JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA IN CIVIL
LOCATION : PERTH
CITATION : KULLEEN PTY LTD as trustee for the GISMONDI FAMILY TRUST trading as ITALSTEEL STRUCTURAL ENGINEERING WA -v- ROSTRUCT PTY LTD [2013] WADC 172
CORAM : STEVENSON DCJ
HEARD : 2 SEPTEMBER 2013
DELIVERED : 8 NOVEMBER 2013
FILE NO/S : CIV 896 of 2012
BETWEEN : KULLEEN PTY LTD as trustee for the GISMONDI
FAMILY TRUST trading as ITALSTEEL
STRUCTURAL ENGINEERING WA
Plaintiff
AND
ROSTRUCT PTY LTD
Defendant
Catchwords:
Contract - Contract formation - Construction - Whether fixed sum or rates contract - Contractual terms - Interpretation of contract terms - Breach of contract - Alleged repudiation - Right to terminate - Damages - Overpayment
Legislation:
Construction Contracts Act 2004 s 13, s 14
Result:
Subcontract is a fixed sum contract, not a rates contract No repudiation of outstanding works by Rostruct Other claims allowed in part
Representation:
Counsel:
Plaintiff : Mr S D Pentony
Defendant : Mr G J Douglas
Solicitors:
Plaintiff : Lavan Legal
Defendant : Hotchkin Hanly Lawyers
Case(s) referred to in judgment(s):
Command Energy Pty Ltd v Nauru Phosphate Royalties Trust [2003] VSC 261
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623
STEVENSON DCJ :
Introduction
1 This action concerns four unresolved disputes between the plaintiff (Italsteel) and the defendant (Rostruct) arising out of a subcontract made in April 2010 for the erection of structural steel at the Bulkyplex Complex in Cannington (the works). The development comprises four buildings known as buildings A, B, C and D (the site). But for these issues, the works are complete.
2 Italsteel fabricates and supplies structural steel. Rostruct is a steel rigger engaged in the business of erecting structural steel.
3 The first dispute requires the court to determine the nature of the subcontract between the parties. Italsteel contends the subcontract is a fixed sum contract, whereby Italsteel agreed to pay Rostruct a lump sum contract price of $117,000 plus GST for completing the works in accordance with the engineering drawings and marking plans. Rostruct denies it was required to complete the works for $117,000 plus GST. Instead, Rostruct says it agreed to erect 130 tonnes of steel at a rate of $990 per tonne (inclusive of GST), and it was an oral term of the agreement that, if more than 130 tonnes of steel was required to be erected, Italsteel would pay Rostruct $990 per tonne (inclusive of GST) for every tonne of steel erected in excess of 130 tonnes (additional steel).
4 If the subcontract is held to be a lump sum contract, Italsteel seeks to recover from Rostruct the $75,076.52 (excluding GST) it says it overpaid Rostruct. If it is held that the subcontract is a rates contract, Rostruct says it is entitled to be paid the further sum of $7,129.48 (plus GST) by Italsteel (see Scott Schedule). This amount differs to the claimed amount of $41,783.94 (inclusive of GST) by Rostruct in its defence and counterclaim, on the premise it is entitled to be paid for 42.206 tonnes of additional steel.
5 Rostruct's alternative plea to a rates contract is that Italsteel is obliged to pay for the additional steel erected because it was an implied term of the agreement that it would be paid a reasonable rate for the work. Further or alternatively, Rostruct claims it is entitled to be paid a reasonable rate for additional steel pursuant to s 13 and s 14 of the Construction Contracts Act 2004 . Finally, Rostruct makes a claim in restitution that it is entitled to a reasonable payment for erecting the additional steel. None of the pleaded alternatives were contended for at trial.
6 The second dispute concerns certain work which Rostruct admits was not done and which, subject to a determination of the extent of its liability under the agreement, it accepts must be done (the Anaconda works). Rostruct says it was at all times ready, willing and able to undertake the works but was not given access to the Anaconda store at the material time. Resolution of this issue involves a determination of the scope of work to be undertaken by Rostruct and the reasonable costs of the work.
7 Italsteel says the cost of the 'repainting' work in the Anaconda store is $72,450 (excluding GST). Rostruct disputes the reasonableness of the alleged cost of the Anaconda works by reference to what it says is required to meet its obligation under the contract. Rostruct also complains it was prevented from undertaking the work because it was not given possession before the tenants took possession of the building - or at least before the store was fully stocked. If it is liable 'to wash down the steel and touch up damage to the paint', Rostruct says the reasonable cost of such work is a maximum of $8,354.78 (plus GST).
8 The third dispute is Italsteel's claim for the cost of repairs to an air-conditioning unit which it says was damaged on 20 October 2011 by a Rostruct employee while operating a tele-handler machine to carry out the works. According to Italsteel, the replacement cost of the air-conditioning unit, is $7,705 (including GST). In its written opening submissions, Rostruct contended Italsteel was unable to prove that the damage was caused by a Rostruct employee, partly because it said no witness saw the alleged incident and because the photographic evidence was inconclusive. However, as a result of evidence adduced at trial, in particular from Mr Porter on behalf of Italsteel, Rostruct now accepts liability for the replacement cost of $7,705.00. Nothing further need be said about this claim.
9 The fourth dispute is a claim by Italsteel for damages arising out of costs allegedly incurred to engage another rigging subcontractor to complete some outstanding works at a cost of $5,330 (excluding GST) (the outstanding works). The issue between the parties is whether Rostruct repudiated the subcontract by failing to complete the outstanding works within a reasonable period of time as instructed by Italsteel. Rostruct pleads it was not given access to the site to complete the works at the relevant time and denies its conduct constituted a repudiation and clear renunciation of the contract. On the other hand, Rostruct contends Italsteel terminated the contract without lawful justification. If it is held liable, Rostruct does not dispute that the cost of the works would be $5,330 (plus GST).
10 The parties agreed the evidence-in-chief of the witnesses would be given by receiving their witness statements and responsive statements as exhibits (subject to any objections or amendments). The witnesses were then cross-examined on their written statements, and re-examined. In assessing credibility issues, I have taken into account Rostruct's witnesses had the advantage of seeing the witness statements exchanged on behalf of Italsteel before preparing their responsive statements, contrary to the Western Australian Bar Association's 'Best Practice Guide 01/2009-2011: Preparing witness statements for use in civil cases'.
11 In general terms, the pleadings defined the issues at trial, but some of the claims have been varied as to quantum and some issues totally abandoned. The issues at trial were further clarified by provision of a Scott Schedule which was submitted to the court after the evidence and before closing submissions. It is not necessary to refer to the pleadings in detail for resolution of these issues. However, counsel for Italsteel submitted that Rostruct's pleaded version of the contract was subtly different to the contract propounded at trial, but in my view nothing turns on the semantics. The essential issue between the parties is whether the contract is a fixed lump sum contract for the works, or a rates contract whereby Rostruct was, in effect, to be paid on a calculation of the tonnage of steel rigged at the rate of $990 (inclusive of GST) per tonne.
12 I would observe that the issues for determination are essentially factual ones and that the legal principles involved are trite law, and therefore not set out in detail.
1. Is the subcontract a fixed sum or rates contract?
(a) The issue
13 Resolution of this issue requires the court to determine whether the subcontract between the parties is a lump sum contract or a rates contract. Italsteel contends Rostruct is entitled to a fixed sum to erect the steel in accordance with certain drawings, irrespective of the precise quantity of steel rigged. Rostruct says it is entitled to payment, in effect, at the fixed rate of $990 per tonne (inclusive of GST), irrespective of the actual amount of steel rigged.
14 Italsteel submits the subcontract is entirely in writing and is comprised of an email dated 13 April 2010 from Mr Gismondi of Italsteel to Mr Ivanhoe of Rostruct, together with the attachments to that email, being a purchase order (the purchase order) and accompanying conditions of acceptance (the conditions), both dated 13 April 2010.
15 On the premise the subcontract is entirely in writing, Italsteel submits there is no ambiguity in the documents read as a whole. Italsteel contends, by reference to the express terms of the clauses in the purchase order and the conditions, Rostruct agreed that the erection of the structural steel would be completed in accordance with the engineering drawings and marking plans, and that the contract price is the lump sum of $117,000 plus GST. That is, Italsteel agreed to pay Rostruct a fixed price for completing the Works as defined by the engineering drawings and marking plans referred to in the documents.
16 Rostruct's pleaded version of the subcontract is that, pursuant to the purchase order, it was obliged to erect 130 tonnes of steel at a rate of $990 per tonne (inclusive of GST) and, it was an oral term that if more than 130 tonnes of steel was required to be erected, Italsteel would pay the sum of $990 per tonne (inclusive of GST) for every tonne of steel erected at site in excess of 130 tonnes. This version of the subcontract is pleaded at par 7 of Rostruct's defence and counterclaim. The oral term is particularised as follows:
On or about 10 April 2010, at [Italsteel's] office Mr Gismondi said to Mr Ivanhoe and Mr Ivanhoe orally accepted that [Italsteel] would pay [Rostruct] the sum of $990 per tonne (inclusive of GST) for every tonne of steel erected by Rostruct at Site.
17 As an aside, 130 tonnes of steel at this rate equates to $128,700 (inclusive of GST).
18 In addition, Rostruct pleaded three alternative bases for its claim to be paid at a rate per tonne. First, it submitted it was an implied term of the subcontract that it would be paid $990 per tonne (inclusive of GST) or a reasonable rate for any steel erected in excess of 130 tonnes. Secondly, Rostruct contended it was entitled to be paid a reasonable rate pursuant to s 13 and s 14 of the Construction Contracts Act 2004 . Finally, it contended Italsteel had obtained a benefit from its erection of the Additional Steel and was therefore obliged to pay a reasonable payment for its rigging. These alternative reiterations of the subcontract were not pressed by counsel for Rostruct in his closing submissions and, in my view, must be rejected in any event. At trial Rostruct's case is in effect that the contract documents, properly interpreted, confirmed that the subcontract was a rates contract. If not, then Rostruct's position is that it was an implied term of a partly-written contract and partly-oral contract and that Rostruct was entitled to be paid at the rate of $990 per tonne (inclusive of GST) for any steel rigged in excess of 130 tonnes.
19 If regard is had to extraneous evidence for the purpose of construing and determining the nature of the subcontract, then both parties appreciated the final position must be informed by, among other things, the credibility issue between Mr Gismondi and Mr Ivanhoe as to the content of the discussions between them at their meeting on 12 February 2010.
(b) Fabio Tony Gismondi
20 Mr Gismondi is the managing director of Italsteel which carries on business as a specialist provider of steel fabrication, custom metal works and erection of structures. In March 2010, he was requested by Dome Property Group (owner of the Bulkyplex complex) to provide a price for Italsteel to carry out the works. For this purpose, he received a set of architectural and engineering drawings to enable him to formulate a price. The drawings are the same drawings Mr Gismondi says were provided to Mr Ivanhoe to enable Rostruct to determine its price for the erection of the steel. Italsteel was asked by Dome to tender for the supply and erection of the steel as set out in the engineering drawings. The drawings are exhibit 1.1, pp 1 - 56.
21 Mr Gismondi said Italsteel would fabricate the required structural steel but needed to subcontract the rigging of the steelwork, including the purlins and bridgings. For this purpose, Mr Gismondi prepared some calculation sheets. There was a line item for each building for site erection, labour and craneage costs. The estimated value was determined by an hourly rate for labour and an estimated lump sum for craneage. The total estimated value of the erection items was $117,130. Mr Gismondi used this budget quote to arrive at the price offered to Dome for provision of steel shop detailed drawings, fabrication, delivery, erection and surface treatment of the steel based on the engineering drawings. Dome accepted Italsteel's offer as set out in its letter of 3 March 2010.
22 In late March 2010, Mr Gismondi met with Mr Stewart of Westside Constructions (WA) Pty Ltd and conducted a 'page-turn', of the engineering drawings with him - that is, Mr Gismondi went through each of the drawings with Mr Stewart to ensure he was fully aware of the scope of work before his firm priced it. They also discussed possible pressure points on the job and any special conditions that might be required. Mr Gismondi said he gave Mr Stewart a copy of the engineering drawings. As a result, Mr Gismondi received a fixed price quotation from Westside on 1 April 2010 for the erection of all structural steel work and purlins 'as per the supplied engineering drawings for Buildings A to D'.
23 Mr Gismondi said he wanted to obtain another price, so he approached Mr Ivanhoe of Rostruct because it had previously done this kind of rigging work for Italsteel. According to Mr Gismondi, on 12 April 2010 he met Mr Ivanhoe in his office and conducted a similar page-turn of the engineering drawings. Again, Mr Gismondi said he pointed out things of importance arising out of the specifics of the job which he thought might be relevant to Mr Ivanhoe to price the works. Mr Gismondi said he went through all the engineering drawings and provided a copy of the drawings to Mr Ivanhoe to take away.
24 In his evidence, Mr Gismondi said he told Mr Ivanhoe that Italsteel required a lump sum price for the rigging works and that he had a budget price of $117,000 in mind. Mr Gismondi denied there was any discussion between himself and Mr Ivanhoe about the total tonnage of steel in the job. Like Mr Ivanhoe, Mr Gismondi did not have a particularly good recollection of their discussions, but he was certain he did not refer to the job involving 130 tonnes of steel. He was also certain that there was no discussion involving pricing the job by using a rate per tonne of steel. According to him, the only pricing discussed was a lump sum price.
25 It is common ground that Mr Ivanhoe sent an email to Mr Gismondi on 12 April 2010 at 4.12 pm as follows:
Hi Fab
Good to catch up with you today.
Have just been through the drawings and we are happy to go ahead with
the rate as agreed and can be on-site as you require.
Any further queries please call my mobile on ….
Kind regards
Anthony Ivanhoe
26 Mr Gismondi responded by email seven minutes later to Mr Ivanhoe as follows:
Anthony
I will issue an order via email soon.
In the mean time can you please submit JSA for the dividing wall.
Regards,
Fabio Gismondi
Manager
27 The next communication between the parties was an email from Mr Gismondi to Mr Ivanhoe on 13 April 2010 at 1.37 pm as follows:
Anthony,
Please accept attached Purchase Order for your reference.
Regards
Fabio Gismondi
Manager
28 The email had two attachments, being the purchase order dated 13 April 2010, which relevantly provided as follows:
Item Length Width Weight (T) Qty Unit Price Due By Amount
Please proceed to erect 130.000 130.00 900.00 13-Apr-10 117,000.00
structural steel in accordance to
the eng's drgs and marking plans
Buildings A to D inclusive.
Project is staged at different times.
Please refer to Italsteel's standard conditions attached.
Totals: .000m 130.000 Total Price 117,000.00
Discount 0.00
Notes: Please place this Purchase Order # on your Tax Invoice. Tax 11,700.00
As per terms and conditions attached. Total 128,700.00
29 The email also attached the conditions of acceptance dated 13 April 2010, which provide as follows:
Conditions of Acceptance of Order No: PO-03083
Acceptance of the above order for the erection of structural steel on the project known as Bulkyplex Cannington and is conditional upon the following:
1) You agree to the contract price of $117,000 + GST .
2) You are to supply all labour, cranage, scissor or boom lifts, and tools to complete the erection of the project to the satisfaction of the builder.
3) You have made allowance to cover all site allowances and levies set for the project. Proof of payment will be required before contract payments are issued.
4) You are to ensure that all steel is clean and erected free of all sand etc, and any damage to surface treatment is to be touched up with correct coating.
…
13) Special conditions of this contract;
a) Include 2 off dividing wall in Building A.
b) Site welding where required and touch up welds with Zinc Rich paint.
c) Inclusive Clamp plates & angles to secure the delta plans as per eng's drg #C-S3-2.
d) Includes canopies, boxed framework & signage as per eng's Drgs A-S1-1, A-S2-1, C-S5-1, C-S5-2, D-S5-1 & D-S5-2.
e) Includes fascia trusses.
f) Includes all panel to panel brackets.
g) Includes core drilling if required.
30 Mr Gismondi was cross-examined extensively in relation to his recollection and version of the 12 April 2010 meeting with Mr Ivanhoe. The factual controversy between the two parties was fairly put to Mr Gismondi and he consistently rejected any proposition that there had been any discussion of Rostruct's quotation being based on a rate, or that the quantity of 130 tonnes of steel was mentioned. As with Mr Ivanhoe, some time has elapsed since the relevant events and therefore, for both of them, a lack of recall of some details is to be expected.
31 In evidence Mr Gismondi confirmed it was possible to calculate the weight of the steel involved in the construction from the engineering drawings, but he said he did not do this at the relevant time. Mr Gismondi explained the software used to prepare the purchase order required him to input figures into each of the identified items, namely length, width, weight, quantity, unit price, due by and amount. He said he could not just insert $117,000 in the amount column because that figure is automatically generated when figures for the weight and unit price are inserted. It could not be inserted separately. He explained the only reason he used $990 as the unit price was because, based on his experience, it was a 'good rough tonnage rate'. He said he then divided that unit price into the contract price, which produced 130 which he inserted in the column for 'weight' so that he could generate a purchase order for the agreed price of $117,000.
32 Mr Gismondi said the marking plans referred to in the purchase order, would be prepared by Italsteel's shop drawing subcontractor, Cadstruction, but did not those plans existed at the time. He said some marking plans were included in the engineering drawings, which did relate to the works but which showed a partition wall that had previously been constructed at the site. The work to be undertaken by Rostruct required the installation of a further two partition walls as outlined by the shop drawings. The shop drawings were, according to Mr Gismondi, provided to Mr Ivanhoe.
33 The purchase order is time and date-stamped as 13 April 2010 at 12.50pm which is consistent with Mr Gismondi's evidence of its preparation after his meeting the previous day with Mr Ivanhoe.
34 The subcontract works were commenced by Rostruct in about April 2010.
35 Italsteel then received four tax invoices, the first three were dated 29 April 2010, 15 August 2010 and 30 September 2010. The first claim description was 'Progress Claim 1 – 6%'. The invoice was for 6% of $117,000 (namely $7,020). The second claim was referred to as a progress claim. It referred to the 'original contract sum' of $117,000 and sought payment of $8,000. The third claim followed the same format, referring to the original contract sum of $117,000.
36 The fourth tax invoice, dated 31 October 2010, adopted the same format as the previous two claims, referring to the original contract sum as $117,000.
37 Italsteel places some weight on the format of Rostruct's invoices which it says is consistent with Rostruct (at least until October 2010) conducting its accounting for the works on the sole basis that it was a lump sum contract. Italsteel submitted the invoices were not prepared and do not disclose any claim based on a rates contract. Furthermore, the 31 October 2010 tax invoice was rendered after Mr Ivanhoe became aware that in excess of 130 tonnes of steel had been erected. Mr Ivanhoe explained that the invoice was formatted or prepared by their accounts department, which was instructed to prepare it in that form.
38 Mr Gismondi gave evidence about a mezzanine floor variation. The accounting records between the parties disclose that the cost of the variation was paid on an hourly basis and not by reference to the tonnage of steel involved. This was treated as a variation.
39 As the works progressed to completion in late October 2010, Rostruct became aware that in excess of 130 tonnes of steel had been erected by its riggers on site. As a result, there were a number of meetings and discussions between the parties, including discussions about the actual tonnage of steel involved in the works. It seems Mr Ivanhoe received advice from Cadstruction Drafting on, 27 October 2010, that the tonnage for the structural steel work was 178 tonnes and purlins/girts 37 tonnes.
40 As a result of these discussions between the parties, it appears Italsteel paid an additional amount to Rostruct by reference to estimates of tonnages involved. There is a handwritten note prepared by Mr Gismondi on Friday, 18 February 2011, with various calculations on a rates-basis by reference to tonnage of steel in the context of overall works done, including variations, which Mr Gismondi said was his version prepared at the meeting. Rostruct relies on this subsequent conduct and negotiation between the parties as supporting its interpretation of the nature of the contract as soon as it became aware that the tonnage erected exceeded 130 tonnes.
41 In addition, Rostruct relied upon a letter dated 9 March 2011 from Italsteel's former solicitors as containing an admission by Italsteel that it was indebted to Rostruct for $70,117.50 under the subcontract. Even if the post-contract conduct of the parties is admissible to determine the proper interpretation of the subcontract, I am not persuaded, taking into account all the circumstances, that Paiker & Overmeire's letter of 9 March 2011 can be held up against Italsteel as an admission of liability. Even though the letter is not marked without prejudice, it is clear by its terms and the context of the negotiations existing between the parties at the time that it was written for the purpose of settling the dispute. In this regard, Italsteel may have been motivated by any number of factors including the lack of commerciality and wisdom of investing further time and money in the dispute with Rostruct. It is also possible that Paiker & Overmeire were not afforded a full opportunity to obtain instructions and to review the contract documentation to provide advice to Italsteel on its legal position.
(c) Anthony Steven Ivanhoe
42 Mr Ivanhoe is a director of Rostruct. Rostruct provides a range of services including tilt-up panel and pre-cast concrete erection, structural steel erection, mechanical rigging, equipment and labour hire across the mining and resource, industrial and commercial industries. Mr Ivanhoe described his role as being centred on developing and maintaining relationships with clients and project management and supervision.
43 As to the meeting on 12 April 2010, Mr Ivanhoe confirmed he met Mr Gismondi in Italsteel's offices. He said during the meeting Mr Gismondi showed him drawings of the project and explained that Italsteel wanted to engage Rostruct to rig the steel on the project. In evidence-in-chief, Mr Ivanhoe said he was only shown the drawings for the main building, building D. His evidence was that Mr Gismondi said to him 'If you can do it for $900 per tonne, you've got the job'. He said the rate was not one suggested or quoted by him but was offered by Mr Gismondi. Mr Ivanhoe said he then asked Mr Gismondi what the tonnage of steel required was and, according to him, Mr Gismondi said words to the effect, 'The quantity of steel required for the works is 130 tonnes'.
44 The evidence of Mr Ivanhoe is that he said he thought $900 was a fair market rate at the time for the work involved. At par 20 of his witness statement (exhibit 5.1) Mr Ivanhoe said:
20. Prior to accepting the offer I reviewed the drawings to determine the complexity of the job and establish whether the rate was reasonable, that is, whether it was a fairly straightforward job to rig the steel, or whether it was
45 According to Mr Ivanhoe, the first time he became aware that the subcontract was a lump sum contract rather than a rates contract was on receipt of Paiker & Overmeire's letter dated 9 March 2011. As the parties could not reach a settlement agreement, the dispute was referred to adjudication and the issues to be determined in this trial remained extant. 46 At par 5 of Mr Ivanhoe's supplementary witness statement, his evidence was that he did not receive 'architectural drawings' at the meeting on 12 April 2010. He does not say whether he received any engineering drawings, but does say he was shown and provided a copy of the engineering drawings for building D only in hard copy.
47 Mr Ivanhoe was cross-examined at length by counsel for Italsteel.
48 In cross-examination, Mr Ivanhoe's evidence as to the meeting on 12 April 2010 was that Mr Gismondi 'only showed me briefly some of the engineering drawings to building D. He did not show me the full project'. Mr Ivanhoe did not accept that Mr Gismondi had shown him and provided him with a copy of the full set of engineering drawings (as stated by Mr Gismondi). When pressed as to which of the engineering drawings were provided to him, Mr Ivanhoe was initially non-responsive. He did not accept that he discussed with Mr Gismondi the quantity of steel required to be erected.
49 Mr Ivanhoe's evidence in cross-examination was, in part, as follows:
How many members of steel need to be rigged is an important piece of information for you to know to formulate a price for rigging?---No, it's not.
Not at all?---It can be considered, but it's - it's - we work off tonnage. We work off - and that's the discussion.
So your evidence is that you didn't talk about how many individual members of steel needed to be erected on this job?---No, we didn't talk about the individual items.
Not at all?---No.
And you didn't talk about how many lifts you'd need to do?---No.
Not at all?---Not at all.
You didn't need that information, it's your evidence, to formulate the price?---No.
You talked about the heaviest steel member that you would need to be lifted, didn't you?---No, we didn't.
But you need that information to work out how big a crane you need?---No, we - - -
Isn't that the case?---Those buildings are fairly typical in size and the – the cranes that we - we have within our company are - are adequate to lift -generally lift most - most of those commercial-type projects.
My question, Mr Ivanhoe, was you need to know the weight of the heaviest member in order to work out what crane you need to use?---No.
…
The type of crane you would need would impact on your cost, wouldn't it?---It could do.
Yes?---It can do.
Is that a yes?---It is, yes.
You also needed to go to the site, didn't you, to satisfy yourself about access issues?---Yes.
And you needed to consider, didn't you, all of the things I've put to you. Heavy member, number of lifts, crane size, access issues, to formulate your price?---Yes.
You weren't prepared, at that meeting with Mr Gismondi then and there, to agree to his 117,000, were you?---Mr Gismondi never spoke about 117,000.
You needed to consider a number of things before you were able to agree anything with Mr Gismondi. That's fair to say, isn't it?---To - yes.
Yes. So you left that meeting and you told Mr Gismondi you'd get back to him?---Yes.
For at least - on all-fours, when we say you left the meeting and nothing had been agreed. That's correct?---Mr Gismondi asked me if I could do the 130-tonne for $900 a tonne and he said, 'Get back to me.' And then I got back to him.
50 Mr Ivanhoe was unsure whether he went to the site to consider the access issues before entering into the subcontract, even though he accepted access was relevant to price. He also accepted that on leaving the meeting on 12 April 2010 his intention was to review the drawings provided to him. Mr Ivanhoe maintained in cross-examination the reference by him in his email of 12 April 2010 to Mr Gismondi to 'the rate as agreed' was a reference to 130 tonnes of steel at the rate of $900.
He maintained that the rate of $900 per tonne was discussed during the meeting.
51 Later in cross-examination the evidence of Mr Ivanhoe is, with respect, even more difficult to follow. For example see:
Well, your earlier evidence was that Mr Gismondi didn't say anything about 117,000?---Because we discussed the rate and the tonnage.
So did you discuss the number of 117,000 or not?---It – it – the 117,000, to the best of my knowledge it was never discussed. We only discussed the tonnage and the rate.
Did you discuss the figure of 117,000?---We only discussed the tonnage and the rate.
You said earlier that you didn't. You said now that you did and you're saying again now that you didn't. Which one is it?---We discussed the tonnage and the rate.
Not 117,000? Yes or no?---We – the 117,000 may have come up, but we predominantly discussed the rate.
Did it come up or didn't it?---It most likely did.
It did now?---It most – it most likely did come up as a number.
And he said it as a number because he told you that he had a budget of 117, didn't he?---No, he didn't.
He didn't say that?---He showed me the drawings and he said I have – I have – the drawings are at 130 tonnes at $900 a tonne and then I – I worked out my price off that. I worked out that we can do the job for that.
You did work out your price after that, didn't you? You went away, you worked it out by reference to all the things that are put to you and you said, yeah, 117, I'll do it for that. That's what you did, agreed?---Yes.
Thank you. And when you went back to him and said rate as agreed, you were saying exactly that, I'll do it for 117, correct?---130 tonnes for 117,000 was a good rate.
Well, you said – just to clear, Mr Ivanhoe, one thing up in relation to the drawings, did you ever tell your solicitors that you were not provided with a copy of the drawings to analyse by Mr Gismondi?---I can't recall.
Did you ever tell your solicitors that Mr Gismondi did not allow you theopportunity to review the drawings?---I cannot recall
52 In his subsequent cross-examination, Mr Ivanhoe accepted that a letter written by his then solicitors advising that Rostruct 'was not provided with a copy of the drawings to analyse' was incorrect because Mr Ivanhoe accepted that 'we did get the drawings'. To his credit, Mr Ivanhoe accepted that he approved the solicitor's letter but was unable to explain why it was untrue in this regard. He was also uncertain about the reference to provision of a 'quotation for the works' referred to in the letter because he also accepted Rostruct did not provide a quotation to Italsteel.
53 Mr Ivanhoe did not recall whether he read the order and the conditions provided to him by Mr Gismondi, although by reference to his usual practice 'he mostly did'. His attention was drawn to the reference to 'Buildings A to D inclusive' on the purchase order and he accepted Rostruct was required to erect the steel in respect of each of the buildings. However, when asked by reference to the express terms of the purchase order that Rostruct had agreed to rig all the steel for buildings A – D for $117,000, his response was 'that the structural drawings did not identify the buildings. On being taken to the drawings, he retracted his non-responsive answer and admitted he was aware the drawings identified the buildings individually.
54 Mr Ivanhoe was equivocal as to whether, at the time, he referred to the drawings identified in the purchase order. He accepted by reference to the contract price of $117,000 plus GST referred in condition 1 of the acceptance of order that Rostruct agreed it would do the work on all the engineering drawings for the contract price of $117,000. He could not recall if he read the conditions at the time.
55 Mr Ivanhoe was cross-examined as to the reason why the initial invoices from Rostruct were described as progress claims and based on a percentage of the contract sum of $117,000. His response was he did not raise the invoices. He accepted Rostruct's accounts were based on a percentage of the order price specified in the contract documents. The best explanation for Rostruct's conduct from Mr Ivanhoe was 'we would have raised it off the order'. Almost inexplicably, he did not accept Rostruct would necessarily have raised an invoice by reference to the tonnage of steel rigged if it had been a rate per tonne contract. He then sought clarification of the question. His evidence at this point is difficult to understand and accept.
56 It is common ground that the initial invoices rendered by Rostruct were based on a percentage of the contract price by reference to the fixed sum of $117,000. There was no calculation based on a rate per tonne. Mr Ivanhoe accepted this was even the case after he had become aware that Rostruct had erected more than 130 tonnes of steel. As an aside, it is difficult to comprehend how Rostruct could have rigged nearly 180 tonnes of steel without being aware it had surpassed the contract amount (according to it) of 130 tonnes. Mr Ivanhoe accepted Rostruct lost money on the subcontract which might, among other things, be indicative of the quality of the systems utilised by Rostruct for undertaking the works.
57 Mr Ivanhoe was cross-examined about other works which constituted variations to the subcontract, and for which Rostruct was paid on the basis such works were a variation. This is in contradistinction to the dispute between the parties as to the nature of the subcontract described in the purchase order and conditions of acceptance.
(d) Robin Richard Wheelwright
58 Mr Wheelwright is a quantity surveyor and director of Borrell Rafferty Associates Pty Ltd.
59 Mr Wheelwright was retained by Rostruct's solicitors to provide an opinion on the quantity of steel erected by Rostruct for the works at the site. In his report dated 30 January 2013, Mr Wheelwright expressed the opinion that the total quantity of structural steel erected by Rostruct was 235.19 tonnes. In evidence he confirmed this quantity included 44.93 tonnes of steel calculated by him in the purlons, girts, and joists in the four buildings. In addition, in cross-examination, he calculated that at least 13.85 tonnes of steel in building A was attributable to the mezzanine.
60 Mr Wheelwright's calculation was based on an undated drawings register and the CD of drawings and marking plans provided by Rostruct. It is not clear whether the drawings and marking plans relied upon by Mr Wheelwright are the same as those referred to in pages 1 – 56 of exhibit 1.1 (the drawings and plans, which according to Mr Gismondi, were provided to Mr Ivanhoe for the purpose of entering into the agreement).
61 In addition to the drawings and marking plans provided, Mr Wheelwright used the Australian Standard Method of Measurement of Building Works (5th ed – January 1990) published by the Australian Institute of Quantity Surveyors and the Master Builders Construction & Housing Association Australia Inc. The methodology adopted by Mr Wheelwright involved the use of proprietary software (which is not without its problems, as demonstrated in cross-examination) to arrive at the total quantity of steel used. For example, in relation to building A the quantity breakdown consisted of individual descriptions of the steel constituting the columns, beams, steel frames, steel canopies, trusses, staircases, purlons, girts, joists etc.
62 As noted by Mr Wheelwright in his report, he did not include small cleats, gussets, stiffeners and bolts which, in his opinion, would be negligible. Mr Wheelwright also noted that no consideration had been given to any site instructions or variations which may have been agreed or otherwise between the parties and which might affect the total quantity of structural steel actually erected on site.
63 In cross-examination, Mr Wheelwright was required to explain aspects of the calculated quantities which were derived from the software used and certain deficiencies in this regard. For example, in the quantity breakdowns for each building (appendix C) there is a heading 'Width' for purlons and girts. This is incorrect. The correct description for the column is the weight of the steel in kilograms per metre. Similarly, the column dealing with 'Factors Width' in the software did not disclose that the factor was 0.001. Notwithstanding these issues, the total weight of the relevant purlons and girts expressed in the column 'Quantity' is correct and represents a multiplication of the preceding information in the row.
64 Italsteel did not challenge the expertise of Mr Wheelwright to express the opinions contained in his report and did not adduce any expert evidence of its own to counter the calculations of the weight of the structural steel used in the works as determined by Mr Wheelwright.
(e) Discussion and findings
65 There is a clear conflict between the evidence of Mr Gismondi and Mr Ivanhoe as to the content of their discussions at the meeting on 12 April 2010 - in particular, whether Mr Ivanhoe was provided with a copy of the engineering drawings to take away for the purpose of agreeing to a fixed sum price for the works. Having had the advantage of observing both witnesses give their evidence in relation to these matters, and taking into account the prior conduct and objective surrounding circumstances at the relevant time, I prefer the account of Mr Gismondi. I did not find Mr Ivanhoe to be credible or persuasive on the critical factual issues arising out of that meeting. With respect, in my view he was at times evasive and shifted his ground, and was unclear and uncertain in a number of his answers. Nevertheless, I accept it is always difficult in a witness box after a lapse of time to be firm about matters that have occurred.
66 Having assessed all the relevant admissible evidence on the issue, I find that Mr Gismondi sought and obtained a fixed sum subcontract from Mr Ivanhoe to erect the structural steel in accordance with the engineering drawings and marking plans for buildings A to D, for the fixed sum of $117,000. I find that Mr Ivanhoe was given a copy of the engineering drawings for the buildings at the meeting on 12 April 2010 and that he took them away with him in order to consider whether Rostruct would undertake the work for the fixed sum of $117,000.
67 As a result of Rostruct indicating it would undertake the works on the basis discussed at the meeting on 12 April 2010, Mr Gismondi prepared the subcontract documentation in the form subsequently agreed too, which was consistent with the subcontract being a fixed sum contract and not a rates contract. At the time, no doubt, Rostruct was pleased to have the commercial opportunity to undertake the works on the site.
68 As a result, Italsteel is entitled to recover from Rostruct the sum of $75,076.52 plus GST on the basis that it is common ground Italsteel paid Rostruct the total sum of $244,760.78 plus GST for the works. Italsteel was only obliged to pay Rostruct the lump sum contract price ($117,000 plus GST) and the cost of agreed variations ($52,684.26 plus GST).
69 If the subcontract had been determined to be a rates contract as contended by Rostruct, then Italsteel would have been obliged to pay an additional amount of $7,129.48 for the works.
2. The Anaconda store remedial works
(a) Rostruct's contractual obligation
70 It is common ground that cl 4 of Italsteel's conditions of acceptance imposed the following obligation on Rostruct:
4. You are to ensure that all steel is clean and erected free of all sand etc, and any damage to surface treatment is to be touched up with correct coating.
71 The proper interpretation of this clause, in my view, is plain and unambiguous. The obvious intent of the parties is to impose a liability on Rostruct, if the steel erected in situ is either not clean or free of sand or,if any surface treatment (e.g. primer or paint) is damaged then, and only then, Rostruct must clean the steel and, if necessary touch up any surface treatment to make good. In other words, the expectation of Italsteel is that the steel will be erected, as far as reasonably possible, in the same condition as it was delivered to Rostruct, and that any previous surface preparation of the steel would not be damaged. In short, Rostruct agreed to remedy any damage to the steel as a result of rigging.
72 It is common ground that the relevant steel in the Anaconda store was supplied by Italsteel with a white primer coating. Rostruct also accepts, in any event, that it is liable to undertake some remedial works to satisfy its obligation under cl 4.
73 There now appears to be a commercial requirement on the part of the tenant, Anaconda, for the steel in the store to be finished to a shop standard and, as a result, at least one further coat of paint, or possibly two, is required to be applied to the steel. For example, see the email from Mr Alvarez dated 20 October 2011 to Mr Porter of Italsteel, which states 'We confirm the tenant requires ALL the steel to be repainted in White to ensure consistency throughout the tenancy'. On the evidence adduced at trial, there is no doubt that two new coats of paint would bring the steel up to a shop standard and finish. The question is, who is responsible for what and to what extent, as between Italsteel and Rostruct?
74 The issue between the parties requires a determination of whether the steel in the Anaconda store is erected in compliance with the express term of the agreement. The question is: was the steel clean and/or damaged and, if so, what remedial work, if any, is required by Rostruct to satisfy its obligation under cl 4.
(b) Italsteel's pleaded claim
75 Italsteel pleads that, in the course of completing the Anaconda works, Rostruct 'permitted the structural steel to be damaged' and 'failed to rectify paint damage following erection of the structural steel'. Further, as will be seen by reference to the evidence adduced at trial, Italsteel says Rostruct has admitted liability to remedy the damaged surface of the steel. Italsteel says the cost of carrying out the remedial work is $72,450 (excluding GST).
(c) Rostruct's pleaded response
76 In its defence and counterclaim Rostruct denies it permitted the structural steel to be damaged. Rostruct pleads the builder delayed it on site from erecting the steel immediately after delivery. The reason for the delay is said be because concrete tilt panels had not been erected by Niche Constructions, and as a result the steel was exposed to weather and moved around the site with a forklift and/or tele-handler, causing damage to the steel. Rostruct does not accept liability to repaint 'all exposed steel in the Anaconda store' or to 'sand down the upright posts and repaint' (emphasis added).
77 At trial Rostruct contended that, if it is liable to wash down the steel and touch up damage to the surface treatment (primer) it is only liable for a maximum of $8,354.78 (plus GST).
78 The essential issues between the parties are the scope of any work required to be undertaken by Rostruct in order to comply with its obligation under cl 4 of the conditions of acceptance and, once determined, the cost of such works.
(d) The evidence
79 On 1 March 2011, Mr Gismondi on behalf of Italsteel, sent to Mr Ivanhoe of Rostruct, an email attaching a Non-conformance Notice (NCR No 22) dated 14 February 2011. The notice was issued by Niche Construction WA Pty Ltd to Italsteel and is headed 'Anaconda – Touch Up Painting To Structural Steel'. The detail on the notice provided:
The structural steel work finish has been listed as a defect on the Anaconda Building by the Tenant.
There is touch up paint required to areas that have been site modified, and there is a lot of footprints that need to be removed.
Please arrange with Tenant re – access to do the works.
80 In his email of 1 March 2011, Mr Gismondi asked Mr Ivanhoe to attend to the matter urgently. It is noteworthy that at this time the parties were already in dispute about the nature of the contract between them and the amount payable by Italsteel to Rostruct for the works. It is more important to note that NCR No 22 is circumspect as to the extent of the alleged non-conformance. It is limited to 'touch up paint required to areas' and removal of footprints.
81 At page 270 of exhibit 1.2, there is a photograph of a column in the Anaconda store that shows discolouration and marking of the surface treatment the subject of the claim. On my observation, given the extent of the marks shown on the exposed side of the column, it is difficult to see how anything other than at least one coat applied to the whole of the column could remedy the visible 'damage'. Otherwise, a blotchy effect would result from any attempt to patch-paint the individual affected areas.
82 Mr Gismondi in his evidence expressed concern that Rostruct was storing the steel on site in what he considered to be 'an undesirable manner'. According to him, the manner of storage allowed rain to pool in the channels on the beams. He also observed persons walking on the steel that had been stored in this way which, he said, left observable footprints in the channels of the beams. Mr Gismondi said he observed crayon markings on the painted steel work erected in the Anaconda store that were extensive and readily visible. Although it is common practice for rigging subcontractors to mark the steel in various places for the purpose of erection, Mr Gismondi said he made it plain to Rostruct on a number of occasions that, if the markings were visible after erection, they would need to remove them.
83 By email dated 18 March 2011, Mr Gismondi asked Mr Ivanhoe 'regarding the cleaning of the paintwork' in the Anaconda store, to 'please rectify your works urgently'. The language used was 'cleaning'.
84 On 22 March 2011, Mr Porter by email to Mr Ivanhoe confirmed he would 'discuss and seek access' to the Anaconda store to enable the works to be carried out. At the same time he expressed disappointment that the contractual obligation of Rostruct to make good under cl 4 of the conditions of acceptance had not been carried out prior to the Anaconda store being handed over to the builder and then subsequently to Anaconda itself.
85 According to Mr Porter, during subcontractor site meetings representatives of Niche Constructions frequently mentioned that the structural steel erected in the Anaconda store 'was dirty and needed to be cleaned'.
86 Mr Porter gave evidence about a meeting on 29 March 2011 held in the Anaconda store to deal with the non-conformance notice. He said the meeting was attended by himself, Stephen Haskayne of Plato (who was the superintendant of the Bulkyplex project), Mr Ivanhoe and Mr Omar Ahmed of Rostruct. The paintwork on the structural steel was inspected and access options discussed for the remedial work. Mr Porter said Mr Haskayne said words to the effect, 'You need to rectify the paintwork, touch up and remove the marks'. Mr Porter said during the meeting Mr Ahmed tried to remove some of the dirt on one of the steel columns with Ajax Spray 'n Wipe using a red cloth. Mr Porter said Mr Ahmed was unable to remove the dirt and the cloth used left red fluff on the column.
87 Mr Porter said the need for the Anaconda stock to be covered and the major access issue was discussed at these meetings. Mr Porter said it was also mentioned by Mr Haskayne that the work would need to be done on Sundays, because the store was trading and the store manager would need to be present.
88 According to Mr Porter, Mr Ivanhoe said he would obtain a quote from a painter for the work. Mr Porter said he had observed 'extensive damage to the steel' which he described as 'significant amounts of mud on steel [and] … damage to the paintwork and clearly visible foot marks over much of the steel'.
89 By email dated 4 April 2011, Mr Ivanhoe informed Mr Porter that Rostruct was waiting for quotations from 'cleaning contractors'. This email was in response to an email received earlier in the day from Mr Porter to Mr Ivanhoe and Mr Ahmed requesting an update on the 'rectification works' required in the Anaconda store.
90 On 7 April 2011, Mr Ivanhoe sent an email to both Mr Porter and Mr Ahmed referring to the non-conformance notice and the internal columns and ceiling beams 'yet to be cleaned and painted'. Mr Ivanhoe said Rostruct had arranged for a subcontractor to execute the works on Sunday, 24 April 2011, and sought confirmation of the suitability of the date from Mr Porter.
91 In a subsequent email on 7 April 2011, Mr Porter sought confirmation from Mr Haskayne that the proposed date was suitable to Anaconda. In turn, Mr Haskayne also on 7 April 2011 by email to the Anaconda store manager, confirmed an earlier telephone call with her that 24 April 2011 was not suitable to Anaconda. He requested a further date on a Sunday for the works to be carried out. Mr Ivanhoe and Mr Ahmed received this email.
92 It is plain from the conduct and actions of the parties that, at all material times, Rostruct accepted responsibility to undertake some remedial work on the steel in the Anaconda store. For this reason Mr Ivanhoe arranged for Mr Cochrane of AJ Cochrane and Sons to prepare a quotation for the proposed work. Mr Cochrane's quotation is dated 8 April 2011. The detail of the work to be carried out for the sum of $7,150 (inclusive of GST) is stated as:
Upright steel beams to be washed down where required, touched up and finished in one coat of Durabuild STE White.
Face of full strength beams from end of shop to the other and across the shop, now painted white – under side edge to be prepared and finished as stated above.
93 In evidence, Mr Cochrane said the quotation was based on one person doing the work. He readily accepted, as set out in the quotation, that 'all goods that may be in the way of painters will need to be moved by others'. The quotation does not allow for the movement of stock and/or covering up of stock during the remedial works. Mr Cochrane estimated it would take about eight days. He also accepted the quotation was on the basis the remedial work would be carried out in normal working hours Monday to Friday.
94 Self-evidently, the quotation is deficient because it is common ground the parties at the relevant time fully appreciated the work would need to be performed outside normal shop hours and that the stock would need to be moved and covered. It is noteworthy, and a matter of importance, that the quotation arranged by Rostruct allowed for touch-up and finishing with 'one coat' of paint (emphasis added). It is not clear from the quotation whether it covers all of the steel work in the Anaconda store.
95 Mr Ivanhoe's evidence was that Rostruct attempted to carry out the remedial work. However, according to him 'a number of times these arrangements were cancelled by the tenant so the works did not get done'. On 7 March 2013, Mr Ivanhoe attended the Anaconda store and took a series of photographs which confirm the remedial work still had not been done (exhibit 1.3, page 571). By reference to the photographs, even though I declined a view, it is easily observable that the steel work is dirty and/or otherwise marked in a number of places and requires the existing surface treatment to be touched-up with a similar coating.
96 By letter dated 13 April 2011, Mr Ivanhoe confirmed the parties met on site in the presence of the superintendent for the works to discuss the work to be carried out and noted that 'the extent of paint work was agreed'. Mr Ivanhoe referred to and relied upon Mr Cochrane's quotation dated 8 April 2011 (which included one coat of paint after touch up). This communication appears to be part of a separate adjudication process. If reference to it is not permissible in this action, it is consistent with other evidence at the time and was relied upon by both parties for their respective positions. The letter is in any event referred to at par 97 of Mr Porter's witness statement and has not been redacted.
97 Mr Porter attended the Anaconda store on or about 1 May 2013 and took a series of photographs of the painted structural steel (see exhibit 1.2, page 371). It is also clearly evident from these photographs that the steel is marked and the surface treatment is damaged, such that remedial work in accordance with cl 4 is required to be undertaken by Rostruct.
98 On 27 June 2011, Mr Porter forwarded an email from Mr Alvarez of Elements Property to Mr Haskayne dated 24 June 2011 requesting Mr Porter and Anaconda to arrange access to complete the make-good of the 'marked steel works'. Mr Alvarez noted in his email as follows:
It's essential that any make-good painting works match the existing white paint colour. Any variance in colour will not be acceptable to the 'Principal'. If the colour cannot be adequately matched to the existing painted steel work, the make-good 'Works' will be rejected.
Ital/Rostruct may need to consider painting ALL of the white steel works to ensure the 'White' painted surfaces are consistent and look the same.
99 On 20 October 2011, Mr Alvarez by email to Mr Porter again confirmed that Anaconda required 'ALL the steel work to be repainted in white to ensure consistency throughout the tenancy. Patchy paint touch-up work will not be accepted.'
100 On 8 November 2011, Mr Michael Snaddon (by email) provided a price to Mr Porter 'to repaint the steel work in Anaconda store' for $95,832 (inclusive of GST). The quote allowed $7,200 for Anaconda staff wages to hold the store open after hours. This quote was based on a second quotation obtained from AJ Cochrane & Sons dated 7 November 2011.
101 In cross-examination, Mr Cochrane said the proposed work 'would make the steel look nice'; he confirmed the work would be carried out on Sundays only and included covering and/or moving stock to the extent necessary. The detail of the work to be carried out included all exposed steel in the main selling area and bare bolts to be 'touched-up with a 2 Pak metal primer and finished in two coats of Dulux Weathershield X10 Low Sheen. Upright posts are to be sanded down and given one coat of Durabuild STE and finished in Dulux WeatherMax'. In his quotation, he described the work as 'very slow and tedious' due to access equipment and getting over the stock in the store. The quotation was based on the premise that the work would be carried on Sundays only for a period of 12 weeks using hired machines and two or more people. Mr Porter's evidence is that Anaconda now trades seven days a week thereby suggesting that the remedial work will need to be completed at night time.
102 In re-examination, Mr Cochrane described (as he did in cross-examination) the quotation as 'a Rolls-Royce' because it would provide the longest durable paint system for Anaconda. By reference to the quotation, he said it was prepared in error to the extent it referred to 'plans, scope of works, specifications and finishing schedules supplied at the time of tendering'. Mr Cochrane's evidence was that he elected to use, or chose, two coats of paint for the purpose of the quotation – not that this was the instruction given to him or his brief. It follows that, if the extent of remedial works required to be undertaken by Rostruct does not involve two coats of paint, then the quotation will not be apposite for determining the value of the works necessary to satisfy cl 4 of the conditions.
103 Italsteel adduced evidence from Mr Leslie Connors, a director of Project Painting Services (WA) Pty Ltd (PPS). PPS carries on business as a specialist provider of corrosion protection coating systems, floor coating applications and external/internal building refurbishment. Mr Connors is a painter by trade with 27 years experience in the protective coatings industry, specialising in project management, quality assurance and quality control for large scale refurbishment, new construction and maintenance projects.
104 Mr Connors said in May 2013 he was contacted by Mr Porter and asked to provide a quote for repainting the structural steel in the Anaconda store. He met Mr Porter on-site at the store with an assistant. In evidence he said 'there were substantial markings all over the structural steel including footprints, dirt and damage to the painting coat'. According to Mr Connors, Mr Porter informed him the paint on the structural steel was 'a solvent based two-part epoxy primer'. Mr Connors said, in order to gain access to the steelwork, he would need to use an electrical boom lift with a high reach capability, which could not be diesel driven because of the noxious exhaust fumes and the internal location.
105 Mr Connors obtained a specification from Dulux for the work by email on 27 May 2013, together with a price for the paint. Based on this information and his expertise, Mr Connors prepared a calculation sheet. The first calculation produced a price of $47,925, but this was based on normal working hours and omitted to allow for time needed to cover and protect store merchandise (the same error made by Mr Cochrane on behalf of Rostruct).
106 On becoming aware of his error, Mr Connors re-estimated the costs of the remedial works, making allowance for nightshift loadings and provision to cover store merchandise. The total price for the revised estimation was $72,450 (excluding GST). This quotation was provided to Mr Porter on 30 May 2013.
107 In his evidence, Mr Connors confirmed that PPS was willing and able to carry out the works for the revised quotation price. Mr Connors was cross-examined in relation to some of the parameters used in his calculation but otherwise his quotation was not challenged. Mr Cochrane in cross-examination said his price to do the work now would be similar to that of PPS and would be derived using a similar methodology to that used in the revised PPS quotation.
108 In cross-examination, Mr Connors was pressed on whether two coats were necessary. He confirmed he had sought advice from Dulux because PPS are applicators, not paint experts. PPS does not, in his words, take on liability for determining the scope of works or what is necessary to rectify works. Importantly, Mr Connors said in evidence the primer used on the steel 'coats quite well'. In his opinion the steel would, however, be harder to clean than a smooth epoxy because it was rough. He described the existing finish in question as 'an epoxy two-pack zinc phosphate primer'.
109 In cross-examination Mr Connors said, if the steel had been finished with a top coat, it would be easy to clean. I interpose that this is irrelevant to the issues between the parties, if it is suggested by Rostruct that the cost of the remedial work should include an allowance for additional cleaning costs because the steel was not finished with a top coat. This is allegedly the contractual obligation of Italsteel to Dome. I make no finding about the contractual obligation which existed between Italsteel and Dome as to the surface treatment of the steel, which is prima facie set out in Italsteel's letter of 3 March 2010 to Dome. The issue in this case is the proper interpretation and extent of any liability of Rostruct to Italsteel under cl 4 of the agreement between them. The condition applies to the steel as supplied by Italsteel to Rostruct at the time of the contract. The evidence, in any event, is that Rostruct was unaware of the Italsteel letter of 3 March 2010 until shortly before the trial.
110 It follows that Mr Cochrane's second quotation and the revised PPS quotation provide for the remedial work to be carried out outside of normal working hours; the work to include the covering and moving of floor stock as necessary; and requisite machinery to access the steel work. Both quotations are premised on the application of two coats of paint and two coats of primer paint to be applied to the steel work. Whether or not this is necessary is a question of fact to be determined by reference to the liability of Rostruct under cl 4.
(f) Italsteel's submissions
111 Italsteel seeks payment of the sum of $72,450 (excluding GST) based on the revised PPS quotation as the reasonable cost of carrying out the work which, it says, Rostruct was obligated to perform pursuant to cl 4 of the conditions of acceptance. If allowed, this would result in a top coat paint system of two coats of paint being applied to the steel. This is, not surprisingly, the tenant's preference because it will produce the best optimal finish, which was described by one witness as a 'Rolls Royce' outcome.
(g) Rostruct's submissions
112 Rostruct submits 'it had an obligation to clean and touch-up any damage to the surface treatment of the steel, but that it was Italsteel's obligation to finish and apply a top coat system to the steel'. Rostruct maintains that any liability it has for remedial works under the contract is to pay a reasonable sum to wash down and touch-up the visible steel. It contends that a reasonable sum for this cost can be determined by reference to Mr Cochrane's quotation dated 8 April 2013. The latter submission must be rejected.
113 Even assuming Mr Cochrane's quotation is to be used for determining the reasonable cost, it does not allow for the work to be done outside business hours. It is common ground the Anaconda store was trading at the relevant time. The contention must also be rejected because Mr Cochrane's quotation did not allow for the cost of moving and covering up the stock during the works. It does however expressly provide for the application of one coat of paint, not two coats.
114 I note Rostruct's submission is premised on the basis that Rostruct, on receiving on 1 March 2011 the notice of non-conformance dated 14 February 2011, 'acted promptly to engage a contractor to do the work and was ready, willing and able to perform the work'. Notwithstanding, Mr Ivanhoe's attempt to apportion responsibility to Anaconda for not allowing access, the only finding from the evidence (which is not controverted) is that Rostruct was on notice pursuant to the non-conformance notice that remedial works in the Anaconda store were necessary (even putting aside the evidence of Mr Porter that there had jbeen prior discussion throughout the course of the works that Rostruct would need to comply with its obligations under cl 4 of the conditions of acceptance in the Anaconda store).
115 As at the date of trial, no remedial work had been undertaken by Rostruct or anybody else on behalf of either party, or by Anaconda.
(h) Discussion
116 The factual question for determination is the extent of the scope of work required to be undertaken by Rostruct to comply with its obligation under cl 4 of the terms and conditions of the purchase order.
117 In my view, the express obligation in cl 4 is to 'touch-up' or 'make good' in the sense that the obligation is to treat any damaged areas. Depending on the extent of the damage, the remedy might require treatment by the application of one or two coats of paint to the affected steelwork. It may be that, in order to touch-up the damaged area, it is necessary to recoat the entire steelwork. It might also only become apparent after the application of the first coat that it is necessary to apply a second coat to restore the surface treatment because of the damage caused.
118 As can be seen from the letter dated 3 March 2010 from Italsteel to Dome Holding Pty Ltd the price agreed by Italsteel included: 'steel shop detail drawings, fabrication, delivery, erection and surface treatment – Internal steelwork blast class 2.5 then coat with Inorganic zinc Silicate to 75 microns plus white top coat paint system to match existing, External steelwork Hot Dip Galvanize'. This price was based on the engineer's drawings provided (all of which, according to Mr Gismondi, were discussed with Mr Ivanhoe and provided to him to enable him to assess whether Rostruct was prepared to undertake the work for the fixed sum of $117,000). Whatever Italsteel's obligation to Dome is under this provision is not to the point. This is especially so as Rostruct had no knowledge of the matter at the time it entered into its subcontract with Italsteel.
119 Italsteel cannot expect Rostruct to paint the steel to a standard that it agreed with Dome if Italsteel did not provide the steel to Rostruct for erection to the requisite standard and type, whatever that might be. In cross-examination, Mr Gismondi indicated that Italsteel's specification to DOME provided for a primer with a final white colour coat on top, thereby constituting a two coat system (which is to be distinguished from a 'two-pak primer').
120 It is noteworthy that Mr Gismondi was not 100% sure if the 'white top coat paint system' would involve an extra coat or second coat of paint. Italsteel's offer to DOME was prepared by Mr Gismondi. However, to his credit, in his evidence he admitted he was not sure what he intended or what was meant by the phrase. Mr Connors' evidence in cross-examination was that reference to a 'top coat paint system' did not clarify for him what was meant. Reference was made in the communications between the parties at the time that Anaconda required all the steelwork to be repainted (this assumes it had been painted and was not merely a top coat). As the tenant and occupier of the store, it is understandable Anaconda would adopt this position. However, the liability of Rostruct must be discerned from its obligation in cl 4 of the conditions of acceptance.
121 I reject Italsteel's contention that Mr Ivanhoe in his email of 7 April 2011 accepted liability to paint the steel. He referred to the steel 'yet to be cleaned and painted' in the context of the non-conformance notice. This is not an admission of liability that Rostruct was obliged to paint all the steel in order to comply with cl 4. However, it is acceptance of Rostruct's obligation under cl 4 to make good any damage by touching up with the correct coating. It does not go to the extent of the work required to be undertaken by Rostruct.
122 In the course of closing submissions, counsel for Italsteel was asked whether there was any direct evidence that two coats were necessary in order to make good any damage to surface treatment after cleaning. He was unable to identify any evidence to this effect, bearing in mind that the question goes to the ultimate issue. In any event, based on the whole of the evidence and having regard to the extent of the liability in cl 4, I am not persuaded by Italsteel on the balance of probabilities that the obligation to 'touch up with correct coating' any damaged surface treatment on the steel would require a second coat of paint. I find that the obligation on Rostruct is to apply a single coat of appropriate white paint after the surface has been cleaned and prepared and made good for painting. The obligation to paint only arises out of the damage caused to the surface treatment, being the existing white primer base, and is the appropriate remedy.
123 It is not necessary to make a determination of the extent of the obligation of Italsteel to Dome with respect to the painted surface of the structural steel in the Anaconda store. This is a matter between those parties. In my view, the obligation of Rostruct is to make good any damage to the internal steelwork in the Anaconda store as a result of rigging and erecting the steel. Any damage, including markings, must be touched-up to restore the surface treatment on the steel to the same position it was on delivery of the steel to Rostruct.
124 In my opinion, it is not possible to determine whether one or two of paint is necessary to restore any damage to the surface treatment of the steel in any one particular place. While there may be some parts of the steelwork which might require two coats, I am not persuaded by Italsteel that the extent of the damage, dirt and any other markings requires the entire steelwork to be given one, let alone two coats of paint. Some areas may require no paint but for causing a resultant blotchy effect, which will depend on the standard of the workmanship. While this result may seem unsatisfactory to the parties, in my view, based on the evidence before the court, Rostruct must undertake the provision of one coat of paint on the steelwork in order to satisfy its obligation under cl 4 of the conditions of acceptance.
125 I am not persuaded by Rostruct that it has been prevented, in a relevant way, from undertaking the work at any time prior to the commencement of the proceedings as a result of being denied access to the premises. There is no evidence of any dates or times being offered by Rostruct to Italsteel for the remedial works to be undertaken. Indeed, the quotation of 8 April 2011 relied upon by Rostruct did not even quote for the work to be done in the manner that the parties appreciated was necessary at the time. It appears to have been received by Rostruct after the 7 April 2011 email indicating to Italsteel that Rostruct had arranged for the work to be done by it's subcontractor on 24 April 2011.
126 As canvassed in submissions with counsel, there does not appear to be from either Mr Cochrane in his second quotation, or Mr Connors and PPS in its revised quotation, a direct quote for undertaking the remedial work on the basis of the application of a single coat of paint to the internal steelwork. Although there is a calculation sheet, I am not persuaded that it is a simple mathematical exercise to deduct the cost and time associated with the application of a second coat of paint. The actual quotation of the work may need to take account of different timeframes and less equipment hire. Although I was invited by counsel for Italsteel to engage in some 'fancy footwork' by reference to the calculation schedules prepared by PPS, I am not persuaded that I have the information necessary to arrive at a fair and reasonable quote for the work deemed to be necessary.
127 If, after conferral, the parties are unable to reach agreement as to a reasonable cost for the remedial works based on the scope identified by these reasons for decision, then the matter can be brought back before me and further evidence adduced and a determination made based on competing quotations.
(i) Conclusion
128 For these reasons, I find Rostruct must clean and apply one coat of paint to the internal steelwork in the Anaconda store to satisfy its contractual obligation under cl 4 of the conditions of acceptance.
129 The costs associated with this scope of works cannot be determined on the evidence before the court. If a sum cannot be agreed, or the work undertaken by a subcontractor engaged by Rostruct, then the matter should be brought back for directions and a further hearing.
3. Damaged air-conditioning unit on 20 October 2011
130 At the commencement of the trial Rostruct accepted liability for damage caused to the air-conditioning unit on site and the cost of repairs 'in view of the evidence adduced at trial'.
131 Accordingly, Rostruct is liable to Italsteel for the sum of $7,705 inclusive of GST ($7,004.54 plus GST). Nothing more need be said about this dispute.
4. The outstanding works ($5,330 excluding GST)
(a) Pleadings
132 On the pleadings, Rostruct admits the following further work was still required to be performed under the subcontract as at 10 June 2011:
(a) completion of the internal dividing wall erection between tenancies;
(b) completion of a signage frame over the main entrance; and
(c) completion of tenancy signage frames on the front elevation over two tenancies.
133 At trial Rostruct accepted the sum of $5,330 (excluding GST), paid by Italsteel to Above All Rigging (AAR) to complete the outstanding works, was a reasonable cost for this scope of work.
134 Italsteel alleges Rostruct breached an implied term that it was entitled to give instructions to Rostruct in relation to the timing and sequencing of the works and that Rostruct would diligently comply with those instructions within a reasonable period of time.
135 By reference to the history of the matter and the failure of Rostruct to complete the outstanding works by 24 October 2011, Italsteel purported to terminate the subcontract based on Rostruct's repudiation.
136 As mentioned, Rostruct does not contest the reasonableness of the costs incurred by Italsteel to have the outstanding works completed. However, it contests its liability to pay the costs on the basis that Italsteel's purported termination was wrongful and was itself a repudiation of the contract.
137 Rostruct pleads that, in order to complete the works, it required architectural, engineering and detailed shop drawings from Italsteel and a construction program for the works. It is implicit from Rostruct's pleaded defence that it maintains it was at the time ready, willing and able to complete the works subject to provision of the requested information. This is a live issue. In reply, Italsteel says the identified drawings and program were not necessary for Rostruct to undertake the work. In short, Italsteel says there was nothing preventing Rostruct from completing the works if it had wanted to.
138 The issue to be determined, by reference to the relevant facts and circumstances at the time, is whether Italsteel wrongfully terminated the subcontract based on Rostruct's alleged repudiation.
(b) The evidence
139 In an email dated 17 March 2011, Mr Ivanhoe described the outstanding works as 'completion of minor outstanding works'. The email was sent to Mr Gismondi and indicated: 'As soon as access is given Rostruct will complete the works, in addition please forward to myself (sic) final set of construction drawings.' The email is important because it categorises the outstanding works as 'minor'. It also sets up Rostruct's pleaded position that by inference, in order to complete the works it required a 'final set of construction drawings.' In evidence, Mr Moody (Rostruct's construction manager for the works) accepted that the works were indeed minor.
140 Mr Gismondi responded to Mr Ivanhoe on 18 March 2011, indicating he would advise when the areas would be available to Italsteel, and therefore Rostruct.
141 Some months later, on 9 June 2011, Mr Gismondi on behalf of Italsteel prepared a letter to Rostruct. In the letter, Mr Gismondi asserted that Rostruct fully appreciated the extent of the work remaining under the contract and reiterated that access to the site to complete the work was available at any time. The letter sought a 'categorical confirmation' that Rostruct would complete its obligations under the contract. It indicated a failure to provide such an assurance would be taken as an indication that Rostruct did not intend to return to the site, which would be treated as a repudiation of the contract. In cross-examination Mr Porter (who was aware of the letter at the time) accepted the letter could have been in respect to the Anaconda paint works. In any event, the content of the letter informs the status of the relationship between the parties at the relevant time. The letter was sent to Rostruct by email on 9 June 2011.
142 On 10 June 2011, Mr Ahmed on behalf of Rostruct responded confirming Rostruct's availability to remobilise to the site but that Rostruct required 'clear instruction for the place and timing to execute the required work'.
143 As mentioned on the pleadings, Rostruct accepted that, as at 10 June 2011, the outstanding works remained to be completed by Rostruct.
144 By email dated 4 October 2011, Mr Porter informed Mr Ivanhoe that the builder had 'finally sorted out some of the final items which were part of your contract'. Mr Porter referred specifically to the dividing wall between the tenancies and the two remaining signage frames on the front elevation. Mr Porter indicated that erection of these items was required on 12 October 2011. He sought confirmation from Mr Ivanhoe that Rostruct would make the men available to undertake the work on this date. Attached to the email were the relevant marking plans for the works.
145 In cross-examination, Mr Ivanhoe maintained that Rostruct still required the relevant engineering drawings. Mr Porter in his evidence said that Mr Ivanhoe had the relevant plans to enable to work to be undertaken. Mr Ivanhoe said in cross-examination that he was not told the work was required to be done in three days and, if he had been told, he maintained it would have been. He maintained that no specific timeframe was given to Rostruct for completion of the works.
146 Mr Porter's evidence is that the marking plans provided to Mr Ivanhoe under cover of his email dated 4 October 2011 accurately set out the remaining rigging work that Rostruct needed to complete at that time.
147 According to Mr Porter, on or about 17 October 2011, Rostruct returned to site to begin constructing the remaining internal partition wall in building A. At the same time, Italsteel had engaged another rigging subcontractor, AAR, to erect a second internal partition wall and perpendicular wall (to be parallel) in building A to the wall to be constructed by Rostruct.
148 Mr Porter said that, although Rostruct had commenced some work, AAR was close to completing its partition wall and the perpendicular wall on 21 October 2011.
149 On Friday, 21 October 2011 at 1.06 pm, Mr Porter on behalf of Italsteel received an email communication from Mr Snaddon headed 'delays to project caused by rigger'. Although Mr Snaddon did not give evidence in the trial, the email is contained in exhibit 1.2 and, as I understand it, no issue is taken as to its admissibility. The email was as follows:
As of mid day today, Rostruct are not on site and have demobilized their scissor and crane.
The internal wall is unfinished and unsuitable for ceiling fixers to commence work on Monday as scheduled.
If your rigger does not return to site today, and have the works completed before Monday, the project will be delayed as a direct result of your riggers and delay costs will be applied to you.
In addition, all costs associated with employing others to complete your works, and overtime costs incurred as a result of delays to the ceiling fixers will also be recovered against you.
If you want to avoid these costs, I would suggest that you get Rostruct to return to site this afternoon and tomorrow to complete these works.
If this does not happen I will issue you a formal notice of default on Monday morning.
150 At about 2.13 pm on 21 October 2011, Mr Porter forwarded Mr Snaddon's email to Mr Ivanhoe. The email purports to set out Mr Porter's understanding of the history of the matter, which I understand is not directly challenged. It is necessary to set out the email in full which provided as follows:
Anthony
Further to our phone conversation this morning at approx 11.15 am I have still not had a response from you on the balance of work to be completed at Bulkyplex. See email from Builder below.
You advised that the reason for your men leaving site was that the hire company collected their equipment early.
HISTORY
As per your request we met on site on Monday 10 October, 2011 to view the site and access to undertake the works.
You agreed at that meeting with the builder Michael Snaddon form [sic] Snaddon Projects that you would start the works on Monday 17 October 2011. I advised you that we would have the steel on site at 7.00 am for you to start work.
This was agreed to.
I spoke with you on 14 October 2011 to confirm everything would be ready for you and that I should put the drawings on the truck as you did not have time to collect these, which I did.
I called you at 7.20 am on 17 October 2011 to advise that the truck was here to be unloaded but your staff or equipment was not on site.
You advised that they were on there [sic] way. At 8.10 am one Rostruct employee rolled up with no equipment to unload the truck or access equipment to undertake works on the project.
I am of the understanding that your employees borrowed a forklift to complete the unloading of the truck from a nearby company.
I went back to site at approx 9.45 am and met with your employee who advised he was still waiting on the equipment to arrive.
I was later advised by the builder that you [sic] man had demobilized from site. I called you at 2.39 pm to enquire what was happening with the works. You advised that the equipment had been ordered for the access and also a LPG forklift and you were going to follow up where it was.
On 18 October 2011 when I went to site there was a crew of men but still no access equipment for them to undertake the works. I called you and you advised that the equipment was on its way. I left a message for you at 11.40 am advising you that your employees had left site again due to no equipment except a fault electric winch which they did not have a sling for. At 2.34 you advised me that the equipment should be there and you would go to site and check.
On 19 October 2011 when I arrived at site there was still no equipment.
I spoke with a Rostruct employee who told me it was on it's way. I believe it was approx 8.15 am before the equipment arrived.
On 20 October 2011 while on site on [sic] of Rostruct's employees who was driving the telehandler hit the air conditioning ducting causing extensive damage to it. He advised Craig Moody from Rostruct who came to site to view the damage.
We have another rigging company doing an exact copy of the wall you are doing who have completed it in less than 3 days. Rostruct have been on site for 5 days and there is work still to do to complete your scope.
We currently have the below email from the builder. I need your immediate assistance on this matter to have it concluded. Please reply by close of business today.
151 At 4.51 pm on 21 October 2011 Mr Ivanhoe replied to Mr Porter as follows:
Hi Ray
ITALSTEEL – 1065 BULKYPLEX
We refer to your below correspondence and hereby confirm that we dispute your assertions and correspondence entirely. Your email response dated 7 October 2011 at 10.35 am failed to provide Rostruct with critical information relating to the programme of works and detailed delivery of materials that would have avoided our idol labour and resources throughout the week.
Rostruct have always anticipate [sic] the scope of work to take 2 weeks from commencement and are on programme for completion on Saturday 29th October 2011, any costs associated with expediting Rostruct's scope of works will be at the sole cost of Italsteel.
Please note there are additional costs and an extension of time associated with the erection of additional structural steel and purlins which will be quantified and issued to Italsteel in due course.
If you would like to discuss the above information further please do not hesitate to contact the undersigned on mobile 0406 429 249.
Regards
Anthony Ivanhoe
152 As is evident from this communication, Rostruct purported to maintain that the information previously provided did not include 'critical information relating to the program of works and detailed delivery of materials'. It is noteworthy that these communications were sent after Rostruct had been back onsite for five days to complete the works and there does not appear to be any other documentary evidence during this week supporting Italsteel's assertion that Rostruct's works were to be completed by Monday, 24 October 2011. Mr Porter in his email does not refer to any agreed or necessary completion date by 24 October 2011.
153 On Saturday 22 October 2011 Mr Porter, by email to Mr Snaddon and Mr Ivanhoe, confirmed Rostruct's response that Rostruct believed it had until the following Saturday (29 October 2011) to complete the works 'due to the fact' that Italsteel had not given Rostruct a program. This is not an accurate representation of what Mr Ivanhoe said in his email of 21 October 2011. In his email Mr Porter said that any such program is given by the builder and not Italsteel. He referred to 'the requirements being discussed with my meeting with you and Anthony' and invited a response from Mr Snaddon of his recollection of those discussions. He did not categorically assert himself that the works were always to be completed by 24 October 2011.
154 At 10.35 am on 22 October 2011, Mr Ivanhoe responded only to Mr Porter by email and advised that 'Rostruct will use best endeavours to shorten the program completion date despite Italsteel's failure to provide us with the critical information we have previously requested'.
155 On Monday 24 October 2011 at 9.53 am, Mr Snaddon by email informed Mr Porter that the 'wall girts remain incomplete, and are now holding up ceiling fixers'. As a result, Mr Snaddon 'formally advised' Mr Porter that Italsteel was delaying the project. Mr Snaddon again requested Italsteel to ensure that 'all necessary steps to restart works this morning' and that, if there was no restart, then a third party would be employed to complete the works at Italsteel's cost.
156 Mr Porter's evidence is that, as a result of Mr Snaddon's email on 24 October 2011, he instructed AAR to complete Rostruct's partition wall, but there is a conflict in the documentary evidence of the parties as to the timing of Mr Porter's decision on behalf of Italsteel to terminate the contract. Mr Porter's evidence is that, in response to Mr Snaddon's email of 24 October 2011 sent at 9.53 am, he instructed AAR to complete the works.
157 In his email of 24 October 2011 sent at 12.47 pm, Mr Ivanhoe responded to what had occurred on a without prejudice basis and referred to the wrongful termination of the contract by Italsteel. The email sent to Mr Porter only purports to refer to a telephone conversation between Mr Ivanhoe and Mr Porter 'at 9.27 am this morning terminating our contract'.
158 In support of Rostruct's position, Mr Ivanhoe alleged that Rostruct had 'used best endeavours to fast track the scope in the best interest for Italsteel and the builder' and denied any liability to Italsteel for any costs incurred in completing Rostruct's scope of work. Again, Mr Ivanhoe purported to express Rostruct's 'disappointment' in 'Italsteel's failure to provide Rostruct with the required information and documentation that would have assisted all parties involved in the overall planning and programming of the scope'. This is of course, a qualification on the position maintained initially by Rostruct that it was unable to complete the works without critical drawings.
159 By reference to AAR's tax invoice dated 31 October 2011 it completed the outstanding works within three consecutive days at a total cost of $5,863 (inclusive of GST). Rostruct was not given an opportunity to complete the works in a further three day timeframe.
160 In cross-examination, Mr Ivanhoe maintained Rostruct was not aware of any requirement that the outstanding works be completed by 24 October 2011. According to Mr Ivanhoe, Mr Porter did not say at the meeting that the work was required to be finished by 24 October 2011. Mr Ivanhoe's evidence is that Mr Porter never confirmed a finish date for the works. Mr Ivanhoe in his evidence confirmed Rostruct's request in his email dated 17 March 2011 for access. Although the email requested a 'final set of construction drawings', Mr Ivanhoe's evidence was that Rostruct required 'architectural, engineering and detailed shop drawings and a construction program for the outstanding works'.
161 In support of Rostruct's position, it relies upon Mr Ivanhoe's request by email on 17 March 2011 for a 'final set of construction drawings'; Mr Ahmed's email dated 10 June 2011 requesting 'clear instruction for the place and timing to execute the required work'; and Mr Ivanhoe's email dated 6 October 2011. The email to Mr Porter (and others) confirmed availability to commence works 'on the date you require provided you issue Rostruct with documentation and information' detailed below:
• Detailed construction program
• Detailed confirmation and delivery schedule of all materials and associated items relating to our scope
• Structural drawings, detailed shop drawings, bolt list, material list, cutting list, individual fabrication drawings
• The exact tonnage of structural steel and purlins
• Confirmation from yourself of prior access to Bulkyplex Development to review the site requirements at the latest 7 working days prior to commencement date
162 In the communication, Mr Ivanhoe indicated Rostruct required the above information 'within 48 hours to allow sufficient time to prepare the required equipment and resources to complete the scope'.
163 Mr Ivanhoe's email of 6 October 2011 (sent at 8.53 pm) was responsive to Mr Porter's email to him of the same date, sent at 4.55 pm. In that email Mr Porter characterised a telephone call between himself and Mr Ivanhoe at 3.44 pm that afternoon as 'abusive and threatening'. According to Mr Porter's email, Mr Ivanhoe 'threatened Italsteel that if we continue to request for you to do this you will open up a can of worms and (Rostruct) will sue Italsteel for all the projects that (Rostruct) have undertaken for (Italsteel) in the past'.
164 The final paragraph of the email is important because it contains a reference to the site being made available to Rostruct to complete the outstanding works on 17 October 2011 on the basis that the steel delivery will be at 7.00 am. It is noteworthy that Mr Ivanhoe's response to this communication is not to note or confirm the start date of 17 October 2011, but rather to make any availability to commence work conditional on a number of matters. Again Mr Porter was only concerned that Rostruct start on 17 October 2011. No express reference was made to any finish date. Also, no reference was made to a construction program which would have indicated a timeframe for the completion of the works. No such program was ever created.
165 There were other communications between the parties on 4 and 5 October 2011 that are relied upon by Italsteel as evidence of Rostruct's unwillingness to complete the works (even though Rostruct did attend site and commence the works). In response to Mr Porter's email to Mr Ivanhoe dated 4 October 2011 at 3.33pm indicating erection of the works was required on '12 October 2011', Mr Ivanhoe responded at 9.33 pm requesting:
1. architectural drawings, engineering drawings and detailed shop drawings including materials, cutting and bolts lists;
2. detailed construction program of all works to be complete [sic]; and
3. variation to contract or new purchase order for the additional scope.
166 Mr Ivanhoe indicated that only on receipt of the requested information would Rostruct consider its available resources. The evidence of Mr Porter was that Rostruct already was in possession of the relevant marking plans. I interpolate that it is difficult to understand why a variation to contract or new purchase order was required when at all material times Rostruct had previously accepted (and still does) that the outstanding works were just that, namely works included in the original scope of works under the contract. Indeed, Mr Porter sought further clarification from Mr Ivanhoe on this point.
167 In addition to the email exchanges on 4, 5 and 6 October 2011 referred to above, Mr Porter on behalf of Italsteel sent Rostruct a letter dated 6 October 2011as follows:
I refer to our recent email correspondence of 4th and 5th October 2011. In an endeavour to accommodate you and ensure that you have sufficient time to mobilise the necessary trades and supplies to commence and complete the remaining works under the contract, please be advised that the site will be available to you on Monday 17th October 2011.
This gives you, in effect, the best part of a further week to attend to whatever logistical and organisational matters are necessary to ready yourselves to commence and complete the remaining works.
In that regard, no further purchase order is necessary. The work remaining is the subject of an existing contract. All that is required is for you to confirm that you intend to proceed and complete your obligations. On that basis, should I fail to receive that confirmation prior to 17th October 2011, or alternatively, should you fail to attend site on the 17th October 2011 and begin to carry out the remaining works, and in light of all the previous correspondence between us regarding this issue, I will consider your conduct a clear repudiation of the contract.
168 It is plain that the instruction only required Rostruct to commence the outstanding works on 17 October 2011. Again, it did not expressly provide for a completion date.
(c) 10 October 2011 meeting
169 I accept Mr Porter's evidence that, having given AAR the drawings provided to Rostruct by email on 4 October 2011, Italsteel did not provide any additional information which had not previously been provided to Rostruct, and that AAR completed the remaining works on this basis.
170 In his first witness statement, Mr Porter did not refer to a 10 October 2011 meeting on-site with Mr Ivanhoe and Mr Snaddon of Snaddon Projects. Nor did Mr Porter in his responsive statement refer to the meeting. The fact of the meeting is referred to in Rostruct's defence and counterclaim.
171 Mr Ivanhoe in his evidence-in-chief referred to the meeting. According to him, there was discussion to the effect that Rostruct could not access the site until 17 October 2011, because Furniture Spot needed time to move its furniture. Mr Ivanhoe sought to rely on his email dated 21 October 2011 and his statement that Rostruct always anticipated the scope of work would take two weeks from commencement. This statement was made at the relevant time and in support of Mr Ivanhoe's assertion that Rostruct was 'on program for completion on Saturday 29 October 2011'. In his evidence-in-chief, Mr Ivanhoe did not make any reference to a specific deadline for completion of the works being discussed or agreed. There is no evidence on point to be found in Mr Ivanhoe's supplementary statement.
172 Neither party called Mr Snaddon to give evidence of the discussions and agreements (if any) reached during the 10 October 2011 meeting. Both Mr Porter and Mr Ivanhoe gave oral evidence. There was no application by counsel for either party for leave to adduce additional evidence in relation to the meeting as part of the evidence-in-chief of the witnesses.
173 Italsteel's letter of 6 October 2011 unequivocally put Rostruct on notice that, if it failed to confirm its intention to proceed with the works on 17 October 2011, or if it failed to attend site on 17 October 2011, then such acts would be regarded as repudiatory. There is no indication in the letter of any timeframe imposed upon Rostruct to complete the works.
174 Not surprisingly, Mr Porter seized the first opportunity in cross-examination to refer to the 10 October 2011 meeting. His answer was not responsive to the question. The evidence he wanted to give was: Mr Snaddon 'gave us a program of what was required and when it needed to be handed over'. Later in his cross-examination, he referred to 'the program date we all agreed to with Mr Snaddon' as a result of a question from me as to who he was saying had agreed something. His answer was (ts 123 - 124):
Well, you met with Michael Snaddon, the builder that was looking after the works, myself and Anthony and Michael told us a date that he needed it – to be completed by so he could get following trades in for the handover for the tenants. And it was all supposed to be completed, ready for handover on 24 October, the morning of.
175 With respect, Mr Porter's evidence is unclear and equivocal to say the least. In re-examination, Mr Porter repeated his evidence given in cross-examination for the first time, that the date for completion of the works had been set at the 10 October 2011 meeting as 'ready to handover first thing Monday morning, 24 October'. In re-examination, Mr Porter gave evidence of the slow process by Rostruct in performing the works. He was unsure whether Rostruct's equipment was collected from site on 20 or 21 October 2011 but he accepted Rostruct was engaged in the construction works during the course of the week.
176 Mr Ivanhoe was cross-examined vigorously on the premise that at the meeting he was told the works would need to be completed by 24 October 2010. He firmly and unequivocally rejected this proposition. His evidence was that there was no discussion about 24 October 2010. According to him, it was only the start date that was discussed on the basis they were required to be there on 17 October 2010. In defence of his position, he asserted he had requested a program from Mr Porter which was not received. It is common ground that no programs were provided. I infer that, if a construction program had been prepared, it would have indicated the amount of time allowed for the work, and thereby, a finish date.
177 Mr Ivanhoe maintained he was never provided with a completion date. He sought to justify the two-week period for the work by reference to two teams working consecutively on the job. I interpolate that AAR finished the work that Rostruct had commenced within three days during the week of 24 October 2011.
178 In cross-examination, Mr Ivanhoe accepted that the only things the riggers needed to erect the steel were the marking plans, which he said had been provided. He indicated the fabrication drawings might have been necessary if there were any issues with the steel. Mr Ivanhoe relied on the documentary evidence created at the time which does not record a completion date of 24 October 2010 for the works.
(d) Law of repudiation
A convenient summary of the relevant law of repudiation is set out by Justice Harper in Command Energy Pty Ltd v Nauru Phosphate Royalties Trust [2003] VSC 261 [787] – [789] as follows:
787. Repudiation of a contract is, to adopt the words of Lord Wright In Ross T Smyth & Co Ltd v T D Bailey Son & Co , 'a serious matter, not to be lightly found or inferred.' Lord Wilberforce observed that: 'Repudiation is a drastic conclusion which should only be held to arise in clear cases of a refusal, in a matter going to the root of the contract, to perform contractual obligations.' A contract may be repudiated 'if one party renounces his liabilities under it – if he evinces an intention no longer to be bound by the contract … or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way …' Moreover, 'if one party, although wishing to perform the contract, proves himself unable to do so, his default in performance will give the other party a right to rescind the contract, if the breach goes 'so much to the root of the contract that it makes further commercial performance of the contract impossible.' Consistent with the gravity of such a determination, the conduct of the allegedly repudiating party must be 'such as to convey to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it.
788. Whether or not a party has repudiated its obligations requires an objective assessment of its acts or omissions; it does not turn on 'uncommunicated intention.' So, as Brennan J noted:
Repudiation is not ascertained by an inquiry into the subjective state of mind of the party in default; it is to be found in the conduct, whether verbal or other, of the party in default which conveys to the other party the defaulting party's inability to perform the contract or promise or his intention not to perform it or to fulfil it only in a manner substantially inconsistent with his obligations and not in any other way.
789. Even when, assessed objectively, the defaulting party evinces an intention to carry out the contract, it may be shown that the performance will occur only as and when it suits that party – conduct referred to variously as 'a shilly-shallying attitude in regard to the contract' and 'procrastination … persistently practised'. This can, 'in some circumstances, reach the stage of repudiation even though accompanied by assurances of ultimate performance at some future time'. Here 'the intention to carry out the contract as and when it suits the party.
(e) Findings
179 Having carefully considered the oral evidence of Mr Porter and Mr Ivanhoe, together with the contemporaneous documentary evidence between the parties, I am not persuaded that Rostruct was informed at any material time that the outstanding works had to be completed by Monday, 24 October 2010.
180 I accept the evidence of Mr Ivanhoe that the finish date was not stipulated or agreed at the 10 October 2010 meeting and was not conveyed to Rostruct. It was never conveyed in written form at any material time. I am fortified in this finding because it would have become very apparent to Italsteel in the week of 17 October 2010 that Rostruct was not going to complete the Works by 24 October 2010 and yet this requirement is not averted to in communications between the parties. At the time, it would have been blatantly obvious to Italsteel that Rostruct was not going to complete by Monday, 24 October 2010. In my view if a construction program had been provided to Rostruct, it would have had an end date for the works. No such program was prepared or provided to Rostruct. The only condition imposed upon Rostruct, to which it agreed, was to be on site to commence the works on 17 October 2010, which it did.
181 Given the commercial relationship between the parties at this time (or more accurately, lack thereof) with respect to the overall works, it is not surprising they communicated with each other in the way they did. In particular, the continual conditional acceptance of Rostruct to do the works can only be explained by its reluctance to proceed unless every possible piece of information had been supplied. In this regard, I find Rostruct was in possession of the relevant plans and drawings to enable it to complete the outstanding works and that, as a result to the extent Rostruct sought provision of a 'detailed construction program' it would have been otiose, apart from the obvious fact that it would have identified an end date for the works. AAR was able to undertake the works without reference to any further drawings. In any event, this aspect of the correspondence between the parties before the commencement of the works might point to delay on the part of Rostruct and an unwillingness to commence the works. However, the fact is Rostruct did commence the works on the agreed date of 17 October 2010.
182 In my view, because the third party works by AAR were completed efficiently and in a timely manner, it does not follow that Rostruct was obliged to work at the same rate or pace. Clearly at some point in time, Rostruct's lack of progress might constitute a proper basis for repudiation of the contract by Italsteel. However, in my view, the short timeframe over the weekend was unreasonable and did not permit Rostruct to complete the works that it was undertaking.
183 In my view, Italsteel made a commercial decision to terminate the contract as a result of pressure from Mr Snaddon. I note he did refer to an agreed completion date of 24 October 2011 in his written communications, directly or expressly. Mr Snaddon, on Monday, 24 October 2011 at 9.53 am, informed Mr Porter (and nobody else) that 'Italsteel are delaying this project'.
184 I am not persuaded on the evidence that Rostruct had demobilised from the site and had no intention to complete the works. In the circumstances, in my view, Italsteel unlawfully terminated the contract insofar as the outstanding works is concerned. Proper notice and a reasonable period for completion of the works should have been allowed to Rostruct.
185 In summary, while there was tactical manoeuvring by Rostruct in relation to completion of the works in the period before it commenced the works on 17 October 2011, there was not on the evidence of Rostruct's undertaking of the works, a clear renunciation by its conduct of the contract or unwillingness to complete the works. As Brennan J observed in Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, 642, where repudiation of a term is alleged, a right to rescind the contract depends on the importance of the term repudiated. Such a term has been variously described as a 'fundamental obligation', an 'essential promise' or a 'promise which lies at the heart of the agreement'. Mere delay in performing a non essential contractual obligation, without more, would not entitle the innocent party to terminate the contract. In Laurinda the conduct of the defaulting party was found to be 'not only dilatory but also cavalier and recalcitrant' and it thus amounted to 'more than a case of mere delay'.
186 In any event, repudiation requires the renunciation to be clear and unequivocal: Command Energy Pty Ltd v Nauru Phosphate Royalties Trust supra [827] – [833]. No sufficient intention can be discerned or inferred from the evidence for Italsteel to prove on the balance of probabilities that Rostruct, by its conduct, had categorically evinced an intention not to complete the outstanding works. Rostruct's conduct did not constitute a repudiation, or breach of an essential term or an intermediate term, thereby giving Italsteel a lawful right to terminate its performance of the outstanding works. To the extent there was a failure to perform in a timely manner it was not by itself, or in cumulation, sufficient to constitute a repudiation by Rostruct of its contractual obligations.
Conclusion
187 In summary, for these reasons:
(a) The subcontract between the parties was a fixed lump sum contract. Rostruct agreed to erect the structural steel for buildings A to D in accordance with the engineering drawings and marking plans supplied to it before the formation of the contract and, which are expressly referred to in the contract documentation itself. As a result, Rostruct is liable to repay Italsteel $75,076.52 plus GST.
(b) Rostruct is liable to make good the internal steel work in the Anaconda store by cleaning the steel and ensuring it is free of all sand, and then in order to remedy the damage to the existing surface treatment apply one coat of paint. I am not persuaded a second coat is necessary in order for Rostruct to comply with its obligation under cl 4 of the conditions. The cost of the work cannot be determined on the evidence adduced at trial.
(c) At trial Rostruct admitted liability for damage caused to the air-conditioning unit on site and the cost of repairs ($7,705 inclusive of GST).
(d) Rostruct did not repudiate its obligation to complete the outstanding works and, accordingly Rostruct has no liability for the costs incurred by Italsteel in this regard ($5,330 excluding GST).