance is placed on the way in which the Superintendent dealt with VP31 and VP38 which are dated 22 June 2016 and 2 December 2016 respectively. [277] The defendant submits that this argument has no basis particularly in circumstances where the plaintiff is seeking to rely on “surrounding circumstances” in support of its argument when these events occurred after it received the Aconex transmittals in the circumstances of the current claim. [278] Further, the defendant contends that how the Superintendent chose to assess one variation in one circumstance does not necessarily have any bearing on how it would treat another variation in another circumstance. [279] Reference was made in the evidence to what is commonly referred to as a “do and charge variation”. The evidence by Mr Malone of Tactical was that this approach was fraught with danger if the procedure in clause 36.1 was not followed.97 Mr Cook also gave evidence that he understood the importance of complying with clause 36.1.98 Given the express terms of the Contract, if the procedure under clause 36.1 was not followed then there was a risk that the costs may not have been recovered.99 [280] Alternatively, the plaintiff seeks to rely on estoppel and waiver. In respect of waiver, the plaintiff contends that the defendant, through the Superintendent, acted in a manner inconsistent with its rights pursuant to clause 36.1 of the Contract and accordingly, waived its entitlement to insist on strict compliance with the terms of clause 36.1 of the Contract in respect of the Bathroom Design Variation. In this regard the plaintiff relies upon the evidence of Mr Malone in respect of the way that VP38 and VP31 were dealt with. Both of those variations could be classified as a “do 96 Aura Enterprises Pty Ltd v Frontline Retail Pty Ltd (2006) 202 FLR 435 at [40] per Brereton J; Diploma Construction Pty Ltd v Marula Pty Ltd [2009] WASCA 229; FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340; BMD Major Projects Pty Ltd v Victorian Urban Development Authority [2009] VSCA 221. 97 T4-87, L25-32. 98 T2-51, L25-40. 99 T4-87, L25-32. -- 64 of 210 -- 65 and charge variation” where the difference between the tender drawings and the construction drawings was calculated and then claimed even though clause 36.1 had not been strictly complied with. The Superintendent approved the claims in respect of those variation proposals.100 [281] While those particular claims for costs may have been approved, it is difficult to see how they could be regarded as a waiver in respect of compliance in relation to clause 36.1 more generally. [282] Further, the defendant points out that the “surrounding circumstances” of VP31 and VP38 (dated 22 June 2016 and 2 December 2016) occurred after the alleged communications in respect of the Bathroom Design Variation. Accordingly, they could not be relied upon as “surrounding circumstances” in respect of what is sought to be relied upon to constitute the directions for the Bathroom Design Variation. [283] Further, clause 43 of the Contract is also relevant to the consideration of the issue of waiver. Clause 43 states: “Except as provided at law or in equity or elsewhere in the Contract, none of the terms of the Contract shall be varied, waived, discharged or released, except with the prior written consent of the parties. A party’s failure or delay to exercise a power or right does not operate as a waiver of that power or right.” [284] The defendant points to and relies upon the terms of clause 43. [285] Even if it is accepted that on occasion the Superintendent assessed a variation despite non-compliance with clause 36.1(f), clause 43 expressly prevents relying upon that occasion as an election in respect of all variations or specifically the Bathroom Design Variation. [286] The plaintiff also seeks to rely on estoppel as an alternative basis for its entitlement to the costs associated with the alleged Bathroom Design Variation. The plaintiff expressly relies on the decision of Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd.101 [287] Priestly JA, with whom Kirby P and Samuels JA agreed, concluded on the circumstances of that case as follows: “… I think that what Rozelle’s agent told Mr Dean can fairly be regarded as a promise to pay for the work irrespective of the formal requirements of the contract, which encouraged Update to go ahead with the work without concerning itself with formal contractual requirements, the appropriate remedy for which would be to prevent Rozelle from relying on the lack of formal compliance … an estoppel arose in the present case when the conduct of Rozelle’s agent led Update (i) to suppose that the requirement of writing under cl 6(b) would not be enforced, and (ii) to act to its detriment by both not giving the written notice when it could still have done so, and doing 100 T4-83, L4-17. 101 (1990) 20 NSWLR 251. -- 65 of 210 -- 66 the work; the estoppel being that Rozelle could not after those events rely on the writing requirement in cl 6(b).”102 [288] The plaintiff points to evidence of Mr Cook as establishing that the plaintiff was induced by the defendant to assume that it was directed to undertake the works set out in the “for construction” JPDC drawings. [289] However, the relevant paragraphs of the statement of Mr Cook do not identify the basis upon which it is alleged that the plaintiff would be entitled to additional payment for a variation for undertaking the bathroom works. While it is stated that the plaintiff relied upon the “representation or assumption” in undertaking the additional works, it is not clear the precise representation alleged. [290] While the correspondence confirmed that the “for construction” drawings were “not on hold” it is difficult to see how that could be regarded as a promise to pay for the work without the procedures in the Contract being followed. To the extent there was any ambiguity as to whether that gave rise to an entitlement to be compensated, the Contract pursuant to clause 36.1(g) and clause 20 provided a mechanism to obtain that clarity and to crystalise an entitlement to recover the costs. Without following that procedure there was a risk that there was no entitlement. Further, the plaintiff has not clearly identified facts establishing a representation promising payment, which would be necessary to make out an estoppel. [291] It is precisely this difficulty which the defendant identifies in its submissions as to why an estoppel is not made out. The defendant contends that the plaintiff does not plead with any particularity what the representation was. There is no plea that the defendant represented that the plaintiff would be paid despite the fact that the relevant Aconex transmittals did not comply with clause 36.1(f) or that the plaintiff did not need to issue a notice under clause 36.1(g). [292] Further, in relation to the plaintiff’s reliance upon the case of Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd, the defendant submits that in that case there was a clear representation made that should the builder proceed with the additional work then it would be paid for that additional work. In the circumstances of the current case, there is no similar representation here. The references in the Aconex transmittals to “for construction” drawings and a subsequent statement that the drawings were not on hold, is not a representation in relation to a promise to pay for undertaking any additional work that was identified by way of those “for construction” drawings. [293] On the evidence of Mr Cook and Mr Carlin, it is apparent that the requirements of clause 36.1 were recognised as important and they needed to be complied with.103 Mr Carlin, the recipient of the Aconex transmittals, was not called to give evidence. In these circumstances, the plaintiff has not made out that it was induced to undertake the work in the “for construction” drawings on the basis of a representation that it should proceed with the extra work and that the extra work would be paid for. [294] Clause 20 of the Contract also reinforces this position. 102 See pp 276-7. 103 T2-51, L33-47. -- 66 of 210 -- 67 [295] In the circumstances, whilst it is open for the Aconex transmittals to be characterised as a direction in accordance with the definition in clause 1 of the Contract and that the contents of the “for construction” drawings in relation to the guest room bathrooms changed the scope of the work under the Contract, the plaintiff did not comply with clause 36.1(f) of the Contract. Accordingly, the defendant is not liable for the price of the variation. [296] Further, the plaintiff has not established that there has been an estoppel or waiver. [297] The answer to questions 2(a), (b) and (d) of the list of issues is “no”. [298] In respect of question 2(c) of the list of issues in dispute, given my findings in respect of the Guest Room Data Sheet there is no reduction in the scope of the works. The defendant did not seek the omitted items by way of counterclaim but merely that it reduced the scope of any claim by the plaintiff by the application of a credit. [299] However, if I am wrong about the finding in respect of the Guest Room Data Sheet, then the amounts identified by the defendant would need to be credited in respect of the items that were originally to be provided by the plaintiff but were no longer required by the “for construction” drawings. [300] Further, if I am wrong about the plaintiff’s ability to claim for the price of the variation in respect of the guest room bathrooms and the plaintiff is entitled to payment for the additional bathroom work, then the cost of that work should be priced in accordance with the valuation of Mr Watson, which is based on the plaintiff’s assessment of the actual work undertaken. THE SCHEDULE 3 AND 4 VARIATIONS [301] The issue in respect of the Schedule 3 and 4 variations is dealt with in question 3 of the list of issues in dispute: “In respect of the alleged Schedule 3 (Item 1 only) and Schedule 4 (excluding item 7) Variations, whether: (a) the plaintiff was directed to undertake variations to the works, as alleged, within the meaning of clause 1 and clause 36 of the Contract [SOC [14], [15]; Def [14], [15]];104 (b) the works described in Schedule 3 and Schedule 4 constituted a variation under the Contract [SOC [15]; Def [15(b)]]; and (c) the plaintiff is entitled to payment for the alleged variations [SOC [17], [Sch 3], [Sch 4]; Def [17], [Annex 2]].” [302] In respect of quantum, question 15 of the list of issues in dispute is also relevant: “In respect of the Schedule 3 and 4 Variations, the extent to which, if at all, the plaintiff is entitled to the sums identified in column D of Schedule 3 and column C of Schedule 4 to the amended statement of claim [SOC [17]; Def [17]].” 104 Save for Item 1 of Schedule 4. -- 67 of 210 -- 68 [303] The parties have agreed the following as set out in the list of matters not in issue: “3. In respect of the alleged Schedule 3 Variations: (a) that the plaintiff is entitled to the amount claimed for Items 2, 3 and 4; and (b) in respect of Item 1, that the plaintiff undertook the work described in Schedule 3 of the amended statement of claim [SOC [15]; Def [15]]. 4. In respect of the alleged Schedule 4 Variations: (a) that the plaintiff is entitled to the amount claimed for Item 7; (b) in respect of Item 1, that the plaintiff was directed to undertake the work described in Schedule 4 of the amended statement of claim and is entitled [to] payment of at least $9,130 for Item 1; and otherwise (c) that the plaintiff undertook the work described in Schedule 4 of the amended statement of claim [SOC [15]; Def [15]].” [304] Each of these claims are dealt with below. Schedule 3 - VP38 – “Ceilings and partition alterations in the Great Room” [305] Liability for this variation is not in dispute and the quantum of $6,308.51 (plus GST) is agreed. [306] The amount is based on the assessment of quantum in the joint expert report of $60,626.37 (plus GST) less the existing Contract adjustment of $54,317.86 (plus GST). [307] The plaintiff is entitled to payment of $6,308.51 (plus GST). Schedule 3 - VP53 – “Back of House Corridor – second path of egress” [308] Liability is not in dispute in respect of this variation. [309] The defendant identifies that the quantum is agreed in the amount of $1,188.00. However, the plaintiff disputes this position. [310] The defendant does not make any substantive submissions in respect of this claim. [311] The plaintiff addresses this claim in its submissions and seeks to explain the difference in positions. [312] The defendant’s figure appears to assume that the amount claimed is the difference between Contract Adjustment (CA) 48105 and Variation Proposal (VP) 53106 and that 105 PRO.001.003.0057. 106 PRO.001.003.0054. -- 68 of 210 -- 69 the plaintiff has been paid the amount in respect of CA48. The plaintiff submits it has not been paid that amount. [313] The cost of VP53 is $5,550 (plus GST) which was claimed in Progress Claim No. 24.107 [314] The plaintiff submits that the Superintendent did not certify any cost as payable in respect of VP53 by Progress Certificate No. 24,108 despite having issued CA48 and despite VP53 being an approved variation.109 [315] In these circumstances, the plaintiff is entitled to the full amount of $5,555.00 (plus GST). Schedule 3 – VP59 – “Admin and luggage change layout and joinery” [316] Liability is not in dispute and quantum is agreed in the amount of $3,168.00 (plus GST). [317] The plaintiff is entitled to the amount of $3,168.00 (plus GST). Schedule 3 – VP78 – “BWIC for boom gate” [318] Liability is not in dispute and quantum is agreed in the amount of $1,188.00 (plus GST). [319] The plaintiff is entitled to the amount of $1,188.00 (plus GST). Schedule 4 – VP58 – “BOH (back of house) ceiling” [320] Liability is not in dispute and the defendant does not dispute that the amount of $9,130.00 is payable to the plaintiff. [321] The difference in dispute is $518.56. This is the difference between the assessment of Mr Watson for the plaintiff in the amount of $10,885.15 and the assessment of Mr Hardiman for the defendant in the amount of $10,366.59. [322] The difference is attributable to the 7.5 per cent mark-up for preliminaries and the rates used. [323] The defendant submits that there is no proper basis for the inclusion of the 7.5 per cent for preliminaries. The plaintiff maintains its claim for preliminaries. [324] The issue of the entitlement to preliminaries is discussed in relation to the pricing of the Schedule 6 variations below. I adopt the same conclusion here and accordingly, the 7.5 per cent for preliminaries is not recoverable by the plaintiff. 107 BUI.001.001.25669. 108 BUI.001.003.86921. 109 VP53 does not appear on the list of approved variations in the progress certificate. -- 69 of 210 -- 70 [325] In respect of rates: (a) Mr Watson used rates from the plaintiff’s claim and compared the rates to Rawlinson’s rates to check for reasonableness of the rates. He also used rates from VP59 which had been agreed to by the Superintendent. (b) Mr Hardiman used Rawlinson’s rates, as representing market rates at the relevant time. [326] The plaintiff submits that the difference here is so small that it cannot be said that Mr Watson’s rates are unreasonable. Further the plaintiff contends that Mr Watson’s rates are more likely to reflect actual costs rather than a theoretical assessment. [327] The defendant submits that Mr Hardiman’s approach is based on objective market evidence and provides a sound basis for the Court to assess a fair and reasonable price for the variation work. [328] In the circumstances, I find that the rates used by Mr Watson are reasonable. The rates reflect actual costs and the difference is minor, which also tends to support these rates being reasonable. [329] Accordingly, the plaintiff is entitled to the amount of $10,125.72 (plus GST), adopting Mr Watsons’ approach but the 7.5 per cent for preliminaries is not allowed. Schedule 4 – VP60 – “Bathroom light switch – off master switch” [330] Liability and quantum are in issue. The difference between the two quantum experts is $3,203.89. [331] The plaintiff claims there was a change in the scope of work due to a direction pursuant to either clauses 36.1(f) or 36.1(g) of the Contract, or alternatively that the plaintiff complied with clause 36.2 of the Contract. The plaintiff claims the cost of the variation pursuant to clause 36.4. [332] Clauses 36.1(f) and (g) of the Contract have been discussed in relation to the Bathroom Design Variation above. Clause 36.2 of the Contract states as follows: “36.2 Proposed variations The Superintendent may give the Contractor written notice requesting the Contractor to submit a variation proposal for a proposed variation. The Contractor shall provide the following information with the variation proposal in response to a notice given by the Superintendent pursuant to this subclause 36.2: (a) a detailed scope of the proposed variation, including any drawings or technical details; (b) a detailed breakdown of the price for which the Contractor would carry out the proposed variation, including any delay or disruption costs which may be incurred by the Contractor as a consequence of the proposed variation; -- 70 of 210 -- 71 (c) the effect, if any, of the proposed variation on the date for practical completion; and (d) the expiry period for acceptance of the variation proposal which shall be not less than 10 business days from the date of receipt by the Superintendent of variation proposal. Upon receipt of a variation proposal provided in response to a notice given by the Superintendent pursuant to this subclause 36.2, the Superintendent may in the sole discretion of the Superintendent do any one of the following: (e) direct the Contractor to provide further information; (f) accept the variation proposal and give the Contractor a direction to carry out the variation on the terms contained in that proposal, in which case a valuation under subclause 36.4 shall not be made and the addition or deduction to the contract sum shall be the amount contained in the variation proposal; (g) negotiate different terms with the Contractor upon which the proposed variation shall be carried out; (h) give the Contractor a direction to carry out the proposed variation on the terms contained in the Contract but with a valuation to be made under subclause 36.4; or (i) reject the variation proposal, in which case the Principal may retain another person to carry out the proposed variation the subject of a notice given by the Superintendent pursuant to this subclause 36.2.” [333] Annexure Part K of the Contract includes documents listed under the heading “SPECIALIST LIGHTING – ELECTROLITE”. A number of documents are listed including documents which show the layout of a single circuit in each room, controlled by a master switch.110 Consistent with the construction of the Contract earlier in these reasons, these documents are contractual documents and identify what was required to be built by the plaintiff pursuant to the Contract. [334] The plaintiff also points to evidence contained in emails in July 2016 which confirm the interpretation of the layout diagrams and also that a variation was requested. These emails are as follows: (a) On 7 July 2016, Mr Collison of the Superintendent sent an email to Mr Meredyth of the plaintiff, copying in others, which stated: “Grant I thought the instructions from yesterdays [sic] PCG discussion on this issue were unambiguous however for clarity purposes, [the] following is my understanding of the outcomes: … 110 BUI.001.001.61986; BUI.001.001.61987; BUI.001.001.61988; BUI.001.001.61989. See further WIT.001.004.0001 Witness Statement of Thomas Cook dated 31 August 2018 at [510]. -- 71 of 210 -- 72 Built to issue an estimate of costs for the installation of a light switch to service the bathroom to Pro-Invest/Tactical to review and confirm instructions …” (b) On 11 July 2016, Mr Collison sent an email to Mr Meredyth (copying others) which stated: “Grant, Have you received any cost advice on the proposed bathroom light switch to enable Pro-Invest to review and confirm instructions?” (c) On 19 July 2016, Mr Carlin of the plaintiff sent an email to Mr Malone (copying others) which stated: “Hello Sean, Have had a day of reconciling all things Electrical and anticipate some variations as requested to flow tomorrow … I know you are keen to have these … 2. Bathroom light off master switch & other circuitry to mirrors etc etc A further request for costs for the installation of a light switch to service the bathroom ie take the bathroom light off the master switch. Cost yet to be defined Also combined with this additional circuitry to mirrors/mirror demisters etc …”111 (d) On 20 July 2016, the plaintiff submitted VP60 to the Superintendent.112 [335] The plaintiff identifies the following characteristics of VP60:113 (a) was headed “Variation Proposal No. 60”; (b) identified the request for the variation proposal as being “JPDC For Construction Documentation as at 19/07/16” and also “Tactical-GCOR- 304”;114 (c) included a description of the proposed variation – “[r]emove bathroom light off master switch … given occupant complaints experienced in Macquarie park project”; (d) included the approximate cost of the variation, including a detailed breakdown of the cost; and (e) noted that no extension of time would be claimed as a consequence of the variation. 111 BUI.001.001.64716. 112 BUI.001.001.68530. 113 BUI.001.001.56060. 114 BUI.001.001.71493. -- 72 of 210 -- 73 [336] VP60 further priced the variation to remove the bathroom light off the master switch at $9,167.06 (plus GST).115 [337] The plaintiff also relies on correspondence that was provided after VP60 was submitted. [338] On 22 July 2016, by Aconex mail sent by Mr Malone and Mr Carlin, the plaintiff was provided with updated “for construction” drawings from Electro Light.116 Further, by these mails the plaintiff submits it was instructed to proceed in accordance with the drawings. [339] In particular, the plaintiff relies on the following statements in the correspondence: (a) On 22 July 2016, at 1.15pm from Mr Malone to Mr Carlin which states: “Chris We will assess the variation. The attached updated AFC drawings from Electro Light capture our requested changes and directions regarding switching to respective rooms for the Entry Panel, Bedhead Master Panel, Bathroom Panel. Please proceed in accordance with these as final AFC documents.”117 (b) On 22 July 2016, at 1.59pm from Mr Malone to Mr Carlin which states: “Chris Related to previous transmittal of Electro Light drawings, please proceed with these works in accordance with the attached Electro Light AFCs … We will assess value and revert.”118 [340] The attached drawings required the plaintiff to install an additional electrical circuit for the bathroom light switch, which required work in addition to the work in the earlier layout drawings as the circuit could not be looped into the same power feed.119 [341] Mr Cook was cross-examined in relation to the claimed additional work. The position in relation to requiring an additional circuit for the bathroom light switch was not challenged on that evidence. [342] It is apparent from the comparison of the two electrical layout drawings that there was a change in the scope of work and in the circumstances, I am satisfied that the plaintiff was required to carry out additional work. This would be a variation within the meaning in the Contract. [343] The next issue to consider is whether it constitutes a direction pursuant to clauses 36.1(f) or 36.1(g) of the Contract. The defendant submits that there was no direction 115 See WIT.001.004.0001 Witness Statement of Thomas Cook dated 31 August 2018 at [512]. 116 See BUI.001.001.71520; BUI.001.001.71522; BUI.001.001.61912; BUI.001.001.61913. 117 BUI.001.001.71520. 118 BUI.001.001.71522. 119 See WIT.001.004.0001 Witness Statement of Thomas Cook dated 31 August 2018 at [515]. -- 73 of 210 -- 74 to do the additional work and there has been non-compliance with clause 36.1(g) of the Contract. [344] The defendant does not consider or address in its submissions the application of clause 36.2 of the Contract. [345] Clause 36.2 clearly sets out a procedure in circumstances where the Superintendent requests that the contractor submit a variation proposal. Here the request was made and VP60 was submitted. Further, VP60 provided the necessary information required for compliance with clause 36.2. [346] Further, on the correspondence, the Superintendent indicated that the plaintiff was to proceed with the works and that the Superintendent “will assess value and revert”. In these circumstances, clause 36.2(h) applies, that is that the Superintendent indicated that the contractor was given a variation to carry out the proposed variation on the terms contained in the Contract but with a valuation to be made under clause 36.4. [347] In these circumstances, the defendant is liable to the plaintiff for the cost of the variation calculated in accordance with clause 36.4 of the Contract. [348] The defendant raises an additional issue in relation to there being “reduced scope” because the plaintiff was no longer required to install a two-gang switch in the bathrooms and a D3 bathroom nightlight under the vanity in the bathroom.120 [349] In response to this the plaintiff says that while it was no longer required to install a two-gang switch in the bathrooms, it was required to install a single-gang switch in the bathrooms. Accordingly, the cost in relation to this would be similar. [350] In relation to the alleged removal of the D3 bathroom nightlight, it appears that based on a comparison of the drawings the nightlight has been removed. The plaintiff however points to the fact that the defendant offers no expert quantum evidence of the “reduced scope”. While this was explored with Mr Cook during cross- examination, there is no evidence of any precision that would assist in calculating the amount to be offset against the VP60 quantification. The plaintiff contends that in these circumstances it is not possible for the Court to arrive at a reasonable estimate for any offset against the amount claimed in VP60. Further, no cost of the alleged negative variation was pleaded by the defendant. [351] The defendant claims a negative variation in the amount of $11,826.78 on the assumption that the D3 nightlight was removed in 216 rooms. The amount claimed by way of a negative variation exceeds the amount claimed by the plaintiff on either of the expert assessments. The defendant has not sought to claim the excess by way of counterclaim but rather relies on the negative variation to reduce the variation to a nil amount. [352] As a matter of logic, there is some attraction to the reduction in the scope of work being setoff against the additional work identified in VP60. The difficulty is that the scope of the reduction in the work has not been undertaken by any of the experts and the evidence was sought to be obtained by Mr Cook in cross-examination. The defendant maintains that it has established to a sufficient degree the scope and costs 120 PLE.001.001.0001. -- 74 of 210 -- 75 in respect of the negative variation. However, I am not satisfied that the evidence establishes to the requisite level of satisfaction the amount of work involved and the costs of the specific items. Accordingly, I do not calculate the quantum of the negative variation to in effect set it off against the quantum of VP60. [353] In relation to the quantum of VP60, Mr Hardiman on behalf of the defendant assesses VP60 in the amount of $8,357.93. Mr Watson on behalf of the plaintiff assesses the quantum as $11,561.82. The difference between the experts is $3,203.89. This difference is as a result of: (a) The disagreement about the rates used. Mr Watson has used the plaintiff’s rates and Mr Hardiman has assessed the rates based on Rawlinson’s rates. (b) A variation fee of 10 per cent has been added to the variation claim. This amount is separate. Mr Watson has included this amount on the basis that it has been accepted by the Superintendent in other variations. Mr Hardiman has used market rates and does not see a basis for providing a further mark-up beyond the Rawlinson’s rates in the absence of proof the plaintiff was liable for it. The defendant points to the plaintiff being unable to produce any evidence that this was the case. (c) A 15 per cent mark-up for Builder’s Work in Connection (BWIC) with electrical services. [354] In relation to the rates, the rates in this circumstance are very close and, in these circumstances, it cannot be said that the rates used by Mr Watson are unreasonable. Accordingly, the quantum of VP60 should be calculated on the basis of the rates used by Mr Watson. [355] While the assessment of a variation does not bind in respect of the acceptance of another variation, in these circumstances and given the small amounts concerned, I consider that Mr Watson’s approach of including a variation fee of 10 per cent reasonable in these circumstances. [356] Further, in relation to the 15 per cent mark-up for BWIC with electrical services, I consider that in the circumstances, the allowance should be allowed, given the nature of the works comprising VP60 and the particular evidence provided by Mr Watson as to the approach of including the allowance. [357] Overall, I find that Mr Watson’s assessment is not unreasonable and is priced in accordance with clause 36.4. [358] The issue of the 7.5 per cent for preliminaries is also relevant to this claim. Given the conclusion I have reached in respect of preliminaries, the amount for preliminaries is not recoverable by the plaintiff. [359] Accordingly, the plaintiff is entitled to the amount for VP60 as claimed less the amount in respect of the 7.5 per cent for preliminaries. Schedule 4 – VP64 – “Clipsal colour switchplates as per JPDC finishes schedule” [360] Liability and quantum are in issue in respect of this variation. The difference between the two quantum experts is $314.82. -- 75 of 210 -- 76 [361] This claim relates to an alleged direction to change electrical cover plates in guest rooms from Clipsal custom colour switchplates to brushed aluminium switchplates. Again, this is alleged to be a change from preliminary design documents to the hardware schedule issued by JPDC. [362] The issue between the parties is that the defendant denies there was any direction and further says that the plaintiff was always required to install the brushed aluminium switchplates. [363] Firstly, it is necessary to consider whether the installation of the brushed aluminium switchplates was a variation within the meaning of clause 36.1 of the Contract and whether there was a direction issued pursuant to clauses 36.1(f) or 36.1(g) or whether clause 36.2 of the Contract applied. If liability is established then the costs are to be assessed pursuant to clause 36.4 of the Contract. [364] Mr Cook was cross-examined in relation to the Clipsal product guide. Mr Cook did not prepare VP64 and his evidence is of little assistance in considering this variation. [365] Similar to the approach taken for other variations, it is necessary to consider what was required to be built pursuant to the Contract documents and then to consider whether there has been a change to that position which would amount to a variation. [366] The Electrical Services Specification is listed as a preliminary design document in Annexure Part K of the Contract.121 Relevantly, clause 10.1 of the Specification states: “Accessories in guest rooms and public areas shall be to interior designer’s approval, currently nominated as Clipsal Slimline SC2000 range with custom colour face plates …”122 [367] Subsequently, on 5 May 2016, Ms Fu of JPDC sent to the plaintiff an email attaching revised drawings and schedules for the guest rooms. This included a document described as Hardware Schedule, ID-HSH-003.123 [368] The Hardware Schedule contains a relevant entry in relation to the switchplates, with a reference to the “SLIMLINE SERIES SC2000 BRUSHED ALUMINIUM COVER”. [369] The plaintiff accepts that the “SLIMLINE SERIES SC2000” includes both metal face plate covers (including aluminium covers) and moulded plastic face plate covers. The plaintiff points to an extract from a Clipsal catalogue from around the time of the variation which was emailed from Mr Carlin to Mr Malone which states as follows: “Switch Covers only – SC2000 series In addition to the standard range of covers, covers are also available in a range of decorative metal finishes. Metal finishes available are: - Brushed Aluminium Cover …”124 121 BUI.001.002.26977. 122 At p 57. 123 See BUI.001.001.69541 and BUI.001.001.58508. 124 See BUI.001.001.56253; BUI.001.001.68678. -- 76 of 210 -- 77 [370] The plaintiff contends that there are differences in the language used between the Electrical Services Specification and the Hardware Schedule. The reference in the Electrical Services Specification is to “custom colour face plates”. The plaintiff submits that this should be distinguished from references to “metal face plates” or “decorative metal finishes”. In these circumstances, the plaintiff submits that the reference in the Electrical Services Specification to “custom colour face plates” was a reference to the “standard range of colours” in the Clipsal Slimline Series SC2000. [371] Further, the plaintiff also points to the fact that the brushed aluminium face plates cannot be described as “custom colour” as it comes in only one option. This is in contrast to the “custom colour face plates” which are coloured plastic face plates which can come in a variety of colours and can be custom coloured. This argument was supported by Ms Fu of JPDC in her evidence.125 [372] The plaintiff also refers to a difference in language used when it submits it was intended to refer to the entire Clipsal SC2000 range. I consider there is merit in the submission in respect of the inclusion of the words “with custom colour face plates” after the reference to Clipsal Slimline SC2000 range. If it was the entire Clipsal SC2000 range which was being referred to, which would include the brushed aluminium face plates, there would be no need to include those additional words. [373] However, by including the words “custom colour face plates”, the construction of clause 10.1 of the Electrical Services Specification is that it is a reference to the standard range of covers being the coloured and plastic face plates, not the brushed aluminium face plates. Accordingly, the brushed aluminium face plates were not required as part of the original WUC. [374] It is then necessary to consider the correspondence in relation to the provision of the Hardware Schedule and whether it can be classified as a direction pursuant to clauses 36.1(f) or 36.1(g) of the Contract or alternatively, within clause 36.2 of the Contract. [375] The plaintiff relies on correspondence which shows that following a series of requests for proposals from the plaintiff regarding numerous variations., on 12 July 2016, Mr Carlin emailed the Superintendent stating: “We are in continued negotiations with RDE on cost. And in reality those negotiations are multiple fold across a number of items that I can list:- … 2. Colour switch plates (JPDC vs alternatives to be proposed). Circa $21k x 1.1 = $22,100.00 if JPDC requirements are firm?”126 [376] The plaintiff also refers to a response from the Superintendent later that day responding to point two as follows: “Presume you are flagging this as a potential variation.”127 125 T5-60, L44-45-T5-61, L1-7. 126 BUI.001.001.64657. 127 BUI.001.001.71501. -- 77 of 210 -- 78 [377] Further to this correspondence, the plaintiff submitted VP64A to the Superintendent on 18 August 2016.128 [378] VP64A provided details including the scope of the proposed variation including drawings or technical details, a breakdown of the price, stated that the variation would have no effect on the date for practical completion and provided an expiry period in accordance with clause 36.2 of the Contract. [379] Further, on 22 August 2016 the Superintendent instructed the plaintiff to proceed with the works under VP64A.129 [380] On 15 November 2016, the Superintendent assessed the variation at $0 on the basis that the product was a Contract requirement. [381] The defendant contends that there was no direction issued under clauses 36.1(f) or 36.1(g) of the Contract and accordingly they are not applicable. The defendant does not address the operation of clause 36.2 of the Contract. [382] Clause 36.2 of the Contract has been complied with except for an express written notice from the Superintendent to the contractor requesting that the contractor submit a variation proposal. However, in the circumstances of the correspondence, it is apparent that a number of variations were being requested in respect of issues such as this which were arising and it was included as part of that wider process. In these circumstances it is not necessary for me to determine conclusively whether it is necessary for an express written notice to be provided before clause 36.2 is enlivened. In the circumstances, I am satisfied that the Superintendent’s request for a proposal has been complied with in the circumstances of this variation. [383] This is particularly so given the email dated 22 August 2016 from the Superintendent to the plaintiff, which stated as follows: “Please proceed with works under VP 64. We will review submitted costs against requirements of the Contract and revert.”130 [384] This can be classified as fitting within clause 36.2(h) being a direction by the Superintendent to carry out the proposed variation on the terms contained in the Contract but with a valuation to be made under clause 36.4. Accordingly, the price of the variation is to be assessed in accordance with clause 36.4 of the Contract. [385] The quantum experts in their joint report agree that the price of this variation is in the amount of $4,197.54 (plus GST), but excluding preliminaries. [386] The plaintiff claims a total amount including preliminaries of $4,512.35 (plus GST). [387] Given the finding I have made in relation to the preliminaries claimed not being reasonable, the plaintiff is entitled to the amount of $4,197.54 (plus GST). 128 See WIT.001.004.0001 Witness Statement of Thomas Cook dated 31 August 2018 at [521]. 129 BUI.001.001.71551. 130 BUI.001.001.71551. -- 78 of 210 -- 79 Schedule 4 – VP66 – “Desk lamp hard wired” [388] Liability and quantum are in issue in respect of this variation. The difference between the two quantum experts is $2,205.53. [389] The plaintiff claims that there was a variation on the basis that, under the original Contract requirement, the defendant was to supply desk lamps that could be plugged into a wall outlet. Instead, desk lamps were provided that did not have a power cord and were required to be hardwired. [390] The defendant denies there was a direction pursuant to clause 36.1 of the Contract and further contends that no additional work was required to be carried out beyond that required by the Contract. In part, this is based on the JPDC Guest Room Data Sheet which was considered in relation to the Bathroom Design Variation above. [391] Given my previous finding in relation to the Guest Room Data Sheet, reference to hardwiring in that document is not determinative in respect of this claim. [392] The plaintiff refers to the Luminaire Schedule which is listed in Annexure Part K of the Contract under the heading “SPECIALIST LIGHTING – ELECTROLITE”.131 [393] The document shows a picture of a wall mounted desk lamp but does not expressly state whether the lamps to be supplied by the defendant would have a power cord to be connected to a general power outlet. The plaintiff contends that the image appears to be a “Tolomeo Table Mini” lamp. Further, reference is made to the evidence of Mr Cook and the setup instructions for the lamp which indicate that it is supplied with a power cord that can be plugged into a general purpose outlet.132 The instructions show a power cord with a plug. [394] The plaintiff also contends that the photograph of the desk lamp in the Luminaire Schedule has a cord hanging down from where it is fixed to the wall. The plaintiff submits that this is likely to be a power cord for the wall plug. However, this is not conclusive in itself. [395] The plaintiff also relies on the fact that the defendant does not deny the plaintiff’s pleading that the defendant was required to supply the plaintiff with “desk lamps for the guest rooms with a plug that could be connected to the desk GPO”.133 In these circumstances the plaintiff relies upon this as an admission of the allegation. [396] Given that the JPDC Guest Room Data Sheet is not a contractual document and cannot be relied upon in relation to the obligation under the original Contract terms, and in the circumstances relied upon by the plaintiff, I find that the plaintiff was to be supplied by the defendant with a desk lamp for the guest rooms with a plug. Accordingly, as the defendant supplied desk lamps that had to be hardwired, this amounted to a variation creating additional work for the purposes of clause 36.1. It is then necessary to consider whether there was a direction pursuant to clauses 36.1(f) or 36.1(g) or whether clause 36.2 of the Contract operated in respect of this claim. 131 BUI.001.001.61820 at p 145. 132 BUI.001.001.22200 at p 001. 133 See PLE.001.001.0336 Amended Statement of Claim at p 0363 Schedule 4; PLE.001.001.0001 Third Amended Defence and Counterclaim at p 0084 of Annexure 2 Item 4. -- 79 of 210 -- 80 [397] On 21 July 2016, the plaintiff submitted VP66.134 VP66 sets out a detailed scope of the proposed variation, provided a detailed breakdown of the price, stated that the variation would have no effect on the date for practical completion and provided an expiry period in accordance with the requirements of clause 36.2. The plaintiff relies on the following correspondence: (a) On 21 July 2016, the plaintiff submitted VP66 to the Superintendent for assessment with the subject line of the email being “VP No. 66 Hardwire desk lamps as per Instructions …”. (b) On 22 July 2016, the Superintendent responded and said “[w]e will assess the variation”. (c) No further correspondence was received until 17 November 2016 (almost four months after VP66 was submitted) when the Superintendent assessed VP66 at $0.135 [398] In these circumstances, the plaintiff submits that the Superintendent stating “[w]e will assess the variation” and not otherwise corresponding until well after the relevant works were complete, was a basis for the plaintiff to infer that VP66 had at least been accepted, subject to a valuation to be made under clause 36.4. This is what ultimately occurred. [399] In this regard, the plaintiff submits that clause 36.2 does not require the Superintendent to act pursuant to clauses 36.2(e) to (i) in writing. [400] Accordingly, the plaintiff submits that there was a proposed variation pursuant to clause 36.2 of the Contract such that the defendant is liable to the plaintiff for the cost of the variation calculated in accordance with clause 36.4 of the Contract. [401] The defendant’s position is focused on the Guest Room Data Sheet which was listed under the heading “INTERIOR DESIGN – JOSEPH PANG DESIGN CONSULTANTS” in Annexure Part K of the Contract. It is on this basis that the defendant contends that the Contract always provided for provision of desk lamps that were required to be hardwired and accordingly there was no variation. The submissions do not address clause 36.2 and whether the requirements were complied with. [402] Whilst the form of the request from the Superintendent for a variation proposal is not entirely clear, the provisions of clause 36.2 appear to have been in operation in respect of this claim. Further, while the application of clause 36.2(h) requires some inference to be made, taking a commercial approach to the consideration of the facts, it appears that clause 36.2 of the Contract has been met and accordingly the defendant is liable to the plaintiff for the cost of the variation calculated in accordance with clause 36.4 of the Contract. [403] In respect of the proper cost of this variation pursuant to clause 36.4 of the Contract, the quantum experts in their joint report have assessed the claim as follows: (a) Mr Watson values the claim at $9,426.13 (plus GST); and 134 BUI.001.001.68532; BUI.001.001.56062. 135 BUI.001.001.71621. -- 80 of 210 -- 81 (b) Mr Hardiman values the claim at $7,220.60 (plus GST). [404] The differences between the two valuations are again that Mr Hardiman’s approach has used Rawlinson’s rates, it includes the imposition of a 10 per cent fee (this is in addition to the 10 per cent mark-up for profit and overheads), the BWIC 15 per cent mark-up and also the 7.5 per cent for preliminaries. [405] Given the work identified as being involved, the BWIC allowance would be reasonable in the circumstances. The other differences are not significant and it cannot be said that Mr Watson’s valuation is unreasonable. The plaintiff submits that the second largest component of the difference between the experts relates to the subcontractors’ (RDE) claim for preliminaries in the amount of $658.79. Mr Watson allowed that part of the claim as it was claimed by the subcontractor against the plaintiff. Reference is also made to the fact that the Superintendent has approved it in other variations. While its approval in respect of other variations is not conclusive, it may go to the reasonableness of that cost. [406] In respect of the differences in rates, these are again not substantial differences and in the circumstances it is not inappropriate to use the rates relied upon by Mr Watson in relation to this assessment. [407] Whilst the defendant also appears to object to the preliminaries on the basis of the general objection, it is not apparent whether this is in addition to the preliminaries claimed in respect of the subcontractor. [408] Overall, I adopt Mr Watson’s approach to the assessment of costs. The plaintiff is entitled to the amount of $9,426.13 (plus GST) in respect of this claim. Schedule 4 – VP67 – “Supply and installation of power sockets and wiring for LED lighting” [409] Liability and quantum are in issue in respect of this variation. The difference between the two quantum experts is $12,685.59. [410] This claim relates to additional work for running of additional cabling for each of the lights in a “figure 8 configuration” to connect the “< 200mm tail to the termination point in the ceiling”. [411] The plaintiff submits that the “figure eight” wiring is where the cable is fed from one source to another and back again in a loop type fashion which is not typical installation for lighting. In these circumstances, the plaintiff claims a variation for additional work to be carried out beyond what was required by the Contract. [412] In response, the defendant denies there was any direction issued pursuant to clause 36.1 of the Contract and additionally, submits that no additional work was required to be carried out. [413] In respect of this claim, the defendant again seeks to rely on the Guest Room Data Sheet that is referred to in Annexure Part K of the Contract. Given my previous finding in relation to this not being a contractual document, the same reasoning applies in relation to this claim in respect of that document. -- 81 of 210 -- 82 [414] It is necessary to consider whether the additional work identified was additional to that required under the Contract and also whether there was a direction issued pursuant to clauses 36.1(f) or 36.1(g) of the Contract, or alternatively the operation of clause 36.2 of the Contract. If an entitlement is made out then the cost is to be assessed pursuant to clause 36.4 of the Contract. [415] The plaintiff submits that there was no document that outlined the work under the Contract in respect of the wiring of LED lights. It is uncontroversial that the defendant was to supply the LED lights required. [416] The plaintiff contends that the LED lights provided by the defendant had “an insufficient tail length” and this does not appear to be specifically responded to by the defendant.136 [417] The plaintiff refers to the following matters as a basis for which it can be found that the requirement for “figure eight” wiring was a variation to the work under the Contract: (a) “Figure eight” wiring of the LED lights was not part of the original work under the Contract at all. It is atypical work (consistent with the evidence of Mr Cook) and the plaintiff was not informed of it until 29 June 2016. (b) On 29 June 2016, an email was sent from Mr Bradshaw of MBI to Mr Meredyth which attached “noggin & wiring requirements” for the joinery installation. It also attached two documents which specifically show that “figure eight” wiring would be required for the LED lighting installation in both the bathroom and the kitchen.137 [418] The plaintiff relies upon clause 36.1(g) of the Contract in relation to this variation. The plaintiff contends that clause 36.1(g) does not require a direction from the Superintendent but rather it requires a direction to perform a variation and then a process is set out for confirmation of the direction to perform the variation. The plaintiff contends that the direction to perform the variation was Mr Bradshaw’s email. [419] In addition to the email from Mr Bradshaw dated 29 June 2016, the plaintiff also refers to and relies on the following correspondence. (a) Aconex mail dated 12 July 2016 to Mr Collison and Mr Malone in which Mr Carlin was referring to the LED lights in the context of the “joinery interface” and stated that this “now requires a hardwired plug. Cost yet to be defined. But I understand you have instructed these works to proceed.”138 (b) Aconex mail dated 12 July 2016 where Mr Malone responded seeking Mr Carlin to “clarify if this is a variation, reasoning and where this direction sits”.139 See Aconex mail dated 22 July 2016 from Mr Meredyth to Mr Malone attaching VP67 dated 21 July 2016.140 136 PLE.001.001.0336 Amended Statement of Claim at p 0364 Schedule 4 Item 5; PLE.001.001.0001 Third Amended Defence and Counterclaim at pp 0084–5 Item 5. 137 BUI.001.008.5574; BUI.001.008.5578; BUI.001.008.5575. 138 BUI.001.001.64657. 139 BUI.001.001.71501. 140 BUI.001.001.64743; BUI.001.001.13923. -- 82 of 210 -- 83 (c) VP67 provides a detailed scope of the proposed variation and states “supply & installation of power sockets and wiring for LED lighting in kitchen and bathroom – refer to MBI advice dated 29th June 2016 …” This document also included RDE’s variation proposal which cross referenced to Mr Bradshaw’s email and attachments. VP67 also provided a detailed breakdown of the price, that the variation would have no effect on the date for practical completion and an expiry period for acceptance in accordance with clause 36.1(g). (d) Aconex mail dated 17 November 2016 where Mr Malone provided an assessment based on the JPDC Guest Room Data Sheet and assessed the variation at $0.141 (e) Also on 17 November 2016, Mr Cook responded to Mr Malone and stated: “… As per previous discussions, meetings and correspondence there is now a requirement to run additional figure 8 cabling to the connection at the wall as the ‘hardwired remote driver’ does not reach the ceiling space and further to this is not capable of working as described.”142 [420] On the basis that there is no specific provision in the original Contract document in relation to the work relating to the installation of the LED lights and that the “figure eight” wiring is atypical, this amounts to a variation of the work under the Contract. The plaintiff contends that the requirements of clause 36.1(g) have been complied with and therefore it is entitled to the cost of this variation to be assessed in accordance with clause 36.4. [421] There is an additional difficulty to be considered in relation to this claim and the issue of whether clause 36.1(g) has been complied with. VP67 was not submitted within five business days of receipt of the direction, but was rather submitted 10 business days late. [422] The plaintiff submits that this had no prejudicial impact on the defendant or the Superintendent and this is evidenced by the fact that the Superintendent did not respond to VP67 until 17 November 2016 and by that date, the works had not commenced.143 [423] Further, the plaintiff submits that the Superintendent did not reject VP67 because it was not submitted within five business days of the relevant direction but rather, it was rejected on an erroneous assumption that the JPDC Guest Room Data Sheet was a contractual document and the Contract required the plaintiff to perform the “figure eight” wiring. It is submitted that the variation was assessed “on its merits” rather than whether it had complied with the requirements of clause 36.1(g). In this regard, the plaintiff also points to the evidence of Mr Malone in cross-examination that in respect of variations “outside” mechanical issues he attempted to take an “equitable approach” to their assessment.144 141 BUI.001.001.71622. 142 BUI.001.001.65311. 143 BUI.001.001.71622. 144 T4-85, L15-16. -- 83 of 210 -- 84 [424] However, the defendant refers to the evidence of Mr Malone in his witness statement that to the best of his knowledge, the plaintiff had never submitted a claim in respect of this item which met the notice requirements in clause 36 of the Contract.145 [425] The defendant contends that there had been non-compliance with clause 36.1(g) however that is not expanded upon in the submissions, other than a statement that “Mr Malone was of the belief that the notice requirement of clause 36 had not been met by Built” and the reference to the witness statement. The reference to the transcript in the submissions appears to be more as to whether clause 36.1(f) had been complied with, that is a direction by the Superintendent. It does not appear to be directed at the circumstance of at least partial compliance with clause 36.1(g). [426] The plaintiff contends that it has substantially complied with clause 36.1(g) and that is sufficient to give rise to its entitlement to the cost of the variation. [427] It appears that the works did not commence prior to 26 April 2017.146 In these circumstances, this was not what has been colloquially described as a “do and charge” variation. [428] The purpose of the time limit in respect of the notice being provided is to give the Superintendent the opportunity to make an informed decision as to whether the variation is required to be performed. Given that the work was not undertaken until a considerable time after the variation proposal was considered and the Superintendent did not deal with the variation proposal on the basis that it was outside of the notice period in clause 36.1(g), I am satisfied that there has been substantial compliance with the requirements of clause 36.1(g) and in the particular circumstances of this variation that an entitlement to an assessment of the cost pursuant to clause 36.4 of the Contract arises. [429] In respect of quantum, the quantum experts assess this claim as follows: (a) Mr Watson values the claim at $45,775.49 (plus GST); (b) Mr Hardiman values the claim at $33,089.89 (plus GST). [430] The difference between the experts is $12,685.59. The reasons for this difference include: (a) A variation fee charged by RDE to the plaintiff for performing the works of 10 per cent. Mr Watson allows this amount but Mr Hardiman does not on the basis that “Rawlinsons rates are market prices”.147 (b) The BWIC claim by RDE (comprising 15 per cent of the cost of the works). Mr Hardiman disallows this item on the basis of “no substantiation”. The plaintiff contends that this item is recoverable as RDE charged the item against the plaintiff for performing the works. (c) 7.5 per cent for preliminaries. 145 WIT.001.001.0250 at p 0264 [118]. 146 BUI.001.001.71743; BUI.001.001.66358. 147 EXP.001.001.2176 at p 2206. -- 84 of 210 -- 85 [431] Consistent with my finding in respect of preliminaries, the 7.5 per cent for preliminaries is not recoverable. [432] In respect of this variation there is no real evidence as to what the BWIC mark-up would relate to. Mr Cook could not speak to whether it was reasonable. In the circumstances of this particular variation, the BWIC mark-up is not recoverable. [433] Another issue in respect of the quantum in this matter is whether kitchen wiring has also been included in the assessment. [434] The defendant’s position is that the kitchen wiring should be excluded and accordingly, the maximum amount should be $8,272.47. This amount excludes the 10 per cent mark-up on the subcontractor’s fee, the 7.5 per cent impost for preliminaries and the 15 per cent BWIC mark-up. [435] The plaintiff’s position is that VP67 and the attachments to Mr Bradshaw’s email include “figure eight” wiring as being required for both the bathroom in respect of the vanity and the kitchen areas in respect of the mini bar. Further, the plaintiff submits that its Amended Statement of Claim does not limit its claim to the bathroom areas and the defendant’s Defence refers to wiring for the kitchen mini bar.148 [436] In these circumstances, it appears reasonable that the assessment include both the bathroom and kitchen areas as the logic of the claim in respect of both those areas would be the same. [437] In the circumstances of this variation, the rates used by Mr Watson are reasonable as they reflect the requirements of the work undertaken. This includes the subcontractor’s fees. [438] The plaintiff is entitled to an amount based on Mr Watson’s approach for both the bathroom and kitchen areas, less the 15 per cent BWIC mark-up and the 7.5 per cent for preliminaries. This figure does not appear to have been calculated in the submissions and the parties should calculate the amount for inclusion in the final orders. Schedule 4 – VP73 – “Paint stair soffits/colour contrasting nosings” [439] Liability and quantum are in issue in respect of this variation. The difference between the two quantum experts is $435.25. [440] This claim relates to the plaintiff being required to change the finish of the fire stair soffits from the ground floor to level 12 to a painted finish. [441] The plaintiff contends that work under the Contract did not require a finish to be applied to the fire stairs and the requirement for a painted finish was a change amounting to a variation. [442] The defendant’s position is that the painting finish was rectification of a workmanship issue in relation to work that was in scope. At the trial, witnesses were questioned in relation to the finish and a photograph was tendered. The photograph of the fire stairs was taken prior to the disputed painting taking place and shows precast stairs with 148 PLE.001.001.0336 at page 0364; PLE.001.001.0001 at p 0086. -- 85 of 210 -- 86 paint over partial areas. It is submitted that this produced an “unsightly finish” which was not of the appropriate standard in respect of the Spring Hill Hotel. [443] This claim requires consideration of what was required work under the Contract and whether applying a painted finish to the stairs was a variation. [444] The plaintiff contends that the Reid Campbell drawing A9016 Revision 1 in Annexure Part K of the Contract is the relevant scope drawing. The Schedule did not specify any finish to the fire stairs above the basement 2 carpark. [445] The plaintiff relies upon this for its contention that to apply a finish to the stairs was a variation. The plaintiff also relies on the following correspondence: (a) Email on 25 May 2016 from Mr McBirnie to Mr Meredyth, copying others, which states: “There is an ongoing discussion about what was included in the original schedule, but regardless of how that falls out, the untreated finish won’t be acceptable. Given we are not painting the wall white, what application would you suggest here?”149 (b) Response on 25 May 2016 from Mr Meredyth to Mr McBirnie as follows: “As the rest of the stairs walls and floor are a plain concrete colour, I would suggest a paint finish in ‘Grey’.”150 (c) Email on 22 July 2016 from Mr Roach of Reid Campbell to Mr Cook which states: “… regarding finishes to the fire stair, I would like to determine the scope of the paint and sealer to the fire stair flights. Jim McBirnie has indicated to me that the risers should be painted to the fire stairs and that the external side of the stair stringer and the stair soffits should also be painted … I am in the process of updating my internal finishes schedule, could you please confirm your understanding of the above.”151 (d) Aconex mail from Mark Roach of Reid Campbell to the plaintiff on 4 August 2016 attaching a “revised finishes schedule” which stated that the fire stairs were to be painted.152 [446] The plaintiff contends that the email of Mr McBirnie of 25 May 2016 was a direction pursuant to clause 36.1(f) of the Contract and that clause 36.1(f) had been complied with except for the provision that it expressly state that the direction constitutes a direction for a variation. The plaintiff submits that the email stating that “the untreated finish won’t be acceptable” could not be interpreted as anything other than 149 BUI.001.003.10399. 150 BUI.001.003.10398. 151 BUI.001.001.70703. 152 BUI.001.001.71012 and BUI.001.001.60903. -- 86 of 210 -- 87 a direction. It was from the Superintendent and identified the work the subject of the direction. [447] The defendant’s position is that there was no direction for additional work under the Contract and also there was non-compliance with clause 36.1(g) of the Contract. The email from Mr McBirnie is not clearly a direction as it is ambiguous as to whether it was, in effect, a notice to rectify a defect. Further, on its face it is not a direction within clause 36.1(f) of the Contract. [448] The reference in the email to the untreated finish being unacceptable is consistent with the identification of defective work that did not meet the necessary standard imposed under the Contract. The defendant refers to and relies upon clause 2.2(a)(i) of the Contract in respect of the requirement for the contractor to exercise due care and skill in carrying out and completing the work under the Contract. Further, reliance is also placed on clause 29.1 which requires the contractor to use proper and tradesman like workmanship. [449] The defendant relies upon the photograph and the evidence from the witnesses to illustrate that the level of workmanship was not satisfactory in respect of the finish on the fire stairs. The paint finish that was ultimately applied to the fire stairs was a rectification of what was an unacceptable finish to bring it up to the requisite standard of good workmanship. [450] In the circumstances, I find that the additional work that was required to be undertaken was rectification work to ensure that the requisite standard of workmanship was achieved in relation to the finish on the fire stairs. There has also been non-compliance with the requirements of clause 36.1(g). In the circumstances, no entitlement arises for the cost associated with the additional work undertaken. [451] If I am wrong and an entitlement to the cost of the variation arises, then the assessment should be on the basis of Mr Watson’s assessment less the 7.5 per cent for preliminaries,153 being the amount of $4,620.00 (plus GST). Schedule 4 – VP76 – “Additional corridor lighting given flip of rooms” [452] Liability is not in dispute and quantum is agreed in the amount of $4,435.30 (plus GST). [453] There appears to be an amount in respect of preliminaries that is also claimed by the plaintiff.154 It is not apparent whether this is covered by the general claim for 7.5 per cent preliminaries or is a different claim. It is not addressed in the defendant’s submissions. [454] An amount in respect of preliminaries has not been included. If this needs to be considered separately to the general position, this should be addressed further and clarified prior to the final orders being made. 153 Given the conclusion I have reached in respect of the entitlement to the 7.5 per cent preliminaries. 154 Plaintiff’s written closing submissions at [771]. -- 87 of 210 -- 88 Schedule 4 – VP114 – “Joinery – Damage to walls by separate contractors” [455] Liability and quantum are in issue in respect of this variation. The difference between the two quantum experts is $7,432.39. [456] This claim relates to work undertaken to rectify and make good finished walls, doors, waterproofing and tiles that were damaged or broken by separate contractors, specifically the joinery contractor. [457] The defendant denies there was any direction pursuant to clause 36.1 of the Contract, however, the defendant does not dispute that the alleged works were a variation to the work under the Contract and that the plaintiff performed the works comprising the variation. However, the scope of the actual work required to be undertaken appears to be in dispute. [458] Again, the relevant issue is whether there was a direction pursuant to clauses 36.1(f) or 36.1(g) of the Contract and if an entitlement to the cost of the variation arises then the proper assessment pursuant to clause 36.4 of the Contract. [459] The plaintiff points to evidence of Mr Cook of damage caused by the defendant’s subcontractors when they were installing the guest room joinery and curtains. The plaintiff also refers to various correspondence as to the alleged damage. [460] Further, the plaintiff refers to correspondence between 30 January 2017 and 10 May 2017 between the Superintendent and the plaintiff in relation to a number of defect registers, directing the plaintiff to rectify the defects that were identified in those registers.155 [461] These registers of defects included defects that were caused by MBI. [462] On 14 March 2017, the plaintiff submitted VP114 for additional rectification work that it was directed to undertake, to repair the damage caused by MBI. This included a claim for the cost of patching and painting walls and tiling rectification work.156 [463] Further, on 22 March 2017 the Superintendent assessed VP114 at $0 on the basis that the “variation was not directed by the Superintendent pursuant to clause 36 of the Contract”.157 [464] The defendant contends that this is an ambit global claim without proper evidence linking particular damage to the installation of joinery, and without linking particular damage to particular cost, the claim ought to fail for lack of proof. [465] Further, the defendant points to the evidence of Mr Cook and submits that he has no personal knowledge and is not able to give direct evidence of the breakdown of the hours of work in relation to the alleged damage caused by the joiners. [466] The defendant submits that the hours referred to by Mr Cook had been supplied by a third party subcontractor who has not given evidence and there is no evidence about 155 See WIT.001.004.0001 Witness Statement of Thomas Cook dated 31 August 2018 at p 0094. 156 BUI.001.001.68665; BUI.001.001.56238. 157 BUI.001.001.71721. -- 88 of 210 -- 89 the basis upon which that third party says any particular damage was attributable to the joinery installation. [467] The plaintiff relies on 11 emails which attach defect registers which include defects caused by MBI. The plaintiff contends that the emails identified between 30 January 2017 and 10 May 2017 amount to a direction within clause 36.1(f) of the Contract on the basis that they: (a) were a direction to perform a variation, as the covering emails direct the plaintiff to rectify the damage caused by MBI, which was included within the defect registers; (b) were given in writing by the Superintendent; and (c) identified the work the subject of the direction. [468] However, there was no express statement that the direction constitutes a direction for a variation within clause 36.1(f) of the Contract. [469] By the wording of the emails the Superintendent intended the plaintiff to undertake the work that was set out and identified in the schedules. In these particular circumstances, I consider that the non-inclusion of a statement that the direction constitutes a direction for a variation does not render a direction in the email invalid for the purposes of clause 36.1(f). The unambiguous nature of the emails and the context within which the direction was provided are sufficient for compliance under clause 36.1(f) such that liability for the cost of the variation arises. [470] In relation to quantum to be assessed pursuant to clause 36.4 of the Contract, Mr Watson does not assess the cost of this variation. Mr Hardiman assesses the cost of the variation at $7,423.39. [471] The plaintiff is entitled to the sum of $7,423.39 (plus GST). SCHEDULE 5 PROVISIONAL SUMS [472] Question four of the list of issues in dispute states as follows: “4. In respect of Item 3 of the alleged Schedule 5 provisional sums, whether: (a) (a) the plaintiff was directed to undertake the alleged Provisional Sum Works pursuant to clause 3 of the Contract [SOC [18]; Def [18], [19]]; and (b) the alleged Provisional Sum Works were provisional sum works within the meaning of the Contract [SOC [18]; Def [18], [19]].” [473] In respect of quantum, question 16 of the list of issues in dispute states as follows: “16. In respect of the Schedule 5 provisional sums, the extent to which, if at all, the plaintiff is entitled to the amounts identified in column D of Schedule 5 to the amended statement of claim [SOC [22]; Def [22]].” -- 89 of 210 -- 90 [474] Further, the parties have agreed that the following issue is not in dispute as set out in paragraph five of the list of matters not in issue: “5. In respect of the alleged Schedule 5 provisional sums: (a) (a) that the plaintiff is entitled to the amount claimed for Items 1 and 2; and (b) in respect of Item 3, that the plaintiff undertook the work described in Schedule 5 of the amended statement of claim [SOC [19]; Def [19]].” Provisional Sum No 2 – “Joinery to Greatroom” [475] Liability is not in dispute. [476] An amount of $129,772.51 (plus GST) has been paid by the defendant. [477] In this proceeding, the plaintiff claims an additional $3,840.00 (plus GST). This sum is admitted by the defendant. [478] Accordingly, the plaintiff is entitled to the amount of $3,840.00 (plus GST). Provisional Sum No 6 – “Landscaping, irrigation and paving including design, supply & installation of streetscape trees, grates, kerbing and public artwork” [479] Liability is not in dispute and the defendant admits this claim. [480] The Superintendent’s price was $5,020.39 (plus GST) made pursuant to CA59. This amount has not been paid by the defendant but is admitted by it. [481] In this proceeding, the plaintiff claims an additional $20,050.39 (plus GST) which is also admitted by the defendant. [482] Accordingly, the plaintiff is entitled to the amount of $25,070.78 (plus GST). Provisional Sum No 8 – “Make good of the Council footpath to Wharf and Henry Streets” [483] In respect of this claim, both liability and quantum are in issue. [484] This claim relates to work performed by the plaintiff making good the Council footpath to Wharf and Henry Streets. The issues in dispute are whether an Aconex mail dated 31 October 2016 constitutes a direction pursuant to clause three of the Contract, whether the provisional sum provided for in the Contract only covered work that was not already included in scope work and lastly, what was the proper price for any provisional sum claimable. [485] Clause three of the Contract provides as follows: “3 Provisional sums A provisional sum included in the Contract shall not itself be payable by the Principal but where pursuant to a direction the work or item to which the provisional sum relates is carried out or supplied by the -- 90 of 210 -- 91 Contractor, the work or item shall be priced by the Superintendent, and the difference shall be added to or deducted from the contract sum without any allowance for profits or overheads. Where any part of such work or item is carried out or supplied by a subcontractor, the Superintendent shall allow the amount payable by the Contractor to the subcontractor for the work or item, disregarding: (a) (a) any damages payable by the Contractor to the subcontractor or vice versa; and (b) (b) any deduction of cash discount for prompt payment. If the amount the Principal is required to pay the Contractor pursuant to this clause 2.10 exceeds the total amount of all provisional sums included in the Contract, the Principal must also pay the Contractor an additional amount for profit and attendance calculated as the percentage stated in Item 13 or elsewhere in the Contract of the provisional sum excess amount. The parties acknowledge the contract sum includes an amount for overheads, profit and attendance for all provisional sums included in the Contract.” [486] The plaintiff refers to the definition of “direction” which states as follows: “includes agreement, approval, assessment, authorisation, certificate, decision, demand, determination, explanation, instruction, notice, order, permission, rejection, request or requirement.” [487] As previously observed, the definition of direction is quite broad. The defendant also refers to clause 2.1 of the Contract which states as follows: “The Contractor shall carry out and complete WUC in accordance with the Contract and directions authorised by the Contract. Subject to the express provisions of the Contract and the performance by the Contractor of its obligations pursuant to the Contract, the Principal shall pay the Contractor the contract sum adjusted by any additions or deductions made pursuant to the Contract.” [488] In respect of whether there has been a direction made, the plaintiff relies on the following correspondence: (a) On 18 October 2016, the plaintiff sent an email to the Superintendent stating: “Pursuant to clause 3 and Part P of the general conditions of contract we hereby submit the following submission of cost adjustments justified and calculated against the Provisional Sum allowances of $10,000.00 to make good of the Council Footpath to Wharf & Henry St. Scope of works is defined by the attached drawings and back to back head contract / DA & other authority obligations as presented in the attached BOQ. -- 91 of 210 -- 92 Expiry period for acceptance is 28/10/2016.”158 (b) The attachment to the Aconex mail was PC No 8 which set out a detailed description of the pricing for the provisional sum works.159 PC No 8 rev A was issued when revised in January 2017.160 (c) On 31 October 2016, Mr Malone sent a mail to Mr Carlin and Mr Cook indicating that the works had been “assessed as WUC” but also directing the plaintiff to “proceed as such”. [489] The plaintiff relies on this last correspondence as being a relevant direction. The plaintiff submits that whilst Mr Malone held the erroneous opinion that the works were within the scope of the work under the Contract, he directed the plaintiff to carry out the works. In this respect, the plaintiff contends that the email is a “request”, “requirement”, “approval” or “demand” within the definition of direction in the Contract. It is also contended that the plaintiff performed the works pursuant to that direction. [490] While it is open for that email to be classified as contended for by the plaintiff, the second issue in respect of the original scope of work under the Contract, and whether it needs to be outside of that, is the more substantive issue. [491] The defendant refers to a plan which is listed in Annexure Part K of the Contract. This is document C0201. The document is described as “C0201 Siteworks Plan Rev R2” which is under the heading “CIVIL ENGINEERING – OPUS” in Annexure Part K of the Contract. [492] The defendant contends that this siteworks plan identifies work, which was included in the original scope of work under the Contract. This work does not involve a direction and does not constitute performance of work identified in the provisional sum. [493] The defendant contends that where there is work within the scope of the Contract, it is covered within the Contract sum and it is not work covered by the provisional sum. In these circumstances, it is only work which is additional to the scope covered by the Contract, following on from a direction and which falls within the description of a provisional sum item which would give rise to an entitlement to compensation in respect of the provisional sum. [494] On this approach, work shown in the siteworks plan would be within the scope of the Contract and no additional compensation would arise. If, however, the defendant directed different works or additional works (that is, works not notified in a plan or somewhere in the Contract documents), then that might be work which the provisional sum would operate in respect of. [495] Some evidence was led in the statement of Mr Cook and he was also cross-examined in relation to this work. It is not readily apparent how this work was different to that envisaged by the Siteworks Plan C0201. 158 BUI.001.001.68578. 159 BUI.001.001.56115. 160 BUI.001.001.56226. -- 92 of 210 -- 93 [496] Construction of the Contract supports the conclusion that work covered by the provisional sum does not form part of the work under the Contract. It operates such that the final payment amount will be adjusted to reflect the actual work undertaken in respect of the work identified in the provisional sum description. [497] The plaintiff submits that the words of Part P of the Contract in relation to provisional sum is unqualified and merely states: “Make good of the Council Footpath to Wharf & Henry Streets.” [498] However, the Contract provisions need to be read as a whole. There were clearly aspects in relation to the footpath in Wharf and Henry Streets which were already specifically addressed in the Contract documents. Accordingly, the provisional sum needs to be interpreted in a way which recognises that the scope of work covered by the Contract documents forms part of the work under the Contract. In these circumstances, work additional to that which fell within the description of “making good the Council footpath to Wharf and Henry Streets” would be work which would be subject to a potential direction and claim under the provisional sum procedure. [499] The specific work identified in document C0201 Siteworks Plan Rev R2 constitutes work within the scope of the Contract. An amount in respect of that work has already been included in the Contract sum. To the extent that there is any work outside of that, which fits the description of “make good of the Council footpath to Wharf and Henry Streets” then that could be the subject of a claim if a direction was made. [500] There is no evidence that establishes that the work claimed is other than that which would be covered under the scope of work as identified in document C0201 Siteworks Plan Rev R2. In these circumstances, there is no basis for the provisional sum claimed. Accordingly, the plaintiff is not entitled to recover an amount in respect of this claim. [501] If I am wrong and the plaintiff is entitled to recover in respect of the provisional sum claimed, I accept the submission that the plaintiff has made a claim in respect of the “network alteration to Telstra pits” and that it should be included in the amount. This item is identified in Attachment 13 to Mr Watson’s report which is referenced in Schedule 5 to the Amended Statement of Claim. [502] Accordingly, if the plaintiff is entitled to an amount in respect of Provisional Sum No 8, the amount of $89,411.34 (plus GST) as assessed by Mr Watson should be adopted. [503] The only difference between the value assessed by Mr Hardiman and Mr Watson’s valuation is substantially the amount in respect of that one item. [504] The amount in the joint expert report of Mr Watson’s assessment is $88,979.82 (plus GST). [505] This amount was reduced from the $89,411.34 in Mr Watson’s original report. [506] The plaintiff is entitled to the revised amount of $88,979.82 if I am wrong and the plaintiff is able to establish an entitlement to this claim. -- 93 of 210 -- 94 PRICING OF VARIATIONS SCHEDULE 6 - PRELIMINARIES [507] Question five of the list of issues in dispute relates to claims made in respect of the Schedule 6 variations and states as follows: “5. In respect of the Schedule 6 Variations, whether, if priced pursuant to clause 36.4 of the Contract, the plaintiff is entitled to payment for an additional 7.5% for preliminaries [SOC [25]; Def [25]].” [508] In relation to quantum, question 17 of the list of issues in dispute relevantly states as follows: “17. In respect of the Schedule 6 Variations, the extent to which, if at all, the plaintiff is entitled to the amounts identified in column D of Schedule 6 to the amended statement of claim [SOC [26]; Def [25]].” [509] As set out in paragraph six of the list of matters not in issue, the parties have agreed as follows: “6. In respect of the alleged Schedule 6 variations: (a) that the plaintiff was directed to carry out the variation work described in Schedule 6 [SOC [23]; Def [23]]; and (b) that the defendant has paid to the plaintiff the certified amounts set out in column B [SOC [24] Def [24]].” [510] Schedule 6 of the Amended Statement of Claim lists a number of variations which have been approved and certified by the Superintendent. It is accepted that the work has been carried out and the defendant has paid the plaintiff the amounts claimed, except for the amount identified as representing 7.5 per cent of the certified value of the variations. [511] The issue that is in dispute between the parties is whether, on a proper construction of clause 36.4(d) of the Contract, the plaintiff is entitled to an additional 7.5 per cent for “preliminaries” on top of the 10 per cent already added on account of profit and overheads pursuant to clause 36.4 of the Contract. [512] This issue is also relevant to the Schedule 3 and 4 variations. Those variations in dispute also include a claim in respect of the 7.5 per cent for preliminaries which is also disputed by the defendant. [513] This issue arises in relation to the practical application of clause 36.4(d) which provides that variations are to be priced on “reasonable rates or prices, which shall include an amount equivalent to the percentage set out in Item 32A for profit and overheads”. [514] The variations listed in Schedule 6 were valued pursuant to clause 36.4(d) of the Contract using reasonable rates or prices, including a 10 per cent amount in accordance with Item 32A for profit and overheads. -- 94 of 210 -- 95 [515] The plaintiff submits, and Mr Watson, the quantum expert on behalf of the plaintiff agrees, that the assessment of the price of the variations should include the additional 7.5 per cent claimed. [516] Item 32A stipulates that the amount for profit and overheads is 10 per cent. Further, the quantum experts on behalf of both parties agree that this should be split and allocated as two per cent for profit and eight per cent for overheads.161 [517] As a consequence of this, the defendant submits that there is no proper basis for adding the 7.5 per cent for “preliminaries”. The defendant ultimately submits that to allow this additional 7.5 per cent on each variation would in effect increase the contractually agreed eight per cent for overheads to a figure of 15.5 per cent for overheads. [518] The plaintiff submits that the reasonable rates or prices referred to in clause 36.4(d) of the Contract does not require actual costs, but rather each variation is to be priced using “reasonable rates or prices”. Further, it is submitted that it is common for these types of costs to be charged as a percentage of the overall cost of the variation and this is entirely orthodox and reasonable. It is also contended that time and resources will be incurred in relation to the management of variations and there is no reason why a contractor should not be compensated for the preliminary resources dedicated to a variation to the WUC. [519] Both Mr Watson, on behalf of the plaintiff, and Mr Hardiman, on behalf of the defendant, were questioned in relation to what would be included under the designation of preliminaries and also whether this was the same or different from the overhead allowance as provided for in the 10 per cent. [520] Mr Watson gave evidence of what work would have been required to be undertaken by the plaintiff in relation to each of the variations, including such things as receipt of instructions or amended design drawings, reviewing those documents and informing subcontractors of changes, preparing prices and coordinating with relevant subcontractors, submitting an agreed price with the Superintendent, instructing the subcontractor to proceed with the variation, supervising the variation works and processing a subcontractor’s claim for payment of the variation. [521] The defendant disagrees with this approach. Firstly, the defendant refers to the evidence of Mr Cook as indicating that there is no science to the application of a mark-up of 7.5 per cent and it was just a standard figure that had been applied across the board to all variations without regard to the particular circumstances of certain variations. [522] Additionally, it appears that the 7.5 per cent uplift had not been contemporaneously claimed in relation to the variation proposals, but it was an additional amount which has subsequently been sought by the plaintiff. That is, the 7.5 per cent increase was claimed in Schedule 4 and Schedule 6 of the Amended Statement of Claim as an addition to that which was claimed in the actual variation proposals. [523] Further, the defendant points to the evidence of Mr Watson and in particular that he was instructed to assume that the additional 7.5 per cent added were not overheads. 161 See BUI.001.001.61820 at p 062 and EXP.001.001.2215 at p 2222. -- 95 of 210 -- 96 It is in these circumstances that the defendant contends that Mr Watson’s opinion is meaningless as that assumption was not separately proven. [524] It is apparent from the evidence of Mr Watson and from the other evidence in respect of this claim that the reference to overheads is used in different ways by different people at different times. However, it is apparent that the amount in respect of preliminaries is likely to include some onsite overheads. In this regard, Mr Watson agreed that the Contract price often has built into it preliminaries including the cost of a project manager, a site manager, a contract administrator and similar people. The evidence in relation to this claim does not identify any additional resources that were put on site beyond the ones that were already covered under the Contract. [525] In these circumstances, it is difficult to be satisfied that the 7.5 per cent on account of preliminaries is separate from the allowance for overhead within the 10 per cent allowed for overhead and profit provided for in Item 32A. [526] There is also the additional issue of whether the 7.5 per cent is a reasonable rate or price. [527] Mr Watson expresses an opinion that this “represents an average of the circumstances which would be encountered for variations” and in his experience it is not unusual. Mr Watson undertook some cross-checking to check for reasonableness. [528] However, this approach appears to be rather arbitrary as Mr Watson estimates the number of hours that would equate to the dollar value of the 7.5 per cent and then considers whether the number of hours is appropriate to undertake the tasks which are unidentified but of a general nature of the type that are likely to have been undertaken. [529] Mr Hardiman criticises this approach on the basis that there would be daily timesheets which should record and support the actual cost incurred of doing, for example, additional design work. [530] The difficulty with the 7.5 per cent for preliminaries is that: (a) there is no evidence which identifies with any precision the tasks which it covers. (b) there is no evidence to be satisfied that there is no duplication with the overhead component of the 10 per cent uplift. (c) there is no evidence that the 7.5 per cent is in any way reflective of the actual or likely work undertaken in respect of the particular variations. For example, there is no estimate of the volume of work required for a particular variation that could be described under the category of preliminaries. [531] The defendant contends that in these circumstances the 7.5 per cent impost for preliminaries should not be allowed because: (a) The amount is less than the eight per cent mark-up that is to be applied for overheads (as a component of the 10 per cent uplift for profit and overheads). (b) There is no evidence that any additional resources were required to deal with any of the variations. -- 96 of 210 -- 97 (c) There has been no analysis of whether there were any individual tasks undertaken in respect of each variation which ought, independently, be considered not to be overheads. (d) There has been no consideration of any individual tasks for each specific variation. [532] Given that there is specific provision within the 10 per cent uplift which covers overheads and there is a lack of detail in relation to the items which would be covered by the 7.5 per cent uplift for preliminaries, there is a considerable risk that there would be duplication in respect of these costs. To include this mark-up in these circumstances would result in a valuation which was unreasonable. [533] For the reasons identified by the defendant, I find that the plaintiff has not made out that there is any proper basis to add 7.5 per cent for preliminaries to each variation. Accordingly, the plaintiff is not entitled to recover the 7.5 per cent by way of preliminaries in respect of the variations in Schedule 6. [534] This also applies in respect of the identified variations in Schedules 3 and 4. OTHER CLAIMS BY PLAINTIFF [535] The list of issues also identifies the following further issues relevant to the plaintiff’s claim: “19. The extent to which, if any, the defendant was entitled to deduct, from amounts owing to the plaintiff, amounts for: (a) utility backcharges [SOC [52]–[53A]; Def [33]]; (b) the alleged Vintech Defect [SOC [56]-[57B]; Def [35]– [35B]]. 20. Whether the defendant is liable to the plaintiff for the full amount claimed pursuant to Progress Claim No.24 submitted on 2 May 2017 [SOC [57C]–[57H]; Def [35C]–[35H]]. 21. The extent to which, if any, the defendant was/is entitled to have recourse to the unconditional undertaking provided by the plaintiff to the defendant on 2 May 2016 [SOC [57I]–[57M]; Def [35I]–[35M]].” [536] The list of matters not in issue relevantly states: “8. In respect of the Security Bond, that the plaintiff paid to the defendant the amount of $834,150.68 on 9 May 2019 in exchange for the Bond being cancelled [SOC [57I][57J]; Def [35I][35J]].” [537] The plaintiff addresses these claims in the plaintiff’s written closing submissions under the heading “Wrongful Set-off / Deductions / Withholding of Payments”.162 162 Plaintiff’s written closing submissions at [872]-[903]. -- 97 of 210 -- 98 [538] These claims relate to: (a) utility backcharges; (b) amounts wrongfully withheld for defects; and (c) amounts certified and claimed but unpaid - Progress Claim No 24. [539] These reasons deal with a number of claims which may affect the amounts the subject of: (a) amounts wrongfully withheld for defects; and (b) amounts certified and claimed but unpaid - Progress Claim No 24. [540] The parties should consider these claims in light of these reasons and identify any aspects which remain to be dealt with. Brief further submissions on these issues may be necessary so they can be expeditiously and efficiently dealt with. [541] In respect of the utility backcharges, the plaintiff’s written closing submissions address this claim for $10,025.62. The defendant does not appear to have addressed this claim in its written closing submissions, reply submissions or oral submissions. [542] The plaintiff identifies that the amount in dispute comprises: (a) $5,652.22 being utility charges incurred by the defendant either before the plaintiff had taken possession of the site or after practical completion was achieved. The plaintiff says in these circumstances, it is not obliged to reimburse those amounts. (b) $3,996.49 being GST incorrectly included on top of some utility invoices. The plaintiff says GST was not payable as there was no taxable supply. (c) $377.05 being in respect of invoices other than utility services. [543] The plaintiff submits that the Superintendent has offset in Progress Claim No 24 an amount for utility charges including these amounts which the plaintiff was not obliged to pay. [544] The plaintiff claims that it is entitled to have the amount of $10,025.62 repaid to it. [545] As the defendant has not addressed this claim, the parties should consider the claim in respect of the utility charges as part of the consideration of the amount under Progress Claim No 24 and any outstanding issues. If the defendant maintains the position identified in its Defence, then this should be briefly addressed in the further submissions to be provided. If the defendant does not press its defence to this claim, that should be notified to the plaintiff and incorporated in the calculations in respect of the amounts owing arising out of these reasons. -- 98 of 210 -- 99 COUNTERCLAIM – ALLEGED NON-MECHANICAL DEFECTS [546] Questions nine to 12 of the list of issues in dispute are relevant to the items claimed by the defendant by way of counterclaim. These issues are as follows: “9. Whether the works set out in Annexure 4 (items 1 and 4) and Annexure 6 to the counterclaim are defective works in the ways described therein [Def [38]; R [41]]. 10. Whether the defendant is entitled to recover any costs incurred in engaging consultants to inspect and advise on non-compliant defective works and managing rectification of non-compliant defective works [Def [42](a) & (b); R [41(bc)]]. 11. In respect of the additional liquidated damages claim, to what extent, on a proper construction of the Contract, the defendant was entitled to an additional claim for liquidated damages [Def [47], [48], [49], [50], [51]; R [41]]. 12. Whether, on a proper construction of the Contract, the plaintiff breached clause 2.1, subclause 2.2(a), clause 2.6, subclause 8.1(b), subclause 8.5(a), subclause 8.5(b), clause 8.8, clause 11.1, clause 34.10 and clause 35.1 of the Contract [CC [41(a) to (j)]; R [41(bb)]].” [547] Further, paragraph nine of the list of matters not in issue also states: “In respect of the counterclaim, the works set out in items 2 and 3 of annexure 4 to the third amended defence and counterclaim are defective in the ways set out therein.” [548] In respect of the quantum of the counterclaim, paragraph 22 of the list of issues in dispute is relevant and states as follows: “22. The cost to the defendant, if any, to rectify any defective works in Annexure 4 and Annexure 6 to the counterclaim, and to engage consultants to inspect and advise on non-compliant defective works and manage rectification of non-compliant defective works [Def [42], [43]; R [41(bc)]].” [549] In Annexure four of the defendant’s counterclaim, the defendant sets out four non- mechanical related defects. The plaintiff has admitted liability (but not quantum) in relation to Items Two and Three. Liability is in issue for Items One and Four. [550] Each of these claims are discussed below. Defect Item One – “Crack in the basement level 2 slab” [551] In respect of Defect Item One, liability is largely in issue. [552] The defendant submits that structural drawings prepared on behalf of the plaintiff required the basement level two concrete slab to be constructed using a dowelled joint. The basement level two concrete slab was constructed by the plaintiff without -- 99 of 210 -- 100 using a dowelled joint. As a result, the concrete slab developed a significant crack which allowed water to penetrate through the slab. [553] The plaintiff admits the allegation that there is a crack in the basement level two slab and that this is a defect, but otherwise does not admit the allegation. The plaintiff submits that it is unclear on the pleadings whether the defendant alleges that the slab is defective because water is able to ingress through the crack. [554] Mr Prove, engaged by the defendant, produced a rectification detail at the time Defect Item One emerged. He gave evidence at the hearing as to the steps that needed to be taken to rectify the crack in the slab. Those steps are set out at paragraph 11.2 of his report and included installing new dowelled joints.163 Mr Dummett of LJ Building Services Pty Ltd gave evidence that LJ Building Services Pty Ltd carried out and completed rectification of the basement level two slab in accordance with Mr Prove’s rectification detail.164 Mr Dummett gave evidence that he charged the defendant $18,974 to rectify Defect Item One. The defendant submits that the Court ought to award the defendant $18,974, plus $6,944 for the preliminaries and builder’s margin charged (apportioned on a pro-rata basis).165 [555] Mr Dummett’s evidence also included that these costs were fair and reasonable.166 This evidence was not challenged in cross-examination. [556] The plaintiff submits that, to the extent that any amount is allowed in respect of Defect Item One, it should be limited to the costs relating to the actual rectification of the crack, not the cost of works which related to water ingress. The plaintiff submits that: (a) the defendant has not specifically pleaded that the water which allegedly was coming through the crack is a defect; (b) there is no evidence as to the source of the water which was allegedly coming through the crack, or evidence that the plaintiff is somehow responsible for the ingress of the water; and (c) there is no evidence that any part of the plaintiff’s WUC was defective such as to cause the water ingress through the crack in the slab. [557] The defendant claims the rectification costs on the basis that pursuant to clause 2.2(a) of the Contract, the plaintiff was required to carry out and complete the works with due skill, care and diligence and in accordance with the design documents so that the works would be fit for purpose. [558] The basement level two concrete slab was constructed by the plaintiff without a dowelled joint as required by the plaintiff’s own structural drawings. The defendant contends that as a result, a significant crack developed in the concrete slab which allowed water to penetrate through the slab. 163 EXP.001.001.2459 at p 012. 164 WIT.001.001.0462 at p 0005 [4.9]. 165 WIT.001.001.0462 at p 0009 [8.2]; PRO.061.001.0070. 166 WIT.011.001.0462 at p 0009 [8.3]. -- 100 of 210 -- 101 [559] The rectification work undertaken is identified in the invoice from LJ Building Services Pty Ltd as including work to rectify the water ingress through the crack in the slab. This includes: (a) a trench was lined with geo-fabric; (b) a new slotted pipe was laid over the full length of the trench and connected to the existing storm water pipe; (c) a back flow penetration valve was installed at the junction of the stormwater pipe and the aggregate line to prevent stormwater coming back up through the aggregate line; and (d) the trench was backfilled with drainage stones.167 [560] Annexure four of the Third Amended Defence and Counterclaim is headed “Non- mechanical services systems defective works” and Item 1 reads as follows: “Description of work required: The crack in the basement level 2 slab needs to be rectified so that water cannot enter through the crack. Description of defects: Basement 2 has a large crack in the slab near the B2 Maintenance Room. Water is coming up through the crack into the car park.”168 [561] There is evidence that establishes a link between the incorrect joint being installed and the water ingress. This includes a memorandum from Mr Prove to Mr Dummett produced following an inspection of the water leak through the crack.169 Relevantly, Mr Prove identifies that “[h]ad the joint been installed as the documented [dowelled joint], a crack is unlikely to have occurred in that location.” In respect of the water ingress he goes on to conclude: “Water tends to follow a path of least resistance, in this case, the path of least resistance is now the crack in the slab on ground.”170 [562] Similarly, as recorded by Mr Dummett in his report annexed to the report of Mr Prove: “The sawn joint installed was insufficient to transfer vertical load, created by constant vehicle traffic, across the slab joint to minimise differential deflection, resulting in a significant crack forming in the basement 2 slab and providing a path of least resistance for water to penetrate and enter the building.”171 [563] This supports the reasonableness of the rectification work undertaken as identified as necessary by Mr Prove to rectify the defect and as undertaken by Mr Dummett. [564] The evidence establishes that the defendant is entitled to the full amount claimed in respect of this item on the basis that the plaintiff failed to carry out and complete the 167 Mr Dummett agreed these items of work related to the water ingress through the crack: T13-47; L14- 23. 168 PLE.001.001.0001 at p 0093. 169 Attached to the expert report of Mr Prove EXP.001.001.2459 at p 0053. 170 EXP.001.001.2459 at p 0033. 171 LJ Building Services Pty Ltd Report annexed to the expert report of Mr Prove EXP.001.001.2459 at p 0053 [3.3]. -- 101 of 210 -- 102 work with due skill, care and diligence and in accordance with the design documents so that it would be fit for purpose. Defect Item Two – “The electrical penetration running through the mechanical services slab needs to be adequately sealed and protected” [565] In respect of Defect Item Two, liability is agreed. [566] Mr Dummett of LJ Building Services Pty Ltd gave evidence that he rectified Defect Item Two by engaging an electrician to inter alia:172 (a) isolate the electrical services running through the concrete slab; (b) apply a new layer of polyurethane sealant to the slab penetration; (c) install a new PVC riser around the new penetration seal; and (d) install a new metal angle to divert water away from the slab penetration. [567] Mr Dummett gave evidence that he charged the defendant $3,900 to rectify Defect Item Two, excluding preliminaries and builder’s margin.173 The defendant submits that the Court ought to award the defendant the sum of $3,900, plus $1,452 for preliminaries and builder’s margin (apportioned on a pro-rata basis). [568] The defendant’s submissions indicate quantum is agreed. The plaintiff does not address this claim in its submissions. [569] Based on the evidence of Mr Dummett the quantum of the defendant’s claim in respect of this item has been established.174 Defect Item Three – “The storm water pipes, and each penetration through which they run, need to be adequately sealed and waterproofed” [570] In respect of Defect Item Three, liability is agreed. [571] Mr Dummett of LJ Building Services Pty Ltd gave evidence that, under his direction, LG Building Services Pty Ltd rectified Defect Item Three by sealing the junction of the PVC storm pipe penetrating the slabs with polyurethane sealant, Sikaflex Pro. [572] Mr Dummett gave evidence that he charged the defendant $250 to rectify Defect Item Three, excluding preliminaries and builder’s margin.175 The defendant submits that the Court ought to award the defendant the sum of $250, plus $93 for preliminaries and builder’s margin (apportioned on a pro-rata basis). [573] The defendant’s submissions indicate quantum is agreed. The plaintiff does not address this claim in its submissions. [574] Based on the evidence of Mr Dummett the quantum of the defendant’s claim in respect of this item has been established.176 172 WIT.001.001.0462 at p 0006 [5.10]. 173 WIT.001.001.0462 at p 0009 [8.2]; PRO.061.001.0070. 174 WIT.001.001.0462 at p 0009 [8.1]-[8.4]. 175 WIT.001.001.0462 at p 0009 [8.2]; PRO.061.001.0070. 176 WIT.001.001.0462 at p 0009 [8.1]-[8.4]. -- 102 of 210 -- 103 Defect Item Four – “The concrete structure around the basement staircase and communications hub wall needs to be adequately waterproofed” [575] Liability and quantum are in issue. [576] The defendant submits that the basement staircase has water coming through the walls and pooling on the ground because it has not been adequately waterproofed and does not have a water control system installed to divert water from the stairs. The defendant submits that the plaintiff’s failure to design the basement staircase in a way that avoids water pooling on the ground is a breach of its obligations under clause 2.2(a). [577] The plaintiff denies that the work is defective. The plaintiff submits that the concrete structure around the basement staircase and the communications hub are compliant with the Contract. The site generally experiences overland flow rather than underland flow due to the site location, the fact that the site does not sit below the water table, the dense rock site foundations and the slope of the site. The plaintiff installed a false wall and a waterproofed hob to prevent ingress into the communications hub. This requires water seeping through the walls to the hob to be pumped out. The plaintiff submits that the water ingress is not caused by defective work, but by third party external factors, such as defective neighbouring stormwater systems. [578] Mr Dummett of LJ Building Services Pty Ltd gave evidence that LG Building Services Pty Ltd engaged a waterproofing company as a subcontractor to inject the basement staircase wall with a hydrophilic polyurethane resin to seal the leaking joints and cracks in the wall to prevent water entering the staircase. [579] Mr Dummett gave evidence that he charged the defendant $33,903.64 to rectify Defect Item Four, excluding preliminaries and builder’s margin.177 The defendant submits that the Court ought to award the defendant $33,903.64 plus $12,623 for preliminaries and builder’s margin (apportioned on a pro-rata basis). [580] Mr Dummett gave evidence that the costs were fair and reasonable. This was not challenged in cross-examination. [581] Whilst the plaintiff has raised whether the cause of the water ingress was a faulty stormwater system on a neighbouring property,178 the defendant submits that no evidence was led by the plaintiff that this was the cause. [582] The plaintiff points to previous correspondence where this issue has been discussed and the plaintiff has identified an issue with the neighbouring storm water pit.179 Further, the plaintiff points to the water ingress only occurring during significant rain events.180 [583] It is difficult to see how this last point raised by the plaintiff addresses the issue of liability. Brisbane would have significant rainfall events given its geographical location and the proper design of the firestairs would have to take that into account to meet the obligations under the Contract. 177 WIT.001.001.0462 at p 0009 [8.2]; PRO.061.001.0070. 178 Mr Cook’s evidence of his “belief” WIT.001.001.0476 at p 0002 [13]. 179 See plaintiff’s written closing submissions at [920]-[921]. 180 See plaintiff’s written closing submissions at [919]. -- 103 of 210 -- 104 [584] The defendant maintains that the evidence establishes: (a) Water penetrated the staircase wall on a number of occasions.181 (b) The plaintiff had previously taken steps to rectify the water ingress, including applying an injected treatment.182 (c) Waterproofing was not evident upon Mr Dummett’s inspection.183 (d) There are no spoon drains to divert water away.184 [585] The defendant claims the rectification costs on the basis that pursuant to clause 2.2(a) of the Contract, the plaintiff was required to carry out and complete the works with due skill, care and diligence and in accordance with the design documents so that the works would be fit for purpose. [586] The defendant contends, that on the evidence, the water coming through the walls of the staircase and pooling on the ground is a breach of the plaintiff’s obligations under clause 2.2(a) of the Contract. [587] Under the Contract the plaintiff was to design and construct fire stairs with due skill, care and diligence and that would be fit for purpose. In the circumstances, the defendant contends that this would require the design and construction of fire stairs that were sufficiently waterproofed so that water could not enter the fire stairs and also that had drains to divert water. I accept the defendant’s evidence and submissions in this regard. [588] The evidence in respect of the quantum of rectification work is not directly challenged by the plaintiff, whose approach was to deny the work was defective. Further, the plaintiff submitted that “the rectification works that Built has already performed are … the best that can be done to stop the water ingress”.185 [589] On the evidence, I am satisfied that the defendant has established that the design of the basement staircase did not meet the obligations under clause 2.2(a) of the Contract. [590] Further, I am satisfied on the evidence of Mr Dummett that the steps undertaken to rectify the issue were appropriate and the costs were fair and reasonable. [591] Accordingly, the defendant is entitled to the costs of the rectification work as claimed. COUNTERCLAIM – ALLEGED MECHANICAL SERVICES SYSTEM DEFECTS [592] In Annexure Six of the defendant’s counterclaim, the defendant sets out 19 defects which have been identified in relation to the mechanical services system. The defendant claims the cost to rectify each of these defects. 181 WIT.001.001.0471 at p 0004 [3.2]-[3.6]. 182 WIT.001.001.0471 at p 0004 [3.4(b)]–[3.9] 183 WIT.001.001.0462 at p 0008 [7.5]. 184 WIT.001.001.0462 at p 0008 [7.5]. 184 Plaintiff’s written closing submissions at [923]. -- 104 of 210 -- 105 [593] Each of the claims are dealt with in turn below. Defect 1.1 – “Duct bends & detail design” [594] Liability and quantum are in issue. [595] The defendant submits that it was a requirement of the tender drawings that the plaintiff install duct bends that had a radiused throat or a square throat with turning vanes, combined with offsets and transitions of less than 1:4.186 The defendant submits that the plaintiff installed a number of duct bends which have a square throat and radiused outside without turning vanes and transitions greater than 1:4.187 This contributes to poor air flow performance and the inability of the guest room toilet exhausts to achieve their required design criteria (see Defect 4.2). [596] The plaintiff denies that the installed duct work is defective. The plaintiff submits that the drawings relied on by the defendant were part of the Thwaite design, not the plaintiff’s alternative proposal. As the detail on the tender drawings did not constitute a performance requirement of the Thwaite design, there is no basis for the defendant’s assertion that departure by the plaintiff from the duct bend design and offset and transition detail on the tender drawings constitutes defective work. The plaintiff further submits that there is no cogent evidence that a change in the duct design would result in any particular air flow rate. [597] Mr Lord’s rectification method is to fit turning vanes to the duct bends.188 Mr Dowden gave evidence that this would rectify the defect but, in his experience, this is likely to be more costly than replacing the duct bends by cutting them out and installing new duct bends.189 [598] The parties’ quantum experts differ as to the proper cost for rectifying Defect 1.1.190 [599] In relation to Mr Dowden’s proposed rectification methodology: (a) Mr Hardiman has calculated the proper cost to be $45,259.90; and (b) Mr Watson has calculated the proper cost to be $40,758.07. [600] The difference between the proper cost calculated by the parties’ quantum experts is $4,501.83. The difference relates to the need to use a crane to lift the new pieces of duct work to the roof. Mr Hardiman gave evidence that a crane was necessary because some of the duct work is quite large, being 2,800mm x 350mm and 1,600mm x 300mm. Mr Lord accepted that 2.8m x 0.35m and 1.6m x 0.3m duct would be impractical to bring upstairs. That alone would require a crane. [601] In relation to Mr Lord’s proposed rectification methodology: (a) Mr Hardiman calculated the proper cost to be $41,448.68; and (b) Mr Watson calculated the proper cost to be $24,100.74. 186 BUI.001.001.0157. 187 EXP.001.001.0157. 188 EXP.001.001.0450 at p 0474. 189 EXP.001.001.0512 at p 0552. 190 EXP.001.001.2425 at p 2426. -- 105 of 210 -- 106 [602] The difference between the proper cost calculated by the parties’ quantum experts is $17,347.94. The difference relates to the amount of time required to fit the turning vanes. Mr Hardiman gave evidence that a team consisting of one technician and three labourers would take four hours to fit each turning vane whilst Mr Watson allowed one technician and one labourer one hour to fit each turning vane. [603] My earlier findings in respect of the interpretation of clause 1(u) of Annexure Part O of the Contract are relevant to this claim. The plaintiff was to build its alternative proposal for the mechanical system on the basis that it meet the “performance requirement of the tender drawings and specification”. Consistent with my reasoning in respect of the Mechanical Variation claim, the relevant performance requirements may be found in the Specification and/or the drawings. [604] The defendant’s claim is put two ways: (a) The Contract required the specified air flow rates to be met as part of the alternative proposal: that it was a performance requirement of the Contract that the duct bends and transitions be designed and constructed in a way that did not significantly reduce the air flow pressure in the system, so that the system could meet the specified air flow rates. (b) The obligation of due skill, care and diligence in respect of the design and installation of the ducts pursuant to clause 2.2(a) of the Contract required the specified air flow rates to be met. [605] The impact of the different throated ducts was in issue between the parties’ experts. During the trial it was agreed that the experts would provide a joint report having regard to the air flow calculations available from the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE). Consideration of the data available from ASHRAE could assist in resolving the dispute between Mr Lord and Mr Dowden as to the pressure loss as a result of the bends actually on site. [606] The joint report was provided to the Court on 16 October 2020.191 The conclusion reached by both Mr Dowden and Mr Lord is that the output figures derived from the ASHRAE database closely accord with the figures provided by Mr Dowden. [607] The defendant submits that as a result Mr Dowden’s evidence should be accepted: that is, the Court should accept Mr Dowden’s evidence that the installed duct bends have a significant impact on air flow performance in the mechanical system. [608] In respect of the dispute between the mechanical services experts as to the effect that the bends had on the mechanical system’s air flow performance, in light of the joint report filed on 16 October 2020, I accept the evidence of Mr Dowden. That is, the pressure loss of using a bend with a square throat and radiused back is analogous to a square throated bend. [609] The tender drawings require radiused bends or square throated bends with turning vanes, thereby indicating a level of air pressure in the mechanical system to maintain air flow performance. I am satisfied that this constitutes a performance requirement that was to be met as part of the alternative proposal. By the installation of the square 191 PRO.030.001.001. -- 106 of 210 -- 107 throated ducts without turning vanes the performance requirement has not been met, constituting a defect as a result of the impact on the air flow performance. [610] There are two identified methods to rectify this defect. [611] The first method proposed by Mr Dowden is to replace the duct bends by cutting out the duct bends and installing new ones.192 There is a dispute as to the quantum involved in this method:193 (a) Mr Hardiman for the defendant: $45, 259.90. (b) Mr Watson for the plaintiff: $40, 758.07. [612] The main difference between the two calculations relates to whether a crane is needed to lift the duct pieces onto the roof and traffic management. Mr Lord contends that the pieces could be taken up the stairs: although he did concede that the largest pieces would require a crane as it would be impractical to bring them up the stairs.194 [613] If the rectification methodology proposed by Mr Dowden is to be adopted, Mr Hardiman’s calculation of the cost is to be preferred. Taking the duct pieces up the stairs in a working hotel is not feasible and on Mr Lord’s evidence a crane would be required for the larger duct pieces in any event. [614] The second rectification methodology is that proposed by Mr Lord. It involves fitting turning vanes to each of the square throated ducts. There is also a dispute as to the quantum involved in this method:195 (a) Mr Hardiman for the defendant: $41,448.68. (b) Mr Watson for the plaintiff: $24,100.74.196 [615] The difference between the two calculations is as a result of the amount of time allowed to fit the turning vanes. Mr Hardiman has allowed one technician and three labourers four hours to fit each turning vane. Mr Watson has allowed one technician and one labourer one hour to fit each turning vane. [616] The plaintiff contends that the time allowed in Mr Hardiman’s calculation is excessive. The defendant points to the scope of work identified by Mr Hardiman in cross-examination as supporting his time estimate, namely: (a) removing a portion of the duct (which may be up to 2.4 metres in size); (b) opening up the duct; (c) bringing up the turning vanes (which may be 2.4 metres in size); and 192 EXP.001.001.0512 at p 0552. 193 EXP.001.001.2425 at p 2426. 194 T13-5, L25-35. 195 EXP.001.001.2425 at p 2427. 196 The plaintiff’s written closing submissions at [960] and [964] refer to the amount of $17,347.94 as the calculation of Mr Watson. This appears to be the difference between Mr Hardiman and Mr Watson, rather than the amount of Mr Watson’s calculation. -- 107 of 210 -- 108 (d) attaching the turning vane by bolting it down inside the duct work, with each vane needed to be bolted down to reduce vibrations.197 [617] Mr Hardiman also gave evidence during cross-examination, as to the number of men required, including for health and safety reasons given the size of the ducts involved.198 [618] The defendant also points to Mr Dowden’s view that it takes quite a bit of work to retrospectively fit turning vanes to the duct work and that ordinarily, it is more economic to simply replace the defective duct bend.199 This corroborates the closeness of Mr Hardiman’s estimate on the second method to his estimate on the first method. [619] In respect of the second rectification method, the approach of Mr Hardiman is to be preferred on the calculation of the costs involved. While there is some uncertainty as to the labour and time required, I consider the approach of Mr Hardiman is reasonable and considers the various relevant factors which may impact on the time and labour required. [620] The difference between the two rectification methodologies using Mr Hardiman’s calculations is $3,811.22. This difference is not significant. [621] While Mr Dowden does accept the second methodology would be an acceptable solution,200 his proposed rectification approach was the first methodology. In the reply report he concluded the decision as to which method could be left to the contractor, but his view was “more site labour would be involved, at additional cost, therefore this may not be economical”. [622] Balancing the objective of rectifying the defect in respect of the rate of air flow and the costs associated with the rectification work, I consider that the first methodology is preferable. There is a greater level of certainty as to the costs involved between the two quantum experts. [623] Accordingly, the defendant’s claim for rectification of Defect 1.1 in Annexure Six in the Counterclaim is allowed in the amount of $45,259.90 (plus GST) being Mr Dowden’s rectification methodology and Mr Hardiman’s assessment of the costs. Defect 2.1 – “Air conditioning – simultaneous heating and cooling” [624] Liability is in issue, but quantum is agreed if liability is established and depending on the appropriate rectification methodology. [625] The defendant submits that it was a performance requirement of the tender drawings and the Specification that the air conditioning system designed and installed by the plaintiff be capable of performing the Independent Heating/Cooling Function on the ground floor. 197 T13-8, L13-38. 198 T13-9, L13-30. 199 EXP.001.001.0512 at p 0552. 200 EXP.001.001.0512 at p 0552. -- 108 of 210 -- 109 [626] The plaintiff denies that the alleged defect constitutes defective work. The plaintiff submits that the ground floor system is not defective as there was no performance requirement of the Thwaite design which required the plaintiff to install a system which provided simultaneous heating and cooling to the FCUs in all spaces. [627] Mr Dowden and Mr Lord propose different rectification methods.201 Mr Dowden proposes that the ground floor mechanical system ought to be rectified by changing the current two-pipe system to a three-pipe system to enable independent heating and cooling.202 Mr Lord proposes to increase the number of condenser units being installed in each area with a consequent increase in the number of power supplies and outdoor units to be installed and maintained.203 [628] The parties’ quantum experts agree that the proper cost of rectifying Defect 2.1 is: (a) $151,201.57 to $151,203.09 if Mr Dowden’s proposed rectification methodology is adopted; or (b) $53,087.01 if Mr Lord’s proposed rectification methodology is adopted. [629] Both parties agree that the outcome of this claim will be largely determined by the decision in relation to the Mechanical Direction claim. [630] In respect of the Mechanical Direction claim, as set out earlier in these reasons, the proper construction of the Contract is that the plaintiff was required to design and install an air conditioning system allowing mode control in each guest room, with the ability for occupants of individual guest rooms to select temperatures utilising the heating or cooling system independently of other guest rooms. [631] In respect of this claim, it is necessary to construe the Contract in relation to the plaintiff’s obligation in respect of the ground floor air conditioning system. [632] The relevant provisions of the Contract, tender drawings and the Specification are set out in the reasons relating to the Mechanical Variation. In addition, the provisions of the Specification relevant specifically to the ground floor air conditioning system are in clauses 2.2.5 to 2.2.8 and state as follows: “2.2.5 FOH GF AIR CONDITIONING AHU-PN, AHU-PW + AHU-C • The perimeter zones in the public areas shall each be air conditioned by a system comprising ceiling mounted AHU which supplies conditioned air to the perimeter zone via thermally insulated sheet metal duct work connected to ceiling mounted linear grilles via flexible duct work … • The AHU shall include CHW and HHW coils 2.2.6 BOH GF AIR CONDITIONING FCU-GC, FCUGW, FCU- GN 201 EXP.001.001.0512 at pp 0553-6. 202 EXP.001.001.0512 at pp 0555-6. 203 EXP.001.001.0512 at pp 0553-5. -- 109 of 210 -- 110 • The back of house areas shall be air conditioned by a system comprising multiple ceiling mounted FCUs each of which supplies conditioned air to the spaces via thermally insulated sheet metal duct work connected to ceiling mounted grilles via flexible duct work. … • The FCU shall include CHW and HHW coils 2.2.7 MEETING ROOMS GF AIR CONDITIONING FCU-M1 + FCU-M2 • The 2 meeting rooms shall each be individually air conditioned by systems comprising ceiling mounted FCU which supplies conditioned air to the spaces via thermally insulated sheet metal duct work connected to ceiling mounted grilles via flexible duct work … • The FCU shall include CHW and HHW coils 2.2.8 KITCHEN GF AIR CONDITIONING FCU-K • The kitchen shall be spot cooled by a system comprising ceiling mounted FCU which supplies conditioned air to the kitchen area via thermally insulated sheet metal duct work connected to ceiling mounted grilles via flexible duct work. … • The FCU shall include CHW and HHW coils” [633] For the reasons articulated in respect of the Mechanical Direction claim, the language of clause 1(u) of Annexure Part O required that the performance requirements in the tender drawings and specifications be met even though a VRF air conditioning system was being provided rather than a four-pipe chiller (heat recovery) type system. [634] The requirements in clauses 2.2.5 to 2.2.8 of the Specification are consistent with that interpretation. The system being capable of providing independent heating and cooling to specific areas on the ground floor is a performance requirement that the plaintiff had to meet under clause 1(u) of annexure Part O of the Contract. [635] The use of “conditioned” air in respect of each area is relevant to arriving at this construction. On the plaintiff’s case “unconditioned air” is used to moderate temperature. This is clearly not what was intended. [636] For the reasons explained earlier in these reasons, a consistent interpretation of the Contract is the proper construction of the Contract in respect of the ground floor air conditioning system. [637] On the proper construction of the Contract, the plaintiff was required to design and install an air conditioning system allowing mode control in each of the specified areas on the ground floor, with the ability to select temperatures utilising the heating or cooling system independently of other areas on the ground floor. -- 110 of 210 -- 111 [638] While not relevant to the construction task, the expert evidence of both Mr Dowden and Mr Lord is consistent with the interpretation of the requirements of clauses 2.2.5 to 2.2.8 as indicating a requirement for the ground floor to have independent heating and cooling in different areas.204 The defendant points to this evidence in support of its contention. The construction of the Contract is a question for the Court. However, the view expressed by the experts provides a degree of comfort that the construction arrived at is not inconsistent with a technical understanding of the Specification. [639] Having construed the Contract in respect of the requirements for the ground floor air conditioning system, it is necessary to consider whether the installed ground floor air conditioning system is defective. [640] The plaintiff installed a two-pipe Toshiba VRF system on the ground floor. The defendant contends that the air conditioning system is defective because it is unable to simultaneously heat and cool as required by the Contract. [641] As the air conditioning system installed on the ground floor did not comply with the Contractual requirements it is defective. The plaintiff is liable for the remedial action needed to rectify the defect. [642] Two different rectification methods are proposed: (a) Mr Dowden proposes changing the ground floor air conditioning system from the two-pipe system to a three-pipe system, similar to the work that was already undertaken in respect of the guest room air conditioning system. These modifications would enable independent heating and cooling as required by the Contract. (b) Mr Lord proposes that the number of condenser units installed in each area be increased (with a consequential increase in the number of power supplies and outdoor units). [643] The defendant submits that Mr Dowden’s proposal should be preferred as: (a) it is a tried and tested method of rectification of this defect; (b) it maximises utilisation of existing equipment (including fan coil units, controls and power supplies); (c) it maintains heating and cooling capacities of currently installed fan coil units; and (d) it utilises refrigerant pipework lengths within the manufacturers’ acceptable limits. [644] Mr Lord in cross-examination accepted that Mr Dowden’s proposal was not unreasonable and would provide the required independent heating and cooling capability.205 [645] The plaintiff submits that Mr Dowden’s proposal is “unreasonable, unnecessary and disproportionate”. The plaintiff relies on the evidence of Mr Lord in relation to the 204 EXP.001.001.0012 at pp 0157-0158; T8-33, L9-13; T8-85, L44-T8-89, L14. 205 T8-96, L27-36. -- 111 of 210 -- 112 cost and disruption of the proposal and that “[t]here is an easier way to achieve the same result”. [646] The plaintiff contends that Mr Lord’s methodology ought to be preferred. In this regard the plaintiff points to the evidence of Mr Lord that given the layout of the ground floor, even if less flexibility in the air conditioning is offered, it is not likely to have any significant effect.206 [647] The defendant opposes Mr Lord’s proposed rectification method and points to the following: (a) The proposal was incomplete and had not been fully costed. (b) Mr Lord did not inspect the Spring Hill Hotel (as Mr Dowden had done) leading to issues in the proposed design. (c) The proposal is a “patch-work” solution which “strays significantly from the Tender Drawings and Specification.” (d) The proposal does not actually provide for independent heating and cooling in all of the required areas. In particular, it does not provide for independent heating and cooling in each of the offices or individual meeting rooms.207 (e) The design would need to be modified but the extent of the modifications was not clear and the extra cost involved was also not known. [648] The rectification method proposed by Mr Dowden is reasonable and the resulting modified system will meet the contractual requirement for independent heating and cooling. Mr Dowden’s proposal should be adopted to rectify the defective work. [649] The quantum experts are essentially in agreement about the value of the work using Mr Dowden’s method, with a difference of under $2. In these circumstances, the slightly higher value of $151,203.09 of Mr Hardiman should be used. [650] Accordingly, the defendant is entitled to the amount of $151,203.09 for the rectification of Defect 2.1. Defect 2.2 – “Air conditioner – air commissioning” [651] Liability is in issue but the parties agree on quantum if liability is established. [652] The defendant submits that the test results issued by Testing and Maintenance Solutions (TMS) demonstrate that only one out of the four Air Handling Units (AHUs) tested on the ground floor achieved the air flow rate specified on the as-built drawings the plaintiff produced at the end of the Contract. The defendant submits that the low air flow rates leads to a reduction in air conditioning performance and poor temperature control. [653] The plaintiff denies that the defect as alleged exists. The plaintiff submits that clause 2.1.1.10 of the Specification does not require the AHUs to achieve any particular air flow rate. Rather, clause 2.1.1.10 requires only that there be “[t]esting and 206 T8–93, L7-26. 207 EXP.001.001.0512 at pp 0554-0555. See also T8-92, L39-T8-94, L2; T8-94, L42-T8-96, L2. -- 112 of 210 -- 113 commissioning of all installed systems to NEBB standards”, and that commissioning figures are provided for approval. The plaintiff further submits that testing and commissioning of the ground floor air conditioning system has been performed and that testing demonstrated that the systems have the capacity to provide sufficient heating and cooling to the spaces served. [654] Mr Dowden has proposed a method to rectify Defect 2.2 which was not addressed by Mr Lord. Mr Lord has not provided an alternate proposal for rectification. [655] If liability is established, the parties’ quantum experts agree that the cost to rectify Defect 2.2 is $2,400. [656] The defendant’s claim relies on: (a) Clause 2.2 of the Contract, in that the plaintiff was required to carry out and complete the design in accordance with the “Principal’s project requirements”, including that the Spring Hill Hotel be fit for purpose. (b) Clause 2.2(a)(i), in that the plaintiff was required to complete the work with due skill, care and diligence. (c) The requirement to meet the performance requirements of the tender drawings as required by clause 1(u) of Annexure Part O of the Contract. [657] The defendant points to the plaintiff’s as-built drawings which show the design air flows and also the test results conducted by TMS and submitted by the plaintiff. The defendant contends that the test results show that only one in four of the AHU’s tested on the ground floor achieved the air flow rate specified on the as-built drawings.208 [658] Further, clause 2.1.1.10 of the Specification provides that “[t]esting and commissioning of all installed systems to NEBB Standards and provision of commissioning figures for approval.” The defendant contends that the requirement of the NEBB Standard is that all air flows must be within 10 per cent of the design quantities, which has not been met here. [659] The defendant relies on the TMS test results showing that only one AHU achieved an air flow rate within 10 per cent of the specified air flow rate: AHU-PN at 94 per cent of its design rate.209 Further, AHU-PW achieved an air flow rate of only 53 per cent of its design rate.210 [660] The TMS test results show that none of the AHUs achieved their designed outside air flow rate, measured as between 19 to 48 per cent of the required design rate.211 [661] Mr Dowden’s evidence included: (a) Low supply air flow rates leads to a reduction in air conditioning performance, below specified requirements, leading to poor temperature control in various zones. (b) Low outside air flow rates will lead to poor indoor air quality. 208 EXP.001.001.0012 at p 0177. 209 EXP.001.001.0012 at p 0231. 210 EXP.001.001.0012 at pp 0232-0234. 211 EXP.001.001.0012 at p 0159 and pp 0231-0234. -- 113 of 210 -- 114 [662] It is in these circumstances, that the defendant submits that a mechanical system that cannot meet its design air flow rates is not fit for purpose, was not completed with due skill, care and diligence as required by the Contract and failed to meet the performance requirements contained in the tender drawings. [663] The defendant has established that the air flow rates do not meet the designed rates shown in the plaintiff’s own as-built drawings in accordance with the NEBB Standards. This is a sufficient basis for the claim to succeed on the basis of not being fit for purpose and not completed with due skill, care and diligence. Defect 2.2 has been established by the defendant. [664] It may be that the performance requirements contained in the tender drawings are a further basis, however, on the submissions and evidence identified in respect of this defect claim this is not clearly established. In the circumstances, it is not necessary to consider this further given the defect has been established. [665] Accordingly, the defendant is entitled to the cost of rectifying Defect 2.2 in the amount of $2,400. Defect 2.3 – “Substation air intake” [666] Liability is in issue but the parties have agreed on quantum if liability is established. [667] The defendant submits that tender drawing M04 demonstrates that the outside air intake is required to be connected to an outside air louvre.212 The defendant also submits that clause 3.1 of the Specification requires compliance with AS 1668.2. Clause 2.3 of AS 1668.2 requires air to be taken from outside the Spring Hill Hotel. The defendant submits that the outside air intake is located inside the loading dock behind the roller door.213 As a result, the outside air intake is sucking in pollutants from trucks in the loading dock. [668] The plaintiff denies that the work is defective. The plaintiff submits that there is no evidence that the requirements of tender drawing M04 were a performance requirement. The plaintiff further submits that the requirement to achieve outside air was achieved. The duct work was extended to sit behind the roller door. There is no practical difference between the design and the duct work built. The duct draws air from outside through the grilled roller door, just as it would through louvres. Accordingly, the ability to draw outside air is not affected. [669] Mr Dowden has proposed a method by which to rectify Defect 2.3 which was not addressed by Mr Lord. Mr Lord has not provided an alternate proposal for rectification. [670] If liability is established, the parties’ quantum experts agree that the proper cost to rectify Defect 2.3 is $9,833.64. 212 EXP.001.001.0012 at pp 0160 and 0217. 213 EXP.001.001.0012 at pp 0160 and 0444. -- 114 of 210 -- 115 [671] The evidence in respect of this claim includes the following: (a) Mr Dowden: “The substation outside air intake is installed in the loading dock behind the roller door. The substation outside air intake is not connected to an outside air grille, leading to intake of pollutants from trucks in the loading dock.”214 (b) Mr Lord: “… none of this is good practice, in my opinion … We shouldn’t have been drawing air from the garbage room through the loading dock. We shouldn’t be taking outside air from the loading dock to go into the substation. Neither of those outcomes is good practice, nor do I believe that they actually comply with the design criteria. Both the Thwaite design and the design – if this red thing is what’s installed on site, that too is not compliant … I don’t think you can say that the loading dock is an acceptable source of air quality.”215 [672] On the evidence, the defendant has established Defect 2.3 on each of the bases identified. Accordingly, the defendant is entitled to the amount of $9,833.64 in respect of Defect 2.3. Defect 2.4 – “Office – carpark ventilation noise” [673] Liability is in issue, but the parties agree on quantum, if liability is established. [674] The defendant submits that the carpark ventilation fan is creating excessive noise in the back of house office. In this way, the mechanical system is not fit for purpose. [675] The plaintiff denies that the defect as alleged exists.216 The plaintiff submits that the carpark exhaust fans are fit for purpose. Attenuators were installed and all systems have tested as compliant. The plaintiff further submits that the carpark exhaust fans are only run at maximum speed in an emergency or when the emergency system is tested approximately twice per year. In either case, the offices will be evacuated. Accordingly, there is no material impact on the back of house office. [676] Mr Dowden has proposed a method by which to rectify Defect 2.4 which was not addressed by Mr Lord. Mr Lord has not provided an alternate proposal for rectification. [677] If liability is established, the parties’ quantum experts agree that the proper cost to rectify Defect 2.4 is $3,606.35. 214 EXP.001.001.0012 at p 0160; EXP.001.001.0012 at p 0444. 215 T9-54, L45-T9-55, L8. 216 PLE.001.001.0143 at p 0083. -- 115 of 210 -- 116 [678] The defendant relies on the evidence from Mr Dowden in respect of this claim which includes: “The back of house office is located above the carpark exhaust fan location and the carpark exhaust duct passes over the office in the ceiling space. Excessive noise is experienced in the office when the carpark exhaust fans are run at maximum speed. Attenuators have been installed in an attempt to rectify previously notified defects, however excessive noise is still experienced in the office area at times when the fans run at maximum speed”.217 [679] The plaintiff points to there being no evidence of actual noise levels or evaluation of the noise levels by any particular standard. In this respect, the plaintiff contends that the defect claim is unsubstantiated. [680] On the basis of the evidence identified and relied upon in respect of this claim, this defect has not been established. Accordingly, the defendant is not entitled to the rectification costs claim in respect of Defect 2.4. Defect 4.2 – “Guest room & maids room exhausts” [681] Liability and quantum are in issue in respect of this claim. [682] The defendant submits that clause 3.2 of the Specification requires compliance with AS 1668.2. AS 1668.2 requires that bathroom and toilet exhausts located in hotels achieve an air flow rate of 25 litres per second per room. The defendant also submits that the same requirement is specified in tender drawing M09. Tender drawing M06 requires that each maid room exhaust achieve an air flow rate of 100 litres per second per room. Neither the Specification nor AS 1668.2 provides the air flow rates for the maid rooms. [683] The defendant submits that the test commissioned by Mr Dowden and conducted by Mr Visser demonstrated that the guest room toilet exhausts and maid room exhausts do not achieve the specified air flow rates.218 [684] The plaintiff denies that the alleged defect constitutes defective work.219 The plaintiff submits that earlier tests obtained from Remtech and TMS indicate that air flow results were satisfactory. The plaintiff submits that there is no cogent evidence that the earlier results were not accurate. The plaintiff further submits that the results obtained by Mr Visser are not accurate, as Mr Visser allowed insufficient time before taking a reading. [685] Mr Dowden’s rectification method is to gain access to the toilet exhaust risers and have each one sealed (if necessary) by a qualified sheet metal worker.220 Mr Lord’s proposed rectification method is to spray an atomised sealant “Aeroseal14” into the mechanical system. The sealant can only be applied by one company known as Aeroseal.221 217 EXP.001.001.0012 at p 0161. 218 EXP.001.001.0012 at p 0204. 219 PLE.001.001.0143 at pp 0083-4. 220 EXP.001.001.0512 at p 556. 221 EXP.001001.0512 at pp 557-8. -- 116 of 210 -- 117 [686] The parties’ quantum experts differ as to the proper cost for rectifying Defect 4.2. [687] In relation to Mr Dowden’s proposed rectification methodology: (a) Mr Hardiman calculated the proper cost to be $664,306.69; (b) Mr Watson calculated the proper cost to be $376,727.68. [688] The difference between the proper cost calculated by the parties’ quantum experts is $287,579.01. The difference relates to the number of walls that need to be demolished to seal the risers and the number of man hours to conduct this work. Mr Hardiman gave evidence that 226 walls would need to be removed and eight man hours would be needed per room.222 Mr Watson gave evidence that 143 walls would need to be removed and two man hours would be needed per guest room and a further eight hours per riser in the maid rooms.223 [689] In relation to the rectification methodology proposed by Mr Lord, the parties’ quantum experts agree that the proper cost to rectify Defect 4.2 is $56,980. [690] The defendant relies on clause 1(u) of Annexure Part O of the Contract that the alternative proposal for the mechanical services system be installed on the basis that it meets “the performance requirement of the tender drawings and specification”. Consistent with the reasoning in respect of the Mechanical Direction claim, the specific requirements set out in the tender drawings and the Specification were to be met by the plaintiff. [691] This would include the air flow rates for the guest room and maid rooms specified in the tender drawings. Further, clause 3.2 of the Specification provides that the mechanical services system must comply with certain Australian Standards, including AS 1668.2 in respect of mechanical ventilation for acceptable indoor-air quality.224 [692] In respect of the guest rooms, Appendix B of AS 1668.2 and tender drawing M09 (Mechanical Services Typical Guest Room Layout)225 both require an air flow rate of 25 litres per second per room.226 [693] In respect of the maid rooms, the required air flow is not specified in the Australian Standard, but is shown on the tender drawings. Tender drawing M06 (Mechanical Services Level 2-11 Layout)227 requires that each maid room exhaust is to achieve an air flow rate of 100 litres per second per room.228 [694] Consistent with the reasoning in respect of the Mechanical Direction claim, these are performance requirements of the tender drawings and the Specification and the plaintiff was required to design and install a system that met these requirements. 222 EXP.001.001.2425 at p 2430; PRO.071.016.0004. 223 EXP.001.001.2425 at p 2430. 224 BUI.001.002.34972 at p 031. 225 PRO.071.015.0001 at p 0007. 226 PRO.071.015.0001 at p 0006. 227 PRO.071.015.0001 at p 0008. 228 There is some evidence that this was later modified to 70 litres per second per room. BUI.001.001.24769 at p 011. -- 117 of 210 -- 118 [695] The defendant relies on the testing undertaken by Mr Visser, who Mr Dowden engaged to undertake independent air flow testing, to establish that the requirements were not met. Mr Visser was cross-examined in respect of his testing approach and it was put to him that his test results were not accurate as the tests were undertaken too quickly. [696] Mr Visser’s evidence was credible, logical and methodical and he answered all questions put to him in a professional manner. He is highly experienced in undertaking tests of this nature and is certified and accredited in the area. I accept the evidence of Mr Visser as to his testing methodology and the accuracy of his test results. [697] The plaintiff seeks to rely on the TMS test results but no witness was called to explain the test results or the basis on which the tests were undertaken. There is considerable uncertainty as to what was tested by TMS. In these circumstances, the TMS test results cannot be used in direct comparison to the evidence of the test results given by Mr Visser. [698] The tests results of Mr Visser show:229 (a) 48 guest room toilet exhausts were tested,230 being a sample of 21 per cent. Only five of the tests achieved a design air flow rate within 10 per cent of the required 25 litres per second per room. Consequently, on average 90 per cent of the guest room toilet exhausts did not achieve the required air flow rates. (b) 12 maid room exhausts were tested, being 100 per cent. None of the maid room exhausts achieved a design air flow rate within 10 per cent of the required 100 litres per second per room or 70 litres per second per room. [699] The test results clearly establish that the air flow rates in the guest rooms and the maid rooms do not comply with the requirements of the tender drawings and the Specification (including AS 1668.2). [700] On the evidence, the defendant has established Defect 4.2. It is then necessary to consider quantum. [701] Two different rectification methods are identified. Further, there is a considerable dispute as to the proper costs of the method proposed by Mr Dowden. [702] The defendant contends that the Court should accept Mr Dowden’s proposal for rectification as it is a “tried and tested method for the rectification of this kind of defect” and will avoid any risk to the fire dampers located in the duct work. [703] The plaintiff contends that Mr Dowden’s proposal is “unreasonable, unnecessary and disproportionate given the available alternative methodology”. Further, the plaintiff submits that the required work for Mr Dowden’s proposal is “invasive and disruptive”. 229 Test results commence at EXP.001.001.0012 at p 0204. See also defendant’s written closing submissions at [58] for summary. 230 Of the 226 guest rooms. -- 118 of 210 -- 119 [704] Mr Dowden’s rectification proposal requires the demolition and reinstatement of the bathroom walls of each of the guest rooms. This is required to provide access to the toilet exhaust risers to enable each one to be resealed. [705] In contrast, Mr Lord’s rectification proposal is for the atomised sealant “Aeroseal 14” to be applied to the exhaust and supply air risers. Mr Lord’s evidence is that this is a “conventional method” and “tried and tested”. Mr Lord also is of the opinion that it is a simpler and cheaper proposal and also deals with both air supply and air extraction.231 [706] There is considerable disagreement in relation to the second proposal, including: (a) how long the Aeroseal coating would last; (b) whether it met the standard specified in the tender drawings and the Specification; and (c) the risk of damage or interference with fire dampers in the duct work. [707] The plaintiff submits that Mr Lord has addressed all of these concerns in his evidence and the second rectification proposal should be preferred over Mr Dowden’s proposal. [708] Conversely, the defendant submits that while Mr Dowden accepted the Aeroseal method may contribute to satisfactory air flow, the other concerns remain and as a result Mr Dowden’s rectification proposal should be preferred. [709] The evidence before the Court does not assist in resolving all of these areas of disagreement. [710] I have accepted the evidence of Mr Dowden as to the defective performance of the guest rooms and maid room exhausts. The rectification proposal identified by Mr Dowden includes: “The walls and ceilings should be removed to gain access to toilet exhaust riser … Toilet exhaust riser ducts should be inspected internally to assist in identifying leakage paths and check cleanliness. Any debris present should be removed. Toilet exhaust riser ducts should be sealed to reduce leakage … The air systems should be re- balanced, adjustments made to the heat exchange units and test figures submitted … The walls and ceilings should be re-instated …”232 [711] Considering all of the evidence in respect of this claim, the rectification proposal of Mr Dowden addresses the defects in the work undertaken by the plaintiff and maintains as close as possible what would have been the original work if the contractual requirements were carried out in the first place. Accordingly, I accept Mr Dowden’s proposed solution in respect of the rectification work. [712] In relation to quantum, the cross-examination of Mr Hardiman highlighted that there is considerable uncertainty as to how many walls need to be demolished and 231 EXP.001.001.0450 at pp 0475-6. 232 EXP.001.001.2279 at p 2292. -- 119 of 210 -- 120 reinstated and the labour required to undertake the work. The calculations used by Mr Watson assess what work needs to be undertaken for the necessary access and also seek to minimise unnecessary work which would not assist in achieving the rectification of the defect. On balance, I prefer the assessment of costs of Mr Watson in respect of Mr Dowden’s rectification proposal. [713] In these circumstances, I consider that the defendant is entitled to the costs of the rectification of Defect 4.2, which should be assessed in accordance with the costing undertaken by Mr Watson. Defect 4.3 – “Level 1 to 12 outside air supply” [714] Liability is in issue but the parties agree on quantum if liability is established. [715] The defendant submits that tender drawing M10 requires that the outside air flow rate on each floor is 50 litres per second.233 It is unclear what air flow rates are being achieved, as the level one to 12 outside air supply system has been configured in a way which does not allow for the air flow rates to be measured at each floor.234 The defendant submits that the air flow rates are a performance requirement and the ability to measure air flow rates should be held to form part of that performance requirement. [716] The defendant further submits that section 12 of the Specification requires commissioning of the mechanical system. This requirement cannot be met, as the installed system cannot be commissioned. Once Defect 4.3 is rectified, test results will need to be submitted in accordance with clause 2.1.1.10 of the Specification which requires testing and commissioning to NEBB Standards.235 [717] The plaintiff denies that the defect as alleged exists.236 The plaintiff submits that the ability to measure air flow rates at each floor is not a requirement of the Contract and it is not necessary to test air flow rates at each floor to obtain adequate measurements using the NEBB guidelines. The plaintiff submits that it complied with the Contract by causing the outside air supply flow to be tested in accordance with the NEBB standards at each HRV unit and at the top of each supply riser. [718] Mr Dowden proposes that Defect 4.3 should be rectified by installing additional duct work to facilitate air flow measurements from the supply air dampers. This involves removing parts of the ceiling and conducting reinstatement work once the work is complete.237 Mr Lord proposes that Defect 4.3 may be rectified by measuring the riser air flow at a point between each riser take-off and, by deduction, identifying how much outside air has been delivered.238 [719] The parties’ quantum experts agree that the proper cost to rectify Defect 4.3 is: (a) $760 to test and balance the system; and (b) $40,857.90 to install the additional duct work (including associated work) to facilitate air flow measurement from the supply air dampers. 233 BUI.001.002.34983; EXP.001.001.0512 at p 0545. 234 EXP.001.001.0163. 235 EXP.001.001.0162. 236 PLE.001.001.0143 at pp 0084-5. 237 EXP.001.001.0012 at p 0163. 238 EXP.001.001.0512 at pp 0559-60. -- 120 of 210 -- 121 [720] Consistent with the reasoning in respect of the Mechanical Direction claim and the other defect claims in respect of air flow rates, the air flow rate specified in the tender drawing is a performance requirement. Further, the ability to measure air flow is an inherent requirement in the overall system design and also to meet the commissioning requirements in section 12 of the Specification. [721] As identified by Mr Dowden, the tender drawings and the Specification require the mechanical services system to be “balanced and commissioned to ensure satisfactory performance”.239 It is necessary therefore to be able to measure the air flow rates on each guest room floor. This would also be consistent with the obligation for “due skill, care and diligence” pursuant to clause 2.2(a)(i) and being fit for purpose. [722] In these circumstances, the inability to measure air flow rates for each floor is a defect. Once there is the ability to undertake measurements then compliance with the specified air flow rates needs to be considered. [723] Mr Lord proposes that the defect can be rectified by measuring the riser air flow at a point between each riser take-off and then deducing how much outside air has been delivered. Mr Dowden’s evidence is that this proposal is not feasible and in any event would require significant wall demolition and reinstatement to achieve the necessary access. [724] Mr Dowden’s proposal is for the defect to be rectified by installing additional duct work to facilitate air flow measurements. This requires removal of parts of the ceiling and reinstatement work once the work is completed. This work has been costed by the quantum experts. [725] I accept the defendant’s submission that Mr Dowden’s proposal should be preferred as Mr Dowden attended site and also considered the feasibility of both methodologies. Further, any demolition and reinstatement work that may be required under Mr Lord’s proposal has not been fully considered nor costed. [726] In the circumstances, the defendant is entitled to an assessment of the rectification work in accordance with Mr Dowden’s proposed rectification of the defect in the amount of the agreed quantum, being $760 to test and balance the system and $40,857.90 for the additional duct work. Defect 4.4 – “Guest room toilet exhaust risers – fire rating” [727] Senior Counsel for the defendant indicated during closing oral submissions that this defect claim was not being pressed.240 Defect 4.5 – “Guest room fan coil unit – interface with occupancy controls” [728] Liability and quantum are in issue. [729] The defendant submits that clause 2.2.21 of the Specification requires that “[t]he guest rooms shall have standalone electronic controls to operate each FCU serving the room and shall be interfaced with the guest room energy management system (turns FCU ON-OFF).” The energy management system is referred to as the Vintech 239 EXP.001.001.0512 at p 0545. 240 T14-54, L35-40. -- 121 of 210 -- 122 energy management system. The purpose of the system is to automatically turn the air conditioning off when a guest leaves the room and automatically turn the air conditioning on when they enter or remain in the room. The defendant submits that the mechanical system’s FCU does not properly interface with the Vintech energy management system. As a result, the Vintech energy management system can turn the FCU system off but it cannot turn it back on after inactivity. [730] The plaintiff denies that the defect as alleged exists. The plaintiff submits that the defendant directed the plaintiff to install the Vintech energy management system.241 There is no identified defect in the installation work carried out by the plaintiff, or in any of the other equipment installed by the plaintiff in respect of the Vintech energy management system. The plaintiff submits that there is no evidence that the Vintech energy management system operates in any way other than how the system is designed to operate. [731] Mr Dowden has proposed that the guest room FCU and Toshiba controls interface to the Vintech energy management system should be modified to enable the air conditioning system to automatically turn on and off. Before this work can be carried out, a 600mm x 900mm piece of the ceiling in each guest room will need to be removed, and then reinstated after the system has been modified.242 Mr Lord did not propose an alternate methodology. [732] The parties’ quantum experts disagree as to the proper cost to rectify Defect 4.5: (a) Mr Hardiman assessed the proper cost to be $95,425.11; and (b) Mr Watson assessed the proper cost to be $71,651.60. [733] The difference between the proper cost calculated by the parties’ quantum experts is $23,773.51. The reason for the difference is that Mr Hardiman allowed 1.5 hours per room for a technician to modify the controls interface whilst Mr Watson allowed 0.5 hours per room. [734] The defendant describes the defect in Item Nine of Annexure Six to the Counterclaim as follows: “The interface with the energy management (Vintech) system has the ability to turn the guestroom fan coil units off, but does not have the ability to turn them on, contrary to this specified requirements.” [735] Clause 2.2.21 of the Specification states: “The guest rooms shall have standalone electronic controls to operate each FCU serving the room and shall be interfaced with the guest room energy management system (turns FCU ON-OFF)”. [736] The difficulty with this defect claim is that while it is clear that the air conditioning may turn off automatically but not restart when a guest moves within their room, the cause of the issue is not clearly established on the evidence. 241 WIT.001.004.0001 Witness Statement of Thomas Cook at p 0083; T7-76, L11-12. 242 EXP.001.001.0512 at pp 0560-1. -- 122 of 210 -- 123 [737] The defendant contends that it is the interface between the mechanical system and the Vintech energy management system which is the defect. Further the defendant points to the evidence of Mr Dowden that “adjustments” by Toshiba and Vintech have previously been made and this resolved the issue.243 [738] However, there is no evidence of what the plaintiff is alleged to have done or not done to cause this problem. [739] The plaintiff installed the Vintech energy management system as directed. There is no evidence that the Vintech energy management system operates other than as it was designed to do. There is no evidence that the installation by the plaintiff was faulty. [740] The difficulty is highlighted by a lack of evidence as to precisely what work a technician would do to rectify the issue. [741] The lack of precision about identifying the actual cause of the issue and the “adjustments” that need to be made to rectify the issue results in there being insufficient evidence to establish this as a defect. Defect 4.6 – “Guest floor lift lobbies – moisture damage to ceilings and dripping air conditioning grills” [742] Liability and quantum are agreed. [743] The defendant submits that the mechanical system is leaking condensation from the air conditioning grills causing moisture damage to plasterboard ceilings. A mechanical system that leaks condensation and causes damage to plasterboard ceilings is not fit for purpose. The defendant further submits that this is a breach of clause 2.2(a)(i) of the Contract. [744] The plaintiff admits the existence of the defect alleged. [745] Mr Dowden has proposed that the roof top heat recovery units be commissioned and controlled to ensure that the supply air is dehumidified and sufficiently cooled to prevent condensation.244 Mr Lord did not propose an alternate rectification methodology. [746] The parties’ quantum experts agree that the proper cost to rectify Defect 4.6 is $5,130. [747] The defendant is entitled to the amount of $5,130 in respect of Defect 4.6. Defect 5.1 – “HX-1, HX-2 filter installation” [748] Liability is in issue but the parties have agreed on quantum, if liability is established. [749] The defendant submits that clause 4.5.1 of the Specification requires that service access to change the filters be from the dirty side of the filters. Access to the filters is poor and the filters are removed by sliding out rather than by removal from the dirty side.245 243 EXP.001.001.0512 at pp 0546-7. 244 EXP.001.001.0012 at p 0165. 245 EXP.001.001.0012 at p 0166. -- 123 of 210 -- 124 [750] The plaintiff denies that the defect as alleged exists.246 The plaintiff submits that full access to the filters was enabled by duct work modifications to the filter plenums and construction of a platform ladder for service access to HX-1. The filters were replaced and upgraded and gauges were fitted for pressure drop readings.247 The plaintiff submits all rectification work has been completed and access is adequate for the proper maintenance of the filters. [751] Mr Dowden has proposed that Defect 5.1 may be rectified by modifying the filters so that access can be gained from the dirty side of the filters. Mr Lord has not provided an alternate proposal for rectification. [752] If liability is established, the parties’ quantum experts agree that the proper cost to rectify Defect 5.1 is $3,232.95. [753] Senior Counsel for the defendant in closing oral submissions recognised the difficulty with this claim arising out of the rectification work that the plaintiff has already undertaken.248 Whilst Mr Dowden observed the problem with the access to the filter, there is no clear evidence on whether the work done, including the platform ladder, fully addresses the concerns.249 [754] Mr Dowden’s report is based on inspections in October 2017 and March 2018.250 In the report to the Superintendent dated 28 June 2018 the plaintiff lists the rectification work as completed. [755] Given the rectification work that has already been completed by the plaintiff to enable access to HX-1251 and there being no evidence that this has not adequately addressed access for the maintenance of the filters, this defect has not been established. Accordingly, the defendant is not entitled to the costs claimed in respect of the defect rectification work for Defect 5.1. Defect 5.2 – “Roof mounted duct work – water pooling” [756] Liability is in issue but the parties agree on quantum, if liability is established. [757] The defendant submits that clause 2.2.12 of the Specification requires duct work exposed to the weather to be constructed with a graded top surface to prevent pooling of water. The ducts exposed on the roof have not been constructed with graded top surfaces. As a result, water is pooling on the duct work and rust stains are forming. [758] The plaintiff submits that clause 2.2.12 of the Specification relates to the specific system designed by Thwaite and is not a performance requirement of the plaintiff’s alternative proposal. Accordingly, there has been no failure to comply with the Contract. 246 PLE.001.001.0143 at p 0088. 247 BUI.300.001.0010 at p 16. 248 T14-55, L17-23. 249 Whilst there are questions about the filters in the context of the testing undertaken by Mr Visser, the rectification work and access does not appear to have been put directly to him in cross-examination. 250 EXP.001.001.0012 at p 0019. 251 BUI.300.001.0009; BUI.300.001.0010 at p 0015. -- 124 of 210 -- 125 [759] Mr Dowden proposes that Defect 5.2 may be rectified by constructing a graded cover. Mr Lord has not provided an alternate proposal for rectification. [760] If liability is established, the parties’ quantum experts agree that the proper cost to rectify Defect 5.2 is $0.00 on the basis that it is included in the quantum for other defects. [761] Clause 2.2.12 of the Specification relevantly states: “All duct work on the roof shall be internal acoustic type and cross broken so that no water is able to accumulate on the flat surfaces. All flanged joints and the flexible discharge joints shall be covered in sheet metal to stop water pooling and to provide UV protection.” [762] Consistent with the reasoning in respect of the Mechanical Direction claim, clause 1(u) of Annexure Part O required the plaintiff to install the alternative proposal for the mechanical system on the basis that the performance requirement of the tender drawings and the Specification were met. The requirement in clause 2.2.12 was a requirement that the plaintiff needed to meet. [763] The evidence of Mr Dowden is that the ducts on the roof have not been constructed with graded top surfaces and as a result water is pooling and rust stains are forming. The evidence establishes that is defective work on the basis that the requirement of the Specification has not been met, it is not fit for purpose and/or it has not been undertaken with due skill, care and attention. [764] However, there is no additional loss caused by this defect and accordingly the defendant is not entitled to any additional cost specifically in respect of this defect. Defect 5.3 – “Insulation on roof duct work” [765] Liability is in issue but the parties agree on quantum if liability is established. [766] The defendant submits that clause 2.2.12 of the Specification requires all duct work on the roof to be internal acoustic type,252 and that tender drawing M08 requires the insulation to be 75mm thick.253 Internal acoustic type duct work refers to sheet metal duct work with sound attenuating insulation contained on the inside. The defendant submits that 75mm of internal acoustic type duct work has not been provided for in relation to the supply air duct work from HX-1 and HX-2 to the risers. [767] The plaintiff denies that the work is defective.254 The plaintiff submits that the Contract, including the alternative proposal, does not require all insulation to be installed inside the duct. To the extent that the Specification sets out a performance requirement, there is no evidence that the relevant performance relates to anything other than noise attenuation. The method by which noise attenuation is achieved is not a requirement of the Contract. The plaintiff submits that, in any event, the insulation to the duct work includes internal insulation. The insulation fulfils its purpose of noise attenuation and is not defective. 252 BUI.001.002.34972 at p 023. 253 BUI.001.002.34981. 254 PLE.001.001.0143 at p 0089. -- 125 of 210 -- 126 [768] Mr Dowden has proposed that Defect 5.3 be rectified by replacing the non-compliant roof ducts with 75mm internal acoustic duct work. Mr Lord agreed with Mr Dowden’s proposed methodology. [769] If liability is established, the parties’ quantum experts agree that the proper cost to rectify Defect 5.3 is $14,757.64. [770] The defendant points to clause 2.2.12 of the Specification for the requirement that “[a]ll duct work on the roof shall be internal acoustic type”. Further the defendant refers to tender drawing M08 for the requirement that the insulation be 75mm thick. [771] The evidence of Mr Dowden is that the insulation installed on the duct work is 50mm external insulation.255 Mr Lord accepted that the insulation installed was not internal acoustic insulation.256 [772] The plaintiff denies that the work is defective and makes submissions that the insulation installed is adequate to achieve noise attenuation. [773] However, this fails to address the concerns raised by the defendant in respect of the longevity of the external installation. Internal acoustic type insulation has “significantly better longevity” due to the protection from the elements. This is evident from the photographs taken by Mr Dowden, with the external insulation already showing damage from exposure to weather.257 [774] The duct work on the roof is non-compliant in that it is not internal acoustic type with a minimum thickness of 75mm. Consistent with the reasoning in respect of the Mechanical Direction claim, clause 1(u) of Annexure Part O of the Contract required that the mechanical services system meet the performance requirement of the tender drawings and the Specification. This work does not and is defective. [775] Accordingly, the defendant is entitled to the cost of replacing the non-compliant roof ducts with 75mm internal acoustic duct work. This cost is agreed in the amount of $14,757.64. Defect 5.4 – “HX-1, HX-2 condensation traps omitted” [776] Liability is in issue but the parties agree on quantum if liability is established. [777] The defendant submits that clause 3.2 of the Specification requires compliance with AS 3666 – “Air handling and water systems of buildings – Microbial control”. Clause 2.9.1 of AS 3666 requires drain lines to be trapped to seal against air flow. The defendant submits that heat recovery units HX-1 and HX-2 do not have condensate traps installed to allow condensate to drain. As a result, there is a retention of water in the internal drain trays and water overflow into the compressor, resulting in microbial growth inside the machine.258 255 EXP.001.001.0012 at p 0179. 256 T9-87, L11-29. 257 EXP.001.001.0012 at p 0167; EXP.001.001.0512 at p 0549; EXP.001.001.0012 at pp 0445-0446. 258 EXP.001.001.0012 at pp 0167-8. -- 126 of 210 -- 127 [778] The plaintiff does not admit this allegation. The plaintiff submits that none of the plaintiff’s witnesses were cross-examined about this issue and the Court should not accept on the balance of probabilities that there is a defect. [779] Mr Dowden has proposed that Defect 5.4 be rectified by installing condensate traps with graded pipework for both heat recovery units.259 Mr Lord has not provided an alternate proposal for rectification. [780] If liability is established, the parties’ quantum experts agree that the proper cost to rectify Defect 5.4 is $767.90. [781] Clause 3.2 of the Specification identifies the requirement for compliance with AS 3666. Equally design to meet this requirement would be required by clause 2.2(a)(i) of the Contract, requiring the work to be undertaken with due skill, care and diligence, as well as clause 2.2 to be fit for purpose. [782] Mr Dowden gave evidence that he observed that there were no condensate traps installed on HX-1 and HX-2 to allow condensation to drain. He also gave evidence that this is resulting in retention of water in the internal drain trays and water into the compressor, resulting in microbial growth inside the machine.260 [783] The evidence establishes that the requirement relates to the quality of air circulated throughout the Spring Hill Hotel and non-compliance with the requirements results in the system not being fit for purpose. [784] In these circumstances, the defect has been established and the defendant is entitled to the cost to rectify the defective work being $767.90. Defect 5.5 – “Water in HX-1 isolating switch” [785] Liability is in issue but the parties agree on quantum, if liability is established. [786] The defendant submits that clause 3.2 of the Specification requires compliance with AS 3000 “SAA Wiring Rules”. Clause 1.5.4.4 of AS 3000 requires that electrical equipment be protected by enclosures to suit the environmental conditions.261 The defendant submits that Mr Dowden observed water running out of the electrical power isolating switch on the exterior of the HX-1 heat recovery unit on the roof. [787] The plaintiff does not admit this allegation. The plaintiff submits that none of the plaintiff’s witnesses were cross-examined about this issue and the Court should not accept on the balance of probabilities that there is a defect. [788] Mr Dowden proposes that Defect 5.5 be rectified by replacing the isolating switch, junction boxes, switch housing and conduits before sealing these items to prevent the ingress of water. Mr Lord has not provided an alternate proposal for rectification. [789] If liability is established, the parties’ quantum experts agree that the proper cost to rectify Defect 5.5 is $1,298.00. 259 EXP.001.001.0012 at pp 0167-8. 260 EXP.001.001.0012 at pp 0167-0168. 261 EXP.001.001.0012 at p 0168. -- 127 of 210 -- 128 [790] Based on the evidence of Mr Dowden and the requirement to comply with AS 3000, there is sufficient evidence to be satisfied that the work undertaken by the plaintiff is not fit for purpose and is defective. [791] In the circumstances, the defendant is entitled to the cost to rectify this defect in the amount of $1,298.00. Defect 5.6 – “HX-1, HX-2 filter gauges defective” [792] Liability is in issue but the parties agree on quantum, if liability is established. [793] The defendant submits that clause 4.5.1 of the Specification requires pressure gauges to be installed across air filters, adjusted, and marked ‘Filter Dirty – Replace’ at the appropriate pressure. The defendant submits that the gauges are not reading correctly and are not correctly zeroed.262 [794] The plaintiff does not admit this allegation. The plaintiff submits that there is no cogent evidence adduced by the defendant in support of Defect 5.6. Specifically, Mr Dowden did not give any evidence of checks undertaken by him of the gauges and did not provide any explanation of the measurements recorded by TMS. Mr Visser did not provide any such evidence. The plaintiff submits that the Court should not accept on the balance of probabilities that there is a defect. [795] Mr Dowden proposes that Defect 5.6 be rectified by having a controls technician calibrate and zero the gauges and check for compliance with the manufacturer’s recommendations. Mr Lord has not provided an alternate proposal for rectification. [796] If liability is established, the parties’ quantum experts agree that the proper cost to rectify Defect 5.6 is $760.00. [797] There is evidence from Mr Dowden that the pressure tests conducted by Mr Visser demonstrate that the gauges were not reading correctly and Mr Dowden also personally observed that the gauges were not correctly zeroed.263 [798] Further, the test results also show a significant difference between the measured results and the readings from the gauges. Only one gauge read correctly.264 [799] It is in these circumstances that the defendant submits that gauges which do not accurately record the status of the filters are not fit for purpose. Additionally, the defendant contends that accurate gauges are a performance requirement as they are required to indicate when filters need to be checked and changed. [800] There is also evidence from Mr Lord in cross-examination, including: (a) “I think if you look at the gauges, the gauges are all over the place and – and, potentially, damaged or wrong, or full of dirt.” (b) “… there’s something clearly wrong with the gauge”. 262 EXP.001.001.0012 at pp 0168-9. 263 EXP.001.001.0012 at p 0168. 264 HX-2 (Toilet Exhaust Filter). EXP.001.001.0012 at p 0205. -- 128 of 210 -- 129 (c) “But can I suggest to you those [sic] – the readings from the gauges there indicate to you that they are not operating properly?—The … gauge readings make no sense, yes. I would agree with that assertion.” (d) “I would perhaps even go stronger, that they are operating defectively”. (e) … I think the gauge readings there make no sense; I think the gauges there are defective”.265 [801] There is sufficient evidence to establish that there is a defect in respect of the gauges and the rectification work proposed by Mr Dowden is reasonable. [802] Accordingly, the defendant has established an entitlement to the cost of rectifying Defect 5.6 in the amount of $760.00. Defect 5.7 – “HX-2 – water pooling in outside air duct” [803] Liability is in issue but the parties agree on quantum, if liability is established. [804] The defendant submits that clause 6.5.1 of the Specification requires “[d]ucts exposed to weather to be constructed with graded top surface to prevent pooling of water”.266 The defendant submits that implied in clause 6.5.1 is a requirement that water does not enter the duct. The defendant submits that Mr Dowden observed water pooling in the HX-2 heat recovery outside air intake duct. The presence of water in the duct will lead to increased humidity in the air intake, exacerbating problems with excess moisture in the corridors.267 [805] The plaintiff does not admit this allegation. The plaintiff submits that it inspected the roof duct work in a heavy rain event in March 2018. Most of the duct had no pooling of water and the plaintiff installed graded sheet metal capping to the sections of affected duct work. The plaintiff submits that the Court should not accept on the balance of probabilities that there is a defect. [806] Mr Dowden proposes that Defect 5.7 be rectified by weatherproofing the outside air intake duct to prevent the ingress of water and installing trapped drainage provisions at the bottom of the duct to ensure that any water is drained from the duct.268 Mr Lord has not provided an alternate proposal for rectification. [807] If liability is established, the parties’ quantum experts agree that the proper cost to rectify Defect 5.7 is $1,298.00. [808] The defendant in oral submissions clarified that there may be a misunderstanding by the plaintiff in respect of this claim. The basis of the defendant’s claim is that there is water inside the duct, not pooling on the outside of the duct.269 265 T9-42, L19–T9-43, L11. 266 BUI.001.002.34972 at p 053. 267 EXP.001.001.0012 at p 0169. 268 EXP.001.001.0012 at p 0169. 269 T14-56, L27-30. -- 129 of 210 -- 130 [809] The evidence of Mr Dowden is as follows: “Water was observed pooling in the HX-2 outside air intake duct, to a depth of about 20mm. This indicates that rainwater is making its way into the duct. The presence of rainwater in the duct will lead to increased humidity in the air intake, exasperating problems with excess moisture in the corridors ...”270 [810] The design and installation of the outside air duct allowing water to enter and pool in the duct is clearly in breach of the requirement that it be fit for purpose and designed with due skill, care and diligence. [811] The evidence establishes the defect and accordingly, the defendant is entitled to the cost of rectifying the defect in the amount of $1,298.00. Defect 6.1 – “As installed drawings (O&M manuals)” [812] Liability and quantum are in issue. [813] The defendant submits that clause 12.7 of the Specification requires the plaintiff to supply to the defendant post contract drawings that accurately represent the actual installations.271 The defendant submits that as-built drawings M07 Mechanical Services Levels 2-10 Typical Layout and M09 Mechanical Services Roof Layout contain a number of inaccuracies.272 [814] The plaintiff denies that the work is defective.273 The plaintiff submits that the as- installed drawings are true and accurate representations of the actual installations. Alternatively, to the extent that any information is omitted from the drawings, the plaintiff submits the inaccuracies are minor and the drawings comply or substantially comply with the Contract. [815] Mr Dowden proposed that Defect 6.1 be rectified by employing a draftsperson to accurately depict the duct work configuration and equipment installed on site in the as-built drawings. Mr Lord has not provided an alternate proposal for rectification. [816] The parties’ quantum experts disagree as to the proper cost to rectify Defect 6.1: (a) Mr Hardiman assessed the proper cost to be $12,000.00; and (b) Mr Watson assessed the proper cost to be $1,200.00. [817] The difference between the proper cost calculated by the parties’ quantum experts is $10,800.00. The reason for the difference is that Mr Hardiman based his calculation on the cost of a technical consultant for 10 days whilst Mr Watson based his calculation on the cost of a technical consultant for one day. 270 EXP.001.001.0012 at p 0169. 271 BUI.001.002.34972 at p 096. 272 EXP.001.001.0012 at pp 169-70. 273 PLE.001.001.0143 at p 0091. -- 130 of 210 -- 131 [818] The difficulty with this claim is that Mr Dowden’s evidence relates to inaccuracies in two drawings but the claim is wider than that. Mr Dowden’s evidence is as follows: “The Levels 1-12 typical floor drawing … does not show the correct location and configuration of the toilet exhaust fire dampers, toilet exhaust grilles, outside air ducts to guestrooms. Similarly, the Roof drawing … shows the incorrect location of HX- 1, does not show extended air intake ducts to HX-1 and HX-2, and does not show installed configuration of KEF-1, SPF1A and SPF 1B”.274 [819] Clearly the inaccurate drawings would not be fit for purpose and should be corrected. [820] To the extent that the claim is wider than the identified drawings, there is not sufficient evidence to establish the defect. [821] Mr Watson has costed the time it would take to rectify the omissions identified by Mr Dowden. [822] Accordingly, the defendant is entitled to the cost of rectifying as-built drawings M07 and M09 in the amount of $1,200.00. Defect 6.2 – “O&M manual content” [823] Liability and quantum are in issue. [824] The defendant submits that clause 12.8 of the Specification lists the requirements for the Operating and Maintenance (O&M) manuals, including “satisfactory performance tests”.275 The defendant submits that the O&M manuals do not contain the requisite commissioning data for guest room FCUs, ground floor FCUs, guest room toilet exhaust system, guest room and levels one to 12 outside air supply system and refrigerant pipework including extra refrigerant quantities added.276 The defendant submits that there is no evidence these items had been commissioned, tested and balanced.277 [825] The plaintiff denies that the work is defective.278 The plaintiff submits that the O&M manuals do not omit any required information. Alternatively, to the extent that any information is omitted, the plaintiff submits the inaccuracies are minor and the O&M manuals comply or substantially comply with the Contract. [826] Mr Dowden proposed that Defect 6.2 be rectified by:279 (a) carrying out testing and commissioning of the above items after the required rectification had been carried out and including the results in the O&M manual; and 274 EXP.001.001.0012 at p 0169. 275 BUI.001.002.34972 at p 097. 276 EXP.001.001.0012 at p 0170. 277 EXP.001.001.0012 at p 0170. 278 PLE.001.001.0143 at p 0091. 279 EXP.001.001.0012 at p 0170. -- 131 of 210 -- 132 (b) searching for the refrigerant pipework test results (if they exist) and including them in the O&M manuals. [827] Mr Lord has not provided an alternate proposal for rectification. [828] The parties’ quantum experts disagree as to the proper cost to rectify Defect 6.2: (a) Mr Hardiman assessed the proper cost to be $12,000.00; and (b) Mr Watson assessed the proper cost to be $1,200.00 [829] The difference between the proper cost calculated by the parties’ quantum experts is $10,800.00. The difference arises because Mr Hardiman based his calculations on the cost of a technical consultant for 10 days whilst Mr Watson based his calculation on the cost of a technical consultant for one day. [830] To the extent that the O&M manuals do not include “satisfactory performance tests” the O&M manuals would not be fit for purpose. This commissioning data is an important aspect of monitoring the overall performance of the system and is clearly identified in clause 12.8 of the Specification. [831] The defendant has established Defect 6.2 and is entitled to the costs of the rectification work. [832] The difficulty with the assessment of costs by both quantum experts is that the assessment is based on imprecise information. As it is not clear whether the plaintiff ever undertook the required testing, further commissioning data may be required. Providing an estimate of the costs of obtaining that data and preparing the updated manuals is akin to estimating the length of the proverbial piece of string. [833] Mr Dowden’s rectification work identified in the right hand column of EXP.001.001.0012 at page 170 at point two identifies the need to undertake “testing and commissioning”. In the cross-examination and re-examination of Mr Hardiman there was some confusion as to what Mr Hardiman had included in his estimate. In re-examination Mr Hardiman was asked to clarify exactly what he had costed and he responded as follows: “Ten days of work. It’s … an allowance. I mean, it is … future work as opposed to [a valuation] of works being carried out. It was an allowance of 10 days which was an allowance I thought was reasonable of two weeks for carrying out any … necessary testing to get the results that are required to include in the O and M manual. And then completion of the O and M manuals themselves.”280 [834] Leave was granted to the plaintiff to re-open cross-examination of Mr Hardiman. Mr Hardiman’s evidence included: (a) “I’ve allowed in my report what I thought was a reasonable, I suppose, guesstimate of how long it would take somebody to complete those reports based upon my experience in other projects, how long these things take.”281 280 T13-30, L30-37. 281 T13-32, L8-10. -- 132 of 210 -- 133 (b) “What about testing the operation of individual heating control mechanisms in the rooms? – As I said, I didn’t break it down into that much detail. I allowed two weeks for the whole exercise.”282 (c) “And you’re just making it up, aren’t you? You’re just – this is just trying to justify your 10-day estimate which you – where you haven’t referred in any of your reports – whether your first report, the joint report or your reply report – to this requirement to actually carry out testing or any allowance for carrying out of testing? – As I say, I spoke to Mr Dowden, I understood what was required to complete the O and M manuals. I then made a calculation in my head as to roughly how long I would expect that to take on a normal process of work and allowed 10 days. It’s ... not a scientific number; I have to accept that … (d) But, in fact, you’ve got no clue – you can – how long it would … take to go around to the rooms and check the Vintech system?—No, but … (e) Whether it’s a few or 10 days? --- But …. I allowed what … I believed to be a reasonable allowance for that type of work”.283 [835] Mr Watson’s estimate of one day is unreasonably low and I do not accept that as a reasonable estimate of the cost of the rectification work. [836] Mr Hardiman’s cost is based on his estimate of the likely costs based on his experience. While this evidence is less than perfect, I prefer the evidence of Mr Hardiman in respect of the reasonable cost of the rectification work given what is identified by Mr Dowden as to the scope and extent of the work involved. [837] On the evidence the defendant has established Defect 6.2 and the defendant is entitled to the costs of the rectification work based on the estimate provided by Mr Hardiman in the amount of $12,000.00. DEFENDANT’S CLAIM FOR ADDITIONAL LIQUIDATED DAMAGES [838] In respect of the quantum of the counterclaim, paragraph 23 of the list of issues in dispute is relevant and states as follows: “23. The extent to which, if any, the defendant is entitled to further amounts for liquidated damages [Def [51]; R [41(bi)]].” [839] The list of matters not in issue as agreed between the parties relevantly states: “7. In respect of liquidated damages, that the Date of Practical Completion certified by the Superintendent was 3 March 2017 [SOC [42]; Def [29]].” [840] The defendant seeks payment of the amount of $196,623.31 (plus GST) by way of additional liquidated damages calculated as a result of the correction of an error in calculating the date for practical completion. 282 T13-32, L19-21. 283 T13-32, L26-42. -- 133 of 210 -- 134 [841] Clause 34.7 of the Contract provides that the defendant is entitled to liquidated damages for every day after the date for practical completion to and including the date of practical completion. The rate is specified in Item 29 of Annexure Part A of the Contract, namely $14,044.53 per day. [842] The date for practical completion is specified in Item 7 of Annexure Part A of the Contract, namely 1 September 2016. This date may be adjusted as a result of any extensions of time granted by the Superintendent under the Contract.284 [843] The Superintendent, Tactical, certified on 9 March 2017 that: (a) The date for practical completion was 10 November 2016. (b) The date of practical completion was 3 March 2017. (c) The period between the date for practical completion and the date of practical completion is 113 days. (d) The total value of liquidated damages due and payable by the plaintiff to the defendant is $1,587,032 (plus GST).285 [844] On 13 March 2017, the liquidated damages amount was deducted from amounts due to the plaintiff for Progress Claim No 24. Further, on 20 March 2017 the defendant set-off that sum from moneys certified as otherwise being due and payable to the plaintiff.286 [845] The defendant’s claim is made on the basis that subsequently to this, an error by the Superintendent in calculating the adjusted date for practical completion was identified. The defendant contends that in calculating the adjusted date for practical completion a five day work week was used when a six day work week should have been used. [846] The defendant points to the Contract as contemplating a six day work week, as evidenced by: (a) the Contract Baseline Program in Annexure F, which shows activities were programmed on all days except Sundays.287 (b) the Brisbane City Council Approval Package Ref A003851963 listed in Annexure Part K, permitted work to be performed on Mondays to Saturdays.288 [847] Further, the defendant relies on evidence that shows that work was carried out on a six day work week, including: (a) Mr Cook, the project manager on site, stated in cross-examination that work was done six days a week “as much as possible”.289 284 Clause 34 of the Contract. 285 PRO.001.001.1749. 286 PLE.001.001.0336 at p 0348 [46]-[47]; PLE.001.001.0001 at p 0040 [31]. 287 The defendant refers to the example of EXP.001.001.0858 at p 1046. 288 BUI.001.001.61820 at p 141; PRO.071.005.0002. 289 T3-27, L38-40. -- 134 of 210 -- 135 (b) Mr King’s as-built prepared from primary documents (such as site diaries) shows work was carried out Mondays to Saturdays.290 (c) A number of extensions of time claims by the plaintiff were made on the basis of a six day work week.291 [848] Mr King in his report gives evidence in relation to the Superintendent’s extension of time register (Register). Mr King explains from his consideration of the Register, the counting of days in the Register was done on the basis of a five day work week.292 [849] On the basis of the Register, the date for practical completion was to be adjusted by 44.5 working days. The Superintendent had arrived at an adjusted date of 10 November 2016 using a five day work week. Using a six day work week, the adjusted date of 27 October 2016 is arrived at.293 [850] On 20 May 2019, the Superintendent provided the plaintiff with a further progress certificate pursuant to clause 37.2 of the Contract correcting the error. The Superintendent certified: (a) The correct adjusted date for practical completion is 27 October 2016 calculated on the basis of a six day work week. (b) The period between the correct adjusted date for practical completion and the date of practical completion (3 March 2017) is 127 days. (c) The total value of liquidated damages due and payable is $1,783,655.31 (plus GST).294 [851] Clause 37.2 of the Contract relevantly states: “At any time and from time to time, the Superintendent may by a further progress certificate correct any error which has been discovered in any previous progress certificate.” [852] The defendant contends that the natural and ordinary meaning of this clause permits the correction to be undertaken, resulting in the additional amount of liquidated damages claimed.295 [853] The plaintiff’s position in response is that the defendant is not entitled to the additional amount of liquidated damages for a number of reasons. [854] The first basis that the plaintiff relies on is that the plaintiff is entitled to an extension of time caused by the Mechanical Direction and as a result no liquidated damages would be payable. This basis is not made out given my findings in respect of the plaintiff’s claim in respect of the Mechanical Direction claim. 290 EXP.001.001.0858 at pp 944 [277] and 962 [316]. 291 BUI.001.001.71465; BUI.001.001.63006; BUI.100.003.8934; BUI.100.004.0417; BUI.001.001.61822; BUI.001.001.71410. 292 EXP.001.001.0858 at pp 0880-3 [68]-[80]; see EXP.001.001.0858 at p 0880 [72]. 293 EXP.001.001.0858 at p 0882 [75]. 294 PRO.060.001.0095. 295 The amount claimed is the difference between the sum already set-off and the corrected amount. PLE.001.001.0001 at p 0054 [51]. -- 135 of 210 -- 136 [855] Secondly, the plaintiff contends that the defendant is not able to adjust the date for practical completion to an earlier date as it purports to do. The plaintiff points to Item 7(a) and clause 34.5 of the Contract as allowing the date to be extended only, not shortened to an earlier date. The plaintiff submits that the ability to rectify errors pursuant to clause 37.2 is subject to what the Contract allows. [856] Consequently, the plaintiff’s position is that the defendant cannot after the Spring Hill Hotel has reached practical completion assert that the date for practical completion was earlier. [857] This contention was addressed in more detail in the plaintiff’s submissions in respect of its claim for an extension of time.296 In support of its contention that the date for practical completion cannot be adjusted after it has been certified the plaintiff refers to: (a) The definition of the “date for practical completion” in clause 1 of the Contract. The relevant date is the date in Item 7(a) or “if any EOT for practical completion is directed by the Superintendent or allowed in any dispute resolution procedure or litigation, it means the date resulting therefrom”. Based on this meaning, the plaintiff submits that the “date for practical completion” is the date specified or extended, and it does not allow the date to be extended and then brought back again. (b) Clause 34.5 of the Contract provides for the Superintendent to grant an extension of time, within 14 days of a claim or in the exercise of the unilateral discretion to grant an extension of time. In the clause there is no reference to revising an extension of time once granted. Once granted, the Superintendent is functus officio in relation to the exercise of the discretion. (c) The Contract does not provide for an amended extension of time and consequently the Superintendent does not have power to do so.297 The final paragraph of clause 37.2 is a specific provision enabling errors in progress certificates to be corrected. There is no similar provision in respect of extensions of time.298 (d) The parties must “work towards the date for practical completion, as extended from time to time”. The contractor may, for example, accelerate work to avoid liquidated damages. The plaintiff submits “[i]t would be a perverse result if, a long time after practical completion, the date could be moved to an earlier date and the contractor told that, unfortunately, liquidated damages were payable because the contractor had not achieved this new date”. [858] The third basis that the plaintiff relies on is that the defendant has not established on admissible evidence that in fact the Superintendent failed to take into account work done on Saturdays in determining the adjusted date for practical completion of 10 November 2016. 296 Plaintiff’s written closing submissions at [372]. 297 In support of this contention the plaintiff refers to the decision of RB Burden Ltd v Swansea Corp [1957] 3 All ER 243 at 250 per Lord Radcliffe, but acknowledges that case related to a payment certificate. The reasoning in this case is of no real assistance in determining the current issue. 298 The plaintiff identifies that progress payments are always on account, so the specific provision in clause 37.2 is not surprising. -- 136 of 210 -- 137 [859] In response the defendant submits that the words “it means the date resulting therefrom” in the definition of date for practical completion makes it clear that the actual date for practical completion is a “mathematical function” of the number of days that have been directed by the Superintendent or allowed by the Court. [860] The defendant submits that it is the number of days extension of time that is certified, not the adjustment of the date for practical completion. That is, once an extension is allowed (by the Superintendent or the Court) the date for practical completion results from the calculation of the number of days allowed. [861] The defendant contends, that the correction issued on 20 May 2019 was a correction to the certification of the amount of liquidated damages on the basis that the proper date for practical completion was always 27 October 2016. It did not change the number of days extension that had been certified previously and was not a correction to the date for practical completion. [862] In respect of the issue of admissible evidence, the defendant relies on the liquidated damages certificate issued by the Superintendent on 20 May 2019 that was admitted into evidence for a hearsay purpose and was not objected to by the plaintiff. The certificate relevantly states: “Our certification of liquidated damages issued on 9 March 2017 applied a 5 day working week to the calculation of liquidated damages. We are now aware that this was issued in error and that a 6 day working week applies. … A total of 44.5 business days were approved as at 6 October 2016. Applying a 5 day working week, the date for practical completion was calculated as 10 November 2016. Correctly applying a 6 day working week, an additional approved EOT falls on each consecutive Saturday such that the adjusted date for practical completion was 27 October 2016.”299 [863] There is some logic in the defendant’s approach in respect of the extension of time being in respect of time. An extension is granted in respect of days delay to the work under the Contract in accordance with clause 34.3. Applying the definition of “date for practical completion” the adjusted date is the date “resulting … therefrom” the extension of time. [864] Extensions of time have been granted and the number of days previously granted is not in dispute. It is the identification of the “date” resulting from the extensions which is relevant. The two different dates arise from a counting error – determined by whether Saturdays are included in a work week. [865] The difficulty with the defendant’s claim arises from how the defendant is seeking to correct the error. [866] On 9 March 2017, the Superintendent certified the amount of liquidated damages pursuant to clause 34.7. This used the date for practical completion of 10 November 299 PRO.060.001.0095. -- 137 of 210 -- 138 2016 and calculated the period of 113 days for the purposes of calculating the amount of liquidated damages. This notice did not purport to certify the date for practical completion and clause 34.7 did not give the Superintendent power to do so.300 [867] Based on this certification by the Superintendent, the certified amount of liquidated damages was deducted from amounts due to the plaintiff for Progress Claim No 24 and the defendant set-off that sum. [868] On 20 May 2019, the Superintendent sought to correct the error by issuing a further progress certificate pursuant to clause 37.2. Pursuant to clause 37.2 a progress certificate is to set out the “calculations employed to arrive at the amount which is due from the Principal or the Contractor”, including amounts the Principal may be entitled to deduct pursuant to the Contract. [869] The final paragraph of clause 37.2 contains a power for the Superintendent to issue a further progress certificate correcting any error in a previous progress certificate. [870] This provision in clause 37.2 may assist if there was an error on the face of the progress certificate itself: for example, if there had been a transcription error between the amount certified as payable as liquidated damages in the Superintendent’s certificate dated 9 March 2017 and the figure set-off or deducted in the progress certificate on 13 or 20 March 2017. Clause 37.2 may assist in correcting the incorrect figure to the correct figure. [871] The defendant seeks to deploy the error correction provision in clause 37.2 to in effect correct the certification of the amount of liquidated damages due and payable. But that certification is done under clause 34.7 of the Contract: a completely different provision in the Contract. Clause 34.7 provides: “If WUC does not reach practical completion by the date for practical completion, the Superintendent shall certify, as due and payable to the Principal, liquidated damages in Item 29 for every day after the date for practical completion to and including the earliest of the date of practical completion … ” [872] Clause 34.7 of the Contract provides a mechanism to adjust the amount of liquidated damages if an extension of time is granted after the liquidated damages have been paid or set-off: the amount is to be repaid. This mechanism does not assist in the current circumstances. [873] Clause 34.7 does not include any provision for an adjustment in the amount of liquidated damages calculated as a result of an error by the Superintendent. [874] The purported correction of the progress certificate on 20 May 2019 did not operate to correct the underlying certification of the amount of liquidated damages due and payable by the plaintiff to the defendant. The amount stated in the 9 March 2017 certification is the amount that remains due and payable. It has not been altered. [875] In these circumstances, the defendant’s claim for additional liquidated damages based on the error in the calculation of the date for practical completion must fail. 300 PRO.001.001.1749. -- 138 of 210 -- 139 INTEREST [876] The plaintiff claims an entitlement to interest at the rate prescribed by s 67P of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act). Schedule Eight to the Amended Statement of Claim sets out the interest on the amounts claimed by the plaintiff. [877] Section 67P of the QBCC Act provides: “(1) This section applies if— (a) the contracting party for a building contract is required to pay an amount (the progress amount) to the contracted party for the building contract; and (b) the progress amount is payable as the whole or a part of a progress payment; and (c) the time (the payment time) by which the progress amount is required to be paid has passed, and the progress amount, or a part of the progress amount, has not been paid. (2) For the period for which the progress amount, or the part of the progress amount, is still unpaid after the payment time, the contracting party is also required to pay the contracted party interest at the penalty rate, as applying from time to time, for each day the amount is unpaid. (3) In this section— penalty rate means— (a) the rate made up of the sum of the following— (i) 10% a year; (ii) the rate comprising the annual rate, as published from time to time by the Reserve Bank of Australia, for 90 day bills; or (b) if the building contract provides for a higher rate of interest than the rate worked out under paragraph (a)— the higher rate.” [878] Alternatively, the plaintiff claims an entitlement to interest on the rate prescribed by the Contract. Item 35 of Annexure Part A of the Contract provides an interest rate of 10 per cent per annum as the interest rate on overdue payments, pursuant to clause 37.5. [879] Clause 37.5 states: “Interest in Item 35 shall be due and payable after the date of default in payment.” -- 139 of 210 -- 140 [880] The plaintiff proposes that further submissions be made as to specific amounts payable by way of interest following the decision of the Court in respect of liability and quantum. [881] The defendant also proposes that further submissions should be made with respect to the amounts payable by each party for interest after the Court has determined liability and quantum on the claim and counterclaim. [882] In respect of the counterclaim, the defendant claims interest under s 58 of the Civil Proceedings Act 2011 (Qld). [883] Directions will be made to provide for further submissions from both parties, including submissions on the appropriate rate of interest arising out of the findings on liability and quantum in these reasons. NEXT STEPS [884] Once the parties have had an opportunity to consider these reasons, the parties are to confer to agree on a timetable for directions on the following: (a) the parties confer and agree on the headings and structure (agreed form) of further submissions to be provided as to the appropriate orders to be made in light of these reasons. (b) each party is to provide further written submissions in the agreed form, not more than 25 pages (including attachments). [885] The draft directions should be provided to my Associate. If draft directions cannot be agreed, then each party is to provide draft directions and a brief explanation for the disagreement. [886] If the parties consider that any additional findings of fact are required at this stage, these should be identified in the written submissions. The written submissions should also address interest and costs. -- 140 of 210 -- 141 ANNEXURE A – MECHANICAL VARIATION, COSTS, DELAY, EXTENSION OF TIME AND LIQUIDATED DAMAGES Plaintiff’s claim for costs of carrying out the Mechanical Variation [887] If I am wrong about the construction of the Contract and the notice dated 11 August 2016 constitutes a direction for a variation in respect of the mechanical works within the meaning of clauses 1 and 36 of the General Conditions, then it is necessary to consider whether the plaintiff would be entitled to the costs of the variation and also, whether it would be entitled to an Extension of Time (EOT). [888] The plaintiff claims the costs of the variation, an EOT and delay damages. [889] The defendant accepts that if the Mechanical Direction was a direction to undertake a variation then the plaintiff would be entitled to the cost component of the variation. However, the defendant does not accept that the plaintiff would be entitled to an EOT and delay damages. [890] There are three questions in the list of issues which are relevant to these considerations, questions six, 13 and 18. Question six is as follows: “6. In respect of the alleged Mechanical Delay: (a) the extent to which, if at all, the Mechanical Direction caused a delay to practical completion [SOC [27]; Def [26]; R [28]]; and, if so (b) to what extent, on a proper construction of the Contract, the plaintiff was entitled to an extension to the Date for Practical Completion [SOC [30]; Def [26], [27]; R [28], [29]]; and …” [891] The defendant has identified an additional question relevant to this issue which is not agreed to by the plaintiff: “(c) whether the plaintiff’s extension of time claim dated 28 October 2016 or otherwise complied with the requirements in clause 34.3 of the Contract [SOC [29]; Def [26(c)]; R [28(c)]]”. [892] Questions 13 and 18 are agreed as follows: “13. In respect of the alleged Mechanical Variation [SOC [9]; Def [10]]: (a) the price of the work performed by the plaintiff in carrying out the alleged Mechanical Variation; and (b) whether, (and if so to what extent) the plaintiff is entitled to costs of delay as part of the price of the Variation [SOC [32]; Def [27]]. … -- 141 of 210 -- 142 18. In respect of the alleged delay to Practical Completion: (a) the extent to which, if any, the costs claimed were: (i) costs incurred by the plaintiff by reason of the delay; and (ii) costs which the plaintiff is entitled to recover on a proper construction of the Contract, [SOC [32]; Def [27]]; (b) the extent to which, if any, the defendant is entitled to have deducted, from amounts owing to the plaintiff, amounts for liquidated damages [SOC [42], [48]; Def [29], [31]; R [31], [33]].” [893] On the basis that the Mechanical Direction was a direction to the plaintiff to undertake a variation in respect of the mechanical works, within the meaning of clause one and clause 36 of the Contract (Mechanical Variation), it is necessary to consider the terms of clause 36. Clause 36 states as follows: “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): (a) increase, decrease or omit any part including the omission of any part of WUC with a view to retaining a third party to perform that part of WUC either prior to or after the date of practical completion (with no liability to compensate the Contractor for any loss of profit); (b) change the character or quality; (c) change the levels, lines, positions or dimensions; (d) carry out additional work; (e) demolish or remove material or work no longer required by the Principal. 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: (f) the direction to perform the variation given by the Superintendent is in writing, expressly states that the direction constitutes a direction for a variation and identifies the work the subject of the direction; or -- 142 of 210 -- 143 (g) before performing the variation and in any event within 5 business days of receiving the direction to perform the variation, the Contractor has given the Superintendent a notice in writing which identifies: (i) the date the direction was given: (ii) whether the direction was given orally or in writing; (iii) the substance of the direction and, if it was in writing, a copy of the direction must be attached; (iv) the approximate cost of the variation including a detailed breakdown calculated in accordance with subclause 36.4; (v) whether a claim for an EOT will be made as a consequence of the variation and if so, an estimate of the period; and (vi) where the variation relates to the design documents or the Principal's project requirements, by identifying the relevant requirement and the change to that requirement. (h) Except where the Contractor is entitled to make a claim under this subclause 36.1, the Contractor shall have no entitlement as a consequence of complying with a direction for a variation. (i) Where the Contractor wishes to make a claim for an EOT as a consequence of a variation, in addition to the notices it is required to give under this subclause 36.1, the Contractor shall give all notices required under clause 34. … 36.4 Pricing The Superintendent shall, as soon as possible, price each variation using the following order of precedence: (a) prior agreement; (b) applicable rates or prices in the Contract; (c) rates or prices in a schedule of rates or schedule of prices, even though not Contract documents, to the extent that it is reasonable to use them; and (d) reasonable rates or prices, which shall include an amount equivalent to the percentage set out in Item 32A for profit and overheads, and any deductions shall include an amount equivalent to the percentage set out in Item 32B for profit but not overheads, -- 143 of 210 -- 144 That price shall be added to or deducted from the contract sum.” [894] Clause 36.4 sets out the price of a variation for which the principal is liable. [895] Expert reports have been prepared on behalf of both parties and provided to the Court in relation to calculating the value of the Mechanical Variation in accordance with clause 36.4 of the Contract. Mr Watson has prepared a report on behalf of the plaintiff and Mr Hardiman has provided a report on behalf of the defendant. [896] Mr Bell has also provided an expert opinion in relation to the calculation of delay, costs and delay damages. This issue is dealt with by Mr Hardiman on behalf of the defendant. [897] The quantum of the plaintiff’s claim in respect of the Mechanical Variation is the total of $2,076,392.25 (plus GST) being: (a) $1,074,577.25 (plus GST) in respect of the costs of the Mechanical Variation; and (b) $1,001,815 (plus GST) being delay damages as a consequence of the critical delay caused by the Mechanical Variation, on the assumption of 117 days of critical delay.301 [898] The defendant submits that the plaintiff is entitled to: (a) a maximum of $831,833.36 (plus GST) for the cost of the variation; (b) the return of liquidated damages at a daily rate equal to the extension of time granted; and (c) Nil delay damages. [899] It is convenient to firstly deal with the costs of the variation first, followed by the claim for an EOT and lastly, delay damages. Costs of the variation [900] Helpfully, the experts have prepared a joint report and this highlights the areas of difference between the two positions.302 [901] The plaintiff relies on the 11 August 2016 direction to undertake the work outlined in it pursuant to clause 36.1. Further, the plaintiff relies on a notice issued by it pursuant to clause 36.1(g) of the Contract.303 This notice was given before performing the work and was given within five business days of receiving the direction. This notice identified the approximate cost of the Mechanical Variation as required by clause 36.1(g). 301 See plaintiff’s written closing submissions at [6]-[7]. 302 Attachment A to EXP.001.001.2176 Joint Expert Report pp 2-8. 303 BUI.001.001.25031. -- 144 of 210 -- 145 [902] It is not contentious that if the Mechanical Direction was a variation pursuant to clause 36.1 of the Contract the requirements of clause 36.1 have been complied with, therefore, an entitlement to an assessment of the costs of the Mechanical Variation pursuant to clause 36.4 of the Contract would arise. [903] Both parties agree that the relevant subparagraph of clause 36.4 is subparagraph (d) that the valuation is to be priced using “reasonable rates or prices”. [904] The plaintiff in its submissions has helpfully identified that the difference between the experts’ assessment is the sum of $242,743.89.304 The differences between Mr Watson and Mr Hardiman are in relation to the following items: “(a) Credit $8,984.27 – Credit contract works not required or incorporated ($211,000 vs $202,015.73); (b) $103,147.68 – Additional works – 3 pipe mechanical system, upgrading current, pipework, FCUs, condensers, heat exchange units, electrical and ductwork, and BWIC ($1,010,368.78 vs $907,221.10); (c) $34,576.50 – demolition ($39,456 vs $4,879.50); (d) $42,498.23 – ceilings and partitions ($47,305.18 vs $4,808.96); (e) $6,685.73 – tiling ($6,685.73 vs nil); (f) $8,400 – electrical ($11,125 vs $2,725); (g) $516.19 – fire ($1,400 vs $883.81); (h) $1,695.24 – hydraulics ($2,800 vs $1,104.76); (i) $31,487.57 – BWIC (Builder’s work in connection) ($48,902.26 vs $17,414.69) (relating to x-ray scanning, crane hire and road closure); (j) $179.69 – builder’s profit and overheads on deductions (2%) ($4,220 vs $4,040.31); (k) $22,900.71 – builder’s profit & overheads on additions (10%) ($117,254.30 vs $94,353.58).”305 [905] It is necessary to consider each of these in turn. Credit – contract works not required or incorporated due to Mechanical Variation [906] This concerns a credit allowance for works not required because of the Mechanical Variation. Mr Watson arrives at a credit of $211,000. Mr Hardiman arrives at a credit of $202,015.73. [907] In its written closing submissions, the plaintiff has indicated that it is prepared to accept the credit proposed by Mr Hardiman for the purposes of the quantification of the Mechanical Variation.306 That is the amount of $202,015.73. 304 Plaintiff’s written closing submissions at [158]-[159]. 305 Plaintiff’s written closing submissions at [159]. 306 Plaintiff’s written closing submissions at [164]. -- 145 of 210 -- 146 [908] Mr Hardiman’s assessment is based on an approach of going to market prices and applying them to measured quantities to arrive at an objectively reasonable sum. [909] In the circumstances of the concession by the plaintiff and the fact that there is no evidence to suggest that Mr Hardiman’s assessment is other than a reasonable approach, I find the negative valuation in the amount of $202,015.73. Additional works – three-pipe mechanical system [910] The next item is described as “[a]dditional Works – 3 Pipe Mechanical System – upgrading current pipework, FCUs, Condensers, Heat Exchange Units, Electrical and Ductwork, and BWIC”. [911] Mr Watson’s assessment for this item is $1,010,368.78 and Mr Hardiman’s is $907,221.10. The difference between the experts is $103,147.68. [912] This work relates to the actual work required to convert the two-pipe VRF system to a three-pipe VRF system. [913] The original VP57 claim was in the amount of $963,800. Mr Watson has undertaken an assessment based on the original VP57. [914] In respect of this item Mr Hardiman has taken the approach which is described as the “Rawlinson’s approach”, namely, going to market prices and applying them to measured quantities to arrive at an objectively reasonable sum. The defendant submits that this is a more robust approach. [915] By comparison, Mr Watson has used the amounts in the plaintiff’s VP57, which in turn was based on quotations obtained from Batec (at the time the variation proposal was prepared). [916] In particular, reliance is placed on a quotation from Batec dated 17 October 2016.307 That quotation contained a number of “lump sum” figures for particular items which have been used by Mr Watson in respect of specific work items. Mr Watson in his analysis identifies that there were some adjustments made between that final quotation and VP57. It is on this basis that Mr Watson has assumed that the costs set out in VP57 were the amounts ultimately agreed between the plaintiff and Batec for the supply of those particular items. [917] Mr Watson’s report explains his basis for this approach, including that the assessment of a reasonable rate or price must have regard to the circumstances under which the works are undertaken. In the circumstances that this particular variation arose, one relevant circumstance is that obtaining competitive quotations was not really a viable option given that the work had to proceed as expeditiously as possible. It is in these circumstances that it is argued that using the rates quoted by the subcontractor who was onsite was appropriate. [918] The plaintiff submits that Mr Hardiman’s approach and arriving at rates and quantities to arrive at a valuation is not appropriate. In particular it submitted that this approach does not take into account the fact that the conversion of the two-pipe VRF system to 307 BUI.001.003.58590; BUI.001.003.058591. -- 146 of 210 -- 147 a three-pipe VRF system was not typical, had to occur quickly and in the middle of construction happening around it, as it was a congested construction site that was nearing completion. A further relevant practical consideration pointed to by the plaintiff was that it could only really be completed by the mechanical contractor who was already on site, that is Batec. [919] It is in these particular circumstances that the plaintiff submits that Mr Hardiman identifying alternative prices that may be cheaper or other construction methodologies does not reflect the realities of the work that needed to be done. [920] The most substantive difference between the two experts is the approach to the valuation of labour. Mr Watson adopts a figure of $267,520 for labour. The original VP57 included a claim of $178,000 in respect of labour. [921] Mr Hardiman adopts a value for labour of $78,119.04, but it needs to be acknowledged that this is only a portion of the labour cost. This is because at another place in the valuation undertaken by Mr Hardiman, a rate is used which covers not only the supply of a new refrigerant pipe, insulation and pipe supports but also includes the labour for the installation. The amount for that item totals $224,369.77 but does not identify the portion that relates to labour. This is to be contrasted with the figure for the pipe identified by Mr Watson which is $134,000 but does not include labour. [922] An issue came up during the cross-examination of Mr Hardiman in relation to this calculation of the supply of a new refrigerant pipe, insulation and pipe supports. During the questioning by Counsel for the plaintiff, Mr Hardiman was taken to schematic drawings and was asked questions that appeared to infer that Mr Hardiman’s approach was incorrect as he had not factored in that certain pipes needed to be removed which may have previously been installed for the two-pipe system and to, in effect, install three-pipes. Objections were taken to this approach at the time and I gave an indication that out of fairness to the witness, the basis for the questioning should be clarified. This invitation to do so was not taken up. [923] Mr Cook’s witness statement is the evidence relied upon by the plaintiff in respect of the work that was undertaken. There is no suggestion in Mr Cook’s statement that the existing two-pipe system that had been partially installed had to be removed entirely as part of this process. I do not make any findings adverse to Mr Hardiman’s evidence in this regard based on the cross-examination that occurred in respect to this aspect of the valuation exercise. [924] The defendant submits that Mr Watson’s amount for labour of $267,520 is an unreasonable overestimate of the cost. The defendant points to the following particular matters as evidence of this: (a) On 4 August 2016, Batec gave a price breakdown for a three-pipe air conditioning system which included $75,000 for the labour component.308 (b) On 15 September 2016, a second estimate had come from Batec which increased the labour to $88,000 for the installation of a three-pipe system.309 308 WIT.001.001.0002 at p 0045 [268]; BUI.001.003.61318. 309 BUI.001.002.44139. -- 147 of 210 -- 148 (c) Mr Cook went back to Batec and asked it to revisit the pricing because he did not think the labour allowance would be sufficient for the work required.310 (d) On 15 September 2016, a third estimate was received which increased the labour to an amount of $171,000.311 (e) Mr Cook, in his witness statement, maintained his view that the figure in VP57 was reasonable and fair for labour.312 [925] Mr Watson’s current valuation of the labour component is approximately $90,000 greater than the third estimate received from Batec in September 2016. [926] Mr Watson’s figure is arrived at based on the general statements contained in Mr Cook’s witness statement. It does not involve any detailed analysis of contemporaneous documents such as timesheets or site diaries. [927] The difficulty is also compounded by the fact that Mr Cook stands by his estimate of $178,000 for labour but it is his statement which is relied upon by Mr Watson to justify the calculation of the higher value. [928] The criticisms made about the labour figure identified by Mr Watson are justified. [929] At paragraph [234] of the defendant’s written closing submissions an alternative position is proposed if I am satisfied that it is appropriate to use Mr Watson’s figure as a starting point. It is proposed that the overall figure should be reduced to $911,360.78. This adopts the labour figure of $178,000 calculated by Mr Cook. It is submitted that while this is a broad approach, it reflects the unsatisfactory nature of Mr Watson’s evidence and the unreasonableness of his calculation of the labour costs. [930] Given the concerns raised in relation to the estimate of the labour costs in Mr Watson’s calculation, this compromise approach appears to arrive at a reasonable value for this item. It considers the difficulties of evaluating and comparing the labour costs of Mr Hardiman where there is only a portion which is direct labour costs and the other portion is covered in the supply and installation rate in relation to the new refrigerant pipe. [931] In these circumstances I find the amount in relation to this item is $911,360.78. This takes into account Mr Watson’s concerns about the realities of the work being undertaken on site and the need to undertake the work in a short timeframe but also adjusts the overall figure to take into account the issues identified in relation to the labour costs component. Demolition [932] As identified in the joint expert report, the amount in dispute in relation to this item relates to the cost of demolition for levels seven to 12. [933] Mr Hardiman arrives at a value of $4,879.50. Mr Watson arrives at a value of $39,456. The differential is $34,576.50. 310 WIT.001.001.0002 at p 0045 [302]. 311 BUI.001.003.62181. 312 WIT001.001.0002 at p 0064 [365]. -- 148 of 210 -- 149 [934] It is common ground between the parties that the difference is largely explained by the date used by each expert as the relevant date for the valuation. Mr Watson valued the demolition as at 14 October 2016 and Mr Hardiman valued the demolition as at 26 August 2016. [935] The 26 August 2016 date used by Mr Hardiman is based on the 11 August 2016 notice having been given and that by the 23 August 2016 the decision of a three-pipe system had been finalised. The date of 26 August 2016 is the first date after the Mechanical Variation that photographic evidence of the progress of the works was available for this analysis to be undertaken.313 [936] The plaintiff contends that the difference should be resolved in favour of the plaintiff if the Court finds it was reasonable for the plaintiff to order the condensers on 14 October 2016. Conversely, the difference could be resolved in favour of the defendant if the Court finds that the plaintiff should have done so immediately after 11 August 2016. [937] Alternatively, the defendant contends that because of the 11 August 2016 Mechanical Variation, the defendant should not have to pay for the construction works which obviously would have to be demolished when the alternative system was ultimately installed. In those circumstances, Mr Hardiman’s figure should be adopted.314 [938] I do not consider that the submission made by the plaintiff in respect of the timing of the ordering of condensers is the critical issue. It is more persuasive that the direction was given on 11 August 2016, the decision was finalised by 23 August 2016 and by 26 August 2016, there is evidence of the progress actually on site. [939] Even if it was reasonable for the plaintiff not to order the condensers until 14 October 2016, it may not logically be consistent that it was reasonable for work to continue where it was obvious that it would need to be demolished for the installation of the alternative system, particularly where the design was already finalised by 23 August 2016. Further, even if the issue of the brand of the condenser was outstanding, it still did not justify work being undertaken which would need to be later demolished to undertake the installation of the alternative system. [940] In these circumstances, I consider that the appropriate figure in relation to the demolition costs is Mr Hardiman’s valuation, being $4,879.50. Reinstatement works Ceilings and partitions reinstatement [941] This work relates to the reinstatement after demolition of the work. The difference between the experts is $42,498.23. Mr Watson’s valuation is $47,305.18 and Mr Hardiman’s valuation is $4,808.96. [942] A similar issue arises here in relation to the date of assessment. Mr Watson assesses the value as at 14 October 2016 and Mr Hardiman assesses the value as at 26 August 2016. 313 EXP.001.001.1621 at p 2148. 314 Defendant’s written closing submissions at [239]. -- 149 of 210 -- 150 [943] For the reasons outlined above in relation to the demolition work, I consider that it is not reasonable for the defendant to have to pay for reinstatement of work undertaken after 26 August 2016, after which time the design of the three-pipe system had been finalised and the relevant work inevitably had to be demolished. [944] I find the cost of this item as that assessed by Mr Hardiman, $4,806.96. Tiling reinstatement [945] This item relates to the reinstatement of demolished tiling. Mr Watson’s value is $6,685.73 and Mr Hardiman’s value is nil. [946] The similar issue in relation to the date of assessment arises in relation to this reinstatement. Where the reinstatement relates to work undertaken after 26 August 2016, at which time the design of the three-pipe system had been finalised, it is not reasonable that the defendant be required to pay the costs associated with that work. [947] The value for this item is nil. Electrical reinstatement [948] The electrical reinstatement is a different issue. Mr Watson values the work required at $11,125 and Mr Hardiman values it at $2,725. This relates to reinstating fire proofing for electrical penetrations. [949] There appears to be some discrepancy between the submissions made by the plaintiff and the defendant in relation to this item. [950] The defendant identifies that Mr Watson agreed that the methodology applied by Mr Hardiman was acceptable and refers to Transcript Day 11 page 59 lines 1-2. The defendant points to the exchange between Mr Watson and the defendant’s counsel at Transcript Day 11 page 63 commencing at line 42 as supporting Mr Watson ultimately agreeing with the approach of Mr Hardiman. That is, Mr Watson and Mr Hardiman are effectively in agreement of the valuation of $2,075 as shown on page seven of Attachment A to the joint report.315 [951] Conversely, the plaintiff’s submissions maintain that Mr Hardiman’s methodology for valuing this item should not be accepted and that Mr Watson’s assessment should be allowed. [952] Mr Watson had previously allocated a value of $8,400 in respect of the costs of reinstating fire proofing for electrical penetrations. Mr Hardiman allowed nil for that component. Given the exchange at trial, it appears that the reasonable cost in relation to this item should be the amount of $2,075, which takes into account the reduction of $8,400 from Mr Watson’s figure. [953] The value of this item is $2,075. 315 Defendant’s written closing submissions at [243]-[244]. -- 150 of 210 -- 151 Fire ratings reinstatement [954] Mr Watson’s valuation of this item is $1,400 and Mr Hardiman’s valuation is $883.81. The difference between them is an amount of $516.19. [955] The plaintiff’s submission in relation to this item is that Mr Watson has adopted the plaintiff’s claim rate whereas Mr Hardiman has used Rawlinson’s approach. [956] The plaintiff further relies on its submissions in relation to Mr Watson’s assessment being reasonable rates. The plaintiff also relies on its arguments about the applicable rates being those which are a reasonable rate in the particular circumstances that the works are being undertaken. In this regard, the plaintiff repeats its arguments in relation to the additional works undertaken in respect of the installation of the three- pipe system. [957] Conversely, the defendant contends that this item should be assessed in the same manner as the electrical reinstatement works. That is, the amount relates to the 100mm sleeve issue and once that amount is taken into account then effectively Mr Hardiman and Mr Watson are in agreement as to the figure of $883.81. [958] In these circumstances, and given the evidence that was given at trial by Mr Watson, I consider that the assessment of the reasonable amount for this item is $883.81 consistent with the figures shown at page seven of Attachment A to the joint report. [959] The value of this item is $883.81. Hydraulics reinstatement [960] In relation to this item, Mr Watson arrived at a value of $2,800 and Mr Hardiman arrived at a value of $1,104.76. The difference between them is $1,695.24. [961] The plaintiff contends that the difference is explained by Mr Watson adopting the plaintiff’s claim rate whereas Mr Hardiman used the Rawlinson’s approach. In this regard, the plaintiff relies on its previous submissions in relation to the appropriateness of using a rate in the particular circumstances of the work being undertaken. [962] Conversely, the defendant contends that this item turns on whether 26 August 2016 or 14 October 2016 is the appropriate date from which to quantify this work. If the appropriate date is 26 August 2016 then the figure should be $1,104.76. If it is 14 October 2016, the amount should be Mr Watson’s figure of $2,800. [963] Consistent with the approach taken in relation to the previous reinstatement work, by 26 August 2016 the design for the three-pipe system had been finalised and it is not reasonable that work undertaken after that date, which then had to be demolished and reinstated, should be paid for by the defendant. In the circumstances, the appropriate figure is that of Mr Hardiman being $1,104.76. BWIC [964] In relation to this item, Mr Watson has allowed the sum of $48,902.26. Mr Hardiman has allowed the sum of $17,414.69. The difference between the experts is a sum of $31,487.57. -- 151 of 210 -- 152 [965] This item includes road closure for craneage, craneage to lift plant to roof, mobilisation and de-mobilisation, traffic control during crane days and x-ray scanning core holes. Each of these items will need to be considered further. Item 128 – “Core holes – 200mm through to 210mm post tension slab" [966] There are two items within this item which are agreed between the experts. In relation to Item 128 “Core holes – 200mm – through to 210mm post tension slab”, the experts agree an amount of $5,544. Item 127 – “Core holes – 200mm through to 700mm post tension slab” [967] In relation to Item 127 “Core holes – 200mm – through to 700mm post tension slab”, the experts agree an amount of $3,354. Item 132 – “Road closure for craneage” [968] In respect of Item 132 “Road closure for craneage”, Mr Hardiman arrived at a figure of $235 and Mr Watson arrived at a figure of $2,600. The defendant submits that there is a rate in the Contract for this sub-item and that where it exists it should be used. Mr Watson agreed with this.316 [969] The defendant contends that craneage should only be needed for one day. [970] However, the plaintiff points out that Mr Hardiman agreed in cross-examination that it was not unreasonable to allow for a two day road closure to allow for things including weather or other contingencies. [971] In the circumstances, it would be appropriate to allow two days at Mr Hardiman’s figure which would be an amount of $470. Item 129 – “Craneage to lift plant to roof” [972] In respect of Item 129 “Craneage to lift plant to roof”, there is a similar dispute as to whether one or two days should be allowed. Mr Hardiman expresses the view that the Contract sum includes craneage for one day and this had not been expended because the original units had not been delivered to site. In these circumstances, Mr Hardiman allows one additional day. [973] Mr Watson has used two crane days. This results in the difference of opinion in respect of this component. [974] Mr Hardiman’s figure is $2,144 based on one day and lifting of 12 additional units. [975] Mr Watson provides a figure of $13,600 for this item. [976] The defendant also points out that only six of the 12 additional condensers had to be lifted to the rooftop, whereas the other six were to be lifted to level one. [977] Under cross-examination, Mr Watson agreed that without restrictions, it was possible that the lift could occur in one day. 316 T11-36, L43-44. -- 152 of 210 -- 153 [978] In the circumstances, I consider that an appropriate value in relation to this item would be the adoption of Mr Hardiman’s rate of $2,144, but allowing a two day lift period to take into account various contingencies and the fact that it needed to be done in the particular circumstances of the work being undertaken on the site. While the cost of lifting the original 12 units was already covered in the original Contract sum, the fact that this was additional work and was being done in an expedited process, the allowance of two days to complete this work would be reasonable in all of the circumstances. [979] Accordingly, the value in relation to Item 129 is $4,288. Item 130 – “Mobilisation and de-mobilisation” [980] In respect of Item 130 Mr Hardiman’s position is that nil should be allowed on the basis that the original Contract sum included mobilisation and de-mobilisation of equipment to lift the original 12 units. Mr Watson was of the opinion that this may depend on whether the original condensers were to be lifted by a fixed tower crane or a mobile crane. If it was the latter there would be no additional cost. However, Mr Watson was unable to assist further in relation to the resolution of the costs with respect to this issue. [981] In the circumstances, where this was included in the original Contract sum and Mr Watson is not able to conclusively address this issue given that he did not have access to contemporaneous documents, it is appropriate that nil be awarded in relation to Item 130. Item 131 – “Traffic control during crane days” [982] The defendant contends that the amount of $2,212.59 should be awarded on the basis of Mr Hardiman’s figure and only one day being necessary. [983] There is a difference in rates between Mr Hardiman and Mr Watson. Mr Hardiman has adopted an average value based on the plaintiff’s claimed rate and a preliminary cost. It is difficult to understand Mr Hardiman’s basis for arriving at the rate. [984] In the circumstances, I consider it reasonable to adopt the rate identified by Mr Watson and to allow for two days consistent with my previous findings. In the circumstances, the appropriate amount for Item 131 is $5,850.36. Item 126 – “X-ray scanning core holes” [985] In relation to Item 126 “X-ray scanning core holes”, Mr Watson has arrived at a figure of $8,500 and Mr Hardiman, a figure of $3,925.10. [986] Mr Watson’s figure adopted the plaintiff’s claim amount and Mr Hardiman sought an independent quotation at or about the time of preparing his report. [987] The plaintiff criticises Mr Hardiman’s use of a rate obtained years after the Spring Hill Hotel was completed and also identifies that the rate is subject to the same difficulties previously addressed in the plaintiff’s submissions in that it does not take into account the practical realities of the particular circumstances of the work being undertaken on site. Further, it is contended by the plaintiff that Mr Hardiman did not in fact know what was required to perform the x-ray scanning. -- 153 of 210 -- 154 [988] For example, one of the differences between the two experts was the time allowed to move from hole to hole. Mr Watson assessed 90 minutes per hole and Mr Hardiman assessed a 30 minute time estimate with 15 minutes to move from hole to hole. [989] However, the plaintiff points to the cross-examination of Mr Hardiman where he agreed that he did not have a proper basis to conclude that each hole could be x-rayed in 45 minutes. Further, it was established in the cross-examination that he did not know how large the machine was, how it was attached or how the scan was performed. In all of these circumstances, the plaintiff contends that it was reasonable to use the quote obtained by the plaintiff of $250 per scan. [990] While there is considerable uncertainty in relation to Item 126, I consider that the figure of Mr Watson of $8,500 is reasonable in the circumstances. Summary [991] The following is a table summarising the findings in respect of the quantification of the Mechanical Variation. As some of these figures have been recalculated, some of the figures will need to be further calculated in order to get to the ultimate figure for quantum in relation to the Mechanical Variation. Item Amount Credit – contract works not required or incorporated due to Mechanical Variation -$202,015.73 Additional Works - Three-Pipe Mechanical System - upgrading current pipework, FCUs, Condensers, Heat Exchange Units, Electrical and Duct Work and BWIC $911,360.78 Demolition $4,879.50 Ceilings and Partitions (reinstatement work) $4,806.96 Tiling (reinstatement work) NIL Electrical $2,075 Fire $883.81 Hydraulics $1,104.76 BWIC [TBA] Consultants (agreed between experts) $4,500.00 Builders Profit & Overheads on Deductions (2%) [TBA] Builders Profit & Overheads on Additions (10%) [TBA] Total [TBA] [992] For completeness, the parties are invited to undertake these additional calculations so that the summary of the quantification of the Mechanical Variation can be completed. [993] Once the final figure is calculated, this will be the answer in respect of question 13(a), namely the price of the work performed by the plaintiff in carrying out the alleged Mechanical Variation. -- 154 of 210 -- 155 Delay and the Mechanical Variation [994] There are two further claims that need to be considered in respect of the Mechanical Variation: is the plaintiff entitled to an extension of time and is the plaintiff entitled to any delay damages? [995] The first step is to consider whether the plaintiff is entitled to an extension of time as a result of the Mechanical Variation and, if so, what extension of time should be granted? [996] If the plaintiff is entitled to an extension of time, it is then necessary to consider whether the plaintiff is entitled to delay damages and the amount of any delay damages? [997] Lastly, it is necessary to consider the effect of any extension of time on the liquidated damages which the defendant has withheld. Is the plaintiff entitled to an extension of time due to the Mechanical Variation? [998] There are a number of aspects to be considered, including: (a) Clause 34, and in particular clause 34.3, and how it applies in the current circumstances. (b) The factual circumstances of the Mechanical Variation and some factual matters that occurred after the Mechanical Direction was given. (c) The expert evidence analysing the delay and the differences in approach. [999] Clause 34 of the General Conditions deals with time and progress. Clause 34 states as follows: “34.1 Progress The Contractor shall ensure that WUC reaches practical completion by the date for practical completion. 34.2 Notice of delay A party becoming aware of anything which will probably cause delay to WUC shall promptly give the Superintendent and the other party written notice of that cause and the estimated delay. 34.3 Claim The Contractor shall be entitled to such EOT for carrying out WUC (including reaching practical completion) as the Superintendent assesses, if: (a) the Contractor is or will be delayed in reaching practical completion by a qualifying cause of delay; (b) the Contractor gives the Superintendent, within 14 days of when the Contractor should reasonably have become aware of that qualifying cause of delay occurring, a written claim for an -- 155 of 210 -- 156 EOT evidencing the facts of causation and of the delay to WUC (including extent); (c) the qualifying cause of delay was beyond the reasonable control of the Contractor and affects the critical path of the activities required to complete WUC as shown on the approved construction program; (d) the Contractor or others for whom it is responsible did not contribute to the cause; (e) the Superintendent is satisfied that WUC was actually delayed; (f) the Contractor has taken all reasonable steps to mitigate the effect of the delay; and (g) if the qualifying cause of delay is an industrial action or industrial dispute, the industrial action or industrial dispute: (i) is either: (A) of a state-wide or nation-wide character and is not- specific to the site or the Contractor; or (B) an illegal industrial action; (ii) affects WUC; and (iii) has not been caused by an act or omission of the Contractor on any other site on which the Contractor is engaged. If further delay results from a qualifying cause of delay evidenced in a claim under paragraph (b) of this subclause, the Contractor shall claim an EOT for such delay by promptly giving the Superintendent a written claim evidencing the facts of that delay. … 34.5 Extension of time Within 14 days after receiving the Contractor’s claim for an EOT, the Superintendent shall give to the Contractor and the Principal a written direction evidencing the EOT so assessed. If the Superintendent does not do so, there shall be a deemed assessment and direction for an EOT as claimed. 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. … -- 156 of 210 -- 157 34.7 Liquidated damages If WUC does not reach practical completion by the date for practical completion, the Superintendent shall certify, as due and payable to the Principal, liquidated damages in Item 29 for every day after the date for practical completion to and including the earliest of the date of practical completion or termination of the Contract or the Principal taking WUC out of the hands of the Contractor. If an EOT is directed after the Contractor has paid or the Principal has set off liquidated damages, the Principal shall forthwith repay to the Contractor such of those liquidated damages as represent the days the subject of the EOT. The Contractor acknowledges that the liquidated damages provided for in this subclause are a genuine pre-estimate of the Principal’s loss and not a penalty. If Item 29 is not completed or completed by words which indicate that liquidated damages shall not apply to the Contract (whether by the use of the words ‘nil’, ‘not applicable’ or otherwise), the Contractor shall indemnify the Principal for any loss, damage, cost or expense suffered or incurred by the Principal by reason of the Contractor’s delay in the execution of WUC including the Contractor’s failure to bring WUC to practical completion by the date for practical completion. If the liquidated damages provide for in this subclause 34.7 are found to be unenforceable for any reason, the Contractor shall indemnify the Principal for any loss, damage, cost or expense suffered or incurred by the Principal by reason of the Contractor’s delay in the execution of WUC including the Contractor’s failure to bring WUC to practical completion by the date for practical completion. … 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: (a) the costs of delay which have already been included in the value of a variation or any other payment under the Contract; or -- 157 of 210 -- 158 (b) any qualifying cause of delay which is not a compensable cause of delay. The amount payable by the Principal to the Contractor under this subclause 34.9 is the agreed damages payable by the Principal to the Contractor and is in full satisfaction of all claims which the Contractor may make or bring against the Principal arising in connection with all and any delay or disruption however caused or encountered by the Contractor in the execution of WUC. …” [1000] The defendant contends that if the Mechanical Direction was a direction to undertake a variation, the plaintiff would be entitled to the cost of the variation but would not be entitled to an extension of time. It is contended that while the Mechanical Variation would be a qualifying cause of delay under clause 34.3, the plaintiff would not be entitled to an extension of time for the following reasons: (a) the plaintiff failed to give the Superintendent a written claim for an extension of time within 14 days of reasonably becoming aware of the Mechanical Direction; (b) the plaintiff contributed to the cause of the delay by failing to provide shop drawings of the mechanical system in breach of clauses 8.3 and 8.8 of the Contract; and (c) the plaintiff failed to take reasonable steps to mitigate the effect of the delay, including by failing to order the additional plant it needed to comply with the Mechanical Direction within a reasonable period of time. [1001] The plaintiff’s position is that: (a) The notice delivered on 26 August 2016 was within time. (b) It was delayed in reaching Practical Completion by 117 days, until 7 March 2017. (c) Mr Bell’s delay analysis should be preferred to Mr King’s analysis as he adopts the correct methodology pursuant to the Contract, namely a prospective delay analysis. (d) Further, a number of assumptions relied upon by Mr King are not established. For example, the plaintiff did not act unreasonably in not ordering the mechanical plant for the conversion of the alternative proposal to a three-pipe system immediately following the Superintendent’s instructions on 11 August 2016, 16 August 2016 and 17 September 2016. [1002] If it is necessary to consider whether the plaintiff is entitled to an extension of time, these reasons set out my findings in respect of the following issues which are in dispute between the parties: (a) Did the plaintiff give the Superintendent a written claim for an extension of time within 14 days of reasonably becoming aware of the Mechanical Direction as required by clause 34.3(b)? (b) What is the correct delay analysis methodology pursuant to the Contract? -- 158 of 210 -- 159 (c) Did the plaintiff fail to take reasonable steps to mitigate the effect of the delay, including by failing to order the additional plant it needed to comply with the Mechanical Direction within a reasonable period of time? (d) Did the plaintiff contribute to the cause of the delay by failing to provide shop drawings of the mechanical system in breach of clauses 8.3 and 8.8 of the Contract? (e) Should the Christmas shutdown of 17 days at the end of 2016 and the beginning of 2017 be excluded from any delay period? [1003] I will deal with each of these in turn. [1004] The plaintiff’s submissions set out extracts from correspondence leading up to the Superintendent’s instructions on 11 August 2016, 16 August 2016 and 17 September 2016. Factually, this is largely not in dispute and it is not necessary to repeat it all here. [1005] If the Mechanical Direction was an instruction to undertake a variation then these issues arise. For ease of reference, in this section of my reasons, the “Mechanical Variation” refers to this scenario (if my primary findings are found to be incorrect). [1006] Written notice of claim within 14 days [1007] Clause 34.3(b) of the Contract requires the plaintiff to give the Superintendent a notice “within 14 days of when the Contractor should reasonably have become aware” of the qualifying cause of delay occurring. The notice is required to set out certain information. [1008] The plaintiff served a notice on 26 August 2016.317 The contents of the notice are not in dispute. The issue is whether the notice was delivered out of time. [1009] The defendant contends that the plaintiff became aware of the qualifying cause of delay on 11 August 2016 when it received the Mechanical Variation, and accordingly the notice was due on 25 August 2016 (being 14 days after becoming aware). [1010] The plaintiff contends that the 14 day time limit in clause 34.3(b) only runs from “when the Contractor should reasonably have become aware of that qualifying cause of delay”. Notwithstanding that the evidence at the trial proves that the plaintiff became aware of the Mechanical Variation on 11 August 2016, the plaintiff’s position is that the plaintiff should reasonably have become aware on or after 12 August 2016 and therefore the plaintiff complied with clause 34.3(b) of the Contract by delivering its notice on 26 August 2016. [1011] It is necessary to consider the evidence in respect of this issue in some detail and also to consider how this evidence unfolded at the trial. In summary: (a) The plaintiff opened its case on the basis that the Mechanical Variation email was sent after business hours and did not come to the attention of the plaintiff until the next day. Accordingly, the plaintiff should have been aware of the direction at the earliest on 12 August 2016.318 317 BUI.001.001.66766. 318 T1-33, L18-30. -- 159 of 210 -- 160 (b) In initial cross examination, Mr Cook gave evidence that included319 that he recalled receiving the Mechanical Variation on the day it was sent and he was in the site office when he received the direction.320 (c) Senior Counsel for the defendant called for the plaintiff to produce internal emails of “Built emailing this to other members of Built on the evening of 11 August 2016”.321 The following day the plaintiff produced some documents in response which were dated 12 August 2016. (d) In re-examination, Senior Counsel for the plaintiff sought to take Mr Cook to a document that he had not been taken to in cross-examination. Objection was taken to this as it did not arise out of the cross-examination.322 (e) Senior Counsel for the plaintiff conceded that “[that] side of the bar table weren’t aware of these matters” and wanted to take the witness to the documents to test his memory.323 (f) It was submitted that this was a “crucial point”. Ultimately, to enable the issue to be appropriately dealt with, the plaintiff was allowed to re-open evidence in chief, with the defendant having a further right of cross-examination on the issue. (g) In further evidence in chief, Mr Cook gave evidence that: (i) He circulated the direction the following morning after receiving it. (ii) The following morning was the first time he would have been able to get to his computer. (iii) He saw the direction the night before most likely on his phone or from home, not on his computer. (iv) He did not think he was at work when he first saw the direction. (v) He discussed the direction with Mr Meredyth by a phone call or a text message.324 (h) Senior Counsel for the defendant then further cross-examined Mr Cook and ultimately Mr Cook gave evidence that. (i) He was in the office when he received the Mechanical Variation. He had a positive recollection of being at the office. (ii) He would have shown Mr Meredyth the direction on the evening of 11 August 2016, if Mr Meredyth had not received it independently.325 [1012] The plaintiff concedes that the Court must accept the evidence of Mr Cook that he was in the site office when he received the direction but should give little weight to it given Mr Cook’s poor recollection of the precise details of the events.326 319 This evidence will be set out in more detail later in these reasons. 320 T2-5, L18-21. 321 T2-5, L37-38. 322 T3-29, L16-19; T3-29, L21-23. 323 T3-32, L35-46. 324 T3-37, L1-24. 325 T3-48, L1-T3-51, L2. 326 Plaintiff’s written closing submissions at [289]. -- 160 of 210 -- 161 [1013] The defendant’s position is that the evidence of Mr Cook must be considered in the particular context of the period leading up to the Mechanical Variation being actually received by Mr Cook on 11 August 2016. This context was put to Mr Cook in the witness box and is as follows: (a) As early as 10 June 2016, the plaintiff was aware that there may be an issue with the two-pipe system not providing the Independent Heating/Cooling Function.327 (b) By an email on 14 June 2016, the Superintendent advised the plaintiff that the Independent Heating/Cooling Function was “non-negotiable and is in accordance with the original design intent”.328 (c) On or about 15 June 2016, Mr Cook took Mr Van Grootel of Thwaite around the site.329 (d) By an email on 20 June 2016, the Superintendent asked the plaintiff whether the mechanical system had the ability to perform the Independent Heating/Cooling Function.330 (e) Mr Cook accepted that by 20 June 2016 it was clear that a “difference of opinion” had arisen between the Superintendent and the plaintiff as to whether the Independent Heating/Cooling Function was required by the Contract. This was taking into account all the emails referred to in paragraph 225 of Mr Cook’s witness statement.331 (f) On 11 July 2016, the Superintendent issued “Superintendent Instruction No 9”.332 Mr Cook accepted that: (i) The reference to the Superintendent not receiving information to support the plaintiff’s claim that the two-pipe system complied with the Contract was a reference to the above request by the Superintendent.333 (ii) The Superintendent indicated that the intent of the original design was to allow guests to have independent heating and cooling and Mr Cook understood that to be the Superintendent’s position.334 (g) In mid-July 2016, the plaintiff went to Batec and Cushway Blackford seeking information about how they would go about changing the two-pipe system to a three-pipe system as this is what the plaintiff believed the Superintendent and the defendant wanted.335 (h) On 14 July 2016, Batec sent through its initial cost estimate for changing the two-pipe system to a three-pipe system and Batec’s engineers were already looking at the design of a three-pipe system.336 327 See T1-78, L26-T1-79, L3; WIT.001.001.0002 at p 0035 [207]; BUI.001.001.71783; BUI.001.001.62025. 328 See T1-79, L8-40; WIT.001.001.0002 at p 0035 [213]-[214]; BUI.001.001.71450. 329 T1-79, L46-47. 330 T1-80, L31-T1-81, L10; WIT.001.001.0002 at p 0037 [225]; BUI.001.001.71468. 331 T1-81, L45-T1-82, L2. 332 T1-82, L15-20. 333 T1-82, L25-34. 334 T1-84, L7-8. 335 T1-84, L41-45; WIT.001.001.0002 at [2]. 336 T1-85, L4-29; WIT.001.001.0002 at p 0040 [244]; BUI.001.002.43899; BUI.001.002.43900. -- 161 of 210 -- 162 (i) On 15 July 2016, the plaintiff met with Batec and Cushway Blackford to finalise its response to “Superintendent Instruction No 9”337 and emailed the Superintendent that same day.338 (j) Mr Cook’s evidence was that from this time the issue escalated.339 (k) On 26 July 2016, the plaintiff sent an email to the Superintendent.340 (i) In the email the plaintiff requested a direction on how the plaintiff was to proceed regarding the guest room heating and cooling issue discussed in earlier correspondence. Mr Cook agreed this was in the email.341 (ii) Mr Cook’s evidence in his witness statement was that “[w]e made this request because Built believed that what was asked for deviated from the contract requirements (which we thought was for a 2-pipe system).”342 (iii) This demonstrated that the plaintiff regarded a direction to move to a three-pipe system as a variation as early as 26 July 2016. (l) On 30 July 2016, a further email was sent by the plaintiff to the Superintendent attaching schematics of a three-pipe system which the plaintiff had developed together with Batec.343 Mr Cook accepted in evidence: (i) The plaintiff was again seeking a direction from the Superintendent as to how the defendant wanted to proceed.344 (ii) It was the second occasion where the plaintiff had asked for a direction of this kind.345 (m) Mr Cook admitted in cross-examination that the plaintiff was waiting on a direction: “So you were, I take it, anticipating that – or you were asking for, and you really wanted a direction? – We were asking for clarity, yes.”346 (n) On 1 August 2016, the Superintendent emailed the plaintiff asking for time and cost impacts to upgrade the system to a three-pipe system by way of introduction of branch boxes, pipework upgrades and condenser reconfiguration.347 337 T1-85, L31-T1-86, L22; WIT.001.001.0002 at p 0041 [252]-[253]; BUI.001.001.66727 and documents in Attachment Schedule 11. 338 T1-86, L24-30; WIT.001.001.0002 at 0042 [254]. 339 WIT.001.001.0002 at p 0037 [225]. 340 T1-88, L5-T1-89, L2; WIT.001.001.0002 [260]; BUI.001.001.64767. 341 T1-88, L28-33. 342 WIT.001.001.0002 at 0043 [260]. 343 T1-89, L4-10; WIT.001.001.0002 at p 0044 [264]-[265]; BUI.001.001.64792; BUI.001.001.14214; BUI.001.001.14215. 344 WIT.001.001.0002 at p 0044 [264]. 345 T1-89, L4-7. 346 T1-89, L9-10. 347 T1-89, L12-16; WIT.001.001.0002 at p 0044 [267]; BUI.001.001.71529; BUI.001.001.61918; BUI.001.001.61919; BUI.001.001.61920. -- 162 of 210 -- 163 (o) Mr Cook gave evidence that by this time the plaintiff had looked at ways it could upgrade the two-pipe system to a three-pipe system.348 (p) On 4 August 2016, Batec emailed the plaintiff attaching a further estimate of the cost of converting the two-pipe system to a three-pipe system.349 (q) On 5 August 2016, the plaintiff sent an email to the Superintendent with a response by the plaintiff to the request for time and cost implications to upgrade to a three-pipe system.350 The email provides: (i) A program time of six weeks to procure the branch boxes. (ii) “80 days from site instruction received Thursday 11th August to complete extends to Friday 18th November completion (Practical completion 3rd of November)”. (iii) “Total Time implications (EOT) 13 Days”. (r) Mr Cook gave evidence that the email was referring to an 80 day period if the direction was received on 11 August 2016.351 (s) On 11 August 2016, Mr Cook sent a further email to the Superintendent.352 Mr Cook accepted: (i) This email was the plaintiff again pressing for a direction.353 (ii) The email stated that “The Contract requires that Built comply with such a direction.” (iii) If a direction was given under the Contract, the plaintiff was required to comply with it. That was Mr Cook’s view as project manager.354 (iv) Parallel without prejudice discussions could take place at the same time.355 [1014] The defendant submits that it is critical that this background context is kept in mind when consideration is given to the receipt of the Mechanical Variation. The receipt of the 11 August 2016 notice was raised with Mr Cook in this context in cross- examination as follows: “Thank you. Can I take you to paragraph 272 of your statement: Later on 11 August Built received from Tactical attaching a notice which was said to be a notice to rectify defective work pursuant to clause 29.3. Do you see that?---Yes. 348 T1-89, L21-22. 349 T1-89, L24-T1-90, L14; WIT.001.001.0002 at p 0045 [268]; BUI.001.003.61317. 350 T1-90, L18-47; WIT.001.001.0002 at p 0045 [269]; BUI.001.001.64823 and the documents in Attachment Schedule 12. 351 T2-3, L11-25. 352 T2-3, L27-T2-4, L24; WIT.001.001.0002 at p 0045 [271]; BUI.001.001.64850. 353 T2-3, L31-32. 354 T2-3, L39-40. 355 T2-4, L21; T2-4, L24-25. -- 163 of 210 -- 164 Now, I’ve taken you through your statement. On multiple occasions, you had been saying, ‘You’ve got to give us a direction’. You agree with that proposition?---Yes. And on the 11th and on the 5th of August you said, ‘We need a direction by the 11th of August’?---Correct. And you were waiting on the 11th of August for the direction?--- Yes.”356 [1015] Mr Cook then gave evidence that: (a) When the Mechanical Variation came through he was waiting for it and saw it.357 (b) He immediately telephoned other people at the plaintiff. This was likely to have been his commercial manager (either Mr Peter Lincoln or Mr Cameron Davidson) and general manager (Mr David Vincenzino).358 (c) Mr Meredyth would have been in the office with him. He would have had direct contact with him.359 (d) He was in the site office when he received the Mechanical Variation.360 (e) It was inevitable that he would have spoken to Mr Meredyth and shown him the Mechanical Variation as he was in the office with him.361 [1016] The defendant also points to evidence going to Mr Cook’s state of mind in respect of delay and a potential extension of time claim, including as follows: (a) As at 5 August 2016: (i) The email from the plaintiff to the Superintendent of 5 August 2016 refers to 80 days from the site instruction received on 11 August 2016 and a time implication of “EOT 13 days”.362 (ii) It was within Mr Cook’s state of mind that there may be a requirement for an extension of time if a direction was given on 11 August 2016.363 (iii) Mr Cook was the author of the email and he had shown it to his commercial manager and general manager before sending it.364 (b) As at 11 August 2016: (i) Mr Cook appreciated that if a direction was given it would be a qualifying event that caused a delay.365 356 T2-4, L26-39. 357 T2-4, L41-43. 358 T2-4, L45-T2-5, L1; T2-5, L3-15. 359 T2-5, L17-18. 360 T2-5, L20-21. 361 T2-5, L26-29. 362 WIT.001.001.0002 [269]; BUI.001.001.64823. 363 T2-6, L40-46. 364 T2-6, L40-46; T2-7, L1-5. 365 T2-7, L20-29; T2-8, L5-10. -- 164 of 210 -- 165 (ii) Mr Cook held the view that it was likely to have an EOT result, as had been foreshadowed some days earlier.366 [1017] Following this evidence the issue arose that resulted in leave being granted for the plaintiff to reopen evidence in chief from Mr Cook. [1018] Mr Cook’s further evidence in chief included as follows: “Did you think it was important to circulate this notice quickly, or was that not of particular importance to you?---Yes, I dare say – it’s 7 – around that time would’ve been the first time I would’ve been able to get to my computer the following morning. When you saw – I think you said you saw the mechanical direction the previous night. I think that was your evidence?---Yes. So you would’ve been at your computer at that point?---No, most likely on my phone or from – from home. Not on my computer. I see. So is it the case that you don’t think you were actually at work when you first saw that mechanical direction?---I believe so, yes. I think you gave some evidence yesterday that I think you discussed it with Mr Meredith [sic] on the evening of the 11th of August; do you recall that?---I do recall that, yes. Can you explain, if you weren’t at work, how did you discuss it with Mr Meredith?---A phone call or a text message.”367 [1019] Mr Cook was also taken to an email from himself to Mr Gary Stagnitta dated 12 August 2016 at 7.10am.368 The email attaches the 11 August 2016 direction and states: “How do you want to proceed with the attached? Let me know if we need to make a meeting or if you wish to discuss anything.” [1020] Mr Cook gave evidence including as follows: (a) Mr Stagnitta was the plaintiff’s national commercial manager at the time. (b) Mr Stagnitta was overseeing nationally all contracts; all the requirements and commercially.369 (c) The email was copied to numerous people as he considered it important that the direction be circulated to those people.370 366 T2-7, L20-29; T2-8, L5-10. 367 T3-37, L5-24. 368 BUI.001.003.09334. 369 T3-36, L38-40. 370 T3-36, L45-46. -- 165 of 210 -- 166 [1021] The plaintiff also relies on two further documents in respect of this issue: (a) A meeting invitation sent from Mr Brett Mason scheduling a meeting to occur on 12 August 2016 at 11am. This was sent to various people at the plaintiff including the general counsel, Mr Andrew Lonsdale.371 (b) Mr Cook’s acceptance of the meeting invitation.372 [1022] Mr Cook gave evidence in re-examination about these documents as follows: (a) Mr Mason was the managing director of the Built Group, including the plaintiff.373 (b) He recalled attending the meeting.374 (c) At the meeting the effect of the Mechanical Direction was discussed.375 (d) Moving forward from the meeting, notices were to be prepared advising that a number of items were incorrectly addressed in the Mechanical Direction.376 [1023] Mr Cook was then cross-examined again by Senior Counsel for the defendant. Mr Cook was stepped through his evidence and asked to confirm it.377 [1024] Critical to his evidence regarding receipt of the Mechanical Variation is the following exchange:378 “See, I then asked you: Okay. So you were in the office. You recall being in the office when you received this? And you answered: The site office, yes. I asked for your actual recollection, and you gave it. That was the truth when you gave that evidence, wasn’t it?---Yes. You were at the site office?---I can’t recall exactly where I was, but – yes. That’s what I said. Yes. Well, you volunteered to me in the prior answer that you were in the office and that’s why you would’ve thought Mr Meredith [sic] would’ve been there with you. You see, I didn’t ask – suggest to you you were in the office. You volunteered it; correct?---Correct. And I asked you – I wanted to make sure that I understood your question, so I asked for your actual recollection: You recall being in the office when you received this? 371 BUI.001.003.75583. 372 BUI.001.003.72575. 373 T3-37, L45-46-T3-38, L1-7. 374 T3-38, L9-39. 375 T3-38, L45-46. 376 T3-39, L4-7. 377 T3-45, L23-T3-53, L3. 378 T3-48, L1-T3-51, L2. -- 166 of 210 -- 167 And your answer was: The site office, yes. That is your recollection, isn’t it?---Yes. … I’m not reading from the transcript now, but I’m – you’ve given your recollection that you were in the site office and you’ve confirmed that you were; correct?---Yes. What I’m suggesting to you is that you have a recollection that Mr Meredith [sic] was also in the site office at the time the 11th August 2016 notice was received?---That could be it, yes. Now, yesterday I think it’s fair – I did ask you questions whether you recalled showing him the document and - - - HER HONOUR: Is that Mr Meredith [sic] you’re referring to, Mr - - - MR SULLIVAN: Yes. I’ll read out that question. And I said: And you spoke to Mr Meredith [sic]. I take it he was present with you. Do you recall speaking to him about it?---I can’t recall. I can’t recall. So you gave evidence you didn’t have a positive recollection, but then you said – I said: It’s inevitable that you would have spoken to him about it, isn’t it? And your answer was, “Yes”?---Correct. You stand by that evidence?---Yes. Thank you. And then I said: And it’s inevitable you would have shown him the document as well, wouldn’t you? And your answer was: If he didn’t receive it himself, yes. Do you stand by that evidence?---Yes. And it’s – can I suggest to you it’s the case it is inevitable that if he didn’t receive it independently, that you would have shown him that document on that occasion on the evening of 11 August 2016?---Yes. Okay. Why? Why then did you change your evidence today about being at home?---It was just based on the time of the 11th. It was an assumption that at that time I would typically be at home. Right. Even though you accept now you’ve got a positive recollection of being at the office?---I do, yeah.” -- 167 of 210 -- 168 [1025] The plaintiff contends that: (a) The plaintiff needed to consider the Mechanical Direction and form a view as to whether it constituted a variation and whether it would be likely to delay practical completion. As the Mechanical Direction was only delivered at 7.20pm the plaintiff contends it was entirely reasonable to consider the Mechanical Direction in detail and obtain input from all relevant personnel. That could reasonably be expected to occur on 12 August 2016, at the earliest. (b) The meeting on 12 August 2016 was the first occasion when Mr Mason, the plaintiff’s managing director, and Mr Lonsdale, the plaintiff’s general counsel, were able to discuss the Mechanical Direction and its potential effect on the progress of the work under the Contract. (c) The time when Mr Cook first saw the notice is not the time at which the plaintiff should reasonably have become aware of the qualifying cause of delay. (d) When time begins to run is an objective question and it does not depend on when the contractor in fact became aware of the relevant matter. [1026] The defendant contends that: (a) The plaintiff’s contention should be rejected for the following reasons: (i) Mr Cook was the project manager and he was the person who sent correspondence on behalf of the plaintiff seeking a direction by 11 August 2016. (ii) Mr Cook was waiting at the site office on the evening of 11 August 2016, as he was anticipating a direction. (iii) There is no basis in the Contract for it being the board of the plaintiff who must be reasonably aware. (iv) Mr Cook as project manager was the appropriate person to send the direction to and he received it on 11 August 2016 and consequently the plaintiff became aware of the qualifying cause of delay occurring on 11 August 2016. (v) On the balance of probabilities, it is open for the Court to conclude that Mr Meredyth and the other identified members of senior management of the plaintiff became aware of the qualifying cause of delay occurring on 11 August 2016. (b) Mr Cook received the Mechanical Variation in the context identified above. In particular, having on three prior occasions requested a direction, having had contractors consider what could be installed, having considered costs estimates and time impacts and having the belief that if a direction was given then the plaintiff had to comply with it. (c) On 11 August 2016, a Thursday, Mr Cook requested a direction, was waiting for that direction in the office, received the direction and read it. (d) Mr Cook appreciated that the direction would be a qualifying cause of delay likely to give rise to a need for an extension of time. -- 168 of 210 -- 169 [1027] On 12 August 2016, an email was sent pursuant to clause 34.2. This was not a notice pursuant to clause 34.3(b). [1028] The notice sent on 26 August 2016 was outside the 14 day period if time started to run on and from 12 August 2016 (that is day one is 12 August and day 14 is 25 August). [1029] The defendant submits: (a) Clause 34.3 is in mandatory terms and requires strict compliance. If one of the subclauses is not satisfied then the Contractor is not entitled to an extension of time. (b) Courts have held that provisions of this kind should be enforced according to their terms, even though the consequences for non-compliance with strict notice provisions may be severe.379 (c) In the subcontract between the plaintiff and Batec, the plaintiff assessed liquidated damages against Batec as the work was not completed by November 2016.380 Mr Cook gave evidence that this was because Batec had not sought an extension of time arising from the Mechanical Variation.381 The liquidated damages claim assessed by the plaintiff exceeded the total amounts Batec claimed. [1030] In the case of Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd,382 Giles CJ was considering an extension of time clause which was substantially similar in its terms to clause 34.3 of the Contract. His Honour relevantly stated: “The contract called for practical completion by particular dates subject to extensions of time. Any extension of time was for specified cause, cause which had to be beyond the control of ACT, and for a period equal to the delay to ACT. The time by which the date for practical completion should be extended was to be determined by ADC, and it was therefore necessary that ADC be in a position rationally to assess the existence of a cause of delay, whether it was a cause of delay of one of the specified kinds, whether it was beyond the control of ACT, and what the extent of the delay to ACT was. Imposing the notification requirement upon ACT was a deliberate and important part of the mechanism for determining the time by which the date for practical completion should be extended. It was in mandatory terms ("shall notify") equivalent to the mandatory terms imposed on ADC ("shall determine the time") … 379 Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd (1978) 139 CLR 231 at 238 (Barwick CJ); Opat Decorating Service (Aust) Pty Ltd v Hansen Yuncken (SA) Pty Ltd (1994) 11 BCL 360 at 364 (Bollen CJ, with whom Prior and Duggan JJ agreed); Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd & Ors (1996) 12 BCL 317 at 339 (Giles CJ). 380 PRO.052.004.0226. 381 T2-28, L18. 382 (1996) 12 BCL 317 at 339. -- 169 of 210 -- 170 In my opinion, therefore, in the absence of timely notification as required by article 4.4.1 ACT was not entitled to extension of the date for practical completion.” [1031] A similar conclusion was reached in Opat Decorating Service (Aust) Pty Ltd v Hansen Yuncken (SA) Pty Ltd,383 where Bollen J (Prior and Duggan JJ agreeing) stated: “Let me look at cl 31(b). It begins by speaking of circumstances in which the parties contemplate that the appellant might want an extension of time within which to complete work. The parties when negotiating the contract, knowing the exigencies of the trade, agreed that some such circumstances might arise. What should be done about it? They answered this question by saying that the notice should be given by the appellant to the respondent, by subcontractor to contractor. They decided something about the time within which notice should be given. What did they decide? They decided that it should be given within fourteen days after the cause of delay arose. They knew the exigencies of the trade. They knew what practical questions or issues would arise when notice was given. They knew when it was best for the notice to be given. They fixed on that fourteen day period. And they meant the clause which emerged from these deliberations to be effective within its terms. That is to say they meant what cl 31(b) says to be the position. They meant to bind themselves to it.” [1032] In these circumstances, the defendant contends that: (a) Clause 34.3(b) of the Contract required notice from the plaintiff of its claim for an extension of time evidencing facts of causation and the extent of delay to the WUC by 25 August 2016. (b) As notice was not given by that date, the plaintiff is not entitled to: (i) An extension of time or delay damages which are dependent upon the extension of time claim. (ii) Return of any liquidated damages set-off by the defendant for late completion. [1033] In respect of Mr Cook’s evidence, I accept his evidence that was given initially in cross-examination and which was confirmed in his further cross-examination. He was at the site office on the evening of 11 August 2016 and received the Mechanical Direction. This is also consistent with the earlier correspondence from the plaintiff that calls for a direction by that date. It is consistent with that position, that Mr Cook received the Mechanical Direction and then provided an update to others that night. [1034] When considered in the context of the events leading up to that point in time, the plaintiff was in a position to consider and respond to the Mechanical Direction within the time period in the Contract. The submission that the time the plaintiff “should reasonably have become aware of a qualifying cause of delay” was not until 12 August 2016 is also not persuasive given the identified context and the evidence of Mr Cook. The timing was exactly what the plaintiff asked for. 383 (1994) 11 BCL 360 at 364. -- 170 of 210 -- 171 [1035] This is also supported by the evidence of Mr Cook that multiple notices were given by the plaintiff on 12 August 2016, including:384 (a) a notice under clause 20 of the Contract that the plaintiff considered the Mechanical Direction was in error or was a direction for a variation.385 (b) a notice under clause 34.2 of the Contract that the Mechanical Direction was likely to cause delay to the WUC.386 (c) a notice under clause 41.2 of the Contract that the plaintiff would make a claim as a request of the Mechanical Direction.387 (d) a notice of dispute under clause 42 of the Contract in relation to the Mechanical Direction.388 (e) a notice under clause 36.1 of the Contract that the Mechanical Direction constituted a direction to perform a variation.389 [1036] Whilst the Mechanical Direction may not have been exactly what the plaintiff wanted, on the balance of probabilities the evidence supports the conclusion that the plaintiff was anticipating receipt of a notice on the evening of 11 August 2016 and on becoming aware of the Mechanical Direction took steps under the Contract promptly on 12 August 2016. [1037] In all of these circumstances, the evidence on the balance of probabilities, supports the conclusion that not only did the plaintiff actually become aware of the qualifying cause of delay on 11 August 2016, it also “should reasonably” have become aware that same day. [1038] The plaintiff contends that the board of the plaintiff was the relevant decision maker of the plaintiff and this issue is to be considered based on when the board should have reasonably become aware of the qualifying cause of delay. I do not accept that proposition. It is contrary to the requirements of the Contract. The parties could have factored a requirement for notice to the board into the Contract but did not do so. [1039] If it is necessary to consider the plaintiff’s entitlement to an extension of time in respect of the Mechanical Variation, I make the following findings: (a) For the purposes of clause 34.3(b) of the Contract, the plaintiff “should reasonably have become aware” of the qualifying cause of delay occurring on 11 August 2016 when the Mechanical Direction was received. (b) Consequently, pursuant to clause 34.3(b), any written claim for an extension of time was due by 25 August 2016, being 14 days after (a). (c) The plaintiff gave notice of a written claim for an extension of time on 26 August 2016, being 15 days after (a). 384 WIT.001.001.0002 at p 0046 [280]. 385 BUI.001.001.68752; BUI.001.001.25027. 386 BUI.001.001.66753; BUI.001.001.25028. 387 BUI.001.001.66754; BUI.001.001.25029. 388 BUI.001.001.66755; BUI.001.001.25030. 389 BUI.001.001.66756; BUI.001.001.25031. -- 171 of 210 -- 172 (d) Consequently, the plaintiff’s notice of a written claim for an extension of time was outside the contractually stipulated period. [1040] In these circumstances, the plaintiff is not entitled to an extension of time. Delay analysis methodology [1041] This issue concerns whether the Contract permits a prospective or a retrospective delay analysis. This is of significance as different approaches have been used by the experts engaged by the parties to undertake an analysis of the delay: (a) Mr Bell uses a prospective delay analysis in his report relied upon by the plaintiff.390 (b) Mr King uses a retrospective delay analysis in his report relied upon by the defendant.391 [1042] The difference between the two approaches was commented on by Flanagan J in Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd.392 In that case, the two approaches were described as follows: “[643] … [The prospective approach] methodology involved him undertaking the following steps: (a) he considered the statused program that was issued prior to the commencement of the alleged delay; (b) he determined the criticality (or otherwise) of the relevant activity prior to the delay occurring; (c) he reached an opinion as to the impact to the delay on the date for practical completion by introducing a delay activity into the program to model the claimed delay; and (d) he considered any programs that were produced during the period that the delay was occurring to determine whether the criticality of the relevant activity was maintained. (a) … [645] … [The retrospective or the “as-planned” v ‘as-built”] methodology …: (a) determined that the [relevant activity] was on the critical path during the period of the claimed delay; (b) determined which work activities within the [relevant activity] were on the actual critical path; 390 EXP.001.001.0705. 391 EXP.001.001.0858. 392 [2017] QSC 85. -- 172 of 210 -- 173 (c) compared the planned and actual duration for the [relevant activities] which were on the actual critical path …”. [1043] The appropriate methodology is governed by the terms of the Contract.393 [1044] Clause 34.3 of the Contract relevantly states: “The Contractor shall be entitled to such EOT for carrying out WUC (including reaching practical completion) as the Superintendent assesses, if: (a) the Contractor is or will be delayed in reaching practical completion by a qualifying cause of delay; … ” (emphasis added) [1045] The plaintiff contends that the Contract requires a prospective delay analysis based on the words “is or will be delayed”. The plaintiff submits that this conveys current or ongoing delay which would be prospective. [1046] The plaintiff relies on the decision in CMA Assets Pty Ltd Formerly Known as CMA Contracting Pty Ltd v John Holland Pty Ltd (No 6)394 in support of its submission. The clause being considered included the words “is or will be delayed” and Allanson J concluded that the language is prospective. [1047] The plaintiff also points to other parts of the Contract which support this construction, including: (a) Clause 34.2 requires a notice of delay to be given when a party becomes “aware of anything which will probably cause delay” and the notice is to identify the cause and “the estimated delay”. (b) Clause 34.3(c) refers to the qualifying cause of delay affecting “the critical path of the activities required to complete WUC as shown on the approved construction program”. (c) The final paragraph of clause 34.3 requires an update of the length of delay “[i]f further delay results”. (d) Clause 32.2(b) provides that the “approved construction program will be used by the Contractor and the Superintendent to … assess delays and any EOT.” (e) Clause 32.2(c) requires the plaintiff to issue a revised approved construction program within 5 business days of “being notified of an EOT being granted under the Contract”. [1048] The plaintiff recognises that clause 34.3(e) may arguably suggest a retrospective analysis of delay by the words “the Superintendent is satisfied that WUC was actually delayed”. However, the plaintiff submits that this requires the work under the contract to be delayed, not practical completion. Consequently, the plaintiff contends 393 Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd [2017] QSC 85 [663]. 394 [2015] WASC 217. -- 173 of 210 -- 174 that this is not relevant to delay methodology, but that the Superintendent must be satisfied of some actual delay. [1049] However, the plaintiff’s position is that even if clause 34.3(e) allows a retrospective methodology, the Contract requires a prospective analysis for delay longer than 28 days due to clause 34.5. Clause 34.5 requires the Superintendent to assess the delay within 14 days of receiving the claim for an EOT, which in turn is required to be given within 14 days of when the contractor should reasonably have become aware of the qualifying cause of delay occurring. If this does not occur, then there is a deemed direction for the EOT claimed. [1050] As the delay caused by the Mechanical Variation was longer than 14 days, the plaintiff contends that only a prospective approach to delay analysis can be applied. [1051] Flanagan J in Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd395 construed “has been or will be actually delayed in achieving Practical Completion” as permitting both a prospective and retrospective delay analysis. [1052] The plaintiff points to two differences between the clause in that case and clause 34 in the Contract: (a) Clause 34.3 uses the words “is or will be delayed” which is prospective language in contrast to “has been or will be”. (b) Clause 34.5 requires an assessment within 14 days or there is a deemed direction for the EOT claimed. Without such a provision it was open to do a retrospective assessment of delay once the delay had ended but that is not possible under the current Contract. [1053] The defendant submits that on a proper construction of clause 34.3 of the Contract, it is open to the Court to use either methodology to determine the entitlement to an extension of time but that Mr King’s analysis should be preferred. [1054] The defendant accepts that clause 34.3 is “oddly drafted” in that it mixes tenses: the Superintendent must be satisfied that the plaintiff “is or will be” delayed in reaching practical completion and that the WUC was “actually delayed”. [1055] The defendant also refers to and relies on the decision of Flanagan J in Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd396 in support of its construction. [1056] The defendant submits that Flanagan J had to consider a similar extension of time provision with mixed tenses and his Honour concluded: “[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. 395 [2017] QSC 85 at [658]. 396 [2017] QSC 85. -- 174 of 210 -- 175 [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 – (B) the Contractor – (5) demonstrates to the satisfaction of the Principal that the Contractor has been or will be actually delayed in achieving Practical Completion.’ [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. … [662] … 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.” [1057] Based on this approach, the defendant submits that clause 34.3 of the Contract permits either a prospective or retrospective analysis to be performed. That is, the words “‘will be delayed’ invite a prospective analysis, the words ‘is .. delayed’ and ‘was actually delayed’ invite a retrospective analysis”. [1058] The defendant also addresses the plaintiff’s argument in respect of clause 34.5 that a prospective analysis is required where the delay is greater than 14 days. The defendant submits that this argument is incorrect. -- 175 of 210 -- 176 [1059] Clause 34.5 of the Contract provides that the Superintendent is to assess the contractor’s extension of time claim within 14 days of receiving it. Otherwise, the clause provides that there is a deemed assessment of the EOT claimed. [1060] The defendant submits that the current exercise is totally different. The issue before the Court is determining the plaintiff’s entitlement (if any) to an extension of time well after the expiration of the alleged delay event and also well after practical completion was achieved. The defendant submits that clause 34.5 cannot operate to place the Court in the “shoes of the superintendent at the time of assessment” to determine the plaintiff’s entitlement to an extension of time now.397 [1061] Reference is again made to the decision of Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd.398 In that case Flanagan J also had to consider a clause, similar to clause 34.5 of the Contract, which stated: “If the Contractor is entitled to an extension of time for Practical Completion the Principal’s Representative shall, within 28 days after receipt of the notice of the number of days extension claimed, grant a reasonable extension of time. If within the 28 days the Principal’s Representative does not grant the full extension of time claimed, the Principal’s Representative shall before the expiration of the 28 days give the Contractor notice in writing of the reason.”399 [1062] At paragraph 756 his Honour accepted that the appropriate extension of time on an as-planned as-built analysis was 111 days. The existence of the clause extracted above requiring an assessment of a claim within 28 days, did not prevent this conclusion. [1063] Importantly, the defendant contends that regardless of the methodology used, clause 34.3 provides that the delay must be calculated by reference to “the critical path … as shown on the approved construction program”. This issue is further discussed below. [1064] The language used in clause 34.3 of the Contract is consistent with the language considered by Flanagan J in Civil Mining & Construction Pty Ltd v Wiggins Island Coal Export Terminal Pty Ltd and a similar construction of the contractual provision should be adopted here. [1065] Accordingly, it is open on the proper construction of clause 34.3 of the Contract for either a prospective or a retrospective methodology to be used to determine the entitlement to an extension of time. Reasonable steps to mitigate delay [1066] Clause 34.3(f) states “the Contractor has taken all reasonable steps to mitigate the effect of the delay”. Accordingly, pursuant to the Contract, the plaintiff is only entitled to an extension of time if it took all reasonable steps to mitigate the effect of the delay. 397 Defendant’s written closing submissions at [179]-[183]. 398 [2017] QSC 85. 399 [2017] QSC 85 at 271. -- 176 of 210 -- 177 [1067] The question is, therefore, whether the plaintiff failed to take all reasonable steps to mitigate the effect of the delay caused by the Mechanical Variation by not ordering the mechanical plant necessary for the three-pipe conversion on or immediately after 11 August 2016. [1068] The defendant’s contention is that the plaintiff did not place the order for the necessary mechanical plant until 14 October 2016 and that it was unreasonable for the plaintiff not to have done so earlier. [1069] The defendant identifies the effect is as follows: (a) A delay of 64 calendar days, between 11 August 2016 and 14 October 2016, claimed to be caused by the plaintiff’s failure to order the mechanical plant following the Mechanical Variation. (b) A further delay of 17 calendar days as the delay occurred during the Christmas shutdown period, 18 December 2016 to 3 January 2017. [1070] The defendant’s position is that if the mechanical plant was ordered shortly after the Mechanical Variation there would have been no delay to the works or alternatively, if it had been ordered earlier than 14 October 2016 there would have been a reduction in the period of critical delay. [1071] The plaintiff contends that it did not act unreasonably in not ordering the mechanical plant: (a) On or immediately after 11 August 2016 – The plaintiff’s position is that while it accepts it did not order the mechanical plant, it was not unreasonable as: (i) The design of the three-pipe system was not finalised. (ii) Toshiba was not an approved manufacturer and at that stage Toshiba condensers were proposed to be used for the three-pipe conversion. (iii) The Mechanical Variation from the Superintendent suggested there may be other issues with performance requirements of the Mechanical Services System that needed to be addressed that went beyond the mode control requirement.400 (b) On or immediately after 16 August 2016 – The plaintiff’s position is that while it accepts it did not order the mechanical plant, it was not unreasonable as: (i) The design was still to be reviewed by the defendant’s mechanical consultant. (ii) The correspondence suggested further discussions would take place, including a dispute resolution meeting on 18 August 2016.401 (c) On or before 22 August 2016 – The plaintiff’s position is that while it accepts it did not order the mechanical plant, it was not unreasonable as there was still a further “submission” to be considered, which was to be provided by the plaintiff in respect of the proposed conversion.402 400 BUI.001.001.61926. 401 PRO.017.001.0922. 402 BUI.001.001.71548. -- 177 of 210 -- 178 (d) By 24 August 2016 – as the design still had not been finalised and discussions were on-going with the Superintendent and the mechanical consultants.403 (e) As at 31 August 2016 – it was not unreasonable as it was still proposed to use plant manufactured by Toshiba as part of the upgrade which was not an approved manufacturer.404 (f) Prior to 14 October 2016 – the plaintiff refers to correspondence between 16 September and 14 October 2016 in respect of uncertainty in relation to Toshiba and the work under the direction.405 [1072] On 14 October 2016, the plaintiff indicated it would implement the direction on the assumption “there is no objection to Toshiba as equipment manufacturer”.406 The plaintiff submits that this was the plaintiff taking a substantial financial risk in the best interests of the Spring Hill Hotel. This was done to minimise delay as much as possible. [1073] In all of these circumstances, the plaintiff contends that it did not act unreasonably at any point up until 14 October 2016 in not ordering the mechanical plant for the conversion to a three-pipe system. [1074] The defendant relies on a number of matters to establish the failure to take reasonable steps, including the following: (a) On 10 June 2016 the Superintendent first notified the plaintiff that it was concerned that the mechanical system could not perform the Independent Heating/Cooling Function.407 (b) On 20 June 2016 the Superintendent requested that the plaintiff “confirm that the two-pipe system has the ability to enable each room to call for cooling or heating independently of other Guestrooms”.408 (c) On 12 July 2016 the Superintendent issued “Superintendent Instruction No 9” which stated:409 “Pursuant to Clause 29.3 of the Contract and as discussed / requested in PCG Meeting No.13, we have not received information to support the Contractor’s claim that the 2 pipe mechanical system complies with the Contract. The Superintendent considers any responses to date provided Without Prejudice (as attached) as completely insufficient. 403 BUI.001.001.66457; WIT.001.004.0001 at [295]-[296]. 404 BUI.001.001.71561. 405 BUI.001.001.15390; BUI.001.001.71572; BUI.001.001.65012; BUI.001.002.43897; BUI.001.003.72664; BUI.001.001.65035; BUI.001.001.71576; BUI.001.001.67957; BUI.001.001.66778; BUI.001.001.25054; BUI.001.001.71580; BUI.001.001.61945; BUI.001.001.25054; BUI.001.001.65095; BUI.001.001.61946; BUI.001.001.71582; BUI.001.001.61948; BUI.001.001.71583; BUI.001.001.65105; BUI.001.001.71584; BUI.001.001.61950; BUI.001.001.65130; BUI.001.001.71587. 406 BUI.001.001.65149. 407 BUI.001.001.71783; WIT.001.001.0002 at p 0035 at [208], [210]. 408 BUI.001.001.71468; WIT.001.001.0002 at p 0037 at [225]. 409 BUI.001.001.61891. -- 178 of 210 -- 179 …Should sufficient information not be received within 5 days, and Pursuant to Clause 29.3(c), the Superintendent will require the Contractor to takes all steps to replace and reconstruct the mechanical system in accordance with the Contract. Key Issues for Contractor Response: … 2. The guest rooms are required to be heated and cooled. Built have proposed a VRF heat-pump type system based on the FCUs on a condensing unit being on the same façade and hence able to be either all heating or cooling. In this scenario no additional electric heaters are required however all the FCUs on a condensing system will heat OR cool simultaneously. This is not the intent of the original design as the intent was to allow the occupant to select their own temperature and that may require some heating whilst others on the same condensing system may require cooling. This is a loss of amenity.” (emphasis added) (d) Mr Cook gave evidence including: (i) Following “Superintendent Instruction No 9”, from 14 July 2016 the plaintiff worked with Batec and Cushway Blackford to identify how it could change the two-pipe system to a three-pipe system so that it could perform the Independent Heating/Cooling Function.410 (ii) Whilst the plaintiff maintained that the alternative proposal complied with the Contract it knew the defendant disagreed and in parallel the plaintiff progressed a design of a three-pipe system.411 (e) By 30 July 2016 the plaintiff had developed a detailed schematic of the three- pipe system, which was then further developed.412 (f) On 1 August 2016, the Superintendent emailed the plaintiff requesting that it confirm the time and cost implication to upgrade the mechanical system to a three-pipe system in accordance with the schematic sent on 30 July 2016.413 (g) On 5 August 2016, the plaintiff sent to the Superintendent a breakdown of the time and costs that would be incurred and further said it would need a direction by 11 August 2016 if those estimates were to be achieved.414 (h) On 11 August 2016, the Superintendent issued the Mechanical Variation. (i) On 12 August 2016, the plaintiff issued a notice of dispute pursuant to clause 42 of the Contract requiring the parties to commence without prejudice discussions.415 410 WIT.001.001.0002 at p 0040 [242]; T1-85, L28-29. 411 WIT.001.001.0002 at pp 0041-0049 [247]–[296]; T1-86, L11-22. 412 BUI.001.001.14214; WIT.001.001.0002 at p 0044 at [264]–[265]. This schematic was not the same as what was ultimately installed. 413 BUI.001.001.71529; WIT.001.001.0002 at p 0044 [267]. 414 BUI.001.001.64823 with attachments; WIT.001.001.0002 at p 0045 at [269]. 415 BUI.001.001.25030; WIT.001.001.0002 at p 0046 [280(d)]. -- 179 of 210 -- 180 (j) Mr Cook gave evidence that the plaintiff was obliged to act on the Mechanical Variation whilst the without prejudice discussions were happening in parallel.416 (k) From 11 August 2016 the plaintiff continued to develop the three-pipe system it had been developing since 14 July 2016, in circumstances where there was a direction from the Superintendent to rectify the defective two-pipe system to facilitate the performance of the Independent Heating/Cooling Function.417 (l) Mr Cook gave evidence that the design for the three-pipe mechanical system was finalised on 23 August 2016, including the number and type of condensers and branch boxes.418 [1075] Mr Cook was cross-examined about whether the plaintiff could have placed the order for the condensers on 23 August 2016 and whether that was a reasonable step in the circumstances. Mr Cook’s evidence was that he did not believe so, as the Mechanical Variation did not allow the plaintiff to use Toshiba equipment.419 [1076] The defendant submits that this should not be accepted where: (a) The plaintiff ultimately did use Toshiba equipment; (b) On or about 14 October 2016, Batec ordered the Toshiba condensers; (c) The design had been finalised since 23 August 2016; (d) Whilst without prejudice discussions had been occurring as to whether or not Toshiba was “approved”, contractually the plaintiff was required to carry out the Mechanical Variation; (e) Nothing between 11 August 2016 and 14 October 2016 changed that position; (f) On multiple occasions the Superintendent confirmed that the Mechanical Direction was “current and valid”.420 [1077] The defendant submits “at the very least” it was reasonable to contact Toshiba on 23 August 2016 and make some sort of arrangement for the condensers to be available at a later date, particularly where the plaintiff knew the condensers were time sensitive. This was not done. [1078] In these circumstances, the defendant contends: (a) Pursuant to clause 34.3(f) the plaintiff is not entitled to an extension of time for the whole period claimed as it failed to take all reasonable steps to mitigate the effect of the delay. (b) Alternatively, the plaintiff should have placed the order for the condensers on 23 August 2016 and accordingly, any extension of time would be limited to 62 days (which excludes the Christmas shutdown period as discussed further below). 416 T2-11, L27-40. 417 Defendant’s written closing submissions at [149]. 418 T2-13, L36-T2-14, L14; PRO.071.001.0004. 419 T2-17, L5-13. 420 16 August 2016, 31 August 2016 and 17 September 2016. -- 180 of 210 -- 181 [1079] Clause 34.3(f) requires the plaintiff to have taken all reasonable steps to mitigate the effect of the delay. Even acknowledging that the plaintiff may have had justification for arguing its position in respect of the requirements of the Contract and the direction, the requirement of “reasonable steps” may result in a need for the plaintiff to have acted at an earlier point in time. [1080] Here, the parties were clearly taking entirely opposing positions from the time the Mechanical Direction was given as to whether it was an instructed variation or not. There are strong factors which point towards the need to have taken steps, particularly where the plaintiff was aware of the likely effect of any delay. By 5 August 2016, the plaintiff estimated a six week timeframe to procure the branch boxes and an 80 day impact on completion. It was in this context that the plaintiff pressed the defendant for a direction, resulting in the Mechanical Direction. [1081] From that time 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 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 Mechanical Direction 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. Contribution to cause of delay [1088] The defendant contends that the plaintiff contributed to the cause of delay by failing to provide detailed shop drawings of the mechanical system prior to construction. [1089] Even if the plaintiff overcomes the hurdle of the notice provision in clause 34.3(b) of the Contract, the defendant submits that the plaintiff is still not entitled to an extension of time because of the operation of clause 34.3(d). -- 181 of 210 -- 182 [1090] Clause 34.3(d) provides that “the Contractor or others for whom it is responsible did not contribute to the cause”. As each of the subclauses needs to be satisfied, if the plaintiff did contribute to the cause of the delay then the claim for an extension of time must fail. [1091] The relevant provisions relied upon by the defendant are: (a) Clause 8.3 of the Contract which states: “8.3 Contractor-supplied documents The Contractor shall submit the proposed design documents to the Superintendent within the time periods specified in Item 17 and, in any event, not later than 20 business days before the Contractor proposes to issue those design documents for construction.” (b) Item 17 of the Contract provides that the design documents are to be supplied “Prior to WUC contained in those design documents being undertaken”. [1092] Consequently, the defendant submits that the plaintiff was required to submit design documents to the Superintendent no later than 20 business days before the plaintiff proposed to issue those documents for construction. [1093] Further, the defendant relies on clause 8.8 of the Contract which provides as follows: “8.8 Shop Drawings The Contractor shall prepare shop drawings as part of the design documents which shall: …. (b) include layouts and details of all plans, equipment and installation, including plinths and bases, penetrations, pipework and valves, ductwork, registers and grilles, conduit runs, control and power wiring, chases, cores and penetrations (as applicable); … (f) show sufficient information to enable the Superintendent and other appropriate consultants to check that the equipment can be installed, operated, adjusted and maintained in the manner for which the system, into which they are to be incorporated, was designed …” [1094] Clause 8.8 operates to provide an opportunity for the Superintendent to consider the drawings and to notify of any amendments. It enables the Superintendent to understand how the trades and services will operate, including the mechanical services system. -- 182 of 210 -- 183 [1095] Reading clauses 8.3 and 8.8 together, shop drawings would need to be issued approximately six weeks before installing the duct work.421 Mr Cook also agreed that a period of six weeks was reasonable.422 [1096] The defendant estimates that the shop drawings should have been provided to the Superintendent for at least level one by 3 November 2015.423 This is based on: (a) The mechanical works were to be installed from the ground up in accordance with the Baseline Program in Annexure Part F of the Contract.424 (b) The guest rooms on level one had “rough-in” to commence on 15 December 2015.425 [1097] The plaintiff did not provide any shop drawings of the mechanical system to the Superintendent.426 [1098] A request was made by Thwaite to the plaintiff on 2 December 2015 for shop drawings to be provided so that outstanding items in respect of the mechanical system could be closed out.427 [1099] On 10 December 2015, the Superintendent repeated the request.428 [1100] On 7 June 2016, the Superintendent was requesting the shop drawings be provided “as a matter of urgency”. The email states: “On the basis that mechanical services are being roughed in to numerous levels, workshop drawings should be readily available and it would be appreciated if you could arrange for them to be issued for our review as a matter of urgency”.429 [1101] The defendant contends that as late as July 2016 the plaintiff had not provided shop drawings despite the fact that the mechanical work was 25 to 30 per cent complete and the plaintiff had progressed mechanical rough-in works up to levels six, seven and eight.430 [1102] The defendant’s position is that had the shop drawings been provided for level one by 3 November 2015 prior to the installation of the mechanical services system as required, then the defendant would have become aware that the mechanical system being installed could not perform the Independent Heating/Cooling Function. 421 Mr King gave evidence that based on his experience a period of two weeks after the shop drawings had been issued would be needed to manufacture the mechanical duct work before commencing construction. EXP.001.001.0858 at p 0898 [140]. 422 T1-78, L1-3. 423 EXP.001.001.0858 at p 0899 [147]. The reference in Mr King’s report to 2016 should be a reference to 2015. 424 BUI.001.001.61820 at p 0103; EXP.001.001.0858 at p 1046. 425 Activity 377; EXP.001.001.0858 at p 0899 at [147]. 426 WIT.001.001.0224 at p 0232 [48]; WIT.001.001.0002 at p 0030 [167]-[169]. 427 BUI.001.001.71393 at p 0001. 428 BUI.001.001.71393. 429 PRO.017.001.1160 at p 0002. 430 WIT.001.001.0002 at p 0033 [195]–[196]. -- 183 of 210 -- 184 [1103] The effect on delay, is that the defendant submits that the Mechanical Variation would have been issued around late 2015, rather than 11 August 2016, avoiding the critical delay now claimed. [1104] The plaintiff in response to this allegation says that the defendant’s contention is not supported in a number of respects, including: (a) On 10 June 2016, the plaintiff provided schematics for the air conditioning system.431 (b) The piping systems disclosed by the piping schematics were materially identical to those reviewed by Thwaite before the Contract was executed on 29 April 2016.432 (c) The plaintiff says as a result Thwaite and the defendant knew that the alternative proposal was for a two-pipe VRF heat pump system, which did not provide independent heating and cooling to individual rooms. (d) The non-provision of shop drawings could not be said to have contributed to the defendant or Thwaite not being aware that the alternative proposal did not provide for independent heating and cooling to individual rooms. (e) No one from Thwaite was called to give evidence and a Jones v Dunkel433 inference should be drawn that the evidence of Mr Thwaite or Mr Van Grootel would not have assisted the defendant.434 [1105] In response the defendant submits: (a) None of the correspondence states that the alternative proposal could not perform the Independent Heating/Cooling Function. (b) The evidence does not support the plaintiff’s attempt to impute knowledge that the two-pipe VRF system could not by virtue of its design provide the Independent Heating/Cooling Function. (i) Mr Collison of the Superintendent was called by the defendant. His evidence was that: (A) at the time of the Contract formation he knew the alternative proposal was a two-pipe VRF heat pump system. (B) he did not know that a two-pipe VRF heat pump system could not, as a matter of design, perform the Independent Heating/Cooling Function; and (C) he did not know that the alternative proposal offered by the plaintiff could not perform the Independent Heating/Cooling Function.435 431 BUI.001.001.71436; BUI.001.001.67836; BUI.001.001.26910; BUI.001.001.26911; BUI.001.001.26912; BUI.001.001.26913; BUI.001.001.26914. 432 Plaintiff’s written closing submissions at [212]. 433 (1959) 101 CLR 298. 434 Plaintiff’s written closing submissions at [212]. 435 T4-23, L34-T4-34, L22. -- 184 of 210 -- 185 (c) There is no evidence that pre-contractually the Superintendent knew the alternative proposal could not perform the Independent Heating/Cooling Function. (d) The defendant did not call Mr Paul Davis who was the technical director pre- Contract as he had passed away.436 (e) Mr McBirnie took over from Mr Davis and was responsible for the day to day management of the Spring Hill Hotel on behalf of the defendant. Mr McBirnie had no understanding of technical matters in respect of the mechanical services system.437 Further, there is no evidence that prior to June 2016 anyone told Mr McBirnie that the alternative proposal did not provide the Independent Heating/Cooling Function. [1106] Further, in respect of the plaintiff’s contention that Thwaite had this knowledge and a Jones v Dunkel inference should be drawn as Mr Thwaite and/or Mr Van Grootel were not called to give evidence, the defendant submits: (a) A Jones v Dunkel inference is only available if there is evidence that Mr Thwaite and Mr Van Grootel knew that the alternative proposal could not perform the Independent Heating/Cooling Function. That is not the case here. (b) Mr Thwaite and Mr Van Grootel were available to both parties. A Jones v Dunkel inference cannot operate where a witness is available equally to both parties.438 (i) Thwaite was engaged as independent mechanical consultants by the Superintendent, not the defendant. (ii) Mr McBirnie gave evidence that the last time he had anything to do with Mr Thwaite or Mr Van Grootel was a few years ago.439 (c) Even if Thwaite had the alleged knowledge (which has not been proven), Thwaite did not tell the Superintendent, who consequently did not tell the defendant. [1107] The defendant submits that the plaintiff cannot seek to use a Jones v Dunkel inference to, in effect, fill gaps in the evidence.440 [1108] The case of Shum Yip Properties v Chatswood Investment & Development441 confirms that: “… The making of a Jones v Dunkel inference depends upon the closeness of the relationship of the absent witness with the party who did not call him.” 436 WIT.001.001.0275 at [5]. 437 T6-18, L14-15. 438 Claremont Petroleum NL v Cummings (1992) 110 ALR 239 at 259. 439 T6-16, L30-37. 440 In the matter of Azmac Pty Limited (in liquidation) [2020] NSWSC 204 [49] (Rees J); Ronchi v Portland Smelter Services Ltd [2005] VSCA 83 [81] (Nettle JA); Cook’s Constructions Pty Ltd v Stork Food Systems Australia Pty Ltd [2008] QSC 179 [51]-[52] (Martin J). 441 [2002] NSWSC 13 at [64] per Austin J. -- 185 of 210 -- 186 [1109] Clause 34.3(d) of the Contract requires consideration of whether the plaintiff contributed to the cause of the delay. Clause 8.3 of the Contract requires design documents to be provided to the Superintendent 20 days in advance of being issued for construction. [1110] Further, clause 8.8 of the Contract requires shop drawings to also be provided to enable the Superintendent to be able to check them clearly, these provisions provide an opportunity for the Superintendent to consider the design drawings and to notify any amendments. This includes the opportunity to understand how equipment and services are to be installed, including the mechanical services system. [1111] Here, shop drawings should have been provided by at least 3 November for level one. No shop drawings of the mechanical services system were provided to the Superintendent, despite request. [1112] This is a design and construct contract and clearly, further design work was to be undertaken by the plaintiff. This included the mechanical services system. In this context, prompt provision of design documents and shop drawings in advance is a critical component of the contractual objections. This enables the Superintendent to consider the design and shop drawings and then to take appropriate steps under the Contract. This may be to approve the design, to amend the design, to require the design to be redone to comply with the Contract or even to vary the Contract to allow the proposed design to proceed. [1113] Without the provision of the design drawings and shop drawings sufficiently in advance the process under the Contract is not engaged. The Contract clearly envisages the design process being an on-going dialogue and ultimately requiring approval. [1114] Non-compliance with these clauses is established. The issue is whether this non- compliance contributed to the cause of the delay. [1115] This largely turns on whether the Superintendent had knowledge that the alternative proposal could not perform the Independent Heating/Cooling Function. There is no direct evidence that the Superintendent knew. [1116] The plaintiff contends that Thwaite had this knowledge and seeks a Jones v Dunkel inference as Mr Thwaite and Mr Van Grootel were not called to give evidence. However, I do not consider that such an inference is open in the circumstances of this case. I accept the defendant’s submissions in this regard. In particular, there is no evidence that either Mr Thwaite or Mr Van Grootel knew that the alternative proposal could not perform the Independent Heating/Cooling Function and this would need to be present to support an inference. [1117] In the circumstances, I find on the balance of probabilities that the failure to provide the design documents and shop drawings in advance to the Superintendent as required by the Contract contributed to the cause of the delay. [1118] If the issue with the air conditioning system had been identified earlier then steps could have been taken. This is particularly so if the shop drawings had been provided for level one by 3 November 2015, as this was prior to the installation of the mechanical services system. -- 186 of 210 -- 187 [1119] I accept that if the design documents and shop drawings had been provided at this time, the Mechanical Variation could have been issued in late 2015 or early 2016 and the consequential delay could have been substantially mitigated. [1120] Accordingly, if it is necessary to consider the plaintiff’s entitlement to an extension of time, for the purposes of clause 34.3(d) I find that the plaintiff contributed to the cause of delay by the failure to provide design documents and shop drawings as required by clause 8.5 and clause 8.8 of the Contract. Christmas shutdown [1121] Mr King’s report reduces the delay by 17 days on the basis of a “Christmas shutdown” period at the end of December 2016 and at the beginning of January 2017. This is in dispute between the parties. [1122] While this is raised in Mr King’s report, the plaintiff objects to the assumption on the basis that there is no further explanation provided for it.442 [1123] The joint report of Mr Bell and Mr King further refers to it as being the period Mr King claims to be the on-site Christmas shutdown.443 [1124] The plaintiff points to the lack of an explanation as to why the manufacturers of the condensers would have had a similar shutdown as the site work.444 [1125] In cross-examination, Mr King referred to this being based on his knowledge of shutdown periods in New Zealand manufacturing. However, the plaintiff submits that this evidence should not be accepted. [1126] This is particularly so due to the lack of precision and detail in the evidence. The plaintiff points to the following evidence of Mr King as illustrating this: (a) Typically all manufacturing factories in New Zealand shutdown from just before Christmas through until mid-January.445 (b) In New Zealand everything shuts down for nearly three weeks.446 (c) There was a code in New Zealand, applicable to manufacturing, which mandates the shutdown period.447 [1127] On further questioning on this last point, Mr King said he could not say it applied to every manufacturing plant in New Zealand, he did not know if it had the force of law and ultimately he did not think it had the force of law.448 [1128] As to the actual impact of the delay claimed, Mr King could not say whether the manufacture of the condensers had been completed by Christmas 2016 so it remains unclear whether the shutdown would have had any impact or not.449 442 EXP.001.001.0858 at [259]. 443 EXP.001.001.1325 at p 1338. See also T11-18, L43. 444 EXP.001.001.1325 at p 1338. 445 T11-19, L1-4-T11-20, L18. 446 T11-19, L9-10. 447 T11-19, L29-39. 448 T11-19, L41-47-T11-20, L1-7. 449 T11-19, L20. -- 187 of 210 -- 188 [1129] The plaintiff submits that if the shutdown did extend to the middle of January 2017, it is not likely that the manufacture of the condensers could have been completed after that date and then shipped to Brisbane and delivered to site by 28 January 2017.450 [1130] The plaintiff submits that the exclusion of 17 days for the Christmas shutdown has no validity and should be rejected. [1131] In respect of the exclusion by Mr King of 17 days for the Christmas shutdown, I find that there is insufficient evidence to establish the basis for this conclusion. [1132] Accordingly, if it is necessary to consider the plaintiff’s entitlement to an extension of time, I find that the 17 day period from the end of December 2016 and the beginning of 2017 should not be excluded on the basis identified by Mr King in his report. Claim for EOT [1133] It is necessary to consider the competing delay analysis reports of Mr Bell and Mr King. Their opinions, however, must be considered in light of the findings set out above. [1134] These reasons set out certain findings in respect of the delay analysis, but it may be necessary for further consideration to be given to the calculation of the delay period and any extension of time in light of all the reasons. [1135] Mr Bell’s report uses a prospective delay analysis. The plaintiff summarises the approach adopted by Mr Bell to assess delay as follows: “(a) First, Mr Bell identifies the program statused immediately prior to the delay event. Mr Bell then reviews that program to ensure that it is reasonable to be used and, if not, make necessary corrections to the program (this is referred to as the Baseline Program). This Baseline Program is then used to determine the forecast date of practical completion prior to the delay event; (b) Second, Mr Bell impacts the Baseline Program with the delay event and determines the revised forecast date of practical completion, having regard to clause 34.5 of the Contract (this is referred to as the Impacted Program); (c) Third, Mr Bell calculates the difference between the forecast date of practical completion in the Baseline Program and in the Impacted Program. The difference is the delay period for the delay event; (d) Fourth, Mr Bell analyses the delay period pursuant to clause 34.4 of the Contract for any overlapping delay that may be a non-qualifying cause of delay. If such a delay is identified, it is apportioned accordingly; and 450 Plaintiff’s written closing submissions at [390(d)]. -- 188 of 210 -- 189 (e) Fifth, the delay period resulting from the delay is added to the then current date for practical completion to determine a revised date for practical completion.” [1136] In line with the first step above, Mr Bell identified the plaintiff’s Status Program dated 1 August 2016451 as the “current program” that existed prior to the Mechanical Variation on 11 August 2016. [1137] Mr Bell then makes a series of corrections to the Status Program dated 1 August 2016 before adopting it as his Baseline Program.452 These corrections were identified as arising out of the following: (a) The installation of mechanical and hydraulic plant and equipment on the roof was to commence on 11 August 2016. (b) The date for practical completion was 11 November 2016. (c) The handover of levels 11 and 12 was to occur on 14 and 16 November 2016, after the date of practical completion, as a result of errors in sequencing. [1138] As a result, the date of practical completion was changed to 17 November 2016. The extension of the date in effect reduces any delay. [1139] The corrected program is referred to as the “Corrected Status Program 1 August 2016”.453 Mr King agrees with these corrections and the change to the date for practical completion.454 [1140] The next step is that Mr Bell impacted the Corrected Status Program 1 August 2016 with the additional activities required as a result of the Mechanical Variation, namely: (a) 1 week mobilisation period for design and ordering of plant and equipment, with two crews: one crew working levels one to six, and one crew working levels seven to 12. (b) 12 week procurement period for the condensers, with a further 12 days for installation. (c) 5 week procurement period for the branch boxes, with a further 14 days for instalment over 12 floors.455 [1141] The Impacted Program456 produced from this exercise results in a delay of 107 days, with a forecast date of practical completion of 4 March 2017.457 Mr Bell considers that this is critical delay as the final commissioning/testing cannot be carried out until the condensers are installed.458 451 BUI.001.001.14712. 452 EXP.001.001.0705 at [71]-[73]. 453 Attachment 6 to Mr Bell’s Report EXP.001.001.0705. 454 EXP.001.001.0858 at [175]. 455 EXP.001.001.0705 at [77]. 456 Attachment 7 to Mr Bell’s Report EXP.001.001.0705. 457 EXP.001.001.0705 at [79]. 458 EXP.001.001.0705 at [81(c)]. -- 189 of 210 -- 190 [1142] The plaintiff claims a total of 117 days. This is as a result of the actual date of delivery of the condensers being 10 days later than forecast, with their delivery to site on 28 January 2017.459 [1143] In respect of the additional 10 days: (a) Mr Bell considers that the plaintiff would have been entitled to an additional EOT of 10 days for the further delay in the delivery of the condensers and he prepared a further Impacted Program reflecting this.460 (b) The plaintiff’s EOT claim submitted on 28 October 2016 was rejected by the Superintendent.461 The plaintiff submits that while it could have submitted a further EOT claim for the 10 days pursuant to the last paragraph of clause 34.3 of the Contract, it was futile in circumstances where the Superintendent had already decided the Mechanical Variation was not a qualifying cause of delay.462 (c) Mr Bell was cross-examined in respect of this issue but the plaintiff contends that the cross-examination was misconceived. The approach is still prospective and is consistent as it is the calculation of a “forecast date of practical completion”.463 (d) The forecast date of practical completion under the further Impacted Program is 14 March 2017, with 117 calendar days of delay compared to the Corrected Status Program 1 August 2016. [1144] The defendant is critical of the approach taken by Mr Bell. [1145] The first criticism is the use of a prospective delay analysis methodology. The defendant submits this is theoretical by its very nature: it captures “likely effects” at the time the delay event occurred, as opposed to the actual delay that resulted from the delay event. [1146] Mr Bell was aware there were issues with the methodology he adopted,464 but he gave evidence that he thought he was compelled to adopt the prospective analysis due to clauses 34.3 and 34.5 of the contract. [1147] On the basis that the defendant says either methodology was open under the Contract,465 the defendant submits a retrospective analysis is the most appropriate methodology to adopt, particularly given the context in which the assessment of the entitlement must be made. That is, assessing the entitlement over four years after the delay event occurred by calculating the actual delay to the WUC by reference to contemporaneous project documents and the approved construction program as updated from time to time subsequent to the Mechanical Variation.466 459 BUI.001.002.31204. 460 Attachment 8 to Mr Bell’s Report EXP.001.001.0705. 461 BUI.001.0001.09841; BUI.001.001.61955. 462 Plaintiff’s written closing submissions at [367]. 463 Plaintiff’s written closing submissions at [367]. 464 EXP.001.001.0705 at p 0725 [48]-[49]. 465 This position is consistent with my finding earlier in these reasons. 466 Defendant’s written closing submissions at [184]. -- 190 of 210 -- 191 [1148] Mr King described the comparison of the two approaches as follows: “Why look in the crystal ball when you can read the book?”467 [1149] The defendant’s second criticism is that Mr Bell failed to do his analysis in incremental windows, which was contrary to the requirements of the Contract. This also is said to exacerbate the theoretical nature of the analysis. [1150] Clause 34.3(c) refers to the qualifying cause of delay affecting the “critical path … as shown on the approved construction program”. Clause 1 defines “approved construction program” to mean: “(a) the original approved construction program set out in Annexure Part F; and (b) any revised approved construction program approved by the Superintendent from time to time pursuant to subclause 32.2”. [1151] Clause 32.2 relevantly includes as follows: “(b) The approved construction program will be used by the Contractor and the Superintendent to: (i) convey information to the Superintendent about the construction and commissioning of the Works; (ii) measure and report on the progress of the Works towards meeting the date for practical completion; and (iii) assess delays and any EOT. (c) The Contractor must revise the approved construction program and issue 3 hard copies and a compact disc containing an editable electronic version of the approved construction program in Microsoft Project format of the revised approved construction program to the Superintendent within 5 business days after: (i) the last day of each month; and (ii) being notified of an EOT being granted under the Contract. … (e) Each revised approved construction program submitted to the Superintendent must be based upon information current at the time of submission prepared in the form of a computer generated critical path network logic chart presented as a cascade diagram showing: (i) the sequence and duration of all activities and identifying activities constituting the critical path and the interrelationship between activities including design, documentation, procurement, construction commissioning 467 EXP.001.001.0858 at p 0894 [118]. -- 191 of 210 -- 192 and finalisation activities and including float for activities not on the critical path … … (g) Within 15 business days after receipt, the Superintendent must review a revised approved construction program to assess conformity with the presentation and technical requirements specified in subclause 32(g) and either: (i) approve the revised approved construction program, or (ii) request the Contractor in writing to amend the revised approved construction program. If the revised approved construction program is approved by the Superintendent, the Contractor must submit to the Superintendent the approved construction program in the format described in subclause 33(c) indicating the date of the program within 5 business days of the approval by the Superintendent …” (emphasis added) [1152] What is encompassed by the “approved construction program” is therefore the original approved program, which is then updated by the plaintiff within 5 business days at the end of each month and after being notified of an extension of time. The result is that the approved construction program was regularly updated and was to be used for progress reporting and to assess extensions of time. [1153] The defendant submits the requirements of clauses 1 and 32.2 of the Contract have a consequential effect in that the delay analysis must be done incrementally, regardless of which method is used.468 [1154] An incremental review is also consistent with good industry practice. In support of this contention the defendant points to: (a) Core Principle 7 of the Society of Construction Law Delay and Disruption Protocol which states: “7. Incremental review of EOT Where the full effect of an Employer Risk Event cannot be predicted with certainty at the time of initial assessment by the CA, the CA should grant an EOT for the then predictable effect. The EOT should be considered by the CA at intervals as the actual impact of the Employer Risk Event unfolds …”469 (b) Keith Pickavance in the text “Delay and Disruption in Construction Contracts” states: “Unless the omission to be impacted is of short duration, say less than four weeks long, it will rarely be appropriate for the duration of the omission to be impacted in full from its commencement. For omissions, or failures to perform lasting 468 Defendant’s written closing submissions at [167]. 469 PRO.071.012.0009 at p 0032. -- 192 of 210 -- 193 longer than four weeks, a ‘windows’ approach to its impacting should normally be adopted.”470 (c) PJ Keane’s text “Delay Analysis in Construction Contracts” states: “Inserting fragnets [activities] with excessive durations (spanning several updating cycles) will effectively override progress achieved during that entire period and will not allow the base programme to account for any delays due to concurrent events, lack of progress or logic changes implemented in the relevant monthly updates. This might prevent potentially critical delay events from emerging as critical until the conclusion of the fragnet. Every attempt should be made to make the fragnets as discrete as possible so the impact of each event can be limited to the period of time being analysed. Breaking events into bite-sized chunks for analysis is one of the reasons the TIA [time impact analysis] approach is known as being labour intensive and technically complex. The longer the fragnet, and the longer the duration between each base programme, the more prospective and theoretical the results will be. If the TIA is used prospectively, the analysis will produce ‘likely effects’ of delays. If the fragnets are as discrete as possible, limited to durations less than a single updating cycle (i.e. 30 days), and if those fragnets rely on actual durations, the results are going to be closer to the actual effect of delay experienced and mitigated from progress update to progress update.”471 (d) Andrew Burr in his text “Delay and Disruption in Construction Contracts” identifies that where a schedule is updated on a regular basis for example monthly, then that can be used for the relevant “window”. Further, this approach provides “the only way in which the true effect of an event can be analysed to take account of all its consequential effects and concurrency during the course of a building contract”.472 [1155] Mr King’s view is that it is necessary to incrementally review delay over successive programs because the critical path may change resulting in an incorrect view on the extent of the critical delay.473 [1156] Mr Bell assumed that the Status Programs provided to him were Approved Construction Programs but then proceeds to use the 1 August 2016 Program (which he corrected) to impact the delay. This is despite two or three programs per month being prepared by the plaintiff in the period after the Mechanical Variation.474 470 PRO.071.012.0008 at p 0003; EXP.001.001.0858 at [127]. 471 PRO.071.012.0007 at p 0002. 472 PRO.071.012.0006 at p 0003 [15.162-6]. 473 The float values of activities may also change. EXP.001.001.0858 at [127]. 474 EXP.001.001.0705 at p 0782. -- 193 of 210 -- 194 [1157] The defendant contends that the use of the single Corrected 1 August 2016 Program was contrary to the Contract and also contrary to accepted practice. It also increases the prospective and theoretical nature of the analysis. [1158] The third criticism of Mr Bell’s approach is that he has selectively mixed a prospective and retrospective approach, which has the effect of increasing the period of delay. [1159] This issue concerns the delivery of the condensers: (a) 107 days was inserted into the corrected 1 August 2016 Program for the delivery of the condensers. This was based on the plaintiff’s estimate, with the condensers having a delivery date of 16 January 2017.475 (b) But the condensers were actually delivered on 28 January 2017, 10 days later.476 [1160] Mr Bell adjusted the date arrived at by the prospective time impact analysis by retrospectively impacting the program with the 10 additional days. The defendant submits that this is not appropriate. [1161] The defendant says Mr Bell either must accept the date originally arrived at or he should account for all subsequent progress after the Mechanical Direction. He cannot select one activity and retrospectively use it. This may result in an over calculation of delay as there is no consideration of other activities that could reduce the delay or entitlement to an extension of time.477 [1162] The defendant submits that Mr King’s analysis should be preferred for the following reasons: (a) The retrospective as-planned as-built analysis is not theoretical, it is “grounded in reality”. (b) Mr King uses a “windows” analysis and assessed the extent of delay by reference to the approved construction program as revised by the plaintiff from time to time (as required by the Contract).478 (c) This analysis shows that the façade works “slipped” beyond 16 August 2016 as shown on the corrected 1 August 2016 Program until 8 November 2016 when the condenser delivery fell on to the critical path. This is not considered in Mr Bell’s analysis.479 (d) The slippage in the façade works was due to the plaintiff’s failure to perform.480 (e) Mr Bell agreed that the façade works were unaffected by the Mechanical Direction.481 475 EXP.001.001.0705 at p 0735 [78]. 476 EXP.001.001.1325 at p 1333. 477 Defendant’s written closing submissions at [194]–[195]. 478 EXP.001.001.0858 at pp 0894-7 [116]–[117], [124] and [134]. 479 EXP.001.001.0858 at pp 0921-0940 [193]-[258]. 480 EXP.001.001.0858 at pp 0929-0940 [212]–[217], [223]–[224], [240]–[243] and [258]–[263]. 481 T10-51, L44-T10-52, L39; T10-56, L23-T10-59, L43. -- 194 of 210 -- 195 [1163] The defendant’s ultimate position is: (a) 62 days of delay, if the plaintiff should have ordered the condensers on 23 August 2016 when it finalised the three-pipe design; or (b) a maximum of 81 days of delay, if the condensers were ordered after 14 October 2016. [1164] If the condensers were ordered: (a) on 17 August 2016, there would have been no critical delay. (b) prior to 14 October 2016, there would be a reduction in the period of critical delay. [1165] The issue of the Christmas shutdown period arises if the condensers should have been ordered by 23 August 2016. The defendant contends that the date for installing and commissioning would fall on 23 December 2016 in the Christmas shutdown period. This would further push it out to 9 January 2017. That is an additional 17 days plus the original six days, but the critical delay should be 62 days. [1166] The plaintiff is critical of Mr King’s approach, including as follows: (a) Mr King attempts to bring the date for practical completion forward to 27 October 2016. The plaintiff maintains that to do this is wrong. (b) Mr King makes certain assumptions about when the shop drawings should have been received. (c) Mr King calculates dates when the plaintiff was expected to deliver construction programs. (d) At paragraph 168 of Mr King’s report, Mr King makes certain assumption, namely that: (i) The plaintiff should have ordered the mechanical equipment on 18 August 2016, which is wrong. (ii) Only limited work on the mechanical system occurred between 12 August 2016 and 29 September 2016. The plaintiff submits this is imprecise and refers to the statement of Mr Cook as to the work that was done in this period.482 (iii) On 29 September 2016, the plaintiff instructed Batec to continue with the two-pipe system. This is correct. However, Mr King goes on to assume “[t]he effect of this was that follow-on trades would in turn be installing redundant work from 29 September to 14 October 2016 which would need to be removed”. The plaintiff says this is wrong as far as it suggests that the “redundant work” is the plaintiff’s responsibility. (iv) On 14 October 2016, the plaintiff instructed all subcontractors that the mechanical system was being changed and to stop work in the affected areas. This is correct. 482 WIT.001.004.0001 at [280]–[316]. -- 195 of 210 -- 196 (e) Mr King forms the view that by 14 July 2016 the plaintiff was 42.5 days behind schedule. This is said to be based on a comparison of the Impacted Program and the approved construction program.483 The plaintiff raises a number of points in response, including: (i) Being behind at a point in time is not determinative that practical completion will not be reached by the date for practical completion as the works could be accelerated to achieve it. (ii) Mr King seems to accept that the plaintiff was scheduled to achieve the adjusted date for practical completion of 17 November 2016.484 (iii) The critical path shifted to the installation of the mechanical plant on the issuing of the Mechanical Variation. As a result other activities, including the level 13 roof slab pour, gained float such that any delay to that activity was no longer critical. (iv) The Status Programs of 3 September 2016 and 27 September 2016 were incorrect as they do not show any reference to the Mechanical Variation. They cannot therefore be relied upon in any retrospective analysis. (v) A fundamental defect in Mr King’s analysis is that he uses a Status Program dated 18 October 2016 to assess the effect of the Mechanical Variation. This could only be used as the starting point if the program did not already include delay resulting from the Mechanical Variation. The plaintiff contends that it did. (A) Mr King fails to address what Mr Bell says at B11 of the joint report that the programs prior to 26 October 2016 do not contain any activities relating to the changes required by the Mechanical Variation and as a consequence there is no reliable critical path in those programs. (B) The key issue is where the critical path would be if they did contain the activities required by the Mechanical Variation. (C) If the procurement of the mechanical plant was critical, then the previous critical activities were no longer critical. This would include the activities relating to the façade, which then had in effect plenty of time to be completed. (D) The delay caused by the Mechanical Variation commenced well before 18 October 2016.485 The 1 August 2016 program was the last program which was unaffected by the Mechanical Variation. This is evident when looking at the dates scheduled for the mechanical installation which has a “slip” of 63 days for the early finish dates and 32 days for the late finish dates. This was because the work could not advance until a decision was made on the mechanical system to be installed. This issue was not addressed by Mr King. 483 EXP.001.001.0858 at p 0921 [188]. 484 EXP.001.001.0858 at [196]-[197]. 485 WIT.001.004.0001 at [282], [283] and [311]. -- 196 of 210 -- 197 (E) The 32 day delay by the 18 October 2016 program should be added to the 83 days assessed by Mr King as the delay to the date for practical completion, resulting in a delay of 115 days using Mr King’s approach properly applied. (f) As a result of the issue with the 18 October 2016 program, the plaintiff contends that even if a retrospective analysis is used, when it is properly applied it validates Mr Bell’s conclusion. That is: (i) Mr Bell concludes 117 days of delay. (ii) If apply Mr King’s corrected analysis: (A) If assess the effect on the date for practical completion, 112 days of delay. (B) If assess the effect on the particular activity, 115 days of delay. [1167] The plaintiff is also critical of the analysis undertaken by Mr King to effectively reduce the delay of 83 calendar days486 to zero. This includes: (a) Using the specific activity in the 18 October 2016 program that was delayed. The activity had a late finish date and Mr King uses that date to calculate 81 calendar days of delay (from the late finish date of 8 November 2016 to 28 January 2017). Mr King provides no reason for this conclusion. (b) That the mechanical plant should have been ordered much earlier.487 (c) Taking into account a Christmas shutdown of 17 days.488 [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: (a) Consistent with my earlier findings under the Contract it is open to consider a prospective or a retrospective delay analysis. (b) Mr King’s incremental delay analysis is to be preferred as it more closely accords with the requirements of the Contract in clauses 1, 32.2 and 34.3(c). (c) Mr King’s analysis needs to be further considered in light of the other findings in these reasons, including in respect of the Christmas shutdown period. Delay Damages [1169] The plaintiff claims that the defendant is liable to the plaintiff for an amount of $1,001,815 plus GST for delay damages in respect of the Mechanical Variation. To get to the point that this claim needs to be considered, the plaintiff needs to establish that: 486 The 18 October 2016 program has a date for practical completion of 16 December 2016. If the 26 October program is adjusted for the actual date of plant procurement, the scheduled date for practical completion is 9 March 2017. The difference between the two due to the Mechanical Variation is 83 days. 487 See separate discussion of issue. 488 See separate discussion of issue. -- 197 of 210 -- 198 (a) the requirement to do the work set out in the Mechanical Direction was a variation under the Contract; (b) the plaintiff performed the work; (c) the variation caused a delay to the date for practical completion; and (d) the plaintiff is entitled to an extension of time under clause 34.3 of the Contract of 117 days, as claimed by the plaintiff or another period as established on the evidence. [1170] If I am wrong and the plaintiff is entitled to the costs of the Mechanical Variation and the extension of time, I briefly deal with the claim for delay damages. [1171] Clause 34.9 of the Contract deals with delay damages and states as follows: “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: (a) the costs of delay which have already been included in the value of a variation or any other payment under the Contract; or (b) any qualifying cause of delay which is not a compensable cause of delay. The amount payable by the Principal to the Contractor under this subclause 34.9 is the agreed damages payable by the Principal to the Contractor and is in full satisfaction of all claims which the Contractor may make or bring against the Principal arising in connection with all and any delay or disruption however caused or encountered by the Contractor in the execution of WUC.” (emphasis added) [1172] Item 31A states: “Maximum amount of delay costs (clause 34.9) $$13,148.00 per day excluding profit and overheads”. (emphasis added) [1173] Whilst the submissions from the parties and the expert reports consider the approach to delay damages in relevant texts and authorities, the starting point has to be the interpretation of the contractual provision. -- 198 of 210 -- 199 [1174] A “compensable cause” is a defined term and includes a direction to undertake a variation. It is not established if it is a direction to rectify defective work. [1175] The key aspects of the provision are that the plaintiff must establish the costs claimed: (a) are actual costs incurred; (b) are reasonable; (c) are necessary; and (d) by reason of the “compensable cause”. [1176] There is a dispute between the parties in respect of the requirement for the costs to be reasonably incurred. The plaintiff says that the defendant’s pleading does not plead that the costs are not reasonable and therefore the defendant is precluded from running that as a positive case. The defendant in response says that it is squarely raised on the pleading and in any event the onus is on the plaintiff to establish reasonableness in order to come within clause 34.9. [1177] Paragraph 27(f)(ii)(1)(a) of the Third Amended Defence and Counterclaim states: “The Plaintiff’s claim for delay damages does not include any actual costs for time related site overheads which were reasonably and necessarily incurred by reason of the alleged Mechanical Direction”. [1178] This pleading identifies that the defendant contends that the costs claimed did not meet the requirement of being actual costs that were reasonably and necessarily incurred. This put the plaintiff on notice that reasonableness was in issue. [1179] Paragraph 27(f)(ii)(1)(b) of the Third Amended Defence and Counterclaim then states: “In the premises of the matters pleaded in paragraph 27.f.ii.1.a the Defendant, pursuant to clause 34.9 of the Contract is not obliged to pay to the Plaintiff any additional delay damages for its site overheads; Particulars A. Section 6.2.42 to 6.2.46 of the Expert Report of David Hardiman dated 5 April 2019.” [1180] The plaintiff contends that the Hardiman Report identified in the particulars only addresses “actually” and “necessarily” and does not refer to “reasonably”. [1181] The defendant’s pleading may operate to preclude it from being able to run a positive case that the costs were not reasonable. But by the pleading in paragraph 27(f)(ii)(i)(a) the plaintiff is put to proof of reasonableness. This is also a requirement of clause 34.9 in any event and the onus is on the plaintiff to establish that the requirement of reasonableness is met. [1182] The pleaded defence and the plaintiff’s claim itself are consistent with the plaintiff being put to proof of the reasonableness of the costs claimed. This is what the defendant does. -- 199 of 210 -- 200 [1183] There is also a dispute between the parties as to how Item 31A operates. It stipulates the maximum amount of delay damages. That is the actual costs incurred can be claimed up to that maximum amount (subject to the other requirements being met). [1184] Item 31A states the maximum figure as “$13,148.00 per day excluding profit and overheads”. It is not contentious between the parties that the reference to “overheads” in Item 31A is a reference to offsite overheads. [1185] What is contentious is whether the provision excludes profit and offsite overheads from being recoverable at all (as contended for by the defendant) or whether the maximum cap does not include profit and offsite overheads, and they are recoverable and are in addition to the maximum cap (as contended for by the plaintiff). [1186] The plaintiff submits that the words “excluding profit and overheads” must be given some work to do. Objectively read, it is submitted that the words mean that the parties did not intend for profit and overheads to be included within the “maximum specified in Item 31A”. That is, these words do not limit the recoverability of profit and overheads and simply results in profit and overheads not being constrained by the maximum. [1187] The defendant contends that clause 34.9 and Item 31A read together exclude the recovery of offsite overheads. The defendant submits that in the context of delay damages, profit and overheads are not generally considered to be types of costs which are claimable. But this does not focus on the language of the section but rather on general principles. [1188] The defendant further submits that profit and overheads are in the same category. Profit is not an “actual cost” and offsite overheads are not costs which are “necessarily incurred” by reason of any particular delay to a particular project (unless they are dedicated offsite overheads). The difficulty with this submission is that it is applying the words in the first paragraph of clause 34.9, rather than giving any work to the words in Item 31A. [1189] I find that the correct construction of clause 31A is that contended for by the plaintiff, namely that profits and overheads are not included within the “maximum specified in Item 31A”. It is not to be construed to make profit and overheads not recoverable pursuant to clause 34.9. However, the position contended for by the defendant may ultimately be reached in any event by the consideration of, and operation of, “reasonably” and “necessarily” in respect of particular costs claimed. [1190] The operation of the third paragraph of clause 34.9 is also contentious between the parties. The plaintiff submits that the third paragraph is “self-explanatory” but the parties are in dispute as to whether any delay damages already included in the cost element of the alleged variation are to be deducted from any entitlement to delay damages. [1191] Clause 34.9 relevantly states that “[n]othing in this subclause … shall oblige … to pay delay damages for … the costs of delay which have already been included in the value of a variation or any other payment under the Contract”. The provision is clearly directed at avoiding particular costs being recovered twice. -- 200 of 210 -- 201 [1192] The plaintiff contends that the costs recoverable under clause 36.4(d) being the 10 per cent on account of “profit and overheads” for the variation are a different category of “profit and overheads” to what is claimed under clause 34.9. [1193] The basis for this includes that the costs of the variation are not dependent on whether there has been any delay. The plaintiff submits that the price of a variation, including any uplift, is entirely separate from the damage caused by the delay by reason of the variation. The price of the variation is determined by the work required by the variation, not the delay period that follows. As a result, the plaintiff submits there is no automatic entitlement to recover delay costs where there is an uplift on account of overheads in the price of a variation. [1194] Further, the plaintiff contends that whether there is a need to nevertheless deduct from any amount of delay damages the amount included under clause 36 for overheads depends on what the amount for overheads covered. That is, for example, what did the eight per cent uplift for overheads compensate the plaintiff for. [1195] The plaintiff’s position is that the eight per cent uplift is entirely unrelated to delay damages and compensates the plaintiff for overheads “expended responding to, and managing, the variation itself”. This is in a different category to compensation to the plaintiff for the prolonged overheads it incurred as a consequence of the 117 (or other period established on the evidence) critical delay. [1196] As the eight per cent overhead component of the variation cost is not related to the delay incurred, or even if there is a delay, the plaintiff ultimately contends there should be no deduction of the amount of overheads included in the variation cost. [1197] The defendant contends there should be a deduction to avoid the plaintiff “double dipping”. [1198] This issue depends on the correct construction of the words “the costs of delay” which have already been included in the value of a variation. It is clear that if an amount relates to “the costs of delay” then it should be excluded. [1199] Clause 36.4 sets out how the “price” of a variation is to be calculated. There is a hierarchy of options with the last option (d) stating: “reasonable rates or prices, which shall include an amount equivalent to the percentage set out in Item 32A for profit and overheads”. [1200] That is the relevant provision applied in respect of the assessment of costs for the Mechanical Variation being considered in this matter. [1201] Where a variation results in a “deduction” clause 36.4 specifies that the percentage in Item 32B applies “for profit but not overheads”. Items 32A and 32B state as follows: (a) “32A Variations, the percentage for profit and overheads for additions (subclause 36.4) 10% of the cost of the work comprising the variation.” (b) “32B Variations, the percentage for profit for deductions (subclause 36.4) -- 201 of 210 -- 202 2% of the cost of the work comprising the variation”. [1202] There is nothing in these provisions to suggest there is an automatic overlap and that the eight per cent uplift for overheads includes “costs of delay”. However, it may depend on the particular costs claimed and also what is included in the “reasonable rates and prices” as opposed to just a consideration of the uplift for overheads. [1203] Some rates may include components which would not be recoverable. For example, clause 36.4 also provides for the price of a variation using: “(a) prior agreement; (b) applicable rates or prices in the Contract;” [1204] If these are used to arrive at the price of a variation, consideration would have to be given as to whether any amount was “the costs of delay” and therefore not recoverable as part of any delay damages. [1205] Some assistance is also provided from a consideration of other parts of clause 36 in respect of variations. Clause 36.1 sets out procedures for variations and states that the principal shall only be liable to the contractor for the price of a variation calculated in accordance with subclause 36.4. Under clause 36.1(g) before performing the variation a notice is to be given identifying “the approximate cost of the variation including a detailed breakdown calculated in accordance with subclause 36.4”. [1206] In contrast clause 36.2 provides an alternative variation procedure where the superintendent may give the contractor notice requesting a variation proposal be submitted by the contractor. Certain information is to be provided as part of the variation proposal including: “(b) a detailed breakdown of the price for which the Contractor would carry out the proposed variation, including any delay or disruption costs which may be incurred by the Contractor as a consequence of the proposed variation”. [1207] Clause 36.2 then sets out various options open to the superintendent following receipt of a variation proposal. These include: “… (f) accept the variation proposal and give the Contractor a direction to carry out the variation on the terms contained in that proposal, in which case a valuation under subclause 36.4 shall not be made and the addition or deduction to the contract sum shall be the amount contained in the variation proposal; (g) negotiate different terms with the Contractor upon which the proposed variation shall be carried out; (h) give the Contractor a direction to carry out the proposed variation on the terms contained in the Contract but with a valuation to be made under subclause 36.4 …” [1208] Clause 36.2(b) requires that delay and disruption costs be included in the variation proposal. If that variation proposal is accepted under clause 36.2(g) the price in the -- 202 of 210 -- 203 variation proposal becomes the price of the variation. As a result, the price of the variation would include “delay costs”. Therefore, if a claim for delay damages was also made under clause 34.9 then those “delay costs” would not be recoverable as part of the delay damages. [1209] This is an example of how paragraph (a) of the third paragraph of clause 34.9 may operate. [1210] The practical difficulty in the current matter is identifying with precision what is included in the price of the variation and isolating any cost of delay which is included. There is no direct evidence that there is any component which is a “cost of delay”. [1211] The eight per cent uplift in the price of the variation is to be interpreted as onsite overheads in respect of the actual work done for the variation unless there is evidence that all or part is a “cost of delay”. In the absence of any such evidence, the eight per cent uplift in the price of the variation does not need to be deducted from any delay damages. [1212] There are two further issues in dispute between the parties: (a) Whether the claimed onsite overhead costs are actual costs reasonably and necessarily incurred by reason of the Mechanical Variation? (b) Whether the claimed offsite overhead costs are actual costs reasonably and necessarily incurred by reason of the Mechanical Variation? [1213] Firstly, dealing with the claim in relation to onsite overhead costs. [1214] The plaintiff’s quantum expert, Mr Bell, undertook the following analysis to arrive at the amount claimed for onsite overhead costs: (a) From the plaintiff’s job costs (being the plaintiff’s cost records for the Spring Hill Hotel) Mr Bell used the cost codes to identify costs which were an onsite overhead and time related in the period of the claimed critical delay, 4 October 2016 to 28 January 2017. (b) Mr Bell then calculated the average daily time related cost rate from the identified onsite actual costs based on calendar days for each month in the period of critical delay. (c) Mr Bell then applied the average daily time related onsite cost rate to the number of critical delay days claimed (117) in each of the months. (d) In undertaking this exercise, Mr Bell arrived at the average daily time related cost rates for onsite overheads, which are less than the maximum of $13,148.00 per day. [1215] The defendant objects to this approach on a number of bases, including: (a) Mr Bell only analysed whether the costs recorded were time-related overhead in nature and whether it fell within the period of critical delay. He did not analyse primary documents such as invoices and time sheets to determine whether the costs were reasonably and necessarily incurred by reason of the Mechanical Variation. -- 203 of 210 -- 204 (b) In respect of “reasonableness”, Mr Bell’s only evidence on this in cross- examination was “contractors seldom spend money they don’t have to”. He also confirmed this was speculation as he had not separately investigated whether the costs were reasonably incurred.489 (c) In respect of “necessarily incurred by reasons of the Mechanical Direction”, Mr Bell in cross-examination gave evidence that all he did was identify whether the costs were incurred during the delay period and did not go beyond that task to consider whether they were incurred in the period because of the Mechanical Variation as opposed to other work in the period.490 [1216] The defendant refers to overhead labour costs as an example491 of the deficiencies in Mr Bell’s analysis. Mr Bell was questioned about the costs incurred for Mr Meredyth in his role as “Project Manager”. The total costs for Mr Meredyth for the period were included in the delay costs. Mr Bell did not examine timesheets to see if he was managing any other work in this period. While Mr Meredyth was on site during the period that arose due to the claimed critical delay from the Mechanical Variation, there is no evidence of what Mr Meredyth was doing on site, in particular whether he was involved in the Mechanical Variation or other work.492 [1217] The defendant submits that identifying onsite overhead costs incurred in the delay period is not sufficient to prove an entitlement to delay damages under clause 34.9, in circumstances where: (a) The plaintiff led no evidence that each of the onsite costs it claims would have ceased but for the claimed delay. (b) Further, or alternatively, the plaintiff provided no explanation as to why any expenditure, after the relevant date, was solely related to work required by the Mechanical Direction. (c) The plaintiff did not lead any evidence that the costs were reasonably incurred or necessarily incurred by reason of the Mechanical Direction. (d) In respect of overhead labour costs there was no attempt to identify the functions undertaken during the period of delay to only claim costs necessarily incurred by reason of the delay event. [1218] Overall, the defendant submits that the plaintiff has not addressed the causation requirement of costs necessarily incurred by reason of the compensable cause, in this case the Mechanical Variation. Merely identifying overhead costs incurred during the period of critical delay is not enough. There must be a causal connection between the compensable cause of delay and the costs incurred. [1219] The plaintiff’s response to these criticisms includes: (a) If it is accepted that the Mechanical Variation caused 117 days of critical delay, the Spring Hill Hotel would have achieved Practical Completion 117 days earlier, with the consequence that the plaintiff’s onsite overheads would have been demobilised 117 days earlier. 489 T9-105, L11-22. 490 T10-12, L4-16. 491 Overhead labour costs are a large portion of the costs claimed. 492 T10-14, L29-T10-15, L9. -- 204 of 210 -- 205 (b) It is incorrect to calculate the daily onsite overhead cost based on the costs incurred over the last 117 days of the project. (c) It is irrelevant that it is not possible to attribute the site overheads to the particular work encompassed by the Mechanical Variation. The point is, were it not for the delay caused by the Mechanical Variation, the plaintiff would have had 117 days fewer of costs related to onsite overheads. That is, onsite costs would not otherwise have been incurred. (d) The plaintiff doing other work at the same time does not mean that the costs arising because of the longer duration of the project are not attributable to the delay. [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. [1222] Dealing with the claim in relation to offsite overhead costs. [1223] The plaintiff contends that there is no reason in principle why it is not entitled to its offsite overheads. [1224] Further, the plaintiff submits that there was no evidence that the offsite costs were costs that would have necessarily been incurred irrespective of the delay to the Spring Hill Hotel.493 This, however, does not address the relevant contractual requirement. [1225] Mr Bell’s methodology to quantify the plaintiff’s daily offsite overheads is set out in paragraph 57 of his report.494 Mr Bell’s method included: (a) Consideration of the plaintiff’s financial records for the financial years ending 30 June 2016 and 30 June 2017, as they span the time that the work was performed under the Contract and also the delay period. (b) Identification of certain actual corporate expenses and revenues and then calculated a percentage of total expenses to total turnover, as representing the percentage for offsite overheads for those financial years. 493 Plaintiff’s written closing submissions at [445]. 494 EXP.001.001.1518. -- 205 of 210 -- 206 (c) Calculation of an average percentage of 3.16 per cent for the period of the project. (d) A daily rate for offsite overheads is then calculated as $2,088 per calendar day. [1226] Mr Bell’s report also contains some further comments on the approach including: (a) The percentage is an “all up” percentage, which takes into account revenues from both contract works and variation works. Mr Bell considers that this approach is more conservative as a lesser percentage is obtained than if revenues from variation margins were deducted from the calculation. In any event, variation margins cannot be identified from the details provided.495 (b) The daily rate for offsite overheads was calculated using the Emden formula. Mr Bell notes that this formula is a refinement on the Hudson formula in that it utilises actual head office overheads/profit percentage. The Hudson formula uses allowances for head office overheads which the contractor included in its tender for the contract.496 [1227] The plaintiff claims an amount for all overheads of $1,040,106, which includes both onsite and offsite overheads. The amount claimed for onsite overheads is $794,433.00. The plaintiff’s submissions do not separately indicate the figure for offsite overheads, but logically this should be $245,673 (being the difference between the two figures).497 [1228] The defendant contends that the plaintiff’s claim for offsite overheads is flawed for the same reason that its claim for onsite overheads is flawed: that is, the plaintiff has not proved the costs were reasonably and necessarily incurred by reason of the Mechanical Variation. [1229] The defendant identifies that Mr Bell has calculated, using the Emden formula, the average head office overhead and profit percentage that was achieved overall in the contractor’s business and then applied that to the period of delay. As acknowledged by Mr Bell in cross-examination, this is an apportionment of actual offsite overhead costs incurred by the plaintiff in running its business to the period of delay.498 [1230] The defendant submits that this claim is not for additional offsite overheads incurred by reasons of the Mechanical Variation. It is a claim for a portion of the total running costs of the plaintiff equal to the period of delay.499 [1231] The defendant recognises that under clause 34.9 additional head office costs may be recoverable as offsite overheads where they were incurred by reason of the variation. But costs “to run the contractor’s business that cannot be recovered by projects, due to delayed completion and hence reduction in turnover, that is, a loss of opportunity to recover” would not be recoverable.500 495 EXP.001.001.1518 at [57(b)]. 496 EXP.001.001.1518 at [57(d)]. 497 Plaintiff’s written closing submissions at [473]-[475]. 498 T10-24, L15-25. 499 Defendant’s written closing submissions at [305]. 500 Description taken from Robert Gemmell’s text “Quantification of Delay and Disruption in Construction and Engineering Projects” PRO.071.013.0006 at pp 0003-0006. -- 206 of 210 -- 207 [1232] The defendant relies on clause 47(c) of the Contract as the basis for this second category of offsite overhead costs being not recoverable. Clause 47(c) states: “The Principal shall not be liable to the Contractor for consequential or indirect loss whether arising out of or in connection with the Contract, under statute, in tort (for negligence or otherwise) or any other basis in law or equity.” [1233] Clause 1 defines “consequential and indirect loss” as follows: “means any loss of income, loss of revenue, loss of profit, loss of financial opportunity, loss of business or loss of business opportunity, loss of contract, loss of goodwill, loss of use, loss of production or failure to realise anticipated savings (whether the loss is direct or indirect)”. [1234] The defendant submits that as a result of clause 47(c) the defendant is not liable for any consequential or indirect loss, which is the true character of the plaintiff’s claim for offsite overheads. [1235] Senior Counsel for the defendant cross-examined Mr Bell in respect of this issue, including as follows:501 “Built’s claim for offsite overheads is for costs incurred to run its business, but these costs are not costs directly chargeable to this project?---That’s – that’s a fair assessment, yes. Do you agree that in the abstract some offsite overheads may be dedicated overheads, that is, head office overheads dedicated to supporting onsite resources in a particular project?---They could be. But you haven’t identified any dedicated offsite overheads in this case?---No. I haven’t given any detail of what the overhead costs are comprised of. Now, have you identified any dedicated offsite heads that increased as a result of a mechanical direction?---No. … I understand what you’re saying, but these are costs that would have been incurred, in any event, regardless of the project?---I don’t know that. Well, you don’t know otherwise, do you?---No, I don’t. And you cannot – there’s no basis, or nobody’s provided you any basis to suggest that these are dedicated offsite overhead costs?---I – I have not got any information about whether they would be described in that particular fashion in the way that Mr Gemmell does. Okay. See, what I’m going to suggest to you is, in the absence of that evidence, you can’t say, one way or the other, anything other than 501 T10-25, L33-45-T10-27, L12-29. -- 207 of 210 -- 208 that the head office had costs in running its business?---That – that’s probably a fair assumption. Yes. And you haven’t got any basis – you don’t have any – sorry – you don’t have any basis to suggest that those costs would have been incurred in any event, regardless of the mechanical direction?---I don’t have any insight into what the basis of the incurring of those costs was.” [1236] In light of this evidence from Mr Bell, the defendant says that the claim for offsite overheads is “properly characterised as a claim for the loss of opportunity to earn revenue from other work to support its offsite resources because it[s] onsite resources remained on site longer because of the delay”.502 [1237] This contention is supported by the evidence of Mr Hardiman that the Emden formula used by Mr Bell is an accepted method for calculating overheads for a loss of opportunity claim.503 Such a claim is precluded by clause 47(c) of the Contract. [1238] The defendant alternatively contends that, even if the claim was not precluded under clause 47(c), the plaintiff has not established on the evidence that it lost an opportunity to earn additional revenue to support its offsite overhead resources. [1239] The Plaintiff maintains that Mr Bell’s calculations should be accepted by the Court, including on the basis that: (a) The Emden formula is entirely orthodox. (b) Mr Bell has specific expertise as a delay expert and in delay costing. Mr Hardiman has more general expertise as a quantity surveyor. (c) The plaintiff’s claim for daily costs of overheads, both onsite and offsite, does not exceed the ‘maximum specified in Item 31A”, being $13,148.00 per day. (d) The right to claim delay damages expressly conferred by clause 34.9 is not subject to the limitation in clause 47(c) of the Contract.504 (e) Authorities support the recoverability of offsite overheads without consideration of evidence establishing the loss of opportunity (along the lines of, “[b]ut for this, we would have gone out and got this other contract”).505 [1240] Again, the difficulty in relation to this claim for offsite overheads is whether the amount claimed satisfies the contractual requirement in clause 34.9. The question must be asked in respect of the costs claimed in relation to offsite overheads: are they costs reasonably and necessarily incurred by reason of the compensable cause, being the Mechanical Variation)? [1241] The evidence establishes that the amount claimed by the plaintiff in respect of offsite overheads is a portion of the total running costs of the plaintiff’s business for the period of the delay. There has been no attempt to find a causal connection with the 502 EXP.001.001.1621 at p 1691 [6.2.54]; PRO.071.013.0006 at p 0004. 503 T13-2, L45-T13-3, L3. 504 T15-33, L10-18. 505 T15-33, L34-45; Alfred McAlpine Homes North Ltd v Property and Land Contractors Ltd (1995) 76 BLR 59 at 70; J F Finnegan Ltd v Sheffield City Council (1988) 43 BLR 124 at 134-135. -- 208 of 210 -- 209 Mechanical Variation. It is a purely mathematical exercise – a daily rate of offsite overheads costs has been calculated and then multiplied by the number of days in the delay period. [1242] Equally, there has been no attempt to establish that these costs were reasonable and necessary. It is again a purely mathematical exercise – calculations have been undertaken based on categories of corporate expenses, with no evaluation of the costs incurred. [1243] The plaintiff has the onus of establishing an entitlement to delay costs pursuant to clause 34.9. It has provided evidence in support of its claim but that evidence is not focused on the contractual requirements of clause 34.9. The Contract sets out clearly and unambiguously that the recoverable costs are costs that are reasonably and necessarily incurred “by reason of that compensable cause”. Global claims are not sufficient. [1244] On the evidence it is not possible to be satisfied that the offsite 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. Liquidated damages [1245] The last issue to be considered if the Mechanical Variation is established is the effect of any extension of time on the liquidated damages which the defendant has withheld. [1246] If an extension of time is ultimately granted than a corresponding adjustment to the amount of liquidated damages will need to be made. [1247] One unresolved issue remains: whether any adjustment to the liquidated damages uses the date for practical completion of 10 November 2016 or whether the “correct” date for practical completion of 27 October is used as the starting point for any adjustment as a result of an extension of time? [1248] While the defendant’s claim for additional liquidated damages arising out of its attempt to correct the error was not allowed, it may be open, or even appropriate, to use the revised date in any adjustment of the liquidated damages by the Court. [1249] The defendant’s claim was unsuccessful due to an inability to correct the error as there was no provision in the Contract to allow that to occur. [1250] There is evidence as to the error in Mr King’s report506 and also in the liquidated damages certificate issued by the Superintendent on 20 May 2019.507 [1251] The definition of “date for practical completion” in clause 1 envisages the date for practical completion being adjusted as a result of litigation: “if any EOT for practical completion is … allowed in any … litigation, it means the date resulting therefrom”. 506 EXP.001.001.0858 at pp 0880-0883. 507 PRO.060.001.0095 which was admitted into evidence and can be relied upon for the truth of its contents. -- 209 of 210 -- 210 [1252] The submissions of the parties in relation to the error in the date for practical completion were directed at the defendant’s claim. It may be appropriate that further submissions be provided on this issue if an extension of time is ultimately granted and the date for practical completion needs to be identified for the purposes of working out the period for liquidated damages to be calculated. -- 210 of 210 --