PND Civil Group Pty Ltd v Bastow Civil Constructions Pty Ltd

1. [1]

   McCOLL JA: I agree with McDougall J.

2. [2]

   GLEESON JA: I agree with McDougall J.

3. [3]

   McDOUGALL J: The respondent (Bastow) engaged the appellant (PND) as a subcontractor to perform work on a project at Terrigal. Bastow claimed that PND’s work was defective. It sued to recover the cost of rectification. The primary judge concluded that the work was defective, and awarded Bastow some (but not all) of the claimed cost of rectification.

4. [4]

   PND appeals from the whole of the decision of the primary judge. Bastow cross-appeals from his Honour’s disallowance of a portion of its claim, and from a particular costs order made by his Honour.

The subcontract

1. [5]

   Bastow contracted with Energy Australia (the parties and the primary judge referred to this entity as “Ausgrid”, and I shall do likewise) to undertake work that involved constructing trenches in public roads, installing cable ducts in those trenches, and backfilling and sealing the trenches. Bastow subcontracted some of that work to PND. The subcontract, on the findings of the primary judge (not now challenged) was oral, but was made by reference to a “Pre-Works Order Inspection” (PWOI) which included notes and a diagram of the trench profiles. Documents including the PWOI and other material were given to and discussed with PND before the subcontract was made. It showed, among other things, the depth of the trenches, the positioning of the ducting within them, and the specification for composition and depth of the various layers of backfill.

The alleged defects

1. [6]

   When the work was complete or nearly complete, Ausgrid asserted that portions of it were defective, because the backfilling did not comply with the specification. The local council, Gosford City Council (the Council), became involved. Some rectification work was done. Thereafter, Bastow retained Coffey Geotechnics Pty Ltd (Coffey) to investigate and report.

2. [7]

   The work performed by PND extended over several streets. Coffey looked at each of them. It concluded, in most cases, that “the reinstated pavement might be expected to be adequate to support anticipated traffic loads”. In one case, however, Coffey concluded that “the design load might exceed the capacity of the pavement over its design life”. For that particular section of road, Coffey made the following recommendation:

The settlement agreement

1. [8]

   Bastow commenced proceedings in the court below on 22 March 2013. They came on for hearing on 23 March 2015. On that day, the parties reached what they said was an agreement to settle their dispute. The agreement was recorded in short minutes of order which were provided to the court. The agreement was:

2. [9]

   Mr DP O’Connor of Counsel, who appeared on the hearing of the appeal with Ms Bustos–McNeil of Counsel for PND, submitted that the settlement agreement had been “entered” as an order of the court. That is incorrect. The court noted the parties’ agreement, and made consequential orders (in accordance with the short minutes) standing the matter over with liberty to apply.

Negotiations with the Council

1. [10]

   On 7 April 2015, Bastow advised the Council of the parties’ settlement agreement. The letter said:

2. [11]

   The Council agreed to that proposal. Its email to Bastow of 8 April 2015 stated, so far as is relevant:

3. [12]

   Thereafter, PND negotiated with the Council as to the work to be done. Bastow involved itself in those negotiations. At some stage, PND or its solicitor suggested that the Council had declined to agree to the rectification works. Bastow took that up with the Council. The Council made its attitude clear. By email dated 14 September 2015, the Council stated, among other things:

4. [13]

   On 15 September 2015, after (it appears) further discussions, PND wrote to the Council. It suggested that it would be sufficient if PND were to remove the asphalt sealing and install a deeper layer. The letter proposed an alternative if that method of “rectification” were unacceptable to the Council.

5. [14]

   The Council reiterated its position. By letter of 7 October 2015, it said that it wanted the work done in accordance with Coffey’s report. The Council’s stated requirement was as follows:

6. [15]

   The settlement agreement broke down at that point. After a contested interlocutory hearing, Bastow sought and was granted leave to amend its claim to include a claim for damages for breach of the settlement agreement. Bastow pleaded that those damages included, but exceeded, the damages claimed for breach of the subcontract.

7. [16]

   PND denied the allegation of breach of the settlement agreement. It pleaded that Bastow had “rejected [PND’s] endeavour to have the matter referred to mediation and thus was in breach of the settlement agreement”. PND pleaded, further, that Bastow “cannot allege ‘further’ loss and damage as the ‘further’ losses claimed already are sought” by reason of PND’s alleged breach of the subcontract: the cost of rectification.

8. [17]

   PND also pleaded, although with less than conspicuous clarity, that Bastow was not entitled “in addition” to the further loss and damage claimed for breach of the settlement agreement. That further loss, PND pleaded, could be claimed “only as an alternative” to the claim for damages for breach of the subcontract.

9. [18]

   Thereafter, the matter was relisted and the hearing proceeded before the primary judge in August 2016.

The primary judge’s reasons

1. [19]

   The primary judge set out the factual background that I have sketched. He concluded that there was an oral subcontract made between Bastow and PND, under which PND was to carry out the trenching works required by Ausgrid at a rate of $83 per metre. There was some dispute as to whether this was merely a “labour only” contract, but nothing now turns on this, because PND accepts (as it had before the primary judge) that whatever may have been the nature of the subcontract, it was required to carry out the work in a proper and workmanlike manner.

2. [20]

   The primary judge concluded that to carry out the works in a proper and workmanlike manner, PND was required to perform them in accordance with Ausgrid’s specification, which (his Honour found) had been provided to PND before the subcontract was formed. PND does not challenge that aspect of his Honour’s reasons.

3. [21]

   The primary judge concluded that Bastow had repudiated the settlement agreement. His Honour said that:

   1. (1)

      the settlement agreement provided that if the Council refused to permit PND to carry out the rectification works, Bastow and PND were to mediate; and

   2. (2)

      Bastow repudiated the settlement agreement by filing its amended statement of claim instead of proceeding to mediation.

4. [22]

   The essential but unstated premise of that reasoning is that the Council had refused to permit PND to carry out that work. His Honour did not deal with this. For the reasons I give at [80] and following below, that unstated premise was not proved.

5. [23]

   It is convenient to point out at this stage that PND had not pleaded that Bastow repudiated the settlement agreement, nor had it pleaded that it had accepted any such repudiation and elected to treat the settlement agreement as discharged thereby. Nor was there any reference made to repudiation in PND’s submissions until, at the heel of the hunt, its written submissions in reply raised the point; and then only in reply to Bastow’s submissions seeking costs of the motion for leave to amend.

6. [24]

   The primary judge then turned his attention to Bastow’s claim on the subcontract. He concluded that the work done by PND was defective. PND does not now challenge that finding. His Honour concluded, contrary to PND’s submissions, that Bastow had suffered loss as a result. PND does challenge that finding.

7. [25]

   The primary judge quantified Bastow’s loss at the costs of rectification, $269,355.15. PND does not challenge the arithmetic of that quantification.

8. [26]

   In reaching that figure, the primary judge excluded an amount of $43,669 claimed by Bastow for the time its employees spent in connection with the defects and their rectification. His Honour said that “there is no evidence that the allocation of this time resulted in any additional cost to Bastow”. Bastow challenges that conclusion by its cross-appeal.

9. [27]

   As to costs, the primary judge ordered that PND should pay Bastow’s costs of the action, excluding costs associated with the claim for breach of the settlement agreement. His Honour ordered that Bastow should pay PND’s costs in relation to that claim, including the costs of the application for leave to amend. His Honour ordered that those costs should be assessed on the indemnity basis “because, in my opinion, Bastow acted most unreasonably in failing to submit to mediation in face of PND’s manifest desire to come to some suitable arrangement with both the Council and Bastow”.

The grounds of appeal

1. [28]

   PND’s amended notice of appeal raises three grounds:

The grounds of cross-appeal

1. [29]

   Bastow’s notice of cross-appeal raises the following grounds:

Bastow’s notice of contention

1. [30]

   Bastow filed a notice of contention. It contended that the decision of the primary judge (presumably, except in respect of management costs) could be affirmed on the following grounds:

Appeal grounds 1 and 2: accord and satisfaction; repudiation

1. [31]

   Mr O’Connor submitted that the settlement agreement, on its proper construction, operated as an agreement for accord and satisfaction. In consequence, he submitted, any liability that PND may have had under the subcontract was discharged, and there were substituted for that liability (if any) its obligations under the settlement agreement.

2. [32]

   Alternatively, Mr O’Connor submitted, the settlement agreement could be construed as an accord executory, by reason of which, upon PND’s performance of its obligations under the settlement agreement, its obligations under the subcontract would be discharged.

3. [33]

   On either basis, Mr O’Connor submitted, because Bastow had (as the primary judge found) repudiated the settlement agreement, that was the end of any rights that Bastow had. Mr O’Connor submitted that the primary judge was correct to conclude that Bastow had repudiated the settlement agreement, but that his Honour erred in not proceeding from there to hold that, by reason of the settlement agreement’s operating as an accord and satisfaction, PND could have no further liability under the subcontract.

4. [34]

   Mr McNally submitted that neither accord and satisfaction nor repudiation had been pleaded. In those circumstances, he submitted, PND should be held to its pleaded case.

5. [35]

   Mr McNally submitted, further, that if, contrary to his principal submission, PND were permitted to rely on accord and satisfaction and repudiation, nonetheless:

   1. (1)

      on the proper construction of the settlement agreement, it did not operate as an accord and satisfaction (or as an accord executory); and

   2. (2)

      viewing the facts overall, Bastow did not repudiate the settlement agreement; it was PND that had breached the settlement agreement by failing to undertake the rectification works advised by Coffey and required by the Council.

6. [36]

   Mr O’Connor accepted that accord and satisfaction had not been pleaded. However, he submitted, that was merely a question of the characterisation of the written agreement, and thus was something that could be dealt with in this court. Mr O’Connor accepted, also, that repudiation had not been pleaded. However, he submitted, it had been adverted to from time to time in the course of the hearing, and (as I have noted) had been raised in PND’s written submissions in reply provided to the primary judge. Mr O’Connor submitted, correctly, that Bastow had not then challenged PND’s reliance on repudiation.

7. [37]

   At the conclusion of the argument on ground 1, the court indicated to the parties that it would not permit PND to rely on accord and satisfaction or repudiation. It said that reasons would be given.

8. [38]

   The only basis on which this court could consider permitting PND to rely on accord and satisfaction would be that the question had been fully ventilated in the evidence (even though the issue was not pleaded), so that, as a practical matter, each party had had the opportunity of adducing whatever evidence it required, and putting whatever submissions it wished, on all the evidence bearing on that issue. Plainly, that did not happen.

9. [39]

   Although it is correct to say that the pleaded settlement agreement was wholly written, that does not mean that evidence of mutually known background and mutually understood context is irrelevant. It is sufficient to refer to the joint reasons (French CJ, Hayne, Crennan and Kiefel JJ) in Electricity Generation Corporation v Woodside Energy Ltd [1] at [35]. Their Honours said:

10. [40]

    In this case, because the issue of accord and satisfaction was not pleaded or otherwise hinted at, Bastow was deprived of the opportunity to adduce evidence of background and context. On the contrary, as Mr McNally submitted, Bastow made a forensic decision not to read a particular affidavit which dealt with the making and documentation of the settlement agreement.

11. [41]

    Further, and again as Mr McNally submitted, if the question of accord and satisfaction had been pleaded, it is at least possible that Bastow would have re-examined its forensic approach, and focused more closely on the claim for breach of the settlement agreement as its primary claim, rather than (as it did) the claim for breach of the subcontract.

12. [42]

    What I have just said, which deals principally with ground 1, applies a fortiori in respect of ground 2. Repudiation was not pleaded. It was not until PND provided written submissions in reply that Bastow was given any indication that PND wished to rely on the proposition that Bastow had repudiated the settlement agreement. And that asserted repudiation was apparently to be relied upon only on the question of costs.

13. [43]

    The argument now sought to be made is not that (as the primary judge found) Bastow repudiated the settlement agreement by failing to participate in the mediation for which it called. It is, rather, that Bastow repudiated the settlement agreement “by agreeing a method of rectification with [the Council] that was outside the terms of the compromise agreement agreed between the parties”. That is a paradigm example of a factual argument that could and would have been the subject of evidence, had it been raised by way of a pleading. The absence of any pleading denied Bastow the opportunity to address the facts, both in the evidence it adduced and in its submissions.

14. [44]

    To permit PND now to rely on accord and satisfaction and repudiation would cause very significant injustice to Bastow. In theory, the adverse consequences of permitting PND to rely on those matters could have been accommodated by sending the matter back for a fresh hearing. However, it would be utterly unconscionable to do so, bearing in mind that there has already been a three day hearing, and that the amount of damages was quantified at less than $270,000.

15. [45]

    The failure to plead the issues sought to be argued through those grounds means that PND cannot be permitted to rely upon them in this court. It follows that the grounds are not sustained.

Appeal ground 3: no loss

1. [46]

   Mr O’Connor referred to passages in the Coffey report which suggested that the works as executed “may offer greater capacity than construction by the advised specification”, with one exception that Mr O’Connor accepted did require full rectification. That conclusion appears to have been based on Coffey’s estimate of the traffic loads to which the roads would be subjected. In those circumstances, Mr O’Connor submitted, his client’s work was fit for its intended purpose.

2. [47]

   That being so, Mr O’Connor submitted, it was neither necessary nor reasonable to redo the work that PND had done so as to bring it into conformity with the specification. It followed, he submitted, that Bastow had failed to prove loss.

3. [48]

   Mr McNally referred to unchallenged evidence given by Mr Jason Bastow, the sole director and shareholder of Bastow, in an affidavit sworn 11 March 2015. In that affidavit, Mr Bastow drew attention to defects that he had observed in the work done by PND, and to work undertaken (it would appear, by Ausgrid) to rectify those defects. He said that Bastow was backcharged for the cost of those works, $64,247.

4. [49]

   It is apparent that this rectification was done in 2013, well before the Coffey report was prepared. It followed, Mr McNally submitted, that Coffey’s evaluation of the load bearing capacity of the various pavements related to the pavements “as repaired”.

5. [50]

   The starting point, in my view, is that Mr O’Connor’s submission that the work done by his client was fit for purpose fails to address the real issue. There was no pleaded case that PND warranted that its works would be fit for purpose. The pleaded issue was whether, by one means or another, the subcontract required PND’s work to conform to Ausgrid’s specification. Bastow pleaded its case on this question two ways. First, it pleaded, there was an express term to that effect. Alternatively, it pleaded, there was an implied term of the subcontract that PND would carry out its backfilling work in a proper and workmanlike manner, and that satisfaction of this obligation required PND to do its work in accordance with the Ausgrid specification.

6. [51]

   PND denied that there was an express term as pleaded. It admitted that there was an implied term to the effect of that pleaded.

7. [52]

   The primary judge did not decide whether there was an express term to the effect of that for which Bastow contended. He held, consistently with the pleadings, that the subcontract included the implied term for which Bastow contended. The primary judge then held that compliance with that implied term required PND to ensure that its work met the requirements of Ausgrid’s specification. His Honour said [2] :

8. [53]

   The amended notice of appeal did not challenge that aspect of the reasons of the primary judge. Nor did Mr O’Connor address it in submissions. That aspect of the primary judge’s reasoning is plainly correct, taking into account the unchallenged evidence, and the consequent finding of the primary judge, that Ausgrid’s specification for the works was provided to PND when the terms of the subcontract were being negotiated, and before it was concluded. The primary judge found, in consequence, that the subcontract was one whereby PND was required, for a consideration of $83 per metre, “to perform the works described in” Ausgrid’s specification and discussed by Mr Di Cello of PND with Mr Hutchinson of Bastow before the subcontract was concluded.

9. [54]

   The next point is that after PND claimed to have finished its work, Ausgrid carried out investigations. Mr Murray of Ausgrid wrote to Bastow saying that trial holes had been excavated throughout the project and that there were “inadequate road base levels found in almost all sections”. Mr Murray advised Bastow that if Bastow did not rectify the defects, Ausgrid would do so at Bastow’s cost.

10. [55]

    Bastow in turn passed that requirement on to PND. Mr Di Cello said that “PND take no responsibility and will not carry out any works [of rectification] and will not pay any cost to Bastow for works [of rectification].”

11. [56]

    It was after that exchange of correspondence that the temporary repair works to which Mr Bastow referred in his affidavit of 11 March 2015 (see at [48] above) were performed.

12. [57]

    The primary judge held that:

    1. (1)

       Bastow was obliged by the terms of its contract with Ausgrid to make the works compliant with Ausgrid’s specification [3] ; and

    2. (2)

       the rectification work would be carried out by Bastow to the satisfaction of the Council, whereby Bastow would suffer loss [4] .

13. [58]

    Mr O’Connor did not challenge those findings of the primary judge. The first is self-evidently correct. The second is a conclusion adequately based on the evidence before the primary judge, and bearing in mind the absence of challenge, is one that must stand.

14. [59]

    In those circumstances, Bastow has suffered loss. As the primary judge held, that loss is the cost to it of bringing PND’s defective work into compliance with Ausgrid’s specification. The conclusion of the primary judge to that effect is amply supported by the authorities to which his Honour referred, including Bellgrove v Eldridge [5] and Tabcorp Holding Ltd v Bowen Investments Pty Ltd [6] .

15. [60]

    Even if, contrary to what I have said, the real issue were whether PND’s works were fit for purpose, the evidence does not support the proposition that they were. I have referred to some aspects of the Coffey report at [7] above. Coffey’s analysis used a computer program known as CIRCLY. It required, among other things, assumptions as to the traffic loads to which the pavement will be subjected. Those pavement loads were expressed in ESAs (the acronym denotes Equivalent Standard Axle). Based on those assumptions (which were not shown to reflect the design requirements for the roads in question), Coffey expressed the opinion “that the as-constructed condition may offer greater capacity than construction by the advised specification” (with an exception identified in the report). That is hardly a ringing endorsement of the quality of PND’s work. Nor is Coffey’s conclusion, expressed elsewhere in the report as to particular sections of pavement, that they “might be expected to be adequate to support anticipated traffic loads”.

16. [61]

    I add that it is clear from the Coffey report that the somewhat tentative opinion that sections of pavement “might be expected to be adequate to support anticipated traffic loads” refers in each case to “the reinstated pavement”. Thus, as Mr McNally submitted (see at [49] above), it is clear that those tentative expressions of opinion related to the reinstated pavement, not to the work originally done by PND.

17. [62]

    Ground 3 fails.

Conclusion on the appeal

1. [63]

   Each of the grounds of appeal fails. It is not necessary to consider Bastow’s notice of contention.

2. [64]

   I turn to Bastow’s cross-appeal.

Cross-appeal ground 1: cost management time

1. [65]

   Mr McNally submitted that the primary judge had erred in holding that Bastow was not entitled to recover, as an element of its damages, the cost of the management time spent by its employees in dealing with PND’s defective work. He noted that the evidence of quantification was detailed and unchallenged.

2. [66]

   Mr McNally referred to a decision of the Queensland Court of Appeal in Orlit Pty Ltd v JF&P Consulting Engineers Pty Ltd [7] . In that case, the plaintiff developer sued the defendant for damages for negligence. The defendant, an engineer, had designed inadequate slabs for a townhouse development undertaken by the plaintiff. The primary judge (Moynihan J) held that the engineer had been negligent, and that the developer was entitled to recover, in round figures, $342,000 by way of damages [8] . The damages awarded included $44,663 for management time [9] . Moynihan J upheld the claim on the basis that the amount in question was paid for executive time that otherwise would have been of no use to the developer.

3. [67]

   The Court of Appeal (Fitzgerald P, Davies and Shepherdson JJ) dismissed the engineer’s challenge to the allowance for management time. Their Honours said [10] :

4. [68]

   Moynihan J held that the developer had incurred an expense for the time spent by the executives (who were employed not by the developer, but by a related entity) in connection with the defects and their rectification. That expense was incurred through book entries whereby the developer was debited, and their actual employer was credited, with the cost of their time. There was also evidence, to which Moynihan J referred [11] , that the actual amount charged to the developer was more than the amount of damages allowed, because some of the time for which the developer was charged was spent by the executives on other projects. It could be inferred that, apart from the problems caused by the engineer’s negligence, the amount that the developer was required to pay for the services of those executives would have been less, by $44,663, than the total amount actually paid.

5. [69]

   On that basis, if I may say so with respect, the ultimate conclusion in Orlit both at trial and on appeal, on the issue of management time, was plainly correct. It is unnecessary to express a view about the reasoning that led the Court of Appeal to that conclusion. It is enough to say that, properly understood, the decisions in Orlit provides no support for Bastow in this case.

6. [70]

   In the present case, and in contrast to the facts in Orlit, there is no evidence that any additional expense was incurred. It does not seem that Mr Bastow caused himself or the other staff member involved (who were both employees of Bastow) to be paid overtime or any other compensation or additional remuneration. Nor does it seem that any additional staff or contractors were employed, either to deal with PND’s defective work and its consequences or to attend to tasks from which Mr Bastow had been distracted because of his attention to those matters.

7. [71]

   I can understand that where existing staff are paid more, or additional staff are employed, to manage a breach of contract and its consequences, the damages recoverable may include the amounts so paid. I can understand, also, that if no additional staff were employed, but the diversion of management time to the breach of contract meant that the employer lost other valuable business opportunities, then damages might be allowed, although their quantification could be a matter of some difficulty. But there was no evidence in this case that Bastow had been prevented from seeking or taking up any valuable business opportunity because Mr Bastow’s attention was focused on PND’s breach of contract and its consequences.

8. [72]

   In my view, ground 1 of the notice of cross-appeal fails.

Cross-Appeal ground 2: repudiation

1. [73]

   Mr McNally accepted that, in light of the court’s decision not to permit PND to rely on repudiation, this ground fell away.

Cross-Appeal Ground 3: costs

1. [74]

   Mr McNally accepted that the primary judge’s decision on costs represented the exercise of a discretion under s 98 of the Civil Procedure Act 2005 (NSW) and Part 42 of the Uniform Civil Procedure Rules 2005 (NSW). He accepted, in consequence, that this court would not intervene unless there were shown some relevant mistake of fact or error of principle in the approach taken by the primary judge [12] . Mr McNally submitted that there were two such errors.

2. [75]

   The first error, Mr McNally submitted, was that the trial judge had taken into account repudiation, in circumstances where that issue had not been pleaded and fought. The second error, Mr McNally submitted, was that in any event the primary judge had erred in concluding that Bastow had repudiated the settlement agreement, or had “acted most unreasonably in failing to submit to mediation” pursuant to that agreement.

3. [76]

   In those circumstances, Mr McNally submitted, it was open to this court to re-exercise the costs discretion. He submitted that the ordinary result – that costs follow the event of the action – should apply, because:

   1. (1)

      there was but one event;

   2. (2)

      the claim in relation to the settlement agreement was not clearly dominant or separable (he referred to Waters v PC Henderson (Aust) Pty Ltd [13] ;

   3. (3)

      the claim under the settlement agreement was, at least by the time of the hearing, only an alternative, as indeed the primary judge realised [14] ; and

   4. (4)

      the subsidiary and alternative nature of the settlement agreement claim was so far from being a dominant or separable issue that Counsel (Mr Stewart) appearing for Bastow before the primary judge had felt it necessary to remind his Honour that the claim had not been abandoned, but nonetheless, if Bastow succeeded on the primary claim, was one that would have no further work to do.

4. [77]

   Mr O’Connor submitted that it was reasonably open to the primary judge to conclude that Bastow had “acted most unreasonably in failing to submit to mediation”, a finding of fact that, he said, underpinned the primary judge’s conclusion that Bastow had repudiated the settlement agreement. (That statement of PND’s submissions appears from its written submissions in reply in this court; but it should be noted that in oral submissions, Mr O’Connor was not prepared to accept that the factual finding underpinning the primary judge’s reasons on costs was the same as his Honour’s conclusion on the settlement agreement.)

5. [78]

   Mr O’Connor submitted that since Bastow had taken the step of amending its pleadings to plead the case based on the settlement agreement, it should not now be permitted to resile from that decision. In those circumstances, he submitted, the costs decision now under challenged was amply justified.

6. [79]

   In my view, the primary judge’s exercise of the costs discretion did miscarry, and in a material way. His reasons appear to assume (as do his reasons on PND’s defence to Bastow’s claim based on the settlement agreement) that, in the events that had happened, Bastow was required to attend mediation. That is simply not correct.

7. [80]

   Under the settlement agreement, mediation was only required if the Council “refuses to meet and/or refuses to permit [PND] to carry out the rectification works” that had been specified in a Joint Costing Report dated 23 March 2015 [15] . In the present case, the Council did agree to those works being carried out; indeed, it insisted on their being carried out, and stated that it would not accept anything less by way of rectification. That is plain from its email of 8 April 2015 [16] , its statement in the email of 14 September 2015 that it had “not denied PND the right to undertake the works”, [17] and its statement in its letter of 7 October 2015 that it required “a full depth pavement reconstruction of the subject trenches… to Council’s specification”. [18]

8. [81]

   To the extent that it might be appropriate to consider breach, or repudiation, of the settlement agreement, PND was plainly the party in breach. It breached the agreement by failing to carry out the works to which Council had given consent. And, arguably, by its repeated refusal to do so, it repudiated that agreement.

9. [82]

   It is apparent that the trial judge’s exercise of the costs discretion must be set aside. As the parties accepted, this court should re-exercise it.

10. [83]

    The prima facie position suggested by UCPR r 42.1 is that costs should follow the event. The relevant event in this case is that Bastow succeeded on its claim. It recovered a judgment for about 86% of the total amount of its claim. Even if the reasons of the primary judge as to the alternative claim based on the settlement agreement were correct, that aspect of the claim was by no means dominant or separable. At least by the time of the hearing, it was treated as an alternative formulation, to be pressed only if the claim based on the subcontract failed.

11. [84]

    In my view, the proper re-exercise of the costs discretion in the court below would require that PND pay Bastow’s costs of the action.

Costs

1. [85]

   As I have said, PND’s fails. There is no reason why it should not pay Bastow’s costs of the appeal.

2. [86]

   Bastow’s cross-appeal (to the extent that it was necessary to consider it separately from the appeal) has succeeded in part and failed in part. In my view, the appropriate costs order is that there should be no order for the costs of the cross-appeal.

Orders

1. [87]

   I propose the following orders:

   1. (1)

      Notice of appeal dismissed with costs.

   2. (2)

      On the cross-appeal: