Heavy Plant Leasing Pty Ltd (In Liquidation) v McConnell Dowell Constructors (Aust) Pty Ltd (No 2)

1. [1]

   A decade ago, Santos Limited embarked on the Santos GLNG project. The project related, amongst other things, to the extraction, compression and transportation of coal seam gas in Southern Queensland. The relevant part of the project was constructed in the Roma region on a 54 hectare project site which accommodates four large evaporation ponds and a compressor hub station. The object of the completed project was the conversion of coal seam gas into a form capable of being transported by a pipeline to a site in Gladstone for further processing into liquefied natural gas, for export to Asia.

2. [2]

   The project site is depicted in this aerial photograph:

3. [3]

   Santos appointed Fluor Australia Pty Ltd as its head contractor for the project. Fluor subcontracted work on what was described by the parties as the “Roma Hub” to the defendant, McConnell Dowell Constructors (Aust) Pty Ltd (“MacDow”).

4. [4]

   In turn, MacDow subcontracted civil works, including major earthworks, to Reed Constructions Australia Pty Ltd. Reed Constructions was to perform bulk earthworks and other construction works necessary to build concrete pads on which a compressor hub station and other equipment, such as turbines and a desalination plant, were to rest, as well as four evaporation ponds.

5. [5]

   On 30 November 2011, MacDow and Reed Constructions entered into a subcontract (“the Contract”) in respect of these works.

6. [6]

   Reed Constructions subcontracted that work to a large number of secondary subcontractors. Apart from supervisory work, Reed Constructions itself did no work on the site, otherwise than through subcontractors.

7. [7]

   Reed Constructions was an entity within what the parties described as the “Reed Group”, being a number of companies founded, and to a large extent then owned, by Mr Geoffrey Reed.

8. [8]

   The Reed Group collapsed in 2012. Reed Constructions entered voluntary administration on 15 June 2012.

9. [9]

   Two days earlier, on 13 June 2012, the Contract was novated to the plaintiff, Heavy Plant Leasing Pty Ltd (now in liquidation) (“HPL”). HPL was part of the Reed Group known as the “Heavy Plant Group” which owned a fleet of heavy plant and equipment hired to mine operators or companies undertaking construction works at mine sites.

10. [10]

    On 14 March 2013, Australia and New Zealand Banking Group Ltd (“ANZ”) appointed receivers and managers to HPL.

11. [11]

    On 18 March 2013, MacDow purported to terminate the Contract. On 21 March 2013, HPL treated MacDow’s purported termination of the Contract as a repudiation of it and purported itself to terminate the Contract.

12. [12]

    Between March and December 2013 MacDow completed the works the subject of the Contract.

13. [13]

    These proceedings concern the question of whether MacDow was entitled to terminate the Contract. It is common ground that if MacDow was not entitled to terminate then its purported termination was a repudiation of the Contract entitling HPL to terminate.

14. [14]

    Depending on the answer to that question, further questions arise as to the damages to which MacDow or HPL are entitled arising from the termination of the Contract and MacDow’s completion of the works.

15. [15]

    The central questions are whether:

    1. (1)

       MacDow was entitled to rely on cl 25.2 of the Contract to retain two amounts, in the order of $5.8 million and $7.9 million, that it had in January and February 2013 certified as being payable by it to HPL (“the Certified Amounts”); and

    2. (2)

       MacDow’s “de-certification” in March 2013 of amounts provisionally allowed and paid on account of particular works [1] constituted a breach by MacDow of an implied term of the contract to which I will return.

16. [16]

    To a very large extent, the answer to these matters depends upon the proper construction of the terms of the Contract. For that reason, I will immediately turn to the relevant provisions and their proper construction.

The Contract

1. [17]

   There was no dispute before me as to the principles concerning the construction of commercial contracts.

2. [18]

   A court in interpreting a provision of a document has regard to its words, its context and the purpose of the document as a whole. The leading modern statement on the importance of context and purpose is found in the reasons of French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd: [2]

3. [19]

   Further, as has also been correctly stated, concerning contracts generally:

4. [20]

   The following clauses in the Contract are relevant to the dispute before me. As the Contract was novated from Reed Constructions to HPL, I will refer only to HPL.

5. [21]

   By cl 3.1 of the Contract HPL agreed to execute the Contract works in a professional and competent manner and represented and warranted that, relevantly, it was and would remain at all times solvent.

6. [22]

   By cl 3.5(c) HPL undertook to:

7. [23]

   For the reasons I develop below, HPL’s obligation under cl 3.5(c) to pay its subcontractors (to whom I will refer as the “HPL Subcontractors”) constituted a vital component of its obligations under the Contract. It was HPL’s failure, and indeed evident inability, to comply with its obligations under this clause that in February 2013 led MacDow to exercise its rights under cl 25.2 of the Contract to retain the Certified Amounts.

8. [24]

   Further, as I explain below, in early 2013 MacDow exercised its right under cl 3.5(c) to pay some of the HPL Subcontractors directly, giving rise to an entitlement to set-off those payments against payments otherwise due by it to HPL.

9. [25]

   Clause 18 of the Contract was headed “MacDow’s right to set-off”.

10. [26]

    Clause 1.6 of the Contract provided that headings may be used to interpret the provisions in the General Conditions of the Contract “where there is uncertainty or ambiguity”.

11. [27]

    Clause 18.1 provided:

12. [28]

    As is evident from its terms, MacDow was only entitled to exercise the right to “set-off” provided for by cl 18.1 if it had in fact incurred a cost or expense. This was an additional entitlement available to MacDow to that in cl 3.5(c) if, as happened, MacDow directly paid any of the HPL Subcontractors directly following a breach by HPL of its obligations under cl 3.5(c) to pay those Subcontractors.

13. [29]

    As I explain below, on 25 February 2013, MacDow purported to exercise its right to set-off under cl 18.1.

14. [30]

    However, before me, MacDow accepted that it was not entitled to do so.

15. [31]

    A vital clause in the Contract is cl 25 which was headed “Other Indemnities” and provided:

16. [32]

    The clause imposed on HPL the obligation of indemnity in cl 25.1 and conferred on MacDow the entitlement of retention in cl 25.2.

17. [33]

    The clause did not provide for right of set-off and was clearly intended by the parties to confer on MacDow rights additional to those contained in cll 3.5(c) and 18.1; hence the heading “Other Indemnities”.

18. [34]

    Clause 25.2 had a number of elements.

19. [35]

    First, MacDow’s entitlement under cl 25.2 was, relevantly, only enlivened if HPL was in breach of its obligations under the Contract.

20. [36]

    Second, MacDow’s entitlement to retain payment otherwise payable (such as the Certified Amounts) only arose if there was a “contingent claim, action, proceeding, loss, damages, costs or expenses” arising from or in connection with such a breach.

21. [37]

    There was, initially, debate before me as to whether the word “contingent” should be read distributively, so that MacDow’s entitlement arose if there was a “contingent” claim, or action, or proceeding, or loss, or damages, or costs, or expenses arising from or in connection with a breach by HPL of the Contract. On behalf of HPL it was initially submitted that the word “contingent” only governed the following words “claim”, “action” and “proceeding” and that the clause should be read so that the “loss, damages, costs or expenses” must arise from a “contingent claim, action, or proceeding.” [9]

22. [38]

    I do not see how cl 25.2 can be read this way. The natural reading of the words used in the clause is that the word “contingent” governs each of the following words, “claim, action, proceeding, loss, damages, costs or expenses”. Ultimately, HPL accepted that this was so.

23. [39]

    That reading is confirmed when the wording in cl 25.2 is contrasted with that in cl 25.1 which speaks of an indemnity against claims, actions or proceedings “and” loss, damages and costs and expenses.

24. [40]

    Had the parties intended that the word “contingent” in cl 25.2 govern only claim, action and proceedings, they would have placed the conjunction “and” between “proceeding” and “loss” (as they did in cl 25.1).

25. [41]

    This is a vital point, as MacDow’s contention in this case is that, from February 2013, it faced a “contingent” “cost” or “expense” being an obligation to pay the HPL Subcontractors in order to keep them on site or, as happened, itself to complete the works.

26. [42]

    Third, MacDow was only entitled to retain such monies as it may “reasonably require” to meet, relevantly, any contingent costs or expense. It is common ground that that question must be determined objectively and that, as the language of the clause states, MacDow was obliged, in exercising the power, to act reasonably.

27. [43]

    The restraint thereby imposed on MacDow’s exercise of the power under cl 25.2 meant MacDow could not retain monies referable to a contingent loss or expense that was obviously fanciful or known to MacDow to be without foundation or unlikely to be realised. But the coupling of the restraint on retention only of monies “reasonably required” with the need to meet “contingent” losses or expenses made clear in my opinion that such losses or expenses need not be ones that would certainly be incurred and could include losses or expenses that were likely to, or even might possibly, be incurred.

28. [44]

    Fourth, the contingent loss or expense must arise from or be in connection with a breach by HPL of its obligations under the Contract. In that regard HPL submitted in reply:

29. [45]

    If that submission was intended to mean, as was put orally, that it was necessary that MacDow identify to which breach each amount retained related, I do not accept it. What the clause entitled MacDow to do was retain “such monies” as it “may reasonably require” to meet “any” contingent loss or expense arising from or in connection with “any” breach by HPL of the Contract. MacDow did not have to identify to which particular breach each retained sum related.

30. [46]

    The retention by MacDow of funds must, however, as HPL submitted, have related to an existing breach by HPL of the Contract.

31. [47]

    HPL contended a further element of cl 25.2 was that MacDow could only retain payment for so long as the retained amount was “reasonably” required to meet the relevant contingency. An amount retained by MacDow in relation to monies said to be due to a HPL Subcontractor, Egans Mining Services Pty Ltd, arises for consideration in this respect, as I discuss below.

32. [48]

    The provisions to which I have so far referred are within the “General Conditions” of the Contract.

33. [49]

    In the “Schedule to the General Conditions” of the Contract was a “Part B” containing cl 10, headed “Payment”. [11]

34. [50]

    Clause 10.1 made provision for HPL to make a “Payment Claim” each calendar month setting out the value of the work done in the preceding month. As I discuss below, it is Payment Claims 14, 15 and 16 made in early 2013 which are central to this dispute.

35. [51]

    Clause 10.4 obliged MacDow to issue to HPL within 10 business days of receipt of a Payment Claim a “Payment Certificate” which was to state “the payment which, in the opinion of MacDow, is to be made by MacDow” to HPL. MacDow was obliged to give reasons for any difference between the amount claimed in the Payment Claim and the amount provided for in the Payment Certificate.

36. [52]

    Clause 10.5 provided that the issue of the Payment Certificate, or the payment of monies:

37. [53]

    Thus, cl 10.5 stated that any payments made in response to a Payment Claim were “provisional” and “on account only”.

38. [54]

    Consistently with this, cl 10.2 spoke of “interim payments” and provided, that subject to cl 10.5, “interim payments” [12] would comprise the total value of the works properly executed and materials and goods properly provided, less amounts previously paid:

39. [55]

    Clause 10.2 spoke of MacDow being entitled to “take into account”, relevantly, a “dispute” with Fluor (that is a dispute between MacDow and Fluor), or a “withholding” by Fluor (that is withholding of payments otherwise due from Fluor to MacDow). The subject of cl 10.2 was “interim payments”, to be measured against the value of the works to date and amounts previously paid. It was in respect of these matters that MacDow was “entitled to take into account” a dispute it had with Fluor. There were many such disputes. One way in which MacDow could so “take into account” such matters would be, when determining whether to make the “interim payments” of which the clause speaks, to consider the value of the works done to date. As I discuss below, this issue arises in relation to MacDow’s assessment of HPL’s Payment Claim 16 and MacDow’s issue of Payment Certificate 16.

40. [56]

    In reply submissions delivered after the close of oral addresses, HPL submitted that cl 10.2 did not permit MacDow to “take into account” a “capricious, irrational refusal by Fluor to approve variations claimed by MacDow”. HPL submitted that MacDow could only “take into account” a dispute with Fluor if the dispute “rationally [bore] upon a reasonable assessment of the value of the work performed by HPL under [the Contract]” or had a “rational bearing upon the objective value of the work performed by HPL”.

41. [57]

    But this is to read into cl 10.2 words which are not there. The clause permits MacDow to take into account “any” dispute with or withholding by Fluor (and so on).

42. [58]

    It is common ground that the Contract was not a “pay when paid” contract in that it did not permit MacDow to withhold payment from HPL merely because Fluor had withheld a corresponding payment from MacDow. But cl 10.2 did provide MacDow a basis on which it was able to “take into account”, including to its advantage, the manner in which its head contractor, Fluor, dealt with it under their contract (“the Head Contract”); including as to the amounts “to be paid” for works or the value of works executed to date.

43. [59]

    Clause 10.8 provided, relevantly:

44. [60]

    The relevance of this clause is that, from December 2012, HPL provided statements [14] that not only did not state that the HPL Subcontractors had been paid all money due and payable to them but accepted and asserted that some had not.

45. [61]

    In that context, there was debate as to the significance of the words “and if so directed by MacDow” in the chapeau to cl 10.8 and, in particular, whether those words qualified the earlier words in the chapeau that the provision of the relevant statement was a “condition precedent to any entitlement” of HPL to payment of the relevant Payment Claim.

46. [62]

    HPL submitted that “the condition precedent in Clause 10.8 is only enlivened if MacDow directs the provision of the statutory declaration” referred to in cl 10.8.

47. [63]

    Clause 10.8 is awkwardly worded, but I do not think its effect is as HPL contended.

48. [64]

    The direction referred to in the chapeau to cl 10.8 was again referred to in cl 10.8(b). Whereas cl 10.8(a)(i) obliged HPL to provide a statutory declaration that suppliers and workers had been paid, cl 10.8(b) provided that, in addition to such a declaration, HPL must provide “documentary evidence” that “at the date of the direction” suppliers and workers had been paid all monies due and payable to them.

49. [65]

    That suggests, as MacDow submitted, that the words in the chapeau “and if so directed by MacDow,” were directed to the provision of the “documentary evidence” referred to in cl 10.8(b) and were not intended by the parties to be a qualification to the condition precedent specified at the outset of cl 10.8.

50. [66]

    The better reading of cl 10.8 is, thus, that a condition precedent to an entitlement to payment of a Payment Claim was a statutory declaration setting out the matters specified in (relevantly) cl 10.8(a)(i) and (iii) and, if MacDow directed the provision of “documentary evidence” of payment of monies due and payable to suppliers’ workers, also the provision of that documentary evidence.

51. [67]

    I think that MacDow was correct to submit that this reading of the clause is made clear by the provision in the chaussure to cl 10.8 which provided that, notwithstanding MacDow not having given a direction of the kind earlier specified, HPL was deemed to have provided a warranty that it had complied with, relevantly, cl 10.8(a)(i) (the payment of all monies due and payable to its suppliers) when it submitted its Payment Claim.

52. [68]

    As MacDow submitted:

53. [69]

    Further, as MacDow submitted, the reference in subpar (B) to a statutory declaration was evidently a reference to a further statutory declaration to be called for after the Payment Claim had been made. The clear purpose of that clause was to give MacDow the right, up to 10 days before a Payment Certificate was due, to ensure that at that later point in time, HPL was still in compliance with its obligation to pay the HPL Subcontractors.

54. [70]

    Thus, my conclusion is that, whether or not MacDow gave a “direction” of the kind referred to in cl 10.8, the clause provided that it remained a condition precedent to HPL’s entitlement to payment of a payment claim that it provide a statutory declaration to the effect that all HPL Subcontractors had been paid.

55. [71]

    As I set out below, during the critical period between December 2012 and March 2013, HPL did not provide any statutory declarations but, rather, provided “Subcontractor Statements” signed by Mr Reed. MacDow takes no point by reason of the provision of a statement, rather than a statutory declaration. The wider point is that, as I describe below, those statements did not assert that all HPL Subcontractors had been paid. On the contrary, they stated in terms that some had not; thus establishing that the condition precedent in cl 10.8 had not been met.

56. [72]

    But at no point did MacDow then contend that this itself was a reason to withhold payment. Between December 2012 to March 2013, MacDow responded to HPL’s payment claims (by issuing payment schedules) without raising this issue as a basis for withholding payment.

57. [73]

    I think HPL was correct to submit that MacDow thereby waived any right to rely on non-fulfilment of the cl 10.8 condition precedent as being, itself, a basis to withhold payment.

58. [74]

    HPL alleges that there were implied terms of the Contract that:

59. [75]

    There is no authority of the High Court, nor of any intermediate appellate Court, which states a duty of good faith is to be implied as a matter of law in all commercial contracts. [17]

60. [76]

    However, the obligation of a certifier, assessor, valuer or administrator of a construction contract to act reasonably, in good faith, in accordance with the contract and in a manner necessary to enable the benefit of the contract to be conferred on the parties to it, has been recognised consistently since the decision of Macfarlan J in Perini Corporation v Commonwealth of Australia. [18] In Kell & Rigby Holdings Pty Limited v Lindsay Bennelong Developments Pty Ltd [19] Hammerschlag J (as his Honour then was) considered a clause in a construction contract requiring that the principal ensure that at all times there was a superintendent and that, in the exercise of the functions of the superintendent, the superintendent act honestly and fairly. His Honour noted that the relevant clause was “an express imposition of a duty which would anyway ordinarily be imposed on a person in the position of superintendent” and cited Perini Corporation as authority for that proposition. [20]

61. [77]

    There are other cases which have held a party in the position of MacDow, called upon to form an opinion or belief in the context of a construction contract, must act honestly and reasonably. [21]

62. [78]

    In any event, terms to the effect contended by HPL should be implied as a matter of fact in this case. They are capable of clear expression. They are necessary to give business efficacy to the Contract as, otherwise, MacDow would be entitled to act unreasonably in forming an opinion for the purposes of, for example, cl 10.4 in Part B of the Contract as to the amount to be paid to HPL. The existence of such a term is also, in my opinion, so obvious that it goes without saying. Had the parties applied their objective minds to the question of whether or not MacDow would be entitled to certify the sum due to HPL unreasonably, and still validly discharge its contractual obligation, the answer would obviously have been “no”. And, if it be relevant, each of Mr Roberts, Mr Mills and Mr Foxwell [22] readily accepted that MacDow was obliged to act reasonably in assessing progress claims. As HPL submitted, an unreasonable exercise of the certification function, or one engaged otherwise than in good faith would likely deprive it of the benefit of the Contract. [23]

63. [79]

    As I set out below, at the time of the events with which these proceedings are concerned, MacDow expressed reliance on identified clauses in the Contract in taking certain steps. In particular, it purported to rely on cl 18.1 (as well as cl 25.2) to assert an entitlement to “set-off” amounts owing by HPL to the HPL Subcontractors against the Certified Amounts. It also purported to rely on cl 3.6 in relation to its assessment of HPL’s Payment Claim 16 and its issue of Payment Certificate 16. MacDow now accepts it was not entitled to rely on cll 3.6 nor 18.1.

64. [80]

    Further, in relation to Payment Certificate 16, there is an issue as to whether MacDow was entitled to rely on cl 10.2, notwithstanding that it did not, in terms, purport to do so at the time.

65. [81]

    However:

66. [82]

    In final submissions, HPL accepted application of this principle had the result that “whatever MacDow said it was doing at the time is one thing, but what matters now is what was it entitled to do”. [25]

Credit

1. [83]

   This is not a case where the credit of any of the witnesses called is determinative of the result. Indeed, HPL made no submissions as to credit and MacDow’s submissions on that subject were confined. For the most part, the communications between the parties were in writing. Many of the witnesses who made affidavits in the proceedings were not cross-examined. Those witnesses whose evidence was the subject of cross-examination appeared to me to be doing the best they could to give an accurate recollection of events that had occurred many years ago.

2. [84]

   MacDow made some criticisms of the evidence given by HPL’s expert quantity surveyor, Mr Stephen Bolt. I deal with this below when considering the question of quantum.

The res judicata point

1. [85]

   MacDow submitted that HPL was precluded from raising, as an issue in these proceedings, whether the Contract was lawfully terminated under cl 26.3 by MacDow by reason of the judgment of the Queensland Supreme Court in McConnell Dowell Constructors (Aust) Pty Ltd v Heavy Plant Leasing Pty Ltd. [26]

2. [86]

   In closing submissions MacDow stated that it relied upon “the principles of res judicata, issue estoppel and Anshun estoppel” and went as far as to submit that “the entire question” of its ability to recover the costs of completion of the works “only arises if MacDow is unsuccessful” in relation to those matters.

3. [87]

   However, the point was not pursued with great enthusiasm in final oral submissions.

4. [88]

   That was for good reason, because, as HPL pointed out, there is no substance to the contention for three reasons.

5. [89]

   First, the decision in that case was a decision to quash an adjudication determination under the Building and Construction Industry Payments Act 2004 (Qld). Section 100 of that Act, as then in force, provided that nothing in the relevant part of the Act affected any right that a party to a construction contract may have under the contract or may have apart from the Act in relation to anything done or omitted to be done under the Contract. [27]

6. [90]

   Second, the decision was not a final decision as to the parties’ rights and liabilities under the Contract and therefore could not give rise to a res judicata or issue estoppel.

7. [91]

   Third, the issue of whether MacDow’s purported termination of the Contract was unlawful by reason of MacDow’s conduct having caused or contributed to the appointment of the receivers and administrators on 14 March 2013 was not resolved by the decision.

Events leading to termination

1. [92]

   I now turn to the events leading to the termination of the Contract in March 2013.

2. [93]

   On 7 December 2012, HPL made Payment Claim 13 pursuant to cl 10.1 of Part B of the Contract for $13,845,836.63.

3. [94]

   On 14 December 2012, MacDow issued a Payment Certificate pursuant to cl 10.4 of Part B of the Contract certifying an amount of $5,845,750.49.

4. [95]

   On 17 December 2012, Mr Reed for HPL signed a “Subcontractor Statement” in purported compliance with cl 10.8 in Part B of the Contract. In that Subcontractor Statement Mr Reed stated that all HPL Subcontractors had been paid “with the exception of” three named subcontractors, to whom a total of $1.824 million was said to be owing (with two amounts, totalling some $1.7 million “to be paid prior to Christmas”).

5. [96]

   HPL thereby revealed that HPL Subcontractors to whom it owed $1.824 million had not been paid and thus that it was in breach of cl 3.5(c) of the Contract.

6. [97]

   HPL also thereby revealed that the condition precedent to payment of Payment Claim 13, as specified in cl 10.8 of Part B of the Contract, had not been satisfied. But, as I have said, MacDow processed this and subsequent payment claims without raising this as an issue and thereby waived any entitlement to rely on the point.

7. [98]

   Between December 2012 and March 2013, MacDow received numerous communications from HPL Subcontractors complaining of non-payment by HPL of amounts owing to them and, in many cases, requesting MacDow for payment directly.

8. [99]

   I invited the parties to reach agreement as to the identity of HPL Subcontractors that wrote to MacDow between December 2012 and March 2013 either requesting direct payment from MacDow or asserting non-payment by HPL, the amounts that each such HPL Subcontractor asserted was owing to it, the identity of HPL Subcontractors that HPL itself asked MacDow to pay and the dates and amounts of such payments.

9. [100]

   The parties were unable to reach agreement about these matters.

10. [101]

    MacDow produced a lengthy table setting out the amounts it asserted it had paid HPL Subcontractors. That table showed that the total amount paid was $8,106,864.43. HPL contented itself with a response which said no more than that the document references in MacDow’s table “are all invoices and not remittance advices or other proofs of payment”. However, MacDow had adduced evidence from its Group Project Controls Manager, Mr Alan Walker, and from its Group Finance Systems Manager, Ms Inez Clement, deposing to these payments. That evidence was not challenged, and I accept it. I find that MacDow paid HPL Subcontractors the figure the subject of MacDow’s calculations, or at least an amount in that order.

11. [102]

    In any event, the Subcontractor Statements signed by Mr Reed showed that, at least by February 2013, HPL was unable to comply with its obligations under cl 3.5(c) of the Contract to “discharge all debts and liabilities which may be owing from time to time to all of [the HPL Subcontractors]”. (Emphasis added.)

12. [103]

    MacDow had no obligation itself to pay the HPL Subcontractors, although it had a right to do so under cl 3.5(c) and an entitlement to recover from HPL any amount so paid.

13. [104]

    As MacDow submitted, if HPL did not pay the HPL Subcontractors, and despite MacDow having no contractual obligation to do so, there was a powerful commercial imperative on MacDow to make the payments. That was because, first, if the particular HPL Subcontractors were critical to the completion of the works, MacDow was left with no practical choice but to pay them itself to ensure those subcontractors remained on site to continue the works, or face being in breach of the Head Contract with Fluor. Second, in the nature of things, HPL Subcontractors were likely to have financial imperatives of their own and, facing delayed payment from HPL, unlikely to be overly concerned with what MacDow described as the “niceties of contractual privity”.

14. [105]

    I think MacDow was correct to submit that its need to ensure that the works progressed without interruption was of vital importance. As MacDow submitted, the works were part of a major infrastructure project where the consequences for MacDow of any failure or delay to perform was serious indeed. MacDow was liable to pay liquidated damages to Fluor for each day of delay in respect of either completion of key work milestones or to final completion of the work. Those liquidated damages were payable on demand by Fluor or, alternatively, could be deducted by Fluor from any amount certified as payable to MacDow, or recovered from MacDow’s performance securities.

15. [106]

    As MacDow also submitted, the possible contingent loss to which MacDow was exposed by reason of HPL’s breach of its obligations under cl 3.5(c) was not confined to the extent of unpaid debts owed by HPL to the HPL Subcontractors. HPL had, in effect, subcontracted all of its obligations under the Contract to the HPL Subcontractors. HPL’s ability to pay the HPL subcontractors was fundamental to its ability to perform its obligations under the Contract. If, as emerged by February 2013, HPL was unable to perform its obligations under the Contract, there was a real prospect that MacDow would be obliged to terminate the Contract and itself step in to complete the works and incur the unknowable further costs that that would entail.

16. [107]

    For that reason, HPL’s failure to pay the HPL Subcontractors, and the consequent danger that its ability to progress the works was thereby impeded, was a significant concern for MacDow in the period leading up to the termination of the Contract. That was made clear to HPL in two important emails that Mr David Robinson, the Chief Executive Officer of MacDow, sent to Mr Reed on 15 February 2013, to which I will return.

17. [108]

    On 21 December 2012, HPL made Payment Claim 14 in the sum of $10,022,038.14. The effect of cl 10.1 of Part B of the Contract was that this Payment Claim was deemed to have been issued on 2 January 2013. Payment Claim 14 concerned work done by HPL on the project during December 2012.

18. [109]

    On 15 January 2013, MacDow issued Payment Certificate 14 certifying its opinion that the amount payable in respect of Payment Claim 14 was $1,206,582.61.

19. [110]

    HPL was dissatisfied with MacDow’s assessment of Payment Claim 14 and on 17 January 2013 asked that it be reassessed.

20. [111]

    On 22 January 2013 HPL issued a letter to MacDow. On 22 and 23 January 2013 representatives of HPL and MacDow met to discuss that question.

21. [112]

    This resulted in MacDow on 24 January 2013 issuing what the parties described as “Payment Certificate 14A”.

22. [113]

    The Contract did not contemplate the issue of more than one Payment Certificate in response to a Payment Claim. The arrangements entered into by the parties that led to Payment Certificate 14A were, in effect, a collateral contract. There was no dispute before me that the collateral contract was otherwise itself subject to the terms of the Contract.

23. [114]

    Payment Certificate 14A was for a total of $7,043,420.24 comprising the $1,206,582.61 the subject of Payment Certificate 14 together with a further amount of $5,836,837.63. MacDow requested that HPL provide separate tax invoices in respect of these two amounts. HPL did so on 25 January 2013.

24. [115]

    MacDow paid the tax invoice of $1,206,582.61 on 31 January 2013.

25. [116]

    MacDow did not pay the $5,836,837.63. This is the first of the two Certified Amounts which MacDow, in these proceedings, contends it was entitled to retain exercising its rights under cl 25.2 of the Contract.

26. [117]

    In the meantime, on 25 January 2013, Mr Reed signed a further Subcontractor Statement, in purported compliance with cl 10.8 of Part B of the Contract, certifying that all HPL Subcontractors had been paid, with the exception of 11 named subcontractors, whose “amounts outstanding” totalled $3,237,157.26. The amount due to one of those subcontractors, DDT Liners Pty Ltd, said to be $921,043.20, was stated “to be paid in full upon receipt of balance of Payment Claim 14 monies”.

27. [118]

    On 4 February 2013, HPL served on MacDow Payment Claim 15 in the sum of $12,341,594.72.

28. [119]

    On 8 February 2013 MacDow issued a responsive Payment Certificate in the sum of $7,898,918.42.

29. [120]

    MacDow did not pay HPL this amount. It is the second of the two Certified Amounts which MacDow contends it was entitled to retain under cl 25.2 of the Contract.

30. [121]

    On 12 February 2013, Mr Reed signed a further Subcontractor Statement in the same form as that to which I have earlier referred. This statement said that all HPL Subcontractors had been paid with the exception of six named subcontractors, to whom $2,085,229.40 was said to be owing. In each case it was said that those HPL Subcontractors were to be paid “upon receipt of balance of Payment Claim 14 monies”.

31. [122]

    On or around 10 February 2013, Mr Reed telephoned Mr John Dickinson at Fluor and said that if MacDow did not pay the full amount of Payment Certificate 14A by 13 February 2013, HPL would serve on Fluor a “Notice of Claim of Charge” under the Subcontractors’ Charges Act 1974 (Qld).

32. [123]

    The effect of service of a Notice of Claim of Charge would have been to prevent Fluor making a payment to MacDow in a sum equal to the amount of Payment Certificate 14A; that is the unpaid $5,836,837.63. [28]

33. [124]

    At around that time Mr Reed caused to be sent to Mr Dickinson at Fluor two Draft Notices of Claim of Charge, one for $5,836,837.63 (the amount of the unpaid portion in Payment Certificate 14A) and a second in the amount of HPL’s Payment Claim 15.

34. [125]

    Ultimately, Mr Reed did not proceed to seek to enforce the Notices of Claim of Charge. This, nonetheless, did not improve relations between MacDow and HPL.

35. [126]

    Thus, on 13 February 2013, Mr Jeffrey Mills, an independent contractor engaged by MacDow in relation to the project, wrote to Mr Reed:

36. [127]

    Later on 13 February 2013 Mr Mills wrote to Mr Reed:

37. [128]

    There was a dispute between HPL and MacDow as to when the $5,836,837.63 the subject of Payment Certificate 14A was due. HPL contended the amount was due on 1, or perhaps 6, February 2013. MacDow contended that it was due on 13 February 2013. HPL submitted, without analysis, that MacDow was incorrect to have asserted the payment was due on 13 February 2013, relying on a statement made by Mr Mills in a later email that MacDow’s interpretation of when the payment was due was “generous”. But, as I explain below, Mr Mills had no authority to make any statements concerning MacDow’s contractual obligations, on MacDow’s behalf or at all. HPL did not develop any submission as to why its contention about this matter was correct and MacDow’s was not.

38. [129]

    But it provides the context for the decision that MacDow made, on 11 February 2013, to place the payment of the $5,836,837.63 “on hold”.

39. [130]

    Thus, on 12 February 2013, Mr Walker, who was then a Finance Manager at MacDow, wrote to Mr Jim Frith, MacDow’s General Manager, Pipelines and Tunnelling division:

40. [131]

    The decision to place payment of both of the Certified Amounts, that is the $5,836,837.63 the subject of Payment Certificate 14A and the $7,898,918.42 the subject of Payment Certificate 15, on hold was made by MacDow’s Chief Executive Officer, Mr Robinson.

41. [132]

    Thus, Mr Robinson said in his affidavit:

42. [133]

    As is to be expected, there were numerous communications at around this time between MacDow and HPL and numerous internal communications within MacDow.

43. [134]

    Much was made by HPL, particularly in opening submissions, of things said by Mr Mills in the many emails he wrote during the relevant period. However, as MacDow pointed out, Mr Mills was an independent consultant engaged by MacDow. He was not an employee or director of MacDow and had no authority to make any decisions or make any statements on MacDow’s behalf. I do not see the opinions expressed by Mr Mills in those emails to be relevant.

44. [135]

    It was Mr Robinson who made MacDow’s position perfectly clear.

45. [136]

    First, early on 15 February 2013, Mr Robinson wrote to Mr Reed:

46. [137]

    The words I have emphasised in italics in Mr Robinson’s email were plainly a reference to cl 25.2 of the Contract.

47. [138]

    Later on 15 February 2013, Mr Robinson sent a further email to Mr Reed in which he made clear that MacDow relied on cl 25.2:

48. [139]

    In this email, Mr Robinson, in terms, made reference to MacDow’s rights under cl 25.2 of the Contract.

49. [140]

    The following day, on 16 February 2013, MacDow sent HPL a notice of “Breach of Contract” in which it stated:

50. [141]

    In the same letter, MacDow gave HPL notice of its intention to exercise its rights under cl 25.2. Thus, it wrote:

51. [142]

    By this point, MacDow commenced to give consideration to the question of what amount it could reasonably retain in exercise of its rights under cl 25.2 of the Contract.

52. [143]

    Thus, Mr Mills, who, as I have said, was not a decision maker but who was actively involved in the project, wrote to Mr Robinson, Mr Frith and Mr Robert Harris, a project Manager at MacDow on 18 February 2013:

53. [144]

    Two days later, on 20 February 2013, Mr Mills wrote to Mr Andrew Rattray, Commercial Manager at MacDow:

54. [145]

    Mr Mills was thus anticipating that MacDow may have to expend funds to ensure completion of the works and to ensure that the subcontractors “do not leave site”. Mr Mills’ comment that “the wording of [the Contract] is quite liberal” was, I would infer, an observation he made about the ambit of MacDow’s rights under cl 25.2, a matter to which I will return.

55. [146]

    Mr Rattray replied later that day, referring to Mr Mills’ comment that MacDow needed to “quickly work up our exposure” and attaching a spreadsheet that:

56. [147]

    MacDow was thus giving careful attention to the contingent costs and expenses that it might incur were MacDow to terminate the Contract.

57. [148]

    An issue arises as to what MacDow should reasonably have concluded was due by HPL to Egans Mining Services Pty Ltd.

58. [149]

    In that regard, during final submissions, MacDow sought to amend its List Response to alter particulars hitherto given as to the amounts owing by HPL (including to Egans) on 1 February 2013 and 15 February 2013.

59. [150]

    The existing List Response alleges that the amounts owing by HPL to the HPL Subcontractors (including to Egans) on those dates were in the order of $5.5 million and $5.3 million respectively.

60. [151]

    The proposed amendment sought to alter those particulars to allege that the amount owing by HPL to the HPL Subcontractors (including to Egans) was in the order of $13.5 million on 1 February 2013 and $14.25 million on 15 February 2013.

61. [152]

    HPL submitted that it would be unfairly and irreparably prejudiced were those amendments allowed, that it was not in a position to meet them, and had the issues been raised earlier it would have led further evidence and cross-examined certain of MacDow’s witnesses differently. When an amendment is sought to be made very late in proceedings, if the opposing party reasonably contends that it would, or may, have conducted its case differently had the amendment been made earlier, the Court will be hesitant to grant the amendment. That is particularly so where, as here, Senior Counsel for MacDow candidly stated:

62. [153]

    In those circumstances, I declined to grant MacDow leave to make the amendment proposed.

63. [154]

    On 22 February 2013, Mr Mark Hall, the Chief Financial Officer of Egans, wrote to MacDow as follows:

64. [155]

    On 25 February 2013, MacDow wrote to Mr Reed, “[MacDow] continues to hold grave concerns regarding HPL’s failure to pay its subcontractors”. The email went on to say that MacDow “continues to receive demands for payment from HPL’s suppliers and subcontractors for monies presently owed by HPL” and stated that “Egan Mining Pty Ltd has requested that MacDow retain funds in the amount of $8,391,110.26 from any payments to HPL”.

65. [156]

    Mr Reed said that after he received MacDow’s letter of 25 February 2013 he had this conversation with Mr Egan:

66. [157]

    Mr Reed also said that at about that time he had this conversation with Mr Mills:

67. [158]

    However, Mr Mills gave evidence that on 26 February 2013, Mr Egan said to him words to the effect of:

68. [159]

    Mr Mills also gave evidence that he met with Mr Egan on 1 March 2013 and that at that meeting Mr Egan said to him words to the effect of, “HPL owes Egans about $8 or $9 million”.

69. [160]

    There is a suggestion in the evidence that Mr Egan may have been motivated to make these statements to MacDow by reason of an arrangement that he proposed to Mr Reed in the middle of February 2013.

70. [161]

    In his affidavit Mr Reed said that he had a telephone conversation with Mr Egan to this effect:

71. [162]

    Although Mr Reed was a little equivocal about this, the suggestion appeared to be that despite Mr Reed rejecting Mr Egan’s proposal as outlined in that conversation, Mr Egan nonetheless represented to MacDow that money was owing by HPL to Egans.

72. [163]

    However that may be, the fact is that Egans made the statements I have set out in its letter of 22 February 2013 and that Mr Egan made the statements to Mr Mills that I have set out above.

73. [164]

    However, and inconsistently with these statements, on 5 March 2013 Mr Egan wrote to Mr Mills:

74. [165]

    Mr Mills replied on that day:

75. [166]

    Later on the same day Mr Egan forwarded a copy of Mr Mills’ email to Mr Reed but, curiously, omitted the middle paragraph. Evidently Mr Egan did not wish Mr Reed to see that part of Mr Mills’ email.

76. [167]

    In any event, the following day, 6 March 2013, Mr Egan sent Mr Mills a further email:

77. [168]

    As Mr Mills pointed out in cross-examination, this was inconsistent with what Mr Egan had earlier told him.

78. [169]

    Mr Egan’s email also appears equivocal and designed to leave open the possibility of Egans asserting that money would be due for payment “at the end of March 2013”.

79. [170]

    In these circumstances, MacDow was entitled to be sceptical about Mr Egan’s evident change of heart, and assertions that, despite what was said in his Chief Financial Officer’s letter of 22 February 2013, nothing was presently owing by HPL to Egans.

80. [171]

    On 25 February 2013, HPL made Payment Claim 16 for $27,133,704.26.

81. [172]

    This led to MacDow serving a Payment Certificate in which it “de-certified” previously certified payments and asserted that no money was due from MacDow to HPL in respect of Payment Claim 16. I will return to this below.

82. [173]

    Also on 25 February 2013, MacDow served on HPL a Payment Schedule pursuant to s 18 of the Building and Construction Industry Payments Act. [34]

83. [174]

    It was in this document that MacDow made the assertions concerning an entitlement to set-off monies under cl 18.1 (and also cl 25.2) of the Contract.

84. [175]

    In that document, MacDow stated:

85. [176]

    After asserting some matters not presently relevant, MacDow stated:

86. [177]

    HPL then referred to nine HPL Subcontractors.

87. [178]

    In relation to eight of those nine HPL Subcontractors (including Egans) MacDow stated that the HPL Subcontractor in question had requested MacDow to pay the amount said to be due and stated that “if [MacDow] does not pay this amount then the delivery of the works under the [Head Contract] is likely to be affected”.

88. [179]

    In relation to the ninth HPL Subcontractor, Quantum Concrete, MacDow said that it had paid that organisation “via invoices from Civil Pacific Services, to ensure that the works can progress” and stated that if it “did not pay this amount then the delivery of works under the [Head Contract] is likely to be affected”.

89. [180]

    I think MacDow was correct to submit that the passage in the Payment Schedule that I have set out at [175] shows that what MacDow was conveying in the passage I have set out at [176] was that, as a justification for disputing a payment claim under the relevant security of payments legislation, it was entitled to withhold money from HPL for three reasons, namely that it had paid HPL Subcontractors, it was exposed to claims from other HPL Subcontractors and it needed to pay each of these sums to progress the works.

90. [181]

    HPL referred to this purported set-off as the “First Set Off”.

91. [182]

    MacDow submitted that, despite the language used in this Payment Schedule, “[N]either cl 18 nor cl 25.2 allowed MacDow to set-off MacDow’s ‘exposure’ to claims from HPL’s unpaid subcontractors” and that the use by the author of the Payment Schedule of the expression “set-off” “only betrays a lack of understanding on the author’s part as to the true operation of [the Contract], a matter of no legal relevance in determining the parties’ rights under [the Contract]”. [35]

92. [183]

    As I have said, it is common ground in these proceedings that the question is whether, notwithstanding MacDow’s misapprehension of its legal position when serving this Payment Schedule, it was entitled to retain the Certified Amounts in exercise of its entitlements under cl 25.2 of the Contract.

93. [184]

    On 28 February 2013, Mr Walker and Mr Mills, for MacDow, met with Mr Reed and Mr Field, HPL’s Chief Financial Officer, for HPL. MacDow’s solicitor, Mr Matthew Croagh from Norton Rose Fulbright, also attended.

94. [185]

    On 1 March 2013, Mr Croagh sent Mr Mills an email summarising what had occurred at the meeting. It was common ground before me that Mr Croagh’s email was an accurate summary.

95. [186]

    Mr Croagh said:

96. [187]

    Mr Croagh then set out what had been agreed at the meeting:

97. [188]

    The second of the two Certified Amounts, the $7,898,918.42 the subject of MacDow’s Payment Certificate 15 on 7 February 2013, was due for payment on 28 February 2013.

98. [189]

    The agreement on 28 February 2013 amounted to a compromise between HPL and MacDow of the disputes that had been brewing during February 2013.

99. [190]

    Mr Croagh’s email made clear the agreement was that:

100. [191]

     On 4 March 2013, Mr Field sent Mr Mills a “spreadsheet” which purported to show that the amount due from HPL to the HPL Subcontractors as at 28 February 2013 was $4,287,732.12, together with what he described in an affidavit as “confirmations for the outstanding amounts from all but a couple of the HPL [Subcontractors]”. Mr Field said he sent “additional confirmations” to Mr Mills the next day. [37]

101. [192]

     HPL submitted that the 28 February 2013 “arrangement was imposed by MacDow and was not performed” and that the “arrangement reached was never performed by MacDow”.

102. [193]

     I have not been directed to any evidence to suggest that the “arrangement” reached on 28 February 2013 was “imposed” by MacDow.

103. [194]

     On 6 March 2013, MacDow sent HPL its Payment Certificate 16 in response to HPL’s Payment Claim 16 and stated:

104. [195]

     I will discuss MacDow’s Payment Certificate 16 below. It appears from this letter that, notwithstanding MacDow’s contention in Payment Certificate 16 that HPL owed it something in the order of $17.1 million, it was nonetheless prepared to act consistently with the 28 February 2013 agreement and make payments to HPL Subcontractors.

105. [196]

     It did so.

106. [197]

     Thus, on 8 March 2013, MacDow paid Civil Pacific Services $1,162,531.81 and on 13 March 2013 paid $256,907.19 to HPL with a request that HPL provide it with proof that the money was used to pay its subcontractors.

107. [198]

     On 13 March 2013 Mr Walker sent an email to Mr Field saying:

108. [199]

     On 14 March 2013 HPL requested MacDow to pay $236,468.47 for amounts due to Absolute Earthmoving, ALNDD Engineering Pty Ltd, Mr Brett Redgen, Mr Connor O’Keefe, Ezyquip Pty Ltd, Future Fleet Pty Ltd, Mikcon Pty Ltd, Mining and Construction Training Pty Ltd and The O’Loughlin Group Pty Ltd. Those payments were ultimately not made because of ANZ’s appointment, on 14 March 2013, of receivers and managers.

109. [200]

     MacDow did not pay all of the subcontractors named in Mr Field’s spreadsheet but, so far as the evidence reveals, made some payments consistently with what was agreed on 28 February 2013.

110. [201]

     Whether or not MacDow or HPL performed all of their obligations under the 28 February 2013 agreement, there is no suggestion in the evidence that either, at the time, alleged that the other had repudiated the agreement, let alone sought to bring it to an end.

111. [202]

     At the time that the ANZ appointed receivers and managers on 14 March 2013, the agreement was on foot and in the process of being performed.

112. [203]

     The 28 February 2013 agreement has every hallmark of the parties agreeing to “draw a line in the sand”, compromise their strict entitlements under the Contract and enter a new agreement to resolve the dispute concerning MacDow’s retention under cl 25.2 of the Contract of the Certified Amounts.

113. [204]

     This alone is an answer to HPL’s contentions concerning MacDow’s alleged breach of Contract, at least to this point in time.

114. [205]

     As I have said, HPL served Payment Claim 16 on 25 February 2013 seeking $27,133,704.26. MacDow was obliged to provide a Payment Certificate in respect of that Payment Claim by 7 March 2013.

115. [206]

     Payment Claim 16 included a claim for $6,031,887.05 for work done in February 2013 and $18,701,169.12 for variations; a significant increase on the amount hitherto claimed for variations. In Payment Claim 15 HPL stated that the total amount claimed as variations to date was only $5,791,380.52.

116. [207]

     By Payment Certificate 16 MacDow stated, relevantly to this aspect of the case:

117. [208]

     By this document, MacDow “de-certified” a number of earlier “certified” claims.

118. [209]

     As I have set out above, payments made following “certification” for payment under cl 10.4 in Part B of the Contract were agreed not to evidence the value of work done, nor that work had been executed satisfactorily, nor to be an admission of liability to pay, but to be provisional and on account only.

119. [210]

     Although the “negative $17,124,956.84” resulted from MacDow “de-certifying” a number of earlier “certified” claims and also involved a disallowance of much, if not all, of HPL’s variation claims and claims for work done in February 2013, debate before me focused on MacDow’s “de-certification” of amounts it had hitherto certified for payment under cl 10.5 of Part B of the Contract for “rippable rock” ($6,884,230.30), and for “extra over compaction” ($8,129,232.10). In addition to the amounts deducted by MacDow for rippable rock and extra over compaction, MacDow also deducted a further $2,640,622 on account of other matters. In closing submissions HPL said it took “no issue with those deductions”.

120. [211]

     I pause to explain what is involved in relation to those two matters.

121. [212]

     Mr Daniel Foxwell, MacDow’s Contract and Commercial Manager, assessed HPL’s Payment Claims on behalf of MacDow.

122. [213]

     Mr Foxwell explained that “rippable rock” is “anything that can be broken up with a certain machine and reworked into the pad”, in contrast to “un-rippable rock” being “boulders that can’t be broken up with – I think it’s specified as a D9 dozer”. [39] The issue was as to the volume of removed rippable rock, in terms of cubic metres, in respect of which HPL was entitled to payment.

123. [214]

     MacDow had previously certified a payment to HPL, on the “provisional or on account only” basis specified in cl 10.5 in Part B of the Contract, of an amount of $6,884.230.30 for rippable rock.

124. [215]

     “Extra over compaction” was the additional compaction required of material in a particular part of the project site made necessary by reason of a direction given by Fluor that compaction be increased from what the parties described as “92%” to “98%”.

125. [216]

     MacDow had previously certified an amount in favour of HPL, again on a “provisional or on account basis only” for extra over compaction of $8,129,232.10.

126. [217]

     During February 2013 Fluor disputed whether claims made by HPL as to the quantity of rippable rock removed by it was justified by survey.

127. [218]

     On 15 February 2013, representatives of MacDow met with representatives of Fluor. An email later that day stated that:

128. [219]

     The author of that email expressed the view that Fluor was “back tracking” and that “this will be an item that will not be solved on site and will finish in Dispute”.

129. [220]

     Also on 15 February 2013, Fluor wrote to MacDow referring to photographs taken of the relevant part of the site and stating:

130. [221]

     On 17 February 2013, Mr Foxwell sent Mr Mills an email saying that “we have met with Fluor three times in the past two days and don’t appear to be able to get to the bottom of the issue”. In that email Mr Foxwell speculated that Fluor “are running out of money and are trying to dispute all items wherever they can”.

131. [222]

     On the same day, Mr Harris sent Mr Frith an email saying, in relation to rippable rock, that “Fluor’s position is one of complete rejection of the merits of the claim”.

132. [223]

     Mr Mills also said in cross-examination that he had attended a meeting with representatives of Fluor at which “Fluor said there was an awful lot of rock claimed that they didn’t believe had been done, but they would look into it.”

133. [224]

     Whether or not Mr Foxwell’s speculation about Fluor’s motivation reflected the true position, the fact was that Fluor was disputing its obligation to make any payment in respect of MacDow’s claim on Fluor arising from HPL’s claim on MacDow for rippable rock.

134. [225]

     MacDow was also of the view that HPL’s claims were not supported by survey evidence.

135. [226]

     Thus, Mr Foxwell said in cross-examination that “there was no evidence provided” and that “we couldn’t substantiate what they had provided to us”.

136. [227]

     Mr Foxwell agreed that “HPL was encountering rippable rock” but said:

137. [228]

     Mr Foxwell disagreed that MacDow had no “additional information available as to the quantities of rippable rock” when it made the assessment in Payment Certificate 16 as compared to when it had originally and provisionally certified the payment. He said:

138. [229]

     The issue that MacDow had with HPL in relation to extra over compaction arose from an approach that Mr Reed made to Fluor about this issue in which MacDow contended that Mr Reed had provided Fluor with what Mr Foxwell described in an email to Mr Mills dated 4 March 2013, to which I will return, as “commercial confidential and privileged information”.

139. [230]

     In his affidavit Mr Foxwell explained:

140. [231]

     Mr Foxwell was referring to an email he sent to Mr Jim Connor, a Project Manager at MacDow, on 1 February 2013 in which Mr Foxwell said:

141. [232]

     Mr Foxwell gave evidence about this email in his affidavit. That evidence was not objected to and Mr Foxwell was not challenged about it.

142. [233]

     In his affidavit, Mr Reed disputed that he had “told” Fluor at what rate MacDow was paying HPL for compaction but agreed that he had discussed the compaction rate with Mr Foxwell in the presence of Mr Dickinson from Fluor. Mr Reed asserted that Mr Dickinson said, evidently in relation to those rates, “that seems reasonable”. Mr Foxwell’s email to Mr Connor suggests Fluor had second thoughts about that. In any event, Mr Reed did not dispute that he had discussed the rates that MacDow was paying HPL for compaction in Mr Dickinson’s presence.

143. [234]

     Evidently Mr Foxwell believed that Mr Reed’s approach to Fluor bespoke a breach by HPL of cl 3.6 of the Contract and, as documents to which I will refer reveal, provided a basis for MacDow to de-certify the amount previously certified by MacDow for extra over compaction.

144. [235]

     Clause 3.6 of the Contract provided:

145. [236]

     In closing submissions, Senior Counsel for MacDow, in effect, accepted that cl 3.6 of the Contract did not in fact provide a basis for MacDow to “retract all previous payments” for extra over compaction and that Mr Foxwell was mistaken in his belief that cl 3.6 had this effect.

146. [237]

     However, Mr Foxwell was not challenged about these matters in cross-examination. In particular, it was not put to Mr Foxwell in cross-examination that he had no genuine belief that HPL had acted in breach of cl 3.6 nor that such a belief provided a justification to “de-certify” the previously certified amounts for extra over compaction.

147. [238]

     Mr Mills suggested to Mr Foxwell that he prepare Payment Certificate 16 on alternative bases.

148. [239]

     The first, which Mr Foxwell ultimately described as “Option 1” was the “removal” of amounts provisionally paid by MacDow to HPL for rippable rock and extra over compaction that had not been certified by Fluor to MacDow.

149. [240]

     The second, “Option 2”, was to leave in “MacDow assessed values for changes in compaction requirements and rippable rock claims [that] we consider Fluor will eventually pay” [40] or “removal of all previously overclaimed amounts but leaving in payment in relation to compaction and rippable rock”. [41]

150. [241]

     In cross-examination, Mr Mills said:

151. [242]

     On 4 March 2013, Mr Foxwell sent Mr Mills an email:

152. [243]

     As I discuss later, in final submissions HPL placed great reliance on the passage I have emphasised in this email. However, during cross-examination, Mr Foxwell was asked no questions about it.

153. [244]

     Mr Mills denied that he had instructed Mr Foxwell “to produce a negative assessment” and said, “I didn’t know what the answer would be” although “I knew there would be a deduction from what had already been certified in terms of some of the items”.

154. [245]

     Mr Foxwell also denied that Mr Mills had “told” him to “remove from the Payment Certificate any amounts for extra over compaction and rippable rock which Fluor had not certified.”

155. [246]

     I see no reason to disbelieve this evidence. Both Mr Mills and Mr Foxwell impressed me as careful and truthful witnesses. No submission was made to the effect that I should not accept their evidence.

156. [247]

     In the 4 March 2013 email, Mr Foxwell then set out “Option 1 Assessment” and “Option 2 Assessment”.

157. [248]

     In relation to the Option 1 Assessment, and as to extra over compaction, Mr Foxwell said:

158. [249]

     Thus, under the Option 1 Assessment, two matters were proposed to be “removed”: “previously overclaimed amounts" and payments MacDow had made to HPL in relation to extra over compaction, provisionally and on account [44] but that had “yet to be agreed with Fluor”. The spreadsheets identified in the relevant paragraph of Mr Foxwell’s affidavit show that he, or someone at MacDow, conducted a detailed analysis of the amounts involved in each of these categories.

159. [250]

     The reason Mr Foxwell made these deductions was, evidently, because of an assessment made by MacDow that HPL had “over claimed” certain amounts and because of the, perhaps related, provision by HPL to Fluor of the “commercial, confidential and privileged information” to which Mr Foxwell referred in his email which, as I have set out above, related to the rates that MacDow was paying HPL for extra over compaction.

160. [251]

     As I have set out above, in his affidavit Mr Foxwell spoke of HPL’s “attempt to discuss its [extra over] compaction claim directly with Fluor” and, in the immediately succeeding paragraph, said that “Fluor disputed the amount claimed by [MacDow] and the basis for its calculation”, suggesting that it was HPL’s approach to Fluor which had caused Fluor to dispute MacDow’s claim. Mr Foxwell was not cross-examined about these matters.

161. [252]

     As to rippable rock Mr Foxwell said:

162. [253]

     In his affidavit Mr Foxwell explained:

163. [254]

     Again, these matters were not explored in cross-examination with Mr Foxwell. However, the combination of these two statements by Mr Foxwell, together with the evidence he gave in cross-examination, suggests that Mr Foxwell had proposed that MacDow deduct, from amounts paid by MacDow to HPL provisionally and on account for rippable rock, the amounts that Fluor asserted were not justified by survey and which MacDow also could not confirm from survey material available to it or by its enquiries of HPL’s survey team. [45]

164. [255]

     Again, the material to which Mr Foxwell referred in his affidavit dealing with this shows that a very precise calculation was performed by MacDow about this.

165. [256]

     In relation to the Option 2 Assessment, Mr Foxwell simply said:

166. [257]

     Payment Claim 16 reveals that someone within MacDow decided to adopt Mr Foxwell’s Option 1. Mr Foxwell said that he did not make the decision and that he did not know who did. Mr Mills said he believed that either Mr Roberts or Mr Frith made the decision. HPL submitted that it was likely Mr Frith. However, Mr Robinson was the person who decided to withhold payment of the Certified Amounts arising from Payment Certificates 14A and 15 and said in his affidavit that he “was the only person in MacDow with the authority to make a decision to withhold money”. It thus seems likely that it was Mr Robinson who decided to adopt Option 1.

167. [258]

     In Payment Certificate 16, in addition to the statements at [207] above, MacDow set out the basis of its de-certification of the amounts previously certified for rippable rock and extra over compaction.

168. [259]

     As to rippable rock, Payment Certificate 16 stated:

169. [260]

     This explanation, although terse, seems accurately to reflect the substance of the basis on which Fluor was disputing the claim made by MacDow and thus, in effect, the claim made by HPL concerning rippable rock.

170. [261]

     As to extra over compaction, Payment Certificate 16 stated:

171. [262]

     In Payment Certificate 16, in addition to “de-certifying” the previously scheduled amounts for rippable rock and extra over compaction, MacDow stated:

172. [263]

     MacDow then set out particulars of the claims of the 11 Subcontractors.

173. [264]

     MacDow did not include Egans in this list of subcontractors.

174. [265]

     Although MacDow, twice, expressed its actions here as being by way of set-off, and made reference to cl 18 of the Contract, its position before me was that it sought to justify the conduct described in this paragraph as a retention under cl 25.2 of the Contract.

175. [266]

     In supplementary closing submissions HPL said that it took “no issue with the deduction, by way of agreement, of the $3,862,277 on account of [HPL Subcontractors] … in accordance with the 28 February 2013 arrangement”.

176. [267]

     As I have said, ANZ appointed receivers to HPL on 14 March 2013.

177. [268]

     It is common ground that it was the issue by MacDow of Payment Certificate 16 that prompted the ANZ to appoint receivers to HPL.

178. [269]

     Thus, in MacDow’s closing submissions it was stated:

Termination

1. [270]

   MacDow gave notice terminating the Contract on 18 March 2013. HPL gave a corresponding notice on 21 March 2013.

MacDow completed the works

1. [271]

   MacDow then, primarily using the former HPL Subcontractors, completed the works.

2. [272]

   On 13 December 2013 MacDow gave HPL, then in receivership and administration, notice that the works were complete and submitted to it a “Cost to Complete Claim” pursuant to cl 26.5 of the Contract.

Did Payment Certificate 16 constitute a breach of the Contract?

1. [273]

   Although HPL’s closing submissions ranged more widely, HPL’s “pleaded” [47] case in its Commercial List Statement is that MacDow’s assessment of Payment Claim 16 was made in breach of:

   1. (1)

      the implied term of the Contract to which I have referred at [74] to [78] above that MacDow act in good faith [48] ; and

   2. (2)

      cll 3.5(c), 18.1 and 25.2 of the Contract. [49]

2. [274]

   Thus, in par C98 of its Commercial List Statement, HPL stated:

3. [275]

   As I have said, in written submissions delivered after I reserved judgment, HPL said it took “no issue” with MacDow’s “deductions” of $2,640,622 (being those referable to matters other than rippable rock and extra over compaction) or the deduction of $3,862,277.07 on account of amounts due by HPL to the HPL Subcontractors.

4. [276]

   Also in those submissions, and in response to a written enquiry from me [50] as to the basis on which the closing oral submissions to which I refer at [286] below were put, HPL contended, incorrectly, that its pleaded case was “that PC 16 was not determined reasonably and in good faith”.

5. [277]

   HPL added, parenthetically:

6. [278]

   It is far too late for HPL to seek to amend its case this way.

7. [279]

   I accept MacDow’s submission:

8. [280]

   I decline to give HPL the leave it seeks.

9. [281]

   In par C102 of its Commercial List Statement, HPL contended that by reason of these matters, MacDow acted in breach of the implied terms to form opinions and exercise powers under the Contract reasonably and in good faith [51] and in breach of cll 3.5(c), 18.1 and 25.2 of the Contract.

10. [282]

    In closing, HPL did not direct submissions to the proposition that the manner in which MacDow dealt with Payment Certificate 16 was a breach of any of cll 3.5(c), 18.1 or 25.2 of the Contract, and I cannot see how any such proposition could be maintained.

11. [283]

    Rather, albeit only in a footnote and without elaboration, HPL contended in closing that MacDow’s conduct constituted a breach of cl 10.2 in Part B of the Contract. This is not an allegation made in HPL’s Commercial List Statement and is for that reason one not open to HPL. In any event, cl 10.2 deals with the question of the constitution of interim payments and is subject to the important qualification allowing MacDow to “take into account” any dispute with or withholding by Fluor. For the reasons I develop below, it provides a basis on which MacDow’s actions in relation to Payment Certificate 16 can be contractually justified, rather than a basis upon which to impugn them.

12. [284]

    As to the allegation that MacDow acted otherwise than in good faith, apart from a general submission that “the negative certification [in Payment Certificate 16] was unreasonable and in breach of MacDow’s obligations to fairly and reasonably value HPL’s work”, MacDow’s closing written submissions do not address the question of whether MacDow acted otherwise than in good faith. The expression “good faith” does not appear once in that part of HPL’s written submissions directed to the detail of MacDow’s actions relating to Payment Certificate 16.

13. [285]

    Rather, HPL’s submissions were there directed to the alleged lack of justification, by reference to the express terms of the Contract, for MacDow’s de-certification of the amounts previously certified for rippable rock and extra over compaction.

14. [286]

    However, in oral closing submissions, Senior Counsel for HPL submitted that MacDow’s decision recorded in Payment Certificate 16 was:

15. [287]

    These are grave allegations. But they do not form part of the allegations made in the Commercial List Statement at par C98.

16. [288]

    The submissions appear to be based primarily on Mr Foxwell’s statement in his 4 March 2013 email to Mr Mills that “we have been forced to produce a negative assessment”. [52]

17. [289]

    Mr Mills, in response to a question from me, denied that he was “trying to engineer a nil figure”, that Payment Certificate 16 was “a device used to apply pressure to HPL” and that it did not “really reflect what [MacDow] thought was due”.

18. [290]

    Mr Mills responded:

19. [291]

    But it was not put to Mr Foxwell, the author of the 4 March 2013 email on which HPL placed such reliance, that his formulation of “Option 1 Assessment”, ultimately reflected in Payment Certificate 16, was designed and intended to have the result the subject of Senior Counsel’s submissions. In particular, Mr Foxwell was not asked what he meant when he said in his email that “we have been forced to produce a negative assessment”. All that was put to Mr Foxwell was that his decision “to de-certify amounts for rippable rock and extra over compaction was because Mr Mills told you to”, a proposition which Mr Foxwell denied. I accept that denial.

20. [292]

    In those circumstances, I do not think it was open to HPL to put the case this way.

21. [293]

    I propose to deal with HPL’s contentions concerning Payment Certificate 16 in accordance with its case as set out in its Commercial List Statement.

22. [294]

    HPL made no submissions in support of this allegation.

23. [295]

    There is no evidence that MacDow made any such decision. And the evidence shows that MacDow regarded HPL’s performance of the Contract as being far from satisfactory. That opinion was very clearly expressed in Mr Robinson’s two emails to Mr Reed on 15 February 2013. [53]

24. [296]

    HPL submitted that when calculating Payment Certificate 16, MacDow was motivated by an “underlying cash flow preservation imperative” and drew attention to an email exchange between Mr Walker and Mr Rattray on 6 March 2013.

25. [297]

    Mr Walker wrote to Mr Rattray:

26. [298]

    Mr Rattray replied:

27. [299]

    I am not persuaded that this isolated exchange is sufficient to establish that MacDow made a commercial decision of the kind alleged by HPL. Mr Rattray’s remark appears to be little more than an aside. After all, as was pointed out on behalf of MacDow in closing submissions, the payment from Fluor of which Mr Walker spoke was expected within two days.

28. [300]

    More importantly, Mr Robinson gave clear evidence that MacDow had no policy of only paying HPL when it received payment from Fluor. Mr Robinson said:

29. [301]

    Mr Foxwell said in cross-examination that there was “definitely not” any policy that “if we didn’t get paid, we wouldn’t pay”.

30. [302]

    I accept that evidence. HPL has not established that MacDow made the commercial decision alleged.

31. [303]

    In any event, as I have set out earlier, by reason of cl 10.2 in Part B of the Contract, MacDow was entitled to “take into account” a dispute with or withholding by Fluor when considering, amongst other things, the value of the work effected to date by HPL. It could not be said that MacDow was acting otherwise than in good faith if it was, in the particular circumstance, “taking into account” such matters.

32. [304]

    HPL did not make any submission in closing that MacDow had made a commercial decision not to pay HPL otherwise than for “critical” works. MacDow had no obligation to make payments to the HPL Subcontractors, although it was entitled to do so by reason of cl 3.5(c) of the Contract. Any decision by MacDow only to exercise its power under cl 3.5(c) by making payments to critical HPL Subcontractors could hardly be said to bespeak want of good faith on its part.

33. [305]

    Although HPL did not develop any submission in closing directed to this part of its pleaded case, the evidence I have set out above shows that, in relation to rippable rock, Fluor communicated to MacDow its view that it was not satisfied that HPL had done the work it contended it had done. For example, as I have set out above, Fluor contended that photographic evidence did not “support” what HPL (and MacDow) were saying about the volume of rock that HPL had removed.

34. [306]

    Mr Foxwell’s email to Mr Mills of 4 March 2013 does suggest that his Option 1 Assessment to remove “all payments made for Rippable Rock” was a direct response to these communications.

35. [307]

    The evidence shows that this decision was based upon MacDow’s assessment that HPL had not provided a justification for the volume of rock that it said it had processed. As Mr Foxwell said in his affidavit, MacDow had not done its own survey of the quantity of rock claimed by HPL and could not verify what HPL claimed by reference to surveys carried out by Fluor. Nor could MacDow obtain comfort by reference to the surveys carried out by HPL, as discussions with HPL’s “survey team” showed that those surveyors had been told by HPL “just to pick a line in the fill” and “say that everything below that was rippable rock”.

36. [308]

    This no doubt explains the reference made by MacDow in Payment Certificate 16 itself to “ambiguities” in HPL’s re-survey.

37. [309]

    It is true that Mr Foxwell said, in his 4 March 2013 email to Mr Mills, that under the Option 1 Assessment MacDow would adjust “the quantum within HPL’s claim to suit”. Mr Mills agreed that it appeared Mr Foxwell was proposing to make “an adjustment to suit the position Fluor had taken under its contract with [MacDow]”. Mr Foxwell was not asked about this.

38. [310]

    But in substance what Mr Foxwell was proposing, and what MacDow ultimately did, was to do no more than “take into account”, as it was entitled to do under cl 10.2 in Part B of the Contract, Fluor’s “dispute” or “withholding” when assessing the amount “to be paid” to HPL and the value of the works executed by HPL to date.

39. [311]

    As MacDow submitted:

40. [312]

    I am unable to see how it could be concluded in these circumstances that MacDow was acting otherwise than in good faith.

41. [313]

    Seen in the context of the chapeau to par C98, this allegation is that the alleged absence of a reasonable basis was such as to bespeak a want of good faith.

42. [314]

    The particularisation of this allegation in C98(c) by reference to deductions on account of HPL Subcontractors appears to be directed to the withholding by MacDow of the Certified Amounts, to which I return below. It cannot be directed to the $3,862,277.07 referred to at par 9 of Payment Certificate 16 because, as I have said, HPL takes “no issue” with that deduction. [54]

43. [315]

    HPL’s contention that MacDow “believed that more than $7.75 million was due or would be due to HPL” is based on a statement made by Mr Mills in his 5 March 2013 email to Mr Frith, Mr Walker and others that:

44. [316]

    This may well have been Mr Mills’ belief but, as I have said, Mr Mills was not a director or employee of MacDow and had no authority to speak on MacDow’s behalf. Any opinion expressed by Mr Mills cannot be taken to have been an opinion expressed on behalf of MacDow. Nor can it be seen to reflect what MacDow “believed”. In any event, as Mr Mills acknowledged in cross-examination, the opinions he had earlier expressed in his 5 March 2013 email were, ultimately, not accepted by MacDow.

45. [317]

    There is thus no substance in this contention. It was withdrawn by HPL in written submissions delivered after I reserved judgment and following an enquiry from me as to its basis.

46. [318]

    For those reasons I am not persuaded that HPL has established that MacDow made the assessment recorded in Payment Certificate 16 otherwise than in good faith; particularly in circumstances where it was not put to Mr Foxwell that he made the assessment reflected in the “Option” contained therein otherwise than in good faith.

47. [319]

    Indeed, my conclusion is that MacDow was entitled under cl 10.2 in Part B of the Contract to “take into account” the matters raised by Fluor in relation to both rippable rock and extra over compaction. Fluor was “disputing” the claims HPL had made on MacDow, and thus that MacDow was making on it in respect of both of these matters and was “withholding” payment to MacDow on account of these matters. That entitled MacDow to reconsider and reverse the “provisional” and “on account only” payments that it had made to HPL in relation to both rippable rock and extra over compaction.

Was MacDow entitled to rely on cl 25.2 and withhold payment of the Certified Amounts (the $5,836,837.63 in Payment Certificate 14A and the $7,898,918.42 in Payment Certificate 15) and the $3,862,277.07

1. [320]

   MacDow retained and did not pay HPL three amounts:

2. [321]

   These amounts total $17,598,033.12.

3. [322]

   As to the third of the figures comprising the $17,598,033.12, I have recorded that HPL takes “no issue with the deduction, by way of agreement, of the $3,862,277 on account of [HPL Subcontractors] … in accordance with the 28 February 2013 arrangement”.

4. [323]

   Indeed, for the reasons I have set out, the 28 February 2013 Agreement appears to be an answer to HPL’s claim in respect of the entire $17,598,033.12.

5. [324]

   Although MacDow made reference to cl 18.1 in its Payment Schedule of 25 February 2013 [55] and in Payment Certificate 16 [56] and, in those documents, expressed itself as “setting off” amounts owing to HPL Subcontractors against monies claimed by HPL in its Payment Claims, the question is, as I have said, whether MacDow was entitled to “retain” these monies in accordance with cl 25.2 of the Contract. This is in fact what Mr Robinson stated in terms in his emails to Mr Reed on 15 February 2013 [57] and appears to be what Mr Mills alluded to in the answer he gave in cross-examination that I have recorded at [290] above, that the first scenario he proposed that Mr Foxwell adopt “reflected where the real value was on the project if we listened to where Fluor were at that time”.

6. [325]

   Turning to the elements of cl 25.2, there is no doubt that throughout the period from December 2012 to March 2013 HPL was in breach of its obligations under cl 3.5(c) to pay all of the HPL Subcontractors. Not only that, HPL was, at that point, unable to pay them.

7. [326]

   I am also satisfied that MacDow faced a “contingent” loss or expense in that it was receiving numerous demands from HPL’s Subcontractors many of whom were threatening to leave the site if not paid. MacDow was thus, as a practical matter, faced with a contingency of having itself to pay HPL’s Subcontractors in order to retain their services on the site and in order to ensure that work progressed on the site. Not only that, but MacDow faced the very real prospect, as ultimately happened, of having to step in and complete the work, possibly at greater expense than it was obliged to pay HPL (as it contends actually happened).

8. [327]

   Mr Robinson made these matters clear to Mr Reed in his emails of 15 February 2013. [58] In those emails Mr Robinson stated that:

9. [328]

   As to whether the amount that MacDow retained was that which was “reasonably required” to meet that contingent loss or expense, for the reason I have explained above, it was not necessary for MacDow to identify which particular retained sum related to which particular breach by HPL of the Contract. MacDow did have to show that the amount retained related to a contingency arising from or in connection with HPL’s breach of the Contract. There can be no doubt about that in this case. MacDow’s contingent loss expense arose directly from HPL’s inability to comply with its obligations under the Contract.

10. [329]

    As to the calculation of the “reasonably required” amount, Senior Counsel for McDow said in closing oral submissions:

11. [330]

    It may be overstating things to say that a “back of an envelope” calculation was sufficient but a decision to retain monies under cl 25.2 would necessarily have to be made on a broad-brush basis. What MacDow did was to withhold or retain the Certified Amounts, that is the amounts certified in Payment Certificates 14A and 15 and, in the case of Payment Certificate 16, an amount calculated by reference to 11 identified HPL Subcontractors.

12. [331]

    As I have said, the total of these amounts was $17,598,033.12.

13. [332]

    As part of its closing submissions, MacDow provided a lengthy document [59] called “Note on Arithmetic” which contained a detailed analysis of MacDow’s contentions as to the amount owing by HPL to the HPL Subcontractors as at 1 February, 15 February, 28 February and 8 March 2013.

14. [333]

    After I reserved judgment, HPL provided a response to that, to which MacDow provided a reply. [60]

15. [334]

    MacDow’s documents addressed, in great detail, the question of what HPL allegedly owed the HPL Subcontractors on a subcontractor by subcontractor basis. HPL responded to some, but not all, of that detail.

16. [335]

    As for the position as at 8 March 2013, MacDow’s reply note contended that HPL owed its subcontractors $17,531,598.15 whereas HPL contended the figure was $5,377,113.16; a difference of $12,154,484.99.

17. [336]

    One reason for the difference was that MacDow included, and HPL excluded, Egans as an HPL Subcontractor to which HPL owed money: $9,230,221.40. For the reasons I have set out, my conclusion is that MacDow was entitled to be sceptical about Mr Egan’s assertion that, notwithstanding what his Chief Financial Officer had earlier said, nothing was then owing to Egans. [61] It was certainly reasonably open to MacDow to take this sum into account, for the purposes of cl 25.2 of the Contract, when deciding how much it was reasonably required to withhold for the purposes of cl 25.2. Taking the $9,230,221.40 into account, the difference between MacDow’s figure and HPL’s figure is $2,924,263.59.

18. [337]

    Further, HPL did not dispute MacDow’s analysis of the amount owing to 35 of the 65 HPL Subcontractors as at 8 March 2013, to whom a total of $2,696,185.89 was owing.

19. [338]

    As to the remaining 30 HPL Subcontractors (one of which was Egans), 17 were included in Mr Field’s 4 March 2013 spreadsheet [62] as being HPL Subcontractors to whom money was owed, 22 [63] were the subject of an arrangement that Mr Field described in his affidavit and in cross-examination between Mr Reed and Mr Egan whereby HPL agreed to pay a number of Egans’ own creditors and several were not the subject of material on which HPL relied in its response to MacDow’s note but which were not in evidence before me.

20. [339]

    The position is similar if considered at 28 February 2013. As at that date, MacDow had retained the Certified Amounts, a total of $13,735,756.05.

21. [340]

    On MacDow’s calculations, the amount owing by HPL to the HPL Subcontractors as at 28 February 2013 was $14,202,239.99. HPL’s calculation was $2,737,328.31, a difference of $11,464,911.68.

22. [341]

    However, once again, HPL did not include Egans as one of its creditors. As I have said, MacDow is entitled to be sceptical about Mr Egan’s change of heart about whether HPL owed Egans any money. As at 28 February 2013, the last word from Egans was its Chief Financial Officer’s letter of 22 February 2013 asserting that $8,391,110.36 was owing. If that figure is taken into account as in fact owing by HPL, the difference between MacDow’s and HPL’s figures as at 28 February 2013 is reduced to $3,073,801.32.

23. [342]

    Further, HPL did not dispute MacDow’s analysis of the amount owing to 28 of the 61 HPL Subcontractors as at 28 February 2013, to whom a total of $1,847,896.66 was owing.

24. [343]

    As to the remaining 33 HPL Subcontractors (one of which was Egans), 15 were included in Mr Field’s 4 March 2013 spreadsheet as being subcontractors to whom money was owed, and 21 [64] the subject of the arrangement between Mr Reed and Mr Egan to which I have referred at [338] above. Again, several were the subject of material on which HPL relied in its response to MacDow’s note but which were not in evidence before me.

25. [344]

    I was not invited by the parties, and do not propose myself, to engage in a subcontractor by subcontractor, invoice by invoice, analysis of precisely how much HPL in fact owed its subcontractors as at 8 March 2013. However, based on the figures I have set out, I am comfortably satisfied that, for the purposes of cl 25.2 of the Contract, it was reasonably open to MacDow to form the opinion that the amount it reasonably required to retain to meet the contingency that it might itself have to pay the HPL Subcontractors or might otherwise have to meet contingent damage, costs or expenses by reason of HPL’s failure to comply with its obligation under cl 3.5(c) to pay those subcontractors, including possibly having to take over the works, was the amount it did retain: $17,598,033.12.

26. [345]

    Overall, I am satisfied that the amount that MacDow retained was reasonable and thus that MacDow’s retention of that sum did not constitute a breach by it of the Contract.

27. [346]

    In any event, as I have said, to the extent that MacDow retained sums prior to 28 February 2013, that is the amounts referred to in Payment Certificates 14A and 15, it appears that the effect of the 28 February 2013 Agreement was that HPL waived any entitlement to rely, or is otherwise precluded from relying upon, any breach of Contract that such retention might have represented. [65]

MacDow not in breach of the Contract

1. [347]

   For these reasons HPL has not established any breach of the Contract by MacDow.

2. [348]

   MacDow was entitled to terminate the Contract if a receiver was appointed to HPL. [66]

3. [349]

   ANZ appointed receivers to HPL on 14 March 2013. As I have set out above, it was motivated to do so by MacDow’s decision, evidenced by Payment Certificate 16, to de-certify the amounts paid on a provisional basis in respect of rippable rock and extra over compaction. As I have found that MacDow was entitled to make the decision evidenced by Payment Certificate 16, or at least that HPL has not shown that MacDow acted otherwise than in good faith in doing so, the appointment by the ANZ of receivers was itself a basis upon which MacDow was entitled to terminate the Contract.

4. [350]

   MacDow was also entitled to terminate the Contract if HPL committed a “substantial breach” of the Contract and did not remedy the breach within 14 days of MacDow serving a notice specifying the default and stating its intention to terminate the Contract. [67]

5. [351]

   HPL’s failure to pay the HPL Subcontractors throughout December 2012 to March 2013 was undoubtedly a “substantial breach” of the Contract. I have referred above to the critical importance of HPL paying the HPL Subcontractors in compliance with cl 3.5(c) of the Contract. [68]

6. [352]

   On 16 February 2013, MacDow gave HPL notice of its intention to terminate the Contract on the basis of, amongst other things, HPL’s failure to pay the HPL Subcontractors. HPL did not, and was not able to, remedy that breach.

7. [353]

   As I have found that MacDow was not itself in breach of the Contract either by retaining the amounts referred to in Payment Certificates 14A, 15 and 16 nor by reaching the decision otherwise recorded in Payment Certificate 16, HPL has not established that its breach of cl 3.5(c) was caused by MacDow’s wrongful conduct.

8. [354]

   MacDow was also entitled to terminate the Contract if HPL became insolvent. [69]

9. [355]

   It is common ground that from 25 February 2013 HPL was insolvent.

10. [356]

    HPL submitted, however, that MacDow was not entitled to rely on HPL’s insolvency to terminate the Contract for two reasons.

11. [357]

    First, HPL contended that its insolvency was caused by MacDow’s breaches of the Contract. I have found that there were no such breaches.

12. [358]

    Second, with the knowledge of HPL’s insolvency, MacDow affirmed the Contract by participating in the 28 February 2013 meeting and thereafter issuing Payment Certificate 16.

13. [359]

    HPL adopted the curious position of submitting that MacDow should have known of its insolvency, and thus that it was in fact insolvent, from the time “when it decided not to pay HPL”, [70] that is between 13 February and 18 February 2013; whereas its insolvency expert, Mr Tony Samuel, had opined that HPL was not insolvent until 25 February 2013.

14. [360]

    I need not attempt to resolve that apparent paradox because I am not satisfied that the evidence on which HPL relied showed that MacDow had sufficient knowledge of HPL’s financial position to justify a conclusion that it affirmed the Contract knowing HPL was actually insolvent.

15. [361]

    MacDow was certainly concerned about HPL’s financial position from mid February 2013.

16. [362]

    On 13 February 2013, Mr Mills, who as I have emphasised was not a director or employee of MacDow, wrote to Mr Robinson and others stating, “as we have not paid HPL I doubt it will be able to pay its creditors” and that “I can come up with reasons why we suspect HPL’s insolvency”.

17. [363]

    Further, as I have mentioned, on 15 February 2013 Mr Robinson wrote to Mr Reed saying that MacDow had “grave concerns” about “your solvency”. [71]

18. [364]

    And in his email of 18 February 2013 to Mr Robinson, to which I referred at [143] above, Mr Mills said:

19. [365]

    But these statements fall far short of bespeaking MacDow’s knowledge that HPL was actually insolvent.

20. [366]

    As I have said, it is common ground that HPL was insolvent from 25 February 2013.

21. [367]

    As I have held that MacDow’s decisions to retain the Certified Amounts and to make the assessments referred to in Payment Certificate 16 were not in breach of its obligations under the Contract, it follows that there was no conduct of MacDow, in breach of the Contract, that caused HPL to become insolvent on those dates.

22. [368]

    There was debate before me as to whether, as MacDow contended, HPL was in any event insolvent from 31 October 2012.

23. [369]

    HPL did not contend that MacDow acted in breach of the Contract prior to 1 February 2013. HPL thus accepted that, subject to the question of waiver, [72] MacDow was entitled to terminate on the basis of insolvency alone, if established prior to that date, whether or not it thereafter acted in breach of the Contract.

24. [370]

    Thus, the critical question was, at this point of the analysis, whether HPL was insolvent prior to 1 February 2013.

25. [371]

    As I have concluded that MacDow was entitled to terminate the Contract on other bases, it is not necessary for me to resolve this dispute.

26. [372]

    However, in deference to the close attention that the parties paid to the issue, I will deal with it, albeit briefly.

27. [373]

    The question of insolvency is, of course, governed by s 95A of the Corporations Act 2001 (Cth), the test being whether HPL was able to pay its debts as and when they became due and payable.

28. [374]

    MacDow’s insolvency expert, Ms Robyn McKern, agreed with HPL’s expert, Mr Samuel, that HPL’s liquidity position was the “key driver”, but also had regard to the indicia of insolvency summarised in Australian Securities and Investments Commission v Plymin (No 1). [73] Those indicia include such matters as continuing losses, overdue taxes, poor relationship with financiers, access to alternative funds and the like. Mr Samuel agreed that the insolvency indicators to which Ms McKern referred were appropriate and did not suggest that Ms McKern’s application of that approach was flawed in any way.

29. [375]

    The difference in the methodology adopted by Ms McKern and Mr Samuel was, in substance, one of emphasis.

30. [376]

    Ms McKern and Mr Samuel agreed that HPL was insolvent as at 31 October 2012.

31. [377]

    Mr Samuel accepted that HPL was “possibly” insolvent in November and December 2012. He stated that this was dependent upon whether creditors of HPL should be assessed as being payable within 30 days or 60 days.

32. [378]

    In closing submissions, HPL accepted that its position should be assessed upon the basis that its creditors were payable within 30 days. It would follow from this that Mr Samuel’s view was that HPL was insolvent in November and December 2012.

33. [379]

    However, Mr Samuel opined that HPL was solvent in January 2013.

34. [380]

    In their joint report, Ms McKern and Mr Samuel summarised their differences in a table that they described as being the “Bridge between McKern and Samuel”.

35. [381]

    A copy of that table (omitting the part prepared upon the assumption that HPL’s trade liabilities were not payable until 60 days or more) follows:

36. [382]

    In the table, Ms McKern’s “Calculated Liquidity Surplus/(Deficiency)” for HPL is set forth for 31 October 2012 ($3.864 million), 30 November 2012 ($3.735 million), 31 December 2012 ($3.115 million) and 31 January 2013 ($6.203 million).

37. [383]

    Below that analysis are Mr Samuel’s “adjustments” to Ms McKern’s assessments on the various bases indicated. Taking into account all of those adjustments, Mr Samuel agreed that HPL had a liquidity deficiency at 31 October 2012 of $3.394 million, at 30 November 2012 of $458,000 and at 31 December 2012 of $397,000.

38. [384]

    The table reveals however that Mr Samuel’s opinion was that, as at 31 January 2013, HPL had a liquidity surplus of $803,000.

39. [385]

    The table also reveals that the two adjustments that Mr Samuel made from Ms McKern’s 31 January 2013 figure of a $6.203 million of liquidity deficiency were to “add back” the $5.837 million the subject of Payment Certificate 14A and a further amount concerning the “rent obligations” of $1.157 million.

40. [386]

    The question of whether it was appropriate for Mr Samuel to, in effect, add back to Ms McKern’s 31 January 2013 liquidity deficiency figure of $6.203 million the $5.837 million the subject of Payment Certificate 14A depends on whether payment of that amount was due on either 1 or 6 February 2013 as contended by HPL, or on 13 February 2013 as contended by MacDow.

41. [387]

    As I have set out above, although HPL asserted in its submissions that payment of the amount referred to in Payment Certificate 14A was due on either 1 or 6 February 2013, it did not develop any submissions as to why MacDow’s stated position at the time was wrong; apart from referring to Mr Mills’ assertion that this involved a “generous” interpretation of MacDow’s contractual obligations (a matter about which he had no authority, or indeed qualification, to opine).

42. [388]

    HPL has thus failed to show that Mr Samuel was justified in adding back this figure.

43. [389]

    In any event, I see a real difficulty with Mr Samuel’s decision to also add back the $1.157 million concerning the “rent obligations”.

44. [390]

    The Reed Group held a 50% share in a commercial building in North Sydney held through a company Erolcene Pty Ltd. The other 50% share of that building was owned by an unrelated company, Claijade Pty Ltd. Erolcene and Claijade held their interests in the North Sydney property as tenants in common. After Reed Constructions collapsed, the lease of three floors of the building from Erolcene and Claijade to Reed Constructions was novated to Heavy Plant Machinery Pty Ltd, another company within the Reed Group.

45. [391]

    Thus, HPL was not the lessee of the three floors in the North Sydney building. Unsurprisingly, the directors of Claijade gave unchallenged evidence that they did not regard HPL as owing rent under the lease as novated to Heavy Plant Machinery. Those directors also gave unchallenged evidence that they had no intention of causing Claijade to commence proceedings against Heavy Plant Machinery to recover rental arrears to terminate the lease.

46. [392]

    However, as MacDow pointed out, this appears to ignore the commercial reality of the situation whereby, although Heavy Plant Machinery undoubtedly had an obligation to pay rent, it had no capacity to do so. The rent was in fact being paid by HPL, being the only company in the Reed Group with the means to generate funds to do so.

47. [393]

    Significantly, HPL recorded a liability to Erolcene and Claijade for rent in its management accounts.

48. [394]

    For that reason, Ms McKern included an obligation by HPL to pay the rent in her cash flow analysis.

49. [395]

    In cross-examination Ms McKern gave this evidence:

50. [396]

    A short time later Ms McKern said:

51. [397]

    Evidently, the commercial reality was that HPL accepted an obligation to pay the rent and recorded its liability to do so in its accounts. In those circumstances, I prefer Ms McKern’s view that this rent obligation should be taken into account in assessing HPL’s liquidity position. I am thus unpersuaded of the appropriateness of adding back that obligation when assessing, as a matter of practical reality, HPL’s solvency as at 31 January 2013.

52. [398]

    The parties addressed submissions to various other subjects relevant to the question of HPL’s solvency. I need not consider those as my conclusion is that, based upon what I have set out, it is more probable than not that HPL was insolvent at all times from 31 October 2012.

Preference claim

1. [399]

   Alternatively to its claim under the Contract, and in separate proceedings commenced prior to those in which it made that claim, HPL contended that MacDow had received unfair preferences for the purposes of s 588FA of the Corporations Act.

2. [400]

   Section 588FA of the Corporations Act provides:

3. [401]

   HPL contends that MacDow received an “unfair preference” for the purposes of s 588FA by reason of:

4. [402]

   Section 588FA of the Corporations Act applies only to a “transaction” that is an “unfair preference”.

5. [403]

   The expression “transaction” is defined in s 9 of the Corporations Act, in relation to Pt 5.7B, to include a disposition, payment, transfer, obligation incurred or a waiver.

6. [404]

   In closing submissions, HPL accepted that “transaction” did not include an act of retention under cl 25.2 of the Contract. [78]

7. [405]

   I have found that, notwithstanding the use by MacDow of the expression “set-off” at the time, the true characteristic of its conduct in the 25 February 2013 Payment Schedule and in Payment Certificate 16 (so far as concerns the sum of $3,862,277.07) was a retention under cl 25.2 and not a “set-off” of the total amounts referred to in those two documents.

8. [406]

   In any event, as MacDow submitted, the amounts that it paid to HPL under the Contract were paid provisionally and on account of HPL’s final entitlement under the Contract. I cannot see, in those circumstances, how withholding payments pending a final accounting between the parties, could be seen as conferring on MacDow a preference over other creditors.

9. [407]

   As MacDow put:

10. [408]

    Payment Certificate 16 also referred to “Back Charges”. There was no provision in the Contract relating to Back Charges. No evidence was adduced before me as to what constitutes Back Charges and, despite an enquiry I made following reservation of judgment, neither party was able to explain to me exactly what Back Charges were. They appear to be reflected in “contra charges” that HPL deducted from amounts claimed in its Payment Schedules. Consistently with this, MacDow in its closing submissions described Back Charges as an “integer” in calculating the amount of a provisional payment to be made by MacDow to HPL following delivery by HPL of a Payment Claim pursuant to cl 10.1 in Part B of the Contract. The Back Charges were referred to in Schedule D to Payment Certificate 16 and appear to be a running account of some kind, the nature of which was not explained in the evidence. In these circumstances, I am unable to conclude what the Back Charges were nor that MacDow somehow received a preference over other creditors by reason of them.

11. [409]

    HPL has failed to make out its preference claim.

Quantum

1. [410]

   I have concluded that MacDow was entitled to terminate the Contract. Following termination, MacDow completed the works, primarily using the former HPL Subcontractors.

2. [411]

   MacDow seeks to recover from HPL the loss that it alleges it has thereby suffered.

3. [412]

   It is common ground that such damages are to be assessed by reference to cl 26.5 of the Contract, which provided:

4. [413]

   It is also common ground that the clause required a calculation to be made which broadly reflects that which would be done in assessing damages claimable upon a valid termination of a construction contract at common law in accordance with the principles in Robinson v Harman. [79]

5. [414]

   The cost to complete the works is to be determined and assessed against the unpaid balance of the Contract sum. If the cost to complete exceeds the unpaid balance, then HPL owes MacDow the difference. If that cost is less than the Contract sum, then MacDow owes HPL the difference. Consistently with Robinson v Harman, the effect is to place MacDow in the same position, as far as money can, that it would have been in had the Contract been fully performed.

6. [415]

   Against that background, it is agreed that the assessment is to be undertaken by identifying three key amounts:

7. [416]

   The Adjusted Contract Sum is to be deducted from the sum of the Amount Paid to HPL and the Cost to Complete to determine the amount payable to MacDow by HPL or to HPL by MacDow.

8. [417]

   It is MacDow’s position that the result of this calculation will be that HPL owes it some $8.68 million. HPL contends that the result of this calculation is that MacDow owes it some $6.6 million.

9. [418]

   The competing position of the parties in relation to these amounts is set out in the attached table. Attachment - Table

10. [419]

    It is agreed that I should make a decision in relation to the various amounts in dispute, following which the parties will be able to use a “dynamic” workbook in Microsoft Excel prepared by MacDow to calculate the final result.

11. [420]

    The parties have also prepared, at my request, a “Redfern Schedule” setting out, in summary, their contentions in relation to each matter in dispute. I have populated that schedule with my decision in relation to each matter, with references to the paragraphs of these reasons, as attached. Attachment - Quantum Redfern Schedule

12. [421]

    I have endeavoured to deal with all the matters in respect of which the parties were divided. I have not referred to the many matters that, during the course of the hearing, were not pressed or became the subject of agreement.

The Quantity Surveying experts

1. [422]

   HPL and MacDow led evidence from quantity surveyors. HPL’s expert was Mr Stephen Bolt. [80] MacDow’s expert was Mr Paul Roberts. Both are deeply experienced quantity surveyors.

2. [423]

   MacDow made extensive submissions critical of Mr Bolt and, in particular, criticised Mr Bolt for what was said to be his failure to engage with Mr Roberts during the expert conclave.

3. [424]

   MacDow submitted that it was “not necessary for the Court to make any adverse credit findings against Mr Bolt” and accepted that, first, he is “relevantly qualified” and, second, that he did not intend to “mislead either the Court or Mr Roberts”. Nonetheless, MacDow submitted that Mr Bolt “did not always meet the standard required of the independent expert and his evidence should be given less weight than that of Mr Roberts” and that where there was a difference of opinion between the experts, I should prefer the opinion of Mr Roberts.

4. [425]

   As I set out below, there are certain aspects of Mr Bolt’s evidence in respect of which I have some reservations. I will deal with those reservations when I deal with each relevant aspect of the parties’ cases on quantum.

5. [426]

   However, I do not find it necessary to make any global finding about Mr Bolt’s evidence. Nor am I able to reach a conclusion that wherever Mr Bolt’s view was different from that of Mr Roberts, I should prefer that of Mr Roberts, although, as I set out in the details that follow, there are occasions where I have done so.

The Amount Paid to HPL

1. [427]

   Mr Roberts and Mr Bolt agree that MacDow paid HPL an amount of $34,161,801.83.

2. [428]

   Mr Roberts and Mr Bolt disagree concerning the correct GST amount.

3. [429]

   The issue dividing the experts is the application of GST to that part of a $5 million advance payment (“the Advance Payment”) that MacDow made to HPL that had not been offset against HPL’s payment claims at the time the Contract was terminated.

4. [430]

   Appendix G to the Contract provided that HPL “shall be entitled to an advance amount” of $5 million on certain conditions, each of which was satisfied.

5. [431]

   Clause 2.0 in Appendix G provided:

6. [432]

   The Advance Payment was, in effect, a loan paid by MacDow to HPL, to be repaid as set out in that clause.

7. [433]

   In a number of Payment Claims, HPL calculated the total amount of its claim for work done and variations referable to the preceding month, added GST to that amount, and deducted from that gross sum an amount, either $250,000 or $500,000, on account of the Advance Payment.

8. [434]

   In MacDow’s responding Payment Certificates, MacDow expressed an opinion under cl 10.4 in Part B of the Contract as to the amount to be paid for work and variations, calculated GST on this amount, then deducted the Advance Payment amount and certified the total of the difference between the cl 10.4 amount and the Advance Payment amount, plus GST on the former amount.

9. [435]

   HPL then sent MacDow an invoice for the amount so certified, including the amount for GST.

10. [436]

    MacDow paid the invoices in respect of Payment Claims up to Payment Claim 14 but, as I have set out above, did not pay any subsequent invoices.

11. [437]

    HPL thereby repaid $1.25 million of the Advance Payment. The balance of $3.75 million remained unpaid when MacDow terminated the Contract on 18 March 2013.

12. [438]

    MacDow accepts that, so far as concerns the components of the repaid $1.25 million “in this way GST was applied to (the work representing) [the amount] of the Advance Payment which was being repaid” and that “GST on the Advance Payment was therefore effectively applied to the amount deducted when each deduction was made”.

13. [439]

    On receipt of the tax invoices from HPL, MacDow was entitled to claim an input tax credit including “in respect of the amounts of the Advance Payment so deducted”.

14. [440]

    What divides the parties is the manner in which the unpaid portion of the Advance Payment, the $3.75 million, should be treated when calculating the amount paid by MacDow to HPL.

15. [441]

    MacDow’s position was that the entire $3.75 million should be included, whereas HPL contended that a deduction should be made from that $3.75 million to account for the GST that would have been payable on it had the Contract continued.

16. [442]

    Thus, the difference of $340,909.00 between Mr Roberts and Mr Bolt is the GST potentially applicable to the unrepaid $3.75 million.

17. [443]

    In my opinion, MacDow was correct to contend that the amount paid to HPL should be calculated on the basis that there had been no deduction for GST in respect of the unpaid $3.75 million.

18. [444]

    Payment Claim 17 was issued following termination of the Contract and incorporated the remaining amount owing in respect of the Advance Payment; thus treating the entire amount of the Advance Payment as if it had been repaid.

19. [445]

    However, the amount was not in fact repaid, in that MacDow did not issue a Payment Certificate in response to Payment Claim 17, and HPL issued no tax invoice enabling MacDow to claim an input tax credit in relation to the GST that would otherwise have been applicable to the unpaid amount of the Advance Payment.

20. [446]

    HPL has adduced no evidence that it actually remitted GST in respect of the entirety, or indeed any part, of the Advance Payment.

21. [447]

    In those circumstances, in my opinion, Mr Roberts was correct not to deduct the GST component when considering the unpaid amounts of the Advance Payment.

22. [448]

    It is agreed that, if that is so, the correct GST exclusive amount paid to HPL was $34,502,710.82.

MacDow’s Cost to Complete

1. [449]

   The second element in the calculation of MacDow’s damages, to be added to the Amount Paid to HPL, is the Cost to Complete.

2. [450]

   MacDow contends that the Cost to Complete was some $42.9 million. HPL contends that MacDow has not established any reliable figure as the Cost to Complete and that I should allow no sum to MacDow on this account. Alternatively, assuming that submission is not accepted, HPL contends that the Cost to Complete was some $39.8 million.

3. [451]

   MacDow is entitled to an award of damages that will, so far as money can, place it in the same situation, with respect to damages, as if HPL had performed the Contract. [81]

4. [452]

   The general principle concerning proof of damages is:

5. [453]

   By cl 26.5 of the Contract, MacDow was obliged to “ascertain” the Cost to Complete, that is, calculate its damages precisely. It has sought to do so and nominated, to the cent, the figure it contends to be its Cost to Complete.

6. [454]

   This is not a case where MacDow sought to bring a “global claim”, that is, one where it was not sought to attribute any specific loss to a specific breach of contract. [83] Here, as MacDow submitted, there is one single causative event, being the termination of the Contract. Nonetheless, MacDow must show a causal nexus between that breach of right and the whole of the amount it claims.

7. [455]

   MacDow drew attention to the following passage from the current edition of Hudson’s Building and Engineering Contracts: [84]

8. [456]

   The authors referred to the following passages of the New Zealand Supreme Court decision of Fulton v Dornwell [86] in support of those propositions:

9. [457]

   Fulton v Dornwell appears only to have been cited two times in Australia and not in a superior court [88] but, so far as my research has revealed, has not been criticised or doubted.

10. [458]

    However, the principle espoused in Fulton v Dornwell appears to be accepted in the United Kingdom [89] and in New Zealand. [90]

11. [459]

    In the light of that authority, MacDow submitted that:

12. [460]

    HPL did not dispute any of these matters.

13. [461]

    However, the “leeway” [91] thus allowed to a party in MacDow’s position cannot be used to fill gaps in the evidence nor allow the Court to ignore other events that might, separately from HPL’s conduct, have contributed to the Cost to Complete.

14. [462]

    HPL pointed to what it described as the “unexplained disproportion” between the costs incurred by HPL on the project compared to those that MacDow contends it incurred. HPL relied on Mr Foxwell’s evidence that “around 70%” of the total of HPL’s works had been completed by 18 March 2013 and that, as I have found, MacDow paid HPL some $34.5 million for that work. And yet, HPL pointed out, MacDow contends that it had incurred costs of $42.9 million completing the remaining 30% of the work. HPL submitted that, accordingly, the Court “should approach the quantum of MacDow’s [claim] with a great degree of scepticism.”

15. [463]

    I was not assisted by these submissions. The question of MacDow’s Cost to Complete cannot be resolved by reference to such high-level considerations. For all I know, MacDow may have achieved a very profitable deal with HPL when negotiating the rates at which HPL would perform work under the Contract. These matters were not explored in the evidence, and I express no view about them.

16. [464]

    Following its termination of the Contract on 18 March 2013, MacDow engaged the HPL Subcontractors to complete the works on a “do and charge” basis.

17. [465]

    As MacDow submitted, this removed the cost certainty which the Contract provided MacDow. The Contract provided that HPL would be paid for activities on a “rate per activity” basis. Thus cl 14.1 of the Contract provided that MacDow would pay HPL the “Sub-Contract Sum” which comprised the rates in the “Appendix B Pricing Workbook” attached to the Contract. The Schedule of Rates in the Pricing Workbook was subject to remeasure but nonetheless provided MacDow with a level of certainty and left with HPL the risk or opportunity that its actual cost to complete a particular activity were more or less than the compensation provided for by the rate.

18. [466]

    Once the Contract was terminated, MacDow was obliged to engage the HPL Subcontractors and obtain plant and materials at what rates it could, on a “do and charge” basis; thereby exposing MacDow to more uncertainty with respect to costs than was the case under the Contract.

19. [467]

    Mr Roberts said in re-examination:

20. [468]

    If MacDow incurred extra costs by reason of these matters, for the reasons set out at [455] to [459], this is a matter about which HPL cannot complain.

21. [469]

    MacDow commenced the remaining works around 27 March 2013.

22. [470]

    Mr Foxwell was the person primarily responsible for preparing MacDow’s Cost to Complete Claim.

23. [471]

    Mr Foxwell said that:

24. [472]

    Mr Foxwell continued:

25. [473]

    Mr Foxwell deposed to some 3,400 line items of expenses and associated invoices relating to MacDow’s Cost to Complete. Mr Walker also deposed to these matters.

26. [474]

    HPL served Mr Bolt’s first report on 3 March 2022. In that report Mr Bolt considered and opined on each invoice included in the exhibits to Mr Foxwell’s and Mr Walker’s affidavits and included, as an appendix, a fully itemised breakdown of that assessment.

27. [475]

    On 10 May 2022 MacDow served Mr Roberts’ report replying to that of Mr Bolt.

28. [476]

    On 1 July 2022 Mr Bolt made a second report replying to that of Mr Roberts in which he provided a detailed analysis in respect of Mr Roberts’ opinions and subsequent readjustment to his valuation.

29. [477]

    Nonetheless, in conclave with Mr Roberts, Mr Bolt contended, for the first time, that the material adduced by MacDow in support of its Cost to Complete Claim did not take account of six factors, to which I will return, and stated that “there is insufficient information, contained on the invoices [from MacDow’s subcontractors], to accurately assess the impact of [those] factors” on MacDow’s Cost to Complete.

30. [478]

    HPL embraced that opinion and submitted:

31. [479]

    Ultimately, HPL put its position on this point on three bases:

32. [480]

    Otherwise, HPL’s contentions relied on Mr Bolt’s evidence concerning the six factors he identified.

33. [481]

    HPL submitted that, for these reasons, I should conclude that the amount of MacDow’s Cost to Complete was $0. This submission is made in the context of there being no dispute that MacDow, at its own cost, completed the works and where it is obvious that it expended many millions of dollars in doing so. Indeed, as I have said, following a detailed analysis of the granular detail of MacDow’s claim for Cost to Complete, Mr Bolt was, at least until the conclave, able to arrive at a precise figure as his opinion for that Cost to Complete.

34. [482]

    I turn to HPL’s three points.

35. [483]

    I deal with this question below, when considering the fourth of Mr Bolt’s six factors. [92] As I set out below, I do not accept HPL’s submissions on this point.

36. [484]

    On 5 August 2013 MacDow sent to Fluor a document entitled “Request for Reimbursement of Delay and Disruption Costs” claiming some $108.7 million.

37. [485]

    In that letter, MacDow set out in detail its claim for “Delayed and Disruption costs” arising from Fluor “instructions” which had “caused delay and disruption to the [works] arising out of [Fluor’s] late issue of Deliverables (namely, design, material and access)”.

38. [486]

    HPL pointed to assertions made in the letter by MacDow that, amongst other things, its works at the “HUB Compressor Facility” had been delayed and disrupted, that there had been trenching work near that facility involving additional excavation, and that it had received instructions from Fluor to perform various works including “suspension of soil stabilisation and surface finishes in the HUB and Remote areas”.

39. [487]

    HPL submitted that:

40. [488]

    As I have said, Mr Foxwell was the person at MacDow primarily responsible for preparing MacDow’s Cost to Complete Claim.

41. [489]

    Although Mr Foxwell did not, in terms, assert that in setting up the cost codes to which I have referred in MacDow’s “Workbench” system, he took into account any extra costs caused by Fluor’s post-March 2013 requirements, in order for HPL to establish that MacDow had failed to prove its Cost to Complete, it was incumbent on HPL to put that proposition squarely to Mr Foxwell.

42. [490]

    That was not done. Instead, Mr Foxwell was asked:

43. [491]

    Mr Foxwell replied, “in relation to this, no”.

44. [492]

    This question was not directed to the question of whether Mr Foxwell had taken account of any extra costs caused by Fluor. It was focused on two matters. First, the question related only to claims made on Fluor “and paid by Fluor”. It was thus directed to whether or not Mr Foxwell had taken into account, when calculating MacDow’s Cost to Complete, amounts received by MacDow from Fluor. I set out below my conclusions about that matter. [94]

45. [493]

    The question was also directed to money “in respect of the indirect costs”. The “indirect costs” are a component of MacDow’s Cost to Complete and relating to “overheads and management”, which I deal with below. [95]

46. [494]

    I set out below my conclusions in relation to that matter.

47. [495]

    But it was not put to Mr Foxwell that he had failed to take into account any extra costs caused by Fluor’s post-March 2013 requirements.

48. [496]

    In those circumstances, in my opinion, it is not open to HPL to contend that I should find that MacDow has not proved the amount of its Cost to Complete on this basis.

49. [497]

    MacDow accepts that included in its 5 August 2013 letter to Fluor were amounts for MacDow’s overheads and costs of completing HPL’s work (an element on MacDow’s Cost to Complete Claim) and the amounts claimed by HPL against MacDow in these proceedings in respect of Variation 29 (an element of the Adjusted Contract Sum to be deducted from the Cost to Complete). I discuss the question of overheads and Variation 29 below.

50. [498]

    MacDow’s claim against Fluor was resolved by a document dated 5 February 2014 which settled the claim made by MacDow against Fluor on 5 August 2013, together with direct cost weather claims of $13 million and ongoing future delay and disruption claims of $24 million; claims totalling some $145 million.

51. [499]

    The settlement of $45.5 million was comprised of two amounts, being:

52. [500]

    The second amount, the $9 million, represented an amount for an incentive for MacDow to reach a “Milestone Completion Date” that is not relevant to either MacDow’s overheads claim or HPL’s Variation Claim 29.

53. [501]

    The $36.5 million was comprised of two amounts, $17.5 million and $19 million.

54. [502]

    In the Settlement Terms between MacDow and Fluor, the $17.5 million was described as “Settlement Amount (Direct Costs of Delay & Disruption @ 16Jan14 to 28May14).

55. [503]

    The document also provided that MacDow “… releases and discharges … Fluor from all claims arising out [of] facts and circumstances (known or unknown) existing at or preceding 17 January 2014” and that “the releases provided by [MacDow] will not affect [MacDow’s] right to make any claim in relation to facts and circumstances that arise after 17 January 2014.”

56. [504]

    MacDow contended that the release it gave Fluor “was for events which had occurred up until 17 January 2014 and that the release enabled MacDow to make further claims in the event that works were separately impacted by compensable events in the future”.

57. [505]

    On the other hand, HPL contended that the words used by Fluor and MacDow in these documents show that MacDow “received payment for all delay and disruption costs at 17 January 2014 (that is before and up to 17 January 2014) and also forecast through to 28 May 2014”.

58. [506]

    The language used by Fluor and MacDow in this document is not entirely clear. However, my conclusion is that the better view is that the $17.5 million was intended as compensation for delay and disruption costs as at 17 January 2014. Although the document did describe the “Settlement Amount” of $17.5 million by reference to the period 16 January 2014 to 28 May 2014, the reservation to MacDow of a right to make a claim in relation to facts and circumstances arising after 17 January 2014 points to the conclusion that MacDow did not then know what claims it might make in relation to the period after 17 January 2014; and thus to the conclusion that $17.5 million was not intended to be compensation in relation to that period.

59. [507]

    Accordingly, the payment of $17.5 million by Fluor to MacDow must be taken into account in determining MacDow’s Cost to Complete. The manner in which that amount should be taken into account is a matter in respect of which I will invite further submissions. MacDow suggested “pro rating” its claim for Overheads and Management [96] and HPL’s claim for Variation 29 [97] by reference to the proportion of MacDow’s claim on Fluor as Fluor ultimately paid. I remain to be convinced that the question is as simple as this, but will hear further submissions from the parties.

60. [508]

    The $19 million was described as “Recurring Indirect Costs (6 months 1Dec13 through 31May14)”. This is outside the period in which MacDow claimed for overheads as part of its Cost to Complete Claim.

61. [509]

    Apart from the criticism that I have set out above, HPL did not develop submissions in support of the six points made by Mr Bolt. On the other hand, MacDow developed detailed submissions in relation to each of those points. When considering those submissions, I bear in mind that, as I have set out above, Mr Bolt made these points at the eleventh hour and notwithstanding his earlier evident ability to make a comprehensive assessment of the detail of MacDow’s Cost to Complete Claim.

62. [510]

    Mr Bolt’s first criticism was that MacDow’s assessment of its Cost to Complete did not take into account “any variations undertaken that relate to HPL’s scope after 18 March 2013 for which costs have been claimed (not included in the total amount that [MacDow] would have paid HPL)”.

63. [511]

    As I have set out above, Mr Foxwell stated that excluded costs the subject of variations. It was not put to Mr Foxwell in cross-examination that MacDow had improperly included in its Cost to Complete Claim any particular variation that MacDow undertook after 18 March 2013. Nor was Mr Foxwell challenged about his evidence that he had removed variations from MacDow’s claim.

64. [512]

    Mr Bolt did not identify any variation which he contended had been improperly included.

65. [513]

    Some time was spent cross-examining Mr Roberts concerning particular matters, including additional excavation depth at the “oily water treatment area”. The result of the cross-examination was, as MacDow submitted in closing, equivocal.

66. [514]

    I think MacDow was correct to submit that ultimately HPL raised no more than a possibility that the costs of potential variations had been included in the calculation of MacDow’s Cost to Complete, without also being accounted for in the calculations for the Adjusted Contract Sum for which HPL would have been paid, but for the termination of the Contract.

67. [515]

    I am not satisfied that this criticism has been made out.

68. [516]

    Mr Bolt opined that MacDow’s calculations did not take into account costs associated with any rework that subcontractors would have claimed on a time and material basis.

69. [517]

    Again, Mr Bolt did not identify any example of rework that should not be to HPL’s account.

70. [518]

    Mr Bolt said:

71. [519]

    As his evidence revealed, Mr Bolt was engaging in speculation.

72. [520]

    It was not put to Mr Foxwell that the cost of any rework was improperly included in the Cost to Complete.

73. [521]

    I am not satisfied this criticism has been made out.

74. [522]

    Mr Bolt’s third criticism was that MacDow had not taken into account “any invoiced loss of productivity, delay and disruption costs claimed by subcontractors”.

75. [523]

    Again, Mr Bolt did not point to any example of an invoice from a subcontractor making a claim for loss of productivity, delay or disruption costs.

76. [524]

    Mr Bolt agreed:

77. [525]

    Again, this is speculation on Mr Bolt’s part.

78. [526]

    In his affidavit, Mr Foxwell gave detailed evidence of the steps taken to deal with subcontractors at the time that MacDow terminated the Contract. Mr Foxwell said that there was delay in the work recommencing. But my attention has not been drawn to any evidence of any material disruption caused to the progress of the works. In any event, as MacDow submitted, any loss of productivity which resulted from the delay or disruption caused by MacDow having to assume conduct of the works will be to HPL’s account.

79. [527]

    Here, Mr Bolt’s criticism was that MacDow’s Cost to Complete calculations did not take into account activities undertaken by subcontractors who were not included in HPL’s original scope of work.

80. [528]

    The one example that Mr Bolt gave was welding but there was no dispute that welding was not paid out of HPL’s scope of works.

81. [529]

    Mr Bolt also agreed that, when engaging in his detailed analysis of MacDow’s Cost to Complete Claim, he looked carefully to see invoices in which there was an error. He gave this evidence:

82. [530]

    In the light of that evidence, it is hard to see upon what basis Mr Bolt felt able to make the criticism recorded in the Joint Report.

83. [531]

    Mr Bolt’s criticism here was that the description on invoices was in general terms and insufficiently detailed to obtain a clear understanding of the work undertaken.

84. [532]

    MacDow engaged the same subcontractors as did HPL.

85. [533]

    Mr Bolt agreed that the detail on the invoices the subcontractors sent MacDow was much the same as on the invoices those subcontractors sent to HPL.

86. [534]

    That did not, evidently, cause Mr Bolt to have any difficulty in engaging in the detailed analysis that he had earlier made of these invoices.

87. [535]

    I see substance in MacDow’s submission that:

88. [536]

    Mr Bolt’s final criticisms were that some time periods were outside the period during which works were completed. Mr Bolt agreed with the obvious proposition that work may have been undertaken during the relevant period and invoiced thereafter.

89. [537]

    Mr Bolt gave this evidence:

90. [538]

    As MacDow submitted, although the question of dates and time periods may be a reasonable basis upon which to investigate and assess some of the costs claims, it is not a basis upon which to question the veracity of the entire claim.

91. [539]

    For those reasons, I do not accept HPL’s submissions that MacDow has not proven its Cost to Complete Claim although, as I have set out above, the figure of $17.5 million received by MacDow from Fluor as part of the February 2014 settlement must be taken into account in the calculation of that amount.

92. [540]

    I will now turn to the elements of MacDow’s claim.

93. [541]

    As I have said, MacDow contends that its total Cost to Complete was some $42.9 million. HPL contends that MacDow’s Cost to Complete, assuming that it is not nil, was some $39.8 million. Thus, the difference between MacDow’s position and HPL’s position is in the order of $3 million.

94. [542]

    The difference between the parties relates to MacDow’s claims in respect of:

95. [543]

    I will deal with each of these matters in turn.

96. [544]

    These matters can be dealt with together as the same point arises in relation to each.

97. [545]

    MacDow contends that it has paid a total of some $40.7 million in relation to subcontractors, materials, consumables and plant.

98. [546]

    To assess that claim, Mr Roberts and Mr Bolt reviewed some 3,500 invoices received by MacDow on those accounts.

99. [547]

    Mr Roberts and Mr Bolt agreed that MacDow has paid, at least, an amount in the order of $38.4 million in relation to these matters. The disagreement between Mr Roberts and Mr Bolt arose from differing conclusions they have reached on a review of some 500 of the 3,500 invoices in question.

100. [548]

     The categories of dispute between Mr Bolt and Mr Roberts concerned invoices on which MacDow had made allegedly unexplained handwritten apportionments, where the description of work was, in Mr Bolt’s opinion, insufficient, and where Mr Bolt contended that invoices concerned work outside the period in respect of which MacDow completed HPL’s scope of works.

101. [549]

     Both parties agreed that it was not practicable for me to review the 500 invoices and to form a view about the matters in respect of which Mr Roberts and Mr Bolt disagreed.

102. [550]

     HPL contended that, as to the 500 invoices:

103. [551]

     In reply submissions, HPL went further and said:

104. [552]

     I do not see this as a matter of onus. MacDow has led the evidence of Mr Roberts who has expressed an opinion in relation to each invoice. The question is whether his opinion is to be preferred to that of Mr Bolt, in circumstances where the parties accept that I should not myself go through the invoices and form my own view.

105. [553]

     On the other hand, MacDow submitted that the matter should be resolved on the basis of me preferring Mr Roberts’ evidence to that of Mr Bolt.

106. [554]

     Thus, MacDow submitted:

107. [555]

     I do not think that the manner in which Mr Bolt gave his evidence was such that I could make such a sweeping conclusion.

108. [556]

     I am not persuaded that I should resolve this issue on either of the bases proposed by the parties.

109. [557]

     Two well-qualified quantity surveyors have looked at each of these 500 invoices and expressed a view as to whether they form part of MacDow’s Cost to Complete. They are not able to agree as to the conclusions that should be drawn from the face of these invoices. In those circumstances and where, to repeat, the parties agree that it would not be practicable for me to conduct my own review, I propose to give the parties a choice.

110. [558]

     Either they can agree an allocation of the disputed invoices, perhaps by “splitting the difference”, between those that should be taken into account as part of MacDow’s Cost to Complete and those that should not, or alternatively, I will refer the question out to an appropriately qualified person for independent decision. To be clear, I am not suggesting that the parties should agree to any particular allocation, although “splitting the difference” might be as good as any other. Nor am I suggesting that it would be an appropriate way for me to decide this issue by an arbitrary allocation of invoices one way or the other. I am simply giving the parties a choice as to the way forward.

111. [559]

     MacDow claims, as part of its Cost to Complete, an amount of some $2.24 million for “Overheads & Management”.

112. [560]

     Leaving aside the significance of the $17.5 million component of MacDow’s settlement with Fluor, [98] the issue dividing the parties on this subject relates to costs of a little over $1 million incurred by MacDow for surveying work.

113. [561]

     Whether MacDow is entitled to include this cost as part of its Cost to Complete depends upon the proper construction of cl 6 in Appendix E to the Contract, headed “Special Conditions”, which provided that:

114. [562]

     The question is whether the effect of this clause is that not only would HPL provide surveying for the Scope of Works but also pay for such surveying, with only “additional costs”, that is, additional surveying costs, to be met by MacDow.

115. [563]

     It is important to view cl 6 in Appendix E to the Contract in the context of the other clauses therein.

116. [564]

     Those clauses provide for specific exclusions of items of work from HPL’s Scope of Work.

117. [565]

     Thus, cl 2 provided that grouting was “excluded” from the “Scope of [the Contract] Works”. Clause 4 provided that the disposal and replacement of unsuitable materials was “excluded” from HPL’s pricing. Clause 5 provided that oversight and planning of environmental controls were excluded from the “Scope of [the Contract] Works”. Clause 7 provided that industry long service levy payments were “not included” in the subcontractors’ pricing.

118. [566]

     Different wording is used in cl 6. It does not refer to items of work being excluded, or not included. Rather, it refers to the “provision” of surveying being included, with “additional costs”, which I would read as being the additional costs of the “provision” of that surveying, being met by MacDow.

119. [567]

     That is consistent with the fact that, as HPL submitted, and MacDow did not contest, there was no rate or allowance in the Contract for an amount to be paid to HPL for surveying.

120. [568]

     I think HPL was correct to submit, in that context, that in cl 6 “additional” means additional to HPL’s contract sum and that “Surveying” meant all surveying which, to repeat, was to be provided by HPL but paid for by MacDow.

121. [569]

     MacDow pointed to the fact that cl 3.2 of the Contract obliged HPL to comply with the provisions of the Head Contract between MacDow and Fluor, and that it was a provision of the Head Contract that:

122. [570]

     That suggests that, as between MacDow and Fluor, MacDow’s “unit prices” were to include surveying. I see this as confirmatory of my reading of cl 6 of the Contract. As between Fluor and MacDow, Fluor was to pay MacDow for the costs of surveying. As HPL submitted, it would be odd that MacDow be paid by Fluor for surveying, but not be required to pay HPL for the costs of providing that surveying.

123. [571]

     For those reasons, I do not allow the costs incurred by MacDow for surveying as part of its Cost to Complete.

Amount MacDow would have paid HPL – the Adjusted Contract Sum

1. [572]

   I now turn to the costs that MacDow would have had to pay HPL under the Contract, had HPL performed the works. This is the Adjusted Contract Sum which must be deducted from the total of the Amount Paid to HPL and HPL’s Cost to Complete.

2. [573]

   This involves consideration of the amount that MacDow would have been obliged to pay HPL for, first, contract works, and then for variations. From this must be deducted back charges and other direct payments.

3. [574]

   The parties’ submissions addressed, first, HPL’S contract works, and second, HPL’s claimed variations.

4. [575]

   Turning first to contract works, MacDow contends that it was obliged to pay HPL the sum of $60.86 million for contract works. HPL contends that it would be entitled to receive some $63.25 million on this account.

5. [576]

   Three aspects of HPL’s entitlement concerning contract works remain in dispute.

6. [577]

   It is now agreed that HPL was entitled to payment of at least an amount in the order of $1.38 million for screw piling carried out by it.

7. [578]

   HPL claims an additional amount arising from its supervision of work done by an HPL subcontractor, SFL/Piletech (EA) Pty Ltd. MacDow ultimately paid SFL/Piletech some $1.277 million for the work it did.

8. [579]

   HPL claims 10% of that amount, $127,715.10, for its costs of supervising that work.

9. [580]

   Section 42 of the Queensland Building Services Authority Act 1991 (Qld) (“the QBSA Act”) is titled “Unlawful carrying out of building work” and, at the relevant time, provided, relevantly:

10. [581]

    HPL accepts that it did not hold a contractor’s licence under the QBSA Act.

11. [582]

    The question is whether, nonetheless, HPL is entitled to claim “reasonable remuneration” for its supervision of the work done by SFL/Piletech.

12. [583]

    That question turns upon whether the circumstances fell within the two exceptions to an entitlement to claim “reasonable remuneration” contained in subss 42(4)(a) and (b) of the QBSA Act.

13. [584]

    In supervising SFL/Piletech’s work, HPL did not pay any amount “in supplying materials and labour for carrying out the building work” for the purposes of s 42(4)(a) of the QBSA Act.

14. [585]

    For that reason alone, HPL was not entitled to “reasonable remuneration”.

15. [586]

    Further, in claiming an amount for supervision of SFL/Piletech’s work, HPL was in effect seeking compensation for its own work in engaging that supervision and was thus seeking an allowance of supply of its own labour for the purposes of s 42(4)(b)(i) of the QBSA Act.

16. [587]

    For those reasons, I accept MacDow’s submissions that the consequence is, as HPL did not hold a licence under the QBSA Act, it is not entitled to make any charge for its supervision of SFL/Piletech.

17. [588]

    The question here is what work HPL did when installing clay liner surface preparation to one or more of the evaporative ponds on the site.

18. [589]

    Neither party adduced evidence of what work HPL actually did in relation to this matter. The only evidence available to Mr Bolt and Mr Roberts, and the Court, was HPL’s relevant Payment Claims and MacDow’s responsive Payment Certificates.

19. [590]

    Mr Bolt and Mr Roberts agreed that the clay liner surface preparation must be undertaken before a pond liner membrane was installed.

20. [591]

    Mr Bolt opined that it is probable that HPL adopted the “orthodox” and “common sense” method for lining the ponds, that is, to perform the clay liner surface preparation to the entire pond before the clay liner was installed. On that basis, Mr Bolt allowed the full value of preparatory work of some $1.2 million.

21. [592]

    On the other hand, Mr Roberts valued the work based upon what HPL had said in its Payment Claims it had actually done; namely prepare the clay liner surface progressively at the same level of completion as clay liner installation. Mr Roberts allowed $277,623.17.

22. [593]

    Mr Bolt’s hypothesis assumes that HPL did work for which it did not charge, a point that counsel for HPL accepted in closing submissions was “the best point put against me in respect of this”.

23. [594]

    Common sense suggests that HPL performed the work in the manner it asserted in its Payment Claim. Mr Roberts’ view is to be preferred, and I adopt it.

24. [595]

    Mr Bolt and Mr Roberts adopted different mechanisms to measure some aspects of the work done by HPL.

25. [596]

    Clause 14.3 of the Contract provided that it was “subject to re-measurement and re-depth calculation” and that:

26. [597]

    Mr Bolt used software called CostX to measure quantities from Approved For Construction drawings.

27. [598]

    During concurrent evidence, Mr Bolt said, evidently for the first time, that his measurements were based on a geotechnical report provided by Butler Partners on 2 November 2011.

28. [599]

    It is hard to see how the Approved For Construction documents or geotechnical report prepared in November 2011 could be a reliable guide as to the “as-built measured quantities of work” called for by cl 14.3.

29. [600]

    HPL sought to justify Mr Bolt’s use of Approved For Construction drawings by reference to the last paragraph of cl 14.3 which provided:

30. [601]

    HPL pointed to the fact that the Head Contract between MacDow and Fluor required measurements to be based on the Approved For Construction drawings used by Mr Bolt (although not the geotechnical report that Mr Bolt ultimately said he relied on).

31. [602]

    However, the Contract did “otherwise provide” for this purpose as it required in cl 14.3 itself measurement of “as-built” quantities; as I have emphasised in the passage above.

32. [603]

    Mr Roberts conducted his measurements using actual survey quantities carried out by MacDow’s quantity surveyor, Mr Christian Tumaru, at the time, and thus on the basis of “as-built measured quantities”.

33. [604]

    In my opinion, Mr Roberts adopted the contractually mandated position and his measurements should be accepted.

34. [605]

    The next matters for consideration are the variations that HPL contends should be taken into account in the calculation of the Adjusted Contract Sum.

35. [606]

    The parties have reached agreement as to some 21 of the variations claimed by HPL. The result is that MacDow accepts HPL is entitled to a credit in relation to the Adjusted Contract Sum in the order of $6.9 million. MacDow accepts that HPL is entitled to a further credit in the order of $950,000 for variations agreed during the project.

36. [607]

    In addition, HPL does not press some 13 variations initially in dispute.

37. [608]

    I turn now to the disputed variations.

38. [609]

    The dispute here concerns a claim by HPL for “boodling”. Boodling was described by Mr Bolt as:

39. [610]

    I was informed that boodling is carried out using a bobcat, or similar machinery.

40. [611]

    HPL produced no records or supporting documents of the time it spent boodling. There was evidence of the time HPL claimed it had spent on this task (24 minutes per pile) and the amount that MacDow allowed (5 minutes per pile).

41. [612]

    Mr Roberts did a calculation, which he admitted was necessarily theoretical, and concluded that HPL must have spent a little over five minutes per pile on boodling and thus valued this item at $131,125.82.

42. [613]

    On the other hand, Mr Bolt simply split the difference between the amount claimed by HPL and the amount allowed by MacDow and adopted 14 minutes per pile. Mr Roberts agreed that that was not an unreasonable step to take. In the result, Mr Bolt allowed $387,098.58 on this account.

43. [614]

    As this exercise was, in the absence of any records from HPL, necessarily theoretical, and as Mr Roberts thought Mr Bolt’s approach was not unreasonable, I prefer Mr Bolt’s conclusion.

44. [615]

    However, by reason of s 42 of the QBSA Act, HPL is not entitled to any margin for overheads and profit as may be included in Mr Bolt’s figure.

45. [616]

    HPL claims an amount of a little over $2 million as the “costs to stand-down HPL’s plant in the pre-commissioning stage of the works as a result of MacDow’s failure to give approval for HPL to proceed with subcontract works”.

46. [617]

    HPL claims for the costs it alleges it incurred for equipment mobilised onsite but which were not paid for by MacDow. HPL alleges that Reed Constructions was entitled to start work in March 2012 but because of MacDow’s alleged failure to give approval, it could not start work until June 2012.

47. [618]

    Originally, HPL’s claim for its loss in this regard was framed as a variation claim. HPL amended its List Statement on 21 July 2022 to frame this claim as a breach of contract. It appears to be common ground that the claim was out of time if framed as a variation claim. For that reason, HPL seeks an order under s 65(3) of the Civil Procedure Act 2005 (NSW) that its amendment take effect from the date proceedings were commenced. MacDow opposed leave being granted on the basis that HPL had had “years” to make the claim and that no adequate explanation had been given for its failure to do so prior to the 21 July 2022 amendment. MacDow, however, made no assertion of prejudice and, were it relevant to do so, I would have been inclined to make the order under s 65(3) of the Civil Procedure Act.

48. [619]

    But there are other difficulties with this claim.

49. [620]

    The first is that, as HPL ultimately accepted, [99] HPL’s claim was for the “lost opportunity” of recouping hire fees for equipment from MacDow or otherwise renting plant to alternate sources.

50. [621]

    As was put in oral submissions:

51. [622]

    The loss of profit is said to arise from income that Reed Constructions (and now HPL) would have earned from the use of the equipment.

52. [623]

    In closing oral submissions, HPL said that it relied upon an agreement dated 21 January 2012 with Egans in that regard.

53. [624]

    That agreement was made between Reed Heavy Machinery Pty Ltd (defined in the agreement as “Reed”) and Egans.

54. [625]

    Clause 3.4 of the agreement provided:

55. [626]

    Reed Heavy Plant Leasing Pty Ltd is the company now known as HPL.

56. [627]

    The agreement thus provided that all plant hire contract revenue was to be paid into HPL’s bank account, that Egans would be paid a percentage and a margin from that account, and that “Reeds” would be paid the balance of the revenue.

57. [628]

    The Agreement did not define “Reeds”. But it is obvious that reference is intended to be to “Reed”, that is Reed Heavy Machinery Pty Ltd.

58. [629]

    Even if “Reeds” should not be construed as meaning “Reed”, but some other entity, it cannot be HPL because HPL is referred to by its former name of “Reed Heavy Plant Leasing Pty Ltd”, and not by any abbreviation. As MacDow submitted, if Reed Heavy Plant Leasing Pty Ltd (that is, HPL) was to retain the balance of the revenue in its account, then cl 3.4(c) would have said so; but it instead expressly stated that the balance was to be “paid” to “Reeds”.

59. [630]

    The document thus makes clear that the bank account of Reed Heavy Plant Leasing Pty Ltd (HPL) was provided only as a conduit for payment of the revenue to other parties, namely Egans and “Reeds”.

60. [631]

    Accordingly, HPL has suffered no loss by reason of these matters.

61. [632]

    In any event, HPL has adduced no evidence that Reed Constructions could have deployed any or all of the equipment elsewhere during the relevant period and has thus not established that there was an opportunity that has been lost.

62. [633]

    I have held, on the proper construction of cl 6 in Appendix E to the Contract, that although HPL was obliged to make “provision” for surveying, the costs of surveying were to MacDow’s account. [100]

63. [634]

    By Variation 30, HPL made a claim for costs it in fact incurred in providing a surveyor.

64. [635]

    Ultimately, the dispute between the parties focused on an agreement between HPL and MacDow to resolve that dispute.

65. [636]

    In its Payment Claim 13 of 10 December 2012, HPL stated that the total amount claimed for Variation 30 was $800,000.

66. [637]

    In its letter of 14 December 2012 to HPL, MacDow stated, in relation to this:

67. [638]

    Before me, HPL did not dispute that it had entered such an agreement.

68. [639]

    Accordingly, MacDow’s Payment Certificate 13 included an amount of $400,000 on account of Variation 30. HPL accepts it received this $400,000 as part of the calculation in MacDow’s Payment Certificate 13.

69. [640]

    In Payment Claim 14, dated 15 January 2013, HPL included a claim for the balance of $100,000 for Variation 30, making a total of $500,000.

70. [641]

    As I have set out above, by Payment Certificate 14 MacDow certified that an amount of $1,206,582.61 was payable.

71. [642]

    That amount included a negative amount of -$591,532.17.

72. [643]

    The relevant schedule to Payment Certificate 14 shows that the $100,000 certified for Variation 30 was a component of that figure.

73. [644]

    It was thus taken into account in the $1,206,582.61 certified by MacDow as payable under Payment Certificate 14 which amount, as I have set out above, was paid by MacDow to HPL on 31 January 2013.

74. [645]

    Consistently with this, on 19 January 2013 MacDow stated:

75. [646]

    The existence, and HPL’s then acceptance, of the agreement was expressly acknowledged by HPL in its letter of 27 March 2013, in which it stated:

76. [647]

    Mr Reed gave evidence in his affidavit of the meeting of 12 December 2012 referred to in MacDow’s letter of 19 January 2013. He did not make any assertion of duress.

77. [648]

    In those circumstances, I do not accept HPL’s submission that what passed between the parties was no more than an “accord executory”.

78. [649]

    The agreement between the parties was that HPL’s claim for Variation 30 had been settled because MacDow certified $500,000 for it in Payment Certificates 13 and 14.

79. [650]

    HPL accepted that, if this was so, then it was bound by the agreement. I understand it to be common ground that it would follow from this conclusion that HPL’s claim for surveying costs after 18 March 2013 [101] should also fail.

80. [651]

    HPL claims an amount of $186,791.76 for construction of a “laydown area” at an area of the site known as “HUB City”.

81. [652]

    Mr Bolt and Mr Roberts informed me that a “laydown area” is a temporary storage area for equipment.

82. [653]

    There is no dispute that HPL constructed the laydown area in question.

83. [654]

    On 6 October 2012, HPL wrote to MacDow, stating:

84. [655]

    In its Payment Certificate 13, MacDow said of “Variation No 46”:

85. [656]

    This exchange points to the conclusion that MacDow accepted that the work done by HPL to construct the laydown area was a variation.

86. [657]

    It is true, as MacDow pointed out, that its assessed value of that variation was, by reason of cl 10.5 in Part B of the Contract, provisional and on account only and not an admission of liability or evidence that the work was done satisfactorily.

87. [658]

    There is no question here that the work was not done satisfactorily and MacDow appears to me to have accepted that the work done was beyond HPL’s scope and thus a variation.

88. [659]

    In closing written submissions, MacDow pointed to the fact that Part A to the Schedule to the General Conditions of the Contract provided that:

89. [660]

    However, MacDow did not develop any submission to explain why construction of the laydown area would fall within that description.

90. [661]

    I am satisfied that HPL is entitled to this variation.

91. [662]

    This variation is a claim by HPL for the extra costs associated with the use of “Type 3” piles.

92. [663]

    Mr Roberts and Mr Bolt agreed that the appropriate amount of this claim is $62,120.27 inclusive of a 15% margin for overheads and profit.

93. [664]

    By reason of HPL not having a contractor licence, and the provisions of s 42(4) of the QBSA Act, HPL is not entitled to the margin as this represents an allowance for the supply by HPL of its own labour.

94. [665]

    This amount should therefore be allowed at $54,017.63, being the amount excluding that margin.

95. [666]

    This is the most significant, in monetary terms, of the variations sought by HPL and involves a claim exceeding $3.5 million.

96. [667]

    As ultimately propounded by Mr Bolt, the claim is said to arise from what he described as “increased haulage distances for general earthworks of the entire site”.

97. [668]

    To consider whether what HPL did in this regard is a variation, attention must be paid to HPL’s obligations concerning haulage under the Contract.

98. [669]

    Clause 3 in Appendix E to the Contract provided:

99. [670]

    Further, cl 5.1.10 in Part II of the Head Contract between MacDow and Fluor (which is incorporated into the Contract by cl 3.2) provided that the unit rate for rippable rock “includes excavation to specified depths and transporting and disposal of unusable rock to a designated dump location within 5km of Contractors Work Site”.

100. [671]

     Thus, any claim by HPL for additional haulage must be haulage beyond five kilometres because HPL was obliged to haul suitable fill within a five kilometre radius and any claim by HPL for additional haulage or rippable rock must exclude the first five kilometres of haulage because HPL was paid within rippable rock rates for hauling rippable rock within a five kilometre radius.

101. [672]

     Mr Bolt calculated the figure of $3.5 million claimed by HPL as Variation 52 by reference to four integers.

102. [673]

     The first was the tendered quantity of earthworks.

103. [674]

     The second was what HPL described as the “original haulage distances” based on HPL’s original haulage plan.

104. [675]

     The third were the “actual quantities” of volume of earthwork removed.

105. [676]

     The fourth was the actual haulage distances, that is, the actual distances over which HPL hauled material.

106. [677]

     Mr Bolt calculated that there had been an increase of 160% in haulage.

107. [678]

     HPL summarised the basis of Mr Bolt’s calculation as follows:

108. [679]

     As MacDow pointed out, there are significant flaws in Mr Bolt’s process of reasoning.

109. [680]

     First, on account of an error made by Mr Bolt concerning the correct rate per metre squared of rock excavation, [102] HPL conceded that the Court should make a deduction of $84,914.08.

110. [681]

     Second, Mr Bolt had regard to HPL’s original haulage plan, without regard to the nature of HPL’s contractual obligations which, as I have explained, included the need to haul suitable fill and rippable rock within a five kilometre radius.

111. [682]

     Third, an issue arises as to Mr Bolt’s consideration of the actual quantities of earthworks removed. In that regard, Mr Roberts made a number of criticisms of Mr Bolt’s reasoning, one of which HPL acknowledged was an error in Mr Bolt’s calculation, requiring a further deduction of some $72,000 from his figure.

112. [683]

     More importantly, as Mr Roberts pointed out, Mr Bolt has assumed that the depth of rock over the whole area was 4.99 metres but provided no explanation or supporting information to explain why that assumption had been made. In cross-examination during concurrent evidence, Mr Bolt first said he could not explain where the 4.99 metre depth of rock figure came from but thought that it may have come from the Approved For Construction drawings. Overnight, Mr Bolt said that his assessment came from the November 2011 geotechnical report to which I have referred, [103] in particular from bore hole data within that report. Mr Bolt said that he used that report to obtain an average depth of rock based on bore hole data. But this is not set out in either of his reports, and he did not explain in his oral evidence how any such calculation was done. Further, Mr Bolt referred expressly to only one bore hole report which, as Mr Roberts pointed out, provided little guidance to the depth of rock in adjacent areas. Mr Roberts said that bore holes are:

113. [684]

     A further problem arises in relation to Mr Bolt’s fourth integer, which is actual haulage distances. Mr Bolt said that he undertook his own measurement of haulage distances. Most of those distances are for less than a kilometre, only four are for distances greater than a kilometre and none are anywhere close to five kilometres; the longest distance was 1.7 kilometres.

114. [685]

     As HPL was obliged to bear the cost of transport within a five kilometre radius, I cannot see how Mr Bolt’s calculations provide any justification for the variation claimed.

115. [686]

     I have given careful consideration to this variation, bearing in mind the amount of money involved. However, for these reasons, I am not satisfied that Mr Bolt’s evidence provides any basis for it.

116. [687]

     I have referred to the nature of “Back Charges” above. [104]

117. [688]

     Mr Roberts and Mr Bolt agreed that an amount of at least $6.6 million should be deducted from the Adjusted Contract Sum.

118. [689]

     The remaining dispute relates to a payment that MacDow made to Civil Pacific Services of $500,000.

119. [690]

     In the Joint Report, Mr Bolt suggested that “a forensic accountant analyses the Back Charges to reach a conclusive decision” about this matter.

120. [691]

     But there is no dispute that:

121. [692]

     I see no reason to refer this question to a forensic accountant.

122. [693]

     The $500,000 should be included in the Back Charges.

123. [694]

     For the reasons set out at [633] to [650] above, I have found that HPL’s claim for survey costs has been settled. I understand it to be common ground that any such settlement encompassed survey costs after 18 March 2013.

Conclusion

1. [695]

   HPL has failed to establish its case. MacDow has been substantially successful. In due course, HPL’s claim must be dismissed and MacDow given relief to the effect sought in its Amended Technology and Construction List Cross-Claim Statement.

2. [696]

   However, I am not yet in a position to determine precisely to what relief MacDow is entitled.

3. [697]

   The parties should confer and agree as to the steps that now need to be taken to finalise the proceedings.

4. [698]

   The matter will be listed for directions at 9.30am on 10 February 2023, or such other date as is convenient to the parties.