Contractor Entitled to Damages for Variations and Delay

The court awarded the claimant damages for variations and liquidated damages for delay, dismissing the cross-claims. The decision turned on the application of the prevention principle and the existence of misleading and deceptive conduct by the contractor.

OUTCOME: Allowed

Supreme Court New South Wales

Medium Neutral Citation: [COMPANY_1] v [COMPANY_1] [2015] NSWSC 616 Hearing dates: 13 to 17, 20 and 23 April 2015 Decision date: 26 May 2015 Before: Ball J Decision: 1.Judgment for the plaintiff against the first defendant in the sum of $119,117.95. 2.Judgment for the plaintiff against each of the second to ninth defendants in the sum of $13,235.33. 3.Cross-claims dismissed. Catchwords: CONTRACT – whether owner entitled to terminate contract – liquidated damages for delay – turns on own facts. TRADE AND COMMERCE – misleading or deceptive conduct – whether builder engaged in misleading and deceptive conduct by failing to disclose need for construction of large retaining walls – turns on own facts. BUILDING AND CONSTRUCTION – whether owner entitled to recover sums paid for variations under building contract – whether prevention principle applies to prevent owner from claiming liquidated damages for delay. Legislation Cited: Fair Trading Act 1987 (NSW) Home Building Act 1989 (NSW) Practice Note SC Gen 16 Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)) Cases Cited: Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 Foley v Classique Coaches Ltd [1934] 2 KB 1 Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 Galafassi v Kelly [2014] NSWCA 190; (2014) 87 NSWLR 119 Gaymark Investments Pty Ltd v Walter Construction Group Ltd [2000] 16 BCL 449 Gold City Developments Pty Ltd v Portpride Pty Ltd [2010] WASC 148 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623 Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 Re Concrete Constructions Group [COMPANY_2] [1997] 1 Qd R 6 Robinson v Harman (1848) 1 Ex 850 at 855 Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 Traderight (NSW) [COMPANY_2] v [COMPANY_3] of Queensland Ltd [2015] NSWCA 94 Trollope & Colls v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601 [COMPANY_4] (rec and mgr apptd) v [COMPANY_5] (1994) 13 BCL 378 Texts Cited: Hudson's Building and Engineering Contracts, [NAME_6], (12th ed, 2010) Category: Principal judgment Parties: [COMPANY_1] [PHONE] (Plaintiff/First Cross Defendant to First Cross Claim) [COMPANY_1] 116 379 616 (First Defendant/First Cross Claimant on First Cross Claim) Timothy Ainsworth (Second Defendant) [NAME_7] (Third Defendant) [NAME_9] (Fourth Defendant) [NAME_10] (Fifth Defendant) [NAME_12] (Sixth Defendant) [NAME_14] (Seventh Defendant) [NAME_15] (Eighth Defendant) [NAME_16] (Ninth Defendant) [NAME_17] (Tenth Defendant) [NAME_19] (Second Cross Defendant on First Cross Claim) Representation: Counsel: [redacted] [NAME_22] with [NAME_23] (Second to Fifth and Ninth Defendants) In Person (Sixth Defendant)

Solicitors: [redacted] [NAME_24] (Second to Fifth and Ninth Defendants) File Number(s): 2009/334004 Publication restriction: Nil

Judgment

Introduction 1. The first defendant, [NAME_1] (sometimes referred to as "the owner"), is the trustee of a unit trust known as "[COMPANY_25]" (the Trust). The second to tenth defendants are the unit holders in the Trust and are, or at least were at the relevant time, directors of [NAME_1]. The sixth defendant, [NAME_11], also acted as the trustee of the Trust for a time prior to the incorporation of [NAME_1] on 23 September 2005.

2. The tenth defendant, [NAME_18], is now bankrupt and the plaintiff, [COMPANY_1] (sometimes referred to as "the builder"), no longer proceeds against him. There was no appearance for the seventh and eighth defendants, [NAME_26] and [NAME_27]. [NAME_11] appeared for himself. The remaining defendants (including [NAME_1]) were represented by the same solicitors and counsel.

3. At the time of the events giving rise to these proceedings, the Trust owned land at Padstow. The land is located on the southern side of [ADDRESS]. It consists of two blocks, both of which front on to [ADDRESS]. The larger block is roughly 18 metres wide and 150 metres deep and slopes approximately 17 metres downhill in a southerly direction. The second block is adjacent to the eastern side of the first and is approximately 17 metres wide and 53 metres deep. A large exposed sewer pipe runs diagonally across the site. It passes through the south-eastern corner of the smaller block and bisects the larger one.

4. On 17 February 2005, the unit holders in the Trust resolved to proceed with the construction of eight townhouses on the land in accordance with a development approval that had been granted by Bankstown Council on or about 8 October 2003. In accordance with those plans, six townhouses were to be located at the top end of the site – three on either side of a road that was to run down the middle. In accordance with the plans, the road was then to turn right and left and to run down the western side of the larger block leading to the remaining two townhouses (known as units 4 and 5), which were to be located at the bottom of the site, on the other side of the sewer pipe.

5. At some stage, the Trust had appointed [NAME_28] as the project manager and [NAME_28] was involved in obtaining the development approval and various reports relevant to the development. [NAME_28] was appointed a director of [NAME_1] on its incorporation.

6. The building work for the project was put out to tender and the successful tenderer was [COMPANY_1]. Its final tender price was $1,660,000.00, subject to a number of conditions. That figure was subsequently amended in the contract to a figure of $1,665,000.00.

7. Shortly before 22 September 2005, [NAME_11], as trustee of the Trust, accepted [COMPANY_1] tender and agreed at about that time to pay a non‑refundable tender fee of $40,000.00 at a later date. That fee was paid on 20 December 2005. [COMPANY_1] maintains that the fee was a deposit pending negotiation of a binding contract. [NAME_1] contends that the $40,000.00 was paid to cover the costs of further investigations by [COMPANY_1] so that a firm price could be included in the contract. It will be necessary to say more about that issue shortly.

8. Following its incorporation, [NAME_1] borrowed money from a number of financial institutions to finance the costs of the development.

9. The construction contract between [COMPANY_1] and [NAME_1] was entered into on 8 May 2006 following extensive negotiations in which [NAME_1] and its unit holders were represented by [NAME_29], solicitors. Under the construction contract, the nine unit holders (who were parties to the contract) guaranteed [NAME_1] obligations under the contract as to a one‑ninth share each.

10. Work started on the site on 16 August 2006.

11. There were delays in the progress of the work and [COMPANY_1] made various claims for variations which led to disputes between the parties. As a result, [COMPANY_1] suspended work on the site on 8 November 2007. The parties sought to resolve their disputes by a Modification Agreement dated 13 December 2007 by which it was agreed, among other things, that [NAME_30], quantity surveyors engaged by [NAME_1], would value the variations in dispute and future variations. However, further disputes arose and [COMPANY_1] suspended work on another three occasions, the last of which commenced on 18 June 2008. Following that suspension, both parties purported to terminate the contract for breach or repudiation by the other.

The issues 1. In these proceedings, [COMPANY_1] claims the amount of $317,484.18 which it says is the amount owing under the construction contract less the amount it has been paid. It also makes a claim against the unit holders under their respective guarantees for their proportion of the amount claimed.

2. The defendants have filed a cross claim against [COMPANY_1] and [NAME_31], its Managing Director. In addition, [NAME_11] has filed a second cross-claim against [COMPANY_1] and [NAME_31]. As I have said, [NAME_18] is now bankrupt and there was no appearance by his trustee in bankruptcy. In addition, there was no appearance by [NAME_32] or [NAME_15], although [NAME_32] was called to give evidence by the other defendants. It may therefore be inferred that the cross-claims by [NAME_18], [NAME_32] and [NAME_15] have been abandoned. [NAME_11], and the other unit holders who appeared, indicated during the course of the hearing that they no longer pursue their cross-claims. Consequently, the only remaining cross-claim is the one brought by [NAME_1]. 3. [NAME_1] makes a number of claims against [COMPANY_1].

4. First, it contends that prior to termination of the contract it overpaid [COMPANY_1] the sum of $216,851.94 and it seeks to recover that amount. The amount said to have been overpaid consists of amounts paid by [NAME_1] in respect of variations which [NAME_1] contends were not properly claimable by [COMPANY_1].

5. Second, [NAME_1] contends that it is entitled to claim liquidated damages at the contractual rate of $1,160 per day from the date for practical completion under the contract (which was 26 June 2007) to the date on which it purported to terminate the contract (2 July 2008) (that is, 372 days). The total amount claimed is $431,520.

6. Third, [NAME_1] claims the amount that it paid another builder, [COMPANY_33], to complete the work ($588,954.11) less the costs of variations inclusive of GST, making a total of $557,306.36.

7. Fourth, [NAME_1] claims late completion damages in the sum of $376,293.74 in respect of the period 3 July 2008 to the time of the sale of the units on 1 August 2009. That amount is said to represent the interest and other charges that [NAME_1] paid in respect of loans it took out in connection with the project.

8. Fifth, [NAME_1] claims that [COMPANY_1] engaged in misleading and deceptive conduct in contravention of what was then s 51 of the Trade Practices Act 1974 (Cth) (the TPA) (now the Competition and Consumer Act 2010 (Cth)) and that [NAME_31] was a person involved in the contravention within the meaning of s 75B(1) of the TPA. As pleaded, the misleading and deceptive conduct has two elements. One is that [COMPANY_1] gave misleading advice concerning the amount that should be allowed for rock excavation and removal and site excavation and spoil and fill removal and misleading advice concerning the cost of constructing retaining walls. The other is that [COMPANY_1] engaged in misleading or deceptive conduct by failing to disclose to [NAME_1] that substantial excavation would be required and that it would be necessary to construct numerous and large engineered retaining walls which were far in excess of those that had been disclosed to [NAME_1]. [NAME_1] claims that if [COMPANY_1] had not engaged in misleading and deceptive conduct, it would not have entered into the construction contract. It claims as its loss arising from the misleading and deceptive conduct the following: 1 Costs of retaining walls $361,694.14 2 Increased costs of excavation and change in levels $221,535.10 3 Costs of retaining wall built by [NAME_34] (another contractor) $10,950.00

1. Lastly, [NAME_1] and the unit holders rely on an estoppel. [NAME_22], who appeared for the represented defendants including [NAME_1], conceded that its case based on an estoppel could not succeed if its case in respect of misleading and deceptive conduct failed. No separate damages are claimed as arising from the estoppel case. Consequently, it is not necessary to consider it further.

Background facts

Events prior to the contract 1. [COMPANY_1] lodged its first tender on 19 August 2005 for an amount of $1,638,141.00. That tender was subsequently varied and, on 9 September 2005, [COMPANY_1] lodged a final tender for $1,660,000.00. The tender set out various conditions including a condition that [NAME_1] clear the site of all trees, shrubs and grasses and rubbish within a 3 metre radius of the building areas "within 14 days of development approval". Under the heading "Provisional Sum" it provided: 1 Introduce a provisional sum for construction of 12.0m wide "V" shaped concrete drain (as per floor study report) (Prov. Sum $15,000) 2 Introduce a provisional sum for additional surveyors &/or engineer's reports & certificates [Prov. Sum $3,000] 3 Introduce a provisional sum for gas main extension [Prov. Sum $5,000] 4 Introduce a provisional sum for rock excavation [Prov. Sum $7,000] 5 Introduce a provisional sum for soft landscaping including front feature fence and garbage enclosure. [Prov. Sum $60,000] It also relevantly included the following "Other Conditions": 1 Tender is subject to a Survey Report prepared by the Builder's surveyor and results of "[NAME_1]'s Special Project Services" 2 The owner is to have completely removed existing dwelling from the site, including outbuildings, paths, driveways services and footings, above and below ground level, within (14) days of development approval … 5 No allowance is made for retaining walls or BASIX [Building Sustainability Index] requirements. … 10 The Builder is not responsible for any condition imposed by Statutory or other authority not included in the Tender and any items not included in the Tender.

1. The tender was expressed to be valid for 14 days. It also provided: Please acknowledge your acceptance of this tender by signing where indicated below and paying a non-refundable amount of $40,000. A similar term was included in the original tender.

1. The tender also stated: This Tender has been prepared without any geotechnical reports on the site conditions or any investigation of the subsurface conditions and easements. This Tender is subject to a final contour survey by the Builder's surveyor.

1. It appears that some time prior to 22 September 2005 [NAME_28] indicated to [NAME_31], the Managing Director of [COMPANY_1], that [NAME_1] accepted the tender on condition that it made the $40,000 non-refundable payment later. 2. [NAME_31] wrote to [NAME_11] concerning that acceptance on 22 September 2005. In that letter he said: I confirm that in accepting our tender the Trust is unable to pay the sum of $40,000 on acceptance of the tender but nevertheless wishes to proceed with the tender on the basis that those moneys will be paid in die [sic] course.

Accordingly, I advise that [COMPANY_1] is prepared to proceed with the tender for the above development on the basis of, and in reliance upon, your assurance as trustee of the Development Club Trust No. 1 that the sum of $40,000 will be paid within eight weeks of the date of this letter or the date of commencement of construction, whichever is the earlier. Would you please sign and return the enclosed copy of this letter acknowledging the above together with the signed tender. [NAME_11] signed and returned the acknowledgement on 26 September 2005. The $40,000 was subsequently paid on 20 December 2005.

1. Between August 2005 and February 2006, [NAME_1] arranged to borrow funds to finance the cost of the building work. The principal loan was obtained from [COMPANY_35] and was secured by a first mortgage over the property. The loan was for an amount of $1,764,000.00. After paying out the existing mortgage and capitalised interest, the amount available to [NAME_1] for construction work was $1,590,000.00. The second loan, secured by a second mortgage over the property, was obtained from [COMPANY_36]. That loan was for an amount of $650,000.00. After making an allowance for capitalised interest and other expenses, the total funds available on completion of the loan were $488,362.75. The third loan was obtained from [COMPANY_37] in February 2006. It was for an amount of approximately $180,000.00, giving [NAME_1] a total of approximately $2,200,000.00.

2. On 8 December 2005, [NAME_1] provided [COMPANY_1] with contour plans of the site. [NAME_38], the drafting manager at [COMPANY_1], and [NAME_39], an architectural draftsman who worked under the supervision of [NAME_38], used the plans provided by [NAME_1], including the contour survey, to prepare preliminary plans. They identified a number of issues in relation to those plans which were set out in typewritten notes and prepared by [NAME_39]. The notes are dated 21 December 2005. The notes draw attention to a number of problems with the plans. Significantly, the notes state: 3. "Unit 3 & 5" These units have the biggest cut components. Large engineered retaining walls will be required + the adjoining properties of these Units also have pools near the fence line. (Not sure if the pools are in-ground or above ground.) … 8. "Unit 5" Massive cut of 5.11m required. The elevation on the DA does not match this at all. (It is my belief that the original drawings of Unit 4 & 5 were actually set back roughly 7m towards the rear of the block. And upon receipt of survey, they realised that there was an easement there. Thus resulting in the Units moving forward to stay off this. The elevation NGL was not updated.) The notes also set out a number of issues with stormwater.

1. On or about 23 January 2006, [NAME_1] retained [NAME_29] to act for it in relation to negotiations of the construction contract.

2. On or about 20 January 2006, [COMPANY_1] provided [NAME_28] with a draft building contract. [NAME_29] provided comments on that draft on 15 February 2006.

3. According to [NAME_28], in the period up to 9 September 2005 he had a number of conversations with [NAME_40], [COMPANY_1]' architectural draftsman, during which he said words to the effect that [NAME_1] only had a fixed amount of money to spend, that it could not have a tender price where provisional allowance are not as close as they can possibly be to actual costs. He said that he had similar conversations with [NAME_31] and [NAME_40] after 9 September 2005 until the date the contract was signed on 8 May 2006. 4. [NAME_28] also says that he had a series of conversations with [NAME_40] in which [NAME_40] said that if [NAME_1] wanted a more accurate cost then they would have to pay for it and that that payment would not be refundable. [NAME_28] says that he asked [NAME_40] how much [COMPANY_1] wanted and says that in about mid‑September 2005 [NAME_40] said that if [NAME_1] wanted more accurate numbers it would have to give [COMPANY_1] $40,000.00. [NAME_40] denies those conversations. According to him by September 2005, [NAME_28] was dealing with [NAME_31] and he ([NAME_40]) had no discussions with [NAME_28].

5. There was a meeting on site on 27 February 2006. Present at the meeting were [NAME_41], [NAME_40], [NAME_42] and [NAME_43] from [COMPANY_1] and [NAME_28]. [NAME_40] prepared a file note of the meeting. The note includes the following:

3. Excessive rock evident. … 5. Special attention to block retaining wall along western boundary and log retaining wall along western boundary. Log wall requires larger post to support and block retaining [wall] partially requires removal. … 7. Caution with sewer location and depth when commencing roadway on site.

1. Following the meeting, on 1 March 2006 [NAME_31] wrote to [NAME_28] attaching a revised draft of Schedule 2 setting out the progress payments to be made by [NAME_1]. The letter relevantly said: As the DA approved plans did not reflect the correct levels and elevations, the purpose of the meeting was to determine more accurate costing in relation to rock excavation and removal and site excavation and spoil removal. It is our opinion that even after the site inspection and consultation with the structural engineer we can only still provide an estimate of the costs involved. We estimate that rock excavation and removal will cost approximately $20,000.00 and we estimate that site excavation and removal of excess spoil will cost approximately $45,000.00. As these are provisional sums only, we are happy to provide you with our rates in relation to machinery, excavation and removal of rock and spoil and keep a daily record of site activity for the duration of these works. … Other issues discussed are the two existing retaining walls on the right hand side of the site. The copper log retaining wall requires additional support and we estimate the cost to be approximately $2,000.00 The masonery [sic] block retaining wall needs to be demolished and removed and an engineering detail is required for a new retaining wall to be constructed. The cost of this wall can not be determined until the engineering detail is prepared. Before any work in relation to these retaining walls is undertaken an engineering certificate should be obtained and submitted to Bankstown Council stating that the existing walls have not been constructed to the building code and therefore need to be replaced or rectified. The adjoining neighbours could then be approached and asked to pay for the cost of these walls. There is a further retaining wall at the back of the site and we understand that you will advise us of your requirements in relation to this wall. … Please note that when preparing the schedule we have added the provisional allowances in the amount of $65,000.00 for rock and site excavation. There is a dispute whether the reference to "a further retaining wall at the back of the site" was intended to be a reference to the retaining wall to be built adjacent to units 4 and 5 or whether it was a reference to an existing retaining wall that was adjacent to a neighbour's property. 1. [NAME_28] says that none of the representatives from [COMPANY_1] raised with him the implications of the fact that the DA approved plans did not match the contour maps that were subsequently provided by [NAME_1]. In particular, he says that he was not told that it would be necessary to change the position of the retention system for storm water and to change the levels of the driveway relative to the units, with the result that it would be necessary to construct retaining walls in conjunction with the driveway.

2. There were further negotiations between the parties concerning the terms of the construction contract in March and April 2006. The terms were finalised and the contract was signed on 8 May 2006. Before the contract was signed the unit holders met at [NAME_29]'s offices and Mr [NAME_29] took them through the contract in some detail.

The contract 1. The contract is in the form of the Housing Industry Association Building Contract for New Dwellings, November 2004 edition. It consists of standard and special terms together with two schedules – Schedule 1, which sets out the particulars of the contract and Schedule 2, which sets out progress payments to be made under the contract. The contract also incorporated a number of other documents into it, including the tender dated 9 September 2005, a builder's program and a number of drawings.

2. Item 4 of Schedule 1 states: 4(a) Contract price (Clause 1) … The contract price is GST inclusive: $1,665,000 (one million, six hundred and sixty five thousand dollars and [COMPANY_1] acknowledge payment by the Owner of $40,000.00 tender fee prior to the date of this contract. The contract sum remains at $1,665,000 and which contract sum includes a provisional sum of $52,000 (fifty two thousand dollars) for rock excavation on site and removal of rock and spoil, and contract sum includes a provisional sum of $95,000 for stormwater and hydraulics works. Underneath that item was a warning stating that the contract price may vary under various terms set out in the contract.

1. Item 9 states: Other Statutory Obligations (Clause 4) The Owner has to pay reasonable costs associated with, and the Builder is to satisfy any obligations or requirements arising from the conditions of approval from all statutory or other authorities that are not included in the tender.

1. Item 13 states that liquidated damages were $1,160 per day.

2. Schedule 2 sets out the total contract price and the progress payments to be made. The amount allowed for "rock excavation and removal, site excavation and spoil and fill removal" was $52,000.00 and was described as a provisional allowance. An amount of $95,000.00 was payable for "stormwater and hydraulics works complete". That, also, was described as a provisional allowance. A payment of $66,000.00 was payable on completion. That amount included a "[p]rovisional allowance of $60,000.00 to be adjusted accordingly" for site cleaning and soft landscaping.

3. Item 12 of Schedule 1 provides: Contract period (Clauses 1 and 9) The building works must reach the stage of practical completion no more than forty five (45) weeks after the contract period (Clause 8) commences, subject to Clause 9 and the Special Conditions of this contract. Variations to the building works as applied for and approved in accordance with the Contract will extend the Contract period. The building works will be completed according to the Builder's program which is attached at Schedule 2 in this contract.

1. Clause 5.1 provides that the owner must, at the builder's request, deposit that part of the contract price that is not being supplied by a "lending body" into a security account in the joint names of the owner and the builder. Clause 5.2 provides: The owner must, within 2 working days of being requested by the builder at any time, give the builder written evidence, to the builder's satisfaction, of the owner's ability to pay all that is or may become payable to the builder under this contract.

1. Clause 9 of the contract deals with extensions of time. It relevantly provides: 9.1 The builder is entitled to a reasonable extension of the contract period if the building works are delayed by the builder suspending the building works under Clause 32 or from a cause beyond the sole control of the builder including: (a) a variation or a request for a variation by the owner; (b) … (c) adverse weather; (d) … (f) anything done or not done by the owner; … (j) the industry shutdown being a 5 week period commencing on or about 22 December in each year. 9.2 The builder is to give the owner written notice of an entitlement to an extension of time detailing both: (a) the cause of the delay; and (b) the extension of time, within 10 working days after becoming aware of both the cause and the extent of the delay. 9.3 If the owner wishes to dispute the builder's entitlement to an extension of time the owner must, within 5 working days of receiving the builder's notice, give the builder a written notice: (a) disputing the extension of time; and (b) detailing the reasons why the extension of time is disputed. "Adverse weather" is defined in cl 1.1 to mean "any weather condition in which 7.5 mm or more of rain have fallen, as measured and reported by a [NAME_44] measuring station nearest the site within a 24 hour period".

1. Clause 11.1 provides: The owner gives the builder exclusive possession of the site to carry out the building works.

1. Clause 12 deals with hidden site conditions. Clause 12.1 states that if either party believes that the sub-surface conditions may not support or may affect the building work, the builder may, and must at the owner's request, retain consultants to report on the site conditions. Clause 12.2 requires the builder to give the owner notice detailing any extra work required and the costs of that work. Clause 12.5 provides: The builder is only entitled to payment for such extra work if the actual site conditions differ from those either: (a) disclosed or known to the builder prior to this contract being signed; or (b) shown in the contract documents, and if the effect of that difference requires more or less work than that which a reasonable builder would have anticipated on the signing of this contract.

1. Clause 15 deals with progress payments. Clause 15.1 states that the owner must pay the deposit stated in item 4(b) of Schedule 1. That item states that "the deposit is NIL". Clauses 15.2 to 15.5 set out [NAME_1]' obligations to make progress payments and the information that was to be included in a progress claim. Clause 15.6 states: Other than in relation to the final progress claim; (a) payment of a progress claim is on account only; and (b) the owner has no right of set off.

1. Clause 17 deals with variations. Clause 17.1 provides: A variation must be in writing signed by the builder and the owner. Either the owner or the builder may ask for a variation. Clauses 17.2 and 17.3 provide that, if the owner asks for a variation, the builder must reply as soon as is reasonable giving details of the work required, the costs and any resulting extension of time. Clause 17.5 provides: If the price of a variation is not agreed prior to it being carried out that price includes: (a) the deduction of the reasonable cost of all deletions from the building works; and (b) the addition of the total cost of all extra work plus the builder's margin applied to that cost. Under cl 17.6, the price of the variation is due and payable at the next progress payment after it is carried out unless a different time is agreed. Clause 17.7 provides that [NAME_1] must not unreasonably withhold consent to a variation which is required to comply with the law or a requirement of any statutory or other authority.

1. Clause 21 deals with prime cost and provisional sum items. Relevantly, cl 21.5 states: Each provisional sum item must have an allowance stated next to it. The allowance is the estimated price of providing the work and does not include an amount for the builder's margin. Clause 21.6 states that if the actual price was less than the allowance the difference must be deducted from the contract price and if it was more than the allowance the difference and the builder's margin on that difference is to be added to the contract price.

1. Clause 30 provides for the payment of liquidated damages at the rate set out in the schedule from the day after the end of the contract period to, relevantly, "the date this contract is ended". The "contract period" was stated in the schedule to be 45 weeks.

2. Suspension is dealt with in cl 32. That clause relevantly provides: 32.1 If the owner is in breach of this contract the builder may suspend the carrying out of the building works. 32.2 If the owner is in breach of its obligation to make payment to the builder as required from time to time, or is in breach of an essential term of this contract, then the builder may suspend the carrying out of the building works" 32.3 The builder must recommence the carrying out of the building works within a reasonable time after the owner remedies the breach and gives the builder written notice of that fact. … 1. Clause 33 deals with termination of the contract for breach. The clause provides for the service of a breach notice in the case of a "substantial breach". If the defaulting party does not remedy the breach within 10 working days the party not in breach is entitled to end the contract. The clause provides that it is a substantial breach on the part of [COMPANY_1] to suspend the carrying out of the work other than under cl 32 and that it is a substantial breach by [NAME_1] to fail to pay any amount by the due date.

2. Clause 38.1 sets out the warranties given by [COMPANY_1] in accordance with the Home Building Act 1989 (NSW), including the following: (a) the building works will be performed in a proper and workmanlike manner and in accordance with the plans and the specifications attached to this contract; … (d) the building works will be done with due diligence and within the time stipulated in this contract, or if no time is stipulated, within a reasonable time; … 1. In addition, clause 38.2 provides: The builder warrants that it shall use all endeavours to proceed with the building work under the contract with due expedition and without delay.

1. Clause 39 set out a dispute resolution procedure, which required the parties to meet within 10 days of one party serving a dispute notice under that clause in an attempt to resolve the dispute or to agree on a method of doing so.

2. The contract contains a number of special conditions.

3. Clause 44.1 provides that, in the event of any discrepancy between the documents forming part of the contract, the following order of precedence will apply:

1. These Special Conditions;

2. These General Conditions;

3. Variations;

4. Specifications;

5. Copy of the plans;

6. Tender dated 9 September 2005;

7. Other documents.

1. Clause 47.4 provides: All requirements by the builder's engineer are deemed to be final. The parties acknowledge that an inspection of the site by the builder, the owner's representatives and the builder's engineer took place prior to the signing of this contract. The builder is unable to fix the estimated cost of rock excavation and site excavation and removal of excess spoil from the site. The builder acknowledges that it has allowed for the estimated cost of rock excavation and site excavation and removal of rock and spoil in the amount of $52,000.00 (fifty two thousand) dollars by way of a provisional sum item, which sum is included in the total contract sum. It is agreed that: (a) if the costs of the rock excavation works and excess spoil removal works exceed the provisional sum amount of $52,000, then the excess cost amount shall be claimed as a variation pursuant to the terms of this contract; and (b) if the costs of the rock excavation works and excess spoil removal works are less than the provisional sum amount of $52,000, then the saved amount shall be paid to the owner by way of cash rebate or reduction in the contract sum, at the owner's discretion. The builder is to keep the owner informed accordingly.

1. Clause 48.1 provides: No work is to be carried out by the owner or the owner's contractors during the contract period unless agreed to in writing by the builder.

1. Clause 53.2 provides: Unless stated in writing, no provision has been made for: a) Removal of rubbish and trees, including roots & stumps; rock excavation; b) Importing of additional fill, or removal of excess spoil or fill from the site; c) Encountering unsuitable soil not detailed in the tender; d) Any alterations arising from statutory or other authority requirements including NATHERS and BASIX requirements; e) Any retaining walls and steps or landings, unless specified in the tender or variations; f) Collection, diversion and/or dispersion of surface water to statutory or other authority satisfaction.

Commencement of work 1. Building work commenced on 16 August 2006 following delays in clearing the site and in obtaining a construction certificate. The construction certificate was delayed because it was necessary to make a number of changes to the plans to alter the levels of a number of the units in order to comply with condition 19 of the development approval, which specified the maximum gradient for driveways.

2. The builder's program that was attached to the contract contemplated that work would commence on units 4 and 5, at the bottom of the site. However, there were difficulties in obtaining a neighbour's consent to the removal of a tree to permit work to commence on the construction of the retaining wall. As a result, the program was abandoned almost immediately after work commenced and work started at the top of the site on the other six units. Despite a number of requests by [NAME_1] over an extended period of time, [COMPANY_1] never produced a new program.

3. On 13 September 2006, [COMPANY_1] served variation no 1 claiming a total amount of $94,100.00 in respect of the changes to the levels.

4. As building work progressed, [COMPANY_1] submitted a number of other variations, a number of which concerned the construction of retaining walls. It will be necessary to say something more about some of those variations. It is sufficient to observe by way of background that [NAME_1] made payments in respect of a number of variations but not others and that it became increasingly concerned about the variations and their cost.

5. Under the original contract, the work was due to be completed by 26 June 2007. However, it was not complete by that stage.

6. On 23 August 2007, [NAME_31] wrote to [NAME_28] in relation to extensions of time. The letter claimed 21 days on the basis that 7.5 mm or more of rain fell within a 24 hour period as measured by the [NAME_44] at Bankstown Airport on that number of days. It referred to the previous agreement of 30 working days for the retaining wall behind units 4 and 5, which the letter said translated to 38 calendar days. It also claimed an additional extension of 68 calendar days because of shoring works behind units 4 and 5 which prevented work on those townhouses and caused delay for the entire project. The letter also claimed 35 calendar days in respect of the Christmas shutdown in 2006/2007. The letter continued: Additional retaining walls As discussed above, there are additional retaining walls which need to be constructed and thereby necessitate a further extension of time for completion of all the works. At this stage we cannot predict precisely how long that may be as these works are quite complicated especially the retaining wall adjacent to unit 3. Doing the best we can, we propose the following:

1. We claim a total of 162 calendar days (as set out above) bringing the date of completion to about 7 December, 2007;

2. We propose that the completion date of all the works, including driveways and additional retaining walls (subject to what work is required in relation to the retaining wall adjacent to unit 3), be set as mid-December, 2007; Please call to discuss or arrange a mutually convenient meeting to review the progress of the works and discuss the additional retaining walls and attempt to agree on a mutually satisfactory completion date. 1. [NAME_28] replied to that letter on 27 August 2007, in that reply he said: We agree with some of the points in your claim for an extension of time but not with others. He proposed a meeting at the offices of [NAME_29] to discuss the issue. [NAME_28] did not suggest that [NAME_1] had been misled by [COMPANY_1] concerning the requirement for retaining walls.

1. On 13 September 2007, [NAME_31] requested pursuant to cl 5.2 of the contract that [NAME_1] provide [COMPANY_1] with written evidence of [NAME_1]' ability to pay all money that may become payable under the contract. 2. [NAME_11] responded to that letter on 17 September 2007. In that letter, he stated that the total amount owing under the contract was $1,845,840.00 which consisted of the original contract price of $1,665,000.00 together with $40,840.00 for variation no 11 and $150,000.00 for variation no 6, although this was later identified as an error and should have read $140,000. [NAME_1] had paid a total amount of $1,226,176.00, leaving a balance of $619,664.00. [NAME_11] said that amount was available from the facilities that [NAME_1] had in place. 3. [NAME_31] responded to that letter on 18 September 2007. He stated that the letter did not satisfy the requirements of cl 5 of the building contract. In addition, he asserted that the value of the building works to date was $2,145,852.00, that the amount that had been paid was $1,309,390.00, leaving a balance of $836,462.00. 4. [NAME_11] responded to that email on 21 September 2007 saying that [NAME_1] had requested a statement of the amount available from "our lending body" and saying that it would be provided as soon as [NAME_1] received it.

5. On 25 September 2007, [NAME_31] sent [NAME_28] a further letter in relation to extensions of time. In that letter, he pointed out that the initial program had to be abandoned because it was discovered that work could not commence with units 4 and 5 because of problems with the proposed retaining wall. The letter then goes on to explain the difficulties of making extensions of time claims because in some cases the effect of an event did not become immediately apparent. He gave as an example the delay caused by encountering a lot more rock than originally anticipated. The letter continued:

9. As early as 3 November 2006, I was chasing you regarding the owners' instructions for the proposed retaining walls and I stated in my email that the building works were being delayed.

10. On 7 February 2007 we confirmed that we could not adhere to the construction schedule because of the issues with the retaining wall behind units 4 and 5 and the permission needed from the neighbour for the removal of the tree.

11. On 13 February 2007 we advised you that the engineering detail for the construction of one of the turning bays had to be redesigned.

12. On 7 March 2007 I advised you in writing that we would be seeking an extension of 60 days in relation to the shoring works for the wall behind units 4 and 5. This was repeated in my email of 12 March 2007 and was the subject of discussions between us as we looked at various solutions for the retaining wall at the rear. Your response that you would not agree to 60 day extension did not set out any reasons.

13. On 5 April 2007 I sent you a further email in which I reiterated the basis of our claim for an extension of time under the contract.

14. On 14 May 2007 at your request we provided you with a quote as to the construction of the retaining walls. The issue of building the other retaining walls – and how they are to be built – has also been the subject of more recent correspondence. The letter also pointed out that [COMPANY_1] was entitled to 5 weeks due to the Christmas shut down and lost days due to adverse weather. The letter concluded: In our letter of 23 August 2007 we set out the basis of our claim for an extension of time. Even with the additional works proposed, we seek an extension of time to 15 December 2007 in order to complete all the building works. … 1. [NAME_28] replied on 28 September 2007 saying that he could not give a substantive response until 3 October 2007.

2. On 28 September 2007, [NAME_1] sent [NAME_31] a letter in which it asserted that the contract price did not include the price of any variations. The letter also claimed that [NAME_1] was entitled to a reasonable time in which to establish a security account in accordance with cl 5.1. [NAME_31] replied to that letter on 3 October 2007 taking issue with it and requiring [NAME_1] to establish a security account in the sum of $383,818.00 by 10 October 2007.

3. On the same day, [NAME_31] sent an email to [NAME_11] and [NAME_28] in relation to retaining walls. [NAME_31] said that [COMPANY_1] would agree to certain pricing for the retaining walls if [NAME_1] agreed to grant an extension of time in respect of the walls. 4. [NAME_11] wrote to [NAME_31] on 4 October 2007 maintaining [NAME_1]' position that the price of variations was not included in the contract price and maintaining that it would establish a security account for the sum of $48,546.00. Again, [NAME_31] took issue with that position. 5. [NAME_28] replied to [NAME_31]'s letter concerning extensions of time on 8 October 2007. The letter followed a without prejudice meeting between [NAME_1] and [COMPANY_1] at the offices of [NAME_29]. [NAME_28] maintained that the builder had not lodged any extension of time claims under cl 9.2, that extensions of time should be calculated by reference to the critical path, but that since the contract program had been abandoned that was not possible. [NAME_28] disputed a number of other assertions in [NAME_31]'s letter and refused to grant any extensions of time. Again, there was no suggestion in the letter that [COMPANY_1] had misled [NAME_1] concerning the need for retaining walls.

6. On 16 October 2007, [NAME_31] gave notice of disputes for the purposes of cl 39 of the contract and suggested that a meeting occur as soon as possible. The disputes related to [COMPANY_1]' claim for an extension of time, [NAME_1]' demand for the payment of "penalty damages", the establishment of a security account and the nature and extent of variations in respect of the retaining walls.

7. By notice dated 8 November 2007, [COMPANY_1] gave formal notice of the suspension of building works as and from that date. The grounds given were that [NAME_1] had not paid for a number of identified variations and in addition had not complied with cl 5.2 of the contract. Relying on the same grounds, [COMPANY_1] served a notice of breach dated 15 November 2007. 8. [NAME_1] took issue with those notices.

The Modification Agreement 1. Following correspondence and meetings between the parties, the parties entered into the Modification Agreement, which modified the terms of the building contract.

2. Clause 1 of the Modification Agreement set out a procedure to be followed in relation to future variations. In the case of future variations requested by [NAME_1], the builder was to provide [NAME_30], the quantity surveyor appointed by [NAME_1], with the costs of the variation including details of the work to be carried out. [NAME_30] was to determine the reasonableness of those costs. If [COMPANY_1] accepted [NAME_30]' estimate, the work was to be carried out at the price of the estimate. If [COMPANY_1] did not accept the estimate, [NAME_1] was to have access to the site to carry out the variation at its cost. By cl 1.5, it was also agreed that [NAME_1] would be entitled to construct the retaining wall behind unit 3. [NAME_1] engaged [COMPANY_34] to undertake that work. By cl 1.6, work carried out by [NAME_1] would not deprive [COMPANY_1] of an entitlement to claim an extension of time for practical completion referrable to the Christmas shutdown period.

3. Clause 2 dealt with past variation claims. Clauses 2.1 to 2.4 provided: 2.1 The Builder will discuss the valuations of provisional sum adjustment 3 and variations 6, 13, 14, 15, 17, 19, 20, 21 and 22 with the Owner's Quantity Surveyors, [NAME_30] and provide to [NAME_30] all information and documents in relation to the costs of that provisional sum adjustment and those variations requested by [NAME_30] and anything else required by [NAME_30] to make their valuation. 2.2 If [NAME_30] revise their valuation of provisional sum adjustment 3 and/or variations 13, 14, 15, 17, 19, 20, 21 and 22 the Owner will accept that revision and shall pay any increased amount, to the extent the amount of the increase is not covered by the $264,000 payment under clause 3.1, within 7 days of the later of completion of the variation or provisional sum adjustment item and receipt of [NAME_30]' revised valuation. 2.3 If [NAME_30] issue a valuation of variation 6 prior to completion of that variation, 75% of that valuation will be paid within 7 days of receipt of [NAME_30]' revised valuation to the extent that amount is not covered by the $264,000 payment under clause 3.1. 2.4 When [NAME_30] issue a valuation of variation 6 after its completion their value of that valuation will be paid within 7 days of receipt of [NAME_30]' valuation to the extent that amount is not covered by the $264,000 payment under clause 3.1 and the payment under clause 2.3. Clause 2.5 set out a mechanism for expert determination in cases where [COMPANY_1] did not accept [NAME_30]' valuation.

1. Clause 3 was in the following terms: RESUMPTION OF WORK 3.1 Upon the signing of this document the Owner shall pay the Builder the sum of $264,000 on account of the net price payable for provisional sum adjustment 3 and variations 1, 6, 12, 13, 14, 15, 17, 19, 20, 21 and 22 noting that variations 1 and 6 are not complete. 3.2 The Builder will reopen the site for work on 14 December, 2007. The Builder will complete all the building works under the Contract and will not suspend work provided payments are made by the Owner as set out in this document and progress payments and prices of future variations are made under the Contract within 14 days of receipt of the claim. 3.3 By close of business on 14 December, 2007 the Owner shall pay to the Builder the sum of $64,000 being payment on account of the provisional sum item for Hydraulics pending completion of that provisional sum item. Following receipt of the payment of $64,000 the Builder will sign and give to the Owner a form of authority to [NAME_35] to pay to the Owner the first $84,000 of the progress payment to be advanced by [NAME_35] for the Hydraulics provisional sum item. 3.4 Upon resumption of work, any uncompleted work in relation to variations, 6, 13, 14, 15, 17, 19, 20, 21 and/or 22 will continue to be carried out by the Builder.

1. Clause 4.1 provided: CONTINUING DISPUTE The Owners dispute that the Builder is entitled to a variation for the bridge over the existing sewer pipe (variation claim 24) and variation 18 for car parking spaces because the Owner asserts that such work is within the scope of work under the Contract. The Builder reserves the right to pursue payment of those claimed variations.

1. Clause 6.1 provided that the failure of [NAME_1] to pay any money when required under the variation agreement was a substantial breach under cl 33 of the contract. The parties also agreed that cl 5 of the contract was deleted.

Events following the Modification Agreement 1. Under the terms of the Modification Agreement, [COMPANY_1] was required to reopen the site for work on 14 December 2007. It did that and it appears that [NAME_34] did work on retaining walls on the site between January and March 2008. However, [COMPANY_1] could not itself commence work because of the difficulty in re-engaging contractors shortly before Christmas. For that reason, [NAME_31] wrote to [NAME_11] claiming a further extension of time in respect of the period 14 December 2007 to 22 December 2007 in addition to the industry shutdown period of five weeks referred to in cl 9.1(j) of the contract.

2. Despite that, it is apparent that [COMPANY_1] was keen in January to resume work. For example, on 21 January 2008, [NAME_31] wrote to [NAME_11] in these terms: Once again we are being frustrated in carrying out the building works. We can not get a decision on retaining walls adjacent to unit 5 and unit 6 We can not get a decision on the driveway lighting We can not commence with fencing works as the neighbors [sic] have not been notified, the lady at the back of the site told us today not to touch her fence unless it is replaced by a green fence We will not be able to commence for quite some time, the final detention basin adjacent to unit 3 as you have not commenced any works in relation to the retaining wall adjacent to unit 3. We need answers as a matter of urgency (by close of business 23/1/2008) otherwise we will commence works in these areas and this will then create enormous problems and additional cost for the retaining walls. On the same day, [NAME_31] also wrote a letter asking whether [NAME_1] wanted [COMPANY_1] to remove existing fences (which was not covered by the tender).

1. On 30 January 2008 [COMPANY_1] re-commenced work on site. At that time, [NAME_31] wrote to [NAME_11] saying that [COMPANY_1] was limited in the work that it could do because of the work being done by [NAME_34]. [NAME_31] also asked for a response to his earlier request in relation to driveway lighting.

2. On 4 February 2008, [COMPANY_1] served a second suspension notice. The suspension was based on a failure to pay for variations 14, 15, 16 and 23. [NAME_11] responded to that notice of suspension on 7 February 2008 pointing out that [NAME_1] had paid variations 14 and 15, that it was still waiting for a copy of variation 16 and information in relation to variation 23. On 14 February 2008 [COMPANY_1] acknowledged that it had erroneously claimed that [NAME_1] had not paid for variations 14 and 15 and agreed to withdraw the notice. In the letter withdrawing the suspension notice, [NAME_31] made the following observations about [COMPANY_1]' resumption of work:

1. As you are well aware, there have been very heavy rainfalls in recent weeks which made a return to work very difficult given the condition of the site. This has also been exacerbated by the ongoing retaining wall works behind unit 3.

2. We are unable to complete the driveway works, as well as the turning bay, until the retaining wall works behind unit 3 and also unit 5 are completed. The works behind unit 3 are also preventing the completion of the hydraulics works and detention basin.

3. The retaining wall behind unit 6 has not been commenced and as a result we are unable to complete the carport for unit 6.

4. We are unable to commence the fencing work until you have provided us with written confirmation that the affected adjoining owners have been notified by you and have no objection to the removal of the fencing.

5. Despite promises by [NAME_28] the power pole at the front of the site has not been relocated to enable us to connect to that pole.

6. The interiors of units 4 and 5 cannot be completed as our tilers will not work in the prevailing conditions. However, [COMPANY_1] did not make any formal claim for an extension of time.

1. There was lengthy correspondence between the parties concerning the amount due under the Modification Agreement for variations during which time little work was done by [COMPANY_1] on the site, largely because of rain and because it maintained that it was restricted in what it could do because of the work being done by [NAME_34].

2. On 6 March 2008, [COMPANY_1] served a further breach notice claiming an amount of $78,021.68 under the Modification Agreement. It issued a third suspension notice on 12 March 2008. [NAME_1] accepted that it owed $41,027.38 and on 14 March 2008 sent [COMPANY_1] a cheque for that amount. The parties remained in dispute in relation to the balance. [COMPANY_1] refused to recommence work. In the meantime, however, [NAME_31] wrote to [NAME_28] on 26 March 2008 seeking instructions in relation to various matters including driveway lighting and he spoke to [NAME_11] on 27 March 2008 and suggested a meeting to discuss those issues, which [NAME_11] declined. Following that conversation, [NAME_31] wrote to [NAME_11] on 2 April 2008. That letter said in conclusion: I hereby confirm that [COMPANY_1] is ready willing and able to re commence with building works as soon as the financial issues have been resolved and clear instructions provided to us.

1. Eventually, on 8 April 2008 [NAME_1] paid [COMPANY_1] $6,943.95 and the parties met on site the following day. Following that meeting, on 10 April 2008, [NAME_31] wrote to [NAME_11]. In that letter [NAME_31] asserted that building work had not resumed up until that time "due to a combination of bad weather, the substantial retaining wall works undertaken by your contractors and the suspension of works for reasons that have been well documented". [NAME_31] also said that [COMPANY_1] was willing to accept the payment made by [NAME_1] and formally resume building work and he set out his understanding of the then current position and what [COMPANY_1] proposed to do. [COMPANY_1] recommenced work on 16 April 2008.

2. However, a number of issues remained unresolved. [COMPANY_1] commenced work on the fences but complained that it encountered a number of problems, including complaints from neighbours, which [NAME_1] had not resolved. [NAME_1] indicated that it wished to proceed with the driveway lights but wanted to pay [COMPANY_1]' contractor directly, avoiding the margin payable to [COMPANY_1].

3. Another issue related to variation 6, which was the construction of the large retaining wall adjacent to units 4 and 5. Clause 2.3 of the Modification Agreement provided that, in the event that that variation was not complete at the time [NAME_30] valued it, [NAME_1] was to pay 75 percent of the value of the variation to the extent that that amount was not covered by the $264,000 payable under cl 3.1. [NAME_30] determined the value of variation no 6 at $189,075.29 on or about 19 February 2008. Following that determination, [NAME_1] paid [COMPANY_1] $41,027.38. According to [COMPANY_1], work on the retaining wall was completed on or before 26 May 2008. However, [NAME_1] did not pay the balance of the variation. Moreover, on 26 May 2008, [COMPANY_1] sent [NAME_1] contract price adjustment no 4 in the sum of $28,813 in relation to backfilling work in connection with the retaining wall. That contract price adjustment was submitted to [NAME_30] for determination. However, on 4 June 2008, [NAME_1] instructed [NAME_30] to stop work on it. As a result, on 5 June 2008, [COMPANY_1] sent [NAME_1] a notice that unless [NAME_1] instructed [NAME_30] to commence or to continue carrying out the valuation, [COMPANY_1] would consider that [NAME_1] had repudiated the contract.

4. Moreover, on 11 June 2008, [COMPANY_1] sent [NAME_1] contract price adjustment no 5 in the sum of $45,498. That amount related to hydraulic and stormwater drainage works, which [COMPANY_1] maintained were substantially complete. There was a provisional sum item of $80,000 in the contract for that work. The total cost was $109,498, of which $64,000 had already been paid, leaving the balance of $45,498.

5. On 18 June 2008, [COMPANY_1] purported to suspend the building works for non-payment of contract price adjustment no 5. 6. [NAME_1] did not respond to that notice of suspension. Instead, on 2 July 2008, it gave notice purporting to terminate the contract on the basis that [COMPANY_1] had repudiated it. In support of that proposition, the letter giving notice of termination said: From the signing of the Amending Agreement to the present date, a period in excess of 6 months, the only substantial works carried out on site have been completion of the variations referred to in clause 2.1 of the Amending Agreement, stormwater and hydraulics works for which there is a provisional allowance in the contract (completion of that work has been asserted by [NAME_1] but no certification or other evidence of completion has been provided) and two days of fencing work. No attempt has been made by [NAME_1] to carry out any of the other work necessary to bring the building work to Practical Completion.

1. The letter went on to point out that [NAME_1]' own contractors were on site constructing the retaining walls behind units 3 and 6 and opposite unit 5 from 29 January 2008 until 2 April 2008. However, the letter asserted that various work could have been carried out by [COMPANY_1], but was not including the following: • Complete bottom half of driveway up to near Unit 3 (about 70 m) • Both turning bays • All front and back porches • Small retaining wall in front of Unit 5 • Finish brickwork fences and bin areas at front boundary • Landscaping at rear of all areas • Complete Unit 4 & 5 interiors • Clean up and complete interiors of all other Units • 5 slabs and carports • Finish most of the remainder of the fencing • Remove the remaining surplus soil and rocks 1. The letter concluded: [NAME_1] has seriously and persistently failed to comply with its obligations under the contract including Clause 38.3 of the Building Contract and Clause 3.2 of the Amending Agreement. It is evident by its conduct that it intends to fulfil the contract only in a manner substantially inconsistent with its obligations and only if or as and when it suits it to do so. [NAME_1]'s conduct in failing to use all endeavours to proceed with the building work under the contract with due expedition and without delay for a period in excess of 6 months has evinced an intention that it will not bound [sic] by the contract and amounts to a repudiation of the contract.

1. On 7 July 2008, [COMPANY_1] gave notice terminating the contract. In giving that notice, it relied on [NAME_1]' failure to pay the balance owing in respect of variation no 6 and contract price adjustment no 4, the failure to pay the amount claimed in respect of contract price adjustment no 5 and what was said to be the wrongful repudiation of the contract by serving the letter of termination.

2. On 4 August 2008, [NAME_1] entered into a cost plus contract with [COMPANY_33] for the completion of the townhouse project. The estimated cost of completion under the contract was $599,187 plus GST. Attached to the contract was a list setting out the work to be done on each unit together with drawings for the whole site.

The claim based on s 52 of the TPA 1. It is convenient to begin with this claim.

2. As I have said, the claim based on misleading and deceptive conduct has two limbs. One relies on positive representations. The other relies on a failure to disclose.

3. In characterising conduct as misleading or deceptive or as conduct which is likely to mislead or deceive, it is necessary to look at the conduct as a whole. As French CJ explained in Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 at [25]: Characterisation [of conduct that is misleading or deceptive or likely to mislead or deceive] is a task that generally requires consideration of whether the impugned conduct viewed as a whole has a tendency to lead a person into error. It may be undertaken by reference to the public or a relevant section of the public. In cases of misleading or deceptive conduct analogous to passing off and involving reputational issues, the relevant section of the public may be defined, according to the nature of the conduct, by geographical distribution, age or some other common attribute or interest. On the other hand, characterisation may be undertaken in the context of commercial negotiations between individuals. In either case it involves consideration of a notional cause and effect relationship between the conduct and the state of mind of the relevant person or class of persons. The test is necessarily objective. [Footnotes omitted]

1. In the case of silence, the question whether silence is misleading or deceptive is normally answered by asking whether the person alleged to have been misled or deceived had a reasonable expectation of disclosure. The relevant principles were summarised by Sackville AJA in these terms in Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [209], which were cited with approval by Barrett JA (with whom Bathurst CJ and Beazley P agreed) in Traderight (NSW) [COMPANY_2] v [COMPANY_3] of Queensland Ltd [2015] NSWCA 94 at [192] [citations omitted]: (iii) The question in a case of alleged misleading or deceptive conduct as a result of non-disclosure is whether in the light of all relevant circumstances, there has been conduct which is misleading or deceptive … While the circumstances in which silence can be characterised as misleading or deceptive cannot be exhaustively defined, unless they give rise to a reasonable expectation that if some relevant fact exists it will be disclosed, mere silence will not support the inference that the fact does exist. (iv) In commercial dealings between individual entities, the characterisation of conduct must be undertaken by reference to circumstances and context. The relevant circumstances include the knowledge of the person who claims to have been misled and any common assumptions or practices established between the parties or in the particular activity or business in which they are engaged. (v) The language of reasonable expectation is not statutory but is an aid to characterising non-disclosure as misleading or deceptive. The judgment as to whether there is such a reasonable expectation is objective. (vi) The invocation of a reasonable expectation that if a fact exists it will be disclosed, directs attention to the effect or likely effect of non-disclosure unmediated by antecedent erroneous assumptions or beliefs, or high moral expectations that exceed the requirements of the general law or of the prohibition imposed by [s 42 of the Fair Trading Act]. (vi) In general, [s 42 of the Fair Trading Act] does not require a party to commercial negotiations to volunteer information which will assist the decision-making of the other party. A fortiori, s 42 does not require a party to volunteer information in order to avoid the careless disregard of its own interests of a party of equal bargaining power and competence." As is apparent, Sackville AJA's comments were made in relation to what was then s 42 of the Fair Trading Act 1987 (NSW), but they apply equally to claims based on s 52 of the TPA.

1. As finally put, [NAME_1] misleading and deceptive conduct case did not clearly distinguish between the case based on positive representations and the case based on silence, although it was consistent with the case as pleaded. As finally put, the case had the following elements:

1. The DA approved plans on which the tender was based showed no retaining walls;

2. Following the payment of the $40,000, [COMPANY_1] undertook a review of the work that needed to be done and, as a result of that review, it became aware that the elevations and plans did not complement each other and that it would be necessary to make significant changes to the elevations depicted in the DA drawings and to construct large retaining walls; 3. [NAME_28] did not have any relevant technical qualifications and experience and relied on the expertise of [COMPANY_1];

4. The site meeting on 27 February 2006 occurred to permit [COMPANY_1] to firm up its tender price. During the site meeting there was a discussion of the existing retaining walls on the site and the work that needed to be done to them;

5. Despite that, [COMPANY_1] did not disclose the need for the large retaining walls that it knew had to be constructed;

6. It was also misleading for [COMPANY_1] to reduce the provisional sum item for rock excavation etc from $65,000 to $52,000 because that reduction suggested that the original estimate was overly conservative whereas in fact it was inadequate.

1. In my opinion, [NAME_1] has not made out this case. 2. [NAME_1] seeks to characterise the payment of the $40,000 as a payment for services provided by [COMPANY_1]. Implicit in [NAME_1]' submissions is a submission that [COMPANY_1] provided advice to [NAME_1] in relation to the project, that the payment was payment for that advice and that [NAME_1] relied and was entitled to rely on the advice. I do not accept that characterisation of what happened. In my view, the $40,000 was a deposit. The requirement to make the payment was included in the first tender. There is no evidence to suggest that it was included at that time to cover the costs of further investigations and consultancy fees in order to permit [COMPANY_1] to give advice or to permit it to fix costs that were described in the first tender as provisional sum items. The requirement to make the payment simply carried through to the final tender.

3. It is true that the contract stated that no deposit was payable. However, by then the deposit had been paid, and there was no suggestion that a further deposit was payable on the signing of the contract. It was for that reason that the contract itself did not provide for the payment of a deposit. 4. [COMPANY_1] was not paid to give advice. It is possible that [NAME_31] or [NAME_40] told [NAME_28] that there was certain preliminary work that [COMPANY_1] needed to do and that it would not start that work until the deposit was paid. I also accept that it is likely that [NAME_28] told [NAME_40] and [NAME_31] that [NAME_1] wanted as firm a price as possible, and that [NAME_40] or [NAME_31] told [NAME_28] that the preliminary work to be undertaken by [COMPANY_1] would assist in that process. But I do not accept that anyone from [COMPANY_1] said anything to [NAME_1] which suggested that [COMPANY_1] was doing anything other than providing a quote for the work to be done in accordance with its tender and preparing to do that work. 5. [NAME_1] places a great deal of weight on what occurred at the meeting on 27 February 2006 and the letter [NAME_31] wrote on 1 March 2006. However, it is clear from the letter that [COMPANY_1] told [NAME_1] that the development approval plans did not reflect the correct levels and elevations and that work would need to be done to alter the levels. The principal purpose of the site meeting was to assist [COMPANY_1] to determine a more accurate costing of rock excavation etc to take account of that fact. Both the letter and cl 47.4 of the contract (which was a special condition inserted by the parties) made it clear that, despite the site visit, [COMPANY_1] "is unable to fix the estimated cost of rock excavation and site excavation and removal of excess spoil from the site" (to quote from the contract). The provisional sum item of $52,000 must be understood in that context. In the light of cl 47.4, [NAME_1] could not have understood [COMPANY_1] to be representing that it was a reliable estimate or that its previous estimate of $65,000 was conservative. At most, the inclusion of a provisional sum item of $52,000 carried with it a representation that [COMPANY_1] believed at the time that the estimate was an appropriate one. There is no evidence that [COMPANY_1] did not have that belief.

6. I accept that, at the time the meeting occurred, [COMPANY_1] was aware that it would be necessary to construct substantial retaining walls, and I think it is unlikely that [COMPANY_1] passed that information on to [NAME_1]. It is evident from [NAME_31]'s letter that there was some discussion of retaining walls. However, I think that the likelihood is that the discussion was limited to the existing retaining walls on the site and that there was no discussion of the new walls that had to be built. If that matter had been discussed, the likelihood is that [NAME_31]'s letter would have said something specifically about it; and the likelihood is that [NAME_28] would have made enquiries concerning those walls.

7. However, I do not accept that, in the circumstances, [NAME_1] had a reasonable expectation that [COMPANY_1] would have said something about the retaining walls that had to be built and their cost. [COMPANY_1] made it clear in its tender (and in the contract) that retaining walls were excluded from the work for which it was quoting. It is not surprising, then, that it would not have been focussed on the costs of those walls or, for example, the time that it would take to build them. They did not form part of the work that [COMPANY_1] was offering to perform. It is apparent both from the tender and the contract that [NAME_1] was to be responsible for the retaining walls. 8. [NAME_1] submits that [NAME_1] was entitled to infer from the fact that no retaining walls were shown on the plans and from the fact that [COMPANY_1] excluded the cost of retaining walls from its tender that no retaining walls were necessary. I do not accept that submission. To [NAME_1]' knowledge, there were already some retaining walls on the property which would require work. The property ran down a hill. [NAME_1] knew that the plans that were the subject of Development Approval were incorrect and that considerable work would need to be done to alter the levels. If retaining walls were unnecessary, it is difficult to see why [COMPANY_1] excluded their cost from its tender. [NAME_28] did not have technical qualifications and experience, he had been involved in previous developments and had been responsible for obtaining development consent and a number of reports in relation to the site that were necessary to obtain that consent. [NAME_1] was advised by a firm of solicitors who was experienced in the field. It was obvious that [COMPANY_1]' tender excluded retaining walls. [NAME_1] never asked about that exclusion or sought advice from [COMPANY_1] on what retaining walls would be necessary. In those circumstances, I cannot see how [NAME_1] could have had a reasonable expectation that [COMPANY_1] would have given [NAME_1] advice about the retaining walls that had to be built and their cost.

9. If [NAME_1] had relied on [COMPANY_1]' conduct concerning the costs of rock excavation etc and the need for and the costs of the new retaining walls, it is to be expected that it would have said that it had been misled or deceived as soon as it became apparent that the costs for rock excavation etc were substantially more than the provisional sum item that had been allowed for them and that it would be liable for substantial costs for retaining walls. However, it did not do so. The first occasion that [NAME_1] alleged that it had been misled or deceived was well after the contact had been terminated.

10. There is another difficulty with [NAME_1]' misleading and deceptive conduct claim. In its cross-claim, it pleads that, if [COMPANY_1] had not engaged in misleading and deceptive conduct, it would not have entered into the building contract. It led evidence from most of the directors to that effect. The evidence given by the third plaintiff, [NAME_7], is typical. She says: If I had have known there was a need for this substantial excavation and the substantial construction of retaining walls … I would never have signed the construction contract, I would have simply voted to sell the property with the development consent and try to get some of my money back.

1. I accept that evidence. However, a feature of the claim based on s 52 of the TPA is that [NAME_1] does not assert that, if the claim had been successful, it should be entitled to recover damages that would put it in the position it would have been in if the misleading and deceptive conduct had not occurred. Instead, as I have said, [NAME_1] simply claims the costs of the retaining walls (including the amount paid to [NAME_34] for the wall built by it) and the increased costs of excavation. However, it did not incur those costs as a consequence of [COMPANY_1]' misleading and deceptive conduct. This is not a case where [NAME_1] would have entered into the contract in any event and it could have proceeded with the contract without the additional costs if the misleading and deceptive conduct had not occurred.

2. It is true that [NAME_1] would not have incurred those costs if it had not entered into the contract at all. It was open in those circumstances for [NAME_1] to claim the total costs it incurred under the contract less the value of what it received. However, it was not open to it to claim only part of those costs without bringing to account the value of what it received or proving that the difference between its total costs and the value of what it received was at least the amount of those costs. It did not seek to do that. As a result, it failed to prove that it suffered any loss as a result of the misleading and deceptive conduct on which it relies.

Termination 1. The remaining issues in the case largely turn on who was entitled to terminate the contract.

2. It seems clear that, if [NAME_1] was not entitled to terminate the contract, then [COMPANY_1] was because [NAME_1]' purported termination amounted to a wrongful repudiation of the contract entitling [COMPANY_1] to terminate: Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 at 453 per Barwick CJ. 3. [NAME_1] purported to terminate the contract on the basis that [COMPANY_1] had repudiated the contract by not performing its obligations under the contract for a period of approximately six months. It is essential to [NAME_1]' claim that [COMPANY_1] repudiated the contract. A mere breach of contract by [COMPANY_1] would not have entitled [NAME_1] to terminate the contract in the way that it did. In order to terminate the contract for breach, [NAME_1] would have to have served a default notice in accordance with cl 33 of the contract and given [COMPANY_1] 10 working days to remedy that breach. [NAME_1] did not do that.

4. In order to establish that [COMPANY_1] repudiated the contract "it must be shown that [it was] either unwilling or unable to perform its contractual obligations, that is, it … evinced an intention to no longer be bound by the contract or stated that it [intended] to fulfil the contract only in a manner substantially inconsistent with its obligations and in no other way": Galafassi v Kelly [2014] NSWCA 190; (2014) 87 NSWLR 119 at [62] per Gleeson JA, citing Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 at 625-626; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623 at 634, 647-648, 658; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115 at [44]; Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 423.

5. In my opinion, the evidence does not establish that [COMPANY_1] evinced an intention not to be bound by the contract or an intention only to fulfil the contract in a manner substantially inconsistent with its obligations. It suspended work under the contract on four occasions because it believed, with some justification, that it had not been paid amounts due to it. When the work was suspended, it was open to [NAME_1] to serve a notice under the contract giving [COMPANY_1] ten days' notice to resume work. It did not do so. Following the first suspension notice, it agreed to the Modification Agreement under which it paid a substantial sum of money. Following the second suspension, it pointed out that amounts that [COMPANY_1] asserted had not been paid had been. [COMPANY_1] accepted that it had made a mistake and withdrew its suspension notice and agreed to resume work. Following the third suspension notice, [NAME_1] made further payments and following those payments [COMPANY_1] again agreed to resume work. [COMPANY_1] did do work during the periods when work was not suspended. In particular, it completed work on the retaining walls and on the drainage system. It also did some work on the fencing. It explained that it could not do further work because it was delayed by rain, by [NAME_1]' failure to provide instructions and by [NAME_1]' contractor. [NAME_1] did not take issue with the assertion that some delay was caused by rain. It is apparent from the correspondence that [COMPANY_1] was pressing [NAME_1] for instructions on a number of items and that those instructions were not forthcoming or were delayed. [NAME_1] asserts that there was work that [COMPANY_1] could have done while [NAME_34] was completing the work that it was doing. However, it bears the onus of proving that that work could have been done and it has not sought to discharge that onus. It is possible that [COMPANY_1] could have done more and that for that reason it was in breach of cl 38.2 of the contract. However, I do not think that that amounted to a repudiation of the contract.

6. It follows that [NAME_1]' termination of the contract was wrongful and that [COMPANY_1] was entitled to terminate the contract.

Amount recoverable by [COMPANY_1] 1. [COMPANY_1] is entitled to recover as damages an amount which, so far as money can do it, will put it in the position it would have been in if the contract had been performed: Robinson v Harman (1848) 1 Ex 850 at 855 per Parke B; Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 80. Consequently, it is entitled to recover the amount that it would have earned under the contract, less any cost saved as a result of not having to complete the work under the contract together with any other amount payable by it on completion of the contract.

2. The total amount payable under the contract was $1,665,000.00. The total amount paid under the contract was $1,380,637.00. According to evidence given by [NAME_31], which is not disputed, the total cost of the work to complete the contract was $141,034.48. Consequently, [COMPANY_1] is entitled to recover $143,328.52 in respect of work under the contract (that is, $1,665,000.00 less $1,380,637.00 and less $141,034.48). 3. [NAME_1] challenges this calculation on two bases, neither of which is easy to follow. First, [NAME_1] submits that the final tender price was $1,660,000, which included a provisional sum item of $7,000 for rock excavation. Subsequently, in November 2006 [COMPANY_1] served "Tender Amendment 1" which purported to increase the tender price by $45,000 to $1,705,000.00 to take account of the increase of the provisional sum item for rock excavation to $52,000.00. This is said to be an illegitimate attempt to vary the contract price. Second, it is said that [NAME_1] should have received a credit of $40,000 for what [COMPANY_1] claimed was a non-refundable deposit for that amount.

4. The short answer to these points is that the contract makes it clear that the contract price was $1,665,000 and that that was the price notwithstanding that [NAME_1] had paid the sum of $40,000. The clear intention was that the total amount payable by [NAME_1] was $1,665,000 in addition to the $40,000. There is no basis on which [NAME_1] is entitled to deduct the $40,000 from the contract price. 5. [NAME_31] gives evidence that the total value of the variations and provisional sum items was $805,962.70 of which $631,807.04 has been paid, leaving a balance owing of $174,155.66. 6. [NAME_1] does not dispute the calculation of the amount paid under the contract. It does, however, dispute the liability for variations and also claims to be entitled to liquidated damages under the contract for late completion.

Amount claimed in respect of variations and provisional sum items 1. [NAME_1] submits that any amount payable in respect of variations and provisional sum items was "provisional" and was not subject to final determination until the contract was completed. Consequently, it claims that it is entitled to challenge all amounts claimed by [COMPANY_1] or paid by it in respect of that work. Relying on expert evidence given by [NAME_45], it contends that no amount is payable by it in respect of variations and that, in fact, [COMPANY_1] owes it $216,851.94 respect of variations and provisional sum items. 2. [COMPANY_1], on the other hand, contends that it is not now open to [NAME_1] to challenge the amounts paid and payable in respect of variations and provisional sum items. It relies on two grounds. First, it says that that was not the effect of the building contract. Second, it submits that in any event the issue was resolved by the Modification Agreement which dealt with disputed variations and provided a mechanism by which the value of those variations was to be determined.

3. In my opinion, the approach taken by [COMPANY_1] in relation to variations is generally correct. It is necessary to draw a distinction between the amount payable under the contract for the contracted-for work and the amount payable under the contract for variations. Subject to adjustments for provisional sum items, the contract was a fixed price contract and provided for the payment of a lump sum (as adjusted) for the whole of the work to be performed under the contract. The contract also provided for progress payments in respect of work done under the contract. Those payments were "on account" of the price payable under the contract. The actual price for the work was not payable until completion of the contract and it was only on completion that the respective rights and liabilities in respect of the contracted-for work could finally be determined. As Fitzgerald P explained in Re Concrete Constructions Group [COMPANY_2] [1997] 1 Qd R 6 at 12: [T]he process involved is one of making, certifying and paying progress claims. Such claims and payments are, in building contracts in the common form, always intended to be provisional only. See Hudson's Building and Engineering Contracts (11th ed, 1995), at paras 6.186-6.189. That is to say, they await the day when a final certificate issues, in which the ultimate indebtedness by one party to the other is ascertained and fixed. Before that stage is reached, it is generally correct to say that no payment is capable of finally determining the rights of the parties with respect to matters in dispute between them.

1. On the other hand, work done in accordance with a variation is not work covered by the price agreed under the contract. Rather, cl 17 provides for variations to be priced separately. It assumes that the parties will agree on the price before the work is done. Once the price is agreed, it is not open to one party or another to take issue with the price as agreed. The agreed price is payable on the date of the next progress payment after the work is carried out unless the parties agree otherwise. Clause 17 contemplates the possibility that the work will be done before a price is agreed. The clause does not state how the price is determined in the absence of agreement, although cl 17.5 does state what the price is to include. In the absence of a mechanism for determining the price, there can be no doubt that it is an implied term of the contract that the price be a reasonable one: Foley v Classique Coaches Ltd [1934] 2 KB 1.

2. Similarly, under cl 21.6 of the contract, the contract price is adjusted to take account of the actual price of provisional sum items. The contract does not set out how the "actual price" is determined. There is no reason why it cannot be the subject of agreement between the parties. In the absence of agreement, it must be the reasonable price for the work.

3. Often, the parties did not agree on the price of a variation or provisional sum item and disputes arose concerning the price payable. Those disputes were dealt with by the Modification Agreement. Under that agreement, the parties agreed on a mechanism for valuing provisional sum adjustment 3 and variations 6, 13, 14, 15, 17, 19, 20, 21 and 22. They also agreed that [NAME_1] would pay [COMPANY_1] $264,000 on account of those variations and variations 1 and 12. By cl 3.3, they also agreed that [NAME_1] would pay $64,000 on account of the provisional sum item for storm water and hydraulics works pending completion of that work, but they did not agree on a mechanism for the final determination of the amount payable in respect of that item. Lastly, they agreed by cl 4.1 that they remained in dispute in relation to variations 18 and 24. They did not specifically deal with the other variations or the provisional sum item for rock excavation. In particular, although the sum of $264,000 was payable on account of a number of variations including variations 1 and 12, they did not agree on a mechanism for determining the actual amount payable in respect of those two variations.

4. Several points emerge from all this.

5. First, the payments of $264,000 and $64,000 were expressed to be "provisional", like the progress payments. They were provisional payments in respect of the variations and provisional sum items to which they related. As a result, the amount of those variations and provisional sum items was to be determined in accordance with the contract and Modification Agreement. To the extent that the value of the relevant variations and provisional sum items as determined in accordance with the contract and Modification Agreement exceeded the provisional amounts, [NAME_1] was required to pay the difference. To the extent that the value was less, [COMPANY_1] was required to refund the difference.

6. Second, the Modification Agreement did not deal with all variations. In my opinion, those that it did not deal with are generally governed by cl 17 of the contract. If the parties agreed the value of the variation, then they are bound by that agreement. Moreover, if [COMPANY_1] sought payment in respect of a variation and that amount was paid by [NAME_1], then, in the absence of any evidence to the contrary, it can be inferred from the payment that [NAME_1] agreed to the amount claimed. It is not now open to [NAME_1] to challenge that amount and there is no basis on which it can recover what it now says to be an overpayment. That explains why the parties thought that it was unnecessary to address a number of variations in the Modification Agreement. Those variations had been paid and any dispute in relation to them was resolved by the payment. On the other hand, if there is no agreement in relation to a variation and no payment in respect of it, with the result that no agreement can be inferred, then [COMPANY_1] is entitled to recover a reasonable amount in respect of the relevant work – assuming that the work was not included in the original contract. Clause 4.1 of the Modification Agreement specifically reserves [NAME_1]' position in relation to variations 18 and 24 for that reason.

7. Third, it seems to be agreed between the parties that variations 11, 15, 16, 23 and 25 all relate to the provisional sum item for rock excavation etc. However, there is no reason to treat them differently from ordinary variations. If the parties agreed on the amount that was payable or the amount claimed was actually paid, so that it can be inferred that agreement was reached on the amount of the adjustment, then it seems to me that the parties are bound by that agreement. It is not open to them to assert that the amount agreed was "provisional" and that the agreed amount can be challenged.

8. Fourth, where the value of a variation was not determined in accordance with the Modification Agreement before the contract was terminated, there is a question of how the value of that work is to be determined now. The parties have proceeded on the basis that the value of the work should be determined by the Court having regard to the expert evidence filed by them.

9. Following entry into the Modification Agreement, [NAME_30] proceeded to value the variations that it was required to value in accordance with that agreement. It also appears that [NAME_30] valued variations 1 and 12. Subsequently, [COMPANY_1] made claims for the variations as valued by [NAME_30] and [NAME_1] made payments that were additional to the provisional payments of $264,000 and $64,000. [NAME_1] accepts that it has paid for all variations and adjustments to provisional sum items other than variations 6 (which it accepts has been paid in part), 18, 24, 25 and 26 and contract price adjustments 4 and 5.

10. A number of variations that [NAME_1] now seeks to challenge were valued by [NAME_30] in accordance with the Modification Agreement. In my opinion, it is not open to [NAME_1] to challenge those amounts. [NAME_1] agreed to pay for the work covered by those variations in accordance with the Modification Agreement and it is bound by that agreement. In addition, in my opinion, by making payments that were additional to the provisional payments made under Modification Agreement, [NAME_1] accepted that the provisional payments should be allocated to the variations and provisional sum item in respect of which [COMPANY_1] made claims and that further amounts were due in respect of those items. It is bound by the agreement arising from that conduct. In any event, there is no basis on which it is entitled to recover the amounts that it has paid either as a result of the allocation of the provisional amounts it paid to particular claims made by [COMPANY_1] or as a result of further payments by it.

11. It follows that the only amounts that [NAME_1] may be entitled to challenge are those amounts that have been claimed by [COMPANY_1] and have not been paid.

12. As I have said, [NAME_1] maintains that it has not paid for variation 6 (relating to retaining walls) in full. However, that variation was valued by [NAME_30] in accordance with the Modification Agreement and it is apparent from evidence given by [NAME_31] that [COMPANY_1] only claims the amount as determined by [NAME_30] ($189,075.29). For the reasons I have given, [COMPANY_1] is entitled to that amount.

13. Variations 18 and 24 were the two variations that the parties specifically agreed in the Modification Agreement were still in dispute. Variation 18 relates to car parking spaces. [COMPANY_1] claimed an amount of $8,351.97 in respect of that variation. The experts retained by the parties agreed in a joint report that the amount was not properly claimed as a variation as the car parking spaces were shown on the DA approved contract drawings. There is no reason not to accept the joint evidence of the experts on that point. It follows that [COMPANY_1]' claim should be reduced by that amount.

14. Variation 24 relates to a wall that was built to support the driveway where it rose above the sewer pipe. [COMPANY_1] claims $16,085.08 in respect of that variation. The wall was necessary to support the driveway and was shown on the plans. However, [NAME_46], the expert retained by [COMPANY_1], points out that the wall also operates as a retaining wall and on that basis he treated it as a variation. I do not accept [NAME_46]'s approach. The exclusion in the contract in respect of retaining walls is an exclusion in respect of retaining walls that had to be constructed in addition to the contracted-for work. It was not an exclusion in respect of work that was otherwise required by the contract. It is not disputed that the contract required [COMPANY_1] to construct the driveway over the sewer pipe. The wall in question was part of that work. It therefore fell within the contracted-for works, whether or not it also operated as a retaining wall. Consequently, [COMPANY_1]' claim should be reduced by $16,085.08 in respect of variation 24.

15. Variation 25 relates to rock excavation. [COMPANY_1] claims $5,280.00 in respect of this variation. According to evidence given by [NAME_31], [NAME_1] paid for the variation. However, there is no evidence of that payment and in my opinion the likelihood is that it was not paid. The experts agreed in their joint report that no allowance should be made for this variation. [COMPANY_1] did not advance any reason for rejecting the conclusion of the experts. I accept their conclusion. It follows that [COMPANY_1] claims that it is entitled to $5,280.00 in respect of this variation and claims that it has been paid, whereas the true position is that it has not been paid for the variation and it is not entitled to payment. On that basis, no adjustment needs to be made to [COMPANY_1]' claim to take account of this variation.

16. On 4 July 2008, [COMPANY_1] served an invoice for $52,043.00 for "[w]ork done up to 2/7/2008 in relation to construction of turning bay". In its second further amended statement of claim, it claims that amount as variation 26. The variation was not dealt with in accordance with cl 1 of the Modification Agreement. [COMPANY_1] led no evidence in relation to the variation. I am not satisfied that it is entitled to the amount that it claims. Therefore, [COMPANY_1]' claim should be reduced by $52,043.00.

17. That leaves contract price adjustments 4 and 5. Contract price adjustment 4 is for an amount of $28,813.00. It was served on 26 May 2008 and relates to back filling works in relation to the retaining wall adjacent to units 4 and 5. It was not valued by [NAME_30] before the termination of the contract. [COMPANY_1] claimed that that was because [NAME_1] had instructed [NAME_30] not to do any further work on the claim. That instruction, in turn, was the subject of [COMPANY_1]' Notice to Perform Building Contract served on 5 June 2008. [NAME_45]'s assessment of this claim is $13,451.10. [NAME_46]'s assessment is $14,771.00. They differ only in relation to one item which was a claim of $7,635 (plus a 20 percent margin plus GST) for scaffolding. [NAME_45]'s view was that nothing should be allowed for this item because no details were provided as to where the scaffolding was used or why it was required in excess of 6 months. [NAME_46] was prepared to allow $1,000 (plus a 20 percent margin and GST) on the basis that some scaffolding would have been necessary. I prefer the approach of [NAME_45]. [NAME_46]'s assessment is based on an assumption, not on any actual information concerning the work. [COMPANY_1] bears the onus of proof. It has not discharged that onus. On that basis, its claim should be reduced by $15,361.90.

18. Contract price adjustment 5 related to the provisional sum item for stormwater and hydraulic works. The total claimed for this work is $109,489.00. After allowing for the provisional payment of $64,000.00, the balance claimed is $45,489.00. The contract included a provisional sum item of $95,000 for that work. It is not disputed that [COMPANY_1] completed the stormwater and hydraulic works. However, both experts agree that insufficient information was provided to assess this claim. On that basis, [NAME_45] expressed the view that [COMPANY_1] should recover nothing. On the other hand, [NAME_46] was prepared to allow the claim in full. I am satisfied that [COMPANY_1] did the work. It is not possible on the evidence to value that work. In the absence of evidence concerning value, I think that the most appropriate approach is to permit [COMPANY_1] to recover the amount allowed in the contract – that is, the $95,000. On that basis, its claim should be reduced by $14,489 (that is, the amount claimed of $109,489 less the $95,000 allowed).

19. It follows from what has been said that [COMPANY_1]' claim in respect of variations should be reduced by $106,330.95.

Liquidated damages 1. [COMPANY_1] claim must be reduced by the amount of liquidated damages to which [NAME_1] is entitled. [NAME_1] is entitled to liquidated damages in the sum of $431,520.00 except to the extent that [COMPANY_1] was entitled to extensions of time. [COMPANY_1] bears the onus of proving that entitlement. 2. [COMPANY_1] does not plead the extensions of time to which it says it was entitled. Instead, in its defence to [NAME_1]' amended cross-claim claiming liquidated damages it simply denies that [NAME_1] is entitled to liquidated damages.

3. In its written submissions, [COMPANY_1] says that it is entitled to an extension of time on two bases. First, it relies on claimed extensions on 13 September 2006 (35 days), 24 October 2006 (10 days), 26 October 2006 (10 days); 14 November 2006 (28 days) and 13 February 2007 (60 days). It also appears to rely on the extensions of time that were summarised in [COMPANY_1]' letter dated 23 August 2007. As I have said, that letter claims 21 days on the basis that on that number of days 7.5 mm or more of rain fell. It refers to a previously agreed extension of 30 working days (which is said to translate to 38 calendar days). It also claimed 68 calendar days because of shoring work associated with the construction of units 4 and 5 and 35 calendar days in respect of the Christmas shutdown in 2006/2007.

4. Secondly, [COMPANY_1] relies on the prevention principle. That principle was stated in these terms by the House of Lords in Trollope & Colls v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601 at 607, quoting Lord Denning MR in the Court of Appeal: It is well settled that in building contracts — and in other contracts too — when there is a stipulation for work to be done in a limited time, if one party by his conduct — it may be quite legitimate conduct, such as ordering extra work — renders it impossible or impracticable for the other party to do his work within the stipulated time, then the one whose conduct caused the trouble can no longer insist upon strict adherence to the time stated. He cannot claim any penalties or liquidated damages for non-completion in that time.

1. However, the principle does not apply where the contract itself provides a mechanism by which time can be extended for the very reason which is said to cause delay. As Cole J explained in [COMPANY_4] (rec and mgr apptd) v [COMPANY_5] (1994) 13 BCL 378 at 384-5: If the Builder, having a right to claim an extension of time fails to do so, it cannot claim that the act of prevention which would have entitled it to an extension of the time for Practical Completion resulted in its inability to complete by that time. A party to a contract cannot rely upon preventing conduct of the other party where it failed to exercise a contractual right which would have negated the affect [sic] of that preventing conduct.

1. The exception stated by Cole J has not received universal approval: see Gaymark Investments Pty Ltd v Walter Construction Group Ltd (2000) 16 BCL 449. For discussion, see Hudson's Building and Engineering Contracts, [NAME_6], 12th ed, 2010 at 6-031ff. However, in my opinion, the decision of Cole J is correct and should be followed. 2. [COMPANY_1] submits that the exception referred to by Cole J does not apply in this case, relying on Gold City Developments Pty Ltd v Portpride Pty Ltd [2010] WASC 148. In that case, [NAME_47] refused to overturn the decision of an arbitrator who held that the prevention principle applied even though the building contract in that case concerned a provision (cl 11) dealing with extension of time. Clause 11(b) relevantly stated that "[n]otwithstanding provisions to the contrary contained in this Contract the Builder shall not responsible [sic] for any delays caused by any matter or thing over which the Builder shall have no control" including certain specified matters. Clause 11(c) relevantly provided that upon the happening of any of those events "the Builder shall notify the Owner thereof and shall be entitled to such extension or extensions of time for completion of the Works as shall in the circumstances be agreed and if there shall be any dispute the provisions of Clause 18 [relating to dispute resolution] shall apply". [NAME_47] thought that cases which held that similar clauses excluded the operation of the prevention principle were distinguishable on a number of grounds: The extension of time provisions were in contracts which provided for liquidated damages to be paid by the contractor in the event of delay. Further, the provisions are detailed and very clear about how notice of any delaying event is to be made, to whom it is to be made, when it is to be made, and the consequences of failing to give it. Moreover, in none of the contracts referred to in the cases is there a provision with the kind of overriding words seen in cl 11(b). Finally, in none of the cases were there findings that delay had actually been caused by the proprietor and the proprietor was aware of the delay. (at [61])

1. Those features are not generally features of this case. Here, the clause provides a clear mechanism by which extensions of time are to be granted. The contract provides for liquidated damages. There are no words in cl 9 which are similar to the "overriding words" contained in cl 11(b) of the contract considered by [NAME_47]. And generally the delays on which [COMPANY_1] relies are delays arising from variations to the contract. In those circumstances, in my opinion, the prevention principle has no application in this case. Clearly, however, the right to liquidated damages came to an end when the contract came to an end. Moreover, although [COMPANY_1] has not expressly submitted that it should be entitled to an extension of time for delays arising from lawful suspensions of work, for the reasons explained below, I think that it is entitled to extensions for those periods. 2. [NAME_1] submits that [COMPANY_1] is not entitled to an extension of time for two broad reasons. First, it submits that, in the absence of a works program, it is not possible to determine what activities were on the critical path and consequently it is not possible to determine whether the delay in any activity actually caused delay. Second, it submits that none of the claims for extensions of time on which [COMPANY_1] relies were made in accordance with the contract.

3. I do not accept [NAME_1]' first submission. It was not necessary to have a program of works in order to determine whether a particular event caused actual delay. That question can be answered without a program of works, although the issue of delay still requires an answer to the question whether as a factual matter an event caused a delay in the work. The real issue is whether [COMPANY_1] made proper claims for extensions of time.

4. Clause 9 of the contract required [COMPANY_1] to give written notice of a claim for an extension of time. Under cl 9.2, the notice had to detail the cause of the delay and the extension claimed. The claim had to be made within 10 working days after [COMPANY_1] became aware of "both the cause and the extent of the delay". If it gave a notice that satisfied those requirements, then, under cl 9.3, it was entitled to the claimed extension unless within 5 working days of receiving the notice [NAME_1] gave written notice disputing the extension claimed and "detailing the reasons why the extension of time is disputed". [COMPANY_1] bears the onus of proving that it was entitled to an extension of time, [NAME_1] bears the onus of proving that it gave a notice in accordance with cl 9.3.

5. In addition, in the absence of any evidence to the contrary, I think it should be inferred that any claim for an extension was made within the 10 day period. The 10 day period runs from the time that [COMPANY_1] became aware, relevantly, of the extent of the delay. The extension was to [COMPANY_1]' benefit and the expectation is that it would claim an extension as soon as it was in a position to do so – that is, as soon as it became aware of the extent of the delay. In cases where the delay was caused by variations, that may not have been until work on the variation was complete.

6. The first extension of time of 35 days was claimed in variation no 1 dated 13 September 2006. As I have said, the variation related to changes in levels and set out the work that was required. The last paragraph of the variation stated: This variation forms part of the building contract and will cause the contract period to be extended by 35 working days.

1. In my opinion, the claim for an extension satisfied the requirements of cl 9. It was clear from the notice what the claimed cause of the delay was and the extension sought. There is no reason to think that it was made outside the 10 day period. [NAME_1] did not dispute the claim for an extension within the 5 day period. Consequently, [COMPANY_1] was entitled to the extension.

2. The second extension (of 10 days) was claimed in variation no 4 dated 24 October 2006. It raises the same issues as the extension claimed in variation no 1. Again, [NAME_1] did not dispute the entitlement within 5 working days. In my opinion, [COMPANY_1] was entitled to the extension.

3. The third extension (of 10 days) was claimed in an email dated 26 October 2006 from [NAME_31] to [NAME_28]. It related to delays in obtaining engineering details in relation to the retaining wall adjacent to units 4 and 5. The email foreshadowed that further extensions would be claimed in relation to the actual construction of the retaining wall. In my opinion, the claims satisfied the requirements of cl 9. It was not disputed by [NAME_1] within 5 working days. Consequently, [COMPANY_1] is entitled to the extension.

4. The fourth extension (of 28 days) was claimed in a letter dated 14 November 2006 from [NAME_31] to [NAME_28]. The letter is one of a series concerning variation 6 (relating to the retaining wall adjacent to units 4 and 5). When read in context, it is clear that the claim of 28 days was a claim for the time that it was expected to take to construct the wall and it is implicit in the claim that other work could not commence until the wall was built. In my opinion, the claim satisfied the requirements of cl 9. It was not disputed by [NAME_1] within 5 working days. Consequently, [COMPANY_1] is entitled to the extension.

5. The fifth extension (of 60 days) is said to have been claimed on 13 February 2007. However, the document is not identified in the submissions and there appears to be no claim for an extension of 60 days on that day in the tendered material. On the other hand, there is a claim of 60 days in an email dated 7 March 2007 from [NAME_31] to [NAME_28]. That extension related to shoring works in relation to the retaining wall adjacent to units 4 and 5. The email indicated that [COMPANY_1] intended to engage a specialist contractor to do that work. [NAME_28] replied to that claim on 12 March 2007 saying that he would not agree to a 60 day extension, but gave no reasons. [NAME_31] responded on the same day asking whether [NAME_1]' position was that [COMPANY_1] was not entitled to any extension and reiterating that [COMPANY_1] maintained its claim. [NAME_28] does not appear to have replied to that response. However, [NAME_1] gave its consent to the shoring work proceeding. In my opinion, [COMPANY_1] is entitled to the claimed extension. Its claim satisfied the requirements of cl 9. [NAME_1] disputed the claim within time, it gave no reasons even after it was asked to do so. Consequently, it did not comply with cl 9.3.

6. In the letter dated 23 August 2007, there is a claim for an extension of time of 21 days for adverse weather. In my opinion, that claim does not satisfy the requirements of cl 9. It must have been obvious to [COMPANY_1] at the time of the adverse weather that work would be delayed by reason of the fact that more than 7.5 mm of rain had fallen. The claim does not identify the days when it is alleged that there were delays. It my opinion, it needed to do so in order to comply with the requirements of cl 9.2. Without that information, [NAME_1] had no means of assessing whether to dispute the claim on the grounds, for example, that the requisite amount of rain had not fallen on that day or that notwithstanding the rain work actually continued on the site on that day. In addition, the likelihood is that the days on which rain fell were more than 10 working days before 23 August 2007. Consequently, the likelihood is that [COMPANY_1] was aware both of the cause of the delay and the length of the delay more than 10 working days before it made its claim. It follows that it did not comply with the time stipulation in cl 9.2.

7. The letter dated 23 August 2007 claims 35 calendar days for the Christmas shutdown in 2006/2007. No claim was made in respect of that period prior to that date. Again, it seems to me that the claim is out of time. Clause 9 does not automatically assume that there will be a delay over Christmas. Rather, it proceeds on the basis that a claim must be specifically made, presumably on the basis that it is possible that the builder or some of its subcontractors may choose to work over that period. It must have been obvious well before 23 August 2007 whether the builder had been delayed by Christmas 2006. In those circumstances, [COMPANY_1] has not satisfied the requirements of cl 9 and is not entitled to the claimed extension.

8. It is difficult to reconcile the other extensions claimed in the letter dated 23 August 2007 with earlier claims. However, they appear to be a repetition of previous claims. In my opinion, no additional time should be allowed in respect of those claims.

9. Unsatisfactorily, [COMPANY_1]' submissions do not identify any other claims for an extension of time. It is not for the court to go looking for claims for extensions that are neither pleaded nor referred to in submissions.

10. However, there are two additional categories of extensions that should be considered. The first arises out of the Christmas period in 2007/2008. The second arises from the suspensions. It is obvious that [COMPANY_1] claims to have been delayed by those events and although those events are not specifically referred to, reliance on them is consistent with [COMPANY_1]' general denial that it is liable for liquidated damages.

11. I have already referred to the correspondence sent by [NAME_31] immediately after the Modification Agreement was signed seeking an extension of time for 8 days before the commencement of the Christmas period and 35 days for the Christmas period itself. In my opinion, that claim satisfied the requirements of cl 9 of the contract. There is no evidence to suggest that [NAME_31] was aware before the Modification Agreement was signed that it would not be possible to re-commence work immediately. Consequently, I am satisfied that the claim for an extension was within time. [NAME_1] did not dispute the claim within 5 working days. It follows that [COMPANY_1] is entitled to an extension of 43 days in respect of the 2007/2008 Christmas period.

12. As to suspensions, cl 9.1 has two limbs. It states that the builder is entitled to a reasonable extension if building work is suspended under cl 32 or if the delay arises from a cause beyond the sole control of the builder including various nominated causes. In my opinion, the balance of the clause relating to notice etc only applies to the second limb of cl 9.1. In other words, the procedure for giving notice etc does not apply where the delay arises from a suspension. The suspension of work will obviously cause a delay and the length of the delay will be the length of the suspension. It makes no sense to require the builder in those circumstances to serve a notice detailing the cause of the delay or the extension of time claimed. Nor in the case of a suspension does it make any sense for the owner to have to give notice disputing the claimed extension. Either the suspension is valid or it is not. If it is, then the builder must be entitled to an extension. If it is not, then it is not. It is for that reason that cl 9.1 draws a distinction between delays arising from suspension and other types of delay.

13. It follows that [COMPANY_1] is entitled to extensions for the periods for which it validly suspended work.

14. In my opinion, the first and third suspensions were valid.

15. The first suspension commenced on 8 November 2007 and lasted until 13 December 2007. It was based on the failure to pay for variations 13, 14 and 15 and a failure to provide written evidence to [COMPANY_1]' satisfaction that [NAME_1] could pay all moneys payable under the contract and the failure to establish a security account. [NAME_1] subsequently accepted that the amounts claimed in respect of variations 13, 14 and 15 were payable and paid them. It also failed to establish a security account. It follows that [COMPANY_1] was entitled to an extension of time of 36 days in respect of the first suspension.

16. The third suspension commenced on 13 March 2008 and lasted until 15 April 2008. It was based on a failure to pay amounts due in respect of variations valued by [NAME_30]. [NAME_1] paid part of the amount claimed and eventually made a further payment on 8 April 2008. By making the payment, it accepted that the amount paid was payable in accordance with the Modification Agreement. It follows that [COMPANY_1] was entitled to an extension of time of 34 days in respect of the third suspension.

17. The second suspension commenced on 5 February 2008 and lasted until 15 February 2008. It was based on a failure to pay amounts in respect of variations 14, 15, 16 and 23. It subsequently transpired that [COMPANY_1] had already been paid for variations 14 and 15 and [NAME_1] had sought further information in relation to the other two variations. In my opinion, the suspension notice was not valid.

18. The fourth suspension commenced on 19 June 2008 and lasted until 2 July 2008, when [NAME_1] purported to terminate the contract. It was based on the failure to pay contract price adjustment 5. The onus is on [COMPANY_1] to prove that it was entitled to serve a suspension notice. For the reasons I have given when discussing the amount claimed for contract price adjustment 5, I am not satisfied that it has discharged that onus. Consequently, it is not entitled to an extension of time in respect of that notice.

19. It follows that in all, [COMPANY_1] was entitled to an extension of time of 256 days. The total delay was 372 days. After allowing for extensions of time totalling 256 days, [NAME_1] is entitled to liquidated damages for a delay of 116 days. On that basis, the liquidated damages are $134,560.00.

[COMPANY_1]' loss 1. [COMPANY_1]' loss is the amount that it claims ($317,484.18), less the amount by which its claims for variations should be reduced ($106,330.95) and less the amount of liquidated damages payable by it ($134,560). On that basis, [COMPANY_1] is entitled to judgment in the amount of $76,593.23. It is entitled to judgment for one ninth of that amount ($8,510.36) against the second to ninth defendants. In addition, it is entitled to interest at the rate prescribed by Practice Note SC Gen 16. That interest should run from the date of termination of the contract (2 July 2008) to the date of judgment. On that basis, the interest to which [COMPANY_1] is entitled is $42,524.72.

[NAME_1]' claim for breach of contract 1. On the conclusions I have reached, [NAME_1]' claim must fail. However, in the event that I am wrong in my conclusion that [NAME_1] wrongfully terminated the contract, I should say something about its claim. 2. [NAME_1] claims to be entitled to damages falling under four heads. First, it claims an amount representing the costs of completing the contracted-for work. Second, it claims liquidated damages. Third, it claims the amount it says it overpaid for variations. Lastly, it claims consequential loss it said it suffered as a result of the delay in completing the contracted-for works. Those consequential losses are the additional interest expenses it incurred up until the time the units were sold.

3. In principle, [NAME_1] should be entitled to recover any costs additional to those it would have had to pay [COMPANY_1] to complete the contracted-for work. The difficulty, however, is that [NAME_1] has not proved what those costs were. It has proved that it engaged another builder ([NAME_33]) and that that builder did work for which [NAME_1] paid. However, what it has not proved is that the work that [NAME_33] did was the work necessary to complete the contracted-for works. [NAME_1] tendered the contract it entered into with [NAME_33] and invited the court to infer that the work described in that contact was the work necessary to complete the contracted-for work. However, in the absence of any evidence, it is not possible from the contract alone to reach that conclusion. Consequently, I am not satisfied that [NAME_1] incurred any additional costs in completing the contracted-for work. 4. [NAME_1] is obviously entitled to liquidated damages for the delay. I have already assessed those damages at $134,560.00.

5. For the reasons I have given, I do not accept that [NAME_1] is entitled to recover amounts that it has paid in respect of variations. Moreover, it remains liable to pay amounts due to [COMPANY_1] before termination. In calculating the damages recoverable by [COMPANY_1], I have already determined the amount to which [COMPANY_1] was entitled before termination in respect of variations that had not been paid. That amount was the amount claimed by [COMPANY_1] ($174,155.66) less the amount that I held was not recoverable ($106,330.95), making a total of $67,824.71. The calculation is no different in this context. Consequently, [NAME_1] would still be liable to pay [COMPANY_1] $67,824.71 in respect of variations.

6. If [COMPANY_1] wrongfully repudiated the contract, that wrongful repudiation obviously caused [NAME_1] delay in completing the project and selling the units for which it has not been compensated. In my opinion, it is reasonable to calculate the loss [NAME_1] suffered as a consequence of that delay as the amount it incurred in interest and charges between the time of termination and the time the units were sold. It is not disputed that that amount is $376,293.74.

Orders 1. The orders of the court are: 1. Judgment in favour of the plaintiff against the first defendant in the sum of $119,117.95. 2. Judgment in favour of the plaintiff against each of the second to ninth defendants in the sum of $13,235.33. 3. The cross-claims be dismissed. 1. I will hear the parties in relation to costs if they cannot agree on costs.

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