IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION No. 6897 of 2001

BUILDING CASES LIST

KANE CONSTRUCTIONS PTY LTD

(ACN 007 354 396) Plaintiff

v

COLE SOPOV AND ORS Defendants

---

JUDGE: WARREN, C.J.

WHERE HELD: Melbourne

DATE OF HEARING: 21-22, 25, 27-29 August 2003; 2- 3, 9-12, 16-19, 23-26, 30 September 2003; 1-2, 7-10, 14-17, 20-21, 29-31 October 2003

DATE OF JUDGMENT: 30 June 2005

CASE MAY BE CITED AS: Kane Constructions v Sopov

MEDIUM NEUTRAL CITATION: [2005] VSC 237 1st revision 26 July 2005

CONTRACT — Building contract — Construction — Progress certificates — Claims for payment — Evidence and information in support of progress claims — Whether material supporting claims condition precedent to issue of a payment certificate — Validity of late progress claims — Validity of late progress certificates — Assessment procedures — Estoppel — Delay and extension of time claims — Liquidated damages — Right of principal to deduct liquidated damages from progress payments — Role of the superintendent — Undue influence — Suspension of works under the contract — Right of principal to access retention moneys under the contract — Substantial breach — Repudiation — Termination — Alternative rights and remedies available to aggrieved party as a result of repudiation — Contractual damages — Quantum meruit — Whether contractual provision may exclude claim for quantum meruit following termination — Clause 44.10 of AS 2124-1992 — Whether ss.16 and 33 of the Domestic Building Contracts Act 1995 (Vic) apply — Whether s.51A of the Trade Practices Act 1974 (Cth) applies

RESTITUTION - contract – Unjust enrichment – claim for vairiations

DEFENCE AND COUNTERCLAIM — Costs to complete — Claim for defective work — Deduction variations — Whether plaintiff breached contract by serving notice to show cause and suspending works — Costs of completion certificate issued by the superintendent — Extent of completion at the time the plaintiff left building site ---

APPEARANCES: Counsel Solicitors

For the Plaintiff Mr G.J. Digby Q.C. with Deacons

Mr M.J. Stirling

For the Defendants Mr E.N. Magee Q.C. with Pilley & Associates

Mr K.C. Oliver

Pilley & Associates

TABLE OF CONTENTS

INTRODUCTION/OVERVIEW

1 The dispute arises from a building contract between the plaintiff as builder, and the defendants, as owners, in relation to a disused, former industrial building at 158-172 Oxford Street, Collingwood in inner Melbourne. The works under the building contract concern the renovation and extension of a disused boilerhouse that was originally part of the Foy & Gibson empire, the founders of which were famous outfitters and haberdashery manufacturers and merchants in Melbourne during the 19th and 20th centuries. The works involved the internal construction and installation within an existing building of a gallery, office space, restaurant space, basement car park and entrance areas. They included, also, the construction of additional floor levels on the existing roof of the building by way of erection of a steel framework to provide for 14 new residential units including balconies. The design was described for marketing purposes as “industrial boheme” and the project was known as the “Boilerhouse”.

2 The plaintiff and the defendants executed a written contract on 20 August 1999. The agreement followed a tender process when the builder was invited, along with other selected builders, to submit a tender for the building works. The builder was advised by the owners, by letter dated 20 May 1999, that its tender was successful. On 31 May 1999, the builder was given possession of the site and commenced works, although the contractual terms at that time were not finalised. In the following 11-12 week period, up until 20 August 1999, the builder and the owners engaged in negotiations upon the terms of the contract.

3 The works were to be completed in 130 working days. However, a series of delays occurred such that, a year later, the works were incomplete. The builder complained of a long list of matters: insufficient detail in plans and drawings necessitating delays in shop drawings and works, the lack of a suitably qualified superintendent, the refusal or insufficient allowance of extensions of time by the superintendent, the failure to issue certain progress certificates and the failure to allow certain variations 3 T under the contract. These complaints culminated when the builder served a progress claim No. 14 on the owners on 23 August 2000 for the sum of $340,562. The defendants responded to the notice by deducting from the amount claimed liquidated damages and goods and services tax (“GST”), leaving a balance of $132,618.20, which amount the owners paid on 28 August 2000. The builder alleged that the owners breached the contract when progress certificate No. 14 was not paid, in full and on time, and that the liquidated damages were wrongfully deducted from the amount certified. As a consequence, on 8 September 2000, the builder served a show cause notice on the owners as to why the builder should not exercise its contractual rights under cl.44.9 of the contract. The defendants responded on 11 September 2000 and purported to show cause which the plaintiff rejected. On 14 September 2000, the superintendent certified progress certificate No. 15 in the sum of $220,800.

4 On 18 September 2000, the plaintiff suspended the works. The defendants responded with their own show cause notice asserting that the builder improperly suspended the work and claiming undue delays in the work. On 2 October 2000, the owners purported to serve a notice under cl.44.4 of the contract to call up the securities, namely the bank guarantees. The builder asserted that the owners were not entitled to do so and treated the action as repudiatory of the contract. On 6 October 2000, the builder accepted the alleged repudiation and terminated the agreement. From about 29 September 2000 and up until about 2 October 2000, without warning to the owners, the builder removed its plant and equipment and vacated the site.

5 Thereafter, the owners assumed control of the site and set about completion, largely through the engagement of the sub-contractors previously retained by the builder. The builder alleged that at the time of termination the works were completed to the level of 90 per cent. Conversely, the owners alleged that the works were completed to the level of 70 per cent. The owners also alleged that there were extensive rectification works they had to perform to the builder’s works.

6 Arising from these broadly described circumstances, the builder made a series of alternative claims in the proceeding. In summary, they were based on a quantum 4 T meruit, restitution for unjust enrichment, damages for misleading and deceptive conduct in breach of s.52 of the Trade Practices Act 1974 or s.11 of the Fair Trading Act 1999, a claim under s.3 3 of the Domestic Building Contracts Act 1995, and a claim of undue influence by the owners over the superintendent, Mr Jeffery. The builder also claimed variously for amounts under the contract or on account. The quantum of the amounts claimed under the various causes of action was $2,452,253.01, consisting of the works performed and a proportionate share in the value of the renovated building; alternatively, $1,034,728.64 said to be outstanding under progress certificates 14 and 15, if liquidated damages were not deducted or $440,800.00 if such damages were deducted; further, in the alternative, $968,790.95 being for works performed in the nature of variations and the sum of $763,908.00 being for extra costs incurred by certain delays for which the builder held the owners responsible. The builder also sought consequential relief, including declaratory orders.

7 Essentially, the owners denied and disputed the builder’s claims. The owners invoked various provisions of the Domestic Building Contracts Act as a foundation of their disputation of the builder’s claims. The owners rejected progress certificates 14 and 15 as invalid pursuant to certain terms of the agreement. They also relied on certain acts as constituting waiver, estoppel and acquiescence by the builder with respect to progress certificates 14 and 15. In addition, the owners counterclaimed against the builder for the costs of completing the works totalling $1,181,548 and for rectification of defective works performed by the builder totalling $ 325,529.44. The owners also counterclaimed for the deduction of a number of variation amounts and also an allowance with respect to GST obligations.

PLEADINGS

8 In its statement of claim the plaintiff relied upon the contract between it and the defendants, dated 20 August 1999, whereby there was agreement to construct the works for the sum of $3,474,000.00. The agreement was alleged to be in writing and constituted by the document AS 2124-19922 In particular, the plaintiff relied upon cll.3.1, 5, 8.1, 23, 35.5, 36, 40, 42.1 and 42.9 of the general conditions of the agreement and the implied terms that the defendants were precluded from issuing a cl.44.2 notice under the agreement or having recourse to the security while in substantial breach of the agreement.

9 The defendants admitted the agreement, save to allege that it was varied by and subject to the provisions of the Domestic Building Contracts Act and, in particular, ss.15, 16(1) and 33 of that Act. The plaintiff relied upon the letter of 1 August 2000, submitting progress claim number 14 and alleged that the superintendent failed to issue a payment certificate within 14 days after receiving that claim. The plaintiff then relied upon a facsimile, dated 23 August 2000, whereby the superintendent issued certificate number 14 but reduced the amount certified to the sum of $340,562.00. The plaintiff further relied upon the fact that, under cover of letter dated 28 August 2000, the defendants made payment in respect of progress claim 14 in the sum of $132,618.00. As a consequence, the plaintiff alleged that the defendants breached the agreement by failing, pursuant to cl.42.1 of the agreement, to pay to the plaintiff the amount of progress claim 14; alternatively, by failing, pursuant to cl.42.1 of the agreement, to pay the amount certified by certificate number 14 within 14 days; and, in any event, deducting from the amount paid to the plaintiff, in respect of progress claim number 14, the amount of $220,000, purportedly in the nature of liquidated damages.

10 The defendants denied the breach. The defendants further denied that there was an obligation to pay on payment certificate number 14 as issued by the plaintiff or, alternatively, as certified by the superintendent. The defendants alleged that the agreement was varied by the arrangements and conduct under the agreement between the parties, in particular, between the superintendent from time to time and Le Hy Ta on behalf of the plaintiff as its contract administrator. The defendants further alleged in their defence that, by virtue of the conduct of the plaintiff with respect to progress claim number 14 being issued in breach of the agreement, that this amounted to a waiver by the plaintiff of the requirements of cl.42.1 of the agreement, and which waiver had been accepted. The defendants also alleged that an estoppel arose by virtue of the conduct of the plaintiff and the defendants, and also by virtue of s.33 of Domestic Building Contracts Act such that the plaintiff was estopped from alleging non-compliance with respect to payment certificate number 14. The defendants further alleged acquiescence on the part of the plaintiff by its conduct.

11 In addition to denying breach of the agreement as alleged by the plaintiff, the defendants alleged that if they were obliged to pay the amount of either $340,562.00 in respect of progress claim number 14, or obliged to pay the amount of $1,216,546.64 as originally claimed by the plaintiff in respect of progress claim number 14, then such amounts had been superseded and the obligation of the defendants thereto avoided by virtue of payment certificate number 15.

12 The plaintiff further alleged that the defendants, by their agent, the superintendent, failed to grant the plaintiff extensions of time under the agreement to which it was entitled. The defendants claimed liquidated damages arising from and relating to the extensions of time in the sum of $913,000.00. The defendants alleged that the superintendent granted the plaintiff extensions of time totalling 11 days and six hours and otherwise rejected all other claims for extensions of time. The defendants disputed three days of the extensions of time granted by the superintendent and otherwise conceded that the plaintiff was entitled to an extension of time in total of only six days and three hours. The extension of time entitlement conceded by the defendants was contained in a schedule to their defence. The defendants relied upon the provision in the agreement that the works were to be brought to practical completion in consequence of the adjusted date for practical completion of 21 December 1999 and not the date of practical completion as events transpired, namely, 31 March 2002. In consequence, the defendants claimed they were entitled to liquidated damages in the amounts sought consisting of liquidated damages at the rate of $1,100 per day from 22 December 1999 until 31 March 2002, that is, a total of 830 days at $1,100 per day, thereby giving rise to a total sum of $913,000.00. The defendants alleged that the plaintiff wrongfully, and in breach of the agreement as varied by the Domestic Building Contracts Act, claimed and was paid sums over and above amounts to which it was entitled. The defendants alleged that they had overpaid the plaintiff and counterclaimed for the amounts of the over payments.

13 The plaintiff further claimed that the defendants wrongfully served a show cause response dated 11 September 2000 in response to the plaintiff’s show cause notice. The plaintiff alleged that the defendants, by letter 11 September 2000, failed to show reasonable cause because they failed to demonstrate any basis on which the defendants were entitled to deduct liquidated damages from progress claim number 14; they failed to demonstrate any basis on which the defendants were not obliged to pay progress claim number 14; and the letter of 11 September 2000 was not a valid and substantial response to the plaintiff, pursuant to cl.44.9 of the agreement. The plaintiff pleaded that, as a consequence, they were entitled by their notice dated 18 September 2000 to suspend the whole of the work under the agreement.

14 Subsequently, as the plaintiff pleaded its claim, the defendants delivered a show cause notice by a document dated 21 September 2000. The plaintiff pleaded that the defendants’ show cause notice was invalid and of no effect because the defendants were in substantial breach of the agreement at the time, and further, that the defendants’ show cause notice was contrary to the implied term of preclusion from resort to cl.44.2 or the security under the agreement while in substantial breach of the agreement. The plaintiff further relied upon the fact of the suspension of the work by it at the time of the service of the defendants’ show cause notice. It further alleged that it was not open to the defendants to allege failure to proceed with due expedition and without delay, as was alleged in the defendants’ show cause notice, when the plaintiff had made and was entitled to extensions of time to the date for practical completion which had been wrongfully refused or not responded to by the superintendent.

15 As a consequence, the plaintiff alleged that the defendants’ conduct, by the service on 2 October 2000 of the purported notice under cl.44.4 of the contract taking the work out of the hands of the contractor, constituted repudiation of the agreement. The plaintiff also alleged that, in further breach of the agreement, the defendants had recourse to the security provided by the plaintiff under the agreement and that the plaintiff was thereby entitled to accept the defendants’ repudiation and thereby terminate the agreement as it did through its solicitor’s letter dated 6 October 2000.

16 The defendants admitted service of the two show cause notices but denied that its show cause notice was invalid. It further alleged that the plaintiff’s show cause notice was invalid because it failed to state the date by which the defendants were to show cause and wrongfully alleged that the defendants were required to pay an amount of $1,216,546.64; did not raise any allegation against the defendants concerning the deduction of liquidated damages; was issued after the plaintiff agreed to and accepted the amount of payment certificate number 14 as certified by the superintendent, such agreement arising from the plaintiff issuing a tax invoice on 24 August 2000 inclusive of GST in the sum of $374,618.20; the plaintiff did not submit a tax invoice to the defendants for the sum of $1,216,546.64 as required by the GST legislation; and, finally, the notice to show cause was based on claims made in breach of the agreement as varied by the Domestic Building Contracts Act .

17 The defendants further alleged that they, in any event, showed cause pursuant to the terms of the agreement, by their letters to the plaintiff dated 11 September 2000 and 15 September 2000. The defendants relied, further, upon purported admissions by the plaintiff that the sum due to be paid under payment claim number 14 was the sum of $347,618.20 by virtue of the issuing of a tax invoice inclusive of GST on 24 August 2000. The defendants further alleged that they were not required to show cause, in any event, under the show cause notice, as to their entitlement to the deduction of liquidated damages. Further, the defendants alleged that the plaintiff wrongfully purported to suspend the whole of the work under the agreement. The defendants also alleged that the plaintiff, wrongfully, between about 29 September 2000 and 2 October 2000, removed from the works certain site sheds, materials, construction plant and equipment, and temporary works including unfixed materials. The defendants alleged that the removal of the equipment and other items from the site of the works constituted a substantial breach of the agreement.

18 The defendants also alleged that they were entitled to take the work to be completed out of the hands of the plaintiff and denied any wrongful conduct on their part. The defendants alleged that the plaintiff breached the agreement by removing from the site materials and other plant and equipment of which the defendants were the owners. The defendants alleged that, in the circumstances, the plaintiff had wrongfully failed and refused to deliver up such plant and equipment to the defendants and thereby converted such items to their own use.

19 The defendants also alleged, under cl.44.6 of the agreement, to the effect that the works were to be completed by a specified date but in fact were not completed until 31 March 2002. The defendants relied upon a certificate dated 30 August 2002, issued pursuant to cl.44.6 of the agreement, whereby the superintendent certified that the cost incurred by the defendants for the completion of works was $1,181,548.00. The defendants alleged, therefore, that there was a debt due to them from the plaintiff in the sum of $1,401,954.00. The amount was calculated as follows:

Contract Sum $3,474,00.00

Less liquidated damages $ 913,000.00

Amount the defendants claimed would have been paid to the

plaintiff if the work had been completed by the plaintiff

$2,561,00.00

Less the amount actually paid by the defendants $2,781,406.00

Less cost of completion of the works to the defendants $1,181,548.00

Total amount of debt alleged by the defendants against the plaintiff

under clause 44.6 of the agreement $1,401.954.00

20 The defendants further relied upon the issuing by the superintendent of the final certificate, pursuant to cll.42.1 and 42.8 of the agreement, on 28 April 2003, in which the superintendent certified that the amount due by the plaintiff to the defendants was $1,515,199.00. The defendants alleged that the plaintiff had failed to pay the amount of the final payment under the agreement and was thereby indebted to the defendants in the amount claimed. The defendants acknowledged that they received a facsimile dated 5 October 2000 from plaintiff’s solicitor sent to the defendants’ solicitor, informing the plaintiff that the defendants’ conduct was repudiatory. Nevertheless, the defendants denied that their conduct was, in the events which occurred, repudiatory. The defendants alleged that they were entitled to have recourse to the agreement and admitted such recourse.

21 The defendants further alleged that if they in fact repudiated the agreement, then such agreement was affirmed by the plaintiff. Affirmation of the agreement by the plaintiff was said by the defendants to be constituted by the provision of details with respect to progress claim number 14, as provided by the plaintiff to the superintendent on request; the issuing of a tax invoice on 24 August 2000 by the plaintiff; the issuing of progress claim number 15 on about 1 September 2000; the issuing of a notice under cl.44.7 of the agreement by the plaintiff on about 8 September 2000; the purported suspension of the works by the plaintiff in accordance with cl.44.9 of the agreement by notice dated 18 September 2000; the response by the plaintiff to the defendants’ show cause notice thereby affirming the agreement; and the issue by the plaintiff of progress claim number 16 on about 28 September 2000.

22 The plaintiff relied, also, upon a claim based on quantum meruit. The claim was alleged to arise by reason of the termination of the agreement, or its discharge, and the entitlement of the plaintiff to be paid for the work it performed. The defendants denied any entitlement to a quantum meruit on the part of the plaintiff. They alleged that there was no entitlement under the Domestic Building Contracts Act to make such a claim and that it was invalid. The plaintiff further claimed restitution against the defendants. The restitution claim was based upon the plaintiff allegedly suffering a detriment in that it expended labour, materials and money in carrying out works at the instruction of the defendants and the superintendent and that thereby the defendants had been unjustly enriched by receiving the benefit of such works without paying the plaintiff for them. As a consequence, the plaintiff alleged it would be unconscientious for the defendants to receive the benefit of the works. Consequently, the plaintiff claimed that the defendants were obliged to pay it the sum of $2,452,253.01 being the fair and reasonable price for the work; alternatively, in relation to the items of extra work performed by it, the sum of $440,800.00.

23 The defendants denied any unconscionability and denied the claim based on restitution. It further alleged that the basis upon which the plaintiff sought restitution was prohibited by the Domestic Building Contracts Act. The plaintiff also alleged that the defendants breached the provisions of the Fair Trading Act and the Trade Practices Act by engaging in misleading and deceptive conduct. The conduct was said to be constituted by representations made by the defendants to the plaintiff that they would jointly and severally pay the plaintiff for the work performed by it, pursuant to the agreement and in accordance with the terms of the agreement relating to payment and the measure of value of work. The plaintiff relied upon the representations said to be constituted by the agreement, letters to the plaintiff, and oral statements by the superintendent and the defendants about the payment for extra work. The plaintiff alleged that it was induced by, and relied upon, the representations of the defendants, and that it performed the works pursuant to the agreement and upon the instruction of the defendants in the expectation that it would be paid for such works in accordance with the terms of the agreement. The plaintiff further alleged that the first and second defendants, namely, Sopov and Walker, aided, abetted, counselled or procured; alternatively, induced; or further and alternatively, were knowingly concerned in, or a party to, the contraventions under the provisions of the Trades Practices Act . In consequence, the plaintiff claimed damages for misleading and deceptive conduct against the defendants. The defendants denied the allegations of deceptive and misleading conduct.

24 The plaintiff further claimed that it was entitled to be paid upon a quantum meruit for the amount of works and variations, pursuant to the agreement and cll.40.1, 40.3 and 40.5, in the amount of $968,790.95, being on account of having performed the works and variations. It also claimed, pursuant to cl.36 of the agreement, an amount of $763,908.00 in the nature of delay costs. It also claimed, pursuant to cl.35.5 of the agreement, an extension of time to the date for practical completion of 180 days. The plaintiff claimed to be entitled to the amount of the works and variations. Alternatively, the plaintiff alleged that, in breach of cll.23(a), (b) and (c) of the agreement, the defendants had failed to fairly and reasonably determine and certify a reasonable value for the extra work performed by it. In consequence, the plaintiff claimed loss and damage in the sum of $968,790.95. It also alleged that, in the course of performing the works, the plaintiff incurred delay on account of latent conditions, industrial action, directions by the superintendent and inclement weather. As a consequence, the plaintiff claimed an entitlement to a period totalling 180 days in respect of these delays, thereby constituting extensions of time. The particulars of the request for extensions of time were appended to the plaintiff’s statement of claim. In consequence, the plaintiff claimed to be entitled to the sum of extra costs in the amount of $763,908.00. The plaintiff further alleged that the defendants had failed to fairly and reasonably determine and certify the time extension to which the plaintiff was entitled and was thereby entitled to the amount claimed.

25 Further and alternatively, the plaintiff claimed that it was entitled to be paid a sum pursuant to s.53 of the Domestic Building Contracts Act . Alternatively, the plaintiff claimed that, if it was affected by the operation of ss.16 and 33 of that Act, it was entitled to be paid the fair and reasonable price for the performance of the works which the defendants maintained it was not so entitled to be paid for by reason of the said ss.16 and 33 of the Act. Accordingly, the plaintiff sought a variation of the terms of the contract by way of the insertion of the prescribed warning under s.33 of the Act, or alternatively, an order of the court dispensing with the obligation of the plaintiff to comply with the requirements of s.33 of the Domestic Building Contracts Act . The plaintiff further alleged that there was a mutual mistake and thereby the agreement should be rectified to insert the requisite warning under s.33 of the Act. It relied upon correspondence between the parties in support of the allegation of mutual mistake.

26 The defendants denied the claims of the plaintiff with respect to variations, extensions of time and delay costs. If the plaintiff was entitled to extensions of time, the plaintiff applied for such extensions amounting only to 169 days and seven hours and failed to apply for extensions of time for a further 10 days and one hour. In the circumstances, the defendants alleged that the plaintiff was barred, by reason of cl.35.5 of the agreement, from claiming the further 10 days and one hour extension of time sought. The plaintiff also alleged that the defendants unduly influenced the superintendent in about January 2000 and thereafter, in relation to decisions and certification which the superintendent was required to make about the plaintiff’s claims for variations and extensions of time under the agreement. The plaintiff alleged that the superintendent, Jeffery, was unduly influenced by Degenhardt as to the determination of the extensions of time. The plaintiff claimed that it suffered loss and damage in the sum of the delay costs which the superintendent should have certified in respect of the extension of time claims 1-17 and as a result of liquidated damages claimed and deducted by the defendants. The defendants denied the allegations.

27 The defendants claimed entitlement to a set-off of the amount of their counterclaim in extinction of the plaintiff’s claims. They further claimed, by counterclaim, liquidated damages arising from the failure of the plaintiff to bring the works to practical completion by the extended date for practical completion of 21 December 1999. The defendants further claimed loss and damage arising from the failure of the plaintiff to bring the works to practical completion by the extended date.

28 The defendants also made claims by counterclaim for alleged defective work. They alleged that there were terms of the agreement whereby the plaintiff warranted that works would be carried out in a proper and workmanlike manner and in accordance with the plans and specifications set out in the agreement; and that all materials to be supplied by the plaintiff would be good and suitable for the purposes for which they were to be used. That is, the materials would be new; the works would be carried out in accordance with, and would apply with, all laws and legal requirements, including the Building Act 1993 and the regulations under that Act; the works would be carried out with reasonable care and skill; the works and any material used would be reasonably fit for that purpose or of such a nature or quality that might reasonably be expected to achieve that result; and any provisional sum included by the plaintiff in the agreement had been calculated with reasonable care and skill.

29 These allegations were described by the defendants as the “warranties”. The warranties were alleged to be included in the annexure part B of the agreement. The defendants also relied upon ss.8 and 20 of the Domestic Building Contracts Act . The defendants alleged that the plaintiff breached the agreement by breaching the various warranties. By reason of the alleged breaches, the defendants claimed loss and damage. The defendants also claimed deduction variations, thereby reducing the contract price by the amount of $1,024,077.00.

30 The plaintiff sought consequential declaratory relief and damages including, in the alternative, damages pursuant to statute. It also sought rectification to effect compliance with s.33(2) of the Domestic Building Contracts Act and, further, pursuant to s.53 of that Act, provision for a fair price for the work including the extra work.

31 In addition to the denials contained in their pleading, the defendants claimed loss and damage arising from alleged breaches of the agreement. The loss and damage claim was in the nature of loss of interest on the liquidated damages claimed, loss of income and opportunity, loss of interest on income and opportunity, loss of interest on the decreased value of the works and loss of interest on payment of GST. The defendants also claimed that the variations claimed by the plaintiff were based on a provision of the agreement as varied by the Domestic Building Contracts Act and were invalid and/or of no effect.

32 The defendants also alleged that there was a consequential liability to pay GST. As a consequence, the defendants claimed an amount of 10 per cent of any judgment sum in respect of GST liability. They also alleged that they had overpaid sums due under the agreement. In consequence of the denials and the matters alleged, the defendants claimed declaratory relief, damages, liquidated damages, damages for conversion, interest, indemnity, and orders that the plaintiff deliver up to the defendants specified items. The defendants further sought a refund from the plaintiff of the sum of $102,241.00 and other relief in the nature of damages. They also claimed interest.

33 By way of reply and defence to the counterclaim, the plaintiff denied the allegations against it made by the defendants and the defendants’ claims. In particular, the plaintiff made the following allegations:

(1) That from the date of execution of the agreement until early October 2000, the defendants represented, promised or conducted themselves in such a way that the defendants would meet their obligations under the agreement;

(2) It would be unconscientious and, thereby, the defendants are estopped from resiling from the representations and promises made as to compliance by them with the agreement by way of reliance upon the effect of ss.15, 16(1) and 33 of the Domestic Building Contracts Act;

(3) If the defendants are entitled to relief under ss.15, 16(1) an 33 of the Domestic Building Contracts Act then the plaintiff is entitled to an order pursuant to s.87 of the Trade Practices Act or s.41 of the Fair Trading Act to vary the terms of the agreement so that it complies with the provisions of the Domestic Building Contracts Act and ss. 15, 16(1) and 33 of that Act;

(4) Relief under s.53(1), (2) (c) and (e) of the Domestic Building Contracts Act ;

(5) Pursuant to s.15(2) of the Domestic Building Contracts Act , the provisions of the Act do not apply to the agreement;

(6) Relief in light of exceptional circumstances, significant or exceptional hardship by operation of ss.38 (6)(a) and (b) of the Domestic Building Contracts Act , thereby entitling the plaintiff to recover the price of the variations;

(7) The plaintiff submitted progress claim number 14 in the same form as progress claims 1 to 13 in reliance upon information provided by the superintendent;

(8) In consequence thereof, the defendants are estopped from relying upon the plaintiff’s alleged omission to include supporting material in respect of progress claim number 14;

(9) That the final certificate issued by the superintendent was invalid and ineffectual because the superintendent was functus officio and the certificate did not comply with the agreement;

(10) The agreement was in the form of a lump sum contract whereby the defendants were not entitled to adjust the contract sum by reason of an increase or decrease in the actual cost;

(11) The superintendent represented that the variations were authorised;

(12) As a consequence, the defendants are estopped from denying the variations claimed by the plaintiff;

(13) Further, the defendants are estopped from recovering from the plaintiff the sum of any costs saving to the plaintiff which may have arisen by reason of the superintendent requiring or requesting or authorising the variations.

34 In summary, the plaintiff denied the claims of the defendants.

TERMS OF CONTRACT (AND DOCUMENTS INCLUDED)

35 The agreement between the parties was primarily constituted by the written contract signed between the parties dated 20 August 1999 and executed by the plaintiff and the first and second defendants and Stacks Properties Pty Ltd, jointly and severally. The contract consisted of the Australian Standard General Conditions of Contract (AS 2124-1992) together with General Conditions of Tendering and Form of Tender (AS 2125-1992) and Form of Formal Instrument of Agreement (AS 2127-1992). The agreement consisted, further, of attached specifications for mechanical services, electrical services, hydraulic and fire services, and the specific specification for alterations and additions to the Boilerhouse generally referred to as “the specification”.

36 The contract also consisted of documents termed “other documents”, namely, a copy of the tender letter of the plaintiff dated 17 May 1999 and a copy of the defendants’ acceptance by letter dated 20 May 1999. It should be noted that the contract itself referred to the singular when referring to the defendants (“principal” as opposed to “principals”). It is clear however that the word “principal” in the contract referred to any and all of the defendants who were parties to the contract. The contract contained the standard conditions with respect to construction and interpretations and the documents said to constitute the “contract documents”.

37 Clause 5 of the contract was concerned with security, retention moneys and performance undertakings (appendix A). It made provision for security, retention monies and performance undertakings for the purpose of ensuring the due and proper performance of the contract. The form of the security consisted of cash, bonds or inscribed stock.

SECURITY

38 Clause 5.5 was of particular relevance because of the eventual recourse by the defendants to the securities. Clause 5.5 provided:

5.5 Recourse to Retention Moneys and Conversion of Security

A party may have recourse to retention moneys and/or cash security and/or may convert into money security that does not consist of money where –

(a) the party has become entitled to exercise a right under the contract in respect of the retention moneys and/or security; and

(b) the party has given the other party notice in writing for the period stated in the Annexure, or if no period is stated, five days of the party’s intention to have recourse to the retention moneys and/or cash security and/or to convert the security; and

(c) the period stated in the Annexure, or if no period is stated, five days has or have elapsed since the notice was given.

LATENT CONDITIONS

39 Clause 12 was concerned with latent conditions. It defined (cl.12.1) latent conditions as physical conditions on the site or its surroundings which differ materially from the physical conditions that should reasonably have been anticipated. It also provided (cl.12.2) that if, during the execution of the work, the contractor became aware of a latent condition then it was required to give written notice to the superintendent forthwith. There was also provision (cl.12.3) that where delay was caused by a latent condition it may justify an extension of time under cl.35.5 of the contract if it caused the contractor to carry out additional work, use additional constructional plant, or incur extra cost which the contractor could not reasonably have anticipated in which case a variation could be made under cl.40.5 of the contract. Clause 12 is set out in appendix B.

STATUTORY COMPLIANCE

40 Clause 14 of the standard contract provided that the contractor must comply with various specified statutes, including, the Acts of Victoria and other statutory provisions. It further provided that, if a requirement was at variance with a provision of the contract, then the contractor was obliged to notify the superintendent in writing of the difference. If a requirement necessitated a change to the works or method of working as specified in the contract, the superintendent was bound to direct a variation under cl.40.1 of the contract. Specifically, the clause provided that, except to the extent that the contract provided for reimbursement, then the contractor was obliged to bear the cost of compliance with such statutory requirement whether the requirement existed at the time of tendering or not.

41 Clause 14 of the contract is set out in appendix C to these reasons.

THE SUPERINTENDENT

42 The role and performance of the superintendent was a significant issue in the proceedings. Clause 23 of the contract set out the obligations of the superintendent. Clause 24, as amended, provided for a representative of the superintendent from time to time.

43 Clause 23 provided:

“ 23 SUPERINTENDENT

The principal shall ensure that at all times there is a Superintendent and that in the exercise of the functions of the Superintendent under the Contract, the Superintendent –

(a) Acts honestly and fairly;

(b) Acts within the time proscribed under the Contract or where no time is proscribed within a reasonable time;

(c) Arrives at a reasonable measure or value of work, quantities or time.

If, pursuant to a provision of the Contract enabling the Superintendent to give directions, the Superintendent gives a direction, the Contractor shall comply with the direction.

….”

44 Clause 24 provided:

“ SUPERINTENDENTS’ REPRESENTATIVE

The Superintendent shall ensure that at all times there is appointed a registered architect as Superintendent’s Representative under the Contract to exercise the usual duties of a supervising architect but not more than one Superintendent’s Representative shall be delegated the same function at the same time.”

45 Clauses 23 and 24 of the contract are set out in appendix D to the reasons.

CONTRACTOR’S REPRESENTATIVE

46 Clause 25 of the contract provided that the contractor shall personally superintend the execution of the work and have a competent representative present on-site and, if required by the superintendent, at other places at which activities relating to the contract take place.

THE SITE

47 Clause 27 of the contract provided that the principal was to give the contractor possession of the site. It further provided that, if the contractor was in breach of cl.21.1, then the principal may refuse to give the contractor possession of the site or any part of the site until the contractor had complied with the requirements of cl.21. Clause 21 was concerned with insurance arrangements.

THE SET-OUT

48 Clause 28 of the contract provided for the setting out of the works. It required the superintendent to supply to the contractor the information and survey marks necessary to enable the contractor to set out the works and the survey marks specified in the contract. Clause 28.3 was concerned with errors in setting out. It provided that, if the contractor discovered an error in the position, level, dimensions or alignment of any work under the contract, then the contractor was required to immediately notify the superintendent and the contractor would rectify the error unless the superintendent otherwise directed. The sub-clause also provided that, if the error was caused by incorrect information, survey marks or data supplied by the superintendent, then, the cost incurred by the contractor in rectifying the error was to be valued under cl.40.5 as a variation.

MATERIALS AND WORK

49 Clauses 29 and 30 of the contract were concerned with the provision of materials, labour and constructional plant and also the quality of materials.

50 Clause 29.1 provided that the contractor was required to supply everything necessary for the proper performance of its obligations and discharge of its liabilities under the contract. Clause 29.2 provided that the superintendent may direct the contractor not to remove from the site constructional plant or materials. Clause 29.3 provided that the superintendent could direct the contractor to supply particulars of the mode and place of manufacture and the like.

51 Clause 30 required the contractor to use materials and standards of workmanship required by the contract and in the absence of any requirement to the contrary for the contractor to use suitable new materials. Clause 30 also provided that, if the superintendent discovered material or work which was not in accordance with the contract, then the superintendent was entitled to direct the contractor to remove the material, demolish the work, reconstruct, replace or correct the material or work. Clause 30 further provided that, if the contractor failed to comply with such a direction, then provided seven days had elapsed, the principal may have the work performed and the performance of such work was a debt due from the contractor to the principal. Clause 30 further provided that the superintendent may direct a variation pursuant to cl.40 of the contract to be valued, and if the variation causes an increase or decrease in the value to the principal of the works, then regard should be had to that effect; and that if the variation results in the contractor incurring more or less cost than would reasonably have been incurred, then regard was to be had to that difference also.

52 Clauses 29 and 30 are set out in appendix E to these reasons.

PROGRESS AND PROGRAMMING OF THE WORKS

53 Clause 33 of the contract provided that the contractor was to proceed with the work with due expedition and without delay. The contractor was precluded from suspending the progress of the whole or any part of the work except for suspension as provided for under cl.44.9, or as directed or approved by the superintendent under cl.34. Clause 44 related to default or insolvency, and cl.34 related to suspension of the works with respect to insurance arrangements.

54 Clause 33 required the contractor to give the superintendent reasonable advance notice of when it required any information, materials, documents or instructions from the superintendent or the principal. Clause 33 further provided that the superintendent could direct the order and times at which various stages or parts of the work under the contract were to be performed. If the contractor was able to reasonably comply with the direction, then the contractor was obliged to do so. If the contractor could not reasonably comply with the direction, then the contractor was required to notify the superintendent in writing of that fact and provide reasons. Clause 33 also provided that if compliance with the direction caused the contractor to incur more or less cost than otherwise would have been incurred, then the difference would be valued under cl.40.5 as a variation.

55 Clause 33 also provided for a construction program to be constituted as a statement in writing showing the times by which the various stages or parts of the work under the contract were to be executed or completed. Clause 33 further provided that the contractor was precluded from departing from the construction program included in the contract or a construction program furnished to the superintendent. It also provided that the furnishing of a further construction program would not relieve the contractor of any obligations under the contract, including the obligation to not depart from an earlier construction program without reasonable cause.

56 Clause 33 of the contract is contained in appendix F to the reasons.

SUSPENSION OF THE WORKS

57 Clause 34 was concerned with suspension of the works by the superintendent or the contractor. It specifically provided for the superintendent to be empowered to suspend the whole or part of the work if considered necessary because of an act or omission of the principal, the superintendent or an employee or the contractor; for safety reasons; or to comply with an order of the Court. It also provided that the contractor may suspend the whole or part of the work under the contract with the written approval of the superintendent. Clause 34 also provided that any cost incurred by the contractor by reason of a suspension under cl.34 was to be borne by the contractor, but if the suspension was due to an act or omission of the principal, the superintendent, or an employee, then, if the suspension caused the contractor to incur more or less cost than would otherwise have been incurred, the difference was to be valued under cl.40.5 as a variation.

58 Clause 34 is set out in appendix G to the reasons.

TIMES FOR COMMENCEMENT AND PRACTICAL COMPLETION

59 Clause 35 of the contract set out the requirements with respect to the time for commencement of work on the site and, in particular, time for practical completion. Specifically, the clause provided for the contractor to complete the work under the contract to “Practical Completion by the Date for Practical Completion”. The interpretation and definition provisions of the contract, clause 2, provided that the “Date for Practical Completion” meant:

(a) Where the Annexure provides a Date for Practical Completion, the date;

(b) Where the Annexure provides a period of time for Practical Completion, the last day of the period,

but if any extension of time for Practical Completion is granted by the Superintendent or allowed in any arbitration or litigation it means the date resulting therefrom”.

60 The date for practical completion provided in the contract was 10 December 1999. Clause 2 of the contract further provided for the definition of “Date of Practical Completion” as meaning:

“(a) The date certified by the Superintendent in a Certificate of Practical Completion issued pursuant to clause 42.5, to be the date upon which Practical Completion was reached; or

(b) Where another date is determined in any arbitration or litigation as the date upon which Practical Completion was reached, that other date”.

61 “Practical Completion” itself was defined by cl.2 as constituted by the following:

“Practical Completion” is that stage in the execution of the work under the Contract when -

(a) The Works are complete except for minor omissions and minor defects –

(i) Which do not prevent the Works from being reasonably capable of being used for their intended purposes; and

(ii) Which the Superintendent determines the Contractor has reasonable grounds for not promptly rectifying; and

(iii) Rectification of which will not prejudice the convenient use of the Works; and

(b) Those tests which are required by the Contract to be carried out and passed before the Works reach Practical Completion have been carried out and passed;

(c) Documents and other information required under the Contract which, in the opinion of the Superintendent are essential for the use, operation and maintenance of the Works have been supplied.”

62 Clause 35 provided for extensions of time for practical completion. It provided that, where it became evident to the contractor or the principal, then each was obliged to notify the superintendent in writing of details of the possible delay. If the contractor was to be delayed in reaching practical completion and within 28 days after the delay occurred notified the superintendent in writing for a claim for an extension of time for practical completion, then the contractor would be entitled to an extension of time for practical completion. The contractor was only so entitled if a specified cause arose. The causes set out in cl.35.5 were events occurring beyond the contractor’s reasonable control, including industrial conditions and inclement weather; delays caused by the principal, the superintendent or the principal’s employees; actual quantities of work being greater than the quantities specified in the annexure to the contract; latent conditions; variations directed under cl.40; repudiation or abandonment by a nominated sub-contractor; changes in the law; directions by appropriate authorities; delays by specified authorities not caused by the contractor; claims referred with respect to damage to persons and property other than the works; any breach of the contract by the principal; and any other cause which is expressly stated in the contract to be a cause for extension of time for practical completion.

63 The date of practical completion certified by the superintendent was 13 January 2000.

64 Clause 35 further provided for liquidated damages for delay in reaching practical completion. Provision was made that, if the contractor failed to reach practical completion by the date for practical completion, then the contractor was indebted to the principal for liquidated damages at the rate stated in the annexure for every day after the date for practical completion. The annexure to the contract provided for liquidated damages at the rate of $1,100.00 per day. The amount of liquidated damages was unlimited.

65 Clause 35 is set out in appendix H to the reasons.

DELAY OR DISRUPTION COSTS

66 Clause 36 of the contract provided that, where the contractor was granted an extension of time under cl.35, the principal was obliged to pay to the contractor such extra costs as were necessarily incurred by reason of the delay. There was specific provision that nothing in cl.36 obliged the principal to pay extra costs for delay or disruption already included in the value of a variation or other payment under the contract, or limit the principal’s liability for damages for breach of contract.

67 Clause 36 is set out in appendix I to these reasons.

VARIATIONS

68 Clause 40 of the contract was concerned with variations. It provided that the superintendent may direct the contractor to increase, decrease or omit any part of the work under the contract, change it, execute additional work, or demolish or remove material or works that are no longer required by the principal. The contractor was precluded from varying the work, except as directed by the superintendent. Clause 40 provided, further, that the contractor was bound only to execute a variation which was within the general scope of the contract. Upon receipt of a notice from the superintendent advising the contractor of a proposed variation under cl.40, the contractor was required to advise the superintendent whether the proposed variation could be effected and, if so, to advise the superintendent of the effect on the construction program and the time for practical completion and an estimate of the cost, including delay costs of the proposed variation. There was provision that the principal would reimburse the contractor for the reasonable costs of complying with the requirements of cl.40.2. In the absence of agreement between the superintendent and the contractor, the variation was to be valued under cl.40.5 of the contract which specified the particular valuation methods to be used.

69 Clause 40 of the contract is reproduced in appendix J to the reasons.

CERTIFICATES AND PAYMENTS

70 Clause 42 set out the regime for payment claims, certificates, calculations and time for payment. It also provided for a certificate of practical completion and a final payment claim. Broadly, cl.42.1 provided a structure whereby the contractor was to deliver claims for payment referred to as “payment claims”. Within 14 days after receipt of a payment claim, the superintendent was obliged to issue to the principal and to the contractor a payment certificate stating the amount of the payment which, in the opinion of the superintendent, was to be made by the principal to the contractor. The superintendent was required to set out in the certificate the calculations employed to arrive at that amount.

71 Clause 42 further provided that, if the contractor failed to make a payment claim, then the superintendent could nevertheless issue a payment certificate. The clause further provided that if, within 28 days after receipt by the superintendent of a claim for payment, or within 14 days of issue by the superintendent of a payment certificate (whichever was the earlier), the principal was bound to pay to the contractor an amount not less than the amount shown in the certificate as due to the contractor. If no payment certificate had been issued, the principal was bound to pay the amount of the contractor’s claim. Clause 42 further provided that a payment made pursuant to cl.42.1 did not prejudice the right of either party to dispute the amount under cl.47, the dispute resolution clause of the contract.

72 Clause 42.5 also provided for the certificate of practical completion. It required the contractor to give the superintendent at least 14 days notice of the date on which the contractor anticipated that practical completion would be reached. It further provided that, within 28 days after the expiration of the defects liability period, the contractor was to lodge with the superintendent a final claim endorsed “Final Payment Claim”. Clause 42 made provision for interest on overdue payments. It provided that if any moneys due remained unpaid after the expiration of the date for payment, then interest was to be paid at the rate of 5 per cent above the National Bank of Australia’s 90 day bill rate. Clause 42.10 provided for set-offs by the principal, namely, the deduction of moneys due to the contractor where owed to the principal. Clause 42.10 also provided that the principals, subject to cl.5.5, may have recourse to retention moneys and, if they are insufficient, then to security under the contract.

73 Clause 42 is set out in appendix K to the reasons.

DEFAULT

74 Clause 44 set out the applicable provisions in the event of default. It provided that if the contractor committed a substantial breach of contract and damages was not an adequate remedy, then the principal may give the contractor a written notice to show cause. Substantial breaches were defined to include (but were not limited to) suspension of work, failing to proceed with due expedition and without delay, failing to lodge security, failing to use the materials or standards of workmanship required by the contract, failing to comply with a direction of the superintendent, failing to provide evidence of insurance, and other related matters. Clause 44 entitled the principal to serve a show cause notice and specifically provided that such notice must:

(a) state that it was a notice under clause 44;

(b) specify the alleged substantial breach:

(c) require the contractor to show cause in writing;

(d) specify the time and date by which the contractor must show cause, but not less than seven days after the notice is provided;

and

(e) specify the place at which cause must be shown.

If the contractor failed to show cause then the principal was entitled to give notice in writing to the contractor to take out of the hands of the contractor the whole or part of the work remaining to be completed, or to terminate the contract. Upon giving such notice, the principal may suspend payments to the contractor until the date on which the contractor showed reasonable cause, the principal took action under cl.44, or the date which is seven days after the last day for showing cause. If the principal exercised a right under cl.44, then the contractor was not entitled to any further payment in respect of the work taken out of its hands unless a payment became due to the contractor as otherwise provided under clause 44. Where the principal took the work out of the hands of the contractor pursuant to cl.44, then the principal was obliged to complete the work and, as reasonably required, facilitate completion of the works. If the principal took such possession, then it was obliged to maintain plant and other equipment on-site owned by the contractor, and on completion, return it to the contractor.

75 Clause 44 further provided that, where work was taken out of the hands of the contractor and completed, the superintendent was obliged to ascertain the cost incurred by the principal in completing that work and issue a certificate to the principal and the contractor specifying the amount of the cost. If the amount of the cost incurred by the principal was greater than the amount that would have been paid to the contractor if the work had been completed by it, then the difference became a debt due from the contractor to the principal. If the cost was, in fact, less than the amount that would have been paid to the contractor, then the difference became a debt due from the principal to the contractor.

76 Clause 44 also made provision with respect to a default of the principal. It provided that, if the principal committed a substantial breach of contract and the contractor considered that damages was not an adequate remedy, then the contractor may give the principal a written notice to show cause. Substantial breaches were defined to include (but were not limited to) –

(a) failing to make a payment;

(b) failure by the superintendent to either issue a certificate of practical completion or give the contractor, in writing, reasons for not issuing the certificate;

(c) failing to produce evidence of insurance;

(d) failing to give the contractor possession of sufficient of the site;

(e) failing to lodge security in breach of clause 5.

Where the contractor served a show cause notice under cl.44.8, it was required to include in the notice:

(a) a statement that it was a notice under cl.44;

(b) specify the alleged substantial breach;

(c) require the principal to show cause;

(d) specify the time and date by which the principal must show cause;

(e) specify the place at which cause must be shown.

In the event of the contractor exercising its rights and the principal failing to show cause, the contractor, by notice in writing to the principal, was entitled to suspend the whole or any part of the work under the contract. The contractor was entitled to recover from the principal any damages incurred by it arising from the suspension. In the event of the contract being terminated pursuant to cl.44, then the rights of the parties were stipulated under the contract, as they would have been at common law, had the defaulting party repudiated the contract and the other party elected to treat the contract as at an end and recover damages.

77 Clause 44 is set out in appendix L to these reasons.

WAIVER

78 Clause 48 of the contract provided that, except as provided at law or in equity or in the contract, none of the terms of the contract were to be varied, waived, discharged or released, except with the prior consent in writing of the principal in each instance.

SUMMARIES OF WITNESSES’ EVIDENCE

79 The evidence in the trial was substantial, complex and technical. A series of witnesses were called on both sides, mostly technical and expert. All witnesses provided witness statements, some of which ran to hundreds of pages. The witnesses were subject, in most instances, to extensive cross-examination and re-examination. Much of the viva voce evidence involved cross-referencing to multiple specifications, plans, shop drawings and drawings. The documentary evidence consisted of 72 court book volumes, over 100 volumes of lever arch folders and numerous sets of plans and specifications. The documents before the court and the transcript ran to thousands of pages. The trial ran for just over 10 weeks. Without the benefit of witnesses’ statements and the requirement of written submissions, both opening and closing, the duration of the trial would have been many many months. Given the magnitude of the evidence and submissions, and in light of the observations of the Court of Appeal in Fletcher Construction Australia Ltd v Lines MacFarlane & Marshall Pty Ltd (No. 2) , I have considered that evidence and the submissions in considerable and intensive detail. I have borne in mind all the evidence in reaching my findings. Where I do not specifically refer to or recite the evidence of an individual witness, or the detail of a particular document, I have not disregarded or overlooked that matter. Ultimately, in a substantial and technical matter of this type, being a long and hard fought building case, the summary of evidence and submissions and the analysis of the evidence must necessarily be limited.

PLAINTIFF’S EVIDENCE

80 The main witnesses called for the plaintiff were:

(1) Tivendale

• the project manager: his evidence was principally concerned with extension of time claims, termination of contract, the role of the superintendent, the set-out and structural steel issues, defective works and rectification works and issues relating to Kane’s quantum meruit claim.

(2) Forster

• the chairman of directors of the plaintiff company: his evidence was concerned with the contract itself, termination, the role of the superintendent, extension of time claims and various other matters.

(3) Lucas

• the finance director of the plaintiff: his evidence was concerned with termination and other various matters.

(4) Isaacson

• the construction director of the plaintiff: his evidence was concerned with the contract, termination, and the role of the superintendent.

(5) Skarajew

• the site foreman of the plaintiff: his evidence was concerned with termination, the role of the superintendent, the set-out and structural steel issues, the extension of time claims, the variations and the deduction variations.

(6) Williamson

• another site foreman: his evidence was concerned with termination, the role of the superintendent, the set-out and structural steel, the extension of time claims, the variations and other various matters.

(7) Omond

• another site foreman of the plaintiff: he was concerned with termination, the role of the superintendent, the set-out and structural steel, extension of time claims, variations and other matters.

(8) Swarbrick

• the façade foreman: he was concerned with matters relating to the contract, the role of the superintendent, the variations and the deduction variations.

(9) Qi Shao

• the draftsperson employed by the plaintiff to prepare the shop drawings: her evidence was concerned with the shop drawings.

(10) Dordevic

• the steel engineer engaged by the plaintiff: his evidence was concerned with the shop drawings and set-out.

(11) Thomas

• the quantity surveyor engaged as an expert by the plaintiff to give evidence about the quantum meruit assessment: his evidence was principally concerned with the contract, termination, the role of the superintendent and the extension of time claims.

(12) Lynas

• an expert engaged by the plaintiff for the purposes of the trial: his evidence was concerned with the extension of time claims.

(13) Lee

• an expert engaged by the plaintiff concerned with variations.

(14) Gilfillan

• a further expert engaged by the plaintiff: his evidence was concerned with the variations, the deduction variations and aspects of the Domestic Building Contracts Act.

81 There were “pair” expert witnesses in most instances. The expert witness opposed to Lynas was Degenhardt; the expert witness opposed to Lee was Goodwin; and the expert witness called by the defendants to deal with the evidence of Gilfillan was Permewan.

DEFENDANTS’ EVIDENCE

82 The principal witnesses called by the defendants were:

(1) Sopov

• the owner of the site: his evidence was concerned with virtually all matters.

(2) Jeffery

• the superintendent of the site engaged by the defendants: his evidence was concerned with most aspects of the claim.

(3) Brown

• a mechanical consultant retained by the defendants in relation to the set-out and structural steel issues.

(4) Long

• a structural engineer retained by the defendants who gave evidence with respect to the set-out and structural steel.

(5) Pandov

• who made a video recording of the site which was relevant with respect to the topic of termination.

(6) Degenhardt

• an expert witness called by the defendants with respect to the superintendent’s role, extension of time claims and the set-out and structural claim issues.

(7) Goodwin

• an expert called by the defendants in relation to the deduction variations.

(8) Permewan

• an expert called by the defendants in relation to the variations.

83 In light of the breadth and technical nature of the much of the witnesses’ evidence, it is appropriate to set out in summary the evidence given by each of the main witnesses.

PLAINTIFF’S EVIDENCE

(1) TIVENDALE

Tivendale’s Role as Project Manager

In his original witness statement dated June 2003, Gary Charles Tivendale stated that he commenced working as a contractor with the plaintiff, Kane Constructions (“Kane”), in the capacity of contract administrator in 1994 and became a project manager in 1995. He is a graduate of the University of Melbourne, obtaining his Bachelor of Building degree in 1983.

84 In May 1999, when construction commenced on-site, Tivendale commenced work on the Boilerhouse project as Kane’s project manager. From that time until August 1999, he was involved in contract negotiations with Mr Jonathan Forster, the Executive Chairman of Kane.

85 Although project manager for the duration of the works, Tivendale’s presence onsite was not constant throughout the project. From May 1999 to February 2000, he was on-site approximately two or three times per week, for about an estimated two to four hours each time. After February 2000, when he commenced working on the Boilerhouse project full-time, Tivendale attended the site on a daily basis, spending approximately 15 to 20 hours per week on-site.

86 According to his original witness statement, Tivendale’s primary functions and responsibilities in the project were as follows. He assisted Kane personnel in communicating and handling daily communications with the principals, superintendent and sub-contractors; he prepared and submitted extension of time (“EOT”) claims to the superintendent; he supervised the letting of the sub-contracts; he assisted the contract administrators, first Mr Short with progress claim 1 and secondly, Le Hy Ta, with respect to progress claims 2- 15. He was responsible for project planning and wrote Boilerhouse programs 1 through to 11, which set out the sequence of the works to be done and anticipated the date of practical completion. Other tasks involved general project management.

87 In performing his duties, Tivendale was in regular communication with the superintendent; Le Hy Ta (Kane’s contract administrator for the majority of the project); the principal (Mr Cole Sopov); Williamson, Omond & Skarajew (Kane’s onsite managers); and Swarbrick (façade foreman).

88 For the period May 1999 through to December 1999, Tivendale said in evidence that he kept a paper diary recording site progress. Tivendale said that this diary has since been lost by him. For the period January 2000 through to December 2000, Tivendale used a palm pilot to record attendances at meetings and other details in relation to the project, which presumably he also used in the preparation of evidence. Tivendale also retained and used three files in relation to the Boilerhouse project, some or all of which were used in the preparation of his three witness statements. These included file number 75, documents and handwritten notes in relation to the sub-contractor’s works; file number 76, which contained information on-site meetings, general information and handwritten notes made at the site meetings; and file number 77, which included copies of requests for further information (“RFI”s), drawings and handwritten notes.

89 During cross-examination, Tivendale’s abilities as project manager, particularly with respect to the programming task, were called into question. For instance, counsel for the defendants, Mr Magee, suggested to Tivendale that he had consulted Williamson (the façade foreman) about drawing up programs for the project because he himself “hadn’t sufficient experience to draw the Boilerhouse Program 1 without consulting him”. Tivendale flatly rejected the suggestion that his programming was somehow “faulty”, however he said that he had requested Williamson’s involvement because he desired his input as the construction manager.

90 During re-examination, Tivendale outlined his extensive previous experience in performing similar tasks on other sites. He also pointed out that the lack of feedback on the time extensions made it extremely difficult to program the project as contemplated under the contract. In particular, he said that it put him in an uncertain position as to when the date for practical completion would be.

91 Tivendale’s relationship and behaviour with the superintendent and the principal during the project was also questioned. At trial, it was put to him that he demonstrated a distinct inability to follow clear instructions, with one example put forward being his failure to construct a beam in accordance with the plans. During cross-examination, counsel for the defendants also asserted that it was Tivendale’s practice to “go behind the superintendent and Mr Sopov’s back, to try and get calculations from the engineer to justify [his] conduct”. Whether or not one accepts the suggestions of the defendants in this respect, what is clear is that at some stage of the project, perhaps around the beginning of 2000, relations between the project manager and the superintendent, and between the project manager and the principals, had deteriorated to a point where there was apparently little effective communication between the parties.

The Superintendent

92 During Tivendale’s evidence, the work performed by the superintendent, Mr Trevor Jeffery, came under intense scrutiny. In essence, it was Kane’s position that it was the responsibility of the defendants to appoint a competent supervisor, which Kane claimed did not occur. Tivendale, during both cross-examination and re-examination, asserted numerous times that the delays to the project were not to be attributed to himself or to Kane; rather, they stemmed from two particular sources. First, the claimed deficiencies in the contract documents, and second, the alleged incompetency of the superintendent in that role. Moreover, Kane held the superintendent responsible for the claimed discrepancies in the contract drawings and documents since they were in fact issued by him.

93 Tivendale gave evidence that construction problems often arose as a consequence of works being performed according to the contract drawings which were later found to be “unworkable”. He said that many of the construction problems encountered were as a result of what he believed to be discrepancies or “deficiencies” in the contract drawings that resulted in some extension of time claims being issued. Kane contended that the difficulties with the contract drawings and documents had a disastrous flow-on effect.

94 For instance, the situation was compounded by the refusal of the superintendent to respond or allow Kane’s EOT claims, which Tivendale said made the programming task on the Boilerhouse project considerably more difficult. He stated that the consequence of the EOT’s not being answered in a timely fashion was that he had to assume that the EOT’s submitted would be approved, since he had not received feedback and therefore did not have any other date to work from. He stated that this put Kane in an “invidious position”, preventing them from programming the works in light of a properly determined date for practical completion. As proof of their claims with respect to the response times for the EOT’s, counsel for the plaintiff tendered a document, prepared by the witness, which was a table showing the dates of EOT submissions and assessment dates.

95 Tivendale also noted that there were numerous occasions when Kane did not receive timely or accurate responses to RFIs, despite the fact that it was important to the efficiency of the project that RFIs be promptly responded to by the superintendent. As evidence of this, Tivendale pointed to several occasions where Kane apparently submitted RFIs to the superintendent without receiving a response for several weeks. According to Kane, slow response times to both EOTs and RFIs held up progress on the project works.

96 According to Tivendale, Jeffery also lagged in his response times to claimed variations, which along with the RFIs and EOTs not responded to, helped to create unpleasant relations between the contractor and sub-contractors on-site. When questioned by Kane’s counsel about the causes of the discord which apparently existed on-site between Kane and the sub-contractors, Tivendale stated that one of the reasons for this was that “[w]e had the electricians, the plumbers, the plasterers and other sub-contractors whose variations were not being looked at, not being approved, not being answered, and it does cause a lot of grief to a sub-contractor who doesn’t know what he is going to get paid for.” Tivendale went on to say that the subcontractor often did not differentiate between whether the lack of response was due to Kane or the superintendent. Tivendale said that the anxiety and concern over whether the sub-contractors were going to get paid for extra works was aimed at Kane who had hired them and who had the most contact with them.

97 For their part, the defendants claimed that the nature of the relationship between the parties on-site had little to do with the superintendent or the owners; rather, Kane as the main contractor was responsible for creating a harmonious and productive atmosphere which had nothing to do with them.

Progress Claims Procedure

98 Tivendale stated that Le Hy Ta was primarily responsible for the preparation of progress claims 2-15, the first one having been prepared by Short. It was Tivendale’s responsibility however to check each claim before submission to the superintendent. Tivendale stated that this would occur on or about the 28th day of each month of the project, where Tivendale would discuss the contents of each claim prepared by Le Hy Ta, meaning that Tivendale was intimately aware of all the details claimed by Kane for each claim submitted.

99 Following the issuing of each progress certificate, Jeffery requested Kane to sign a statutory declaration certifying that all sub-contractors had been paid. Tivendale signed and dated most of them, since payment from the superintendent was apparently “contingent” upon signing. The few not signed by Tivendale were signed by Le Hy Ta in his absence.

100 Tivendale also asserted in his original witness statement that at no time did he indicate to Jeffery that he would agree to a varied payment or claims procedure, as alleged by the defendants in their amended defence and counterclaim. Tivendale flatly rejected this suggestion, stating that he “did not engage in any discussions with Jeffery in relation to that matter”.

Progress Claim 14

101 Le Hy Ta submitted progress claim 14 on or about 1 August 2000 following Tivendale’s review of it. For progress claim 14, Kane claimed the sum of $1,216,546.64. Certificate 14, issued by the superintendent on 23 August 2000 in response, certified $340,562 (together with GST) in Kane’s favour. The same day, Tivendale stated that he signed the statutory declaration certifying that the subcontractors had been paid so that Kane could receive payment on the certificate; although according to him, this was not necessarily the case. By letter dated 28 August 2000, Kane was then informed that liquidated damages of $220,000 would be deducted from certificate 14, meaning that Kane would in fact receive only $120,562 as a result of the lodgement of the certificate. A revised certificate 14, advising Kane to that effect, was dated 6 October 2000.

Progress Claim 15

102 Progress claim 15 claimed the sum of $1,231,742.81. This sum did not appear to include the $340,562 which had been originally been certified in Kane’s favour in response to progress claim 14. Certificate 15, issued in response to progress claim 15 on 14 September 2000, certified $220,800 in Kane’s favour. This certificate apparently did not deduct or make any reference to the defendants’ entitlement to liquidated damages. The revised certificate 15, dated 6 October 2000, certified less than this amount; this time being $187,000 in Kane’s favour. Kane did not prepare a tax invoice with respect to certificate 15, nor did the contractor receive any payment in relation to it.

103 In his evidence, Tivendale maintained that the superintendent often revised both progress claims 14 and 15 on the basis of what had been “physically done”, ie particularly with respect to the large amount claimed as a result of the sub-contract with the plastering firm, MTK (a company no longer in existence). During reexamination, Tivendale agreed that the superintendent undertook “the process of valuing what he thought the actual value and progress of the works on-site was, from month-to-month, by reference to what was physically going on and what materials were being delivered to the site”. However, Tivendale asserted that Jeffery’s method of breakdown in this respect was a mistake, stating that “[o]ften, these breakdowns don’t relate specifically to the contracts that we let, because there is some up and down in those figures. But at the end of the day we are paid the contract amount, so we proceed for our progress claims based upon an original break-up given at the time of tender”. Hence, the builder was unable to claim where the amounts exceeded breakdown amounts given at the time of tender.

Delays and Delay Costs

104 According to Tivendale, the delays experienced by the builder on the Boilerhouse site were a result of two basic and inter-related problems: firstly, what the witness variously called the “deficiencies” or the “discrepancies” in the contract drawings and documents. The second point concerned Tivendale’s view that delays often came about due to the incompetence of the superintendent hired by the defendants, whose responsibility it therefore was for the delays flowing from Jeffery’s asserted slow response times to EOT claims, RFIs and variation claims. Tivendale clearly thought that the superintendent (and through him ultimately the defendants) was responsible for the issuing of the flawed contract drawings and documents in the first place.

105 On the other hand, during Tivendale’s evidence, counsel for the defendants, Mr Magee, suggested that the delays experienced during the project were at least partially the result of “poor co-ordination” of the tradespersons by Kane. It was inferred that it was at least partially for this reason that Kane suffered poor relations with the sub-contractors. Mr Magee extracted comments from a document written by representatives of Custom Chassis (who installed the handrails) as evidence of this. Tivendale rejected this evidence however, stating that they (Custom Chassis) were “not in a position to comment”. During re-examination, Tivendale clarified what he meant by this, namely that Custom Chassis were not aware of the EOT claims and the other discrepancies and difficulties being experienced on-site.

106 During cross-examination, Mr Magee also referred the witness to the sub-contractor, Australian Aluminium Shop Fitting Pty Ltd (“AAS”), and their complaints to Kane about their inability to access the site, inferring this indicated a lack of co-ordination on Kane’s behalf which led to delays (and therefore presumably costs claimed by Kane for the delays caused). However, during re-examination, Tivendale asserted that this access problem was “impossible to avoid” and, in any case, it occurred over only a short period of time and did not affect the progress of overall works on the critical path.

107 According to Tivendale, the sub-contractors blamed Kane as their employer, when the “real” problems – which they were unable to see given their lack of contact with the superintendent or the principal – stemmed variously from the incompetence of the superintendent and the deficiencies in the contract drawings and documents.

108 As for delay costs, the contract provided by Sopov (AS-2124-1992 to replace the former JCC-D) stated that the daily rate for delays was nil. Tivendale said that he made it clear to Sopov, at a meeting between the parties held on 30 June 1999, that Kane was not prepared to accept nil and that they would need to agree on a daily rate. At that time, Kane had already commenced on-site and had already encountered delays in early June 1999 (basement rock forming part of EOT claim no.1). Tivendale said that Sopov and Hampton had allegedly agreed to a margin of 10 per cent for delay costs incurred, which was now denied by the defendants. Tivendale, and it appears Kane, subsequently relied upon this discussion and not upon the Domestic Building Contracts Act .

Extension of Time Claims

109 As of 13 September 2000, the builder had amassed a claim for $660,135.00 in costs associated with EOTs. This equates to the original contract amount of day-to-day running costs of the project increasing in the order of 550 per cent. Nevertheless, the superintendent’s assessments of the EOTs – all of which were prepared and submitted by Tivendale – approved just $5,675.00 as acceptable costs, or in other words, less than 1 per cent of costs claimed.

Extension of Time Claim 1

110 For EOT 1, Kane claimed 12 days delay as a result of two major items or incidents. With regard to Item 1 of the claim, Tivendale said that Kane was delayed eight days when it encountered rock whilst excavating the lift-overrun pit. During crossexamination, Mr Magee noted that the pit was not “very big”, thereby inferring that the claim for eight days was excessive. Tivendale agreed that the pit was only about 11 metres of excavated material (under 2 metres square, about 1.5 - 2 metres deep), however he said that this event delayed Kane for the period stated. When an outside expert, Mr Degenhardt, was brought in to assess this item of the EOT claim, he stated his belief that it would take in fact only four days to remove the rock. At trial, it appears that the defendants adopted this assessment of four days, despite the superintendent’s certification of only three days in SA152.

111 With regard to Item 1 of EOT 1, Tivendale was also cross-examined on Kane’s claim for delay with regard to the pumping arrangements which had to be made as a result of damage to a water service pipe during concrete cutting to the ground floor slab on 4 June 1999. Tivendale explained that the pit did not have to be tanked, therefore saving time, because they put forward an alternative to use as a waterproof additive, called Xypex, as added to the concrete that they were using for the base and sides of the lift and footings in the basement. However Tivendale stated that they were still required to pump water out of the pit from 4 June 1999 up until 22 June 1999, which was “not work required under the contract”. Tivendale claimed that all of this work was unforeseen extra work which impacted on Kane’s building progress overall.

112 Kane also claimed that the removal of material from the ground floor entry, classified as Item 2 of EOT 1, caused a delay of four days to the critical path of the project. According to Tivendale, this was necessary so that the builder could establish the appropriate foundations for the ground floor entry. When cross-examined on why he thought the ground floor entry and the ramp were “critical” to the completion of the project (an assertion denied by the defendants), Tivendale responded that, as per the program, Boilerhouse 1, the sequence and structural modification required that “you work your way up through the building before you could put… the structure on top of it”. While the witness confirmed that the stair was not a part of the structural modifications, he stated that the excavation of the stair one footings was; notwithstanding that Mr Magee suggested to Tivendale that the superintendent and (the defendants’ expert) Degenhardt claimed that the excavation of the stair one footings was not in fact critical to the progress works.

113 During Tivendale’s evidence, much of the witness’ cross-examination on the subject of EOT’s 1 to 18 centred around the topic of what each party considered was or was not on the “critical path”. With regard to EOT 1 particularly, perhaps because it was the first EOT under cross-examination, Mr Magee queried the witness repeatedly in relation to the “critical path”.

114 In relation to EOT 1, Kane asserted one day concurrent delay with regard to the ramp (included as a part of Item 2 of that claim). Tivendale maintained that the ramp was critical because, as with the removal of material from the stair footings, there was a sequence to be followed in order to keep the concretor on-site. Mr Magee asked the witness why he said that the ramp was critical when it was not critical to the progress of the building at that point, putting it to the witness as follows: “You are saying that it is critical because of some arrangement with the sub-contractor. Is that what you are saying?” Tivendale replied in the affirmative, saying that: “It was the sequence of work that we carried out on-site”. When asked who had the ultimate call in determining the sequence, Tivendale responded that it was a joint decision between himself and the engineer. During re-examination, Tivendale confirmed that if the concretors were prevented from doing their job at that time, then it could be difficult to get them back on-site to do the job as required, and further delay would result.

115 In short, Tivendale considered items to be critical because that was what the sequence on the contract documents and drawings dictated; not because it actually had to be physically “done” at that particular point. This set the tone for Kane’s apparent attitude generally in relation to delays and the “critical path” for the duration of the case.

Extension of Time Claim 2

116 For EOT 2, Kane claimed two days as a result of industrial action. The claim for two days was accepted by the superintendent, however not by the defendants. The two days in contention are 7 July 1999 and 14 July 1999. The defendants refused to allow the days for the reason that, according to them, the works were not affected by strike action on 7 July 1999 and that three hours work was done on-site on 14 July 1999.

117 At trial, both parties agreed that the only dispute with regard to industrial action was how it was to be treated under the contract. In this way, it was left to the court to determine the issue based on the contract.

Extension of Time Claim 3

118 For EOT 3, Kane claimed three days and two hours. There were two items categorised by Tivendale in attachment 1 of his original witness statement that comprised the claim. The first item was also with respect to industrial action. As noted above in relation to EOT 2, that point was not argued in court and it was agreed between the parties at trial that the only dispute with regard to industrial action was how it was to be treated under the contract.

119 With regard to the second item of EOT 3, Tivendale stated that the superintendent directed them to cut the level 2 slab pursuant to the superintendent’s direction SA21. This in turn, he claimed, delayed structural alterations to the chimney face and office stair void, and delayed the scaffolding from being moved down. This claim was wholly rejected by the defendants.

Extension of Time Claim 4

120 For EOT 4, Kane claimed 47 days when it was submitted; however, Tivendale, in attachment 1 of his original witness statement, made reference to two days less than this, namely, 45 days. Counsel for the defendants spent a great deal of time crossexamining the witness on this particular EOT, as this claim was by far the largest of the 18 extension of time claims. Delay costs claimed by Kane for EOT 4 and submitted on 8 October 1999 (the same day the Boilerhouse 3 Program was issued by Tivendale) amounted to $144,000. The claim was mainly in relation to the structural steel and setout.

121 In evidence, and to assist in analysis of Kane’s claim, Tivendale produced a structural steel shop drawing registry (the “shop drawing registry”) and EOT 4 Delay and As Built program (the “As Built”). The shop drawing registry was produced by Tivendale from notations made on the workshop drawings provided by DVP Engineering Pty Ltd (“DVP”), including handwritten notes advising when specific shop drawings were provided for manufacture and notes on when the steel fabrication was completed. The “As Built” was designed to demonstrate the impact of structural steel events on the contract program, drawn from DVP workshop drawings, shop drawings, site diaries of Kane’s foremen and the shop drawing registry.

122 Tivendale asserted that the causes of the delays in relation to the completion of the structural steel were due to changes made by the superintendent and the defendants, as arising from one or more of the following sets of circumstances: lack of detail in the design drawings and inconsistencies in these drawings; design changes made after the shop drawings had been approved; and/or design changes made during and after steelwork had been erected on-site.

123 So that the court might better understand Kane’s claimed delay costs for EOT 4, in his first witness statement, Tivendale divided the critical path of the structural steel works into the following stages:

• Stage 1 (or “Item 1”): Commencement of drafting (12 days);

• Stage 2 (or “Item 2”): Gallery façade steel work (dictating the set-out for southern level 2 columns, southern level 3 floor beams and southern level 3 roof columns and beams) (8.5 days);

• Stage 3 (or “Item 3”): Level 2 and Level 3 floor beams, including level 3 balconies and the Level 2 mansard roof connections to these beams and columns (33 days); and

• Stage 4 (or “Item 4”): Level 3 roof columns and roof beams and the fascia trusses and plant platform (4 days).

• Stage 1 – Stage 4 Structural Delays = 57.5 days in total.

124 The original sub-contract value of the structural steel package was $230,000, and the Boilerhouse 1 Program allowed for a period of 61 working days for the completion of shop drawings and off-site fabrication, plus 10 working days for on-site erection (totalling 71 planned working days for all structural steel works). However, in reality, the process had an excess of 95 working days for the shop drawing process and an excess of 54 days for on-site erection (excess of 149 days = 220 days taken for the entire structural works to be completed). Kane claimed 57.5 days of the excess 149 days in delay costs.

Stage 1 (or “Item 1”) of EOT 4: Commencement of Drafting

125 Tivendale contended that there were six critical issues in the matter of the set-out which delayed Stage 1, i.e., delays to all shop drawings from being completed between 24 June 1999 and 9 July 1999:

• position of the main entry gallery façade steel;

• difficulties with protruding nib walls on the north-west corner;

• existing grid lines had to line up with existing columns – but the existing steel column capitals were much larger than the new steel columns;

• original design deficiencies with respect to the line of the east façade;

• distance from the existing grid E & F to the existing brickwork; and

• the Alucobond columns to level 2 to the north and west façades had to line up with existing external pilasters.

126 In his evidence, Tivendale admitted that there was no provision in the Boilerhouse 3 Program (also written by him) for the shop drawings, or for what time people should commence shop drawings. Tivendale stated, however, that the shop drawing and steel manufacturers should be able to “tell” by the program what day the steel was required on-site.

127 Tivendale was cross-examined on the following assertion made in his original witness statement: “Changes and lack of details caused shop drawing preparation and the approval process to be delayed which in turn delayed fabrication, and, ultimately, delayed on-site erection”. Counsel for the defendants, Mr Magee, put it to the witness that, as S & D Design and Drafting Pty Ltd (“S & D”), sub-contracted by DVP, was the only party producing the shop drawings, they were the “only party which could cause itself delay”. Tivendale agreed with that statement, but he noted the flow-on effect of delays, from the drawing stage, to manufacture and to installation. Counsel for the defendants also put it to the witness that Kane’s claimed delay for Stage 1 (12 days) could hardly be attributed to the defendants if the problems experienced by S & D at the time of drafting (particularly from 24 June 1999 until 9 July 1999) were not communicated to the superintendent or the principals. The inference was that the Stage 1 delay was therefore Kane’s own dilemma to deal with.

Stage 2 (or “Item 2”) of EOT 4: Gallery Façade Steel Work

128 Tivendale asserted that the critical issues with respect to delays for Stage 2 were as follows: (i) lack of information on how the terrace gutters were to be constructed allowing for falls and downpipes; (ii) alterations made pursuant to superintendent’s direction SA21, deletion of the architectural columns; (iii) alteration to beam LT1 and the addition of beam HB1 to the Level 2 slab edge; and (iv) alterations necessary to the main set-out dimensions. Tivendale asserted that all these delays were caused by either scarcity of information or incorrect details on the contract documents or drawings, a situation which was, according to Tivendale and Kane, compounded by the superintendent’s asserted slow response times to queries.

(i) Lack of information on how the terrace gutters were to be constructed

129 During his evidence, Tivendale was questioned on his assertion that the gallery façade steel was structural and therefore on the “critical path”. He stated that the gallery façade was structural because “[i]t holds up the floor beams and it holds up the roof”; and also that the gallery façade steelwork dictated the set-out of the Level 2 columns.

130 Counsel for the defendants also challenged Tivendale’s assertion in his original witness statement that the lack of detail on the original contract drawings for the terrace gutter beam caused a five day delay to Stage 2. Mr Magee put it to the witness that the terrace gutters “delayed absolutely nothing” because they were not structural at all. Tivendale responded that they were on the structural steel drawings (and therefore presumably had to be done). When asked whether the gutters had feasibly been installed as an “appendage” and not as part of the structural steel process, Tivendale replied that the builder could have done so, but “only if the details were shown”. Kane submitted that the details were indeed not shown.

131 Also on the issue of the terrace gutter beam, counsel for the defendants questioned Tivendale’s assertion that the five day delay claimed for this event was caused by Jeffery’s “incapable” response to RFI 42. Mr Magee pointed out during crossexamination that the five day delay could not be claimed by Kane as S & D could be getting on with the shop drawings in other critical areas. Tivendale agreed there were other critical areas that S & D could have been getting on with at that point, for instance the set-out.

(ii) Deletion of the architectural columns

132 In relation to the deletion of the architectural columns, Tivendale essayed the same argument that he had used with regard to the terrace gutter, namely that although the building would not literally fall down if they were not deleted at the given point where the delay of two days was claimed (and therefore they were not in the strictest sense of the word “structural”), they were on the critical path because they were part of the sequence on the structural drawings and were in any case an integral part of the gallery façade.

(iii) Alteration to beam LT1 and addition of beam HB1 to Level 2 slab edge

133 Regarding the alteration of the beam LT1 on Level 2, Tivendale asserted that it was altered because it was fixed to the gutter beam in the area. HB1 was an entirely new beam which had to be added to the terrace area of apartment no. 10, subsequent to the alteration of beam LT1, as this situation was apparently not allowed for in the structural steel drawings. In his original witness statement, Tivendale claimed that the draftsmen were delayed by one day while the approved drawings were revised and the other drawings “were put to one side”. During cross-examination, Tivendale admitted that his claim for one day was based upon the extra time it took to alter the drawings; it was not based upon a delay because the shop drawings could not proceed. He said: “It was not specifically at that time… [b]ut at some stage these drawings had to be revised”. It appears, therefore, that Tivendale’s statement that “this delayed the draftsmen by 1 day whilst these approved drawings were revised…” is not correct. There is no specific delay which can be pointed to.

(iv) Alteration to main set-out dimensions

134 With regard to the alteration of the main set-out dimensions, Tivendale asserted that Sopov gave him verbal instructions to cut the concrete edge of the level two slab 50 T 1550mm from Grid Line 2, thus altering the set-out dimensions for the gallery face steel. He asserted that it was later altered again by the superintendent’s direction SA07 dated 6 August 1999. During cross-examination, Tivendale confirmed that Sopov’s instruction could not be found in writing, Sopov had denied giving the instruction. Mr Magee put it to Tivendale that, in any case, the concrete cutting did not cause a delay to practical completion. Tivendale said that it did because the structural draftspeople had to make changes which in turn impacted on the manufacturing, therefore causing delays in installation. The question here is whether these alterations stopped work on-site, and caused delays to the critical works?

135 In the Boilerhouse 1 program, Tivendale asserted that the gallery façade steel was not originally a “critical” item. However he claimed that this item became critical because it was not installed in time and therefore “fell into the critical path”. Tivendale said that the gallery façade steel should have been included from the beginning as a critical item because it “held up the roof”. Degenhardt and Jeffery both said that the five day delay could not be claimed because it was not on the program, and was not considered “critical path” at this stage (about August 1999). Tivendale’s approach in relation to the gallery façade steelwork can be contrasted with his earlier assertions where he stated that the only items which were on the critical path were those which were stated in the drawings, i.e. those which were in the “sequence”. In my opinion, the project manager was clearly taking conflicting positions on what was or was not on the “critical path”.

Stage 3 (or “Item 3”) of EOT 4: Level 3 roof columns and roof beams and the fascia trusses and plant platform

136 Tivendale asserted that the critical issues with respect to the delays for Stage 3 were in summary as follows: (i) delays to set-down drawings; (ii) alteration to set-down drawings; (iii) mansard roof connection details; (iv) delay due to reversal of beams; (v) extra columns to beams 97A and 99A; and (vi) the removal and replacement of beam 3B2. According to Tivendale, Kane claimed a delay of 33 days overall for this particular stage.

(i) - (iii) Delays and Alterations to the set-down drawings including revision of mansard roof connection details

137 For these three details of Stage 3 of EOT 4, Tivendale said that Kane claimed a total delay of 10 days (33 days claimed overall for Stage 3 of EOT 4). During crossexamination, Tivendale was questioned on his claim that the constant changing of instructions emerging from the superintendent and Keith Long from Keith Long & Associates (“KLA”) regarding the step-downs to the level 3 balconies frustrated the draftsperson (and subsequently construction work), for a period of eight days (an additional two days was claimed for revision of the drawings for the mansard roof connection details on level 2). The defendants, on the other hand, claimed that the instructions were in fact on the contract documents and drawings, and that if there was any delay, that Kane should shoulder the responsibility for that and all the other delays claimed for this third stage of EOT 4. This was the essence of the argument between the two parties on these points. For instance, Mr Magee put it to the witness that: “… this whole episode of 33 days was commenced, maintained and finished by your complete inability to read drawings”. Mr Magee put it to the witness that he simply had not read the drawings correctly and that all the relevant information was before him. The witness denied the allegation.

(iv) – (vi) Delay due to reversal of beams, extra columns and removal and replacement of beams

138 The points relevant to the actual installation and construction work performed on the project that Tivendale categorised as Stage 3 of EOT 4 centred around changes to the contract drawings which delayed on-site work on the one hand (as contended by the plaintiff) and the argument that delays on-site had to do with the builder’s own ineffective co-ordination of the sub-contractors on the other (as contended by the defendants). According to Tivendale, Kane claimed 33 days delay overall for Stage 3 of EOT 4, of which approximately 23 days of the claimed delay is relevant to these points.

139 In fact, it appears the defendants were suggesting that Kane had invented much of their claim in relation to EOT 4 (and not just Stage 3 of EOT 4) in order to cover costs due to poor programming by Kane and difficulties with their sub-contractors. Particular reference was made to Kane’s problems with the sub-contractor DVP, which lagged in bringing the steel, and whose staff apparently “didn’t show” at crucial points. During cross-examination, Tivendale was taken to a document dated 17 November 1999 wherein Skarajew requested from DVP “a program for completion of the structural steel of this project. This is required immediately to enable us to coordinate other trades around your work.” Tivendale explained this as reflecting Skarajew’s difficult position, stating that he was “stuck in the middle of all these delays and… all the EOTs we are claiming”.

140 Nevertheless, Skarajew made some strong complaints about DVP Engineering, Pty Ltd. Tivendale was also taken to a document, dated 4 December 1999, in which Skarajew wrote to DVP – “none of your workers [are] on-site and they are required urgently” and “your lack of labour today is totally unacceptable and we require you to force back today to carry out the above work immediately.” Rather than being the cause of delays in shop drawings (as contended by the plaintiff), Mr Magee inferred that the delays were the result of DVP having “a very full order book around …the last quarter of 1999, and they didn’t have enough men to service their jobs”. Tivendale acknowledged that DVP was working on Fitzroy Town Hall at this time, as well as other Kane projects and projects with other builders.

141 In response to the defendants’ claims that the delays were really the result of Kane’s poor co-ordination of the trades as well as problems with its sub-contractors, Tivendale stated, during re-examination, that the days DVP were not on-site – such as 15 December 1999 and 21 December 1999 – were not “critical” points in time as the defendants suggested. Rather, he stated that they were days on which the overall progress of the builder’s work was not affected by their absence and not the subject of EOT claims made by Kane.

Stage 4 (or “Item 4”) of EOT 4

142 According to Tivendale, the critical issues in relation to the delays to Stage 4 (Level 3 roof columns and roof beams) were discrepancies in the brick parapet; and a query about whether the parapet was too low. The plaintiff essentially argued (once more) that there were discrepancies in the contract drawings and that this delayed them from the critical path of the project works. Once again also, the defendants argued that the reasons for delay were not the major changes to the shop drawings ordered by Sopov or the superintendent; rather, the delays were “made up” by Tivendale to cover costs lost as a result of poor planning. For instance, during cross-examination, Tivendale admitted to the fact that the Alucobond sub-contractor, AAS, had not agreed to the Boilerhouse 1 program. The Boilerhouse 1 program had submitted that 40 days would be required to install the Alucobond, however, AAS had made a point of disagreeing with Tivendale’s estimation and had instead strongly recommended 60 days. Tivendale apparently disregarded the advice and AAS’ job was programed in at 40 days, leaving a shortfall of at least 20 days, since the installation of Alucobond in reality took longer than this. Tivendale maintained, however, that his program did not go to plan because of other reasons – not his or Kane’s incompetence in planning.

143 During re-examination, Tivendale attempted to explain again that the 40 days were not as ambitious as AAS and the defendants were making out, saying that he tried to give AAS “more areas” on-site to work on so that they had more capacity and therefore would be able to do their job a lot more quickly. However, during crossexamination, Tivendale admitted that he was “wrong” in his estimate. Mr Magee suggested to Tivendale that, at that time, “the delays that were occurring… had nothing to do with shop drawings. They were just made up by you to cover the fact that AAS… had not accepted the purchase order, and had not agreed to the program.” Tivendale denied the suggestion.

144 It is apparent, however, that there were problems with respect to the programming and planning of the works. Another sub-contractor, MTK, made similar complaints to the effect that Kane had not allowed sufficient time in the programming for each trade. For its part, the plaintiff maintained that delays claimed were the result of contractual discrepancies which had flow-on effects for the rest of the project.

Extension of Time Claim 5

145 EOT Claim 5 was not the subject of argument between the parties - 2.5 days allowed by the defendants before the commencement of trial.

Extension of Time Claim 6

146 EOT Claim 6, however, was a different matter. There were six items claimed by Kane for which the defendants accepted no responsibility, though Tivendale asserted that Kane claimed a total of 14 days and two hours. The superintendent approved two days and six hours of the claim.

147 With regard to item 1 of the claim, Kane claimed that weather delayed the critical path of the works for two days and six hours on a number of days in November and December 1999. The superintendent approved two days and two hours, with one day concurrent with industrial action. The defendants, however, approved nil.

148 With regard to the second item of EOT 6, Kane claimed five days. One day was for a state-wide strike; four days for a “union-enforced” shutdown on 23 December 1999 and 5 - 7 January 2000. The superintendent allowed one day, concurrent with one day delay as a result of the weather, however, he rejected the further claim for four days from 23 December 1999, saying that these days were "non-working" (holiday) days and therefore no delay costs could be claimed. The defendants, in their amended defence and counterclaim, denied all five days, including 15 December 1999, the date of the state-wide strike.

149 At trial, both Mr Magee for the defendants and Mr Digby for the plaintiff agreed that the only dispute with respect to industrial action is how it was to be treated under the contract.

150 For Item 3 of EOT 6, Tivendale claimed that Beam 3B26 had to be removed on 19 November 1999 and worked on off-site, and subsequently returned on 23 November 1999. Kane claimed that the critical path was delayed between these two dates since it was a critical path item. The superintendent rejected the claim in SA155, dated 8 May 2000, on the basis that the critical path at the time was with regard to the fascia trusses and other off-site activities. However, as Tivendale pointed out in his original witness statement, the fascia trusses were in fact supported by structural steel and was therefore a critical path item. Nevertheless, the question still remains as to whether Kane was necessarily delayed from the critical path by two days, or any time at all, as a result of the removal and reinstallation of Beam 3B26.

151 Item 4 of EOT 6 was in relation to the installation of extra purlins and cleats. Kane claimed delay for these as apparently they were necessary and were not shown on the structural drawings. According to Tivendale, the extra work resulted in a delay to the “critical path” as the roofing sub-contractors were prevented from commencing work until these tasks were done. Kane claimed one day and four hours for Item 4. However, for the same reasons given in Item 3, the superintendent rejected them, on the basis that the critical path was the fascia trusses and other off-site activities.

152 With regard to item 5 of EOT 6, according to Tivendale, Kane noted that the roof plant platform in the contract drawings was not large enough and had to be subsequently re-designed and re-drawn. The contractor claimed four hours for the extra time taken to install the platform as the newly drawn version was twice the size as previously. Tivendale arrived at the figure of four hours by estimating the excess amount of time it would have taken to install the original platform. However, Jeffery rejected Item 5 of EOT 6 for the same reason that he did for Items 3 and 4, namely, that the critical path was at that time stated to be in relation to the fascia trusses and other off-site activities.

153 According to Tivendale, Kane claimed five days for the sixth item in EOT 6. Between 1 and 21 December 1999, Tivendale stated that Kane delayed five days to install ply, as instructed to do by SA23, since there was a discrepancy in the documents. Tivendale said that the Boilerhouse 3 program stated that the level 3 flooring was critical path, so the delay was therefore a valid one. The superintendent denied the claim in SA157 on the ground that these were contract works. During the witness’ cross-examination, Mr Magee suggested there was another reason why EOT 6 could not be granted, namely, because there were “concurrent delays”.

Extension of Time Claim 7

154 Tivendale stated that Kane claimed seven days and one hour for EOT 7. The entire claim was denied by the superintendent and the defendants. Item 1 of EOT 7 was with regard to the floor wastes in the laundry areas, later the subject of a claim that the wastes were less than the required Australian standard. Tivendale claimed that the Clements Consulting Group, under instructions from the defendants to provide advice on the hydraulics aspects of the project, initially advised them not to install the wastes as they were not required. Tivendale gave evidence that the superintendent subsequently reversed this decision and instructed them, in SA158 dated 12 January 2000, to install the wastes. Kane therefore issued a notice of delay six days later advising that Kane would be submitting an EOT claim.

155 During cross-examination, Mr Magee suggested that Kane knew all along that they had to install the wastes, pursuant to the Building Code of Australia – but that Clements Consulting Group told them they “might be able to get [a]round” not installing them. This was denied by Tivendale.

156 In my opinion, it is fairly clear that Kane was initially advised, by expert hydraulics consultants, that floor wastes were simply not required – and it was for this reason that they were not factored into the original schedule or program.

157 With regard to Item 2 of EOT 7, Kane was required to install plywood backing to level 3 areas (this is to be distinguished from Item 6 of EOT6 which required ply backing to the quietel) as installation of plywood backing was not in the original contract drawings. Kane claimed an extension of 18 hours for delays encountered to the critical path, namely to cement and floor sheeting to the third floor. The superintendent, in SA155, refused the claim on the grounds that these were “contract works”.

158 Item 3 of EOT 7 was relevant to the mechanical penetrations. Kane claimed that completion of the penetrations to level 2 delayed completion of the ceiling rough works, which were required before the ceiling and internal walls could be installed. Kane claimed four hours; but the superintendent rejected the claim on the basis that these were contract works.

159 Counsel for the defendants suggested that Kane always knew it had to install the ducts, therefore they should have factored this in, even if they were not shown on the mechanical drawings. Tivendale rejected this suggestion, saying, if it was not shown, then it was not factored in.

Extension of Time Claim 8

160 According to Tivendale, Kane claimed 15 days and three hours for EOT 8. This textension of time claim is comprised of seven items, four of which are relevant to industrial action claims and “inclement weather”.

161 Item 2 of EOT 8 is a claim by Kane for alterations made to the steel, pursuant to the superintendent’s direction SA52. Kane claims that the alterations delayed the installation of the ceiling and internal walls. The superintendent rejected this claim on the ground that the work performed was contract works.

162 Item 3 of EOT 8 was linked to Item 1 of EOT 7, the floor wastes. Kane claimed it was delayed because it had to remove the already installed structure board and replace it with CFC board, as this was necessary to construct the fall required, pursuant to SA68. Kane therefore contended that it was prevented from completing the ceiling in time and that other trades could also not work at the same time due to the risk involved, thus causing further delay.

Extension of Time Claim 9

163 Tivendale stated that Kane claimed 16 days and 3.5 hours for EOT 9. Items 1 to 3 of EOT 9 were concerned with claims made by Kane for delays to the critical path as a result of weather conditions, industrial action taken by the workers on-site, as well as “consequential time” resulting from industrial action.

164 For Item 4 of EOT 9, Kane claimed 12 days, with three of those days concurrent with the other three items (hence, nine days in total). Tivendale contended that the delay occurred as a result of the manufacture and installation of fire-rated boxes for down lights to the level 2 ceiling. Tivendale stated that the standard method of installation outlined in the contract documents for the recessed lights would have destroyed the fire rating, hence the downlights being manufactured and installed in fireboxes between 22 February and 8 March 2000, in accordance with SA080. Tivendale also stated that other works had to be stopped until the boxes were manufactured and installed. During cross-examination, Mr Magee said that Sopov’s position on the issue was that it was not the principals’ fault that the sprinklers were deleted from the contract documents which led to the delays in relation to the fire-proofing of the lights.

Extension of Time Claim 10

165 For EOT 10, Kane claimed four days and 4.8 hours. Both items were relevant to industrial action.

Extension of Time Claim 11

166 Kane claimed 12 days for EOT 11. Items 1 and 2 were with reference to weather conditions and industrial action. For item 3 of EOT 11, Tivendale claimed nine days delay to on-site work as a result of having to carry out extra works to install P50/P60, a type of ceiling edge pursuant to the superintendent’s Direction SA127 dated 14 April 2000. The direction apparently instructed that a fire-rated caulking be placed behind the P50/P60 to maintain the integrity of the fire-rated ceiling. Tivendale maintained that “this work was not required by the original drawings”.

167 However, Mr Magee put it to Tivendale during cross-examination that this work was “always” required to be done by the builder under the contract. However Tivendale rejected this suggestion, stating that “[t]here was no detail provided of how these items were to be installed, and it was extra works”. Moreover, according to Tivendale, the installation of P60, as opposed to P50, proved to be “very difficult and time consuming”, extending between 14 April 2000 and 31 May 2000. Tivendale asserted that the builder had to complete plasterboard works to level 2 ceilings and walls before other trades could follow, thereby preventing them from commencing other works on time.

Extension of Time Claim 12

168 According to Tivendale, Kane claimed 13 days for this EOT. Items 1 and 2 related to Kane’s claim for “extra” time to install the P50/P60 and also extra works to design and fabricate support details for pivot doors. In relation to the pivot doors, Kane contended that numerous RFIs were issued requesting consideration of alternative details regarding the method of installation for the pivot floor boxes. However, in his original witness statement, Tivendale stated that the superintendent “failed to adequately respond” to these RFIs or provide workable instructions to allow Kane to continue with the works. The problem according to Tivendale was this: there was no design detail provided to Kane in relation to this work and detail should have been either provided in the contract documents or, failing that, by the architect upon request. Tivendale maintained that the defendants had not done either of these things.

169 Item 3 was a claim for delay caused by the weather. The superintendent rejected this on the basis that all critical path activities were, at that point, “off-site”.

170 Items 4 and 5 had to do with claims for delay as a result of industrial action.

Extension of Time Claim 13

171 The builder claimed nine days and four hours delay for EOT 13. For item 1, Tivendale gave evidence that the delay resulted from extra works in designing and fabricating support details for the pivot doors, already referred to in item 1 of EOT 12 (levels 2 and 3). Kane claimed that further extensions were needed due to additional delays for these works, on various days between 1 June and 7 July 2000 (EOT 12 referred only to delays claimed for May 2000).

172 Item 2 was a claim for delay of eight hours (or one day) caused by weather conditions. The superintendent rejected the claim on the basis that all critical path activities at that point were “off-site”.

173 Items 3 and 4 had to do with claims for delay as a result of industrial action.

Extension of Time Claim 14

174 Kane claimed five days and four hours for EOT 14. For item 1, Tivendale explained that further delays occurred in relation to the design and fabrication of the support details for the pivot doors (levels 2 and 3). This item is relevant to items 1 of both EOTs 12 and 13. They were rejected by the superintendent on the basis that they were "contract works" (SA215).

175 As for Item 2 of EOT 14, Tivendale stated that the delay was caused by weather conditions. The superintendent rejected this claim in SA215 on the basis that all critical path activities at that point were “off-site” at the time.

176 Item 3 of EOT 14 concerned Kane’s claim for a burst water main in Stanley Street. Tivendale stated that this delayed works on 7 July 2000 as the “site could not be occupied due to the absence of amenities”. Jeffery rejected that claim on the basis that all critical path activities at that point were “off-site”.

Extension of Time Claim 15

177 The builder claimed five days and four hours delay for EOT 15. For the first item, Tivendale stated his opinion that delay occurred by reason of additional work performed to make and install a roof template, to ensure that the Level 3 Alucobond soffits were in one section. The contract drawings indicated the cladding would be installed in two sections, however Tivendale alleged they were subsequently instructed to investigate the installation in one section. Task 5 of Boilerhouse (external) 3 program indicated that the installation of the Alucobond to the gallery face was a critical path item. The installation of the template stalled AAS' fitting of the Alucobond to the gallery for the duration of the investigative works. However, the superintendent rejected the claim on the basis that these were "contract works" and that the works should not have impacted on the date for practical completion.

178 Item 2 concerned claims for delay as a result of weather. Pursuant to the superintendent’s direction CAMC 16, dated 25 August 2000, this claim was rejected on the basis that the works were occurring outside the date for practical completion.

Extension of Time Claim 16

179 The builder claimed five days and five hours for EOT 16. Item 1 was relevant to claims for delay as a result of industrial action. Item 2 of EOT 16 referred to the extra work necessary to install Alucobond soffits (level 3). This item is relevant to item 1 of EOT 15. Tivendale arrived at the figure of two days by estimating the difference in time if the Alucobond had been installed in two pieces as opposed to a single piece. It is therefore not a specific delay. Again, the superintendent rejected the claim on the basis that these were “contract works”. Moreover, Jeffery stated his opinion that the approved shop drawings required the soffit to be installed in two pieces instead of one, which was more efficient and would not have resulted in the delay claim.

Extension of Time Claim 17

180 Kane claimed six days and four hours delay for EOT 17. The first item was relevant to industrial action. Item 2 of EOT 17 referred to delay caused by the weather. However, Jeffery rejected this claim on the ground that the works were occurring outside the date of completion, as extended.

Extension of Time Claim 18

181 For the last EOT, Kane claimed 10 days. There was only one item in this EOT and it related to the suspension of works. According to Tivendale, the calendar showed that Kane was to undertake works between 18 September and 2 October 2000. However, the principals took the work out of Kane's hands. Kane claimed that this affected the installation of the Alucobond to the gallery face, a critical path activity. The notice was also not submitted to the defendants, since Kane was no longer working on the project.

Variations

182 In his original witness statement, Tivendale stated that the contract administrator, Le Hy Ta, was primarily responsible for the preparation and submission of variation claims. However, in most instances, Tivendale reviewed and checked the claim prior to submission of variation claims to the superintendent. In this way, Tivendale was aware of and familiar with each variation claim submitted by Kane.

183 The method used by Kane to calculate variations included the use of “builder’s standard rates” and “prices from sub-contractors”. An overheads and profit allowance of 10 per cent was claimed by Kane, since Tivendale thought that this was the margin agreed pursuant to the contractual negotiations held between the parties in June 1999. According to Tivendale, the architect Tony Hampton stated that he was prepared to pay Kane a margin of 10 per cent and that Sopov did not disagree or correct this statement. The defendants denied that they agreed to a variations margin of 10 per cent.

184 It should be noted that for much of the time that Tivendale gave evidence, the parties were negotiating for settlement outside court on the issue of 164 separate variations. The parties finally agreed to a figure which was equivalent to 82 per cent of the plaintiff’s claim in relation to variations, not including interest or legal costs. Variations were also a matter referred to by counsel as more relevant to the examination of Le Hy Ta.

The Contract

185 Tivendale was not involved in the tender process, however he was actively involved in negotiating the contract for Kane from approximately May 1999 until 20 August 1999. The claim for the amounts owed under the progress claims (under the contract) and the quantum meruit claim are, for obvious reasons, related.

Show Cause Notices and Suspension of Works

186 A notice to show cause was issued on 8 September 2000. The defendants purported to show cause by a second letter dated 11 September 2000, denying breach of contract and stating that payment for progress claim 14 was correct and that liquidated damages were deducted pursuant to cl.35.6 of the contract because “Kane Construction failed to achieve Practical Completion by 13th January 2000, the date that the Superintendent had granted extension of time for Practical Completion”.

187 Following this, Kane suspended the works under the contract following the issuance of a notice to the defendants dated 18 September 2000. In response, the defendants issued another notice, “Principals Notice to Show Cause”, on 21 September 2000. The document alleged that Kane had in fact committed a breach by suspending the works and had failed to proceed with “due expedition and without delay” in breach of cl.33.1 of the contract. The plaintiff denied a contractual breach on their part, confirming the defendants’ breach (for failing to make payment in accordance with progress claim and for deducting liquidated damages from the certified amount) by letter on 28 September 2000.

Termination

188 Tivendale stated that he was informed that the defendants had made recourse to Kane’s bank guarantees on the morning of 6 October 2000. He was also aware at that time of the letter sent by Kane’s solicitors, Deacons, to the defendants’ solicitor on 6 October, whereby Kane terminated the contract and alleged “repudiatory conduct” by the defendants.

189 In the claim for breach of contract, the plaintiff alleged that, as the defendants had not dealt with the extension of time claims in a timely and “reasonable” manner, they were entitled to damages. The plaintiff repeatedly pointed out that the contract contained an express obligation to deal with the claims in a reasonable manner.

Deduction Variations

190 The issue of deduction variations was comprehensively set out in the evidence of Le Hy Ta. The variation claims with which Tivendale had specific involvement are listed 64 T in his second reply witness statement (Tivendale’s third witness statement in this matter). Briefly, they are as follows:

• Item 1.2, Hazardous Material Report

• Item 1.4, Project Signboard

• Item 1.5, Omission of Licensed Surveyor

• Item 6.2, Steel Stud Framing

• Item 9.13, Sadler Tiles over Particle Board

• Item 13.1, Alucobond shop drawings

• Item 14.1, Hardie Panel not factory sprayed

• Item 16.6, Deletion of Window W/G12

• Item 19.1, Plastering

• Item 20.11, Tiles in the Gallery

• Item 20.12, Waterproof membrane over existing concrete slab

• Item 21.6, Polythene pipe in lieu of copper pipe in Apartments 1,2 and 3

• Item 21.8, Remote Water Meters

• Item 26.1, Building Size

191 For each one of the deduction variations in this above list, Tivendale rejected the defendants’ claims (that Kane was not entitled to the variations) by using either one of the following two explanations: namely that either Kane had merely followed the instructions of the principal, his representatives or other authorities; or that at the time that the work was performed, no relevant complaint had been made to Kane explaining that the work was unsatisfactory.

Quantum Meruit Claim

192 Kane claimed some $2.45 million for work performed, which remains unpaid. Further and alternatively, the plaintiff claimed the value and benefit that it said it had created for the defendants by reason of its performance. On the other hand, the defendants stated that the claim was based on a provision of the agreement as varied by the Act, and was invalid and/or of no effect in that it sought to increase the contract price.

193 The defendants also alleged that Kane’s quantum meruit claim included claims for payment for defective work, rectification of defective work, rectification of work damaged by water ingress, and for costs incurred in relation to alleged set-out errors. The plaintiff rejected this submission in evidence. Partly in support of the plaintiff on this point, Tivendale made a third statement, his second reply witness statement in this matter.

Defective Works and Rectification Works

194 Tivendale stated that, between March and September 2000, Kane attended to the rectification of defects by notifying the relevant sub-contractor and ensuring defective work was rectified in a “timely manner”. The defects list, composed by Glenn Skarajew and maintained from about March 2000, showed 86 reported defects items. Of the 86 reported defects listed on the 12 September 2000 defects list summary, Tivendale claimed that only eight were outstanding. This is in stark contrast to Jeffery’s witness statement which identified three categories of defects, equalling a total value of $617,200.

Rectification works Forming Part of Kane’s Quantum Meruit Claim

195 During cross-examination, Mr Magee referred to the construction of the laundries without the floor wastes , which were also the subject of a claim made by the defendants that they were less than the required Australian Standard. Mr Magee suggested to Tivendale that Kane were taking shortcuts and that they were attempting to “get around” putting them in. This was rejected by Tivendale, however, who noted that at the time, Kane was under instructions from expert advisors, Clements Consulting Group (a hydraulics firm contracted by Sopov), not to install the floor wastes. In Tivendale’s opinion, therefore, the associated costs should have been borne by the defendants.

Rectification of the Stud Framing

196 The wall rectification/studs issue formed part of the quantum meruit claim because, according to Kane, the original contract drawings did not provide for studs that were strong enough. Extra work had to be done, namely, ensuring that the studs were removed and then reinstalled with treated pine and weatherproof ply to prevent maintenance issues with the tiling.

197 Counsel for Kane, Mr Digby, noted that Mr Magee had put it to Tivendale, or at least had made the comment during cross-examination, that the removal of the studs was the plaintiff’s responsibility or fault (namely, that Kane had inserted the “wrong” studs in the walls and that in fact Sopov had warned Kane about this very early on). However, Mr Digby noted that, despite the defendants’ emphasis on the point, this work was not the subject of any charge or claim made of the builder by the defendants. Tivendale stated that he provided a credit to Kane’s quantum meruit claim for the instances where the plumbing and electrical fixtures had to be removed to enable the noggins to be installed.

Rectification Work For Items Damaged by Water Ingress

198 According to the defendants, rectification work for items damaged by water ingress, such as the removal and reinstallation of the plasterboard, was factored into Kane’s quantum meruit claim. However, during his evidence, Tivendale was given the opportunity to emphasise that the cost associated with this rectification work in fact did not form part of the quantum meruit claim. He noted that he himself had applied a credit for this against the quantum meruit claim.

Deductions/Credits Made to the Quantum Meruit Claim by Kane

199 Tivendale stated that he had personally checked all of the components of Kane’s quantum meruit claim, including variations works, to identify the existence of other costs claimed by Kane which should be deducted from Kane’s quantum meruit claim, either because they were caused by Kane, or if for some other reason they may not be claimed. According to Tivendale’s calculations, the total deduction to Kane’s quantum meruit claim should be $70,065.

Deductions to the Quantum Meruit Claim Relevant to MTK

200 Kane claimed the amounts which it paid directly to the plastering firm, MTK, the materials supplied to MTK, and the superannuation paid for MTK workers, as originally brought under the contract (under the progress claims). Failing this, Kane claimed that these amounts would fall under a quantum meruit claim. The original primary contract between Kane and MTK was for about $420,000. This increased to approximately $560,000 in value, which Kane claimed as part of the quantum merit claim (representing the “cash out” payments made to MTK). Kane claimed that it has not been paid for the MTK works.

201 During cross-examination and re-examination, Tivendale made it clear that payments for MTK materials were made by Kane because the sub-contractor was experiencing financial difficulties (and is now apparently no longer in existence). This was a purely financial decision by Kane as it would have cost the builder more to hire out another sub-contractor to complete the MTK works. Also, Tivendale asserted that replacing MTK with another plasterer would have caused an “out and out” one week delay to the project.

202 The materials bought for MTK and the superannuation paid for MTK workers falling under the quantum meruit claim is as follows:

• $31,000 (C+BUS Superannuation)

• $176,000 (Boral)

• $25,000 (the Atkar materials)

• $12,000 (SJ Plastering)

• $25,000 (Commercial Interiors)

• $1,200 (Gisborne Plaster)

Other Deductions/Credits Applied

203 Kane applied a credit against the quantum meruit claim for the removal of material in front of the steps near the office area. As well, in a letter dated 19 July 2000, MTK complained to Kane about replacing the fire-rated ceilings as a result of water damage. This was not charged to the principal and a credit was accordingly provided under the quantum meruit claim.

(2) FORSTER

Background

204 The second witness for the plaintiff was William Jonathan Forster. Forster appeared in his capacity as the Executive Chairman of Kane. Forster said that he had been the Managing Director of Kane from 1973 until November 2001. Forster stated that Kane was a “medium sized/second tier commercial construction company engaged in a variety of work including commercial, institutional and residential work” of which Forster gave several examples including 4 Treasury Place, Melbourne ($14,000,000) and Raheen, Kew ($23,000,000).

Tender

205 Forster said that Kane became aware of the Boilerhouse project on or about 10 March 1999 when Stacks Properties sent Kane a written invitation to tender. Kane subsequently submitted a tender on 8 April 1999 in the sum of $3,624,700; and on 17 May 1999, a revised tender was submitted in the sum of $3,474,000. Forster said that the revised sum reflected the negotiations between Sopov and Kane’s chief estimator at the time, Peter Cusack. Forster said that, by letter dated 20 May 1999, the defendants advised Kane that they had been successful in winning the tender.

Project

206 Forster stated that he was familiar with the Boilerhouse project but did not have direct on-site involvement. He said that he received information through Kane’s monthly meetings of directors and, from time to time, from discussions with the project manager, Tivendale. Forster further stated that his “main direct involvement with the project relates to the pre-contractual negotiations from June 1999, the issuing of a notice of dispute by Kane in January 2000, and the period immediately prior to and subsequent to the termination of the contract”. Forster said that the Boilerhouse project was a “construct only project” wherein Kane had “no design functions or obligations”. Forster stated that he believed that the original Boilerhouse project program of 130 days was achievable.

Form of Contract and Role of the Superintendent and Architect

207 Forster stated that the form of contract originally put forward by the principal was a JCC-D 1994 contract which “assumes that an architect will perform the role of Superintendent”. Forster said that Tivendale told him in a conversation in late May 1999 that Sopov wished to change the contract to an AS 2124 1992 contract and that Tivendale had told Sopov that Kane had no objection “provided that the commercial conditions were the same as those upon which Kane had tendered”. Forster said that Stacks forwarded the AS 2124 form of contract to Kane for signing by letter of 4 June 1999.

208 Forster stated that, during May and June of 1999, he was advised by Tivendale and Cusack that negotiations with Sopov were progressing slowly and that he decided to become “more directly involved” in order to expedite the execution of the contract. Forster said that Kane received an unconditional acceptance of its tender on 20 May 1999 and, in about June 1999, established on the site in Collingwood.

209 Forster said that, in about July 1999, Tivendale informed him that “he was finding it difficult to resolve the outstanding contractual issues with Sopov” and that there were issues about variations and delay cost provisions. Forster said that his concerns had been highlighted when he received a facsimile from Stacks on 19 July 1999 copying a letter from Slattery wherein they proposed their appointment as superintendent, and a subsequent facsimile on 20 July 1999 wherein Stacks informed Kane that Hampton had resigned as superintendent and that Slattery had been appointed effective from that date. Forster said that he spoke to Peter Slattery, the principal of Slattery, on about 21 July 1999, and expressed concern about the contract not being finalised, and further, that since Slattery was a “Construction Cost Consultant and Quantity Surveying organization” that he “did not think it likely [they could] adequately fulfil the role of design consultant”.

210 Forster stated that Kane’s subsequent letter of 21 July 1999 set out their concerns about the proposed change in the form of contract and stated that they required an annexure to the contract to “reflect the conditions set out in the tender documents and the need for an experienced architect to be appointed to supervise the work”. Forster said that, further to Kane’s letter of 21 July 1999, a meeting was held at Slattery’s office on 23 July 1999 and attended by himself, Tivendale, Sopov and Jeffery. Forster stated that, at that meeting, he had said that “an architect needed to be involved in the project and in administering the contract” and that “Kane required the extension of time costs to mirror the provisions of JCC-D (without amendment), as this was part of the basis for [their] tender sum”. Forster further stated that, at the meeting, Jeffery indicated that “the arbitration provisions of the contract would require amendment to reflect the Domestic Building Contracts Act. ”

211 Forster stated that Kane received a letter from Slattery, dated 26 July 2000, wherein Jeffery set out the proposed dispute resolution process and suggested the amount in respect of delay costs; but that these were rejected by Kane by reply letter of the same date. Forster said that, on 5 August 1999, Jeffery requested particulars of Kane’s requirements with respect to the annexure to the AS 2124 form of contract “in relation to the appointment of an architect as Superintendent’s Representative” and that these were subsequently forwarded by letter dated 6 August 1999. Forster said that this letter stated that contracts must be exchanged by 11 August 1999, otherwise, Kane would cease work. Forster stated that, by faxed memo of 6 August 1999, Slattery confirmed acceptance of the annexure and that the contract was subsequently signed by Kane and the principal on 20 August 1999.

Compliance with the Domestic Building Contracts Act 1995

212 Forster stated that he was aware that the Domestic Building Contracts Act 1995 would apply to the Boilerhouse project and he cited various Kane and Stacks’ communications referring to that fact. Forster stated that he “relied on the Principal and the Principal’s consultants who proposed and provided the Contracts to include all necessary amendments to ensure compliance with the Act”. Forster said that he had a “general awareness” of the Domestic Building Contracts Act , but no “detailed knowledge” about it, and that no-one at Kane had the responsibility of informing themselves about the Act.

213 Forster said that he understood that if Kane did extra work on the project because of a variation, and/or if Kane was delayed in a way that entitled it to an extension of time, then “it would be paid the fair and reasonable cost of that extra work, and would be paid for compensable delay costs”. Forster further said that, if that was not the case, he would not “have allowed Kane to continue to undertake extra works on the project or go on with the works when Kane were being delayed, if [he] had been aware that the Principal did not intend to pay for extra work done by Kane in the nature of variations and/or did not intend to pay for compensable delay costs incurred by Kane”.

Progress of the Works

214 Forster said that, following the execution of the contract, he was not involved in the day to day works on-site; but that Tivendale reported that the works were progressing slowly and that “Sopov was on the job continuously whereas the Superintendent was an infrequent visitor to the site”. Forster said that, following the resignation of Hampton, a replacement architect was not appointed until November 1999 and that he considered this was “in breach of clause 24 of the Contract”.

215 Forster further stated that, based on Tivendale’s reports to him, he understood that “Sopov’s general response to any requests for information or clarifications or an extension of time was to seek suggestions from Kane and adopt a “sort it out yourself at no cost” approach rather than to give instructions”. Forster said that, between November 1999 and April 2000, the project experienced delays associated with industrial action that were “beyond the control of Kane”, and that it was not possible to complete the project by 10 December 1999. Forster said that this action affected all of Kane’s projects.

216 During cross-examination, Forster conceded that at one point in early 2000 he had ordered a lock-out of workers and that this delay was therefore within Kane’s control. Forster also said that Kane had claimed for the delays associated with the lock-out and that he believed that they were claimable under the contract.

217 Forster stated that, in January 2000, he was informed by Tivendale that there were numerous variations that had not been approved by the superintendent. Forster said that Tivendale informed him that in many cases there had been no response from the superintendent and that this situation became intolerable, leading to Kane eventually issuing a notice of dispute to the principals on 21 January 2000. Forster said that this notice set out “the disputes between Kane and the Principals including in respect of the valuation of variations, extensions of time to the Date for Practical Completion and delay costs”. Forster stated that these disputes were not resolved and that Kane subsequently commenced proceedings in the Victorian Civil and Administrative Tribunal (“VCAT”), with the points of claim being filed on or about 4 July 2000.

Principal’s Repudiation

218 Forster stated that, on or about 1 August 2000, Kane’s contract administrator, Le Hy Ta, informed him that Kane had submitted progress claim number 14, totalling $1,216,546.64, to the superintendent. Forster said that, of that sum, only $132,618 (namely $120,000 plus GST) was paid to Kane on 28 August 2000. Forster further stated that certificate number 14, dated 23 August 2000, certified the amount of $340,562 as payable by the principals to Kane, and that subsequently, Kane issued a tax invoice for that sum (plus GST), namely $374,618.20, on 24 August 2000. Forster noted that cl.42.1 of the contract stated that a certificate must be issued within 14 days of the progress claim being submitted to the superintendent.

219 Forster summarised the ambit of Kane’s dispute with the principals as being, firstly, a claim by Kane for variation claims NPV 1 to NPV 108 for $396,268, of which $94,268 had been approved by the superintendent; and extension of time claims for 139.13 days and claimed delay costs of $590,795.50, of which 11.75 days and $5,675 had been approved by the superintendent.

220 Forster stated that, by letter dated 28 August 2000, Kane was informed by the principals that they were deducting liquidated damages of $220,000 from the certified sum of $340,562. Forster said that he regarded the principals’ actions as indicative of them not abiding by the contract; however he said that he was not sure if Kane would have lifted the subsequent suspension if the principals had paid the amount of liquidated damages deducted from progress claim 14.

221 Forster said that, on or about 1 September 2000, Kane submitted progress claim 15 to the superintendent seeking $1,231,742.91. Forster said that he was “the person within Kane who was making the decision in relation to what step Kane took under its Contract”, and that subsequently Kane issued a notice to the principals, dated 8 September 2000, requiring them under cl.44 of the contract to show cause why Kane should not exercise its rights under cl.44.9.

222 Forster said that the principals responded, by letter of 11 September 2000, that stated, among other things, that the payment of $132,618 for progress claim 14 was “the correct sum under clause 42.1, and clause 35.6 of the AS 2124 contract agreement”. Forster said that Kane responded to the principals’ letter, by way of letter dated 13 September 2000, that stated that Kane maintained its allegation that “the principals have committed a breach of contract”.

223 Forster said that the superintendent issued certificate 15 on 14 September 2000, certifying that the sum of $220,800.00 was payable by the principals to Kane; and that this amount had not been paid despite a request for payment as conveyed by way of letter dated 5 October 2000 from Kane’s solicitors to the principals’ solicitors at the time. Forster said that certificate 15 included no deduction for liquidated damages and that it also stated that the sum of $2,989,350.00 had previously been certified (including the sum of $340,562.00 as certified under certificate 14).

224 Forster said that the principals responded by way of letter on 15 September 2000. However, Forster said that he did not believe that the response adequately responded to Kane’s notice to show cause and that, subsequently, Kane issued a notice of suspension and suspended the whole of the work under the contract on 18 September 2000. Forster said that the principals wrote to Kane, by way of letter dated 21 September 2000, alleging, among other things, that Kane was in breach of contract; and that Kane responded, by way of letter dated 28 September 2000, stating that it had validly suspended the work but that it remained willing to continue if the principals “observe[d] their payment obligations”.

225 Forster said that he was concerned about the security of Kane’s plant, equipment and material that remained on-site, and that, on or about 29 and 30 September 2000, Kane commenced removing it and advised the principals accordingly by way of letter dated 5 October 2000. Forster said that Kane had received a letter dated 2 October 2000 from the principals’ solicitors stating that this removal was effected without the consent required by cl.29.2 of the contract.

226 In cross-examination, it was suggested to Forster, by counsel for the defendants, that Kane removed the plant, equipment and material in anticipation of the principals exercising their rights under cl.44.4 of the contract; however Forster did not concede that point. Forster also rejected the suggestion put by counsel for the defendants that “this whole removal and the way it was done was done in a way to cause maximum financial loss [to the defendants]”.

227 Counsel for the defendants further suggested to Forster that Kane had made up its mind to get out of the contract and had asked its lawyers how best to do that. Forster rejected that suggestion and said that his view was that “Sopov was trying to get out of the contract, take our $5 million-worth of work and keep it for $2.7 million”. Forster said that he believed that the contract was still on foot at 28 September 2000, albeit a “shaky foot”. Forster stated that while, by early October 2000, Kane had completed approximately 95 per cent of the works, it had only been paid for less than 60 per cent.

228 Forster said that, around 11:40am on 6 October 2000, Kane received two revised certificates 14 and 15 from the superintendent wherein liquidated damages were deducted, hence making Forster suspicious about the possibility of the principals exercising “undue and improper influence [on Jeffery]” to issue the revised certificates. Forster said that, in about January 2000, Jeffery had told him that he “was not prepared, and would not make, any decisions concerning [the] contract, without the approval of Mr Sopov”; and that this discussion was in the context of the “failure to make decisions in relation to our time claims and our variation claims”. In crossexamination by counsel for the defendants, Forster said that it had not been his intention, for the purpose of litigation, to prejudice Mr Jeffery as someone not prepared to be independent; rather it simply recorded his view at the time.

229 Forster further said that, at about 11:45am on 6 October 2000, he was informed by Mr Peter Rice of the National Australia Bank that the principals’ solicitor had “called upon and cashed the bank guarantees in the sum of $173,700 that were provided by Kane under the Contract”. In cross-examination by counsel for the defendants, Forster conceded that he had phoned Rice, but that Rice had told him that “My hands are tied”. However, Forster denied counsel’s suggestion that this telephone conversation was deliberately omitted from Forster’s witness statement, as was the attempt by Kane’s solicitors to seek an injunction against the bank guarantees being cashed. In his testimony, Forster also conceded that Rice had rang before the guarantees were cashed, and that, hence, his witness statement could be perceived as contradictory.

230 Forster said that the principals did not give Kane any notice that they intended to cash the bank guarantees as required by cl.5 of the contract. Forster further set out his understanding of the bank guarantees, wherein he stated that the principals had no recourse to take the action they did. Forster said that he considered the principals’ actions to be “aggressive and unlawful” and that this consequently “left [him] in no doubt that Kane’s only practical and sensible course of action at that stage was to accept the principals’ repudiation of the contract”, which Kane subsequently did by way of letter dated 6 October 2000 terminating the contract.

Changes to the Contract Price and Payment for Work Done

231 Forster said that Kane would not have entered into the contract if it was not to be paid for extra works in the nature of variations and if it thought that the principals would rely on the Domestic Building Contracts Act to avoid payment. Forster further stated that at no time prior to the execution of the contract, or during the works, did the principals inform Kane that such payments would not be made or refer to any rights they might have under ss.16 or 33 of the Domestic Building Contracts Act.

232 Forster said that the completed value of the Boilerhouse project (“as valued on behalf of the Principals by PBB Valuations in July 2000”) was $7,740,000, and that “the Principals had derived a benefit from the works done by Kane”. Forster further said that, given this value resulting for the principals, he thought that it was “most unfair for Kane not to retain and recover its costs of performing the works and to be prejudiced or restricted by virtue of section 16, 33 or any other section of the Act”.

Quantum Meruit Claim

233 Forster said that the unpaid portion of the costs incurred by Kane was $2,452,253.01, and that the recording and derivation of those costs was set out in the statements of Lucas and Le Hy Ta. Forster further said that Kane’s claim of an overhead and profit component of 10 per cent in the sum of $474,691.18 was “a reasonable margin” and consistent with their industry practice.

Contractual Claim

234 Forster said that Kane claimed $1,736,728 as the sum owing to it under the contract as at 6 October 2000. Forster further stated that Kane claimed approximately $440,661.16 as variation costs (as set out in the statement of Le Hy Ta and independently verified by Mr Laurie Thomas of WT Partnership (“WTP”)); and delay costs of approximately $768,000 (as set out in the statement of Tivendale).

(3) LUCAS

Background

235 The third witness for the plaintiff was Sidney Robert Stephen Lucas who appeared in his capacity as the Finance Director of Kane. His responsibility was to ensure that appropriate and accurate records were maintained that showed Kane’s financial position and the results of Kane’s operations for the period reported on. He was also responsible for all accounting services. In his witness statement, Lucas explained that “commitment cost accounting” figures were used for forecasting and monitoring job performance for management purposes.

236 Lucas was called by the plaintiff as a witness to prove the fair and reasonable cost of the job undertaken by Kane, in particular, by highlighting that the financial records of the plaintiff’s money claims were valid. Use of the Jobpac computer cost recording system was central to this process.

Jobpac

237 Lucas said that Kane had used an integrated computerised software system called “Jobpac” since 1994. Lucas said that it was specifically designed for use by a construction business in that it enabled the user to establish the revenue and costs that relate to specific projects and record them on a job-by-job basis. With Jobpac, the overall financial position of Kane was readily apparent and ascertainable at any particular time or for any particular period. It recorded all direct costs incurred by Kane (liabilities, all payments made including wages, the raising of amounts receivable and the processing of receipts) but not indirect expenses.

238 Lucas said that “liabilities incurred” were recorded under three categories: capital expenditure, indirect expenses and direct expenses. Lucas described how suppliers’ invoices were forwarded to the contract administrator for verification and approval (which at times involved consultation with the project/site manager). If approved, the contract administrator entered the relevant details of the invoice onto Jobpac. Similarly, Lucas stated that the sub-contractors’ claims had to be approved by the contract administrator and that the amount was then entered onto Jobpac via an “authorisation for payment form”. Lucas did not appear to address the question of what happened when invoices or sub-contractors’ claims were not approved.

239 Lucas asserted that all information provided in the Jobpac reports identified all costs incurred and payments made by Kane on the Boilerhouse project and was the basis upon which claims in these proceedings had been made. Further, Lucas said that the information was of the kind that was regularly entered and made available in the ordinary course of activities. Lucas said that, to the best of his knowledge, the Jobpac system at Kane operated properly throughout the entire period in question (1 May 1999 – 30 April 2003).

240 Lucas said that it was the practice of Kane that project costs and payments be reviewed on a quarterly basis by project managers and/or contract administrators. In this case, Tivendale and Le Hy Ta informed Lucas that they carried out such reviews in relation to the Boilerhouse project, ascertaining costs incurred and payments made by Kane. Lucas said that an independent audit was carried out annually.

Payment

241 Lucas stated that payments by Kane were usually made by cheque. Sometimes payment was made by credit card or electronic funds transfer. All payments were recorded in Jobpac, the latter two as “dummy cheques”. Lucas said that approved invoices were accessed and paid according to the credit terms of the supplier/subcontractor. Sometimes a single cheque was issued to cover a number of invoices or claims across a range of projects. All direct expenses were itemised on the Accounts Payable Enquiry Transaction Report printed on 29 April 2003.

Indirect Expenses and Profit

242 Lucas said that the indirect expenses and profit, for which Kane claimed 10 per cent, were itemised in his witness statement. Lucas said that these expenses were not recorded on a project specific basis, as the expenses didn’t relate to specific jobs. He said that they were entered onto the Jobpac system under “General Ledger”, and were set out in Kane’s financial reports as “Administration and Marketing Expenses”. Indirect expenses were charged to the job within the “on-costs” of the direct labour costs, and, in the case of the Boilerhouse project, these amounted to approximately 30 per cent of Kane’s direct labour charge for the duration of that project.

243 Lucas provided a summary of Kane’s trading and profit and loss accounts for the 1998/99, 1999/00 and 2000/01 financial years. The average net profit and indirect expenses, as a percentage of total income, was 13 per cent. Lucas said that the 10 per cent claimed by Kane in this proceeding was fair and reasonable, as it was lower than the average percentage achieved by Kane over the stated period.

Structural Steel Works

244 The cross-examination of Lucas was focussed around a Kane document itemising variations approved for structural steel works. Lucas agreed that Jobpac recorded the variations which DVP had requested, including those that had been approved and those awaiting approval. Lucas further agreed that Jobpac did, and should, record all the transactions between DVP and Kane in relation to this project.

Demolished Roof

245 Lucas said that he was not aware of the fact that Mr Dordevic was recompensed for demolishing a roof by an off-set of steel. He stated that it was possible that such an ad hoc transaction could appear in the Jobpac system (if a financial value was placed on the steel), but in this case he was not aware of the arrangement having been recorded. Lucas denied that this reflected an inaccurate record of Boilerhouse transactions as long as the net effect remained the same, that is, if in the present case the transaction had been recorded as a credit for the steel, and the steel had then been brought in as a positive variation against the sub-contract. In that case, Lucas said that the records on Jobpac would remain identical.

Variations

246 Lucas agreed that, in so far as such transactions amounted to a “barter”, they did not show up on the Jobpac system if they were not recorded. Instead, one could expect to find the transaction recorded as a variation (under “details”) issued to that subcontractor for the particular item. By way of example, Lucas pointed to the variations in crane hire, which in some cases would have been additional crane hire that Kane had agreed to pay for on credit, for which the sub-contractor would then be charged. Lucas was only able to point to two negative variations on the record for structural steel works.

(4) ISAACSON

Background

247 Antony Peter Grant Isaacson was the fourth witness for the plaintiff. Isaacson’s statement was essentially made with regard to paragraphs 63 and 64 of Sopov’s statement and paragraphs 19, 20 and 21 of Jeffery’s statement. Isaacson stated that he had been a director of Kane since 1999 and that he was appointed Managing Director of Kane on 15 May 2001. Prior to his appointment as Managing Director, Isaacson said that he had been the Construction Director for Kane. Isaacson stated that he had been involved in the property, building and construction industry for approximately 24 years.

Contract Documentation, EOT Claims and Variation Claims

248 Isaacson stated that, in about mid February 2000, he received a call from Sopov requesting a discussion about the progress of the Boilerhouse project, and that a meeting subsequently occurred in Kane’s office on 14 February 2000. Isaacson said that he was “kept informed generally about the progress of the Boilerhouse project” and that he shared the concerns of Kane personnel that “the project was not well documented [and] that there was a detrimentally high degree of involvement from the principal that impeded Kane in completing the works”; and that furthermore, “there had been a large scale rejection of what Kane considered were justifiable claims for extensions of time (and delays costs) and variations claims”.

249 Isaacson said that Tivendale had reported his “serious concerns about the adequacy of the contract documentation” and that “Kane was continually getting bogged down by the necessity of having to submit RFIs … in an endeavour to ascertain the precise nature of work required”. Isaacson said that both Tivendale and Le Hy Ta both reported to him about Kane’s submission of EOT claims and variations claims that had not been approved.

Dissatisfaction of Sopov with Kane Personnel and Performance

250 Isaacson stated that there was a meeting on 14 February 2000 attended by him, Sopov and Jeffery, and for a short time, Tivendale. Isaacson stated that, at this meeting, Sopov voiced concerns about “the quality of Kane personnel and their performance on-site”. Isaacson said that he recalled a discussion about Kane’s plastering and about the Alucobond shop drawings, and that these matters were subsequently followed up with Spencer Wilson, a representative of AAS. However, Isaacson said that he did not recall any other specific issues being raised or discussed at the meeting.

251 Isaacson said that he rejected Sopov’s concerns about Kane’s personnel and performance and that he voiced his own concerns about Sopov’s over-involvement in the project. Isaacson further stated that he told Sopov that he would “continue to maintain an interest in the project”.

Skarajew’s Experience

252 Isaacson also said that, at the meeting on 14 February 2000, he did not say that Skarajew was inexperienced. Rather, Isaacson said that he was aware of Skarajew’s significant experience (including in multi-unit residential construction) when first hiring him.

Extra Resources Provided by Kane

253 Isaacson said that, following the 14 February 2000 meeting, he had decided that “Kane should commit additional staff to the project in an endeavour to improve the progress of the works” and he said that a further meeting was attended by him, Sopov, Jeffery and Tivendale on 29 February 2000.

254 Isaacson said that, in about March 2000, Kane appointed “Roger Swarbrick to be the foreman responsible for the façade” and for “Alexei Simm to replace Tivendale while he was on leave and to assist him upon his return”. Isaacson said that John Chambers later filled the role of assisting Tivendale, and that “David Crews was appointed as leading hand/carpenter from March 2000”.

255 Isaacson said that Kane “committed additional resources to the project in about late February or early March 2000” and that he was aware that “Kane and [its] subcontractors worked significant week-day overtime” and that there “were only ten Saturdays between June 1999 and September 2000 when there was no work on-site”.

EOT Claims

256 Isaacson said that, by the end of February 2000, Kane had lodged EOT claims 1, 2, 3 and 4 which claimed in excess of 50 days of time extensions for delays Kane considered it had not caused.

Criticism of Kane’s Approach, Personnel or Progress by Jeffery

257 Isaacson stated that he rejected Jeffery’s assertion that, prior to the meetings on 14 and 29 February 2000, Kane’s approach consisted of “a lack of progress, coordination, cooperation and communication ultimately leading to the builder abandoning the site in October 2000”. Isaacson said that he attended the site approximately once per month from March 2000 “until Kane suspended work on 18 September 2000” and that Tivendale “continued to report to [him] about the progress of the works on-site at least on a weekly basis”. Isaacson said that he did “not recall Jeffery making any adverse statements about Kane personnel or progress at the 14 or 29 February 2000 meetings” and that to the “best of [his] recollection Jeffery did not state to [him], after 29 February 2000, that he was dissatisfied with the manner in which Kane was performing the works at the Boilerhouse project”.

(5) SKARAJEW

Background

258 Mr Glenn Skarajew was not called as a witness. Counsel agreed to rely on his witness statement and reply witness statement. In his statement, Skarajew said that he was employed as site foreman on the Boilerhouse project by Kane from October 1999 to December 2000. During this time, Skarajew said that he was on-site daily for at least eight hours. Prior to this, Skarajew stated that his experience extended to two commercial/residential development projects in Abbotsford and Cairns (worth $10million and $5million respectively). In his reply witness statement, Skarajew rejected the suggestion by Sopov that he was inexperienced when he worked as site foreman on the Boilerhouse project. Skarajew said that he considered that his prior experience in the building industry was extensive.

Skarajew’s Role

259 Skarajew described his role in the Boilerhouse project as comprising communication, co-ordination, management of day-to-day activities, handling/forwarding labour time sheets, informing Kane of site activities (regular contact with Le Hy Ta and Tivendale) and attending site meetings. Skarajew said that he was also responsible for maintaining a record of site activities through Kane’s foreman’s diary and maintaining time sheets for the project. Skarajew said that he worked in close proximity with Tivendale who attended the site on a regular basis (two to three times per week from October 1999 to March 2000 and daily from March 2000). Skarajew said that he was responsible for reporting to Tivendale on delays and potential costs. He said that he also reported communications that he had with Sopov, Jeffery or Irving.

260 In his reply witness statement, Skarajew rejected Sopov’s statement that there was “poor co-ordination of sub-contractors and the excessive use of day labour”. Skarajew said that he was unable to respond to any specific allegation, since no details or examples were provided. Skarajew said that, generally, his on-site contractors were efficiently coordinated, and that he exercised judgement as to when Kane engaged day labour.

261 In his statement, Skarajew further rejected Sopov’s statement that there was an inadequate handover between Omond and Skarajew. Skarajew said that, prior to commencing as site foreman on 1 October 1999, he had looked through the entire set of contract drawings and specifications. Skarajew said that, on 1 October 1999, he spent the working day on-site with Omond. He said that for part of the day, Tivendale was present to explain the project in general terms. Skarajew said that by that stage Kane had been on-site for approximately four and a half months.

262 Skarajew said that at no stage during the course of the Boilerhouse project did Sopov or Jeffery question his competence as site foreman; or raise in his presence any suggestion that work was poorly coordinated, or that Kane was using too much day labour. Moreover, Skarajew said that he had a very detailed knowledge and appreciation of the contract drawings and specifications. Skarajew said that the contract documentation was deficient, including ambiguities and/or discrepancies between drawings and specifications and insufficient information on contract drawings. Skarajew said that these deficiencies resulted in the high number of RFIs and general delay. Skarajew said that he considered the responses to the RFIs by Jeffery to be inadequate.

Delay

263 Skarajew stated that Sopov was on-site frequently. He suggested that the regular conversations that he had with Sopov in relation to design and construction issues impacted on his work because it detracted from the time he could be spending supervising site issues. Skarajew stated that he spent one to two hours per day with Sopov discussing the progress of works. This was unusual and unnecessary, given that the common practice was to have the principals attend site meetings once per fortnight.

264 During re-examination, Tivendale described Skarajew’s role as determining the priority of what was done on any given day. This was determined according to need and a general approach of “first in best dressed”. This could cause delay if, for example, the crane was being used for one thing while sub-contractors waited for it to be used for their own purpose.

Skarajew’s Communications with Sopov and others

265 In his statement, Skarajew provided examples of the conversations he had with Sopov, Jeffery and Irving in relation to the design and construction issues that often gave rise to a delay. These were generally later conveyed to Tivendale and Le Hy Ta. For example, with regard to Sopov, Skarajew made the following allegations:

• location of power boards – this should have been decided by an electrical consultant;

• vanity units – he was told by Sopov to proceed as per the relevant drawings;

• floor wastes – they were not specified in the drawings. Skarajew suggested they were advisable and Sopov instructed Skarjew to provide them;

• vanity benches – Sopov instructed Skarajew that the height should be 900mm;

• toilet pans – Sopov did not agree with Skarajew that the drawings were unclear;

• Irving – Sopov was “furious” about instructions issued in relation to the flashing to the east façade without prior consultation;

• relocation of sewer pipe – Skarajew indicated that this would be part of Kane’s variation claim;

• industrial conditions on-site (lock-outs) – Sopov stated that if a lock-out occurred he would sue Kane for interest and damages;

• wall expansion joints – Sopov sought advice from Skarajew as to the appropriateness of their location. Sopov did not want to involve Irving or Jeffery as this would entail a cost;

• variation claims – Skarajew spent two hours with Sopov explaining construction issues. Sopov stated that he was not issuing instructions to Kane because this would provide the basis for a variation claim;

• general construction issues – Skarajew said “a couple of hours” were spent in discussion with Sopov during time that could have been spent managing site activities;

• design issues – one hour on 3 April 2000 was spent discussing this with Sopov;

• discrepancy between units 10 and 13 – Sopov said that he had been forced to reverse verbal instructions issued by him to Kane because he believed Kane was trying to “rip him off”. Skarajew could not recall the instructions Sopov was referring to;

• instructions to bricklayer – Sopov was overriding Kane and instructing the bricklayer directly;

• legal dispute – Sopov told Skarajew not to sign any legal documents regarding the dispute between Kane and the principals.

With regard to conversations that Skarajew said that he had with Irving, Skarajew cited the following alleged examples:

• Kane’s requests and confirmations – Irving told Skarajew over the phone that these should be submitted to the principals or Jeffery “for legal and political reasons”;

• visiting the site – Irving told Skarajew that he had been instructed by Jeffery not to visit the site unless an RFI had been issued by Kane.

In relation to the RFIs, Skarajew suggested that Jeffery’s inadequate responses to RFIs created considerable delays in works.

266 When Sopov was cross-examined by counsel for the plaintiff, he stated that, rather than actively giving instructions on construction issues with Kane site personnel, Skarajew would respond to greetings or grant a favour or accept changes when they were put to him. Therefore, as a consequence of this tendency, Sopov stated that he believed Skarajew was an ineffective foreman/manager.

Termination

267 After Kane suspended the works on-site, Skarajew said that he went to the site to begin cleaning work. He said that he was instructed (by whom he cannot recall) to remove Kane’s plant, equipment and some material from the site so that those things could be secured. Skarajew said that removal took place from between 28 September 2000 and 2 October 2000. Skarajew stated that some material belonging to the principals was also removed from the site by PN Electrics, while other items which were left in Kane’s sheds (e.g. tile samples, display boards, keys) were removed in error. Skarajew said that he did not intentionally remove any item belonging to the principals, nor was he instructed to do so. Skarejew said that the property of the principals was returned on or about 1 March 2001 to Sopov.

268 Skarajew stated that on or about 2 October, as he was cleaning the site, Sopov arrived and asked what was going on. Skarajew said that Sopov informed him that Kane was not supposed to remove anything for 28 days. Skarajew said that Sopov told him to stop removing items from the site as he was taking possession of the site and had already taken photos. Skarajew said that he did not understand what Sopov meant by this. Skarajew said that he did not hand over Kane’s keys on request by Irving as he said he did not have any instruction from Kane management to do so. Later on the same day, Skarajew said that Brendan Archer attended the site and introduced himself to Skarajew as Sopov’s lawyer. Skarejew said thatArcher asked him if Kane had removed anything apart from items belonging to Kane. Skarajew said that he told Archer they had not and that Kane left the site at around 4pm.

RFIs

269 Skarajew stated that he had a very detailed knowledge and appreciation of the contract drawings and specifications. He said that the contract documentation was deficient, including ambiguities and discrepancies between drawings and specifications, and insufficient information on contract drawings. These deficiencies resulted in the high number of RFIs and the general delay. Skarajew said that after the RFI was submitted to Jeffery, there were numerous occasions where Kane either received no response at all, or received a delayed or inadequate response.

EOT Claims

270 Skarajew stated that Tivendale was responsible for the preparation of EOT claims on behalf of Kane, but that he had relied on Skarajew for information about site activities (such as inclement weather and industrial conditions) which would affect the outcome of the claim.

Variations

271 Skarajew said that he reported to Tivendale about events which he considered could cause Kane to incur costs such as variations or delays to the works. He stated that he would also report to Le Hy Ta when information was required for variation claims or progress claims. Skarajew said that, in a discussion on-site with Sopov, Sopov stated that he was not issuing instructions to Kane because this would provide the basis for a variation claim.

(6) WILLIAMSON

Background

272 The sixth witness for the plaintiff was Charles Trevor Williamson. In his witness statement, Williamson stated that during the Boilerhouse project he was employed by Kane as an acting site foreman from 31 May to 19 June 1999 (during the first three weeks of the project). During this period, Williamson said that he was on-site every working day for approximately eight hours. Williamson said that his role included:

• assisting Kane personnel in communicating with Sopov, Hampton, sub-contractors and design consultants;

• attending fortnightly site meetings (he said that he attended two meetings during the relevant period);

• keeping a record of site activities in a diary;

• managing day-to-day activities;

• forwarding time sheets to Kane head office; and

• informing Kane personnel (particularly Tivendale) of site activities.

273 Williamson said that there were four days when Peter Omond (another site foreman) and Williamson were both on-site together, namely, 21-24 June 1999.

Construction Supervisor

274 Williamson described how he had been appointed by Kane as a construction supervisor and plant manager in 2000. In his role as construction supervisor, Williamson stated that he would attend the site weekly or fortnightly, or as needed, to discuss with the foremen manpower, safety issues, scaffolding requirements and construction issues/procedures.

275 In his reply witness statement, Williamson rejected the suggestion by Sopov that he was inexperienced or otherwise unable to perform his role as site foreman. Williamson said that at no time did Sopov suggest as much during his time as site foreman. Williamson emphasised his belief that the four days that he and Omond spent on-site during the hand-over period in June were sufficient. Williamson said that Kane had only been on-site at this stage for three weeks, so it was a straightforward task to explain the work completed to that stage.

Delay

276 In relation to the issue of delay, Williamson said that he spoke to Tivendale specifically about the ruptured water pipe and the rock in the lift overrun pit in the basement and ground floor entry ramp as (potential) sources of delay.

Termination

277 In his role as construction supervisor, Williamson said that he arranged manpower and transport to remove the sheds, plant and equipment in late September 2000. Williamson said that he recalled that he was requested to assist in that process by Tivendale.

Set-Out and Structural Steel

278 In closing submissions, counsel for the plaintiff, Mr Digby, stated that there were no difficulties relating to the builder’s performance of the work by reason of any deficiencies in set-out. It was submitted that Williamson did this work and he was not called for cross-examination, which he should or would have been if the matter had been relevant to the defendants’ case. In short, the defence suggested that there was a very specific problem with the set-out, but the allegation was not substantiated by evidence.

EOT Claims

279 In relation to EOT claims, Williamson stated that, prior to preparing EOT claims, Tivendale would ask Williamson for information about site activities and they would discuss the proposed claim together. The discussions encompassed the causes of the delay, the effect of it on overall progress, and the actual period of the delay.

Variations

280 During the relevant period, Williamson stated that he recalled Tivendale attending the site two or three times and spending several hours on-site during each visit. Williamson recalled discussing with Tivendale the progress of the works and events impacting on the progress, including variations and delays.

(7) OMOND

Background

281 Peter James Omond, the seventh witness for the plaintiff made a reply witness statement in which he stated that he was a registered building practitioner. His statement was essentially made with regard to paragraphs 38 and 66 of Sopov’s statement and paragraphs 17, 18 and 106 of Jeffery’s statement.

282 Omond rejected Sopov’s suggestion that Omond was “inexperienced in supervising and executing works of [the] complexity [of the Boilerhouse project]”. Omond highlighted his experience in large scale developments and further stated that, by 1999, he had “13 years experience as a Site Foreman with Kane”.

283 Omond stated that he no longer worked for Kane; but that while he did work on the Boilerhouse project, he “was on-site almost every working day for approximately 8 hours per day”. Omond further stated that at no time did Sopov or Jeffery “question [his] experience or competence”.

284 Omond stated that his role in the Boilerhouse project included assisting Kane personnel in communicating with Sopov, Hampton, Jeffery, Martin, the subcontractors and the design consultants; attending site meetings; keeping a record of site activities in a diary; managing day-to-day site activities; forwarding Kane’s time sheets; and informing Kane personnel of site activities. In particular, Omond said that he discussed the progress of work on-site and any particular problems or issues arising with them with Short, Tivendale and Le Hy Ta.

285 Omond stated that he attended fortnightly site meetings at the Boilerhouse and attended all meetings between 21 June and 1 October 1999, except for the meeting held on 13 July 1999. Omond stated that he maintained a record of site activities in Kane’s foreman’s diary and recorded in the diary the names of sub-contractors onsite, the works being undertaken, meetings that took place with Sopov, Martin, Jeffery, Hampton and Long and others. Omond said that he maintained Kane’s time sheets on the Boilerhouse project that recorded the number of days and hours worked by Kane’s labourers and that he knew each of Kane’s labourers personally.

286 Omond stated that, while he was site foreman, “Tivendale attended the site at least 2 to 3 times per week, spending up to several hours on-site during each visit”. Omond said that, during those visits, Omond discussed the progress of the works with Tivendale and that he “also spoke with Tivendale nearly every day by telephone where [they] discussed the progress of the works on-site and any particular issues that arose”.

Delays and Variations

287 Omond stated that, in his discussions with Tivendale, Omond informed Tivendale of all delays encountered by Kane and all circumstances where the costs might increase “either by variations or delays”. Omond further said that he reported these matters to Tivendale “within a day or so of becoming aware of the information [himself]”.

288 Omond said that he was aware that Tivendale prepared Kane’s extension of time claims and that Omond informed Tivendale “on each occasion” and discussed what he knew about “the cause of the delay [and] the effect of the delay on the critical path or progress of work on-site and the period of the delay”. Omond said that “to the best of [his] recollection”, Short and Le Hy Ta were on-site each day for the duration of the project and that he “regularly informed” them of the knowledge he had in relation to the work performed by Kane as variations and the stage of work completed by Kane at the time their progress reports were prepared. Omond stated that, when he had relevant conversations with either Sopov, Jeffery, Martin or Hampton, he informed Tivendale and Short, or Le Hy Ta, as to the general nature of those discussions.

Extension of Time Issue

289 Omond stated that, in “about mid September 1999”, he had a discussion with Tivendale about the completion date of 10 December 1999, since he was aware that Kane was “encountering significant problems with the structural steel works”. Omond said that he told Tivendale that the completion date of 10 December 1999 was not realistic and that, while he cannot recall telling this exactly to Jeffery, he did tell Jeffery that he was “frustrated in attempting to convince Tivendale that the completion date was not achievable”. Omond said that he did “not believe [that he] stated to Jeffery that it was frustrating working on a project with an unrealistic completion date”.

Handover from Williamson to Omond

290 Omond rejected Sopov’s suggestion that “there was no smooth handover” with Williamson. Omond said that he reviewed all of the appropriate documentation and that, “considering the early stage of works that Kane was at”, he “was well informed about the project generally and the stage of works that Kane had reached by 21 June 2000”. Omond rejected any suggestion that his replacing of the previous site foreman, Williamson, in any way “affected or slowed Kane’s work”.

Relocation of downpipes

291 Omond said that he rejected the suggestion by Jeffery that he said, in about August 1999, that the relocation of two downpipes would cost a maximum of $500. Omond stated that he just quoted that as a “ballpark figure”.

(8) SWARBRICK

292 Roger David Swarbrick, the eighth witness for the plaintiff, was employed by Kane in the capacity of façade foreman on the Boilerhouse project from 4 March to 18 July 2000. He was not called as a witness and his evidence is based upon two witness statements.

293 Swarbrick stated that he was on-site at the Boilerhouse Project almost every working day for nine hours at a time. As façade foreman, Swarbrick assisted Kane personnel in communicating with the principals (mainly Sopov), Jeffery, the superintendent’s representative (initially Mark Irving), the various sub-contractors, and also the design consultants. Swarbrick stated that it was his practice to inform Tivendale and/or Le Hy Ta of the details of discussions held with Sopov, Irving or Jeffery on or about the same day that he had the relevant conversation.

294 Swarbrick said that he attended site meetings and kept a record by way of making entries of site activities in Kane’s foreman’s diary for the period from 8 May to 17 July 2000. This included a record of conversations held with Sopov, Jeffery, Irving or Le Hy Ta. As well, in the diary, Swarbrick said that he particularly noted events in relation to the façade works, the movements of sub-contractors on-site, industrial and weather conditions, and health and safety issues.

295 Other tasks performed in Swarbrick’s capacity as façade foreman included management of daily site activities relating to the façade, such as assisting in the coordination of the various trades on-site, deliveries to the site and monitoring the progress of façade works. Swarbrick stated that he regularly spoke with other Kane employees, namely, Tivendale, Le Hy Ta and Skarajew, in relation to the façade work activities. Swarbrick said that he attended most of the site meetings (he was absent at five) while foreman, which were held on a fortnightly basis.

296 With regard to delays and the EOT claims, Swarbrick said that he reported to Tivendale, either by telephone or in person, about any delays being encountered or anticipated, for example, inclement weather. Tivendale, who was responsible for preparing EOT claims, would also discuss proposed EOT claims with Swarbrick, including the actual period of delay and the effect on overall work progress.

297 Swarbrick said that on occasion he had discussions with Le Hy Ta, particularly when he required information relating to variation or progress claims that Le Hy Ta was preparing. Swarbrick said that Le Hy Ta was on-site for every working day for the duration of project (from the time Swarbrick began work on the project).

298 Swarbrick also said that Sopov was on-site regularly and was generally interested in the set-out dimensions, the visual balance of the Alucobond and Rheinzinc, and the external façade in general. Swarbrick said that he spent a great deal of time with Sopov discussing issues such as balance, symmetry and the joins of various materials for the façade. Swarbrick said that Sopov often told him that he was happy with the visual effect.

299 Swarbrick stated that he could specifically recall discussions with Sopovregardin the Alucobond to the level 3 gallery face soffit and the installation of the face in one piece. Swarbrick noted that the approved shop drawing and elevations showed a joint, but that the section drawings did not. According to Swarbrick, the Manager of AAS, Mr Spencer Wilson, informed him that it would be very difficult to install the face in one piece and that there should be a joint to facilitate installation. However, Swarbrick said that Sopov told him that he did not want a joint. Swarbrick was in this way made aware that a face template was to be manufactured if possible for installation in one piece.

300 In relation to the pivot doors which were inspected and approved by Irving and Sopov on or about 10 July 2000, Swarbrick said that Sopov was happy with them and had no complaints.

301 Swarbrick further maintained, in his reply witness statement, that issues with the façade shop drawings prepared by Kane and the relevant sub-contractors did not directly delay works under his supervision.

(9) QI SHAO

Background

302 Qi Shao, the plaintiff’s ninth witness, was a director of S & D Design and Drafting Pty Ltd (“S & D”). S & D became involved in the Boilerhouse project some time in June 1999 when DVP Engineering Pty Ltd (“DVP”), one of Kane’s main subcontractors, in turn engaged S & D to carry out the drafting component of the structural steel. Shao’s evidence was drawn largely from her reply witness statement dated 8 August 2003 and also from evidence provided at trial.

303 Ms Shao’s background was as follows. She stated that she obtained a Bachelor of Civil Engineering from Tongji University in Shanghai, China (although she did not specify which year). She said that she was qualified as a civil engineer in Australia and that she had undertaken such work for the past 16 years.

304 Shao described S & D as a structural steel drafting company of approximately 12 years standing. She said that the company had worked on projects both larger and smaller in size than the Boilerhouse project, describing the project itself as “medium”sized. According to Shao, S & D derived much of its work through DVP.

305 At the time of the Boilerhouse project, Shao stated that S & D employed two people in a full-time capacity, including herself, to work on the project. The other full-time worker was described as a casual employee. A third person, one Danny Gu, was also a director of the company and worked on a part-time basis. All three worked on the Boilerhouse project. Shao’s role specifically included providing architectural and structural drawings for the fabricator; the drafting of marking plans (which indicated the location of the structural steel); and provision of parts and shop drawings. Occasionally, but not often, she would be involved in discussing and resolving difficulties which arose.

306 In June 1999, S & D were provided with the architectural and engineering (structural) drawings for the project for the commencement of drafting works. Qi Shao stated that the drawings were inadequately detailed and contained inconsistencies which delayed the commencement of detailed shop drawings for steel fabrication. S & D sent two letters to Kane on 23 and 25 June 1999. These letters outlined S & D’s problems and also requested further necessary information.

Drafting Problems

307 In her witness statement, Shao listed the problems encountered during the drafting process. They are, briefly, as follows:

• “inconsistencies” in details provided in the contract drawings;

• details provided that, according to Qi Shao, “did not work”;

• apparent absence of details in contract drawings;

• need for additional shop drawings as a result of changes in the structural steel requirements; and

• late changes/rejection of approved shop drawings which further complicated the process.

308 Shao expanded on and gave examples of these drafting problems in her witness statement. She estimated that 40 per cent of the shop drawings were revised. According to Shao, therefore, all of this caused significant overall delay to the progress of works. She suggested that had the documentation been adequate and no revisions been made, the project could have been completed in four to six weeks. Instead, the task went for a period of approximately four months.

309 Shao stated that, in her opinion, Sopov did not appear to appreciate or understand what was involved in revising the shop drawings. For example, the fact that a small change resulting in the revision of a drawing affected other drawings and connections.

310 Shao acknowledged that some revisions were the result of drafting mistakes, but she estimated that over 70 per cent of the revisions on the project resulted from changes having to be made due to deficiencies in the contractual documentation (including, for example, four revisions to drawing 27 (beam 3B26) and drawing 29 (beam 3B11)).

311 Shao stated that, owing to the numerous major changes resulting from inadequate contract documentation, many meetings had to be held to discuss the problems. At least three of these meetings were with the engineer. Further, the meetings went for a minimum of half a day, causing more delays to the drafting process. Shao said she usually attended on-site or had meetings elsewhere once or twice a week. While Shao recognised her contractual need to visit the site during the course of such a project, this ordinarily did not extend to meetings. At one of these meetings with Sopov and Tivendale, which related to the steelwork for the level three balcony of apartment 11, Shao stated by way of example that Sopov had advised of revised details which would result in the alteration of 13 shop drawings that had already been approved some time earlier and provided to DVP for fabrication.

312 Shao said that she could not recall how long individual shop drawings took to be approved but that there were often long delays. There were significant periods of time when S & D were unable to undertake any drafting because it was awaiting further instructions or information. However, Shao also stated that during the period from July to October 1999, S & D devoted all of its time to the Boilerhouse project, working weekends on numerous occasions and on at least one occasion working through the night to complete the shop drawings relating to the balcony set-downs. As a result, the company could not undertake any other work.

313 In cross-examination, in which she gave evidence through an interpreter, Qi Shao provided other examples of her drafting problems. She said that two or three days after a meeting held with Tivendale, Sopov, the engineer and several others on 29 June 1999, she received part of the information required and began the shop drawings on the column of the ground floor of the gallery façade.

314 Shao said that there were particular difficulties with the holding plans 1 to 3 (HP 1 to HP3) and the marking plans, which formed the basis for the shop drawings. For instance, Shao stated in relation to HP2 (dated 21 June 1999) that she required information on the length of a particular beam and details with respect to the canopy. She would not agree that the canopy could have been done at any time on the basis that it simply had to be bolted on underneath the existing concrete, as its connection point was the column.

315 During cross-examination, it was put to Qi Shao that Tivendale had earlier given evidence to the effect that, following a further meeting with S & D on 9 July 1999, the set-out issues based on the site dimensions were finally resolved. Shao was not able to respond completely. She agreed that shop drawings 1,2 and 3 were dated 9 July 1999 and that no other shop drawings were produced until shop drawings 4 and 5 on 23 July 1999. Shao did, however, explain that while her query in relation to holding plan 1 (HP1) had been answered by Tivendale, she had to wait for answers to HP2 and HP3, which prevented shop drawings being produced for the gallery façade. Shao agreed that she had never directly asked Sopov for information when information was required. She stated that DVP had directed her to contact Tivendale, the project manager for Kane, where necessary.

316 Counsel for the defendants put it to Shao during cross-examination that there was nothing in HP1, 2 and 3 which prevented her from preparing the shop drawings to the gallery façade if that was the place she thought she had to start. However Shao stated that the dimensions and arch location had to be approved by the engineer and architect for that part before she could start and the information had to be complete. Nevertheless, Shao agreed with the proposition that structural engineers only ever approve holding down plans for shop drawings for structural integrity and they never approve dimensions.

317 During re-examination, Shao gave evidence that the information she required in the June/July 1999 period included (i) set-down information which was not marked on the original drawing and could only be supplied by the engineer, and (ii) design information such as column location which she said needed to be provided by an architect.

318 As to the need for site measurement, attention was drawn to plan AO1 A-A which Shao recognised as one of the plans Dordevic, a Director of DVP, had given her in the middle of June 1999. Notes on the right hand side read: “the contractor is to verify the existing column grid spacing and all set-out dimensions prior to commencing the work”; with respect to which Shao gave evidence that it was not her job to interpret what the notes on the plan required.

319 It was put to Shao that she requested site measurements between 16 June and 7 or 8 July 1999 on a piecemeal basis. Attention was drawn to the fact that a number of documents were eventually provided setting out the dimensions rather than, as should have occurred, the site measurements being provided before beginning drafting work.

(10) DORDEVIC

Background and Role of DVP in the Boilerhouse Project

320 Vlastimir Dordevic, as the tenth witness for the plaintiff, gave evidence for the plaintiff in his capacity as a director of DVP Engineering Pty Ltd (“DVP”). Dordevic stated that DVP was an engineering and fabrication firm which entered into a subcontract with Kane on 8 June 1999 for the drafting of shop drawings and the fabrication and erection of the structural steel for the Boilerhouse project. Dordevic said that DVP had been providing structural steel engineering works for 27 years in projects both larger and smaller than the Boilerhouse project. Dordevic said that, for over 10 years, DVP had obtained a significant amount of work through Kane. Dordevic stated that his role in the Boilerhouse project encompassed managing workshop operations and overseeing the shop drawing process and contract administration. Dordevic said that he had approximately 30 years experience as a structural steel fabricator.

321 Dordevic said that programs usually have to allow for more time in relation to a refurbishment project as a result of the complexities associated with ensuring that the structural steel complements the existing structure. He said that approximately 20-30 per cent of DVP’s work over 26 years had involved structural steel refurbishment projects, many of these similar to the Boilerhouse project. Dordevic further said that, according to his professional experience, the structural steel component (drafting, fabrication and erection process) of the Boilerhouse project should have taken eight to nine weeks, inclusive of approximately four weeks at the beginning of the project for the resolution of any queries in relation to contract drawings and the drafting and approval of shop drawings; two to three weeks for fabrication; and 10 days for the erection of the resulting structural steel.

322 Dordevic stated that the tender drawings S1 to S11, A1 to A11-A, A16-A to A17-A and A21-A were provided to DVP in late March or early April 1999 and that DVP provided its quote to Kane by document dated 8 April 1999. Prior to being awarded the contract on 8 June 1999, Dordevic said that he had discussed the requirements with Tivendale, including the time required for the drafting, fabrication and erection. Dordevic further said that he was aware that Kane had programd the structural steel to be erected on-site in early August 1999 and that DVP could have met that deadline. Dordevic alluded to the Kane program provided by Tivendale in early August 1999 which allocated 61 days for the structural steel. Dordevic said that, given the relatively small size of the project, six weeks with 10 days for critical structural steel erection was a “realistic and feasible program”.

323 During cross-examination by counsel for the defendants, Dordevic said that he was not provided with a program when awarded the sub-contract, but that he was told of an approximate timeframe for the fabrication and erection of steel. Dordevic said that the production of drawings could be staggered so that fabrication could commence before all the shop drawings were complete, i.e., a certain amount of the drawings (from 60-90 per cent over the first four weeks) could be sent for approval and fabrication and could start, while the remaining drawings could be finalised over the next two weeks. As to the steel itself, Dordevic said that it was ordered and could be delivered in one day, whereupon fabrication could be done straight away, or it could take up to one week depending on the amount of work DVP had at the time.

324 In his witness statement, Dordevic outlined the processes involved in drafting, fabrication and erection as being the obtaining of a full set of structural and architectural drawings from the builder; the engagement of a drafting company to provide a set of competence drawings in order to fabricate the structural steel; the resolution by the draftsperson of any queries which may arise (generally these are few) from the drawings directly with the architect, builder and owner; the preparation of shop drawings in sections so that fabrication can commence while drafting of other sections continues; the seeking of approval by DVP from the builder, upon completion of the shop drawings (noting that sometimes the draftsperson will provide the drawings directly to the builder or architect and that these are in the main approved by the architect and returned, although sometimes with markings which indicate any changes to be made); upon approval, the commencement of fabrication by DVP, frequently on the same day the drawings are approved and typically within one day of approval; and finally, the erection of the structural steel on-site.

325 In cross-examination, Dordevic said that DVP’s drafting sub-contractor, S & D, was not provided with a program, nor did Dordevic give S & D any directions as to what sections of the shop drawings should be started first, since there was enough time to do the job – “if the documentation had been right” – and therefore they did not need to begin with the critical area.

326 Dordevic said that he reviewed the shop drawing registry which indicated the number of revisions made to the shop drawings during drafting (and produced by Tivendale) and believed that it was an accurate record of the details in the shop drawing. Dordevic said that the register indicated approximately 70 changes to the approved shop drawings which is excessive and atypical, and that they were also having to “deal directly with the Principal to get information”. Dordevic said that this was a “very unusual situation” and that he could not recall DVP having worked on a similar project without an architect. Dordevic further stated that, in his experience, approved shop drawings were final, and in the absence of significant error, the structural steel would be produced and any revisions were usually minimal (with approximately one or two revisions for every 20 drawings).

327 Dordevic’s witness statement highlighted the following issues in relation to the submission of shop drawings over a five month period: the tender drawings lacked sufficient detail to enable the production of shop drawings and were not revised (according to Tivendale) so as to avoid problems as is typical; an excessive number of changes made by the superintendent and principals during drafting, fabrication and installation were caused by inconsistencies in the contract drawings of which Dordevic was informed by S & D and Tivendale (additional members were then required to be shop drawn, fabricated and erected as a result); changes made by the superintendent and/or principals after shop drawings had been approved and changes to the structural steel requirements after it had been erected on-site; and the absence of an architect familiar with the project who could resolve any issues that arose quickly.

Competency of S & D

328 Dordevic said that the standard practice was for the fabricator to appoint a draftsperson, as opposed to the builder. Dordevic said that DVP had dealt with S & D on a regular basis for approximately 8-10 years and was content with the standard of their workmanship. Dordevic said that S & D was retained, without written contract, because of the small size of the project, within one week of DVP being awarded the structural steel contract. Dordevic said that in mid-June 1999, shortly after the drawings were provided to S & D, Qi Shao, a director of S & D, informed Dordevic by telephone that the drawings did not contain sufficient detail to begin producing shop drawings. Dordevic said that DVP passed on the complaints to Tivendale and that this resulted in several meetings being held between S & D, Kane and the principal.

329 In cross-examination, Dordevic said that when Qi Shao complained to him about the insufficient detail and many discrepancies (although she did not go into detail about these), Dordevic told her to speak to Tivendale. Dordevic further said that within a day (or not more than two days), Dordevic himself spoke to Tivendale about Qi Shao not being able to begin the shop drawings. Dordevic said that Tivendale told him that he would deal with it, and Dordevic said that he believed that there would have to had been a conversation between Qi Shao and Tivendale as a result.

330 Dordevic said that during the shop drawing process he was frequently informed by Qi Shao of difficulties caused by the lack of detail, and/or where detail was stipulated, it was often unworkable. Dordevic said that, on 16 November 1999, Danny Gu, a director of S & D, wrote to Dordevic outlining the difficulties and additional work required as a result of inadequate contract drawings and changes made by the principals. Dordevic said that, in his opinion, the drafting process should have taken four weeks, but instead took from June 1999 until 15 November 1999 and that this resulted in a delay to fabrication and the erection of structural steel.

331 Dordevic said that, on occasion, S & D provided DVP with shop drawings – simultaneously with the provision of these drawings to the engineer for approval – in order that fabrication of the structural steel commenced (namely, prior to the approval of the principals and the superintendent) and that delays were thereby minimised. Dordevic said that the fabrication of the structural steel should have taken two weeks but instead took from 15 September 1999 until 22 November 1999 due to deficiencies in the structural steel documentation.

332 During cross-examination, Dordevic said that there were problems with the structural steel drawings, but that these were much less than the problems with the architectural drawings which included set-out, measurements, and how each member connected to gutters, concrete and similar things. Dordevic said, however, that he had never checked the architectural drawings in detail, nor had he conducted an analysis of the delay to the structural steel fabrication as a result of the delay to shop drawings. Dordevic said that he had, to a certain extent, made an analysis of the delays to the structural steel shop drawings caused by the deficiencies in the plans by noting the timing of where members were pulled out and changed. Dordevic said that in doing this, considerable time was wasted on the job. Dordevic said that changes were required to the shop drawings and structural steel and that the builder also required changes to the structural steel. However Dordevic said that the only the record of the alterations required by the builder were to be found on the invoices that he provided to the builder.

333 Dordevic said that the fabrication delays were also caused by the infrequent and irregular manner of obtaining the approval of shop drawings. Dordevic said that DVP received the approved shop drawings for connecting beams or components at different times. Dordevic further said that the erection of the structural steel, which should have occurred over 10 consecutive days, instead took 12 weeks, from 21 September 1999 until to 13 December 1999. He said that this was caused by the delays in the drafting and fabrication processes and the increased number of structural steel components and by the late changes to the approved shop drawings which were made after the beams were installed. Dordevic said that, for instance, beam 3B26 was revised four times, with the beam having to be removed, the altered beam fabricated and then re-erected.

334 Dordevic said that the installation of the structural steel was programd to be completed by 24 September 1999 and that the program allowed for 10 days. Dordevic said that, had it not been for inadequate contractual documentation and substantial changes made during shop drawing, fabrication and erection processes, this timeline would have been achievable. Dordevic said that he had read Tivendale’s witness statement which stated that the original program allowed 61 working days for shop drawings and off-site fabrication and 10 working days for on-site erection; however Dordevic said that the shop drawing process occurred from mid-June to late October 1999 which was a period of time in excess of 95 working days. Dordevic said that the on-site erection which was programd to begin on 18 August 1999 did not begin until 18 September 1999 and that it proceeded through to early December 1999, that being a period in excess of 54 days. Dordevic said that these delays could not have been reasonably anticipated on the structural steel documentation prior to entering the contract and were caused by the excessive number of changes made by Sopov to the structural steel requirements.

Specific Delays

335 Dordevic said that DVP were provided with the approved shop drawings with respect to the gallery face on 13 August 1999, by superintendent’s instruction of 5 August 1999 and with annotations that indicated the principals’ approval. Dordevic said that the approved shop drawings included handrails and the ARC columns. Dordevic further stated that DVP were informed, on or about 8 September 1999, that the ARC columns were to be deleted and, as a result, shop drawings 11B and 13B were produced and provided in mid-September 1999 for fabrication. Dordevic stated that these changes involved the deletion of six columns, 12 connection points to the ARC columns on six beams, and the re-location of the bolt holes in these beams for the altered handrail layout. Dordevic said that, at the time that he was notified of the changes, shop drawings 11 O and 13 O had been received for fabrication, but Qi Shao advised him that these beams were to be altered and had not been fabricated.

336 Dordevic further said that he was also advised, by way of instruction SA21 dated 8 September 1999, that the cutting of the level 2 slab adjacent to the 2nd floor terrace on the south of the chimney required the alteration of the length of the main beam LT1 and an additional beam HB1. Dordevic said that shop drawing 14 O was provided to DVP for fabrication on 10 September 1999 and the steel was subsequently fabricated on 23 September 1999. Dordevic said that, as required by SA21, the beam was then altered in length and the end plate connections were added.

337 Dordevic stated that DVP had experienced many delays and difficulties with respect to the Level 2 columns and level 3 beams and balconies. Dordevic said that on 14 September 1999, Qi Shao informed him that the connection steel to the columns and beams at the north-west corner had been omitted from the architectural plans and approved shop drawings but were later required. Dordevic said that some of the columns and beams to which these connections related had already been manufactured in DVP’s workshop while others were in the process of being fabricated. During re-examination, Dordevic said that the shop drawings provide therecord of the fabrication date of the members.

338 Dordevic further said that, on or about 22 September 1999, Tivendale and Qi Shaoadvised Dordevic that Sopov had instructed revisions to be made to the balcony in apartment 11 and that these revisions affected 13 drawings that had been fabricated in accordance with the approved shop drawings of 3 September 1999. Dordevic said that the fabrication of six of these drawings (17C, 23C, 25AB, 27A, 29A and 35A) had already been undertaken. Dordevic said that revised shop drawings were provided on or about 24 September 1999 or 27 September 1999, but that Dordevic then received instruction from Tivendale on or about 30 September 1999 that Sopov wanted to revert to the original structural steel design and so a hold was placed on fabrication. Dordevic said that the revised approved shop drawings were provided to DVP on 5 October 1999, but that DVP were instructed not to begin fabrication until approved by the engineer and that this approval occurred on 6 October 1999. Dordevic said that the altered steel was delivered to the site on 14 October 1999 and that the removal of the beams which had been installed in accordance with the earlier shop drawings delayed the project for nine days.

339 In cross-examination by counsel for the defendants, Dordevic said that he had not carried out an investigation to establish whether or not the whole project was delayed due to the structural steel, but he believed that, as a natural “flow-on effect”, delays with the structural steel would mean that the progress of other trades would also be halted. Dordevic said that the main problems were that S & D were delayed in producing the shop drawings and that the erection of the structural steel was still occurring between 30 September 1999 and 14 October 1999 while there were still problems with the documentation. Dordevic said that DVP should have finished their work by 2 September 1999, but that it was taking longer because the erection of the structural steel was being done in “bits and pieces”.

340 In cross-examination, Dordevic said that the demolition of the roof which preceded the structural steel work did not delay in any way the structural steel work itself. Dordevic further said that he could not recall the exact date when demolition began, but estimated that it was in late July 1999 or early August 1999. Counsel for the defendants suggested to Dordevic that demolition of the roof did not begin until after 18 August 1999, but Dordevic said that he believed that it had occurred before that date. Dordevic also said that the gallery façade steel was attached to the roof and could not have been left alone completely or put on months after the main structure was built.

341 Dordevic also said that there were problems with the gutters and that alterations had to be made due to the deletion of some holes and therefore the documentation had to be changed. In re-examination, Dordevic said that the problems were indicated onengineering drawing S6 between grids 1 and 2; on drawing S5; and on drawing S8,which apparently did not indicate where the holes had to be drilled in relation to fixing the balustrade. Dordevic said that the area of guttering was part of the gallery façade steel which Dordevic considered an integral part of the structural steel work.

342 In re-examination Dordevic said that he went to the structural engineering drawings to identify the problems arising from time to time which included a mansard roof which was never shown in structural drawings and the alteration in the size of the plant platform on the roof.

343 Dordevic stated that, on 5 November 1999, beam 3B26 was again revised (after it was installed) from it being a straight to a cranked beam. Dordevic said that this meant that the beam had to be removed, altered and re-installed. Dordevic said that DVP did not keep a record of beams that had been installed. However Dordevic said that, based on a discussion he had with the door manufacturer, he knew that one of the beams had to be returned for alteration around the end of October 1999. Dordevic said that these instructions again changed on 12 November 1999 and that the final revision occurred on 13 November 1999, with work undertaken between 19 November 1999 and 23 November 1999, meaning that the project was delayed by 2.5 days.

344 Dordevic said that difficulties also arose from the insufficient height of the reinforced core filled blockwork pier supporting beams 97A and 99A. It appears that this particular problem was not discovered until DVP had commenced installing the beams on 29 September 1999. This meant that three extra columns had to be fabricated by DVP to support the beams. Dordevic said that this caused a delay to onsite erection between 30 September 1999 and 14 October 1999, a period of nine working days.

345 Dordevic said that he believed that Kane’s claim was justified for a delay of 45 days between 27 September 1999 and 2 December 1999. Dordevic said that, given the difficulties and delays to structural steel, he believed that Kane’s claim of 45 days was “conservative”.

(11) THOMAS

General

346 Lawrence Maxwell Thomas was a quantity surveyor by profession with almost 30 years of experience in his field. He first became involved in the Boilerhouse project when the WT Partnership (“WTP”), of which he was a Director, was engaged by the plaintiff’s solicitors to provide an expert opinion on whether the costs of $5,221,603 incurred by Kane were fair and reasonable.

Quantum Meruit Report

Background/Methodology

347 Thomas’ Order 44 statement included a report of the quantum meruit claims made by Kane, as assessed by Thomas. Thomas said that, to verify the accuracy of the quantum meruit claims, WTP audited a selection of representative items. These were detailed in Table 1 of his witness statement. Purchase orders were chosen on a criteria of value and possible contention and included 22 entries. Table 2 of Thomas’ witness statement used a selection of contract final accounts, selected on the basis of their significant increase in end value in relation to the initial value (i.e. variations and possible EOTs). The sample included six sub-contracts.

Findings of Thomas

348 Thomas’ findings were that records were well kept with clear and logical sequence and annotation. Contract administration was held to be of a high standard. While not all records were perfect (for example, pages were missing from the foreman’s diary), WTP considered that the claim of costs incurred was accurately reflected. As to Kane’s claim for a 10 per cent mark-up on costs to recover overheads etc, WTP found it to be a fair and reasonable charge on a quantum meruit basis, based on previous average costs of administration (13.44 per cent).

349 Notwithstanding the above findings, WTP reported some items which, by industry standards, were arguably higher than expected. Thomas identified these items as relevant to “the amount and value of Kane’s direct labour”. By “direct labour”, I take the expert to mean that this was the cost to Kane for employing their own workers and payment for sub-contractors’ employees where necessary to complete works. Nevertheless, according to Thomas, the higher costs were justified as labour was onsite and expenses were incurred as a result of one or more of the following situations: poor coordination of documentation supplied by the proprietor, giving rise to the need for variations which the trade sub-contractors were not willing to undertake; use of Kane’s own scaffolding crews, employed to minimise industrial and safety issues; delays caused by unproductive use of direct labour; and the MTK liquidation, for which Kane entered into a scheme of arrangement ensuring that works could be completed using day labour and with Kane paying MTK employees at agreed rates.

350 Thomas found that the claim by Kane on the quantum meruit basis of an outstanding amount of $2,452,253 truly reflected the actual costs.

351 Thomas summarised his statement by concluding that the increase in actual costs incurred over the original contract sum could be explained by a combination of factors including: (i) prolongation costs associated with the extended duration of the project; (ii) significant cost increases in the construction industry as a result of booming activity and the impact of the Enterprise Bargaining Agreements introduced at that time (1999); and (iii) variations “necessarily incurred in a project of this nature”, where, for example, complex construction matters have not been not reflected in tender documents.

352 During cross-examination, Thomas said that he visited Kane’s offices three times. He met only Tivendale and Lucas at their offices.

353 Thomas accepted that he took 22 entries (relating to costs) worth 69 per cent of the value of the job and divided the information into two tables. He explained that, through the audit, WTP were trying to identify the areas that would be most contentious and of the highest value. First they searched for any records that appeared “untoward or incorrect”. On finding nothing in this regard, they looked for costs that were higher than expected. Day labour was one such area, and so WTP interrogated Kane about it.

354 It was inferred by counsel for the defendants during cross-examination that Thomas could not have come to an accurate or fair conclusion about the records of costs incurred because an assumption was made about the accuracy of what Kane told him.

355 During re-examination, Thomas was given the opportunity to explain why he concluded that the increase in the day labour figure was plausible. His response was that Kane used their own labour (which in other circumstances could have been a trade contract). They also had two leading hands on the project because of the complexity of the issue of construction as well as extra labour on-site.

356 All of this resulted in extra delays. The longer duration of the project, caused by the fact that works had been extended by up to a year longer than expected, meant that labour (paid by time not by task) produced higher costs in wages.

357 With regard to the quantum meruit claim, Thomas acknowledged that the subcontract agreement sum for MTK work (plastering/stud work) was $420,000.00, whereas Kane’s quantum meruit claim with respect to the MTK work amounted to $565,553.00, representing an increase of approximately $145,000 from the contract price. Thomas said that he did not measure the amount of stud and plaster work installed on the Boilerhouse project as WTP was not requested to do so. Thomas was not able to say whether the scope of stud or plaster work increased from when the contract was first let. He observed that it was not his brief to determine changes in the scope.

(12) LYNAS

Background

358 Gordon Lynas, the plaintiff’s twelfth witness, was a director of Tracey, Brunstrom & Hammond Pty Ltd (“TBH”). His Order 44 statement was prepared at the request of the plaintiff’s solicitors who asked TBH to review the EOT claims, numbered 1-18 inclusive, made by the builder in respect of the Boilerhouse project. The brief provided to TBH by the plaintiff’s solicitors indicated that these EOT claims could be found in schedule 3 of Kane’s Amended Points of Claim dated 16 November 2000; schedule 2 of Kane’s Points of Claim dated 3 July 2000; and Kane’s Further and Better Particulars of its Points of Claim dated 4 September 2000. Lynas stated that he was “an expert in project management processes and techniques with particular emphasis on time, cost, scope and risk management”.

Methodology

359 Lynas described his methodology for quantifying the delays as involving several aspects. These were described as, firstly, reviewing the factual evidence to determine the circumstances of the delay and its chronology; then reviewing the contractor’s programs to identify the immediately preceding program; inspecting the relevant program to determine whether the delay affected any of the program’s critical paths at the time of the delay; and where the program showed more than one critical path, inspecting the “as built records” to determine if the path had actually been critical at the time of the delay. Lynas further stated that the critical delay to completion was defined as the period for which the progressive critical path was delayed and that the next occurring delay was treated on the same basis.

360 In examination by counsel for the plaintiff (and despite the objections made by counsel for the defendants about Lynas’ mode of evidence), Lynas gave a PowerPoint presentation to illustrate how it was that he went about identifying activities of work in relation to the overall construction works undertaken by the builder, for the purpose of identifying what work was critical and what work was not critical on the project. Lynas further stated that, even if, hypothetically, his assessment of the critical path was not accepted with respect to the EOTs, he believed that “in general terms, the delays [were] stand alone items”.

361 Lynas stated that the time set for the project by the contract was from 31 May 1999 to 10 December 1999, i.e. 6.5 months, and that taking into account “normal construction practice”, the available number of work days in that contract period was 154 days. Lynas stated that, based on his understanding of “the statistical relationship between time and cost for construction projects”, a period of 154 days would require “performance from all parties to the works equivalent to or better than that achieved by the top 25 per cent of projects” and that such a timeframe could be considered to be “somewhat ambitious but not unachievable for a project of this type and value”.

Analysis of EOT Claims

362 Based on his analysis, Lynas came to the following conclusions about Kane’s EOT claims:

363 In his analysis, as summarised above, Lynas noted that some of the delays were concurrent with others. Taking this factor into account, the total delay assessed by Lynas, on behalf of TBH, was 151 days. Lynas further stated that the superintendent had approved delays totalling 11.75 days. Lynas therefore concluded that additional non-concurrent work day delays totalling 139 days and two hours was justified.

364 Lynas further stated that, in light of his analysis, the practical completion date should be extended from 10 December 1999 to August 2000. After further taking into account inclement weather delays and what may or may not have been covered by the conditions of the contract, Lynas concluded that Kane was entitled to an extension of time of 147 days, and that the extended date for practical completion should be 4 August 2000.

365 In cross-examination, Lynas conceded that what he had assessed as a construction program did not take into account “off-site activities”, and that there could have been “critical” off-site activities which affected the on-site program. However, in re-examination by counsel for the plaintiff, Lynas said that although the programs that the builder produced did not have programd activities such as procurement or the preparation of shop drawings, he did not believe that the absence of such activities rendered those programs “defective”; since Lynas thought that the time available from the beginning of the program until those items were required was still adequate.

(13) LEE

Background

366 Norman John Lee was a quantity surveyor. He, like Thomas, was an employee of the WT Partnership (“WTP”). WTP prepared a report and Order 44 statement, as commissioned by the plaintiff’s solicitors, Deacons, in respect of both Deduction Variations and Costs to Complete.

Deduction Variations

367 In his witness statement, Lee said that WTP reviewed the 19 deduction variations that had been claimed by the principal and set out in the annexures to the statements of Jeffery and Goodwin. Lee said that WTP concluded that the listed variations claimed by the principals were “not fair and reasonable”.

368 Counsel for the defendants questioned Lee on his methodology. Lee said that he had seen Tivendale “half a dozen times” and that he had read Le Hy Ta’s witness statement. However Lee said that he had not spoken to the defendants; nor had he seen any documents showing how the superintendent had assessed the claims. Lee said that the documents that he had seen from the defendants’ side were the principals’ claim for the deduction variations, the Jeffery Report, the Construction and Asset Management Consultant (the “CAMC” Report) and the Goodwin Report.

369 Lee summarized the competing assessment of the claims as follows: 31

Principals’ Claim $185,183

Goodwin Assessment $77,307

Jeffery Assessment $75,625

WT Partnership assessment $50,886

370 A table comparing the competing assessments of each of the items was given by Lee as follows:

371 In cross-examination, counsel for the defendants questioned Lee about two deduction variations in particular: the car park entry ramp and the shop drawings.

372 With regard to the car park entry ramp, Lee said that there was some “confusion” between the architectural and structural drawings. He said that Kane had constructed the car park entry in accordance with the structural design. Nevertheless, under cross-examination, Lee conceded that he was not a structural engineer (or an architect) nor had he read anything that the structural engineer, Keith Long, had said about the car park entry ramp. It is in this way difficult to see how Lee could have concluded that Kane had in fact constructed the car park entry in accordance with the structural designs.

373 In his report, Lee stated his opinion that the shop drawings should not constitute a deduction variation. However, during cross-examination he acknowledged that this opinion was formed based on the information provided to WTP by Kane. Lee also admitted to making assumptions about the shop drawings without having seen them.

Costs to Complete

374 Lee said that WTP were instructed by Kane to quantify the outstanding works for the following four trades (from 6 October 2000 onwards): the rendering works; the Alucobond cladding; fire spray and the shower screens.

375 In Lee’s opinion, “a fair and reasonable cost to complete” the works was $40,645 (excluding GST). In contrast, the principal’s claim was for $95,247 (excluding GST). Lee considered, however, that the principal’s claim stood “well outside expected industry parameters”.

376 In cross-examination, counsel for the defendants questioned Lee on the methodology he employed in calculating the costs to complete. Lee conceded that the four trades selected were given to him by Kane. He also agreed that he had not spoken to the defendants and that he relied upon the information provided by Kane to make his assessments. It appears that Lee obtained most documents directly either from Kane’s project manager, Tivendale or from the contract administrator, Le Hy Ta.

377 Counsel for the defendants questioned Lee about each of the four trades forming the basis of his calculations for the costs to complete.

378 With regard to the first trade, the rendering works, Lee assessed the costs to complete at $2,205. Counsel showed Lee photographs of rendering in certain areas; and Lee said that he was not aware of (and had not taken into account) such rendering that had apparently occurred subsequent to termination.

379 As for the Alucobond cladding, Lee assessed the costs to complete to be $20,750. He said that he had assessed the supply and installation of Alucobond at $250 per square metre. He agreed that he was not shown any documents that would have made clear that the actual cost – as shown by invoices and actual prices paid – was in fact $295 per square metre (i.e. $45 per square metre more than that assessed by Lee).

380 Lee assessed the costs to complete for the fire spraying to be $8,250 in total. He said that he was not shown RFI 83, which was a Kane document showing Jeffery what amount was allocated with respect to this trade (and which presumably may have assisted Lee in making his calculations).

381 For the shower screens, Lee calculated the cost to complete to be $9,440. That is, 16 uninstalled screens valued at $590 each. The principal, however, claimed costs to complete of $13,806. Lee said that he had not seen the invoice dated 17 November 2000 (as produced by counsel for the defendants) from Premium Showers and Robes which stated that the remainder of works totalled $9,510 and that this amount had been invoiced to Stacks Properties. Nor had Lee seen the Kane document which showed the uncompleted work being that of 40 uninstalled mirrors from Expert Glass totalling $4165. Lee testified that the mirrors had been provided to WTP for assessment as a cost to complete that was part of the shower screen item.

382 The assessment and analysis by Lee was of limited assistance as his views were principally based on information provided by the plaintiff. This constrained the independence of Lee and is a factor I have taken into account.

(14) GILFILLAN

383 The fourteenth witness for the plaintiff, Kenneth Struan Gilfillan, is a qualified architect. His Order 44 statement was prepared at the request of the plaintiff’s solicitors.

384 Gilfillan was engaged to “provide an expert opinion on the variations claimed by Kane in respect of the Boilerhouse project”; however he was not instructed to assess the quantum of the variations and therefore “[made] no comment on the valuation of the variations assessed”.

385 For the purpose of preparing his report, Gilfillan stated that he was provided with the contract dated 20 August 1999; the contract drawings and specification; folders of documents relating to variation claims including RFIs, superintendent’s directions, invoices, notices of price variations and variation approvals; and “relevant pleadings” provided by the plaintiff’s solicitors, Deacons.

386 Gilfillan said that during his engagement he met with Tivendale on three occasions, both on-site and in Tivendale’s office, and that the duration of those meetings may have been “a day at a time”.

Variations

387 Gilfillan said that he concentrated on the variations which “had not been approved by the Superintendent”.

388 Gilfillan’s report concluded that the majority of the variations claimed by Kane “required additional labour and materials and were variations under the contract”.

389 Gilfillan further stated that the builder was retained under a AS 2124 form of contract which was “not a design and construct contract” and he concluded that “a significant number of variations resulted from deficient, poorly coordinated and inconsistent contractual documentation”.

390 During cross-examination, Gilfillan agreed that he had assessed the variations by considering what each “rival” side had said about them and coming to a conclusion. Gilfillan further agreed that this process that he had engaged in was similar to that which would have occurred had he been making a determination as an arbitrator at VCAT where he was a sessional member.

391 Gilfillan’s assessment of the variations, as listed in Appendix 1 of his report, may be summarised as follows:

Domestic Building Contracts Act

392 In cross-examination, counsel for the defendants questioned Gilfillan on variation 66 regarding the laundry and floor wastes. In response to this questioning, Gilfillan said that he didn’t think at the time that the Domestic Building Contracts Act applied to this item. However, he also said that he was aware of the Domestic Building Contracts Act and did consider it when he was assessing the variations.

DEFENDANTS’ EVIDENCE

(1) SOPOV

Background

393 Cole Sopov, who is a sculptor by profession, was the first-named defendant in this proceeding. His wife, Norma Rose Walker, was the second-named defendant. Both Sopov and Walker are directors of the third-named defendant, Stacks Properties. Collectively, these three defendants are referred to as the principals. Sopov stated that, prior to him becoming the registered joint proprietor of the Boilerhouse project on or about 22 March 1996, he was a lecturer in fine arts at Monash University from 1977 until 1995.

394 Sopov stated that, in April 1997, he was introduced to Ross Carpenter who was to subsequently become the design architect for the Boilerhouse project. Sopov further stated that, given Sopov’s vision for the Boilerhouse project and his background and experience in art and design, he took “an active role in the design process”. Sopov stated that the design architect had costed the project by employing quantity surveyors, Slattery Australia Pty Ltd (“Slattery”). Sopov further stated that the design architect prepared all of the documentation for the tender.

The Tender Process

395 Sopov said that he invited six building companies to tender for the Boilerhouse project and that Kane Constructions was one of three companies short-listed for interview. Sopov stated that he met with Peter Cusack, representing Kane, three times, namely, on 20 April 1999 and 10 May 1999 at Sopov’s office and once at the Bolierhouse on a date that Sopov said that he could not recall. Sopov said that at the first meeting there was “a discussion of the suitability of the use of the Australian Standards General Conditions of Contract AS 2124-1992 for the project”. Sopov further stated that he told Cusack that Kane would win the tender if they could “get their price down to $3.5 million”.

396 Sopov said that, on 17 May 1999, Kane submitted an amended tender in the sum of $3,474,000, in which it was stated that the project would be constructed in 26 weeks (130 working days). Sopov said that he informed Kane on 20 May 1999 that theirs was the winning tender. In cross-examination, Sopov agreed that he “expected to get a fixed price on a fixed lump sum contract”.

397 Sopov said that the principals appointed Tony Hampton of Tony Hampton Architects Pty Ltd as the project superintendent, with whom Sopov stated that they signed a Client and Architect Agreement on 28 May 1999 for Contract Administration Services of General Conditions of Contract AS 2124-1992 (Sopov said that the architect, Ross Carpenter was unable to be the superintendent because that was unacceptable to the bank). Sopov further stated that Keith Long & Associates were appointed for the structural works; Fryda Dorne for mechanical and electrical services; Clements Consulting Group for hydraulic services; and Duncan and McKenzie as building surveyors.

398 Sopov said that works began on the site on 31 May 1999. Sopov further said that, on 3 June 1999, he attended the first site meeting on behalf of the principals and that site meetings were to be held fortnightly. Sopov stated that by the time that the builder had abandoned the site in October 2000, there had been 34 site meetings – all of which had been minuted – and all of which Sopov had attended on behalf of the principals.

The Contract

399 Sopov stated that Stacks Properties, in conjunction with Slattery, had prepared the contract for the project and that it was to be signed by 7 June 1999, by which time the builder would provide a construction program. Sopov further stated that this program was not provided until 3 August 1999, despite the builder being reminded about it at the next four subsequent site meetings.

400 Sopov said that the builder did not sign the contract by 7 June 1999 and instead sent Stacks Properties a letter on 17 June 1999 requesting a meeting to discuss various contractual issues. Sopov said that that meeting took place on 30 June 1999 at the builder’s offices and was attended by himself; Tivendale and Cusack of the builder; and Hampton, the superintendent.

401 Sopov stated that the builder said that they would not sign the contract unless Sopov and his wife signed the contract as individuals. Sopov said that he was reluctant to acquiesce and that the builder’s demands made him angry; but he nevertheless agreed because he concluded that he had no other option at that stage of the project. Sopov stated that he subsequently confirmed the agreement, as requested by the builder, by way of letter on 1 July 1999, asking them to sign the contract.

402 Sopov said that Hampton resigned as superintendent on 16 July 1999 and that Slattery was subsequently appointed to that role. Sopov said that he did not know why Hampton had resigned; although he conceded, in cross-examination by counsel for the plaintiff, that it involved a dispute over Hampton’s payment. Sopov said that Hampton subsequently sued him for unpaid fees.

403 Sopov also said, in re-examination, that the builder had never raised any complaint about Slattery assessing the progress claims while Hampton was the superintendent.

404 Sopov stated that he received a letter from the builder, dated 21 July 1999, that complained about both the contract and Slattery’s appointment as superintendent. Sopov said that he had no difficulty with a quantity surveying company like Slattery being the superintendent, as opposed to an architect as apparently preferred by the builder. Sopov said that, consequently, a meeting between Stacks Properties, Slattery and the builder was convened on 23 July 1999 in order to resolve the issues.

405 Sopov said that Slattery sent a letter to the builder with a proposal from Stacks Properties to resolve the outstanding issues; however the builder insisted that the contract be amended to its requirements, otherwise it “threatened to walk out on the project”. Sopov further stated that the builder reiterated its demands in a letter to Slattery on 6 August 1999 and that, subsequently, Sopov stated that “considering that construction was by now in its third month and taking into account the ongoing tension between the parties [Sopov] decided to accept all of the Builder’s amendments”. Sopov stated that he, his wife and Stacks Properties signed the contract on 20 August 1999 and that it stated that “10 December 1999 was the Date for Practical Completion”.

Sopov’s Concerns about the Progress of the Project

406 Sopov said that, in his opinion, the builder commenced work without any satisfactory program; lacked experienced staff allocated to the project; had an incorrect set-out of the works; failed to protect the works from damage during site activities and inclement weather; had poor coordination of sub-contractors and an excessive use of day labour; and had a large amount of defective works that needed to be rectified. Sopov said that he believed that these factors were the “principal reasons” why the builder had failed to meet the original date for practical completion. As to allegations by the plaintiff’s side that Sopov interfered too much in the day-today activity of the project on-site, Sopov conceded, in cross-examination by counsel for the plaintiff, that he was “regularly involved in … giving instructions to the builder’s on-site staff”; although he claimed that these “instructions” were more by way of “friendly discussion” rather than directions or decisions about the work.

407 Sopov said that Jeffery suggested to him, on or about September 1999, that the date for practical completion be extended to 31 March 2000. Sopov said that he agreed in principle to the proposal so that the builder could complete the project without being concerned about the imposition of liquidated damages (to be calculated at the contract rate of $1,100 per calendar day); however upon receiving a revised construction program from the builder on 8 October 1999 wherein it demanded $144,835 for extension of time costs, Sopov stated that he withdrew his in-principle consent for the revised program.

408 Sopov maintained his belief that all extension of time costs had been properly assessed by the superintendent and that Sopov had not interfered. Sopov further said that Slattery eventually suggested that an independent consultant assess decisions on extension of time costs and that, consequently, Degenhardt became involved. Sopov said that Degenhadt was employed, not because Slattery were incompetent to make the assessment (as suggested by counsel for the plaintiff), but because the builder (and Forster in particular) was difficult to deal with and being “negative to the whole process”.

The Events of August-October 2000

409 Sopov said that, on 24 August 2000, he received a tax invoice from the builder for work completed in the sum of $340,562 (plus GST). Sopov further said that, on 28 August 2000, Stacks Properties paid the builder $132,618 (including GST), that amount being $340,562 on payment certificate for progress claim number 14 less a sum of $220,000 in liquidated damages that Stacks Properties imposed.

410 Sopov stated that, on 8 September 2000, the builder served notice on him and his wife alleging that they were in breach of the agreement under cl.42.1 since the builder had not been paid $1,216,546, that being the amount of the contractor’s progress claim number 14. Sopov stated that, on 1 September 2000, the builder submitted progress claim number 15 for $1,572,304.91 and that the superintendent subsequently issued payment certificate number 15 for the sum of $220,800. Sopov further stated that, by way of letter dated 11 September 2000, the principals replied to the builder’s show cause letter of 8 September 2000; and that the builder responded by way of letter on 13 September, to which the principals again responded on 15 September 2000.

411 Sopov said that, on 18 September 2000, following this exchange of letters, the builder gave the principals notice that it had suspended the whole of the work under the contract. Sopov stated that on 21 September 2000, the principals issued the builder with its own notice to show cause, alleging, among other things, that the builder had breached cl.33.1 of the contract by suspending the work and requiring the builder to show cause in writing by 4:00pm on 29 September 2000 as to why the principals should not exercise its rights under cl.44.4 of the contract. Sopov said that the builder subsequently replied, by way of letter of 28 September 2000, denying that the principals’ notice to show cause document had any “validity or effect”.

412 Sopov stated that he attended the site at 9:15am on the morning of 26 September 2000 ready to participate in the fortnightly site meeting scheduled for 10:00am that day; but he found the site locked and no-one present. Sopov further stated that he then arranged for the state of the works at the site to be videotaped by his friend, Victor Pandov; and this videotaping also occurred the following day, 27 September 2000. Sopov rejected the suggestion, made by counsel for the plaintiff, that he had the works videotaped with a view to taking the work out of the builder’s hands or taking possession of the builder’s plant and equipment.

413 Sopov said that when he visited the site on 26 and 27 September 2000, he noticed that, despite the absence of the builder’s personnel, “the Builder’s site sheds and all of its construction plant and equipment were on-site”. However, Sopov further stated that, when he again attended the site on 2 October 2000, all of the builder’s material (except for one site shed) had been removed, and that furthermore, all site records were removed; sewerage pipes and electricity were disconnected; five temporary powerboards had been removed from each floor; and electricity lines had been cut and terminated. Sopov said that the builder’s actions had a devastating effect on him. Sopov further stated that, at that time (on 2 October 2000), he did not engage in any discussion with the superintendent’s representative, Jeffery. However, in response to counsel for the plaintiff highlighting that Sopov’s pleadings indicated that a meeting with Jeffery took place on that day (together with his solicitor, Mr Archer), Sopov stated that he could not recollect the meeting and he further said that he had not deliberately lied earlier in his testimony about the meeting not having taken place.

414 Sopov said that, on 2 October 2000, the principals gave notice to the builder under cl.44.4 of the contract, “taking the whole of the work remaining to be completed on the project out of the hands of the Builder”. Sopov further stated that the principals’ solicitor, Mr Archer, faxed the builder’s solicitors, Deacons, stating, among other things, that the builder’s removal of the construction plant and equipment was effected without the consent of the principals or the superintendent in accordance with cl.29.2 of the contract and therefore represented repudiatory conduct.

415 Sopov said that the builder’s solicitors, Deacons, replied to Archer’s facsimile on 5 October 2000, stating, among other things, that “an obligation on the part of the Principals to pay the sum of $1,216,546.64 to the Contractor crystallised on 15 August when the Superintendent failed by that date to issue a certificate in respect of our client’s progress claim no. 14 dated 1 August 2000”.

416 Sopov said that he attended his solicitor’s office on 6 October 2000 and that his solicitor advised him to draw down on the security held by the principals pursuant to the contract. Sopov said that he signed an authority allowing his solicitor to draw down the security; which his solicitor duly did. Sopov said that he did not think about any need to give the builder written notice of this action, and that instead, he simply acted according to his legal advice. Sopov stated that the drawing down of the security was regarded by the builder as repudiatory conduct on the part of the principals, as they indicated in Deacons’ letter to Archer sent later that day. Furthermore, Sopov stated that Deacons’ letter said that the builder had accepted the alleged repudiatory conduct by the principals.

417 Sopov stated that, subsequent to this correspondence, he consulted John Pilley of John L. Pilley – Barristers and Solicitors, who, “in negotiation with Deacons … reinstated the bank guarantee to the Builder’s satisfaction”.

Completion of the Works after the Exit of Kane Constructions

418 Sopov said that the project was substantially completed by 31 March 2002. He said that, together with the labour and contribution of his own family members, he used some of the builder’s sub-contractors, as well as other contractors, to complete the works. Sopov rejected suggestions by counsel for the plaintiff that he had delayed completing the project because he believed that the builder would be paying liquidated damages.

419 Sopov stated that he believed that, at the time the works were taken out of the builder’s hands, there “were many defects that had to be rectified”. Sopov said that Jeffery compiled a list of these defects. Sopov stated that, on 30 August 2002, the superintendent issued a certificate certifying the amount of $1,181,548 as the cost incurred by the principals in completing the work. Sopov further stated that, on 28 April 2003, the superintendent issued a final certificate, pursuant to cl.42.8 of the contract, certifying that $1,515,199 was the amount due by the builder to the principals.

Deduction Variations

420 Sopov said that there were components of the work undertaken by the builder that were not in the contract and that these were “either omitted or deleted from the work by the Builder, or constructed defectively”. Sopov said that this work had been “valued by the Superintendent as deduction variations in the sum of $617,200”.

421 In cross-examination, Mr Digby for the plaintiff suggested to the Court that many of these deduction variations were indicative of the principals’ “pedantry”. Mr Digby cited, as examples, alterations required to the Custom Chassis work in connection with metal balustrades; internal doors; and the lack of bins in the kitchen on slide-out drawers.

Variations Claimed by the Builder

422 Sopov said that there were some variations claimed by the builder that the superintendent assessed but about which Sopov disagreed. Sopov further said that he regarded the process of approving variations to be one in which both the principals and the builder should be able to express a view; noting in particular that he wished to have the opportunity to object to variations if he disagreed with them. Sopov said that he was also concerned about the effect that the approval or otherwise of variations had on extension of time claims.

423 In cross-examination, Mr Digby questioned Sopov in detail about numerous nonprice variations (“NPV’s). These included, although not exclusively, NPV 13 (Stormwater Pipe); NPV 14 (Fire Proof Slabs and Brick Wall); NPV 20 (Slab Penetration Infills); NPV 34 (Relocation of Downpipe); NPV 35 (Terrace Gutters); NPV 36 (Extra Rheinzinc); NPV 44 (Cranked Beam); NPV 70 (Water Tapping); NPV 78 (Timber Flooring); NPV 80 (Provision of General Power Outlets); and NPV 123 (Redirection of Fire Services). While the plaintiff had argued that these were valid variations, Sopov contended that, in many cases they were not and that the work required should have been obvious to any competent builder.

424 With respect to the quantum meruit claim made by the builder, Sopov stated that the claim incorrectly included “costs for defective work, the rectification of that defective work, rectification of works damaged by the weather for which the builder was responsible and all other costs incurred by it in correcting its own errors”.

Costs to Complete

425 The costs to complete that Sopov claimed on behalf of the principals can be divided into the following five categories: bank expenses; loss of income on rent; additional consultants’ expenses; GST incurred on the sale of apartments; and other (miscellaneous) costs.

426 In relation to bank expenses, Sopov stated that the principals had incurred additional bank expenses amounting to $620,408, as a result of the breaches of contract by the builder.

427 On loss of income on rent, Sopov stated that the principals lost rental income, amounting to $396,600, as a result of the builder not completing the works on time.

428 On the issue of additional consultants’ expenses, Sopov stated that the principals had incurred additional expenses on consultants in the sum of $168,487.10, as a result of the builder’s breaches of contract.

429 In relation to GST incurred on the sale of apartments, Sopov stated that, since the principals had been unable to sell the apartments prior to the introduction of GST on 1 July 2000 as a result of the builder’s failure to complete the work on time, the principals had incurred an additional expense of $76,330.

430 As to other costs, it was suggested in cross-examination that numerous items had been included by Sopov in the costs to complete that should not have been reasonably included and that they [the plaintiff] were “mystified as to how there could be any relation [of the amounts claimed] to the cost of completing the works”. For example, Sopov conceded that superannuation costs for his family amounting to about $170,000 in each of the years ending 30 June 2001 and 30 June 2002 had been included, as well as RACV membership and insurance on his wife’s motor vehicle. Sopov stated that he was unsure of the rationale for each of the items that had been submitted and unclear whether they had been submitted on his instruction or that of his accountant. In any case, Sopov argued that whatever was in the certificate, as accepted by Jeffery, should form the basis of the costs to complete.

(2) JEFFERY

Background

431 Trevor Jeffery, the second defence witness, is a Quantity Surveyor. In his witness statement, he stated that he was an employee of Slattery Australia Pty Ltd (“Slattery”) from June 1998 until August 2000. Slattery was retained by Stacks Properties to carry out cost planning services on the Boilerhouse project. Slattery was also retained by the National Australia Bank to prepare the initial report and subsequent monthly reports on the progress of the Boilerhouse project.

432 Jeffery said that he was commissioned to act as the superintendent’s representative on 20 July 1999. He said that, at that stage, the building contract had not been signed by either party. The builder initially objected to Slattery being appointed as superintendent. Jeffery stated that he commenced working in his own practice, Construction & Asset Management Consultants (“CAMC”) on 7 August 2000 and that, with the full agreement of Slattery, the principals retained CAMC and Jeffery to fulfil the role of superintendent.

433 There were a number of important issues that arose in relation to this witness, and they were dealt with in cross-examination, namely:

• whether he was competent in his role as superintendent and properly understood his role;

• whether he faced a conflict of interest in his dual role as superintendent and bank auditor;

• whether he had breached his duty as an independent superintendent under cl.44.6 in “ascertaining” the costs incurred for completion and substantiating costs included in the costs to complete;

• whether he had caused a breach of cll.35.5 and 23 of the agreement by not properly dealing with and determining the plaintiff’s extension of time (“EOT”) entitlements; and

• the ethical question of whether in his role as superintendent he had been dominated by the principal.

Problems with Builder’s Key Personnel

434 According to Jeffery, the alleged over-involvement of Sopov in the project was a direct result of the builder’s delay in completion, the builder’s inability to ensure staff continuity, and its lack of experience in project administration.

435 Jeffery cited as especially problematic the lack of continuity in site supervisors. For instance, Trevor Williamson (seven weeks) was followed by Peter Omond (14 weeks) who was finally replaced by Glenn Skarajew (approximately one year). Jeffery further stated that there was no handover between Omond and Skarajew.

436 Jeffery also cited the absence of a project manager as difficult, stating that Tivendale was on leave during major wall rectification works. Jeffery stated that most internal walls were demolished and had to be rebuilt because of the builder’s incorrect construction.

437 Jeffery said that certain critical shop drawings for the external façade were not provided which meant that the building could not be made waterproof. He also said that despite the fact that another project manager was provided in Tivendale’s absence, the shop drawings were still not supplied at the critical time.

438 Jeffery stated that he attended a meeting with Isaacson and Sopov at the builder’s office in Richmond on 14 February 2000 so that the directors could be made aware of the problems being experienced on-site. Jeffery stated that the meeting discussed the status of the Alucobond shop drawings, the progress of works and the number of defects generally.

439 Jeffery said that the builder acknowledged the problems and said that it was committed to change, with Isaacson affirming a commitment to “regrouping”, thereby taking a new “proactive, positive” approach to the project. However, Jeffery maintained that any change only lasted around a month, before standards dropped again.

Role of the Superintendent and Role of the Bank Reporter

440 In cross-examination, Jeffery stated that he was aware of Kane’s concern as to Slattery’s dual role as both superintendent’s representative and reporter to the bank concerning the project’s progress. However, during re-examination, Jeffery said that, to his knowledge, Kane never actually went so far as to object to his dual role of bank reporter and superintendent.

441 In the giving of his evidence, Jeffery produced a letter dated 26 July 1999 clarifying the ongoing role of consultants in the project. It was put to Jeffery that, in a letter written by Slattery, the roles of superintendent and bank reporter were to be taken by Jeffery and Fulton respectively in order to avoid a conflict of interest. However, in cross-examination, Jeffery conceded that the bank reports were largely completed by him and the usual practice was for Fulton to then read over and approve them, with occasional amendments. Jeffery said that this was part of Slattery’s quality assurance procedure.

442 It is unclear whether Jeffery was aware that Slattery had told the bank that Fulton would not be involved with the role of superintendent. Jeffery said that he had just “followed the company procedures”.

443 Jeffery denied that Mr Crawford Fulton, one of the associates of Slattery, had “no intimate conversance” with what was happening on the project, although he conceded that he did not take part in monthly site inspections. Jeffery said that he had “not really thought about drawing a distinction” between his role as the bank’s quantity surveyor and superintendent under the contract.

444 Jeffery said that he was not aware of negotiations between Sopov and Slattery regarding the appointment of a superintendent until after Fulton had told him that Slattery had been appointed and that it was considering appointing Jeffery as its representative. Jeffery further stated that he had never before acted as certifier as well as superintendent under a construction contract.

445 Jeffery said that he understood that his role in relation to the bank involved independently evaluating the cost of works being undertaken on the project; advising the bank about the progress of the project; and advising the bank about how the project was going financially, compared with the original Slattery projections.

446 Jeffery said that he adopted a proposed budget already prepared by Slattery Australia, namely, “Construction Costs – Stage 1”, prepared by Mr Des Lynch.

447 Jeffery further said that he provided an initial report dated 27 August 1999 detailing the proposed budget which referred to a realistic funding budget of $3.65 million. He said that he informed the bank that a more likely finishing date would be the end of January 2000 and allowed $176,000 contingency in relation to the construction cost.

Jeffery’s Alleged Lack of Independence

448 In cross-examination, Jeffery conceded that many items in the cl.44.6 certificate were not certified independently by him in his capacity as superintendent. Nevertheless, Jeffery denied that he made an eleventh hour submission of revised progress certificates 14 and 15 (i.e. made just before the 12.00pm deadline on 6 October 2000) in order to place the principals in a better position in the argument that they were having with the builder. Jeffery said that neither Archer nor Sopov had ordered him to make the submissions at that time.

449 Jeffery was cross-examined about the letter dated 21 January 2000 which was a notice of dispute from the builder, wherein it was alleged that Jeffery was not prepared to make independent determinations and was dependent on the whim of one of the principals, namely, Sopov.

450 Jeffery said that he did not recall a conversation with Forster shortly before 21 January 2000 in which he allegedly said that he would not make any decisions concerning the contract without the approval of Sopov.

451 Jeffery further said that he did not recall how or if the allegations made by Kane in the letter dated 21 January 2000 had made an impact on him. Jeffery said that his letter of reply dated 2 March 2000 came five weeks later. The delay was, according to Jeffery, in the hands of Slattery. He said that he did not respond personally, despite the personal nature of the allegations, as he felt bound by Slattery’s Quality Assurance Program.

452 Jeffery further said that he also recalled long discussions with Fulton in which it was decided that they would wait until certain steps had been taken in relation to the notice of dispute before responding to the letter. Jeffery said that he did not agree that the reason for his delay was that he agreed with the allegations being made.

Time Extension Claims

453 Jeffery stated that, from time to time, one or both of Stacks Properties and the builder did not accept Jeffery’s assessments of the EOT claims made by the builder. Jeffery further stated that the builder said that it would provide a construction program by 7 June 1999, however it did not provide one until 3 August 1999.

454 With regard to the notice of delay issued by the builder on 17 September 1999, wherein the builder claimed that the principals were responsible for the delays in production of steel shop drawings, Jeffery said that he found no basis for a valid EOT. Jeffery said that he suggested to Sopov that the completion date should be extended without applying liquidated damages.

455 On or about 8 October 1999, Jeffery apparently received a letter from the builder entitled “Construction Program”. Enclosed with that letter was a revised construction program and modified completion date for 31 March 2000. The new projected completion date included a total of 66 days EOT. According to Jeffery, the builder acknowledged that 15 of those days were the result of the builder’s own issues. Jeffery further stated that, in that letter, the builder requested the amount of $144,835 in delay costs, which amounted to $3,490 per day in delay costs; compared with $1,135 per day according to original tender costs, an increase in excess of 200 per cent.

456 Jeffery said that, as at 13 September 2000, the builder had claimed 170 days in EOT claims. Jeffery, however, had only approved 11.75 days of this time – a similar number of days that the programming consultant verified as being an acceptable amount.

457 In his witness statement, Jeffery claimed that “[a]t no time has the Builder acknowledged the effect that the huge amount of rectification of defective works … [has] had upon the construction program”. Jeffery said that the replacement of most of the internal walls was one such example of rectification works.

458 On 21 January 2000, the builder issued a “Contractor’s Notice of Dispute” to the principals relating to EOT Claims 1 to 6. The notice claimed delays of 60 days and seven hours. Jeffery said that Stacks Properties objected to the notice and said that it would wait for his decision as superintendent.

459 On 2 March 2000, Jeffery said that he issued a response to each item claimed by the builder in the notice of dispute. Jeffery said that he advised Sopov to engage the services of a programming consultant. Mr Bill Degenhardt of BILD Pty Ltd was subsequently contacted and carried out an evaluation of the EOT claims. Jeffery said that Degenhardt’s report confirmed that Slattery’s assessments were fair and reasonable. A copy of Degenhardt’s response was included in Slattery’s response to the builder’s notice of dispute.

460 On 27 March 2000, the builder issued a letter to Stacks Properties voicing its disapproval with the superintendent’s determination. Jeffery then attended a meeting at Slattery’s offices on 6 April 2000 in an attempt to resolve the dispute. However it would appear that little, if anything, was in fact resolved at that meeting. On 14 April 2000, the builder again issued a letter to Stacks Properties, this time blaming the interference of Sopov as an overriding cause of problems. The builder also indicated its intention to take the matter to the Victorian Civil and Administrative Tribunal (“VCAT”).

461 On 9 June 2000, Stacks Properties issued its own (principals’) notice of dispute. Jeffery said that this letter contained information to the effect that the extent of disputed delays was one day, and the costs associated with this delay was $547. Jeffery said that, to the best of his knowledge, the builder did not reply to this notice despite a written response being required within a 28-day period. On 21 July 2000. Jeffery said that he personally issued a response to each of the items listed in the principals’ notice of dispute. Following the notice of dispute as issued by Stacks Properties on 9 June 2000, the defendants did not issue any further notices of dispute relating to the EOT claim assessments. However on 25 July 2000, Stacks Properties issued a letter outlining its dissatisfaction with the superintendent’s determination and requesting a meeting to resolve the dispute. According to Jeffery, “the builder” – by which I take it to mean a representative of the builder – verbally stated that, in light of the pending VCAT hearing, there was “no point” in convening a meeting.

462 Jeffery stated that, as of 13 September 2000, the builder had claimed $660,135 in costs associated with EOTs. Jeffery said that this equated to the original contract amount of day-to-day running costs of the project increasing in the order of 550 per cent. Jeffery further said that his assessments to that date had approved only $5,675 as acceptable costs, which was an amount less than 1 per cent of the costs claimed.

463 In relation to the time lags between the lodgement of the EOT claims and the superintendent’s responses, Jeffery denied that he avoided making determinations. He did however concede that he was “uncomfortable about making an assessment … especially with Time Extension Claim 4, which was for such a large amount of time …”. Jeffery refuted the allegation that he did not feel comfortable and competent as the superintendent to make a determination in relation to these matters. Rather, he said it was a question of getting a “second opinion”, which he said he got from Degenhardt, “via Mr Sopov”, in mid-February 2000. Jeffery said that he provided Degenhardt with the analysis of his own assessments on EOT claims 1–7 as an attachment to a letter, dated 9 February 2000, from Slattery to Degenhardt.

464 With respect to communications between the superintendent and the builder regarding the EOT claims, Jeffery admitted that he did not convey to the builder that he had made a determination of the EOTs as superintendent, nor did he send anything certifying what the builder was entitled to. Rather, he simply attached a report from Degenhardt, and thereby in effect, the builder had not received Jeffery’s decision (under cl.35.5 of the contract) on all of the outstanding EOT claims, most significantly EOT 4.

465 With respect to EOT Claim 4, Jeffery admitted that he had originally made a “very different” assessment to Degenhardt (allowing 10 days delay to the builder to the value of $11,350), but that he had replaced his own view with that of Degenhardt’s (who advocated zero days). Indeed, during cross-examination, Jeffery agreed that with almost every EOT, he had reflected Degenhardt’s opinion. Jeffery further admitted to using Degenhardt’s exact text. However he rejected the notion that he had simply “rubber-stamped” Degenhardt’s views. Jeffery adamantly maintained that he “formed [his own] opinion” and that it just so happened that Degenhardt’s assessments were “the same”. Jeffery subsequently qualified this statement by admitting that there were “minor anomalies” (only in his recollection regarding EOT.

1) where Degenhardt’s assessment was a day or half of one day less than Jeffery’s original assessment.

Variations

466 The defendants alleged that Jeffery changed the variation figures to preserve the $176,000 contingency amount, as estimated by him. Jeffery said that he informed the bank in October 1999 that none of the builder’s variation claims up to that point had been approved. This was despite the fact that the builder had by that stage already claimed about $195,000 in extra work done (full assessments later carried out revealed the amount in dispute was in fact $85,241). Mr Digby put it to Jeffery that the reason why he did not approve any of the claims was that he was concerned that the contingency fixed by himself at $176,000 would be very quickly “whittled away”. Essentially, counsel for the plaintiff attempted to point out that Jeffery was concerned with containing costs through, at least partly, rejecting Kane’s variation claims. It was pointed out by Mr Digby that Jeffery was not just the superintendent, he was in fact paid to be the bank’s consultant on the project as well (raising conflict of interest issues as discussed), and that limiting Kane’s variation claims was therefore in his direct interest.

467 Jeffery denied these assertions. Jeffery said that, in October 1999, he had allocated $125,000 for variations pending (whereas Kane claimed $195,000). Jeffery said that he had not yet approved the amount of $125,000 as he was “negotiating” with Kane on the disputed amount. Jeffery said that he found this difficult as Kane often “stood by what they were claiming” without making any concessions on costs.

468 Jeffery also said that he sought additional information to make sure that he “hadn’t missed anything”. Ultimately, Jeffery said that he refused to approve the amount claimed by Kane as he was “not arriving at their figures” in his calculations.

469 Jeffery admitted that Sopov was involved in arriving at figures for variations insofar as Sopov attended some meetings with Kane and Jeffery, and also some meetings alone with Jeffery. Jeffery denied that he was actively attempting to keep the parties separate in resolving variations.

470 Counsel for the plaintiff suggested that Sopov’s involvement would have made it impossible for Jeffery to come to an even-handed conclusion about the fair and reasonable amount to be paid to the builder in relation to the variation claims. However, Jeffery disagreed, stating that he considered both Sopov’s and Kane’s financial positions based on the information he had from both sides.

471 Jeffery said that he agreed that significant time had elapsed between when the builder submitted the claim and when Jeffery had processed it. Jeffery said that in progress report 3, pending variations were valued at $125,000, and in progress report 4 they were valued at $73,000 (up until that point only $5,658 had been approved).

472 Jeffery said that he did not recall what changed his mind about the merits of the variations; however he denied that his dual role as bank reporter (containing and verifying costs) and superintendent (allowing fair and reasonable payment) influenced him. Specifically, Jeffery said that “there was no concern that estimated costs had to be maintained” and that there was no pressure from Sopov to justify what was payable.

473 Jeffery said that, by the end of 1999, the builder had claimed $353,000 in variations; of this, $8,900 had been approved. In progress report 6 in February 2000, Jeffery said that he increased the variation amount pending approval to $126,380; but he could not explain why.

474 Jeffery said that he was aware of his ability to order performance of extra work as a variation under cl.40. This included the power to direct certain work to be omitted from the contract and the power to vary the way in which works were performed under the contract.

475 Jeffery further recalled that in some instances he communicated to the builder that he, as superintendent, expected the builder to provide a credit to the principals in connection with the work as varied. However, he could not recall whether he documented this in any formal way.

476 Jeffery said that he did not discuss with the builder matters like credits that it should provide for work “directed to be done differently”, because this was something that would be done at the end of the contract. Jeffery said that any unresolved issues, including variations and time extension issues and credits for work directed to be done differently, would be dealt with at the end of the contract.

Deduction Variations

477 Jeffery agreed that the deduction variations had not been made the subject of a formal claim by the defendants under the contract, nor was the builder notified that this would be the case, while Kane was still working on the project, i.e. not prior to September 2000. At trial, Jeffery said that the document “variations not yet claimed” was produced as a running list of deduction variations. He also said that he believed that the builder saw this particular list; however, Jeffery acknowledged that the list was not printed with progress certificate 15 (as at 30 August 2000). Jeffery nevertheless maintained that the document was supplied to the builder, on occasion, as an attachment to progress certificates.

478 By the time that progress report 7 was submitted at the end of February 2000, the $176,000 contingency allowed for in the contract was nearly exhausted, with only $7,593 remaining. Jeffery said that he had indicated to the bank that there was a $45,000 deduction that may become applicable in the end cost calculation.

479 Jeffery said that Sopov was the person who had identified the possibility of this $45,000 deduction, or at least “some” of the items. Jeffery stated that Sopov did not detail what this amount related to, rather, in effect Sopov had said “will you have a look at this and see whether there is something which could be deducted from the contract price?”. Jeffery conceded that about 10 months after Kane left the Boilerhouse project, Sopov “combed through the specification to find points of complaint in relation to works that had been done up until September 2000”, thus giving rise to literally hundreds of deduction variation items.

480 At trial, it was not possible to examine and cross-examine all items claimed by the defendants as deduction variations. The items discussed below therefore merely intend to give an idea of the evidence presented by Jeffery, one of the main witnesses on this point, and are not intended to give a complete evaluation of items claimed.

Plasterboard Walling Work

481 In relation to the allegation that the builder did not complete all the required plasterboard work, Jeffery said that Slattery had valued internal plasterboard wall work at $5,395 more than the contract price. Jeffery said that in RFI 117 dated 16 September 1999, the builder suggested alterations needed to be made to the plasterboard walling and requested authorisation to change the way in which the walling and bulkhead work was to be undertaken.

482 Jeffery stated that in RFI 189, dated 20 October 1999, the builder referred to discussions about amended wall types and layouts and advised him of changes that it was proposing to make in relation to the plasterboard work. Jeffery further said that on 19 November 1999, he informed the builder that the information attached to RFI 189 was acceptable and “the works could continue based on that information as has been the case to date”.

483 Jeffery said that a defects list was compiled from around March 2000. However, the superintendent admitted that he did not bring to the attention of the builder the presence of any other defect or deficiency in the plasterboard work other than the need for the provision of a compliance statement.

Vitrepanel

484 Jeffery agreed during evidence that the contract documentation indicated quite clearly that the vitrepanel was to be a render finished material. He conceded however that the vitrepanel was not in fact render finished. In RFIs 159 and 176, the builder communicated concerns about the drawings and conveyed that if vitrepanel was required then there would be a price variation.

485 Jeffery agreed during evidence to the suggestion that there was ongoing discussion between himself, the superintendent and the builder in relation to which sample would be approved for the CFC cladding. He concurred with Mr Digby when he was asked if it was correct to say that the cladding which was ultimately installed for the Boilerhouse project was the same cladding approved as the material to be applied.

486 Jeffery did say however that the architect, Toscano Architects, had advised him, by way of a letter dated 18 October 1999, that in its opinion the vitrepanel product (as finally approved for use) was not an item they recommended should be fixed with concealed fixings.

487 In relation to the external soffit linings, the builder communicated to Jeffery its belief of Slattery’s approval for the use of 9mm villaboard cement sheeting for those linings. In correspondence to the superintendent dated 10 July 2000 the builder stated “we trust this meets your [the superintendent’s] satisfaction”. No response was apparently forthcoming from the defendants as to the unsuitability of the villaboard. Jeffery also agreed that Slattery had confirmed by letter dated 20 July 2000, that the proposal put forward about the cement sheeting was acceptable to them, but that nevertheless, this item was claimed during proceedings as a deduction variation for the reason that it was something that was not, according to the defendants, properly done under the contract.

Hinged Doors

488 With respect to the suggestion that the builder did not install doors with rebated meeting styles as required by the contract documents, Jeffery conceded in crossexamination that the Raven weather seal specification, which allegedly formed the basis of the $33,000 deduction variation, was only relevant to external timber doors. Of the 33 doors in contention, most were in fact cupboard doors and “common area” doors.

Missing Mullions

489 For deduction variation 17.6, the defendants claimed that the contract provided for mullions to be installed in all wardrobes in all apartment bedrooms, but that this had not been done. The builder contended that there was a variation because the contract drawings did not show mullions. The builder ultimately decided not to claim a variation, noting a nil change in the scope of the work, even though it contended that there were additional mullions. Jeffery said that he approved the work to be undertaken as the builder undertook it, and invited a variation be submitted for extra work. The defendants nevertheless contested the builder’s claim.

490 Jeffery further said that he subsequently submitted a deduction variation for $3,740 for 34 missing mullions under Sopov’s recommendation. The builder said that the deduction should have been $1,200. During re-examination, Jeffery claimed that he in fact charged $1,200 for this item in the final certificate.

Door Weather Seals

491 The defendants claimed a $3,069 deduction variation for the builder’s alleged failure to install Raven door weather seals. Counsel for the plaintiff put it to Jeffery during evidence that only one door would be relevant to the Raven seal specification. However, Jeffery said that he could not confirm that suggestion.

Failure to Install Lift Door Jams and Reveal Linings

492 In relation to RFI 79, Jeffery agreed that shop drawings L1 and L2 were drawings for the lift detail, including lining and reveals provided by the lift contractor. However, Jeffery noted that detail “F” (a detail of lift door including jams and reveals for lift, typically at every level) “was not necessarily what was applicable on-site”.

493 While noting that a Slattery document dated 8 September 1999 showed formal approval of shop drawings submitted by Kane to Slattery for the construction of the lifts, Jeffery said that he made no complaint as superintendent about what materials were installed, nor did he find fault with the standard of work employed.

Alucobond Cladding

494 The argument with regard to the Alucobond cladding centred around the quantities of the material used. If more Alucobond was used than specified in the tender documentation, then Jeffery agreed that Kane should be paid more as appropriate. If however less Alucobond was used, then the builder would not be paid; rather, the principals were entitled to make adjustments by way of a deduction variation. The defendants claimed there were valid deduction variations in relation to the Alucobond cladding. In a report compiled by Mr Roger Goodwin who was instructed by Sopov to prepare an estimate of the work not carried out at the Boilerhouse project, Goodwin assessed that $15,287 was the amount the principals could claim with respect to the Alucobond cladding. This was calculated by reference to the contract area, 550 square metres, and the area of work actually completed, 503 square metres. Jeffery however maintained, on behalf of the defendants, that the figure for Alucobond cladding works to be done was more like 191 square metres, as at the time, progress certificate 15 assessed the Alucobond cladding as 81 per cent complete (at 30 August 2000).

495 Under cross-examination, Jeffery agreed, “in theory”, that his figure of 191 square metres of Alucobond remaining to be installed, together with the 450 square metres already used as at 30 August 2000, would be the total amount of Alucobond cladding used for the project. However, Mr Digby pointed out the anomaly of these figures given that the contract area for the Alucobond cladding was at 550 square metres. Although it would appear that some of the contract works incorrectly specified Alucobond cladding (with Rheinzinc necessarily substituted instead), the amounts contended constituted an area of 12 metres (the defendants) or 34 metres (the plaintiff). Hence, if either of these figures are deducted from the 550 square metres outlined in the contract, the amount claimed by the defendants is still somewhat curious. If Jeffery calculated 81 per cent of this amount to equate to 450 square metres, then the figure claimed by the defendants as remaining to be done – 191 square metres – was over the amount they should have claimed in the event a deduction variation would be recognised here.

Mechanical Works

496 Jeffery was also cross-examined about the mechanical services which the defendants claimed as deduction variations. The builder contended that, with regard to these works, it only needed to perform works on the shell of the building and not the interior. Jeffery said that he agreed that this was his understanding of the builder’s argument. Much of the argument at trial between the parties on this point concerned the scope of the works delineated in the contract documents, since these dictated the extent of the works remaining to be completed once Kane suspended the project in September 2000. For instance, with regard to the mechanical services for the perimeter of the building, Kane argued there was a lack of detail as to the specifications or what was envisaged in terms of the mechanical works systems to be installed. Kane argued that since the contract documents lacked detail and proper specifications, the works were not required under the contract and it should therefore not have to pay the amounts “remaining to be completed” as claimed by the defendants.

Costs to Complete

497 In his witness statement, Jeffery stated that in recording the costs to complete, costs were calculated from an “open book” process provided by Sopov. By “open book”, Jeffery said that this meant that he “inspected invoices and records of payment being BPay, MasterCard statements, receipts, cheque books, bill notes and NAB bank statements on a regular basis as being evidence of the completion costs”. The costs to complete were incurred by Stacks Properties during the final stage of the works, following the departure of Kane from the site up until the time the works were in fact fully completed. Jeffery said that during this time he was on-site approximately two or three times per week.

498 Jeffery noted that he did not record the cost of completion of contract works and the cost in rectifying defects separately. Instead, Jeffery said that he verified amounts expended by the principals according to three criteria: general labour, trade contractors and materials.

499 Jeffery said that, on or about 30 August 2002, he issued a certificate under cl.44.6 of the contract certifying costs incurred by principals valued at $1,181,548. Jeffery said that the amount of $212,981 was referred to as “Balance of Works to Complete”, namely, works not done as part of the original contract and therefore not valued as a deduction variation. In giving evidence, Jeffery agreed that this cl.44.6 certificate did not endeavour to estimate or record costs which would have been incurred by the builder if it had completed the works itself. Rather, it was an assessment of the value of works actually done in order to effect completion of the project. Jeffery said that he used photos and a work status report to estimate the costs to complete works. But during cross-examination, Jeffery said that in preparing his costs to complete, he did not rely solely upon the photos and the status report as indicated in the witness statement. He said that he had also carried out a site inspection around the time when the photographs were taken.

500 In calculating the balance of works to complete for the cl.44.6 certificate, Jeffery indicated during cross-examination that he had made various allowances within his trade breakdown, including allowances for labour, plant and equipment, and allowances against “Future Possible Costs” – that is, costs which Jeffery estimated might be incurred in relation to finishing the project. He also revealed that in preparing the certificate, he included some works completed prior to 6 October 2000 in his calculations of costs to complete, for example the metal work and stair contractors, since they had not been paid the outstanding amounts for their work. Jeffery said that he saw nothing wrong with including earlier costs in his calculations and considered it was appropriate to add them in.

501 Jeffery also said that in preparing the costs to complete, wages and superannuation figures relating to the Sopov family were given to Jeffery by Norma Walker and taken on face value without any verifying documentation, back-up payment vouchers, or group certificates. Jeffery said that he did, however, see receipts for petrol, telephones and contractors’ all-risk insurance.

502 Jeffery conceded that, had he been acting properly as a certifying superintendent, he would have verified each of the items of cost that he was certifying to the builder. Jeffery said that only a very small amount of costs owed to CAMC (for example) by the principals for work completed prior to 6 October 2000 remained outstanding. The progress payment summary prepared on 16 January 2001 recorded Jeffery’s budget for completion costs for the month of October 2000 at $1,896. This was the amount that he reported to the bank. Later, in the overall summary of costs to complete, Jeffery said that the amount for October 2000 had increased to $16,110.38. Jeffery saidthat he adopted the latter amount in response to further costs provided to him by Sopov, and that a similar scenario occurred in November 2000, again because he adopted figures provided to him by Sopov.

503 Jeffery conceded that he did not certify, as the independent superintendent, on his own evidence, many of the items in the cl.44.6 certificate. During re-examination, Jeffery said that when Norma Walker submitted figures to him in relation to wages and superannuation, he assessed figures according to what he considered to be a fair and reasonable amount for the works, and that the final figures Jeffery used were the same as the ones provided by Walker. Jeffery said that apart from wages and superannuation, the process undertaken by him to arrive at the figures referred to in the certificate was to look at cheque butts, invoices and any other documents associated with payment on the project.

504 Finally, on or about 28 April 2003, Jeffery prepared and issued the final certificate pursuant to cl.42.8 of the contract. The final certificate certified that $1,515,199 was owed to Stacks Properties by the builder. During cross-examination, Jeffery stated that certain items included in this final sum were not listed or notified to the builder before the final certificate was issued.

Defective Works

505 Jeffery said that, as superintendent, he understood that he had a formal responsibility to identify defects and require them to be attended to by the builder from time to time. He said that he had made every reasonable effort to ascertain parts of the work which were defective or incomplete. Jeffery did not however recall telling the builder on any occasion the period of time in which he expected a defect to be attended to once it was identified. Jeffery said that the record of site meeting No. 44 on 12 September 2000 attached a running list of accumulated defects and reflected the position of defects according to him at that that date.

506 One particular issue relating to the defective works focussed on at trial was practical completion to Apartments 1, 2 and 3. In a letter sent to CAMC dated 29 September 2000, Kane claimed practical completion of these three apartments. Jeffery said that he believed that at that time the apartments were “nowhere near” the stage of practical completion. Jeffery said that he recalled responding to the letter by saying that once the defects outlined by the architect (Mark Irving of Toscano Architects) had been attended to, then practical completion would be granted. During re-examination, Jeffery confirmed his view that certification of completion was not possible, noting that Irving was unable to complete inspection for his (Irving’s) report, dated 18 September 2000, because “the works were so far from being practically complete”. According to Jeffery, Irving gave up on the inspection after spending only about 45 minutes on-site. Jeffery said that he did not directly assess the accuracy of Irving’s assessment as to the practical completion of the apartments, but that he was involved in taking a video of the apartments around the same time and was generally familiar with the status of the works.

Liquidated Damages

507 Jeffery claimed that he did not advise Sopov in relation to the liquidated damages that he was going to put into the contract. However, counsel for the defendants attempted to demonstrate that Jeffery had in fact played a more active role, at one point alleging that he had raised the option of liquidated damages to Sopov as one way in which they might be able to “balance the books”. According to that view, this was so that Jeffery, in his role as bank reporter, at the end of January 1999, could convey to the bank that projected completion was within the estimated budget of $3.65 million (the same argument made with respect to the rejection of Kane’s variation claims in order to preserve the $176,000 contingency).

508 Jeffery, however, denied that suggestion. He stated that his role in relation to the liquidated damages claims was in fact limited to informing the bank of “all relevant monetary circumstances relating to the project”. He said that his role with respect to liquidated damages was therefore not an advisory one. Nevertheless, the witness later qualified that statement when he admitted under cross-examination that he would have told Sopov what he thought he could charge in liquidated damages against the builder on a monthly basis.

509 In his progress reports to the bank, Jeffery agreed that that the overall figure of variations allowed was steadily decreasing and the overall figure for liquidated damages was increasing. For instance, as highlighted by counsel for the defendants, for progress report 7, liquidated damages were $175,000; while by progress report 10, the amount had increased substantially to $235,400. Nevertheless, Jeffery denied any conscious manipulation of the figures for bank reporting purposes.

Contract

510 In cross-examination, Jeffery acknowledged that Slattery assisted Sopov in negotiating the contract with Kane. He said that he assisted in working on the contract’s appendix and also the general conditions, but that he did not review the contract from the perspective of the Domestic Building Contracts Act . Jeffery stated that this was the task of Mr Crawford Fulton, another quantity surveyor and an associate at Slattery. Jeffery said that, before May 1999, his involvement was only that of quantity surveyor reporting to the National Australia Bank (“NAB”). Jeffery stated that he understood that Fulton had been taking the lead role in contract negotiations.

Progress Reports

511 From about mid-April 1999, Jeffery commenced the task of producing regular reports to the NAB in relation to the project. Those reports were produced pursuant to Slattery’s engagement by the bank, under the terms annexed to the letter from the NAB to Slattery dated 14 April 1999. In his reports to the bank, Jeffery was required to assess whether the project was proceeding in accordance with the construction programs.

512 Under the contract, the builder was contractually obliged to provide a construction program within 14 days of acceptance of tender. However, the first construction program was not provided until 3 August 1999, 43 working days (that is 33 per cent) into the construction period.

513 Jeffery gave his opinion that every program provided was more a record of what had happened up to that date, rather than a prospective program. Jeffery said that the tasks to complete were inconsistently recorded from one program to the next. He said that one such example was the task of “External Windows, Door and Façade”, which was originally programd to start on 23 September 1999 and set down for completion 20 days later on 14 October (Boilerhouse program No. 1). However, subsequent programs provided different (and later) starting dates and longer completion periods.

514 In cross-examination, Jeffery said that he understood that the process of issuing progress reports involved verifying, on a monthly basis, that there had been a fair and reasonable assessment of the amount of work undertaken on the project. Jeffery said that he was officially also charged with issuing progress certificates in that he prepared the paperwork and compiled the figures, however he stated that someone else from Slattery assessed on-site works and prepared the documentation. Jeffery also said that Fulton signed off on the actual progress payment certificates.

515 In re-examination, counsel for the defendants took Jeffery through progress certificates 4 to 13. Jeffery described how he used a variation register (spreadsheet) to reach his calculations, and he indicated how these calculations were ongoing.

Progress Report 1

516 In cross-examination, Jeffery agreed that, in the early stages of the project, he had envisaged that it might become important at some point to re-evaluate the cost of finishing the project. Nevertheless, $3.65 million remained the “benchmark amount” throughout.

Progress Report 3

517 At the time of the preparation of progress report 3, the builder produced the first construction program. Jeffery concurred with the view that he had said nothing to the bank to suggest to them that the program was in any way unsatisfactory. He agreed that he reported to the bank that progress on-site was proceeding in accordance with the revised program.

518 In cross-examination, Jeffery agreed that pending variations at the time of progress report 3 were valued at $125,000. He also agreed that by progress report 4 they were $73,000 (up until that point only $5,658 had been approved). Jeffery stated that he could not recall what changed his mind about the merits of the variations. He denied that his dual role as bank reporter (containing and verifying costs) and superintendent (allowing fair and reasonable payment) influenced him. That is, he was not concerned that estimated costs had to be maintained and there was no pressure from Sopov to whom he had to justify what was payable.

Progress Report 4

519 Progress report 4 was submitted in December 1999 and covered the November 1999 period. For the first time since the preparation of a progress report, the completion date (at that stage March 2000) remained the same, which Jeffery agreed indicated that progress that month had been in accordance with the program and satisfactory. Jeffery could not explain why variations pending had reduced so dramatically from progress report 3 to progress report 4.

Progress Report 6

520 Progress report 6 was submitted to the bank in February 2000. At this stage the anticipated completion date was April 2000. During cross-examination, Jeffery said that he had reported to the bank that progress on-site was proceeding in accordance with the revised program. He stated that he was not necessarily “happy” with progress, but that it was on track. Jeffery agreed that if the builder had suffered any significant delay in this period, Jeffery would have advised the bank. Jeffery could not explain why he had increased the variation amount pending approval to $126,380.

Progress Report 7

521 When Jeffery was asked during cross-examination why variations approved were so much less than variations pending, he responded that it was probably because he was still trying to reach an agreement with the builder as to an approved variation amount. Jeffery said that he could not recall whether or not he was concerned about the fact that only a small minority of variation claims had actually been approved. Jeffery was also asked whether it “concerned” him that he had to advise the bank at this point that he would be recognising $159,420 of the builder’s variation claims, which might come as a surprise to the bank since up until progress report 7, he had in fact only approved $8,978 in total for variations claimed.

522 Progress report 7 conveyed to the bank numerous possible means by which the figures could remain within the estimated cost of $3.65 million. Jeffery canvassed the likelihood of deduction variations, liquidated damages and decreased approval levels for variations. It was put to Jeffery that his statement “[w]e are therefore satisfied that the project cost is still within the bank’s lending facility limits” was indicative of his intention and need to keep figures within the original estimated amount. Jeffery denied this suggestion.

523 Jeffery referred to “progress on-site this month” being “slow due to major rectifications being carried out on the walls”, namely stud wall rectification work. He agreed (both in his capacity as superintendent and as bank reporter) that the builder was endeavouring to minimise delays on-site. Progress report 7 also indicated delays in relation to industrial action.

Progress Report 8

524 The liquidated damages amount of $175,000 claimed in progress report 7 was only taken into account in calculating progress report 8. During cross-examination, Jeffery denied that it was the principals who asked him to put these figures into the report. He also denied that the calculation was done in progress report 8 (as opposed to earlier progress reports) in order to provide a basis for the bank that the budget was not about to overrun. Jeffery continually denied that he introduced deductions to show the bank that there was still a significant contingency available to protect them from overrunning the original estimated cost of $3.54 million. According to Jeffery, the consequence of an overrun did not pose a problem.

525 At the end of March 2000, Jeffery was still negotiating time extensions and time extension costs with the builder. He denied that one of the reasons for such protracted discussions was that it was another way of not adding figures to the balance sheet. In particular, it was put to Jeffery that inclusion of these additional costs would mean that he was put in the position of having to report to the bank that the project cost was no longer within their lending facility.

Progress Report 9

526 Progress report 9 was submitted in May 2000. During cross-examination, Jeffery stated that he believed that the $200,000 liquidated damages amount raised at this point would have been his own calculation, although he did suggest the possibility that he may have discussed the matter with Sopov. On the other hand, Jeffery stated that the contents of the report were prepared entirely without Sopov’s involvement. Jeffery said that he could not recall Sopov ever contacting him in relation to them.

527 Jeffery stated that the increase in the deduction variation sum was a result of additional items coming to light. He said that he could not recall whether by the end of April 2000 he had raised with the builder his intention to deduct $50,000 in deduction variations.

528 Kane submitted $282,000 in EOT claims, $272,000 of which were at the time that progress report 9 was submitted and was under discussion. Kane provided bank guarantees as retention moneys under the contract totalling $173,000.

Progress Report 10

529 In progress report 10, the increase in liquidated damages appears to have allowed Jeffery to report a contingency of approximately $350,000. During cross-examination, Jeffery once again denied that he altered the figures to affect the contingency. Jeffery agreed that he reported a rejection of variation claims amounting to $305,000, whereas in the previous month he had informed the bank that he had rejected a much lower figure of $250,000.

530 In the report, Jeffery noted that “Kane Constructions have accepted our assessment of $190,147”, being the amount payable under the certificate. Jeffery denied that he was inferring by this that there wasn’t a much larger figure being claimed – as was in fact the case regarding amounts in connection with progress claim 12. Jeffery said that he was not suggesting that the builder was not pressing for much larger amounts under the claim. He said that in banking the $190,147, the builder “agreed to the amount on the certificate”.

Progress Report 11

531 In progress report 11, submitted on 24 July 2000, a new entry appeared on the balance sheet entitled “Allowance for Future Variations”. Jeffery could not recall what this entry related to.

532 Jeffery stated that he communicated to the bank that “whilst there is disagreement on a large number of issues, Kane Constructions have made it clear that it is their intent to complete the project to their contractual obligations and that the quality and finishes will not be compromised”. Jeffery claimed that an employee of Kane’s had told him this about the company’s intentions. Although he could not recall the particular Kane employee who conveyed these sentiments, Jeffery said that he had accepted the genuineness of them.

533 Jeffery stated that the amount given as the value to complete ($1,000,000) was an estimate made by Jeffery excluding defects not yet brought to his attention. In relation to the defective and incomplete work that Jeffery was aware of, he did not recall whether adjustments had been made to the calculation of costs to complete, although he agreed that his role as superintendent involved regularly appraising himself of defective or incomplete work. Jeffery agreed that he did not value, as owed to the builder, work which he believed to be defective.

534 Jeffery further stated that it was possible that, as superintendent, he would have the power to decide whether the defect was one that needed rectification before completion of the contract or whether he could allow it to be corrected in the year after practical completion. He admitted, however, that he had not thought of such a situation arising.

Progress Report 12

535 During this period, on 4 August 2000, Jeffery left Slattery to set up his own organisation, CAMC. Jeffery continued to supply Slattery (who were at that stage in official correspondence with bank) with information relating to cost of the work, costs to complete, and the likely completion date. Jeffery was also still able to report to the bank (via Slattery) that the project was under the projected budget of $3.65m.

536 Jeffery was not able to explain what had happened to the deduction variation figure which was no longer referred to. However he denied that this figure was ignored, since liquidated damages figures were so high as to meet the contingency.

Progress Report 13

537 By progress report 13, liquidated damages decreased Kane’ payment up to this stage of the works to $132,618. The amount deducted was $220,000. By 19 September 2000, Jeffery had become aware that the principals had deducted that sum.

Progress Report 14

538 Jeffery assessed the progress of the project as being 91 per cent complete.

Progress Report 15

539 By the time progress report 15 was produced, the builder had left the site, and the principals had proceeded works under their own administration. Nevertheless, Jeffery continued in his capacity as quantity surveyor. Under the heading, “Financial”, a revised budget was produced for these works: $281,553 was the estimated value to complete construction costs up until the end of November 2000. Jeffery stated that, while he provided the figures for this report, he did not see the report in its final form, as prepared by Slattery, before it went to the bank.

540 Progress report 15 stated that the estimated value of works to complete totalled $506,795, into which a $150,000 contingency was built, allegedly to cover unexpected events, bringing the base costs to around $350,000. In Appendix B of the report, Jeffery certified to the bank that the works were being “carried out in accordance with the contract documents and approvals”.

541 Jeffery stated that he expected that, by this stage, the job would be completed by February 2001, and no later than March 2001. In order to reach this estimate, Jeffery said that he made regular site visits (two to three times a week) and inspected what was left to be done. Jeffery said that he could not recall how much effort this involved.

542 Jeffery said that, while he continued to provide consulting services as quantity surveyor, his formal role of superintendent under the contract was no longer relevant, insofar as he no longer supervised works or made decisions about how work was to be done.

Progress Report 17

543 With regard to progress report 17, Jeffery denied that he extended the columns in his report in anticipation of the project running beyond March 2001.

Termination

544 A letter from the plaintiff’s solicitors, Deacons, dated 5 October 2000, refers to contract termination pending action by the superintendent by 12 noon on Friday 6 October 2000.

545 Just before midday on 6 October 2000, Jeffery issued revised progress certificates 14 and 15. Jeffery claimed that the issuance of the certificates just before the deadline was a mere coincidence; that he had been doing some paperwork at the time. The certificates contained express allowance against the builder for liquidated damages, the first time any reference to liquidated damages was made in the progress certificates. Jeffery denied that he was asked to issue the certificates (i.e. by Sopov) and said that he could not recall whether he was in contact with Sopov or Archer around this time. When asked by counsel for the plaintiff if he could have been in contact with one of these two people or associated persons, he responded “I guess”.

(3) BROWN

546 David Arthur Brown gave evidence in his capacity as a senior mechanical services consultant with the firm Fryda Dorne & Associates (“Fryda Dorne”). Brown’s role in the Boilerhouse project was to carry out inspections of the mechanical services installation at various times when requested by Kane, for the purpose of determining compliance with contractual requirements and assessment of standards of workmanship. Brown’s investigations were therefore most relevant to the issues of defective works and variations.

547 Brown asserted that on each inspection it was noted that “significant aspects of the works had not been carried out in accordance with the contract documents, the approved shop drawings, or to typical industry standards”. These shortfalls were noted in a defects lists produced by Fryda Dorne following each inspection. In most instances, Brown stated that he did not re-inspect the works after advice that the defects had been rectified.

548 Brown described several instances where he stated that rectification works were not addressed or not completed satisfactorily by Kane, including the sealing of duct joints. During cross-examination, Brown stated that many of the works could not be re-inspected since “the works had been closed in”, by which I assume he meant either that Kane had left the site or the project was finished altogether. Brown was therefore unable to say whether these “closed in” works had been rectified or not.

549 Brown stated that he had received a number of requests to accept inferior alternatives to change the specific standards of equipment and installation. He stated that these requests were usually accompanied by ultimatums or at least statements requiring an immediate response. Brown stated that the substitutes were rejected unless they provided an equivalent standard to the original specification.

550 During cross-examination, Brown admitted that a flexible duct proposal was put forward by the plaintiff. However, it was rejected by Brown and subsequently not installed.

551 In his witness statement, Brown cited the mechanical exhaust systems as indicating a “severe shortfall in specified performance requirements”. Counsel for the plaintiff suggested to Brown that any shortfall could be attributed to the sub-contractors, Admiral Air Conditioning, who were engaged by the principals, rather than by the plaintiff or by the initial sub-contractors, AllCare Air Conditioning.

552 With regard to the variations, Brown stated that he reviewed the claims made by Kane with respect to mechanical services. Brown regarded both NPV38 (“Extra Fire Dampers and Collars”) and NPV92 (“Ductwork for Exhausts of Range Hoods”) to be a “site co-ordination issue between the builder and mechanical sub-contractor”.

553 With respect to NPV46R (“Plant Platform and Handrail”), Brown stated that such alterations and their associated costs should have been included in the tender price. During cross-examination, Brown agreed that one reason why the plant platform was required to be larger might have been to create a greater clearance (of 1.2 metres) for the York Millennium equipment that the contractor was using. If that was true, then Kane would not be able to claim this item as a variation. However, counsel for the plaintiff suggested that the initial equipment required a clearance of only 900 millimetres. Counsel highlighted documentation from Apac Carrier to that effect.

554 With regard to Stacks Properties’ counterclaim, Brown reviewed several variations in his witness statement, specifically variations 23.2 through to 23.18, and also deduction variation 23.1. With some qualifications, he considered the large majority of claims to be valid.

(4) LONG

555 Keith Ian Long gave evidence in his capacity as a consulting structural and civil engineer. Long was the principal of Keith Long & Associates Pty Ltd (“KLA”).

556 Long was engaged by architect, Ross Carpenter, to undertake the structural design and documentation for the Boilerhouse project. His role also involved checking the steelwork shop detail drawings for structural content (but not for the structural dimensions).

557 Long disputed Kane’s allegations that it suffered extensive delays to the completion of the structural steel, due, among other things, to the lack of detail in the structural design drawings. Long asserted that there “were no major changes to the structural elements of the project”. Long further stated that it was not his “task to approve variations on the Boilerhouse project”. In cross-examination, Long stressed that he did not approve variations, rather, he assessed what was structurally achievable. His evidence essentially concerned one major issue: the balcony step-downs (a structuralsteel issue).

558 Long stated that on 27 July 1999 he received from Slattery Australia a request by Kane Constructions for information regarding the balcony step-downs (the stepdown to the north and west balconies to apartments 11 and 12 was designated to be 190mm). In RFI 48, Tivendale stated that there was a discrepancy in the step-downs, saying that the step-down should be cut out of the beam and that a 150mm cut would be too much. Tivendale suggested that a 70mm step-down with a fall would be more appropriate. Long replied by stating that there was no discrepancy on the drawings; that the extent of a step-down was an architectural issue; and “that 70mm set-down for balconies was adequate”.

559 Long stated that he received a further request from Kane Constructions in RFI 60 on 6 August 1999. RFI 60 sought clarification as to whether the 190mm “drop” was still warranted at the specified terraces. Further, on 9 August 1999, Long stated that Sopov asked him to check the design of the UB sections for the beams to the balconies for a 170mm cut-out.

560 Long stated that he responded to RFI 60 on 10 August 1999 and recommended that all the beams that required cut-outs at balconies be a 310UC beam with a 70mm cutout. However Kane Constructions chose to adopt UB sections rather than UC ones. Long said that the UB beams were cheaper than UC beams.

561 Long said that he nevertheless approved the shop drawing for the UC beams since “they were structurally adequate” and that a 190mm set-down “could have been achieved with the UB section (410mm deep) and 170mm cut-out”. During crossexamination, Long noted that the UC beam had “twice the strength of bending and the area is much greater than a UB”. However, Long said that he had no conversation with the architect, Hampton, about these matters.

562 Long also said that he made a note on the shop drawings that they were on hold, after Sopov told him that “the 103mm cut to the beam drawn by the shop detailer may not achieve the 190mm set-down”. Long’s testimony appeared to concede that the deeper step-down required by Sopov eventually led to the installation of a “cranked beam”.

563 Long said that he met with Sopov and Tivendale at KLA’s offices in early September 1999. At this meeting, set-downs to balconies were discussed, but Long could not otherwise recall the substance of the conversation or whether anything particular was agreed about the set-downs. During cross-examination, Long agreed with counsel for the plaintiff that Sopov was making architectural decisions.

564 Long rejected Tivendale’s implication that Long stated that “a 150mm set-down apparently suggested by Hampton would involve too much of a cut-out from the structural steel beams to the balconies”. Long further recalled discussions with Tivendale (although he could not recall if Sopov was present) about the proposed changes to the steelwork to the balcony on apartment 11. Long said that he conveyed to Tivendale that the proposed changes to the apartment 11 balcony would not work and suggested that Kane should “revert to the original structural framing system shown on the original structural documents”.

565 During cross-examination, Long was asked about RFI 124, dated 20 September 1999, sent by Le Hy Ta regarding a request to review revised shop drawings, including 27A which referred to the balcony step-down showing a 170mm cut. Long testified that a 170mm cut would not necessarily equate to a 150mm step-down since it would depend on the “the relationship with the location of the beam within the ceiling space”. Long further said that he had told the builder that it was structurally satisfactory.

566 Long rejected the assertion made by counsel for the plaintiff that, by telling the builder that it was structurally satisfactory, this implied that the builder could go ahead and have it fabricated. Rather, Long argued that the builder needed it to be checked by the architectural advisor. Long “entirely disagree[d]” with counsel’s assertion that when a “professional consultant [such as Long] approved a shop drawing, that means that it is approved for manufacture by the Builder”.

(5) PANDOV

567 Victor Pandov was responsible for making an on-site video recording of work carried out at the site, at the direction of Jeffery and Sopov. In their testimony, both Sopov and Jeffery confirmed that the video was taken by Panov at their direction.

(6) DEGENHARDT

568 William Herbert Clarence Degenhardt gave evidence for the defendants in his capacity as a project planning consultant and as the Managing Director of BILD Pty Ltd (“Bild”). Bild specialises in providing professional planning and construction services and advice to clients and developers.

569 Degenhardt stated that, in February 2000, he was asked by Jeffery to review the construction programs of Kane Constructions and independently assess the extension of time claims.

570 In carrying out this task, Degenhardt said that he was provided with documentation including the contract; drawings; specifications; builder’s construction programs; and extension of time claims and supporting documentation. He also inspected the site and spoke with Kane Construction representatives and to Sopov and Jeffery.

571 As a result of his investigations, Degenhardt prepared four reports: (a) Program Delay Report and Extension of Time Claim Report of 15 February 2000; (b) Revised Program Report of 11 April 2000; (c) Revised Program Report of 20 July 2000; (d) Program Delay Report of 10 October 2000.

572 A significant part of Degenhardt’s reports turned on the question of variations falling under the EOT claims. Degenhardt relied on what Jeffery had determined about variations, except for where he could “verify” the variations. He also assumed that the documents provided to him were the only relevant documents.

573 Degenhardt formed his own view in relation to the variations about extension of time claims, namely, the lift pit (EOT 1); the floor wastes to laundries (EOT 7); and the light boxes (EOT 9).

574 In relation to the EOTs, Degenhardt’s witness statement reflected the inadequacy of Kane’s program. He said that there was no logical relationship between the external façade and the internal fit-out of the building. He also said that some of Kane’s programs didn’t have procurement activities expressly set out and that this represented an inadequacy.

575 Counsel for the plaintiff suggested to Degenhardt that all of the works off-site need not necessarily have been included in the program; however Degenhardt asserted that “you need to program those critical works that could have an influence on the program, whether they be off-site or on-site”.

576 Degenhardt said that, while it was not impossible to assess an extension of time claim without a program being available, it would be “extremely difficult”. He further reiterated that external or off-site activities could impact on the delay and that a full assessment must include them.

577 Degenhardt said that, in a complicated project such as the Boilerhouse, it was important to have a program early in the contract in order to properly program the work of contractors and sub-contractors.

(7) GOODWIN

578 Roger Goodwin gave evidence for the defendants in his capacity as a quantity surveyor and as an associate of The Rawlinsons Group Pty Ltd. In his witness statement, Goodwin said that, on or about 17 June 2003, he was instructed by Sopov to prepare an estimate of the work not carried out at the Boilerhouse project. Goodwin said that he did not see any witness statements from Sopov, Jeffery or Irving before preparing his report.

579 Goodwin further stated that he had not seen any of the plaintiff’s witness statements relating to the broad issue of deduction variations. Goodwin said that he was asked to assume that the items of deduction variations were works that did not comply with the contract. Goodwin said that he was instructed by Sopov to ignore the pricing on the original document that he was given that had set out “the owners’ claim for deduction variations totalling in the order of $1.2 million”. Goodwin said that it was clear at his second meeting with Sopov that he was to make a totally independent assessment.

580 Goodwin said that he “contacted the relevant suppliers or sub-contractors and discounted present rates back to 1999 prices”; that he used “Rawlinsons’ own publication as a guide and a check”; and that he “used a 10 per cent margin for profits and overheads”. He conceded that it “would be reasonable” to conclude that it was not possible for him to identify what documents he had regard to in reaching his conclusions about the deduction variations, other than those referred to in annexure B of his witness statement. Goodwin further said that, in cases where there was uncertainty regarding the scope of the work, he did not price it.

581 Goodwin’s summary of variation costs is attached to his witness statement as “Annexure B”. The grand total was $639,974. Each item was individually costed in Goodwin’s report and the trade total summaries appear in the annexure as follows:

1. Preliminaries $30,344

2. Demolition $1,385

3. Groundworks $3,033

4. Concrete $54,784

5. Structural Steel $14,871

6. Steel Wall Framing $11,966

7. Masonry $7,331

8. Metalwork $71,474

9. Woodwork $58,604

10. Hardware $5,474

11. Rheinzinc $3,786

12. Roofing $10,722

13. Alucobond $15,287

14. Other Cladding $36,807

15. Insulation $6,101

16. Windows $50,259

17. Doors $49,009

18. Painting $1,381

19. Plastering $41,005

20. Resilient Finishes $26,217

21. Hydraulic Services $34,897

22. Electrical Services $57,690

23. Mechanical Services $47,547

24. Lift Services $6,875

25. (unspecified)

26. General (unable to price items)

TOTAL $639,974

(8) PERMEWAN

582 John Patrick Permewan gave evidence for the defendants in his capacity as a qualified architect. His Order 44 statement was prepared at the request of the defendants’ solicitors. Permewan’s specific instructions were to prepare a report based on the variations listed in the Order 44 statement of the expert witness, Gilfillan, and to comment on those variations, except in those cases where Gilfillan’s opinion was that they were not variations.

583 Permewan said that he visited the site in July 2003. He said that he was there for several hours with Sopov, and that for part of the time, Mr Magee was there also. Permewan testified that he had not been given any instructions about the extent to which works had been completed as at 18 September 2000; nor was he aware that, in the most recent progress claim before 18 September 2000, Kane had claimed the completed work to the value of 94 per cent and that the relevant certificate from the superintendent certified that works had been completed to the extent of 91 per cent.

584 Permewan said that the “claimed variations and supporting documentation provided by the builder are generally perceived to lack clarity and completeness”. Permewan further said that “[t]he RFIs preceding any actual variation claim often appear to be based on a failure to read all the relevant documents, or so selectively, or as an attempt to draw the superintendent into protracted correspondence which may ultimately lead to some variation based on items within that correspondence and not the contract Scope of Works”.

585 Permewan noted that clause 11(b) in annexure A to the contract stated that the percentage payable to the builder for profit and allowance on provisional sums allowed under that clause was 5 per cent “and not the 10 per cent which appears to be claimed by the builder against such allowances”; however Permewan regarded an allowance of 10 per cent as “not unreasonable”.

586 Permewan’s opinions on the variations listed in Appendix 1 of Gilfillan’s report may be summarised as follows: