PHHH Investments No 2 Pty Ltd v United Commercial Projects Pty Ltd

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IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

BUILDING CASES LIST

Revised

Not Restricted

Suitable for Publication

Case No. CI-18-01563

PHHH Investments No 2 Pty Ltd (ACN 602 191 506)

Plaintiff

United Commercial Projects Pty Ltd (ACN 110 860 369)

Defendant

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JUDGE:

His Honour Judge Woodward

WHERE HELD:

Melbourne

DATE OF HEARING:

22–26 February; 2–5 March and 9 March 2021; final oral

closing submissions 19 November 2021

DATE OF JUDGMENT:

5 April 2023

CASE MAY BE CITED AS:

PHHH Investments No 2 Pty Ltd v United Commercial

Projects Pty Ltd

MEDIUM NEUTRAL CITATION:

[2023] VCC 516

REASONS FOR JUDGMENT

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Subject: CONTRACTS

Catchwords: Building and construction – building contract – whether regime for

determination of claims under the contract is exclusive – whether

claims can be re-opened either under the contract or because of

superintendent’s lack of impartiality – assessment of variations and

extensions of time – whether date for practical completion brought

forward by owner taking possession for kindergarten open days –

calculation of liquidated damages – assessment of defect claims -

leave to file and serve further amended defence and counterclaim –

admissibility of additional documents following the close of evidence

Legislation Cited: County Court General Civil Procedure Rules 2018 (Vic) (“Rules”); Civil

Procedure Act 2010 (Vic)

Cases Cited: Allmore Constructions Pty Ltd v K7 Property Group Pty Ltd [2016]

VCAT 1770, Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd

[2002] NSWCA 211, Kane Constructions Pty Ltd v Sopov [2005] VSC

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237, Bellgrove v Eldridge (1954) 90 CLR 613, Tabcorp Holdings Ltd v

Bowen Investments Pty Ltd (2009) 236 CLR 272, Metricon Homes Pty

Ltd v Softley [2016] VSCA 60, The Owners - Strata Plan No 76674 v Di

Blasio Constructions Pty Ltd [2014] NSWSC 1067, Turner Corporation

Ltd (Receiver and Manager Appointed) v Austotel Pty Ltd (1994) 13

BCL 378, Director of War Services v Harris [1968] Qd R 275, Linden

Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1993] 3 All ER 417,

De Cesare v Deluxe Motors Pty Ltd (1996) SASR 28, Westpoint

Management Ltd v Chocolate Factory Apartments Ltd [2007] NSWCA

253, Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012]

NSWCA 184, Aon Risk Services Australia v Australian National

University (2009) 239 CLR 175, Traffic Technique Pty Ltd v Burgmann

[2020] VSCA 319

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APPEARANCES:

Counsel

Solicitors

For the Plaintiff

Mr J Richardson

Noble Lawyers

For the Defendant

Mr S Stuckey QC with

Mr N Andreou

Macpherson Kelley

[2023] VCC 516

JUDGMENT

Table of Contents

Table of Contents .................................................................................................................. 1

Summary and Outcome ......................................................................................................... 3

Factual background ............................................................................................................... 5

The proceeding ...................................................................................................................... 7

The lead up to trial ............................................................................................................. 7

Trial and closing submissions ............................................................................................ 9

Witnesses .......................................................................................................................... 9

Key terms of the Contract .................................................................................................... 11

Issues .................................................................................................................................. 15

Can UCP dispute PC 16 Rev A and the decisions of the architect pursuant to the Contract?

............................................................................................................................................. 16

Contract construction ....................................................................................................... 16

Can UCP dispute PC 16 Rev A and the decisions of the architect due to the conduct of the

architect? ............................................................................................................................. 23

Particular variations ......................................................................................................... 24

Processing variations ...................................................................................................... 27

Variations register............................................................................................................ 29

Communications in relation to variations ......................................................................... 29

Defects ............................................................................................................................ 31

Breach of clause A6.4 of the Contract ............................................................................. 33

PHHH’s submissions ....................................................................................................... 34

Analysis ........................................................................................................................... 37

Did PHHH breach clause A6.4 of the Contract? .............................................................. 46

How should the disputed variations be resolved? ................................................................ 48

Variations which the experts agreed................................................................................ 48

Variation 48 Rev A........................................................................................................... 48

Variation 55 ..................................................................................................................... 50

Variation 56 Rev A........................................................................................................... 51

Variation 58 Rev A........................................................................................................... 51

Variation 59 ..................................................................................................................... 52

Variation 62 Rev A........................................................................................................... 53

Variation 80 ..................................................................................................................... 53

Variation 84 ..................................................................................................................... 54

Variation 88 ..................................................................................................................... 55

Variation 89 ..................................................................................................................... 55

Variation 99 ..................................................................................................................... 56

Variation 94 Rev B........................................................................................................... 57

Variation 96 ..................................................................................................................... 58

Variation 26 and 30 ......................................................................................................... 59

Is PHHH entitled to liquidated damages in the amount certified or some other amount? .... 60

Is PHHH is entitled to liquidated damages? .................................................................... 60

What is the quantum of PHHH’s liquidated damages? .................................................... 63

Amounts owed by UCP to PHHH for breach of contract and restitution .............................. 76

Is PHHH entitled to damages for defective work by UCP? .................................................. 77

What defects are agreed? ............................................................................................... 78

[2023] VCC 516

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What is UCP’s liability for the disputed defects? ............................................................. 78

Should PHHH’s damages be reduced because it denied UCP the opportunity to

undertake rectification works at lower cost? .................................................................... 85

Does PHHH’s sale of the property reduce the amount of the defects damages it can

claim? .............................................................................................................................. 94

Variation 37 Claim ............................................................................................................... 99

Utilities Claim ..................................................................................................................... 101

Incidental matters .............................................................................................................. 102

UCP’s application to file and serve further amended counterclaim ............................... 102

Admissibility of Tranche 14 ............................................................................................ 112

[2023] VCC 516

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HIS HONOUR:

Summary and Outcome

1 By a contract dated 16 March 2016 (“Contract”), the plaintiff (“PHHH”) engaged

the defendant (“UCP”) to construct a childcare centre at 282–284 Victoria Street,

Brunswick, Victoria (“Site”), for $3,833,665.00 (inc GST) (“Contract Price”). All

dollar sums referred to below include GST, unless stated otherwise.

2 During the course of the Contract:

(a) UCP claimed 99 variations. Of these, the architect, Insite Architects (the

representative of which was Mr Luciano Palma) (“the architect”), approved

variations totalling $416,841.80;

(b) UCP claimed 44 extensions of time (“EOT”) and the architect certified EOTs

totalling 4.5 working days (less than the 10-day allowance under the

Contract);

(d) on 23 August 2017, the architect issued progress certificate “No. 016 – Rev

A” certifying that $322,493.54 was payable by UCP to PHHH (“PC 16 Rev

A”); and

(e) UCP did not pay PHHH the amount certified by PC 16 Rev A.

3 The ultimate question for determination in this proceeding is: what is the final

adjusted Contract Price? PHHH claims that the adjusted Contract Price taking

account of PC 16 Rev A is $4,250,506.80 (comprising the amounts certified in

PC 16 Rev A as “Revised Contract Price” of $4,241,638.36 plus the “Total of

This Claim” of $8,864.44) and that PHHH is therefore entitled to restitution for

overpayments under the Contract in a sum totalling $288,774.57. This comprises

an amount of $40,310.37 that UCP admits was overpaid, plus $248,464.20 in

[2023] VCC 516

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payments by PHHH to UCP in respect of unapproved variations. UCP

counterclaims that the adjusted Contract Price is $5,463,855.14 and that PHHH

owes it $923,689.42.

4 In addition to the adjusted Contract Price calculated based on PC 16 Rev A

summarised above, PHHH claims the allowances in that Progress Certificate for

liquidated damages of $324,000.00 and utilities of $7,361.98. These amounts

total $331,361.98.

5 Finally, PHHH claims that UCP breached the Contract as:

(a) UCP’s work was defective or incomplete and that PHHH is entitled to

damages for such breach; and

(b) UCP failed to pay for utilities incurred during the works and is liable to repay

amounts paid by PHHH for utilities.

6 For the reasons below, I have determined that the adjusted Contract Price is the

$4,250,506.80 as submitted by PHHH, and thus PHHH has overpaid UCP a total

of $288,774.57. UCP must give restitution in that sum. Further, UCP must pay

PHHH $331,361.98 for the certified amounts of liquidated damages, plus

damages for defects totalling $174,191.55. There will therefore be judgment for

PHHH against UCP for $794,328.10, plus interest and costs.

7 On the question of interest and costs, PHHH is entitled to interest pursuant to the

Contract at 10% per annum on the amount certified by PC 16 Rev A and unpaid

($322,493.54), from 10 March 2018, being the date this was due for payment by

PHHH. My preliminary view is that the balance of the judgment amount will incur

interest pursuant to s60 of the Supreme Court Act 1986 at the penalty interest

rate, on and from the date of the writ (12 April 2018).

8 On costs, in my view, despite having some claims found against it as set out

below, PHHH has been overwhelmingly successful in the pursuit of its claims.

[2023] VCC 516

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Thus, unless a party can point to an offer of compromise or other sustainable

basis for a different order, I will order that UCP pay PHHH’s costs of the

proceeding (including reserved costs) on the standard basis in default of

agreement.

9 I also confirm my rulings during the hearing:

(a) refusing UCP’s application to file and serve a further amended defence and

counterclaim; and

(b) that the second Powercor invoice is inadmissible.

10 The parties will be invited to check my arithmetic on the various sums awarded

and agree on the form of orders to give effect to these reasons, including on

interests and costs. Failing agreement, they are directed to submit brief written

submissions in support of the orders they seek. Final orders will then be made on

the papers.

Factual background

11 Patrick Honeyborne is the sole director and company secretary of PHHH. In

2014, PHHH purchased the Site with the view to developing it into a childcare

centre that PHHH would continue to own after completion, but would be let out

on a long-term lease to Happy Hippo Kindergarten and Childcare Pty Ltd

(“Happy Hippo”). Mr Honeyborne’s wife, Heather Honeyborne, is the sole director

and company secretary of Happy Hippo. Tendering for the development of the

kindergarten occurred in 2015 and on 16 March 2016, UCP was contracted by

PHHH to complete the project.

12 The Contract was a “build only” ABIC SW-2008 Simple Works Contract. The

relevant terms of the Contract are set out in the following section of these

reasons. As noted above, Insite Architects was appointed to administer the

Contract. Mr Luciano Palma, an associate architect and contract administrator

with Insite Architects, was appointed as the architect’s representative.

[2023] VCC 516

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13 On or about 1 June 2017, PHHH and Happy Hippo entered a lease of the site,

which commenced on 1 July 2017 for an initial 20-year term.

14 The certificate of practical completion was not issued by the architect until 21

July 2017 and there was no final certificate issued by the architect. The parties

dispute the date on which practical completion of the project was achieved.

PHHH asserts that the practical completion was achieved on or about 21 July

2017, as certified by the architect. UCP contends that it occurred when PHHH

took possession of the site – in around April or May 2017.

15 On 23 August 2017, the architect issued PC 16 Rev A which certified that UCP

was to pay PHHH $322,493.54. More particularly, by PC 16 Rev A, the architect

certified that:

(a) the revised Contract price is $4,241,638.36;

(b) the progress claim for PC 16 Rev A totalled $8,868.44; but

(d) there is a deduction of $401.98 for water usage paid by PHHH;

(e) there is a deduction of $6,960 for electricity usage paid by the owner; and

(f) therefore the “Amount for Payment to PHHH Investments No. 2 Pty Ltd”

was $322,493.54.

16 The architect issued the final progress certificate (PC 17) on 20 September 2017,

but this did not make any further adjustments to the amounts stated and certified

in PC 16 Rev A.

17 On 23 February 2018, PHHH delivered PC 16 Rev A and a tax invoice to UCP by

email. PHHH claims that UCP’s failure to pay PC 16 Rev A and the associated

invoice by 9 March 2018 constitutes a breach of subclause N6.1 of the Contract.

UCP asserts that the amounts certified in PC 16 Rev A are incorrect and that it is

[2023] VCC 516

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not liable to pay PHHH. UCP argues that PC 16 Rev A is not of contractual force

and the amounts certified in it are re-enlivened for determination in this

proceeding.

18 In March 2018, PHHH put the Site up for sale and on or about 17 April 2018, it

was sold to an unrelated entity, Duongquynh Pty Ltd, for $7,375,000 by contract

of sale. Settlement occurred on 22 June 2018. Happy Hippo (under the control of

Mrs Honeyborne) remains the tenant of the Site, running its childcare business

from the premises.

19 Around this time, PHHH and UCP were party to other proceedings related to the

project:

(a) In October 2017, PHHH commenced proceedings in the Supreme Court for

an injunction or order that UCP provide it with two unconditional bank

guarantees. This proceeding was dismissed in March 2018.

(b) In January 2018, PHHH commenced proceedings in the Supreme Court

seeking review of an adjudication determine under the Building and

Construction Industry Security of Payment Act 2002. This proceeding was

dismissed in the same month.

20 Following the sale of the Site, on 16 July 2018, the architect issued a defects

inspection report by way of “Architects Instruction” (“AI”) No. 649.

The proceeding

The lead up to trial

21 This proceeding was commenced by PHHH on 12 April 2018, for the recovery of

delay liquidated damages. While UCP filed a notice of appearance, UCP failed to

file a defence and default judgment was entered on 6 June 2018. This was set

aside on 6 July 2018. The proceeding thereafter progressed as follows:

[2023] VCC 516

JUDGMENT

(a) on 1 August 2018, PHHH filed an amended statement of claiming adding

various other claims and on 31 August 2018, UCP filed a defence and

counterclaim;

(b) on 2 November 2018, the proceeding was fixed for trial on 8 July 2019, on

an estimate of 8 to 10 days;

and on 5 and 6 December 2018, UCP filed an amended defence and

counterclaim respectively;

(d) on 21 December 2018, UCP made an application by summons for security

for costs and in April 2019, this application was dismissed;

(e) a short time later, the trial date of 8 July 2019 was vacated;

(f) the ruling dismissing UCP’s application for security for costs was later

overturned by the Court of Appeal, and PHHH was ordered to provide

security for costs of the proceeding until the completion of mediation, in the

sum of $85,000;

(g) in October 2019, the proceeding was re-fixed for trial on 29 June 2020;

(h) in November 2019, UCP made an application for judgment or to strike out

of certain claims made by PHHH pursuant to r23.01(1) of Rules;

(i) on 6 December 2019, this application was dismissed;

(j) on 28 May 2020, UCP made an application to join Mackey Brothers &

Company Roofing Pty Ltd (“Mackey Bros”) and Matthew Mackey (together

“the Mackey parties”) as third parties to the proceeding and for adjournment

of trial;

United Commercial Projects Pty Ltd v PHHH Investments No 2 Pty Ltd [2019] VCC 333.

United Commercial Projects Pty Ltd v PHHH Investments No 2 Pty Ltd [2019] VSCA 192.

[2023] VCC 516

JUDGMENT

(k) on 12 June 2020, UCP was granted to leave to file and serve a third-party

notice joining the Mackey parties, and the proceeding was re-fixed for trial

on 23 November 2020;

(l) on 25 August 2020, the trial date was once again vacated and the

proceeding was refixed for trial on 22 February 2021; and

(m) the third party proceeding against the Mackey parties was dismissed by

consent of UCP and the Mackey parties on 4 February 2022, following a

settlement agreed between those parties.

22 It was revealed during the course of the trial that the settlement between UCP

and the Mackay parties included terms for a payment of around $100,000 by the

Mackay parties to UCP, with that sum to be held by the solicitors for the Mackay

parties and released only by court order or the consent of the Mackay parties

and UCP.

Trial and closing submissions

23 Trial commenced from 22 February 2021 and the evidence concluded on 9

March 2021. On this date, I ordered that UCP file and serve written closing

submissions by 12 April 2021, PHHH do likewise by 23 April 2021 and UCP file

and serve any submissions in reply by 30 April 2021. There were some minor

delays in the filing and service of written submissions, which ultimately concluded

with the filing and service of UCP’s reply submissions on 6 May 2021. I heard

brief oral closing submissions on 19 November 2021. The entirety of the hearing

(including final oral submissions) was conducted remotely over Zoom.

Witnesses

24 The lay evidence-in-chief was given primarily by lengthy witness statements, with

some supplementation by oral evidence-in-chief. PHHH called Mr Honeyborne,

the architect Mr Palma and Mrs Honeyborne. UCP called Mark Potter, UCP’s

construction director and Tamar Soliman, a director of UCP.

[2023] VCC 516

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25 I relation to expert witnesses, PHHH relied on:

(a) David Watson, engineer, in relation to extensions of time;

(b) Trevor Jeffrey, quantity surveyor and project manager, in relation to

variations;

roofing defects;

(d) Richard Drew, structural engineer, in relation to Variation 37; and

(e) Robert Quick, licensed plumber and consultant in building matters

specialising in plumbing and roofing, in relation to roofing defects.

26 UCP relied on:

(a) Peter Quigley, architect, in relation to extensions of time, variations and

defects generally;

(b) Peter Wenning, plumbing inspector and licensed plumber, in relation to

quantum and roofing defects;

(d) Douglas Buchanan, quantity surveyor, in relation to defects generally; and

(e) Robert Lorich, building consultant, in relation to defects generally.

27 The experts gave evidence by way of expert reports, joint reports and concurrent

oral evidence at trial, in a variety of combinations. Generally speaking, the

experts worked cooperatively and constructively during the process of the

witness conclaves and the concurrent evidence. They were able to narrow down

the issues in dispute and made helpful and appropriate concessions. I found the

evidence of some of the expert witnesses more persuasive than others, and I

give my reasons for this when discussing their evidence below.

[2023] VCC 516

JUDGMENT

Key terms of the Contract

28 Schedule 1 of the Contract contains the Contract information, the key items of

which are as follows:

(a) the Contract Price is $3,833,665.00 (Item 4);

(b) the interest rate on overdue amounts is 10% per annum (Item 28);

(d) as agreed by the parties, the date for practical completion is 16 March 2016

(Item 22); and

(e) the rate for liquidated damages is $2,000 per calendar day (Item 24).

29 The key clauses of the Contract are as follows (emphasis in original):

“A Overview

…

A4 Obligations of the owner

The owner must:

a subject to subclause A2.1e, obtain and give to the contractor

all *official documents required to begin the *works and any

shown in item 30b of schedule 1

…

c give [access to] to the *site in accordance with this contract

…

A6 Architect to administer contract

…

The architect is the owner's agent for giving instructions to the

contractor. However, in acting as assessor, valuer or certifier, the

architect acts independently and not as the agent of the owner.

.4 The owner must ensure that the architect, in acting as assessor,

valuer or certifier, complies with this contract and acts fairly and

impartially, having regard to the interests of both the owner and the

contractor. The owner must not compromise the architect's

independence in acting as assessor, valuer or certifier.

…

A8 Disputing architect’s certificate, written decision or failure to act

.1 If a *party wishes to dispute a certificate, notice, written decision or

written assessment issued by the architect, or to dispute the failure of

the architect to do something, the *party must give written notice under

this clause within 20 *working days after:

a receiving the certificate, notice, written decision or written

assessment or

b becoming aware of the failure of the architect to issue

something.

.2 If the *party fails to give a notice under subclause A8.1, the *party will

not be entitled to dispute the matter at all.

[2023] VCC 516

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.3 The architect must assess a notice given under subclause A8.1 and

give a written decision to the *party and the other *party within 10

*working days.

.4 If a *party wishes to dispute a written decision given under subclause

A8.3, or the architect’s failure to give a decision, the requirements of

section P apply.”

…

F The site

F1 Owner to give contractor possession of the *site

.1 The owner must give the contractor [access to] the *site within ten

working days after the owner:

…

c has received, or the architect as agent of the owner has

received, any *official documents required under item 30a of

schedule 1.

…

H Claims to adjust the contract

H1 Time for making a *claim to adjust the contract

.1 The contractor is entitled to make a *claim to adjust the contract only if

the contractor:

a *promptly notifies the architect in writing of its intention to make

a claim after receiving an instruction or, if no instruction is

issued, *promptly notifies the architect after becoming aware of

an event that will result in a claim and

b submits the detailed *claim to adjust the contract to the

architect within a time agreed in writing between the contractor

and the architect or, if no time is agreed, within 20 *working

days after receiving an instruction or, if no instruction is issued,

within 20 *working days after becoming aware of the event that

has resulted in the claim and, for these purposes, an event is

not a consequence of an instruction.

.2 If the claim results from an instruction to proceed with a *variation, the

requirements for submission of the claim are set out in clause H2.

.3 If the claim results from a delay in the progress of the *works, the

contractor is not required to give the first notification required under

subclause H1.1, but the detailed claim must be submitted within 20

*working days after the delay ends.

H2 Details required for claim

.1 A *claim to adjust the contract must contain the following details:

a identification of the architect's instruction, or a copy of the

*official document that caused the claim or, where none has

been issued, details of the event and the basis for the claim

…

H3 Architect to assess claim

.1 The architect must *promptly assess the *claim to adjust the contract

and in so doing the architect must consider the detailed claim

submitted by the contractor and any further information the architect

requests the contractor to supply.

.2 If the architect needs additional information to assess the claim, the

architect must issue a written request to the contractor.

.3 The contractor must *promptly give to the architect any additional

information the architect reasonably requests.

H4 Architect to give assessment

.1 The architect must, within 20 *working days after receiving the claim,

issue to the contractor and to the owner its written decision specifying

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any adjustment to the *contract price or any adjustment to the date for

*practical completion, or both.

.2 The contractor may dispute the architect's decision or a failure to issue

a decision issued under this clause in accordance with clause A8 but,

in accordance with clause P1, must continue to perform its contractual

obligations.

H5 Sum recoverable for claim for *adjustment of time costs

.1 Where a sum or sums per day is shown in item 18 of schedule 1, a

claim by the contractor is limited to that sum [no sum is shown in item

18 of schedule 1]. If no sum or sums per day is shown, the contractor

is entitled to an adjustment to the *contract price equal to the loss,

expense or damage it incurs as a result of the approval of an

adjustment by the architect to the date for *practical completion.

H6 Architect may adjust contract in absence of claim

.1 If the contractor has not made a *claim to adjust the contract in

relation to any change which results from complying with any

instruction under section J for a *variation or from causes of delay

noted in clause L1 or L2, the architect may adjust the contract at any

time up to the issue of the final certificate under clause N11, or a

certificate under clauses Q9 or Q17.

J Variation to the works

…

J5 Adjustment to the contract after written instruction to proceed

.1 If the architect issues a written instruction to proceed that confirms

acceptance of a quotation, the architect must adjust the *contract price

and the date for *practical completion (if applicable) in accordance

with the quotation in the next certificate.

L Adjustment of time

L1 Causes of delay which entitle making a claim for adjustment of

time with costs

.1 The contractor may make a claim for an adjustment to the date for

*practical completion and *adjustment of time costs in respect of a

delay affecting *working days, caused by:

…

b the owner failing to give [access to] the *site in accordance with

clause F1

c an architect's instruction

…

.4 The requirements for making a *claim to adjust the contract and the

procedures to be followed are stated in section H.

L2 Causes of delay which entitle making claim for adjustment of time

without costs

…

.2 The requirements for making a *claim to adjust the contract and the

procedures to be followed are stated in section H.

…

L6 Overlapping delays

.1 Subject to clauses L4 and L5, when one or more *critical construction

activities are delayed by more than one cause at the same time, the

architect must assess and *claim to adjust the contract in accordance

with this clause L6.

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…

M Completion of the works

M1 Practical completion

.1 The contractor must bring the*works to *practical completion by the

date for *practical completion shown in item 22 of schedule 1 is

adjusted in accordance with this contract. The *works are at *practical

completion when, in the reasonable opinion of the architect:

a they are substantially complete and any incomplete *necessary

work or *defects remaining in the *works are of a minor nature

and number, the completion or rectification of which is not

practicable at that time and will not unreasonably affect

occupation and use

b all commissioning tests in relation to the plant and equipment

shown in item 23 of schedule 1 have been carried out

successfully and

c any approvals required for occupation have been obtained

from the *relevant authorities and copies of the *official

documents evidencing the approvals have been provided to

the architect.

.2 Subject to clause M11, the owner takes possession of the *works at

4.00pm on the date the architect issues the notice of *practical

completion.

…

M8 Possession of the *works before *practical completion

.1 If the owner takes possession of the *works before the architect issues

the notice of *practical completion, the *works are to be treated as

having reached *practical completion. The architect must issue to the

contractor and to the owner a notice of *practical completion within five

*working days after being notified in writing that the owner has taken

possession, unless clause M4 applies.

.2 If the owner takes possession of the *works before the architect issues

a notice of *practical completion, the contractor may make a *claim to

adjust the contract.

.3 The requirements for making a *claim to adjust the contract and the

procedures to be followed are stated in section H.

M9 Liquidated damages may be payable

.1 If the *works have not reached *practical completion by the date for

*practical completion as adjusted, the architect must *promptly notify

the contractor and the owner in writing of the owner’s entitlement to

liquidated damages.

.2 Up to 20 *working days after the date of issue of the notice of

*practical completion, the owner may notify the architect in writing

whether it will enforce its entitlement to liquidated damages against

the contractor.

.3 The contractor is liable to pay or allow to the owner liquidated

damages at the rate shown in item 24 of schedule 1.

M10 Deduction of liquidated damages

.1 If the owner notifies the architect in writing under clause M9, then the

architect must:

a notify the contractor of the owner’s decision within one

*working day, and

b deduct liquidated damages from the next and subsequent

progress certificates as applicable.

.2 If, after the architect has issued a certificate in which an allowance for

the owner’s entitlement to liquidated damages has been made, an

adjustment is made to the date for *practical completion, with the

result that the owner’s entitlement to liquidated damages is altered, or

[2023] VCC 516

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the owner has advised that it no longer wishes to enforce its

entitlement to liquidated damages, the architect must make an

appropriate adjustment in the next certificate.

M11 Contractor to correct *defects and finalise *necessary work

.1 The contractor must correct any *defects or finalise any incomplete

*necessary work, whether before or after the date of *practical

completion, within the agreed time as stated in an instruction or if no

time is stated, within 10 *working days after receiving a written

instruction from the architect to do so.

…

N Payment for the works

…

N4 Progress claims - procedure for architect

…

.4 If the architect reasonably needs additional information to assess the

claim, the architect must *promptly ask the contractor for it. If that

information is needed to assess only part of the claim, the architect

must assess the rest of the claim.

…

S Definitions

S1 Definitions

…

claim to adjust the contract a claim made to the architect to adjust the

*contract price (including *adjustment of time

costs) or the date for *practical completion or

both

Issues

30 The key issues at trial were:

(a) Can UCP dispute PC 16 Rev A and the decisions of the architect pursuant

to the Contract?

(b) Can UCP dispute PC 16 Rev A and the decisions of the architect due to the

conduct of the architect?

(d) Is PHHH entitled to liquidated damages in the amount certified or some

other amount?

(e) Is PHHH entitled to damages for defective work by UCP?

31 These issues will be dealt with in turn below.

[2023] VCC 516

JUDGMENT

Can UCP dispute PC 16 Rev A and the decisions of the architect pursuant to the

Contract?

32 It is not in dispute that the form of PC 16 Rev A is valid and will bind the parties

unless it is tainted by fraud, collusion or other misconduct.

However, UCP seeks

in effect to re-open the decisions of the architect that are (ultimately) reflected in

PC 16 Rev A on either or both of two grounds. UCP’s primary ground is that the

architect’s certifications are tainted by misconduct. But it says that if the court

rejects its contentions on this ground, the question remains justiciable. It relies

for this purpose on a finding by Senior Member R Walker in Allmore

Constructions Pty Ltd v K7 Property Group Pty Ltd

(“Allmore”). The second

ground is more straightforward, so I turn to this first.

Contract construction

33 Clause H6 is set out above. It provides in effect that if UCP has not made a claim

to adjust the Contract in relation to any change which results from a variation to

the works or an EOT, the architect may adjust the Contract at any time up to the

issue of a final certificate.

34 In its written reply submissions, UCP sets out the following passage from Allmore

(emphasis added):

“In case I should find the claims made were not in accordance with the

requirements of the Contract, counsel for the Builder relied upon Clause

H6 of the Contract and submitted that, since a final certificate has not

been issued, it is open to me to allow an extension of time pursuant to

that clause, even though the requirements of the Contract were not

complied with. The full wording of that clause is set out in paragraph 23

above. The power is available ‘If the Contractor has not made a claim to

adjust the Contract in relation to any change…’ of the nature described,

and if it is available, the Architect is empowered to ‘…adjust the Contract

at any time up to the issue of the final certificate…’

Since no final certificate has been issued it is submitted on behalf of the

Builder that the power conferred by this clause may still be exercised

and that it is open to me to exercise it now.

…

LexisNexis, Halsbury’s Laws of Australia (online at 7 December 2021) 65 Building and Construction,

‘III Performance’ at [65-865].

[2016] VCAT 1770.

[2016] VCAT 1770 at [150]-[151] and [162]-[163], per Senior Member R Walker.

[2023] VCC 516

JUDGMENT

I think the fallacy in this argument [that H6 applies] is that a claim is

either a valid claim for an extension of time or it is not. If it is valid, then

recourse need not be had to Clause H6. It is invalid, then a claim for an

extension of time has not been made because the requirements for it

have not been satisfied. If the requirements have not been satisfied it is

not a claim of the nature contemplated by the Contract.

It seems to me that I am now standing in the shoes of the Architect and,

if I consider that it would be fair and reasonable to grant any of the

extensions of time that are sought, I should do so. I should therefore look

at each of the claims on the merits rather than ignore them on the basis

that the contractual procedures were not followed. That is not to say, of

course, that the procedures set out in the Contract should be ignored by

the Builder. As was pointed out in the case cited, if a timely claim has not

been made, and the ground on which an extension of time is claimed is

now difficult to decide because of the time that has elapsed since the

time the claim should have been made, that may be a ground on which

an extension should fairly be refused. However that does not appear to

be the case here”.

35 UCT next submits as follows (references omitted):

“Palma’s evidence regarding the EOT claims is that the claims did not

comply with the contractual requirements because there had been no

service (or no service in a timely manner) of a Notice of Likely Delay…

Alternatively he contends that a claim was not made under the Contract.

On the Owner’s case, the EOTs were either not valid claims under the

Contract, or the claims were simply not made. In either case it is

submitted that the Court can, as the Tribunal did in Allmore

Constructions, assess the merits of the EOT claims. The Owner cannot

have its cake and eat it as well.

In any event, and contrary to the Owner’s Closing Submissions, PC 16

Rev A was the subject of a notice of dispute. On 1 September 2017, the

Owner issued a notice disputing the Architect’s failure to issue a

certificate In response, on 4 September 2017 the Architect issued PC 16

Rev A. On 8 September 2017, the Builder sent an email to the Architect

and the Owner disputing PC 16 Rev A. Therefore, it cannot be argued by

the Owner that the subject matter of PC 16 Rev A is not justiciable under

the Contract (leaving aside that it may be justiciable for other reasons).”

36 This argument based on the findings in Allmore was developed for the first time

in UCP’s written reply submissions, and was therefore not the subject of

submissions on behalf of PHHH until oral closing submissions. Those

submissions approached the issue as essentially one of construction of clause

H6, in the context of the Contract as whole. The effect of PHHH’s submissions

(as I understood them) was as follows:

[2023] VCC 516

JUDGMENT

(a) The expression “claim to adjust the contract” is defined by the Contract as:

“a claim made to the architect to adjust the *contract price (including

*adjustment of time costs) or the date for *practical completion or both”

(asterisked terms are defined terms).

(b) Thus a “claim” is simply a demand to adjust one of those two things – it is

not circumscribed by time, nor by whether or not it is accompanied by

particular information.

details that the claim must contain, but these are not pre-requisites as to

whether the claim qualifies as a “claim to adjust the contract”. Rather, these

are criteria for the architect to assess whether or not to approve the claim.

(d) Clause H3 sets out the process of that assessment and clause H4.1 obliges

the architect to issue its written decision specifying any adjustments within

20 working days after receiving the claim.

(e) Clause H4.2 expressly provides that UCP (emphasis added) “may dispute

the architect’s decision or a failure to issue a decision issued under this

clause in accordance with clause A8”.

(f) Clause A8 (set out in full above) is the exclusive regime for disputing

certifications of claims made – it provides in clear terms that if a party fails

to give a notice of dispute under that clause “the party will not be entitled to

dispute the matter at all”.

(g) But a claim that fails because it is rejected by the architect or because the

contractor fails to dispute it as required by clause A8, is still a claim made. It

is analogous to a claim under a claims-made insurance policy. There may

be other conditions precedent to indemnity or other conditions or

exclusions, but an excluded claim is still a claim.

[2023] VCC 516

JUDGMENT

(h) The effect of UCPs submission is that a claim that (for example):

(i) is out of time under clause H1;

(ii) fails to include the necessary details under clause H2; or

(iii) the contractor fails to dispute under clause A8,

ceases to be a “claim to adjust the contract” within the meaning of the

Contract, and thus becomes amenable to an adjustment under clause H6

by the architect, or by the court standing in the shoes of the architect.

(i) This defies common sense. It essentially means that, by the contractor’s

recalcitrance or delinquency, it gets a second chance to pursue its claims.

This, in turn, would mean that a court or VCAT would be routinely called on

to exercise the role of the superintendent under clause H6 (or its

equivalents) wherever a significant dispute develops between parties to a

standard building contract.

(j) Allmore is wrongly decided. First, contrary to the Senior Member’s finding, it

gets no support from the decision of the NSW Court of Appeal in Peninsula

Balmain Pty Ltd v Abigroup Contractors Pty Ltd

(“Peninsula Balmain”). The

clause under consideration in that case is markedly different from clause H6

of the Contract.

(k) Second, the wording of clause H6 could hardly be clearer – it is only

engaged if a contractor has not made a claim. The clause does not say: “If

a contractor has not made a valid claim”.

(l) Properly construed, clause H6 operates to “sweep up” potential claims

under the Contract’s variation or EOT regime, where (for example) the

making of a claim has been overlooked. It does not apply where a claim has

[2002] NSWCA 211.

[2023] VCC 516

JUDGMENT

been made but rejected because the requirements for it have not been

satisfied.

(m) Here, the court is not entitled to adjust the contract price in the shoes of the

architect pursuant to clause H6 as the adjustments sought by UCP were all

submitted to the architect during the course of the Contract and rejected.

37 The principles of construction that are to be applied to a commercial contract like

the Contract are well established.

In determining the meaning of the terms of a

commercial contract, it is necessary to ask what a reasonable businessperson

would have understood those terms to mean. That inquiry will require

consideration of the language used by the parties in the contract, the

circumstances addressed by the contract and the commercial purpose or objects

to be secured by the contract. Unless a contrary intention is indicated, the court

is entitled to approach the task of giving a commercial contract a businesslike

interpretation, on the assumption that the parties intended to produce a

commercial result. Put another way, a commercial contract is to be construed so

as to avoid it making commercial nonsense or working commercial

inconvenience.

38 Applying these principles, I agree with PHHH’s submissions. In my view, the

language of clause H6 is clear. It is engaged only if the contractor has “not made

a claim to adjust the contract” (emphasis added). And “claim to adjust the

contract” is likewise clearly defined as “a claim made to the architect to adjust the

contract”. I can see no reason to read into that definition words to the effect that

the claim must be a valid or compliant claim. Indeed, doing so undermines an

important commercial object to be secured by the Contract. Namely, to create in

clause A8 an exclusive and self-contained regime for resolving disputes in

relation to an architect’s certificate or other decision (or lack of decision).

Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; Mount Bruce Mining

Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, per French CJ, Nettle and Gordon JJ at

[46]-[52].

[2023] VCC 516

JUDGMENT

39 Clause H1 specifies the time limits applicable to claims, clause H2 lists the

details that a claim must contain and clauses H3 and H4.1 govern the process

for the architect to request further information and assess the claim. Most

notably, clause H4.2 then provides that the contractor may dispute the architect’s

decision or failure to issue a decision in accordance with A8. Despite the use of

“may” in clause H4.1, clause A8 itself makes clear that the dispute procedure

under that clause is both mandatory and exclusive. Thus, in my view, “may” in

clause H4.2 denotes the contractor’s option to dispute or not dispute, not a

discretion as to the means of dispute.

40 Clause A8 provides that (emphasis added):

(a) if a party “wishes to dispute a certificate…issued by the architect, or to

dispute the failure of the architect to do something, the party must give

written notice under this clause within 20 working days”; and

(b) if a party fails to give that notice, the party “will not be able to dispute the

matter at all”.

41 It would undermine the dispute regime provided for by these provisions if a

contractor who has made a claim within the meaning of the Contract and had

that claim rejected by the architect, can effectively sidestep clause A8 or, worse

still, reopen a dispute determined under clause A8, by resort to clause H6.

42 Further, it is not an answer to this concern to argue that clause H6 only becomes

available if the claim is invalid or non-complaint because (for example) it is to late

or incomplete. There could be any number of reasons (or combination of

reasons) why an architect may reject a claim. It makes no sense that one basis

for rejection (for example, insufficient supporting material) gives a contractor a

second chance of a claim, where another basis does not. This is particularly so

where the basis enlivening that second chance results from (in PHHH’s words)

the contractor’s recalcitrance or delinquency.

[2023] VCC 516

JUDGMENT

43 Turning to the decision in Allmore, I agree with PHHH that it is wrongly decided.

With respect to the Senior Member, I would make the following observations:

(a) In my view, the argument gets no support from the decision in Peninsula

Balmain. In particular, I would not describe the clause under consideration

in that case as “somewhat similar”. It provided:

“Notwithstanding that the Contractor is not entitled to an extension of time

the Superintendent may at any time and from time to time before the

issue of the Final Certificate by notice in writing to the Contractor extend

the time for Practical Completion for any reason.”

(b) Thus, and in contrast to clause H6, it expressly confers on the

superintendent the power to extend the time for practical completion

notwithstanding that the contractor is not entitled to an extension of time.

Indeed, the Court of Appeal relevantly stated that (emphasis added):

“I accept that, in the absence of the superintendent’s power to extend

time even if a claim had not been made within time, Abigroup would be

precluded from the benefit of an extension of time and liable for

liquidated damages, even if delay had been caused by variations

required by Peninsula and thus within the so-called ‘prevention

principle’.”

concerned with whether a superintendent was obliged to act honestly and

impartially in deciding whether to exercise this power – and it was the Court

of Appeal’s approach in finding that the superintendent was so obliged that

found favour in later cases including Kane Constructions Pty Ltd v Sopov

(“Kane Constructions”).

(d) The Senior Member referred to submissions before him highlighting the

distinction between the clause in Peninsula Balmain and clause H6, but

does not directly address the argument. Nor does he deal with the

construction issue more broadly.

Peninsula Balmain at [78] per Hodgson JA, Mason P and Stein JA agreeing.

[2005] VSC 237.

[2023] VCC 516

JUDGMENT

(e) In particular, the Senior Member makes no reference to the dispute regime

under clause A8 and the implications for the operation of that regime of

reading “claim” in clause H6 as applying only to a “valid” claim (that is, a

claim where the applicable pre-requisites have been satisfied).

44 UCP is seeking adjustment of the Contract price for variations and EOTs

submitted to the architect and already claimed by UCP during the course of the

Contract. UCP is not seeking to challenge the architect’s assessment of these

claims pursuant to clause A8 – which in my view operates as the exclusive

dispute resolution mechanism for such disputes. It has belatedly asserted that it

did issue a notice of dispute under clause A8 in response to PC 16 Rev A, but

has not challenged PC 16 Rev A on that basis.

On the proper construction of

clause H6, UCP is therefore not entitled to an adjustment of the Contract price

for the variation and EOT claims subject of this proceeding pursuant to clause

H6.

Can UCP dispute PC 16 Rev A and the decisions of the architect due to the

conduct of the architect?

45 UCP submits that Mr Palma failed to act fairly and impartially in administering the

contract, resulting in the architect’s certifications being vitiated and of no effect.

In its closing submissions, UCP particularised a range of conduct on the part of

the architect. UCP begins by pointing to the longstanding relationship between

Insite Architects and PHHH. In particular, UCP relies on the following matters:

(a) Mr Honeyborne is a practicing accountant and by his various companies

had developed five separate childcare centres;

(b) three of those centres involved the sale of the site and the business, and

another two involved only the sale of the business; and

UCP’s application to amend its statement of claim to plead reliance on notices of dispute under clause

A8 was refused, as discussed below.

[2023] VCC 516

JUDGMENT

46 However, the bulk of UCP’s submissions on this issue concern the nature and

extent of the communications between PHHH and the architect in relation to

variation claims. These comprise:

(a) submissions focussing on particular variations;

(b) the way variation claims made by UCP to the architect were processed;

the architect listing variations and their status over time (described during

the evidence as the variations register) (“variations register”); and

(d) the nature and the content of communications between PHHH and the

architect.

47 UCP also points to the architect’s handling of defects as demonstrating PHHH’s

efforts to influence the architect and the architect’s failure to act impartially.

Particular variations

48 Turning first to particular variations, UCP’s submissions about these include the

following:

CV 14

(a) On 20 July 2017, PHHH wrote to the architect raising issues with variations,

asserting that UCP is responsible for the cost of, among other things,

locating Telstra existing services, permits and fees. This is notwithstanding

the architect’s and PHHH’s own approval of the cost of locating Telstra

services a year earlier, as shown in the architect’s variation adjustment for

CV 14 dated 12 July 2106 and the variations register dated 22 July 2016.

CV 50

(b) On 2 March 2017, UCP issued CV 50, landscape drainage cell. According

to AI 419, CV 50 was to be assessed by a quantity surveyor. The Builder

performed the work.

[2023] VCC 516

JUDGMENT

and on 25 July 2017, some four months after CV 50 had been claimed by

UCP, PHHH emailed the architect requesting “all the details of this claim”,

which the architect then proceeded to provide to PHHH.

(d) UCP notes that on 26 July 2017 PHHH emailed the architect as follows:

“Have a think about this and please discuss at length with Luc and Kim.

Before this variation gets approved…

…Also if we have don’t the above as designed I would not have had the

crisis with regards to the drainage and inadequate drainage from the play

surfaces we had right at the end [sic].”

(e) UCP submits that on 22 August 2017, variation 50 was marked “additional

information” and then rejected on 23 August 2017. No quantity surveyor

assessment was arranged by the architect.

(f) I note in passing that UCP omits from its submissions the part of the email

of 26 July 2017 where Mr Honeyborne sets out in some detail the reasons

why he was concerned to ensure that the architect “have a think about” the

variation, including copies of extracts from relevant plans.

CV 64

(g) On 28 July 2016, AI 119 requested a quotation to install five additional

Braille exit signs to comply with the new standard NCC2016. This varied the

original specification. This was increased again to 18 signs as specified in

drawing A-50/2.

(h) The variations register of 5 July 2017 and 20 August 2017 showed CV 64

“ticked” as approved by the architect. However, the variations register dated

22 August 2017 bore an “x” against client approval and an “x” against

architect approval.

(i) Mr Honeyborne gave evidence that he had spoken with Mr Palma as to why

the variation had been approved. His evidence was that:

[2023] VCC 516

JUDGMENT

“I discussed with [Mr Palma] as to why this variation came about

when the items were in the original documents and tender

documents and then he went back and he said okay, and he

reviewed it and said well, then he must have been wrong to approve

it… I didn't remonstrate with him. I discussed it and I said look, it's in

the tender documents…[The reason Mr Palma changed the

acceptance of that item was not] because I objected to it. It was

because I pointed out to him it was wrong to approve that.”

CV 66, 73 and 79

(j) Mr Honeyborne was asked in evidence about each of these variations,

which were shown as approved in earlier versions of the variations register.

But in the second version of the variations register of 22 August 2017, the

variations were changed to “further information” or rejected.

CV 94

(k) On 3 July 2017, PHHH wrote to the architect and UCP, agreeing to UCP

conducting overflow works at a price of $46,619 plus GST and to “pause”

liquidated damages for 4 weeks. The variations register dated 4 July 2017

shows CV 94 as under review at $7,500.00.

(l) The variations register is then updated to reflect the agreement. The

variations register dated 5 July 2017 has CV 94 under review at

$46,619.00.

(m) UPC submits that this was based on discussions Mr and Mrs Honeyborne

had with Amiens Consulting, “in which they falsely represented the works

only took 3 days to complete”. I note that these discussions (including the

alleged falsity of the representations) were not put to Mr or Mrs Honeyborne

in the course of their evidence.

(n) UCP submits that On 7 July 2017, in AI 545, the architect approved CV 94

Rev B (overflow works). However, it seems that there was some confusion

over whether an earlier requirement that the final price be subject to review

by a Quantity Surveyor still applied and there is also uncertainty over

[2023] VCC 516

JUDGMENT

whether PHHH’s offer to “pause” liquidated damages had lapsed. Mr

Honeyborne asserted it had.

(o) UCP then asserts that Mr Honeyborne wrote to Cherys Gatt of Insite

Architects on 26 July 2017, instructing her to “… discuss this at length with

Luc and Kim. Before this variation gets approved” and CV 94 Rev B then

became “not approved” in the variations register of 22 August 2017. UCP

submits that this was a change that “can only be explained by the architect

succumbing to pressure from PHHH”.

(p) However, as UCP itself later acknowledges (at paragraph 111 of its written

submissions) this email in fact related to CV 50, not CV 94 (see above).

Processing variations

49 UCP submits that Mr Honeyborne’s evidence establishes that:

(a) variations which were not yet carried out but were in contemplation were

often sent by Insite Architects to Mr Honeyborne;

(b) Mr Honeyborne and Insite Architects would then have a “lengthy

discussion… about what caused the variation and what ‘we’ could do about

it,” before Mr Honeyborne agreed to pay the variations;

Mr Honeyborne would then identify the kind of information he wanted before

he would agree to the variation;

(d) Mr Honeyborne would ask the architect for more information or ask the

architect to seek more information from UCP before he would resolve the

variation;

(e) where variations were not being assessed by the architect, it was because

Mr Honeyborne himself was seeking more information on the variation, and

would identify that further information;

[2023] VCC 516

JUDGMENT

(f) Mr Honeyborne would be given the variation and he would have the

opportunity to review the variation and discuss with Mr Palma whether the

architect was right or wrong in approving it;

(g) Mr Honeyborne would tell the architect what to do and it was Mr

Honeyborne that was challenging the decisions of the architect;

(h) Mr Honeyborne would get Mr Palma to “withdraw” his approval of

variations, but “not a lot”; and

(i) the normal process of assessing a variation involved the architect then

PHHH looking at it.

50 UCP argues that, for his part, Mr Palma:

(a) conceded that Mr Honeyborne purported to dictate to him how he should

assess the variations;

(b) acknowledged that his assessment was the same as what had been

directed by Mr Honeyborne a day earlier;

were accepted by his colleagues.

51 In relation to each of these submissions, I note that:

(a) before accepting that Mr Honeyborne purported to dictate how he should

assess the variation, Mr Palms stated: “I assessed it and I was asking for

additional information. Mr Honeyborne does not dictate how I am to assess

the variations”;

(b) Mr Palma’s evidence was that he made his assessment independently of

Mr Honeyborne’s suggestions and it was in fact Mr Honeyborne who came

to the same conclusion as Mr Palma, not the other way around; and

[2023] VCC 516

JUDGMENT

submission, I am satisfied that Mr Palma is limiting his answer to the period

during which he was on leave.

Variations register

52 In relation to the variations register more generally, UCP relied upon the

following:

(a) Mr Honeyborne was familiar with the variations register maintained by the

architect, and the iterations of the register were provided to him from time to

time.

(b) In the variations register dated 19 July 2017, some 20 variations had not

been assessed by the architect, many of these are highlighted in yellow on

the document. Two columns on the register provide for “Approved by

Architect” and “Approved by client”. CVs 58, 64, 66, 73, 79, 80, 81, 82, 83,

84, 85, 87, 89 and 90 are all approved by the architect and the column for

“Approved by client” is blank.

22 June 2017. On 21 June 2017, many variations which were “under

review” are approved (CV 78 to 90 - CV 86 withdrawn). These approvals

are all later rejected on 22 August 2017.

Communications in relation to variations

53 UCP points to two communications by Mrs Honeyborne, which it suggests show

a willingness to subvert the proper conduct of the variations process. These are:

(a) on 19 December 2016, Mrs Honeyborne stated that she “had no choice” but

to sign CV 1, but wanted further investigations as to whether the hydraulic

engineer had been sent the landscape plans when they were completed in

2015, because she still wanted to determine where the “blame lays for this

blunder”; and

[2023] VCC 516

JUDGMENT

(b) on 16 February 2017, after the architect drew PHHH’s attention to the fact

that all shelving to the storerooms were nominated as “by others”, Mrs

Honeyborne directed the architect to “keep quiet” about it (although there is

no evidence that the architect acted on this suggestion);

54 UCP made similar observations about Mr Honeyborne’s antagonistic approach to

dealings with UCP. For example, upon receipt of a notice of mediation dated 24

July 2017, PHHH wrote to the architect stating: “Can you please tell Hamish

[UCP’s construction manager] to get lost. The EOT (sic) have been assessed

twice already yet he keeps coming back. Is there anything we can do to stop this

harassment”.

55 UCP is also critical of other aspects of the architect’s conduct in relation to

variations. For example, UCP submits that:

(a) while the Contract required the architect to identify what information was

required, the architect largely did not identify the information it required, and

failed to document any discussions he said he had where he asked for

further information;

(b) particular communications between Mr Honeyborne and Mr Palma showed

that Mr Honeyborne sought to dictate to Mr Palma how variations ought to

be assessed;

PHHH showed that Mr Palma was influenced by pressure from Mr

Honeyborne; and

(d) Mr Palma’s was ignorant of various notices of dispute.

56 UCP also relies upon:

[2023] VCC 516

JUDGMENT

(a) meetings between the architect and PHHH’s lawyers in relation to progress

claims 15 and 16 (which it alleges showed further influence of Mr

Honeyborne in Mr Palma’s decisions);

(b) Mr Palma’s failure to meet UCP on or about 21 August 2017 to try and

assess variations being claimed; and

those variations with PHHH).

Defects

57 Turning to the handling of defects, UCP submits that:

(a) in continuance of the pattern of behaviour exhibited by Mr Honeyborne in

relation to variations, on 16 July 2018, Mr Honeyborne directed the architect

to send notices of defects to UCP;

(b) Mr Honeyborne went on to say “I will be very cross if the builder gets away

with not having to make the repairs due to you not sending the notice out.

Don’t go blaming me as I was on leave”;

(i) AI 648, requiring the Builder to rectify a water leak to the entry soffit

(CB4208-4211);

(ii) AI 649, containing a report prepared by Mr Naughton of VPCO Pty Ltd

dated 18 June 2018, referring to all defects; and

(iii) AI 650, attaching a report from Adams Consulting Engineers Pty Ltd

dated 20 June 2018, referring to drainage defects;

(d) two days later, on 18 July 2018, the architect issued AI 651, instructing

UCP to rectify the height of the balustrades, an alleged defect, by the end of

the defects liability period; and

[2023] VCC 516

JUDGMENT

(e) a great number of the defects identified in these AIs arose from defective

design, Insite were the designing architects and thus the architect’s and

PHHH’s interests were aligned in making design defects UCP’s

responsibility.

58 Based on the evidence summarised above, UCP asserts:

(a) requests for information were ultimately a mechanism used by PHHH (and

acquiesced to by the architect) to delay the assessment of UCP’s

variations;

(b) avoiding notices of dispute were also part of delaying the assessment of

variations (and their accompanying EOTs);

longer, the parties were in dispute and had a payment claim before an

adjudicator, which was determined in favour of UCP;

(d) PHHH had no intention of paying the adjudicated amount and was

determined to have an assessment by the architect which would result in a

net payment to itself;

(e) in order to achieve this assessment, PHHH directed the architect and the

architect complied, to reverse previously approved variations, reject

variations which were long overdue for assessment, so called “under

review” and to adopt PHHH’s erroneous calculation of liquidated damages;

and

(f) PHHH could then use the certificate in its favour to offset against the

amount adjudicated by the adjudicator.

59 UCP argues that PHHH exercised “improper pressure, influence or interference”

upon Mr Palma. UCP further says that Mr Palma engaged in “conduct which falls

short of the proper standard of fairness, independence and impartiality”.

[2023] VCC 516

JUDGMENT

Breach of clause A6.4 of the Contract

60 In its written reply submissions and oral closing submissions, UCP’s focus shifted

somewhat from that developed in some detail in its initial written closing

submissions. It describes Mr Palma’s alleged willingness to accede to PHHH’s

improper demands as a “secondary argument” and gives primacy to PHHH’s

express contractual obligation to uphold the architect’s independence. In

particular, UCP argues that:

(a) unlike most of the authorities where the court finds an implicit contractual

obligation on the part of the owner to ensure that its architect acts

impartially in carrying out certifications, in this case there is no room for

uncertainty or ambiguity;

(b) clause A6.4 of the Contract expressly imposes an obligation on the owner

to “

ensure that the architect, in acting as…certifier, complies with this

contract and acts fairly and impartially, having regard to the interests of both

the owner and the contractor” and not to “compromise the architect's

independence in acting as…certifier”;

where the owner is engaging the certifier, is if the builder is assured that

there will not be any attempts to sway the certifier’s impartiality – UCP has

accepted somebody who is in a prima facie position of conflict, but has

done so married with a promise by PHHH not to seek to place any pressure

or to do anything to rely upon that conflict;

(d) if PHHH breaches that obligation, it poisons the well of impartiality in a way

that UCP, in agreeing to that arrangement, legitimately expects will not

occur;

(e) PHHH’s own evidence establishes that it is seriously (and not merely

incidentally) in breach of clause A6.4 – Mr Honeyborne acted consistently,

[2023] VCC 516

JUDGMENT

vigorously and repeatedly to attempt to compromise the impartiality of the

architect;

(f) PHHH had the right or the advantage of holding everyone to the process

laid down by the Contract but elected to suborn that process, and there is

no good reason to put PHHH back into the position it would have been if

this had not occurred;

(g) in those circumstances, PHHH can no longer rely upon the determinative

nature of the architect’s decisions – UCP’s obligation to treat the architect’s

decisions as binding falls away, because the basis on which that obligation

was accepted by UCP has been defeated by PHHH’s conduct; and

(h) it is irrelevant that the architect “manfully resisted such interference and

coincidentally came to the result being demanded. The contention is risible.

But even if it were not, [UCP] contracted for an assessment process that did

not lay itself open to question in that way”.

PHHH’s submissions

61 PHHH submits that the architect acted fairly and impartially. It distils the evidence

on which UCP relies into five broad categories:

(a) PHHH was keen to keep costs down;

(b) Mr Honeyborne and Mr Palma would discuss the variations, and Mr

Honeyborne would seek explanations for the variations;

(d) the architect arrived at the same calculation of liquidated damages as Mr

Honeyborne; and

(e) Mr Palma eventually did not admit the outstanding variations.

[2023] VCC 516

JUDGMENT

62 As to (a), PHHH submits it is “somewhat axiomatic” that an owner would not wish

to pay more than it has to for a project. But this does not inform whether it acted

improperly in achieving this end. Further, Mr Honeyborne’s evidence was that

PHHH’s financial position was not an issue albeit that he was keen not to pay

more than required.

63 As to (b), PHHH argues that Mr Honeyborne’s request for information does not of

itself evince the required degree of interference or influence, and does not affect

the architect’s independence.

64 As to (c), PHHH submits it is difficult to see how this evinces any relevant

conduct on the part of the architect. It argues that the registers were internal

documents, not seen by UCP at the relevant time and, at best, reflected the

architect’s view of the status of the variation claims from time to time.

65 It further contends that whatever the status of those internal documents,

variations that were approved or denied retained their status. The registers did

not alter that fact, “and the Defendant had a contractual mechanism available for

it should it wish these matter to be determined”. PHHH continues (references

omitted):

“Mr Palma’s evidence was clear insofar as he was awaiting further

information on these claims. Tellingly, Mr Potter gave credence to Mr

Palma’s evidence by saying the Defendant decided to stop providing the

information sought by Mr Palma in around late 2016/early 2017 (that is,

months before the impugned conduct), notwithstanding that he fully

accepted that without this the architect could not fulfil his function.

Further, it is noteworthy that event the Defendant’s own experts were

unable to assess many of the variation claims some three years plus

hence, and with the benefit of both a complete suite of documents and

(presumably) in circumstances where the defendant was not refusing to

provide further information…[O]f the variations assessed by the experts

in their joint report, thirteen were agreed as requiring more information,

which included CV 48, CV 50, CV 53, CV 55, CV 56, CV 58, CV 59 and

CV 62, which is the entirety of the variations cited by the Defendant in

paragraphs [108] and [109] of it Closing Submissions in support of its

allegations impugning the architect’s conduct.”

[2023] VCC 516

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66 As to (d), PHHH says this is of no merit as this was a function of rudimentary

arithmetic.

67 PHHH does not address (e) directly, but submits in conclusion that:

(a) The conduct relied upon does fall foul of the indicia set out in Kane

Constructions (UCP has not attempted to characterise the conduct).

(b) UCP has failed to identify what is says the consequences are. Specifically,

and with respect to the focus on events in August 2017, what actions are

impugned and why?

for breach of contract, and it has not pleaded such a claim.

(d) Even if UCP had pleaded a claim for breach of contract:

[T]he architect’s conducts was not causative of its loss and damage in

circumstances where (a) it had a contractual mechanism for challenging

variations, including failures to assess, (b) by its own evidence, it had

reached the conclusion in late 2106/early 2017 that the architect was not

independent, and (c) that, again by late 2016/early 2017, it had opted not

to provide any further information to the architect, notwithstanding that it

was aware that this was necessary for his assessment task.”

(e) Critically, in circumstances where UCP’s claims relate to claims made to

adjust the contract, clause H6 does not apply to the claims made.

68 In oral closing submissions, PHHH responded briefly to UCP’s submissions

relying on clause A6.4 of the Contract. I understood it to be submitting that,

regardless of PHHH’s obligation under that clause and its conduct, the court is

still required to make an objective assessment of whether the architect has in

fact been suborned. Further, in the case of an architect who can be assumed to

ordinarily act in a professional manner, it is going to take a reasonable amount of

effort to demonstrate that he has been suborned. PHHH also emphasised that

UCP must establish that is had suffered loss by reason of any conduct by PHHH

in breach of A6.4.

[2023] VCC 516

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Analysis

69 The law regarding the architect’s role in the administration of a construction

contract is well established and was recently and conveniently summarised by

Digby J in V601 v Probuild,

The architect has two separate and distinct roles:

(a) to act as an agent for the principal; and

(b) to act as an independent assessor and certifier.

70 In the former role, the architect is to act in the principal’s best interests and in the

latter, the architect must ordinarily act independently and in an impartial and fair

manner so as not to advance the principal’s interests over that of the

contractor.

This is reflected in clause A6.2 and 3 of the Contract, which

provides:

“.2 The architect is appointed to administer this contract on behalf of the

owner and the owner warrants that the architect has authority to

administer this contract.

.3 The architect is the owner’s agent for giving instructions to the

contract. However, in acting as assessor, valuer or certifier, the

architect acts independently and not as the agent of the owner”

71 The faithful performance of these two roles may give rise to tension.

72 As discussed above, in addition to the architect’s obligations to act

independently, under clause A6.4 pf the Contract, PHHH must ensure that the

architect discharges this obligation. If the architect does not act independently,

the architect’s certificates may be set aside.

A certificate which is produced by

fraud or improper collusion between the architect and a party is vitiated and has

no effect.

[2021] VSC 849.

V601 v Probuild [2021] VSC 849 at [238], citing Dixon v SA Railways Commissioner (1923) 34 CLR

71, 112.

V601 v Probuild [2021] VSC 849 at [239].

V601 v Probuild [2021] VSC 849 at [253], citing Peninsula Balmain.

V601 v Probuild [2021] VSC 849 at [253], citing Peninsula Balmain Pty Ltd v Abigroup Contractors Pty

Ltd (2002) 18 BCL 322.

V601 v Probuild [2021] VSC 849 at [253], citing Attorney-General v McLeod (1893) 14 LR (NSW) 246;

Perini Corporation v Commonwealth of Australia [1969] 2 NSWR 530; Redmond v Wynne (1892) 13

LR (NSW) L 39; 8 WN (NSW) 103.

[2023] VCC 516

JUDGMENT

73 Circumstances in which the architect’s conduct may be impugned cannot be

stated exhaustively.

Although, in Baulderstone Hornibrook Pty Ltd v Qantas

Airways Ltd,

Finkelstein J identified the following broad categories suggested in

Hudson’s Building and Engineering Contracts, 11

ed 1995: (1) where the

decision-maker has a special interest in the result; (2) fraud or collusive conduct;

(3) improper pressure, influence or interference by the owner; (4) conduct which

falls short of the proper standard of fairness, independence and impartiality; (5)

breach of contract or other act or omission of the owner having the effect of

preventing the builder obtaining a decision; (6) unreasonable refusal by the

decision-maker to consider the matter; and (7) taking improper considerations

into account.

74 In Kane Constructions, Warren CJ also cited with approval commentary in

Hudson’s Building and Engineering Contracts in Australia (“Hudsons”), as

follows:

“It is submitted that fraudulent motion is irrelevant in considering

[interference] which is sufficiently wide to cover any improper

interference with the certifier’s independence and function by either

party. It is, of course, both usual and proper for both parties to make

representations, however strongly worded, to the certifier upon any

matter or dispute upon which the contract requires him to certify. The

dividing line between such representations and pressure of an improper

kind is not difficult to discern in practice, and broadly speaking any

pressure or action which goes beyond representations confined to the

merits of the matter in question, or which does not expressly or impliedly

recognise the certifier’s ultimate right and duty to decide the matter

impartially on its merits, will be suspect.

75 However, her Honour went on to refer to a passage in Hudson’s relied on by

UCP in its reply submissions:

“No doubt where interference or pressure by an owner results in no

certificate being given, the prevention principle will apply but the cases

show that other forms of influencing or interference need only be such as

to cast doubt on the certifier’s independence...once the certifier’s

independence has become suspect, the courts will not concern

Baulderstone Hornibrook Pty Ltd v Qantas Airways Ltd [2003] FCA 174 at [89], quoted in V601 v

Probuild [2021] VSC 849 at [260].

[2003] FCA 174.

Kane Constructions at [620], citing Hudson’s at p822.

[2023] VCC 516

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themselves unduly with the extent or degree of influence over the

certifier, or its precise impact on the certificate in question.”

76 Her Honour next provided a non-exhaustive summary of indicia for determining

whether the architect’s conduct is impugned (citations omitted):

“…when the superintendent allows judgment to be influenced; when the

superintendent is in a position whereby the certificate is deprived of

value; when the superintendent acts in the interests of one of the parties

and by their direction; when the position is misconceived and the

superintendent acts as mediator; when there is not sufficient firmness in

order to decide questions based on his or her own opinion; where

judgement and conduct are controlled by the principal; and where the

superintendent considers the assent of the principal to be necessary, has

ceased to be a free agent and does not give full disclosure of every

communication between the superintendent and the principal. Finally, the

superintendent may lose independence without actually intending to do

so or even without knowledge they have done so.

In relation to the principal, interference will arise where there is an

attempt to lead the superintendent astray in the interests of the principal;

and where there is correspondence and communication of an improper

character between the principal and the superintendent. In relation to the

contractor, interference will arise where the contractor has no knowledge

of the interfering conduct so as to prevent the builder raising the point.”

Did the architect fail to act fairly and impartially?

77 Determining the answer to this question has not been easy. I accept that there

were aspects of the conduct of both PHHH and the architect that raise legitimate

questions about the latter’s independence. However, I have concluded on

balance that the architect did not fail to act fairly and impartially (or otherwise fail

to act independently) in carrying out his obligations as certifier under the

Contract. I am also not persuaded that that PHHH acted in breach of clause A6.4

of the Contract.

78 I accept that Mr Palma routinely passed UCP’s claims on to PHHH for comment,

and thereafter often engaged in unilateral discussions or communications about

the claims with Mr and Mrs Honeyborne (usually the former). However, this alone

Kane Constructions at [621], citing Hudson’s at p822.

Kane Constructions at [623]-[624], quoted in V601 v Probuild [2021] VSC 849 at [259].

[2023] VCC 516

JUDGMENT

does not constitute a lack of impartiality or independence. As observed in

Bailey’s Construction Law:

“The fact that the contract administrator may have communicated or met

with the owner unilaterally, to obtain the owner’s views on a matter in

respect of which the contract administrator is required to make a

decision, does not of itself suggest unfairness…A contract administrator

is not required – unlike a judge – to give the appearance of being

impartial. What matters is that the contract administrator is not actually

partial between the contracting parties, or at least there is not a material

probability of the contract administrator being biased.”

79 The learned authors of Building and Construction Contracts in Australia also

suggest that “the mere fact of private communications from principal to the

[architect] will not result in actionable breach”.

80 Mr Honeyborne is an experienced property developer. As UCP submitted, he is a

practising accountant and has been involved in the development of five separate

childcare centres. He presented as someone with a detailed understanding of

construction practices and contracts, including the Contract. Mrs Honeyborne is

also generally familiar with construction projects and has considerable

experience in the regulation and operation of childcare centres. Further, I accept

PHHH’s submission that it is axiomatic that any owner would not wish to pay

more than it is obliged to for a project.

81 Against this background, the evidence that PHHH was diligent, pedantic and

persistent in ensuring that it only paid what the Contract required, is unsurprising.

And I reiterate part of the passage from Hudson’s cited in Kane Constructions

and set out above that (emphasis added): “It is, of course, both usual and proper

for both parties to make representations, however strongly worded, to the

certifier upon any matter or dispute upon which the contract requires him to

certify”.

Julian Bailey, Construction Law (London Publishing Partnership, 3

ed, 2020), 373.

John Dorter and John Sharkey, Building and Construction Contracts in Australia (Thomson Reuters,

online) at [7.500].

[2023] VCC 516

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82 I accept that PHHH had a relationship with Mr Palma that went beyond this

project. It is likely that in the course of that relationship, Mr Palma came to

recognise PHHH’s expertise and concern to provide input in relation to all

aspects of the Contract, particularly any variations and EOTs that were likely to

impact the price. But I agree with PHHH’s submission that evidence of a pre-

existing or broader relationship is not proof of a lack of independence,

particularly if that relationship is primarily or solely professional.

83 Based on my observations of both Mr Honeyborne and Mr Palma, I am satisfied

that their relationship was entirely professional and not particularly close – there

was no evidence of any personal dealings between them. I have no doubt that

Mr Palma respected Mr Honeyborne’s experience and opinions. However, Mr

Palma’s responses and general demeanour also suggested that he often found

Mr Honeyborne cantankerous, argumentative and difficult. Indeed, it is this factor

that has caused me the greatest difficulty in assessing this issue.

84 More particularly, I have asked myself whether Mr Palma’s frustrations in his

dealings with Mr Honeyborne might have led him to capitulate on some issues in

the face of Mr Honeyborne’s persistence, in order to avoid an argument. Had this

been the case, I would have been obliged to find that the architect had been

suborned by PHHH. Such a finding would have been mandated by Warren CJ’s

observation in Kane Constructions extracted above that the form of influence

“need only be such as to cast doubt on the certifier’s independence...once the

certifier’s independence has become suspect, the courts will not concern

themselves unduly with the extent or degree of influence over the certifier, or its

precise impact on the certificate in question”.

85 I have also considered in this context UCP’s submissions that (some citations

omitted):

“Bad faith…includes circumstances where the owner has given

instructions to the contract administrator for the amount which he should

(under)certify, or as to the decision which he ought to arrive at, and the

contract administrator has acceded to the owner’s demand.

[2023] VCC 516

JUDGMENT

There are cases where evidence of the contract administrator’s conduct

casts sufficient doubt on the exercise of his judgment, so that the

conclusion may be drawn that he has not brought his own mind to bear

on the issue, and that his decision is invalid. It may therefore be prudent,

if not necessary in most cases, for a contract administrator to “repel

unworthy communications” made by the owner; that is, communications

made for the purpose of improperly influencing the contract

administrator.

Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1 VR 27, at 62 the

Court of Appeal (Brooking, Tadgell and Hayne JJ) said:

‘…Architects are often submitted to pressure by proprietors in an attempt

to persuade them not to issue promptly a progress certificate to which the

contractor is entitled. Unhappily, this pressure is not always resisted.

Many architects exhibit timidity, and fail to administer the building

agreement correctly, by sending the progress certificate, not to the

builder, but to the proprietor. … The objection to the sending of progress

certificates by the architect to the proprietor is not merely that the

particular provisions of the building agreement are not being observed but

also that the practice is symptomatic of an unhealthy dependence of the

architect upon his client’”

86 However, considering the evidence as a whole, I am satisfied that this is not what

occurred. My starting point in this conclusion is that I am satisfied that both Mr

Honeyborne and Mr Palma were truthful in their evidence. UCP did not submit

otherwise. There is no doubt that Mr Palma was at times frustrated and even

annoyed by Mr Honeyborne’s pedantic and nit-picking approach to compliance

with the Contract. But I am satisfied that Mr Palma was enough of a professional

to look past this and decide each of the claims on its merits, having regard to

both the content of each claim and any representations by (primarily) Mr

Honeyborne on behalf of PHHH.

87 I accept that Mr Palma frequently determined the claims consistently with the

position being advocated by PHHH. In my view this simply reflected the fact that

Mr Honeyborne had a good working knowledge of the tender process and

Contract and was often able to identify references in the plans or specifications

that supported his position. To my mind, Mr Honeyborne’s communications were

not unworthy in the sense envisaged in the extract from UCP’s submissions

above. For the most part, they comprised reference to relevant parts of the plans

and specifications and requests that the architect “have a think about” the claims

or seek further information or clarification.

[2023] VCC 516

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88 Whether Mr Palma was persuaded by Mr Honeyborne’s representations or

independently came to the same conclusion is not to the point. (It is most likely to

have been a bit of both.) The only relevant question is whether Mr Palma’s

assessments and certifications were directed, overborne or otherwise improperly

influenced by Mr Honeyborne’s protestations. In my view, they were not. Mr

Palma forthrightly rejected the suggestion that he bowed to Mr Honeyborne’s will,

and I accept this evidence. I discuss in more detail below particular aspects of Mr

Palma’s evidence informing that conclusion.

89 Turning to UCP’s submissions identifying more specific instances of alleged lack

of independence or other impropriety, I find as follows:

Particular variations

(a) For the most part, UCP’s submissions on particular variations do little more

than recite the circumstances in which particular claims for variations were

made, the content or effect of PHHH’s response and the result. In some

cases, they highlight where the architect appears to have changed position

following receipt of PHHH’s response. However, I do not detect in them

anything overbearing, unworthy or otherwise improper.

(b) There is a sense in the submissions that the sheer number of instances

where the architect has taken a position consistent with that urged by

PHHH should be enough to establish a lack of impartiality. However, this is

not a sustainable basis for the findings urged upon me by UCP. It merely

reflects the significant number variation claims made, coupled with PHHH’s

practice of making “strongly worded” representations in response.

including, notably, variation 37, requiring PHHH to pay an additional

$167,608.54, discussed further below. I have referred in my summary of its

submission above to other gaps in UCP’s arguments on the particular

variations.

[2023] VCC 516

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Processing variations

(d) These submission tend to discuss the processing of variations from PHHH’s

perspective. In that respect, they merely reflect the undeniable fact that

PHHH was routinely questioning most of the claims and making

representations as to why they should not be accepted.

(e) To the extent that they assert that PHHH was dictating when further

information was needed and what it should comprise, I accept Mr Palma’s

evidence that he ultimately satisfied himself about the need for further

information. This included his assessments after his return from leave when

he reviewed preliminary decisions made by other Insite Architect staff in his

absence.

(f) I also note and agree with PHHH’s submission extracted above to the effect

that:

(i) Mr Potter of UCP effectively conceded that it decided to stop providing

the information sought by Mr Palma in late 2016 and early 2017; and

(ii) the impediments this created for the architect’s assessment of the

claims was echoed in the expert evidence.

Variations register

(g) I agree with PHHH that it is difficult to see how this evinces any relevant

conduct on the part of Mr Palma. The variations register was an internal

working document which merely tracked the status of variations claimed by

UCP – a “tick” in the “Approved by architect” column did not constitute

actual or formal approval of a variation.

(h) The variations register was not seen by UCP in the course of the project. It

at best reflected the architect’s view of variation claims from time to time,

and a record of PHHH’s position (hence the need to supply it to PHHH from

time to time). Mr Palma’s evidence was that the variations registers were

[2023] VCC 516

JUDGMENT

“essentially an accounting document updated progressively”. I accept this

evidence.

(i) I accept that there were numerous variations that were changed from

“under review” to “approved” in the register dated 21 June 2017, but then

“rejected” by the version dated 22 August 2017. However, I am satisfied

that this is explained by the fact that the relevant changes to “approved”

were mostly made by Insite Architect staff while Mr Palma was on leave,

and Mr Palma made the further changes following his return from leave,

having considered Mr Honeyborne’s representations.

(j) Further, many of those late rejections occurred (at least in part) as a result

of insufficient supporting information. As noted above, UCP concedes that it

had stopped providing information sought by Mr Palma from late 2016 or

early 2017.

Communications in relation to variations

(k) The tone and content of some of the emails from Mr and Mrs Honeyborne is

regrettable. However, there is no evidence that Mr Palma paid it any regard

or that it otherwise infected his independence as certifier.

(l) Mrs Honeyborne’s suggestion that the architect “keep quiet” about shelving

to storerooms [CB 10437], gets closest to the type of communication that

might amount to an attempt to suborn the architect, but there are difficulties

with UCP’s reliance on this email. It was not put to either Mr or Mrs

Honeyborne as having the effect alleged (or at all) and Mrs Honeyborne is

not a director or officer of PHHH. Its status is therefore too uncertain to

justify a finding of impropriety against PHHH.

(m) I have referred above to the suggestion that Mr Honeyborne sought to

dictate to Mr Palma how variations ought to be assessed. In my view, Mr

Honeyborne’s language was comfortably within the category of “strongly

[2023] VCC 516

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worded representations” which the authorities accept as being “both usual

and proper”. Further, I have accepted Mr Palma’s evidence that he was not

in any way cowed by Mr Honeyborne’s somewhat strident approach to his

communication.

(n) On the issue of Mr Palma’s final assessment of PC16 Rev A matching that

of PHHH, I agree with PHHH’s submission that this was a function of

rudimentary arithmetic. I am satisfied that the other matters relied on by

UCP in this category are either not made out or do not evidence relevant

impropriety or lack of independence.

Defects

(o) My findings above apply equally to UCP’s submissions in this category. It is

commonly the case that the owner detects defects and requests that the

architect send notices of defects to the builder accordingly. The fact that Mr

Honeyborne might have done so in directive language does not alter the

fundamental character of what is essentially a routine communication.

(p) Equally, it is unsurprising that the architect would err on the side of caution

in notifying defects that might arguably manifest as a design defect (in

whole or in part) rather than a builders’ defect – there are mechanisms in

the Contract for resolving these types of issues.

(q) Further, I do not accept that the evidence supports the assertion that “a

great number of the defects identified in these AIs arose from defective

design”. This is an open question, and I am not persuaded that any adverse

conclusions about the conduct of the architect can be drawn from the

number or the content of the defect notices issue by the architect to UCP.

Did PHHH breach clause A6.4 of the Contract?

90 I have found above that Mr Honeyborne’s communications in relation to variation

claims and defects were comfortably within the category of “strongly worded

[2023] VCC 516

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representations” which the authorities accept as being both usual and proper.

More broadly, I am not persuaded that PHHH’s representations in opposing

variation claims were an attempt to sway Mr Palma’s partiality or “compromise

the impartiality of the architect”.

91 Putting aside the occasionally strident or intemperate language, in my view

PHHH’s representations were essentially doing no more that propounding an

argument as to why particular variation claims were not a variation within the

meaning of the Contract, including (where relevant) by reference to the plans and

specifications. And, as I have observed above, the language discussed in UCP’s

submissions does not alter the essential character of the representations. In

each case, their focus was the subject matter of the variation claims or the lack

of supporting information.

92 The owner’s obligation under clause A6.4 of the Contract is to ensure that the

architect in acting as certifier “acts fairly and impartially, having regard to the

interests of both the owner and the contractor”. Thus, to my mind, a breach of

clause A6.4 requires proof that PHHH was deploying tactics that were directed to

undermining the architect’s fairness and impartiality. In my view, articulating

contractual grounds for the architect to refuse a variation claim, no matter how

frequently this occurs, are not so directed. Rather, they are directed at the merits

of the claim and, to that extent, should inform rather than undermine an impartial

review of the variation.

93 The position would be different if there was evidence that the owner was relying

on ulterior grounds unrelated to the merits of the variation claims, or other

improper leverage, to sway the architect in its favour. Obvious examples would

be the offer of financial incentives (such as more work in the future) or threats

(such as withdrawing existing work). Depending on the circumstances, it may

also extend to intimidation and bullying. For the reasons above, I am not

persuaded that the evidence in this case is sufficient to support a finding that

[2023] VCC 516

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PHHH’s conduct amounted to improper intimidation or bullying, or otherwise

amounted to a breach of clause A6.4.

How should the disputed variations be resolved?

94 As I have determined that the architect did not fail to act fairly and impartially,

and therefore the architect’s decisions cannot be re-opened under clause H6 of

the Contract (or otherwise), it is not necessary for me to determine any of the

disputed variations. If it were necessary for me to do so, I would determine in

relation to each of the variations as set out below. Except as stated in my

summary, these variation claims were either wholly refused or not accepted by

the architect.

Variations which the experts agreed

95 The experts agreed that variations 31, 50, 53, 64, 81, 82, 83 and 90 ought to

have been allowed. Given that the expert evidence in this regard is

uncontradicted and reliable, I would have allowed an adjustment for a total of

$45,368.65 to the contract price for these variation claims. For the variation

claims summarised below, unless I note otherwise, the experts agreed that each

was a variation, but disagree on the quantum.

Variation 48 Rev A

96 This variation relates to framing and fire rating the columns and exterior face of

wall “GF North elevation”. It was the subject of AIs 190, 489, 586 and 653. The

architect determined that additional information was required for the architect to

properly assess it and no adjustment was issued.

97 Mr Buchanan assessed the variation at $14,996, and Mr Jeffery at $3,359.38.

UCP submits that I should prefer the evidence of Mr Buchanan for several

reasons, including the following:

(a) Mr Buchanan has taken into account areas of work facing the wall and

bulkhead, whereas Mr Jeffery has not.

[2023] VCC 516

JUDGMENT

(b) Mr Buchanan provided a comprehensive breakdown of the costing in

support of his valuation.

the cladding around the exterior of the column is new work and the left of

the column you can see that there’s the top hats and the fire check and

ComTex lining noted below the sill levels”.

(d) Mr Buchanan disagreed that the drawing put to him by PHHH in evidence

was the “existing position”.

98 For its part, PHHH submits that:

(a) Mr Jeffrey made it clear he went back to first principles when assessing the

time and labour required rather than applying an abstract, “per metre”

assessment;

(b) Mr Buchanan accepted in cross-examination that he assessed a scope of

works that included the original scope of works, and thus accepted that the

works would have been less than he assessed (though he could not

quantify that); and

and [196] of its closing submissions).

99 I found Mr Buchanan’s assessment of the works (and therefore the likely costs)

associated with this variation more thorough and therefore more persuasive. And

while he accepted that the extent of additional works would be less than he had

allowed, he premised this evidence with the statement: “if the first drawing on

924 are the conditions that were in place as part of the original contract”. Mr

Buchanan could not say that they were, and I accept UCP’s submission that they

were not. PHHH argues that the drawings relied on by UCP to support this

submission were not put to the experts, but the relevant drawings were in

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evidence, and they speak for themselves. I would have allowed Mr Buchanan’s

figure of $14,996 for this variation.

Variation 55

100 This variation relates to the increased height of the glass balustrade on level 1

from 1.5 metres, to 1.8 metres then 2.4 metres. It was the subject of Notice of

Likely Delay 20 and AIs 347 and 440. Mr Buchanan assessed variation 55 at

$20,468.62. Mr Jeffery assessed it at $15,908.87.

101 UCP submits that Mr Buchanan’s opinion should be preferred for reasons

including the following:

(a) Mr Buchanan has made due allowances for additional labour associated

with transporting and manoeuvring the larger sheets of glass, whereas Mr

Jeffrey does not.

(b) Mr Buchanan disagreed with Mr Jeffery’s proposition that a credit was

needed for a deletion of the steel base plate as “none of the documentation

identifies any reduction in the steel supports in relation to this change.

There is no explanation why a credit should be required or expected”.

102 PHHH submits that the difference between the valuations of Mr Buchanan and

Mr Jeffrey came down to the proposition that larger sheets of glass might require

more labour, together with the deletion of a base plate. It points to Mr

Buchanan’s concession the difference between he and Mr Jeffrey was a matter

on which reasonable minds might differ.

103 I again prefer Mr Buchanan’s evidence on this variation. I am satisfied that the

significantly larger (and therefore heavier) sheets of glass necessary for the

higher balustrade would involve a materially higher labour cost. Mr Jeffrey made

no allowance for this. I am also satisfied that there is insufficient evidence of a

saving in the overall cost of steel componentry for the higher balustrades to

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justify a credit. I would therefore have allowed this claim for the $20,468.62

estimated by Mr Buchanan.

Variation 56 Rev A

104 This variation relates to replacement of eight sets of door grills and was the

subject of RFI 177 and AIs 295 and 590. Mr Buchanan assessed the variation at

$3,939.90, and Mr Jeffery at $1,337.45. The amounts involved in these

assessments are small and the areas of disagreement between the experts as

summarised in the parties’ submissions are matters of degree and not

substance. On this variation claim, I would have split the difference between the

two amounts and allowed $2,639.00.

Variation 58 Rev A

105 This variation relates to the supply and installation of suspended ceiling to

external areas and was the subject of AIs 430, 484, 486 and 591 and variation

adjustment 58. Mr Buchanan considered that UCP’s claim of $10,350 was

reasonable. Mr Jeffery assessed the claim at $3,611. UCP submits that:

(a) The two experts have agreed on the materials, but have disagreed on the

amount of labour required.

(b) Mr Buchanan disagreed with Mr Jeffery’s rate of $37 per square metre,

allowing instead a “built up” rate of $91.05, after allowing for “extra over”

costs and furring channels – giving a total value of $13,843.35.

does not show the basis for that opinion.

106 PHHH argues that UCP has correctly identified the divergence between Mr

Buchanan and Mr Jeffrey; namely, the fact that the variation was not a quote for

a one-off job, but additional work carried out with workers already on site. PHHH

says that economies of scale ought to apply.

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107 In my view, Mr Buchanan’s opinion is more soundly based. I accept that some

allowance for the fact that the work was done by workers already on site is

justified. However, Mr Jeffrey’s reduction for this seems too high and is not

adequately supported. I would therefore have agreed with Mr Buchanan that

UCP’s claim of $10,350 was reasonable and allowed that sum.

Variation 59

108 This variation relates to extra framing and trowelling to form bulkheads for

service pipes at the ground floor carpark and was the subject of AIs 485 and 592.

Mr Buchanan assessed the variation at $4,278 and Mr Jeffery at $2,139. UCP

submits that:

(a) The experts agree with the rate to apply, which is $80.50. Mr Buchanan

considers 40 hours to be reasonable as does Mr Quigley.

(b) Mr Jeffery undervalues the amount of labour required.

additional works to be undertaken, whilst still making an appropriate

concession on the rate to be applied.

109 PHHH again notes that the difference in time allowed by the experts essentially

arises from the fact that the variation was not a quote for a one-off job, but

additional work carried out with workers already on site. It submits that the latter

approach (being that adopted by Mr Jeffrey), more correctly reflects the likely

cost to UCP of the variation. It argues that Mr Buchanan conceded it was difficult

to determine the hours required and he conceded this was a matter on which

reasonable minds could disagree.

110 While I agree with PHHH that some allowance for the fact that the works would

be done by workers already on site, there is force in Mr Buchanan’s assessment

of the time likely to be taken by the work regardless of this allowance. Balancing

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these competing arguments, I would have again split the difference between the

two assessments and allowed $3,258.50 for this claim.

Variation 62 Rev A

This variation relates to additional works to staircase 2 and was the subject of

AIs 215, 220, 230, 270, 378 and 593. Mr Buchanan assessed the variation at

$7,358.85 and Mr Jeffery at $6,199.65. The difference between these two

assessments is modest, and does not justify a detailed re-statement of the

parties’ submissions on this claim. I have considered these and determined that

Mr Buchanan’s assessment should be preferred. In particular, I accept Mr

Buchanan’s evidence that:

“As far as I can make out from the original documentation, there was no

requirement for this magnetic hold open and that the cost to supply that

is the largest - is the reason for discrepancy. It requires to be installed to

hold the door open in the event of a fire and that has to be wired back to

the fire indicator panel and the fire control system so that it will operate in

a fire mode.” (T839 Line 8 – 15).

111 Further, Mr Buchanan’s report is supported by a Fire Engineering Report dated

11 November 2016, which indicates that the magnetic hold was the subject of a

variation. On this variation claim I would have allowed $7,358.85.

Variation 80

112 This variation relates to the bin store door and was the subject of AIs 306 and

311. The architect originally allowed an adjustment for this variation, but there is

some disconformity between the variations registers, Mr Palma’s statement and

the expert evidence as to the amount allowed. Mr Buchanan put it at $4,879.45.

Mr Palma’s evidence was that he agreed that his colleagues had correctly

assessed this as a variation while he was on leave but could not endorse the

value without additional information.

113 The differences between the experts on this variation claim echoes that of a

number of the other variation claims. Mr Jeffrey attributed his lower figure to his

labour rates being “based on somebody already on site” and different prices for

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hardware. Having considered the basis for the assessments of both experts as

disclosed in their reports and evidence, I prefer Mr Buchanan’s assessment. It is

both more thorough and reasoned than Mr Jeffrey’s. I also note that it is closer to

the original allowance by Insite Architects, until that was withdrawn pending the

provision of further information. I would therefore have allowed $2,868.12 for this

variation claim.

Variation 84

114 This variation relates to the cost of employing cleaners on site before open days

and was the subject of variation adjustment 84. The architect’s approval and later

withdrawal of approval for this variation followed the same path as Variation 80

discussed above.

115 Mr Buchanan’s assessed the variation at $2,576, based on UCP’s claim for 64

hours of additional services, but at a lower hourly rate than that claimed by UCP

(that is, $35 per hour rather than the $75 per hour claimed). Mr Jeffrey did not

assess the variation in his report. However, in his oral evidence, Mr Jeffrey

agreed with Mr Buchanan that a rate of $35 per hour was fair and reasonable. Mr

Jeffrey was unable to comment on the 64 hours figure.

116 Mr Buchanan accepted in his oral evidence that his assessment of

reasonableness was as to the hourly rate, rather than as to whether or not the

works were done and the purpose of the works. However, there was no real

dispute that the claim should be allowed – Mr Palma agreed in his witness

statement that his colleagues at Insite Architects were correct in accepting the

claim, but he could not endorse the value without further information. I interpolate

that, based on Mr Buchanan’s assessment that the hourly rate claimed by UCP

was more than double what was reasonable, it would appear that Mr Palma’s

request for more information was justified.

117 There is no evidence that UCP’s allowance of 64 hours of additional services

was excessive and Mr Buchanan was content to adopt that figure. I am therefore

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content to accept Mr Buchanan’s assessment and would have allowed this

variation claim at the $2,576 assessed by Mr Buchanan.

Variation 88

118 This variation relates to fire indices of artificial turf and was the subject of AI 611

and variation adjustment 88. The architect’s variations register dated 22 August

2017 shows this as approved for $3,105, but the register dated the following day

records the variation as “not approved”. Mr Buchanan assessed the variation at

$3,105. Mr Jefferey did not assess this variation in his report, but noted in the

joint report following the expert conclave that he would need to see the relevant

invoice and fire report. In his evidence, he doubted the need for the fire indices,

but agreed that the value ascribed was “possibly” reasonable.

119 There seemed to me to be no real dispute among the experts that (if required)

this was a variation and the $3,105 value claimed by UCP was reasonable.

PHHH submits that no evidence was led that UCP needed to carry out these

works. I disagree, despite my reservations more generally about Mr Quigley’s

evidence, on this issue he did carry out an investigation about whether there

were standard fire indices available from the manufacturer and concluded that

“there were no fire indices available from the manufacturer”. To my mind that is

sufficient evidence that UCP was required to seek the opinion of a fire engineer

and I would have allowed this claim in the amount of $3,415.50 (being the $3,105

plus builder’s margin and GST).

Variation 89

120 This variation relates to the fire compartmentalisation between floors and the

requirement for a design accessibility report. It was the subject of AI 612 and

variation adjustment 89. It is similar to variation 88, in that Mr Jeffrey agreed that

Mr Buchanan’s view that the amount claimed of $2,785 was reasonable, “if it was

proved”. As to that, Mr Buchanan states in his report that UCP had submitted a

copy of the Fire Engineer’s invoice for $2,500 “for revisions to the Fire

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Engineering Report with the variation submission” and the invoice “appeared to

be in order”. On that basis, it is likely that I would have allowed this claim for the

$2,785 determined by Mr Buchanan.

Variation 99

121 This variation relates to a CitiPower shutdown for painting of external façade. It

seems that this was one of two CitiPower shutdowns, but at the time the

evidence (including the expert evidence) about this variation was being given,

there was real uncertainty about whether this was a duplication of an earlier

CitiPower shut down claim. Mr Jeffrey’s evidence was to the effect that he could

not be satisfied that it was a distinct shutdown and was therefore not willing to

accept it as a variation. However, he agreed that if a second shutdown was

proven, Mr Buchanan’s assessment of the variation at $11,119.12 would be

correct.

122 UCP submits that it has since established by the documents in Tranche 14 that

there were two distinct CitiPower shutdowns, the first relating to an increase in

the height of the balustrade and claimed as part of CV 55, and this second one. It

seems the Powercor invoices for each were in identical amounts. It submits that

these documents show that UCP did in fact incur two separate power shut down

fees of $10,635.65 each. PHHH resists the late introduction of the Tranche 14

document and submits that, without those documents, UCP has failed to prove

the second shutdown.

123 For the reasons below, I refuse UCP’s tender of the Tranche 14 documents.

Further, I agree with PHHH that, in the absence of the evidence supplied by

those documents, UCP has failed to establish that CV 99 related to a separate

and distinct shutdown. Like Mr Palma, I am not satisfied (on the balance of

probabilities) that two Powercor invoices in identical amounts were rendered to,

and paid by, UCP.

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Variation 94 Rev B

124 This variation relates to play area drainage overflow. As noted by UCP in its

submissions, this was the subject of a number of emails passing between the

architects, PHHH and UCP. The architect initially instructed UCP to proceed with

the work on the basis that the claim amount would be reviewed and approved by

a quantity surveyor. However, UCP refused to proceed with the variation works

on this basis. What happened thereafter is conveniently summarised in PHHH’s

written submissions in relation to this variation. I accept that summary, and agree

with PHHH that UCP has not established that any concluded agreement was

reached on $45,419 claim by UCP.

125 Turning to the expert evidence on the value of the variation, UCP relies upon the

assessment of Mr Quigley, at $45,419 and Mr Jeffery assesses the variation at

$8,607.75. UCP submits that Mr Quigley’s assessment should be preferred

essentially because the plumbing component alone (excluding builder works in

connection or “BWIC”) was quoted by the project plumber at $12,050 ex GST,

and the BWIC excluded from the plumbers’ quote were extensive.

126 PHHH submits that:

(a) Mr Palma gave evidence that the reason he did not approve the quantum of

the variation and wanted it assessed by a quantity surveyor was that he

considered it was worth around $7,000, not the $45,000 being claimed;

(b) Mr Palma confirmed he had a quantity surveyor assess it at around

$7,390.00;

claimed (either from UCP or a third party);

(d) Mr Jeffrey assessed the claim independently at $8,607.00;

(e) Mr Buchanan did not assess the claim;

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(f) contrary to UCP’s submissions, in oral evidence Mr Quigley accepted that

he did not assess the variation; rather, he premised his opinion on the

assumption that the parties had agreed to the $45,419; and

(g) Mr Quigley also confirmed in his oral evidence he did not disagree with Mr

Jeffrey’s calculations.

127 I accept PHHH submissions above, and note that Mr Quigley evidence on this

issue is a good example of his tendency to vacillate and opine on issue outside

his core expertise, discussed further below. Thus, in the absence of any

assessment of this variation by Mr Buchanan, I would have accepted Mr Jeffrey’s

valuation of the variation at $8,607.75.

Variation 96

128 This variation relates to the demolition of a glass block wall located on level 1

east. The issue here is whether the relevant drawing (drawing A-11/1) shows that

the glass blocks are to be demolished. If so, the work to demolish the glass block

window is within the original scope of works and not a variation. Mr Buchanan

valued the claim at $2,668, but accepted that he was not opining on whether it

was within the scope of works. Mr Jeffrey considered that it was within the

original scope of works, and thus not a variation. However, he did not take issue

with Mr Buchanan’s valuation. Mr Quigley’s report does not deal with the correct

interpretation of drawing A-11/1, but in his oral evidence he said: “it’s quite

clearly represented graphically in a different way to two parallel dotted lines

which is the code for existing walls and windows and doors that are to be

demolished”.

129 The drawing in evidence is not sufficiently clear for me to form a concluded view

based on the drawing alone as to whether or not the lines representing the glass

block wall are marked for demolition. However, it is clear from Mr Jeffrey’s report,

that he gave close consideration to the relevant part of the drawing (including by

extracting a section of it in his report) and set out in detail the basis for his

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conclusion. In my view, Mr Jeffrey’s report and evidence is considerably more

comprehensive and considered on this issue than Mr Quigley’s report, and

therefore more persuasive. I therefore agree with Mr Jeffrey that variation 97 was

not in fact a variation.

Variation 26 and 30

130 These variations are agreed by the parties as being the subject of dispute in the

proceeding, but were not the subject of evidence (except by Mr Buchanan) or

submission (except to the extent UCP confirmed its claim in respect of these

variations in a table at [282] of its written submissions). In both cases, the

variations were approved by the architect, but for an amount less than the claim.

In relation to variation 30, UCP claimed $26,723.00, the architect approved

$25,607.90 and Mr Buchanan valued the variation at $25,803.89 (including the

builder’s margin). In relation to variation 26, UCP claimed $13,190.50, the

architect approved $7,759.00, and Mr Buchanan opined that UCP’s claim was

reasonable.

131 In the absence of any expert evidence or analysis to the contrary, I accept Mr

Buchanan’s valuation of these variations. The difference between that

assessment and the architect’s calculation on variation 30 is less than $300. I will

say no more about it. The difference on variation 26 is more substantial

($5,413.50), and thus my reasons for accepting Mr Buchanan’s assessment

warrants some explanation.

132 PHHH sought to challenge Mr Buchanan’s evidence on variation 26 in cross-

examination, by suggesting that his calculation involved a “large degree of

speculation” about the area affected by the work. Mr Buchanan accepted that

there was a lack of detailed information about aspects of the work and that he

had inferred a value against an area based on the engineer’s instruction.

However, I am satisfied that Mr Buchanan’s analysis and the inferences he drew

as explained in his report and confirmed in oral evidence were soundly based,

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and would have supported a finding that variation 26 should be assessed at a

value $5,413.50 higher that the value approved by the architect.

Is PHHH entitled to liquidated damages in the amount certified or some other

amount?

133 As with the variations, having failed to persuade me that the architect’s

assessments (and notably that manifested by PC16 Rev A) are infected by a

failure to act fairly and impartially for the reasons set out above, UCP is largely

precluded from challenging the architect’s assessment of EOTs and liquidated

damages. I have nevertheless set out below for completeness a summary of my

findings on these matters.

Is PHHH is entitled to liquidated damages?

134 PHHH claims, and the architect certified, liquidated damages payable by UCP to

PHHH of $324,000, calculated as 162 calendar days at $2,000 per day (Item 24

of Schedule 1 of the Contract). The 162 calendar days is the difference between

the date PHHH alleges UCP was required to achieve practical completion (9

February 2017), and the certified date of practical completion (21 July 2017).

135 UCP submits that PHHH is not entitled to liquidated damages for two reasons.

First, because PC16 Rev A should be set aside, on the basis that the architect

did not act fairly and impartially (noting that the liquidated damages claim is

pleaded on the basis of PC16 Rev A alone). It is unnecessary for me to say more

on this issue, except to note that PHHH disputes the assertion that its claim to

liquidated damages relies only on PC16 Rev A. It submits that if it also pleads

liquidated damages based on an entitlement under the Contract and breach of

that Contract.

136 UCP’s second and alternative argument is that the contractual pre-conditions to

liquidated damages in clause M10.1(a) are not satisfied. This clause provides:

UCP had relied on a further ground for opposing the claim for liquidated damages, namely, that it is a

penalty, but abandoned this ground at trial.

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“If the owner notified the architect in writing under clause M9 [PHHH may

notify the architect in writing whether it will enforce its entitlement to

liquidated damages against UCP], then the architect must:

(a) notify [UCP] of [PHHH’s] decision within *one working day…”

137 On this alternative ground, UCP submits a follows:

(a) On 16 April 2017 at 9.20am, PHHH notified the architect by email of its

intention to claim liquidated damages.

(b) On 18 August 2017 at 3.27pm, the architect issued notice under clause

M9.1 (AI578) stating that the works had not reached practical completion by

the date for practical completion and PHHH is entitled to liquidated

damages.

Builder within one working day. This was not simply a technical breach: “it

can be safely inferred that the reason for the failure was that the Owner and

the Architect were pursuing their joint agenda to ensure that PC Rev 16 A

was advantageous to the Owner, rather than it being a fair assessment”.

138 PHHH makes several submissions in response. First, that UCP cannot rely upon

clause M10.1(a), as it raised this alternative ground for opposing liquidated

damages for the first time in closing. It was neither pleaded nor foreshadowed in

opening submissions. PHHH refers to r13.05 of the Rules, submitting that:

“By this rule an averment of the due performance of all conditions

precedent is implied in every pleading document for this case; and the

opposite party must specify distinctly any conditions, the performance or

occurrence of which will be contested. If the opposite party does this, the

condition precedent and its performance or occurrence are put in issue,

and the burden of proving the performance or occurrence is cast upon

the party pleading.” (citations omitted)

139 Second, PHHH submits that its entitlement derives from clause M9 of the

Contract, not clause M10. Clause M10 merely obliges the architect to provide

notification of a right that has already accrued under clause M9, and make the

necessary deduction from any progress claim: it is not a pre-condition to the

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accrual of the right. Thus any failure to comply with clause M10 does not affect

PHHH’s entitlement to liquidated damages. PHHH adds (in effect) that this

construction is reinforced by the fact that, in contrast to clause M9, a notice

under clause M10.1(a) is not required to be in writing.

140 Third, PHHH submits that there is “ample authority”

for proposition that strict

compliance with notice provisions is limited to very specific circumstances and

does not apply to notice requirement in clause M10.

141 Finally, PHHH argues that the documentary evidence “immediately preceding

those impermissibly relied on” by UCP, establishes that the architect provided

UCP written notice on 16 August 2017 (AI 573), and thus on the same day as the

architect received notice from the owner.

142 In my view, UCP’s alternative basis for opposing the claim for liquidated

damages must also be rejected essentially for the reasons submitted by PHHH.

Further, each of the grounds relied on by PHHH (with the possible exception of

the pleadings point) is by itself a sufficient basis for rejecting UCP’s submissions.

More particularly:

(a) Clause M9 is effectively self-contained. On its proper construction, the

builder’s liability to pay the owner liquidated damages arises once the

elements of that clause are satisfied, and clause M10.1(a) does not operate

as a condition precedent to liability. It defies commercial common sense to

suggest that the owner’s entitlement accruing under clause M9 is lost

forever if the architect fails to comply strictly with the notice requirements

under clause M10.1(a).

(b) Similarly, even if I am wrong on that construction, I agree with PHHH that

clause M10.1(a) should not be construed strictly. Such a construction gets

no support from the authorities or from the Contract as whole.

JPA Finance Pty Ltd v Gordon Nominees Pty Ltd (2019) 58 VR 393.

[2023] VCC 516

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for the purposes of clause M10.1(a), notwithstanding the subsequent notice

comprised in AI 578.

(d) If contrary to (a) above, the notice under clause 10M.1(a) did operate as a

condition precedent to the builder’s liability for liquidated damages, on

balance I would agree with PHHH that r13.05 of the Rules in effect

precludes UCP from raising this issue for the first time in closing.

What is the quantum of PHHH’s liquidated damages?

143 The quantum of liquidated damages to which PHHH is entitled is the number of

calendar days (if any) between the date of practical completion and the date of

actual completion, multiplied by $2,000. Item 22 of the Contract relevantly

defines practical completion as “Possession of the site plus 195 Working Days

(Commencement Date to be confirmed)”. The date “16

March 2016” has been

handwritten and initialled as part of Item 22 (apparently signifying the confirmed

“Commencement Date”).

144 The parties’ submissions on this issue cover:

(a) the date UCP took possession of the site under Item 22;

(b) the adjusted date for practical completion having regard the EOTs;

works within the time (the “prevention principle”); and

(d) whether PHHH took possession of the works on a date before formal

practical completion, with the result that the works are to be taken as having

reached practical completion on that earlier date.

On what date did UCP take possession of the site?

145 It is an agreed fact between the parties that UCP “took possession of the

premises somewhere between 16 March and 8 April 2016”. PHHH submits it is

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the former (the date the contract was signed) and UCP argues that it is the latter

(when UCP started work).

146 UCP submits that possession is provided for in clause F1, which in turn refers to

item 30 in schedule 1. It argues that on a proper construction of item 30, “official

documents” are required to begin the works and thus possession “is not simply

access to the site but defined by the contractor having the official documents (as

defined) that it required to commence the works”. UCP asserts that it undertook

only “site procurement work” between 16 March and 8 April 2016. It notes that

the architect did not give direct evidence about UCP’s possession of the site and

instead based his conclusions on a review of documents.

147 PHHH submits in response that the date of possession was 16 March 2016

(when the contract was signed). PHHH argues that UCP has misconstrued the

contract, as:

(a) clause A4.1a is expressly subject to subclause A2.1e, which obliges UCP to

“…obtain all official documents required under this contract to complete the

works and any shown in item 30a of schedule 1”;

(b) “official documents” includes “any…permit [and]…any document listed in

item 30 of schedule 1”;

begin the works but to be obtained by UCP and those required to complete

the works but to be obtained by the owner; and

(d) accordingly, “it is clear that the owner providing a copy of the building

permit was not a precondition to the commencement of the works, or, more

importantly, for possession”.

148 PHHH further contends that:

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(a) Mr Palma gave unchallenged evidence that on 6 April 2016, he attended a

site meeting on the premises, where he noted demolition was “continuing”;

(b) UCP issued its first progress claim on 15 April 2016; and

149 In my view, UCP’s submissions should be rejected. Regardless of whether

PHHH or UCP were obliged to obtain the building permit, there is no basis in the

Contract for asserting that PHHH was obliged to provide the “building permit”

before the “works” could commence. It is inconsistent with item 30b of the

Contract (which expressly states the building permit is required to complete, not

begin, the works contrasting it from item 30b). Further, it ignores the reality that,

in projects of this scale, building permits are issued in stages.

150 In this case, the stage 1 building permit was issued on 22 March 2016, followed

by further stage permits (stage 2 on 11 May 2016 – varied on 6 September 2016

– and stage 3 on 17 May 2016). Taking UCP’s argument to its logical conclusion,

it did not have all the “official documents” (and thus “possession” under item 22)

until 17 May 2016. Although it appeared to put this proposition early in its written

submission (at [53] to [58]), it later seemed to be opting for 8 April 2018,

consistently with the range stated in the statement of agreed facts (at [169]).

151 In any case, in addition to the 17 May 2016 date being inconsistent with the

agreed facts, it defies common sense. It is clear that UCP had possession and

was undertaking substantial works at the site well before 17 May 2016. This also

reinforces the absurdity of any construction purporting to align “possession” with

receipt of all “official documents”, including building permits. I agree with PHHH

that UCP does not provide evidence or any other sustainable basis for any

alternative dates after the date of contract signing, with the result that the only

commercially sensible construction of the Contract is that the date of possession

was 16 March 2016 (contract signing).

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What is the unadjusted date for practical completion?

152 The experts agree that the unadjusted date for practical completion (based on a

date of possession of 16 March 2016) is 10 February 2017. I note that the

architect calculated it to be 9 February 2017 for the purposes of PC 16 Rev A.

Neither party seeks to make anything of this one day discrepancy. Further, the

statement of agreed facts (incorporating table B) confirms that the certificate for

practical completion was issued by the architect on 21 July 2017 and that the

architect certified EOTs totalling 4.5 days. Because this was inside the allowance

for delay due to disruptive weather in item 20 of schedule 1 to the Contract, the

162 days for liquidated damages certified by the architect by PC 16 Rev A is

therefore the number of days between 9 February and 21 July 2017.

153 UCP submits that the date for practical completion should be adjusted from the 9

February 2017 date certified by the architect on any or all of three grounds,

namely:

(a) the architect’s certification of UCP’s applications for EOTs should be

revised in its favour;

(b) the conduct of PHHH contributed to the delay (“prevention principle”) and

UCP is therefore entitled to a further extension of time; and

for practical completion.

Extensions of time

154 In its reply closing submissions, UCP refers to Mr Palma’s evidence to the effect

that UCP’s EOT claims did not comply with the Contract because there had been

no service (or no service in a timely manner) of a Notice of Likely Delay pursuant

to the provisions of section L “Adjustment of time”. It then submits:

“On the Owner’s case, the EOTs were either not valid claims under the

Contract, or the claims were simply not made. In either case it is

submitted that the Court can, as the Tribunal did in Allmore

Constructions, assess the merits of the EOT claims. The Owner cannot

have it have its cake and eat it as well.”

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JUDGMENT

155 I have set out above my reasons for rejecting UCP’s reliance on the construction

of clause H6 of the Contract in Allmore in relation claims made by UCP, but

rejected or not assessed by the architect. However, it is not clear from this brief

passage in UCP’s reply submissions whether UCP is here advancing a different

argument. Namely, that the court (standing in the shoes of the architect) can rely

on clause H6 to assess claims for extension of time where (according to Mr

Palma) no Notice of Likely Delay was given. Put another way, is UCP here

arguing that where no Notice of Likely Delay under section L of the Contract is

given, this brings it under clause H6, because the “contractor has not made a

*claim to adjust the contract”?

156 If so, the argument is misconceived. Section L of the contract imposes an

obligation on the contractor to give timely notice of any anticipated delay. It is not

the source of the “claim to adjust the contract”. Clause L1.4 clearly provides that

(emphasis in original): “The requirements for making a *claim to adjust the

contract and the procedures to be followed are stated in section H”. “Claim to

adjust the contract” includes claims to adjust the date for practical completion

(clause S1). Thus clause H6 is potentially engaged when a contractor has not

made a claim to adjust the contract under clause H1, not when it has not given a

under notice of likely delay under section L.

157 The analysis below is therefore concerned only with claims for EOTs under

clause H1 that were either rejected or not assessed by the architect. And, once

again, it proceeds on the assumption that I am wrong in finding that the architect

did not fail to act fairly and impartially, and therefore the architect’s decisions

cannot be re-opened under clause H6 of the Contract (or otherwise).

158 PHHH commences its written closing submissions on the EOTs in issue topic by

submitting that little weight should be given to the evidence of Mr Quigley, and

Mr Watson’s evidence should be preferred. I broadly agree with these

submissions. In particular, the difference between Mr Quigley’s first and second

[2023] VCC 516

JUDGMENT

reports are striking and inadequately explained or supported by source

documents. Further, Mr Quigley’s apparent willingness to resile from or qualify

the conclusions in his second report in the joint report and in his oral evidence

further undermined his credibility. I therefore agree with PHHH that where the

experts disagree, I prefer Mr Watson’s evidence.

EOT 1- Asbestos removal

159 Some time was spent in evidence on the question of whether the particular

asbestos removal undertaken by UCP was that expressly contemplated under

the Contract and thus not properly the subject of a claim for an EOT. In any

event, both experts agreed that an extension of 5 working days was appropriate

and I would have allowed that claim.

EOT 2 - Delay in provision of CAD files

160 UCP claimed delays under EOT for “CAD files and RFI’s for Steel shop

drawings”. The claim was rejected by the architect. Mr Quigley allowed 14 days

for EOT 2 and maintained this view after the expert conclave. Mr Watson agreed

that there was a delay in the provision of the CAD files, but only allowed 8 April

to 18 April if there was not overlap with EOT 1, and zero days if there is an

overlap.

161 UCP contends for Mr Quigley’s calculation, essentially on the basis that Mr

Watson has not properly applied the contractual provision for overlapping delays

in clause L6. PHHH disputes that Mr Watson has overlooked the relevant

provision of the Contract and submits that, in any event, both experts could only

say that there was a potential for a delay. Mr Watson’s evidence was that he was

unable to ascertain what the actual impact was, and Mr Quigley ultimately

accepted that he could not say whether in fact the delay in provision of CAD files

led to a delay in the works.

162 In my view, UCP has failed to adduce sufficient evidence (from the experts or

otherwise) that the delay in the provision of the CAD files in fact led to a delay in

[2023] VCC 516

JUDGMENT

the works. Given UCP bears the onus to establish this EOT claim, I agree with

PHHH that this EOT is not made out

EOTs - 3 to 7 disruptive weather

163 The experts agreed that an EOT of 6.25 days, over the 10 day allowance in the

Contract is appropriate. I would therefore have allowed this claim at 6.25 days.

EOT 8 – Ground floor column stiffening

164 By EOT 8, UCP claimed 68 working days due to additional works strengthening

the ground floor columns. It was rejected by the architect. According to UCP, Mr

Quigley originally allowed a period of 68 days, but was prepared to reconsider

that figure after considering Mr Watson’s report, and reduced his assessment to

30 days. Mr Watson’s allowance in the joint report and in evidence was 8 days in

evidence.

165 UCP argues that Mr Quigley’s assessment should be preferred on the basis that

UCP sent the architect a Notice of Likely Delay on 8 June 2016 and the architect

did not provide the final structural steel solution until 26 July 2016. It says the

relevant works could not commence until 9 August 2016. PHHH submits that Mr

Watson took into account the timing of the matters relied on by UCP in reaching

his 8-day assessment and his evidence was otherwise more credible. In contrast,

Mr Quigley’s first report allowed zero days, his assessment then jumped to 68

days on spurious grounds and in the joint report Mr Quigley again changed his

opinion to “greater than 8 days but less than 68 days”, noting that the difference

“depends on the circumstances”.

166 I agree with PHHH that Mr Watson’s evidence was more reliable for the reasons

it gives, and I would therefore have allowed 8 days for this EOT claim.

EOT 9 - cleats

167 The experts agreed that the appropriate allowance for this EOT claim is 26 days,

and I would have allowed this claim accordingly.

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EOTs 10-13 - disruptive weather

168 EOT 10, 11, 12 and 13 were claimed by UCP for inclement weather (rain). All

four EOTs were rejected by the architect. Mr Quigley allowed 4.3 days for these

EOTs on the assumption that the external works (including cladding) were not

completed due to rain. If the external works were completed, Mr Quigley would

have allowed 2.375 days. Mr Watson allowed 0.625 days.

169 Mr Watson gave evidence that:

“In my view, the delays for EOTs 12 and 13 would not have critically

delayed the works. They affected landscaping, whereas in my view,

works were able to progress inside and that was the critical path at the

time.”

170 Mr Quigley responded that:

“At the conclave I reinforced my position and based on information Mr

Watson provided to 2.375 days and the query I had at the time was in

relation to the activities that were underway on site, my view was that if

external cladding was still proceeding then that was a critical trade and if

the weather had delayed that - and I think obviously it would have

delayed the external cladding - then that would have delayed the

completion of the work.”

171 Accordingly, the issue between the experts was whether the delay was in the

critical path and, in particular, whether the delay coincided with external cladding

works. On the evidence, that is unclear. As the joint report notes, the site diary

refers to landscaping works, rather than cladding works and (as PHHH submits),

no evidence was given that the cladding works were in fact delayed by the

weather. As with EOT 2, I would therefore have assessed this claim as zero.

EOT 20 - increased height of balustrade

172 EOT 20 is connected to and claimed for delays as a result of variation 55, being

the required increased height of balustrade. The architect rejected EOT 20 on

the basis that it should not have caused a delay, noting that “a power shutdown

is part of the building programme”.

173 UCP submits that the EOT should be allowed at 10 days, relying on Mr Quigley’s

second report (in his first report, Mr Quigley allowed no delay). UCP argued that

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Mr Quigley’s evidence should be preferred, because his assessment was based

on the fact that the change in height would have required new shop drawings to

be prepared and the purchase of new materials, whereas Mr Watson’s

assessment was unsupported by evidence. PHHH submitted that Mr Quigley

could not adequately explain how the information provided caused his opinion to

change, including that his evidence as to whether the delay was caused by the

need to re-do shop drawings alone, or this combined with the need for additional

materials, was inconsistent and vague.

174 I agree with PHHH that Mr Quigley’s answers in oral evidence were equivocal

and unconvincing, and ultimately inconsistent with his second report. Mr Watson,

on the other hand, was able to clearly explain that his opinion was based on the

fact that variation 55 only claimed for additional glass, so there was no

justification for a claim for delay associated with shop drawings and re-ordering.

While I also have some reservations about Mr Watson’s evidence, I am satisfied

on balance that UCP has failed to discharge its burden of proof in respect of EOT

20 and would have rejected this claim.

EOT 36 - fire dampers

175 EOT 36 relates to variation 79 for level 1 fire dampers. In his first report, Mr

Quigley considered that there should be no EOT for variation 79 because other

works were going on at the time. In his second report, Mr Quigley allowed 12

days on the basis that UCP was instructed to install fire dampers after the

ductwork and ceiling were already installed. Mr Watson was not able to form a

view on the EOT on the materials before him. UCP submits that, in the absence

of evidence from Mr Watson, I should accept Mr Quigley assessment. It also

notes that Mr Quigley maintained his assessment following the expert conclave.

176 PHHH submits in substance that:

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(a) Mr Quigley accepted during oral evidence that what he meant by the

reasoning in his first report was this variation was not the sort of thing that

would delay the critical path;

(b) in Mr Quigley’s second report, he changes his opinion based on

assumptions he was asked to make regarding the critical path, and he was

asked to assume the very thing he was asked to opine on; and

177 I accept PHHH’s submissions. Despite the absence of evidence from Mr Watson,

the onus lies on UCP to prove the claim on the balance of probabilities and in my

view, it has failed to do so.

EOT 44 - overflow drains to play area

178 EOT 44 was submitted due to variation 94 Rev B. EOT 44 cited “checkpoint

surveyor requirement on 19th June 2017 to add overflow system details to

children’s play areas”. The position taken by the two experts in respect of this

claim are essentially the same as those taken in respect of EOT 36, and PHHH’s

criticisms of Mr Quigley’s evidence also mirror those made about his evidence on

that earlier EOT. Further, in evidence Mr Quigley accepted that he came up with

the allowance of 30 days for this EOT, only after being asked in correspondence

to assume the very fact that he had been asked to opine on.

179 As with EOT 36, I agree with PHHH’s submissions. In particular, I accept that Mr

Quigley’s estimate was premised on the assumption that the work on variation 94

Rev B was the only issue holding up the certificate of occupancy. I therefore

again find that UCP has failed to prove any entitlement under EOT 44.

Can UCP rely on the prevention principle?

180 It is not clear whether this issue is pressed by UCP. Its written closing

submissions make passing reference to it the context of the liquidated damages

claim, but did not develop any argument in written or oral closing submissions in

[2023] VCC 516

JUDGMENT

support of the application of the principle. It received somewhat more coverage

in the parties’ written opening submission. Regardless, I agree with PHHH’s

written opening submission that the prevention principle does not apply in

circumstances where:

(a) the Contract contains provision for an extension of time in respect of delays

caused by the owner;

and

(b) the contractor would have been entitled to an extension of time, but for the

fact that it failed to comply with the preconditions for obtaining the

extension, the satisfaction of which was within its control (failing to comply

with the notice provisions).

Prolongation costs

181 I also note in passing that UCP included in its counterclaim (and briefly

referenced in its oral opening submissions) claims for prolongation costs. I made

rulings during the course of the hearing excluding material comprising

paragraphs of witness statements, spreadsheets and other documents, which

UCP sought to adduce in evidence in support of its prolongation costs. PHHH

therefore submits that:

“It is apparent from the absence of any admissible evidence of loss and

damage at trial, coupled with the fact that clause H6 of the building

contract would not in any event avail the Defendant in the

circumstances…that the Defendant no longer presses it prolongation

costs claim (particularly in the absence of any submissions in this regard

in its Closing Submissions). Therefore this aspect of the Counterclaim

should be dismissed.”

182 As with the issue of the prevention principle, UCP did not expressly resile from its

claim for prolongation cost, but it did not take issue with PHHH’s submission

above in either its written reply submissions or in oral closing submissions. Nor

did UCP otherwise seek to advance any claim for prolongation costs in closing.

S.M.K. Cabinets v Hili Modern Electrics Pty Ltd [1984] VR 391 at 396 per Brooking J.

[2023] VCC 516

JUDGMENT

In those circumstances I agree with PHHH that this aspect of UCP’s

counterclaim should be dismissed, for the reasons it gives.

Did PHHH take possession of the site early, and thereby bring forward the

date of practical completion?

183 Clause M8 of the Contract relevantly provides that if the owner takes possession

of the works before the architect issues the notice of practical completion, the

works are to be treated as having reached practical completion. Relying on this

clause, UCP submits that practical completion occurred when PHHH moved

furniture into the “Zebra room” of the Happy Hippo childcare centre on around 10

April 2017, or when it later arranged and conducted open days, with the first of

these taking place on 10 May 2017. UCP submits that the relevant conduct of

PHHH is:

“[N]ot merely its conduct in accessing the site, it is its assumption of the

possession required to take full control of the parts of the site so as to

invite third parties onto it, furnishing it for the purposes of its business

and preparing for the commencement of business by way of open days”.

184 PHHH submits in response that:

(a) clause F2 of the Contract obliges UCP to give access to the site on

reasonable terms, which occurred;

(b) the court cannot equate partial access with practical completion (particularly

given UCP claims variations and EOTs beyond those dates);

areas while works continue, and occupation for the purpose of practical

completion;

(d) UCP has not provided any authority for the proposition that Mrs

Honeyborne’s limited use of a limited section of the premises constitutes

occupation for the purpose of determining the date of practical completion;

[2023] VCC 516

JUDGMENT

(e) Mr Palma gave evidence that there were outstanding issues at this time;

and

(f) UCP did not challenge the certificate of practical completion and it does not

form part of UCP’s counterclaim.

185 Neither party cited any authority on the question of whether limited access to the

site of the kind that occurred in around April of May 2017 is “taking possession”

for the purposes of clauses along the lines of clause M8 of the Contract, and I

am not aware of any. However, construing the Contract as a whole (including

having regard to clause F2 which expressly provides for giving the owner access

on reasonable terms), it is clear that “possession” in clause M8 contemplates

something considerably more comprehensive than apparently occurred in this

case, essentially for the reasons submitted by PHHH.

186 Further, clause M8 refers to the owner taking “possession of the *works”, not the

other defined term – “site”. “Works” is defined as the “completed construction set

out in the *contract documents (briefly described in item 5 of schedule 1”. The

“site” is defined as “the place at which the *works are to be constructed”. In my

judgment, “possession” for the purposes of clause M8 thus contemplates

conduct consistent with the owner assuming responsibility for the construction,

and probably in a manner that limits or excludes the contractor from undertaking

further works. There is no suggestion that the limited and temporary access to

the site for the purposes of conducting open days for prospective parents, in any

way materially impinged on or assumed responsibility for UCP’s ongoing

construction activities.

187 Accordingly, had I determined that I could revisit PC 16 Rev A, I would have

found that there was no evidence of PHHH formally taking possession of the

works under the Contract at any time before Mr Palma issued the certificate of

practical completion on 21 July 2017. I would therefore have held that the date of

practical completion stands at 21 July 2017.

[2023] VCC 516

JUDGMENT

Amounts owed by UCP to PHHH for breach of contract and restitution

188 In summary, I have determined that the decisions of the architect are not vitiated

as the architect did not fail to act impartially or fairly. Thus, pursuant to PC 16

Rev A, the total adjusted Contract Price is as certified by the architect, being

$4,241,638.36 plus the further $8,864.44 allowed in PC 16 Rev A, totalling

$4,250,506.80. Further, the decision of the architect in relation to liquidated

damages and utilities stands and I find that PHHH is owed $331,361.98 in

respect of these amounts. It follows that the architect’s certification in PC 16 Rev

A that UCP owes PHHH $322,493.54 also stands.

189 PHHH claims that UCP’s failure to pay PC 16 Rev A constitutes a breach of

subclause N6.1 of the Contract. It is not in dispute that UCP has not paid PC 16

Rev A and, accordingly, UCP has breached subclause N6.1 of the Contract by

failing to pay the amount certified as owing by it to PHHH under PC 16 Rev A

being $322,493.54.

190 Clause N15 of the Contract provides that each party must pay interest on any

money that it owes the other but fails to pay on time, at the rate specified in item

28 of schedule 1, which is 10% per annum. This is the rate claimed by PHHH

and I accept that this is the rate applicable the above sum from 10 March 2018

(being the date on which PC 16 Rev A was due, and as claimed by PHHH) to the

date of judgment.

191 In addition to the breach of contract claim, PHHH claims restitution for the

difference between the adjusted contract price, as certified by the architect, and

the amount of progress claims paid by PHHH. The parties agree that PHHH has

paid UCP a total of $4,539,281.37. I have determined that the total adjusted

contract price is as certified by the architect is $4,250,506.80. The difference

between these two amounts is $288,774.57. PHHH submits that it is entitled to

restitution of the overpaid amount “as it would be unfair and unjust for [UCP] to

retain such overpayment and be so unjustly enriched”. I agree.

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JUDGMENT

Is PHHH entitled to damages for defective work by UCP?

192 In addition to the payments PHHH claims pursuant to PC 16 Rev A, PHHH

claims damages for breach of contract for alleged defects in the works

undertaken by UCP. There are five issues in respect of PHHH’s defects claims,

as follows:

(a) whether the alleged defect is in fact a defect in the works undertaken by

UCP, as distinct from a design defect;

(b) how to resolve differences in the expert evidence on the cost of rectification

of the defect;

to undertake the rectification works (including whether PHHH is entitled to

claim a builder’s margin as part of the cost of rectification); and

(d) whether PHHH’s sale of the property reduces the damages it is entitled to

claim.

193 The general principles to be applied in determining the measure of damages

recoverable by PHHH for UCP’s defective work is not in dispute. That measure is

the difference between the contract price of the work and the cost of making the

work conform the Contract. However, that general rule is subject to the

qualification that the undertaking of the work necessary to produce conformity

must be a reasonable course to adopt.

194 The decision of the High Court in Bellgrove v Eldridge

(“Bellgrove”) from which

these principles are derived, and subsequent leading authorities (notably

Tabcorp Holdings Ltd v Bowen Investments Pty Ltd

(“Tabcorp”)) examining

those principles, were considered in detail by the Court of Appeal in Metricon

Homes Pty Ltd v Softley

(“Metricon”). I discuss the application of these

(1954) 90 CLR 613.

(2009) 236 CLR 272.

[2016] VSCA 60, per Robson AJA, Warren CJ and Tate JA agreeing, at [178] to [202].

[2023] VCC 516

JUDGMENT

principles in more detail below, in discussing the effect of PHHH’s sale of the

childcare centre in June 2018 on its defects claims.

What defects are agreed?

195 The parties agree defects as to both liability and quantum totalling $15,998, as

follows:

(a) storeroom plumbing ($743.00);

(b) disabled toilets ($4,089.00);

(d) mechanical air extraction ($257.00);

(e) north western masonry wall ($600.00);

(f) second floor water ingress ($250.00);

(g) waterproofing peeling away ($660.00); and

(h) giraffe roof leak ($2,349.00).

What is UCP’s liability for the disputed defects?

Glass safety barrier (balustrade)

196 PHHH accepts that the weight of the expert evidence on this alleged defect is

that it was a design issue. However, it submits that “the clear (unchallenged and

uncontradicted) evidence of Mr Palma” was that, having started the work other

than in accordance with the structural design drawings, Mr Palma gave UCP two

options. First, proceed with the structural design drawings (start again). Second,

continue as they were, but on the basis that UCP was responsible for having a

structural engineer approve that method (UCP chose this option). PHHH argues

that it follows that UCP was responsible for the design.

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JUDGMENT

197 Unsurprisingly, UCP relies on the weight of the expert evidence to argue that this

is a design defect, rather than a construction issue, for which it is not

responsible. It refers to the following evidence:

(a) Mr Quigley in his report states the alleged defects with the glass safety

barrier is a design defect, which he maintains in the joint report;

(b) Mr Lorich agrees, and maintains that view in the joint report;

evidence that the 10mm glass supplied by UCP was in accordance with the

project specification and that he was not aware of any instruction to the

builder specifying a 12mm thickness; and

(d) Mr Naughton also appeared to agree that the engineer had found that

10mm glass was acceptable, providing the spans were not greater that

900mm centre to centre (it was not suggested that the as-built balustrade

exceeded this allowance).

198 PHHH bears the onus of establishing that the as-built balustrade did not conform

to the design drawings and specifications and, in my view, it has failed to do so,

essentially for the reasons given by UCP. Despite my reservations about aspects

of Mr Quigley’s evidence, in my view his assessment of design issues was

generally more consistent and reliable. He was also supported in this

assessment by Mr Lorich, who impressed me as a careful and reliable witness

within his area of expertise. I therefore reject PHHH’s claim for damages in

respect of the glass balustrade.

Wall specification

199 The experts agreed that this was a defect, but disagreed on quantum. Mr

Buchanan assessed the rectification at $27,345.00, and Mr Naughton at

$30,439.52. PHHH submits that I should split the difference on these

assessments because Mr Buchanan accepted that the difference is marginal and

[2023] VCC 516

JUDGMENT

comes down to methodology and the use of margins and “it seems pointless

arguing over the difference”.

200 UCP submits that I should apply Mr Buchanan’s calculation on the basis that:

(a) he is more qualified and experienced on matters of quantities; and

(b) Mr Naughton’s calculations were presented during the running of the trial

with limited ability for Mr Buchanan to interrogate the figures presented by

Naughton.

201 I agree with UCP that Mr Buchanan is relatively more qualified and experienced

on matters of quantities. Further, his assessments and evidence more generally

impressed me as both considered and balanced. And it is essentially for that

reason that I am inclined to agree with Mr Buchanan that the difference between

his and Mr Naughton’s assessments were marginal and it is pointless to spend

time seeking to separate the two. I will therefore adopt the approach suggested

by PHHH and split the difference at $28,892.26.

Fire rating

202 Liability for this defect is agreed. On the question of quantum I am satisfied that:

(a) it was also agreed at the conclave that, as the rectification of this defect had

already been carried out, the experts would assess quantum based on

costs actually incurred and Mr Naughton would supply the relevant

invoices; and

(b) at trial it transpired that not all the potentially relevant invoices, quotes and

remittance advices had been supplied to the experts, so I ordered a further

limited conclave between Mr Naughton and Mr Buchanan to consider that

further material;

[2023] VCC 516

JUDGMENT

dated 4 September for $9,476) had not previously been discovered or

included in the court book;

(d) the total of the invoices was $40,184.30:

(e) Mr Buchanan accepted that the invoices appeared to be in order and

referred back to quotes, he was unable to comment on the reasonableness

of the invoiced value compared to his assessment;

(f) Mr Buchanan’s revised assessment following the further limited conclave

and review of all invoices and quotes, was $29,185; and

(g) the criticisms in UCP’s written reply submission of both the late and

piecemeal provision of supporting documents by PHHH and of Mr

Naughton’s approach to the scope of the rectification work, have some

force.

203 In these circumstances and based on my preference for Mr Buchanan’s

assessments and evidence as discussed above, I prefer Mr Buchanan’s revised

assessment of $29,185 to undertake necessary rectification work, over an

uncritical acceptance of the invoices rendered to PHHH for the work.

204 Further, Mr Buchanan and the other experts (other than Mr Naughton) were

denied the opportunity to fully interrogate and discuss the invoices and other

documents during the conclaves and at trial. It seems the fault for this lies with

PHHH. To my mind, this is in substance a failure by PHHH to adduce proof on

the balance of probabilities of its loss beyond that accepted by Mr Buchanan. I

will therefore assess damages for this defect claim in the sum of $29,185.00.

[2023] VCC 516

JUDGMENT

Door sealing

205 The parties agreed in their written closing submissions this defect should be

assessed at $2,919.00, representing the consensus reached by the experts

during the conclave. I assess damages accordingly.

Eave soffit lining

206 The experts agreed that this was a defect, and assessed quantum as $55,282,

not including the cost of sarking. The expert costing of the sarking was Mr

Naughton at $8,590.00, Mr Lorich at $4,075.00 and Mr Buchanan at $4,968.00.

PHHH submits that I should assess damages at the midway point between the

highest and lowest expert costings. PHHH argues that I should prefer the

opinions of Mr Lorich and Mr Buchanan as:

(a) their opinions are close; and

(b) Mr Quigley considered that the work could be completed in two days, rather

than the four allowed by Naughton.

207 I will assess damages for this defect at Mr Buchanan’s figure of $4,968.00,

essentially for the reasons submitted by UCP. As I have already noted, I

generally prefer the evidence of Mr Buchanan on these matters over Mr

Naughton, and on this particular defect, that evidence also finds support from Mr

Lorich and Mr Quigley.

Rainwater retention system

208 UCP does not cavil with PHHH’s assertion in closing submissions that it was

agreed that this was a defect. Further, I accept that Mr Honeyborne gave

unchallenged evidence that $1,375.00 was paid to SWR plumbing for these

works and note that this appears to be towards the lower end of the various

expert assessments of likely cost. I would therefore assess damages for this

defect at $1,375.00.

[2023] VCC 516

JUDGMENT

Rainwater harvesting

209 Similarly, UCP does not cavil with PHHH’s assertion in closing submissions that

“it was agreed this was a defect. Quantum was also agreed at $5,198.05”.

Accordingly, I assess damages for this defect in that amount.

Roofing

210 The roofing works were undertaken by Mackey Bros, under a sub-contract with

UCP. As noted above, the Mackey parties were joined by UCP as third parties in

the proceeding, but later reached a settlement with UCP pursuant to which the

Mackey parties paid $100,000 to UCP. Against that background, it is perhaps

unsurprising that the experts agree that there were a number of roofing defects.

The principal differences between the experts arise from:

(a) the assessment of the cost of scaffolding (both the direct cost and whether

that cost should attract a builder’s margin); and

(b) whether or not particular items of defective work is properly attributable to

the Mackey parties.

211 In the joint report, UCP’s roofing expert Mr Wenning costed the roofing defects at

a total of $98,151.63, PHHH’s roofing expert Mr Quick at $135,663.39, the

Mackay parties’ roofing expert Mr Djurovitch at $82,637.57 and PHHH’s

generally quantities expert Mr Naughton at $105,159.73. UCP asserts that the

appropriate revised quantum of Mr Wenning is $98,955, having regard to alleged

concessions he made at trial.

212 On the question of the cost of the scaffolding and whether it ought to be included

as a “line item” (and therefore attract a margin), Mr Quick costed it at $55,000,

Mr Wenning at $50,000, and Mr Naughton at $48,000. Mr Naughton and Mr

Quick considered that it should attract a margin, Mr Wenning disagreed. PHHH

submits that I should prefer Mr Naughton’s assessment, on the basis that he was

the only expert to give a detailed breakdown of this item, together with detailed

drawings. PHHH further argues that Mr Wenning’s basis for not allowing for a

[2023] VCC 516

JUDGMENT

margin on scaffolding cost (because it accounted for half the total cost) was

misconceived.

213 In its written reply submissions, UCP submits that PHHH has overlooked Mr

Wenning’s full explanation for not adding a margin. His evidence was that a cost

of $50,000 was “an unrealistic figure to put, say, 20 or 30 per cent in a

competitive environment”, and a cost as high as $50,000 would not attract any

loading. In commenting on Mr Wenning’s evidence more generally, UCP further

submitted (in effect) that, having made some appropriate concessions during the

evidence, Mr Wenning’s evidence should be preferred.

214 I agree with UCP that Mr Wenning presented as the most balanced of the three

witnesses giving concurrent evidence on these issues. That is not intended to

suggest that Mr Quick and Mr Naughton’s evidence was unbalanced. Rather, the

differences between each of the experts on the roofing issues were generally

minor and subtle, and so weighing the evidence of each of the witnesses is

likewise a subtle exercise. On balance, I was more persuaded by Mr Wenning on

the areas of difference, including in relation to the scaffolding.

215 On the individual items making up the balance of the claim, I agree with PHHH

that as Mr Djurovitch was not a witness at trial, I should disregard his evidence

(including his contribution to the joint report). However, I agree with UCP that:

(a) Mr Naughton is not a roofing expert and therefore his methodology on the

costings needs to be approached with some caution;

(b) on some items there is real doubt about the extent of Mackay Bros role in

the works, including because some items may have been contributed to by

the relocation of mechanical plant on the roof; and

being lower than Mr Quick’s (namely, by allowing for the involvement of

apprentices at a lower cost), whereas Mr Quick seemed to say that he did

[2023] VCC 516

JUDGMENT

not allow for apprentices essentially because it was easier to reconcile

costs using licensed plumber’s rates.

216 For these reasons, coupled with my general preference for Mr Wenning’s

evidence as discussed above, I accept UCP’s submission that the damages for

the roofing defects should be assessed consistently with Mr Wenning’s

assessment as $98,955.00.

Should PHHH’s damages be reduced because it denied UCP the

opportunity to undertake rectification works at lower cost?

217 UCP submits that PHHH is not entitled to claim damages in an amount which

exceeds the loss it would have suffered had it taken reasonable steps available

to it, to try to minimise its loss. It argues in effect that that PHHH is only entitled

to recover damages in respect of the cheaper of two equally effective means of

remedying a defect, and in this case the cheaper means was allowing UCP to

undertake rectification works.

It also appears to suggest that PHHH’s conduct

amounted to a repudiation of the damage limitation period provided for in the

Contract, but I agree with PHHH that there is no pleaded allegation of

repudiation, so this issue can be disregarded.

218 UCP relies in support of its argument on the decision of the NSW Supreme Court

in The Owners - Strata Plan No 76674 v Di Blasio Constructions Pty Ltd

(“Di

Blasio”) in which Ball J held (citations omitted):

“In the case of building contracts, it is also generally accepted that the

owner must give the builder a reasonable opportunity to rectify any

defects. Often, of course, the building contract itself requires the owner

(sic) to repair defects or sets out a procedure by which defects are to be

made good. But, even if it does not, the owner is required to give the

builder an opportunity to minimise the damages it must pay by rectifying

the defects, except where its refusal to give the builder that opportunity is

reasonable or where the builder has repudiated the contract by refusing

to conduct any repairs. That obligation may be an aspect of the duty to

mitigate, since it may be less expensive for the builder rather than a third

party to rectify the defects, particularly if the builder is still on site. But the

obligation is not simply an aspect of the duty to mitigate. The cost to the

Citing McKone v Johnson [1966] 2 NSWR 471, 474–476 (Sugerman JA).

[2014] NSWSC 1067.

Ibid at [43]-[44].

[2023] VCC 516

JUDGMENT

builder of undertaking the repairs is likely to be less than the amount that

a third party would charge the owner for the same work. In that case, the

owner is not mitigating its loss, but rather the builder's damages.”

219 As PHHH notes in its submissions, in the immediately following paragraphs, Ball

J held (citations omitted):

“The question of what is reasonable depends on all the circumstances of

the particular case. One relevant factor is what attempts the builder has

made to repair the defects in the past and whether, in the light of the

builder's conduct, the owner has reasonably lost confidence in the

willingness and ability of the builder to do the work…

It is for the defendant to prove that the plaintiff has acted unreasonably.

It is not for the plaintiff to prove that it acted reasonably.”

220 UCP also cites to Turner Corporation Ltd (Receiver and Manager Appointed) v

Austotel Pty Ltd

(“Turner”) in which Cole J held:

“There is, in my view, no room for a wider common law right in the

Proprietor to treat non-compliance with the contractual obligation with the

Builder as a separate basis for claiming damages being the cost of

having a third party rectifying or completing defective or omitted works.

This is because the contract specifies and confers upon the Proprietor its

right flowing from such breach; that is, the parties have, by contract

agreed upon the consequences for each of the Proprietor and the

Builder, both as to rights and powers flowing from and the consequences

of, such breach… It also follows, in my view, that the Proprietor has no

entitlement to recover the costs of works performed by others at the

request of the Proprietor unless prior to such work being performed the

Architect has given the notice required by cl 5.06.1 prior to the date of

practical completion or pursuant to cl 5.06.01 as incorporated by cl

6.11.05 after the date of practical completion.”

221 UCP argues that during a defects liability period, an owner is generally not

permitted to recover damages from the contractor for the cost of rectifying the

contractor’s defective works unless the owner has first given the contractor the

opportunity to undertake the necessary rectification work, at the contractor’s

expense, and the contractor has failed to perform the required rectification work.

Defects liability provisions confer a positive right upon the contractor to mitigate

or even eliminate the owner’s loss or damage flowing from the contractor’s

Ibid at [45]-[46].

(1994) 13 BCL 378.

Ibid at [395].

[2023] VCC 516

JUDGMENT

breach of obligation (that is, to reduce or eliminate a loss for which the contractor

would otherwise be liable).

222 Applying those principles in this case, UCP submits the Contract expressly

allowed UCP to rectify defects. Indeed, UCP was to correct any defects or

finalise any incomplete necessary work, whether before or after the date of

practical completion, within the agreed time as stated in an instruction (clause

M11). If UCP fails to correct the work within the time nominated under clause

M11 or fails to show reasonable cause for the failure together with a timetable for

correcting the problem, PHHH could use another person to correct the problem

at the cost of UCP (clause M12).

223 In relation to the particular defects that UCP argues are affected by the

application of these principles, UCP submits as follows:

(a) On 28 August 2017 the architect issued an instruction to UCP to correct

defects, but the following day, Mrs Honeyborne emailed Mr Palma saying:

“Tamar [Soliman] issued notices and it has gone legal now, we don’t want

them there as we don’t want a barney in our business. They are not to

attend as they were (sic) issued with AI over 14 days ago and they are in

breech (sic)”.

(b) On 29 August 2017, Mr Palma emailed UCP advising he had been

instructed not to allow UCP on site, and Mr Soliman of UCP had responded

the following day asking “how are we going to attend to defects?”.

the architect issued AI 649, a 129 page instruction including the report of Mr

Naughton. There were further exchanges between the architect and UCP in

relation to the defects in early August 2018, including an email from UCP to

P&M Kaye Ltd v Hosier & Dickinson Ltd [1972] 1 WLR 146, 166 (Diplock LJ); Egan v State Transport

Authority (1982) 31 SASR 481, 484-485.

[2023] VCC 516

JUDGMENT

the architect on 9 August 2018 noting that UCP was arranging “subbies” to

attend to the defects.

(d) On 28 August 2018 UCP wrote to PHHH making an offer to attend to the

following defects:

(i) Item 7.3 – wall specifications – fire rating;

(ii) Item 7.6 – eave soffit lining;

(iii) Item 7.9 – rainwater retention system;

(iv) Item 7.10 – rainwater harvesting;

(v) Item 7.13 - storeroom plumbing;

(vi) Item 7.14 – disabled toilets;

(vii) Item 7.15 – shade sails;

(viii) Item 7.16 – mechanical air extraction;

(ix) Item 7.17 – north western masonry wall; and

(x) Water leaking to the ground floor soffit.

(e) On 31 August 2018, PHHH responded to UCP’s letter conditionally

accepting UCP’s offer to attend the site to rectify items 7.6, 7.10, 7.11, 7.13,

7.14 and 7.17, with the remaining items either already being attended to or

requiring further instructions.

(f) PHHH’s condition was that UCP pay $10,000.00 to Mr Naughton for the

preparation and finalisation of his expert report identifying the defects. UCP

argues that this is not a mechanism under the contract. Under clause M12.1

of the Contract, it is for the architect to determine whether the proposal to

correct the problem is acceptable.

[2023] VCC 516

JUDGMENT

(g) On 18 September 2018, UCP wrote to PHHH rejecting the conditional

acceptance and reinstating their initial offer to rectify the defects set out in

the correspondence of 28 August.

(h) On 20 September 2018, PHHH wrote to UCP stating that they required

more time to obtain instructions. UCP again expressed their willingness and

ability to rectify the defects on 20 September 2018.

(i) On 25 September 2018, the UCP requested that PHHH provide a response

to the offer made on 18 September 2018.

(j) Contrary to Mr Honeyborne’s oral evidence that he did not want UCP to

return because he had “lost confidence” in UCP, Mr Honeyborne’s position

at the relevant time was that attendance at the site was conditional on

payment of fees due to Mr Naughton.

(k) The architect as PHHH’s agent had instructed UCP to attend to defects on

28 August 2017, which is inconsistent with the evidence that Mr

Honeyborne now gives that he had “lost confidence”.

(l) UCP was ready, willing and able to attend to rectify certain defects.

224 PHHH submits that the authorities relied on by UCP do not support UCP’s case,

referring in particular to the passage in Di Blasio immediately following that relied

on by UCP (and set out above). PHHH argues that Bell J in Di Blasio held it was

not unreasonable in that case for the plaintiff to refuse the defendant an

opportunity to rectify defects because the plaintiff took the reasonable step of

engaging an expert to identify the defects, and the builder’s response was

inadequate.

225 PHHH further argues that clauses M12 and M14 impose obligations on UCP to

rectify defects, and confer a benefit to PHHH, including M12.2 – a right to use

another person to rectify the problem. It says that in Turner, the obligation was

[2023] VCC 516

JUDGMENT

on the owner to allow the contractor to rectify defects. PHHH submits that the

actions of PHHH were otherwise reasonable because of the following:

(a) In August and September 2018 when the parties were purporting to discuss

arrangements for UCP to undertake rectification works there were four legal

proceedings underway between the parties (this proceeding, a garnishee

proceeding, an adjudication proceeding and a guarantee proceeding) and

communications were occurring principally through solicitors.

(b) Mr Honeyborne gave evidence that due to the matters which occurred after

practical completion, he had lost confidence in UCP.

in August 2017 (about 11 months before expiry of the damage limitation

period), Mrs Honeyborne gave unchallenged evidence this was because

she did not want any unpleasantness to occur in the childcare centre, and

referred to matters going legal – which suggests a breakdown in

relationship between the parties.

(d) Mrs Honeyborne gave unchallenged evidence of later allowing UCP to

attend the site on numerous occasions, despite her concerns.

(e) The suggestion that UCP was ready, willing, and able to rectify the defects

in August and September 2018 ought to be given little weight. At that time,

it was conducting the proceeding through its current solicitors, and filed a

defence denying almost all of the defects. This suggestion should be seen

as formulaic legalese designed to provide a basis for resisting PHHH’s

defect claims.

(f) UCP’s submissions imply that it lost an opportunity that otherwise would

have been available in August 2018. However, UCP appeared to accept

that the rectification works would be completed by subcontractors. UCP is

able to pursue those subcontractors, and was able to join them to the

[2023] VCC 516

JUDGMENT

proceeding (as it did for the roofing subcontractors). It has lost no right, but

rather made a forensic decision to deny liability up until trial.

226 I agree with UCP that clauses M11 and M12 of the Contract do contemplate that

UCP would ordinarily be given the opportunity to rectify defects before PHHH is

free to engage a third party to undertake the work. PHHH correctly submits that

the provisions do not in terms confer on UCP a right to rectify. However, read

together, I am satisfied that clause M11 and M12 contemplate and implement a

regime under which UCP must correct the defects identified in the relevant

instruction, with PHHH being entitled to “use another person to correct the

problem at the cost of the contractor” under clause M12.1, only after UCP has

failed to comply with clause M11.

227 The next question on this issue is more difficult. It is in substance the question

asked by clause M12.1 of the Contract: Did UCP fail to correct a defect or finalise

any incomplete necessary work within the time required under the Contract? It is

far from clear from the exchanges between the parties after the architect issued

AI 649 whether there was a point at which UCP could be said to have “failed”

within the terms of clause M12.1. Certainly it did so in respect of particular

defects that were not part of its offer on 28 August 2018 to rectify, but neither

party has attempted to make submissions about the effect of any alleged failure

by UCP in respect of particular defects.

228 Instead, each party has sought to deal with the consequences of their respective

submissions globally, as follows:

(a) PHHH has argued that UCP has failed to establish that PHHH acted

unreasonably in restricting or refusing UCP access to the site to rectify

defects, and so PHHH was within its rights to engage third parties to

undertake all of the necessary rectification work; and

[2023] VCC 516

JUDGMENT

(b) UCP submits in substance that, had it been given the opportunity itself to

rectify the defects, it would not have incurred the cost of a builder’s margin

on the rectification work:

“Accordingly should the Court award any damages for defective work, it

should be discounted to reflect the cost to the Builder had the Builder

performed the works by deducting the builder’s margin for any costings

based on third parties rectifying the works.”

229 In relation to PHHH’s submissions, I am not assisted by evidence of exchanges

between the parties in August 2017 suggesting PHHH was denying UCP access

to the site at around this time. In my view, this was superseded by the issue

almost a year later (on 16 July 2018) of AI 649 attaching Mr Naughton’s report

and the exchanges that followed. On the other hand, there is some force in

PHHH’s submissions that UCP’s offers to attend to rectify in around August 2018

were largely window dressing, given the level of disputation between the parties

at this time. The same can probably be said of PHHH’s conditional offer to allow

UCP on site to undertake rectification works.

230 Having said this, in my view, it is not enough for PHHH to rely on UCP’s asserted

failure to demonstrate that PHHH was acting unreasonably in refusing access to

UCP. To my mind, this overlooks the primacy to be afforded to PHHH’s

contractual obligations under clause M11 and M12 discussed above. If (as I have

found) the Contract obliges PHHH to afford UCP the opportunity to rectify defects

and it has failed to do so, this is a breach of the Contract that is not saved by

UCP failing to establish the unreasonableness of PHHH’s conduct. The question

of unreasonableness only arises in relation to PHHH’s duty to mitigate, and

PHHH’s breach is anterior to any question of mitigation.

231 Further, if the question of mitigation were engaged, I am satisfied that PHHH’s

refusal to allow UCP to rectify the defects was unreasonable, for two reasons.

First, Mr Honeyborne may well have lost confidence in UCP, but it is clear from

the correspondence in July to September 2018 discussed above that he was not

relying on this as a basis for refusing UCP access to the site. On the contrary, he

[2023] VCC 516

JUDGMENT

purported to agree that UCP could have access to undertake particular

rectification work, as long as it first paid $10,000 towards the cost of Mr

Naughton’s report. Second, I agree with UCP that PHHH had no basis under the

Contract (or otherwise) to impose that condition. Under clause M12.1 of the

Contract, it is for the architect to determine whether the proposal to correct the

problem is acceptable.

232 Doing the best I can in the absence of guidance from the parties as to how to

apply these findings to particular defects, I propose to adopt the course proposed

by UCP, given my findings in its favour on this issue. That is, I will discount

PHHH’s damages for the defects that UCP offered to rectify by the amount of the

builder’s margin on those particular defects. There was some divergence of view

between the experts as to what that margin should be, but as I have generally

preferred the evidence of Mr Buchanan on the quantification of the defects, I will

apply the margin that he used. Mr Buchanan’s evidence was that this was 25%,

comprising 10 percent for preliminaries and 15% for the builder’s margin.

233 The relevant defect items (that is, those that UCP offered to rectify) in respect of

which the quantum was either agreed or has been assessed by me above are as

follows (the amount assessed is also shown below):

(a) item 7.3 – wall specification – fire rating: $29,185.00;

(b) item 7.6 – eave soffit lining: $4,698.00;

(d) item 7.10 – rainwater harvesting: $5,198.05;

(e) item 7.13 – storeroom plumbing: $743.00;

(f) item 7.14 – disabled toilets: $4,089.00;

(g) item 7.15 – shade sail: $7,050.00;

[2023] VCC 516

JUDGMENT

(h) item 7.16 – mechanical air extraction: $257.00; and

(i) item 7.17 – north western masonry wall: $600.00.

234 As far as I can tell, the final item in the list of those that UCP offered to rectify

(described as “Water leaking to ground floor soffit”) has not been the subject of

claim or assessment. Applying a 25% discount to the quantum assessed on the

total of the other amounts (being $53,195.05), leads to a reduction of $13,298.76

in the damages I will award to PHHH for the defects.

Does PHHH’s sale of the property reduce the amount of the defects

damages it can claim?

235 PHHH sold the property to a third-party purchaser by a contract of sale dated 17

April 2018, with settlement occurring on 22 June 2018. UCP submits that PHHH

is not entitled to damages for the costs to rectify defects that it did not incur as a

result of the sale. It argues that:

(a) the lease between PHHH and Happy Hippo is a standard form LIV lease

and does not provide for any obligation on Happy Hippo to rectify defects;

(b) PHHH completed the sale and parted with any interest in the property after

commissioning the Naughton report and before giving any notice of the

defects to UCP;

to carry them out, before it invoked the contractual regime for the correction

of defects;

(d) only $4,723.80 was expended on defect rectifications before the settlement

of the sale of the property; and

(e) the remainder of the invoices as claimed by Mr Honeyborne in his lay

witness statement of 30 October 2020 were all expended after the sale of

the property had occurred;

[2023] VCC 516

JUDGMENT

236 UCP submits that the fact that the works will not in fact be carried out and the

sale of the property are relevant to the reasonableness of rectification. It argues

that where PHHH has elected to sell the building without carrying out the repairs,

where it has refused UCP the opportunity to effect the repairs, and where it has

presented a grossly inflated damages claim, “the conclusion asserts itself that

this is not an action to recover bona fide loss, but rather to extract a windfall at

the expense of the Builder”.

237 PHHH submits in response that whether the rectification works were carried out

before selling the property is irrelevant, provided the amount claimed is

reasonable. It adds that the reasonableness question is one of fact, it does not

depend upon the likelihood of the works being completed and UCP (as the party

bearing the onus of establishing unreasonableness) has not produced evidence

that any of the rectification works were unreasonable. PHHH further argues that:

(a) much of the cost of rectification works has already been incurred;

(b) Mr Honeyborne gave evidence that PHHH intends to reimburse the landlord

for the completion of these works;

“there will be no rectification” are baseless and cannot be asserted as they

were never put to Mr Honeyborne; and

(d) UCP has been indemnified by the third parties in the sum of $100,000 for

the roofing defects. Therefore, UCP is suggesting it is unreasonable for

PHHH who paid for UCP to carry out this work (which was defective) to

receive this money as it no longer owns the premises, and it is more

reasonable for UCP, who was responsible for the defective work, to be paid

twice over for the defective work.

[2023] VCC 516

JUDGMENT

238 As noted above, the submissions differ on whether the sale of the property, or

the likelihood of the works being carried out, are relevant to the reasonableness

question.

239 In Bellgrove, the High Court held that the possibility that rectification work will not

be carried out does not prevent a claim for damages.

In Director of War

Services v Harris,

Gibbs J held that a sale of the property does not of itself

affect the right to damages, but may be relevant to the question of

reasonableness:

“…If the owner subsequently sold the building, or gave it away, to a third

person, that would not affect his accrued right against the builder to

damages according to the same measure. The fact that the building had

been sold might be one of the circumstances that would have to be

considered in relation to the question whether it would be reasonable to

effect the remedial work.” (at 278)

240 In Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd,

Griffiths LJ (with

whom Keith, Bridge, Ackner and Browne-Wilkinson LLJ agreed) held (citations

omitted):

“In contracts for the sale of goods, the purchaser is entitled to damages

for delivery of defective goods assessed by reference to the difference

between the contract price and the market price of the defective goods,

irrespective of whether he has managed to sell on the goods to a third

party without loss..”

241 In De Cesare v Deluxe Motors Pty Ltd,

Doyle CJ, Bollen and Nyland JJ held

that Gibbs J was “correct in saying that in principle the relevance of the sale of

the building is limited to its relevance to the question of whether it would be

reasonable to effect the remedial work”.

242 In Westpoint Management Ltd v Chocolate Factory Apartments Ltd,

Giles JA

(with whom McColl and Campbell JJA agreed) noted the tension between the

Bellgrove at p620.

[1968] Qd R 275.

[1993] 3 All ER 417.

(1996) SASR 28.

Ibid at 35.

[2007] NSWCA 253.

[2023] VCC 516

JUDGMENT

undesirability of extensive evidentiary inquiries, and the compensatory principle

of damages, his Honour held:

“Ordinarily the court is not concerned with the use to which a plaintiff puts

its damages, and if the likelihood of the plaintiff carrying out the

rectification work were a consideration in the award of damages there

would be the potential for expensive and time-consuming factual

enquiries. On the other hand, adherence to the compensatory nature of

damages suggests that, if the plaintiff will not put itself in the position it

would have been in had the contract been performed, the plaintiff should

not be given the means of doing so.”

243 His Honour went on to say:

“Relevance of the plaintiff's intention to carry out the rectification work to

reasonableness is accepted in, for example, Chitty on Contracts, 29th

ed, at 20-016, and Hudson's Building and Engineering Contracts, 11th ed

at 8-138. It appears to have been accepted in De Cesare v Deluxe

Motors Pty Ltd - indeed, sale of the building may have relevance through

whether or not the rectification work will be carried out. If truly going to

reasonableness, I do not think consideration of whether or not the

plaintiff will carry out the rectification work is inconsistent with Bellgrove v

Eldridge, since the regard to it is part of arriving at the plaintiff's

compensable loss. Once there is compensable loss, the court is not

concerned with the plaintiff's use of the compensation.

But the plaintiff's intention to carry out the rectification work, it seems to

me, is not of significance in itself. The plaintiff may intend to carry out

rectification work which is not necessary and reasonable, or may intend

not to carry out rectification work which is necessary and reasonable.

The significance will lie in why the plaintiff intends or does not intend to

carry out the rectification work, for the light it sheds on whether the

rectification is necessary and reasonable. Putting the same point not in

terms of intention, but of whether or not the plaintiff will carry out the

rectification work, whether the plaintiff will do so has significance for the

same reason, and not through the bald question of whether or not the

plaintiff will carry out the rectification work. That question is immaterial,

see Bellgrove v Eldridge.

So if supervening events mean that the rectification work cannot be

carried out, it can hardly be found that the rectification work is

reasonable in order to achieve the contractual objective: achievement of

the contractual objective is no longer relevant. If sale of the property to a

contented purchaser means that the plaintiff did not think and the

purchaser does not think the rectification work needs to be carried out, it

may well be found to be unreasonable to carry out, the rectification work.

An intention not to carry out the rectification work will not of itself make

carrying out the work unreasonable, but it may be evidentiary of

unreasonableness; if the reason for the intention is that the property is

perfectly functional and aesthetically pleasing despite the non-complying

work, for example, it may well be found that rectification is out of all

[2007] NSWCA 253 [54].

Ibid at [59]-[61].

[2023] VCC 516

JUDGMENT

proportion to achievement of the contractual objective or to the benefit to

be thereby obtained.”

244 In Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd,

Bathurst CJ (with

whom Macfarlan and Meagher JJA agreed) cited and applied the above

passage. The court held that a lack of intention to carry out the rectification work,

the transfer of the property from the defendant to an owners corporation and the

absence of any evidence that the defects were affecting the use and occupation

of the building or the common property, indicated that rectification works were

unreasonable.

245 In my view, the weight of the authorities distils to the proposition that the sale of

the relevant property can be evidence of a lack of intention to carry out works,

which in turn can inform the question of unreasonableness. However, it is clear

that a sale by itself does not prove unreasonableness. I would add that the

decision of the High Court in Tabcorp strongly reinforces the proposition that the

starting point is the innocent party’s strict contractual entitlement. Great care

should be taken with submissions that “rested on a loose principle of

‘reasonableness’ which would radically undercut the bargain which the innocent

party had contracted for an make it very difficult to determine in any particular

case on what basis damages would be assessed”.

246 The substance of UCP’s submissions is that:

(a) PHHH completed the sale and parted with any interest in the property after

commissioning the defects report, and before giving any notice of the

defects to UCP;

(b) PHHH therefore had no interest in the defects being repaired, or any ability

to carry them out; and

[2012] NSWCA 184.

Ibid at [230].

Tabcorp at [19].

[2023] VCC 516

JUDGMENT

regime.

247 In my judgment, none of these facts come close to establishing

unreasonableness of the kind discussed in the authorities. Further, it is clear (as

submitted by PHHH) that:

(a) most of the rectification work had in fact been carried out by the time of the

trial regardless of the sale; and

(b) no attempt was made by UCP in the cross-examination of Mr Honeyborne

to gainsay his evidence that he intended to reimburse the landlord or to

identify particular items of rectification that would never be undertaken or

were otherwise unreasonable.

248 Finally, and perhaps most importantly, the expert evidence (and most notably the

evidence of UCP’s own expert Mr Buchanan) established to my satisfaction that

each item of rectification work for which I have assessed damages was

objectively necessary and reasonable.

249 I therefore award PHHH damages for defects totalling $187,490.31, less the

$13,298.76 for the margin on the works UCP offered to rectify, resulting in a

damages award to PHHH for defects of $174,191.55.

Variation 37 Claim

250 On 12 December 2016, the architect certified that UCP was entitled to variation

37 and PHHH was liable to pay $167,608.54 for this variation. PHHH paid the

assessed variation amount on 21 January 2017. On about 6 July 2018 (over 18

months after certification), PHHH served a dispute notice in respect of variation

37. PHHH pleads an entitlement to repayment of the $167,608.54, on the basis

the Contract documents obliged UCP to construct steel framing to support the

timber floor joists in the level 2 floor structure of the building and it failed to do so.

[2023] VCC 516

100

JUDGMENT

On that basis, it submits that it “primarily claims damages for breach of contract

in respect of Variation 37”.

251 UCP pleads in response that it was only required to construct in accordance with

the contractual drawings, which “stipulated steel beams of 300mm depth (1B4),

timber floor joists of 400mm depth and 10mm thick cleat plates with two M20

bolts located within each steel beam” and that the structural design was changed

in September 2016 “to enable connection between the 400mm joists and the

300mm beam by extending the cleats and specifying three rather than two M20

bolts”. UCP asserts that the contractual drawings did not require connection

between the steel beam and timber floor joist and that PHHH was required to

supplement the design. UCP also points to the very late service of PHHH’s

notice of dispute

252 There was discrete and detailed expert engineering evidence given on this issue

from Mr Drew for PHHH and Mr Herbert for UCP. Based on this evidence, PHHH

characterises the issue as “boiling down to a question on ultimate responsibility

for shop drawings from a sequencing as opposed to a structural perspective”.

UCP submits that describing the dispute of this variation as a sequencing issue

is a mischaracterisation that assumes the answer to the question. It says that: “At

its heart, the dispute over CV 37 is a documentation issue and the extent to

which the design intent was expressed in the documentation”.

253 In my view, for the same reason that UCP cannot rely on clause H6 to review the

architect’s assessments of variations, PHHH is unable to circumvent the

procedure under clause A8 to re-open the architect’s certification of variation 37.

PHHH’s dispute notice was submitted more than a year after 20 working days of

the architect’s variation 37 on 12 December 2016. Thus, PHHH is not entitled to

dispute variation 37 at all, whether it purports to do so on the basis of breach of

contract or otherwise. PHHH has not argued that the architect’s decision in

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relation to variation 37 is open to re-assessment by reason of partiality or on any

other ground.

254 For completeness, had it been necessary to determine the validity of variation

37, I would have endorsed the architect’s approval of the variation essentially for

the reasons stated by UCP, including that I generally preferred the evidence of

Mr Herbert where it conflicted with Mr Drew. There is also force in UCP’s

submission that the variation was supported by Amiens Consulting, whose

assessment had been commissioned by the architect, and Mr Palma’s evidence

that he accepted the variation was not UCP’s fault. I agree with UCP that: “The

relevant engineering drawings did not provide section details for the connection

ultimately used by the engineer and built by the builder”.

Utilities Claim

255 As with variation 37 and for the same reasons, in my view the last word on this

issue is PC 16 Rev A, which certifies utilities totalling $7,361.98, comprising

$401.98 for water usage and $6,960 for electricity usage. It is not open to either

party to now seek to challenge that certification for the reasons previously

explained.

256 If the position were otherwise, I would have agreed with PHHH that utilities are

payable by UCP under Contract on the basis that:

(a) pursuant to clause N1.1a of the Contract, the Contract Price allows for

“everything reasonably required in accordance with the contract to complete

the *works”;

(b) Mr Palma gave unchallenged evidence that “I understand this to include the

provision of power and water to the site, both of which are essential to

carrying out the works”; and

were, on reflection, not due to UCP’s usage, resulting in an allowance for

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utilities of $4141.79, not $10,006.31 set out in the statement of agreed

facts.

Incidental matters

257 There are two incidental matters that arose during proceedings, which I indicated

would be the subject of further elucidation in these reasons. These were:

(a) UCP’s application to amend its counterclaim; and

(b) the admissibility of pages that UCP sought to add to the tender list after the

evidence at trial had concluded.

UCP’s application to file and serve further amended counterclaim

Background

258 On 31 August 2018, UCP filed its original defence and counterclaim. On 4

December 2018, UCP filed an amended counterclaim, separating its

counterclaim from its defence. By paragraph 47 of its original defence and

counterclaim (which became paragraph 9 of the amended counterclaim, but was

otherwise unamended), UCP pleaded that:

“In breach of clauses A6.4, H6 and J5, the Plaintiff has failed to ensure

that the Architect, as certifier, adjusted the contract price and the date for

practical completion fairly and honestly in accordance with the relevant

quotations/variations”.

259 Thus at all times up to and including the start of the trial, UCP essentially relied

only on clause H6 (together with the allegation of the architect’s impartiality and

the breach of clause A6.4) as the source of its entitlement to have the architect’s

certifications of variation and EOTs revisited by the court, standing in the shoes

of the architect. Neither party relied on, or otherwise referenced, the regime for

disputing the architect’s certificates under clause A8.

260 On the first day of the trial (22 February 2021), both parties sought to make what

were, for the most part, uncontroversial amendments to their pleadings. PHHH

sought to rely on a draft amended defence to amended counterclaim that

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updated details of the alleged Contract Price, amended paragraph numbering

and sought to amend paragraph 4 and add a new paragraph 4A. This had

apparently been sent to UCP’s solicitors about a week before trial.

261 UCP sought to rely on a draft amended counterclaim (also updating details of the

alleged Contract Price and revising and further particularising its claim amounts),

and a draft reply to PHHH’s draft amended defence and amended defence to

amended counterclaim. These had apparently been provided to PHHH’s

solicitors a day or so before trial.

262 PHHH’s proposed amendments to paragraph 4 and its proposed paragraph 4A

was the first substantive pleading referring to the dispute regime in paragraph A8

of the Contract. The proposed amendment to paragraph 4 essentially recited the

alleged effect of clauses H6 and A8 of the Contract. The proposed new

paragraph 4A positively asserted that UCP had failed to dispute the architect’s

certifications (or failure to certify) under clause A8 and was therefore not entitled

to raise such a dispute.

263 In its proposed reply to the proposed new paragraph 4A, UCP denied the effect

of clause A8 as alleged by PHHH and, “further or alternatively”, sought to raise

an argument to the effect that PHHH had waived reliance, or was estopped from

relying, on strict compliance with the time limits imposed by the Contract. UCP’s

proposed reply generated debate on the first day of trial. In particular, while UCP

initially disclaimed any need to plead relief under clause A8, PHHH was

concerned to ensure that UCP did not use the proposed reply or other

amendment as a “Trojan horse” – to introduce an estoppel or other fresh claim

that went beyond reliance on clause H6.

264 The debate continued on the second day of trial, in the course of and after each

party’s openings. By the end of that day, it had become apparent that UCP was

seeking to agitate issues that necessitated additions to UCP’s draft further

amended counterclaim. An updated draft was provided by UCP overnight and

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was discussed at the commencement of the third day. Given the extent of the

amendments and the importance of the application for the future conduct and,

potentially, the outcome of the trial, I adjourned the trial for the rest of that day to

allow the parties time to file and serve any affidavits and outlines of submissions.

265 UCP duly filed and served submissions and an affidavit of Ms Nomikos, the

principal lawyer of Macpherson Kelley, UCP’s solicitors. PHHH filed submissions

and an affidavit of Mr Honeyborne and Mr Noble, the principal lawyer of Noble

Lawyers, PHHH’s solicitors. I heard the application on 25 February 2021 and

gave my preliminary ruling that day. I indicated to the parties that I would settle

and elaborate on that ruling in my final reasons for decision in the proceeding,

unless either party needed the settled ruling sooner. Neither party expressed

such a need.

Summary and outcome

266 UCP’s proposed amendments are in two categories. First, revisions and some

further particulars to its claim amounts and what it alleged is the correct Contract

price. Second, amendments alleging that:

(a) UCP had issued notices of dispute pursuant to clause A8 during the course

of the Contract;

(b) PHHH is estopped from relying on strict time limits in the Contract;

ensure the architect acted fairly and impartially; and

(d) UCP had suffered damages in the amount of variations and prolongation

claims, that ought to have been granted by the architect.

267 The first category of amendments were essentially agreed, although there was a

dispute over some of UCP’s revised figures. This was resolved in UCP’s further

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amended counterclaim as filed. PHHH objected to all of the second category of

amendments.

Submissions

268 In both oral and written submissions, UCP identifies a number of reasons why

leave ought to be granted. These are (in summary):

(a) the pleadings in relation to clause A8 and estoppel are necessary to

respond to PHHH’s reliance on clause A8 as a bar to UCP’s claim, which

PHHH raised for the first time in opening submissions;

(b) the interests of justice would favour the amendments being allowed and any

inconvenience and delay would be ameliorated because the interests of

justice would be met;

final trial; UCP would suffer irreparable prejudice as the true issues in

controversy could not be determined;

(d) the amendments sought were not markedly different from the existing case

and stood within the parameters of the current dispute – UCP was simply

seeking to impose a recognised category of relief on what was already

alleged;

(e) this was not the case where UCP was seeking to waste court resources

and time by “seeking to treat the trial hearing as a bargaining counter in the

strategic forensic activities”; and

(f) on the question of whether those behind PHHH would suffer significant

personal stress if the trial were vacated after three days, UCP submitted

that while the stress to litigants is “a respectable and proper consideration”,

stress is inherent to a commercial undertaking for profit on both sides and

would be experienced by litigants in any event.

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269 In respect of the reason for the lateness of the amendment application, UCP

submitted it was not aware that clause A8 was being raised as a bar to its

counterclaim until opening submissions and, in any case, UCP had never

suggested that clause H6 was the sole clause of the Contract being relied on.

UCP argued that: “it can[not] seriously be said that… the defendant’s plan,

considered plan was to argue all of this on the basis only of [clause] H6”.

270 PHHH in its oral and written submissions identified a number of considerations

that weighed against the grant of leave. These are (in summary):

(a) while clause A8 is a bar to claim, this bar was not raised as a defence by

PHHH – clause A8 was only referred to as part of PHHH’s defence to

identify that it was relevant to the construction of clause H6;

(b) the case in UCP’s counterclaim (relying on clauses H6 and A6.4 of the

Contract) is the case that was pleaded for two-and-a-half-years and was the

case UCP opened on in written and oral submissions. The addition of

clause A8 to its counterclaim drastically departs from this position; and

different” to the claim pursued pursuant to clause H6 and would necessitate

new evidence including the deposition of different witnesses.

271 Further, counsel for PHHH submitted that even if the further amendments then

proposed by UCP were allowed, this would not have the effect UCP sought (that

is, forming the basis of an increase to the Contract Price). For UCP to be able to

rely on clause A8, it would need to first allege that clause H4 had been breached,

and then particularise each variation claim and EOT it was entitled to under

clauses J to L of the Contract (as applicable), clause H4 and then clause A8.

PHHH submitted that by only including pleadings in relation to clause A8, UCP

was seeking to bypass the relevant questions of entitlements that were a

necessary prerequisite to such a pleading.

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Ruling

272 Having considered both the written and oral submissions of the parties, on 25

February 2021, I ruled that UCP’s application to introduce a claim involving

reliance on clause A8 of the contract and notices purportedly served thereunder,

would be dismissed. More specifically I ordered that UCP’s “application to file

and serve a proposed further amended counterclaim in the form of the document

exhibited to the affidavit of Victoria Nomikos sworn 24 February 2021, by adding

proposed paragraphs 9A-E, 12, and C in the prayer for relief and by making any

further amendment to paragraph 9, is dismissed”.

273 I otherwise allowed both applications, made further orders for the filing and

service of further pleadings accordingly and ordered that UCP pay PHHH’s costs

of and incidental to the UCP’s application. As noted above, I gave brief reasons

for my ruling, but indicated that I would elaborate on those reasons in my

reasons for judgment in the proceeding generally. I do so as follows.

Reasons for ruling

274 It is trite that the power to grant leave to amend a statement of claim is

discretionary. The High Court in Aon Risk Services Australia v Australian

National University

(“Aon”) held:

“An application for leave to amend a pleading should not be approached

on the basis that a party is entitled to raise an arguable claim, subject to

payment of costs by way of compensation. There is no such entitlement.

All matters relevant to the exercise of the power to permit amendment

should be weighed.”

275 The question is “what do the interests of justice dictate?”.

The interests of

justice will vary greatly depending on the circumstances.

I am to consider and

weigh a wide range of factors as set out in Aon, including:

(a) whether there will be a substantial delay caused by the amendment;

(2009) 239 CLR 175.

Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at 217 [111].

Traffic Technique Pty Ltd v Burgmann [2020] VSCA 319 at [58].

Caroll v Goff [2021] VSCA 267 at [75].

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(b) the extent of any wasted costs;

amendment;

(d) concerns of case management arising from the stage in the proceeding

when the amendment is sought;

(e) whether allowing the amendment will lessen public confidence in the judicial

system; and

(f) whether a satisfactory explanation has been given for seeking the

amendment at the stage when it is sought.

276 These factors are echoed in the provisions of Civil Procedure Act 2010 (“CPA”),

including:

(a) section 7, which provides that the overarching purpose of the CPA is to

“facilitate the just, efficient, timely and cost-effective resolution of the real

issues in dispute”;

(b) section 8, under which the court must give effect to the overarching purpose

in the exercise of its powers; and

making any order or giving any direction.

277 Like in Traffic Technique Pty Ltd v Burgmann,

the matters to be considered in

this case are finely balanced. On the one hand, UCP ought to be able to have

the substantive merits of its case heard and determined. On the other hand,

PHHH should not suffer irreparable prejudice as a result of allowing the

contested amendments. I was satisfied on balance that the interests of justice lie

in denying the contested amendments.

Civil Procedure Act 2010 (Vic) s 9.

[2020] VSCA 319.

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278 The contested amendments would have caused substantial delay. Had those

amendments been allowed, the trial would be adjourned for a fourth time. At the

time, there was no available trial date until at least August 2021 and thus the

delay would have been at least another six months.

279 A delay of this duration was unacceptable because, at the time of UCP’s

application, there had already been substantial delay to the proceedings:

(a) PHHH had commenced these proceedings in April 2018; and

(b) the trial had been adjourned three times:

(i) the first listed trial date was 8 July 2019, which was adjourned due to

appeal of the court’s decision regarding security for costs;

(ii) the second listed trial date was 29 June 2020, which was adjourned

due to the defendant’s joinder of third parties; and

(iii) the third listed trial date was 23 November 2020, which was adjourned

to give the third parties additional time to prepare for trial.

280 Further, the prejudice this delay would cause to PHHH would be irreparable and

was unacceptable. First, the contested amendments and the delay they would

have occasioned would have cause significant financial hardship for PHHH. I

agree with PHHH’s submission that:

(a) PHHH had been preparing for the trial of the case in the amended

counterclaim for almost two years, and the claims it sought to add materially

differed from (and added to) this case; and

(b) had the amendments been allowed, PHHH would be required to re-do and

substantially add to witness statements, and undertake extensive

investigations into the dozens of alleged dispute notices and any

responses, before to be able to respond to the new allegations.

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281 Second, in my view, UCP’s proposed new pleading relying on clause A8 of the

Contract and estoppel itself constituted a substantive new claim. However, I

agree with PHHH’s submission that amendments proposed by UCP at the time

of the application were an incomplete articulation of a fresh claim relying on

clause A8. As UCP effectively conceded, to constitute a complete claim, it would

have been necessary for UCP to add pleadings and particulars of breaches of

clause H4.

282 More particularly, as I noted in the course of oral submissions, to substantiate

claims under clause A8, UPC would first need to establish entitlement to each

variation or EOT claim under the relevant provisions of the Contract. It would

then need to identify and particularise the architect’s alleged failure under clause

H4 (that is, whether it was a failure to decide within 20 days or whether it was

decided in 20 days but decided incorrectly). At the time of the application, there

was no claim made pursuant to clause H4. Further, none of the proposed

amendments in relation to clause A8 informed UCP’s allegation of PHHH’s

breaches of clauses A6.4, H6 or J5 – provisions which UCP had relied on for

over two years.

283 Third, in my view, the financial and non-financial difficulties that PHHH would

suffer as a result of the amendments could not be adequately compensated by

an order for costs. I was satisfied that PHHH would suffer substantial and

probably irreparable prejudice in the form of considerable stress and anxiety for

the director Mr Honeyborne, and Mrs Honeyborne, which would be prolonged

and exacerbated by the substantial further delay and the additional legal and

other expenses the amendments would cause. In an affidavit of Mr Honeyborne

dated 25 February 2021, Mr Honeyborne deposed (and I accepted) that:

(a) disputes relating to this development had been “a constant source of stress

and anxiety” for Mr Honeyborne and his wife, Mrs Honeyborne, and an

adjournment would exacerbate these circumstances;

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(b) Mr Honeyborne had been personally bearing the expenses incurred as a

result of the proceedings (in addition to other proceedings relating to this

development);

expenses incurred as a result of the proceeding and they had to enter a

loan agreement to provide working capital for the childcare business run by

Mrs Honeyborne;

(d) during June 2020, Mr and Mrs Honeyborne “came seriously close to losing

[their] business” as a result of the financial stress caused by the expense of

the proceedings; and

(e) Mr Honeyborne had been “barely able to contain the elevated levels of [his]

anxiety and stress” since the defendant’s solicitors served Mr Honeyborne

(and thereby PHHH) with a statutory demand for payment of $100,000 on

the second day of trial.

284 Fourth, as I also noted during the trial, the amendments sought could not be

explained by anything other than an oversight. UCP had elected to pursue its

claim through the narrow window of clause H6. Its proposed amendments sought

to open a second window, to an entirely new claim. I do not accept UCP’s

submission that the amendment was necessary to respond to PHHH’s reliance

on clause A8 as a bar. PHHH did not raise clause A8 in this way – clause A8

was raised to inform the construction of clause H6, which UCP had relied on in

its counterclaim. UCP now contends that its success at trial could depends on an

alternative ground based on an alleged failure in the dispute resolution procedure

under clause A8, that ground ought to have been pleaded well before the three

days into the trial.

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Admissibility of Tranche 14

Background

285 On 13 April 2021, by email, UCP provided copies of documents it sought to the

court book and, namely tender drawings, a second Powercor invoice and

payment records from UCP (“Tranche 14”) and an amended court book index.

PHHH objected to the purported addition of Tranche 14 to the court book and

requested that the court disregard Tranche 14, on the basis that it was not

appropriate for UCP to attempt to introduce further document after evidence in

the proceeding was closed and given that PHHH had not agreed to the

documents.

286 Shortly thereafter, I indicated my preliminary view that Tranche 14 would not be

received as part of the tender for the reasons provided by PHHH. I invited parties

to make submissions, if UCP were to press the issue, and I indicated that I would

address the issue in these reasons. On 20 April 2021, UCP filed submissions in

relation to the inclusion of Tranche 14, and PHHH did the same on 23 April 2021.

287 In its written submissions, UCP narrowed the tender drawings it sought to add to

a single tender drawing, drawing H05 Rev T1 – a civil engineering tender

drawing prepared by Perrett Simpson and Stantin Consulting Engineers, which

relates to the overflows issue and variation 94. UCP submitted that this drawing

was important for the court’s deliberation, given that it was referred to in the

expert report of Mr Jeffrey,

one of PHHH’s experts, and UCP’s written closing

submissions. According to UPC, it was only seeking to correct an administrative

error by adding the drawing to the court book, since the drawing was referenced

in the court book index.

288 In its written submissions, PHHH agreed to the inclusion of the drawing as a

document referred to by Mr Jeffrey, but on the basis that no witnesses had been

taken to the document during oral evidence.

The written submissions refer to this being a report by Mr Naughton, but this was corrected in an

email on behalf of UCP dated 22 April 2021.

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289 In relation to the second Powercor invoice and associated payment records

(“Powercor documents”), UCP sought to tender these on the basis that, absent

those documents, there was a “serious risk of a mischaracterisation of UCP’s

credit”. UCP noted that the invoice was the subject of oral evidence of Mr Potter,

who stated that the invoice had been claimed twice, but he “wouldn’t say it was

double dipping”. And, as I observed during the trial, there was only one invoice in

evidence before me at that time. UCP further submitted that “such

mischaracterisation of UCP’s conduct may result in a miscarriage of justice”,

when there is evidence available to support that there were two discrete invoices.

290 PHHH submitted that UCP sought to add the Powercor documents to make good

its claim to variation 99, by providing a narrative around matters that were not the

subject of evidence at trial. PHHH submitted that it was unfair to include the

Powercor documents, since Mr Palma was cross examined on the one Powercor

invoice in the court book. In relation to UCP’s concern about a suggestion that it

had engaged in double-dipping, PHHH agreed not to allege double-dipping in

relation to the Powercor invoices.

Ruling

291 It was not in dispute that the question of whether UCP ought be given leave to (in

effect) reopen its case and tender any of the Tranche 14 documents, is a matter

entirely within my discretion. I also note that Rule 34A.29 of the Rules provides

that: “Save with the leave of the Court or by consent of the parties, a party shall

not tender in evidence at the trial of a proceeding a document a copy of which

the party was required to include in the court book of the party but which the

party did not include”.

292 Since PHHH consents to the addition of drawing H05 Rev T1, the tender of this

drawing is accepted by consent, in accordance with rule 34A.29.

293 In respect of the Powercor documents, I agree with PHHH’s submissions that it

would be unfair to admit this document after the evidence has closed, particularly

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as PHHH is effectively denied the opportunity to put the document to Mr Palma.

Further, since PHHH has not pressed the “double-dipping” argument, the

admission of Powercor documents is not necessary to head off any suggestion of

sharp practice by UCP.

- - -

Certificate

I certify that these 114 pages are a true copy of the judgment of his Honour Judge

Woodward delivered on 5 April 2023.

Dated: 5 April 2023

Darcy White

Associate to his Honour Judge Woodward