New South Wales Supreme Court CITATION : Michael Davies Associates Pty Limited v Auburn Council [2007] NSWSC 877 HEARING DATE(S) : 10, 11, 12, 16, 17, 18, 19, 23, 24, 26, 30 April 2007 and 1, 2, 7 May 2007 JUDGMENT DATE : 14 August 2007 JURISDICTION : Equity Division Technology & Construction List JUDGMENT OF : Bergin J DECISION : Plaintiff entitled to judgment. Defendant's cross-claim is dismissed. CATCHWORDS : [CONTRACT] - Claims by plaintiff for outstanding fees for provision of architectural services to the defendants - Claim by defendants in cross-claim that plaintiff was in breach of retainer and that it was negligent in the provision of its services - [MISLEADING OR DECEPTIVE CONDUCT] - Claim by defendants in cross-claim that plaintiff's conduct was misleading or deceptive - Whether alleged representations made - If made, whether false LEGISLATION CITED : Civil Procedure Act 2005 Trade Practices Act 1974 (Cth) Empirnall Holdings Pty Limited v Machon Paull Partners Pty Limited (1988) 14 NSWLR 523 Karedis Enterprises Pty Limited v Antoniou (1995) 59 FCR 35 CASES CITED : Keen Mar Corp Pty Limited v Labrador Park Shopping Centre Pty Limited (1988) ATPR 40-853 Minister for Natural Resources v New South Wales Aboriginal Land Council & Anor (1987) 9 NSWLR 154 Wardley Australia Limited v Western Australia (1992) 175 CLR 514 Wormald Engineering Pty Limited v Resources Conservations Co International (1988) 8 BCL 158 Michael Davies Associates Pty Limited - Plaintiff PARTIES : Auburn Council - First Defendant The State of New South Wales - Second Defendant FILE NUMBER(S) : SC 55013/2004 COUNSEL : JB Simpkins SC - Plaintiff ID Faulkner SC / HJA Neal - Defendants SOLICITORS : Colin Biggers & Paisley - Plaintiff Matthews Folbigg - Defendants IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY & CONSTRUCTION LIST BERGIN J 14 AUGUST 2007 55013/04 MICHAEL DAVIES ASSOCIATES PTY LIMITED TRADING AS MICHAEL DAVIES ASSOCIATES v AUBURN COUNCIL & ANOR JUDGMENT Introduction 1 The plaintiff, Michael Davies Associates Pty Limited t/as Michael Davies Associates, Architects and Design Managers, seeks from the first defendant, Auburn Council (the Council) and the second defendant, the State of New South Wales on behalf of the New South Wales Police Service, damages for unpaid fees for architectural and design services in respect of the redevelopment of the Auburn Civic Centre located at the corner of Queen Street and Susan Street, Auburn (the Project). Alternatively the plaintiff seeks a quantum meruit in respect of its services. The defendants, by cross-claim, seek damages from the plaintiff for alleged breach of retainer, negligence in the provision of professional services and misleading or deceptive conduct in breach of the Trade Practices Act 1974 (Cth) (TPA). I shall refer to this as the "Council's Cross-Claim". 2 The Council and the second defendant proceeded with the Project as a joint venture which included locating the Auburn Local Area Police Command, the Council's administrative offices and community facilities including a town hall, council chamber and library in the redeveloped Civic Centre. The Police Service wished to be in occupation in time for the Olympic Games, specifically by March 2000, and this deadline was an important factor in driving the Project. Consultancy Brief 3 On 28 July 1998 a "Pre-Tender" Meeting for the Project was held at the Council's offices. Those present at the meeting included the various consultants who had received the Council's Consultancy Brief for the Project, one of whom was a member of the plaintiff's firm, Vanessa Kragh. The Consultancy Brief for the Project included concept plans that had been prepared by a firm of architects, Swalwell Schwager Architects (SS) for the "preferred concept (option 2A)". The stated purpose of the Consultancy Brief was to "outline the criteria for the Joint Venture to engage appropriately qualified and experienced consultant/s to prepare and deliver a fully costed quality design incorporating Council's preferred concept (option 2A)". The Consultancy Brief referred to the target date of March 2000 and that "therefore" the procurement method was to be a "Design, Novate, Construct" method. The alternatives that were put forward were: (a) design up to the Development Application (DA) stage; and (b) design up to the DA stage and novate to the construction tenderer. 4 Each tenderer was required to include within their tender an itemised fee statement in respect of developing the Project designed to a DA stage in respect of alternative (a); and developing the Project designed to DA stage and through to the novation and construction design documentation stage in respect of alternative (b). Each tenderer was also required to include the following: (d) Preliminary design concept developed up from preferred concept 2A, identifying potential staging, indicative total project cost of each stage and separate cost estimates of Council/Police/Share facilities. (e) Optional consideration of the provision of possible alternative concepts which the tenderer believes will better satisfy the stated objectives of this brief developed to the level identified in 5.1(a) above. (f) Details of the proposed methodology to be used on this project. 5 Paragraphs 6 and 7 of the Consultancy Brief were in the following terms: 6. PURPOSE FOR WHICH THE SUBMISSION IS TO BE USED I. The submission documentation will become the property of the Joint Venture. II. The project design will be used for obtaining Development Consent for the project. III. The Joint Venture will at this stage determine whether to progress to the novation stage as part of this commission or to commission the project design solution to Development Application Stage only. IV. In keeping with the principles of transparency and open government, information contained within the submissions may be reported in a public forum. 7. TIME FRAME I. The successful Consultant is expected to provide a detailed program to achieve the Joint Venture objectives of a project delivery date of March 2000, for commissioning of at least the NSW Police Service and Council Administration building components, specifically identifying the Development Application lodgement date and the nominal construction certificate issue date. 6 The construction costs were discussed at the Pre-Tender Meeting and the Council officers reported that a figure of $14.7 million had been given to the Council for Option 2A. The Council officers advised the meeting that from an indicative costing point of view the Council had considered an option for construction cost of $14.7 million and was prepared to go along with that. They also reported that it was understood that the figure may be higher and that if that was so, it would need further consideration. The consultants were advised that the closing date for tenders was 19 August 1998. 7 The plaintiff's letter to the various professionals from which it sought prices for services referred to a "fixed lump sum fee" broken down into two components, one for the production of the DA and the other for "documentation services". On 10 August 1998, the quantity surveying firm, DG Jones & Partners Pty Limited (DG Jones), submitted a fee proposal for quantity surveying services to the plaintiff. That proposal was as follows: Preparation of preliminary cost estimate from design concept drawings $2,500.00 Cost Planning services during design development, up to completion of DA documentation $15,000.00 Cost Planning services after novation to builder, up to completion of construction design documentation $22,000.00 Total fee $39,500.00 Plaintiff's Professional Services Proposal (PSP) – 19 August 1998 8 On 19 August 1998 the plaintiff submitted a Professional Services Proposal (PSP) to the Council. The Overview section of that document referred to the plaintiff's concern that the Council may not have had comprehensive advice and that it was locked into a very demanding programme to deliver the Project by early 2000, "hence the proposed delivery method about which we also have serious misgivings". It advised that the plaintiff had developed and rationalised the preferred Option 2A "to make a workable and cost effective solution not previously envisaged" and had developed "a further bold option appropriately termed MDA Option 2000" ("Option 2000"). It claimed that Option 2000 involved the complete demolition of all existing buildings and the construction of purpose made facilities to take the Council well into the 21st century. It also claimed that Option 2000 was simpler than the alternatives and would provide the Council with a modern facility. 9 The PSP included the following in respect of the scope of services for option (a) – design up to the DA: Preliminary Services · Reviewing the Brief including Budget and Programme Requirements · Space Schematics/Flow Diagrams · Consultation with Authorities · Advising on Method of Building Procurement · Engagement of Consultants · Site Analysis · Detailed Off-Site Services Studies · Environmental Studies and Reports Design/Development Application Services · Consultation with Authorities · Site Master Planning · Building Design Services including Coordinating and Integrating Consultants' Services · Estimate and Programme · Presentations to Client and/or Nominees · Preparation of Development Application Documents including Drawings, Room Data Sheets, Accommodation Schedules, Updated Design Brief and Performance Specification for the building, building services and fit out works · Preparation of Estimate and Programme · Presentations to Client and/or Nominees 10 The PSP also included the scope of services for option (b) – developing the project to DA stage and through to the novation and construction design documentation stage. That option included the same services referred to above with the addition of the following: Contract Documentation/Building Application Services · Consultation with Authorities · Documentation consisting of the preparation of documents based on approved Development Application Documents Setting out the Detailed Building Construction Requirements. · Special Materials and Construction Research · Preparation of Building Application Documents · Preparation of Estimate and Programme 11 The PSP also included a fee proposal for the two options with reference to the estimate of the cost of the Project of $13.7 million. The fee proposal for option (a) was $189,800 as a "fixed lump sum" and for option (b) $639,600 as a "fixed lump sum". Each of those proposals included the following: Plus authorised variation fees for increased or protracted work, variations in the Scope of Services, variations to the approved design, disbursements and the like in accordance with the attached Terms and Conditions and on a time charge basis as set out below. 12 The "time charge basis" ranged from $50 per hour for clerical/secretarial staff to $150 per hour for principal architects. The Terms and Conditions that were attached included the following: 16. MDA's liability to you in respect of the project shall be limited to the cost of rectifying the works, the subject of the Professional Services Proposal or $300,000, whichever is the lesser. Construction Management with Guaranteed Maximum Price - GMP 13 On 26 August 1998 the plaintiff responded to some questions posed by Mr Ray Brownlee, the Operations Manager of the Council, in respect of the plaintiff's then current commitments and its specialist consultants. That letter advised that the plaintiff had the "capacity to commence design immediately and to follow with contract documentation". It also included the following: 3. Programme The dates shown on the programme included in our Professional Services Proposal are potentially realistic but will require a very great amount of co-operation from all the stakeholders. In addition, we would like to discuss the delivery method in greater detail with you because we do not believe that design and construction is the most effective delivery method given the time constraints. We would like to suggest construction management, with a guaranteed maximum price to be provided subsequent to a formal tender process for preliminaries, profit and overhead components only. [emphasis added] 14 This appears to be the first time that the construction management method with a guaranteed maximum price (GMP) was mentioned to the Council by the plaintiff. 15 It is apparent that a meeting took place on 27 August 1998 between the Council and the plaintiff at which Alan James, a consultant project manager to the Council, requested the plaintiff to give some estimate of the "gross bottom line" costs associated with the project that had been excluded from DG Jones' estimate. The plaintiff responded to that request on 28 August 1998 advising that in addition to what was contained in the PSP the Council should allow for $10,000 for two sessions of value management, $5,000 for geotechnical investigation and $10,000 for a library consultant, if required. DG Jones' fit out costs were provided for both alternatives Option 2A and Option 2000, being $2,960,000 and $2,815,000 respectively. The plaintiff advised that the Council was better placed to assess the likely real costs of Council fees and/or contributions and finance or land costs. 16 On 1 September 1998 Mr Brownlee met with Mr Michael Davies, the managing director and principal architect of the plaintiff, at the plaintiff's offices. On 2 September 1998 DG Jones wrote to the plaintiff advising that they had been informed that the plaintiff was preparing a programme based on "Construction Management procurement" and requested a copy as soon as possible to assist it in revising its fee proposal. Plaintiff retained – 3 September 1998 17 On 3 September 1998 Mr Brownlee wrote to the plaintiff in the following terms: Thank you for your proposal to supply design services for the first stage of the project. Council is pleased to advise that it has selected your proposal as the successful submission and looks forward to working with you to ensure the project proceeds to the next stage of the process. As tentatively indicated to you at the meeting held in your office on September 1, 1998, Council is endeavouring to arrange a meeting of all Councillors and senior staff to be held at Auburn on September 16, 1998 at 5.00pm to discuss in detail the alternative proposals. After this meeting it would be Council's aim to "lock in" the Master Plan concept and then proceed with the detailed gathering of information to allow documentation to go ahead. The agreed fee for the first phase, that is documentation up to the Development Application stage is $189,900. This figure includes professional services a[s] set out in your submission. Councillor Workshop – 15 September 1998 18 Mr Davies gave a presentation to the Councillors and staff of the Council on 15 September 1998. The Bottom Line Cost Comparison Table produced by the plaintiff for the Council was part of an overhead presentation. That Table was as follows: BOTTOM LINE COST COMPARISON ITEM ORIGINAL OPTION 2A MDA OPTION 2A MDA OPTION 2000 Building Works Demolition $415,000 $296,685 $380,685 Administration Building included $5,281,000 $4,732,000 Multipurpose Community Centre included $1,200,000 $1,200,000 Auburn Library included $2,317,250 $2,317,250 Retail/Commercial not applicable $356,000 $356,000 NSW Police Service included $2,750,600 $3,441,600 External Works $451,000 $256,295 $341,740 Contingency $1,974,892 $622,892 $638,464 Total Building Works $15,791,000 $13,080,722 $13,407,739 Escalation (Aug 98 to Mar 99) $1,894,920 $457,826 $469,271 Car Park $2,000,000 $3,521,071 $3,080,937 Fitout Works $2,063,000 $2,960,000 $2,815,000 Professional Fees $2,172,381 $640,000 $640,000 Temporary Accommodation and Relocation Costs $500,000 $500,000 $500,000 TOTAL $24,421,301 $21,159,619 $20,912,947 Council Meeting – 16 September 1998 19 A report for the Council meeting of 16 September 1998 referred to the timeframe of March 2000 for the development and that it was "imperative" that Council complete the design and documentation of Stage 1 of the Project "in order for detailed costings to be obtained and a report presented to Council for final determination". That report noted that the plaintiff needed a direction on which option to develop further and included the following: A Councillor Workshop on the Civic Precinct Redevelopment was conducted on September 15, 1998. The purpose of the meeting was for the successful tenderer for the design and documentation of Stage 1 of the project, Michael Davies Associates, to discuss the different options available to Council and for Councillors to make comments and debate these options. … At the Councillor Workshop, the concept of possible staging of the project was introduced. The question of staging the project has two-sides; firstly the ability to remove or defer components of the overall scheme will lower the initial capital costs of the project and secondly, deferring components now, may lead to increased costs for those components at some time in the future. Decisions of possible staging of the project, do not need to be determined at this time, as more detailed costings will be obtained at the completion of Stage 1. A report will then be presented to Council for determination. The New South Wales Police Service has advised Council that the proposed Police facility will be a Local Area Command Centre that caters for some 200 police officers, and that they need occupation of the building by March 2000 in order to fulfil their requirements for the Sydney 2000 Olympics. Given this timeframe, it is imperative that Council complete the design and documentation of Stage 1 of the Civic Precinct Redevelopment, in order for detailed costings to be obtained and a report presented to Council for final determination. To complete Stage 1, the architect Michael Davies Associates needs a direction on which option to develop further. Based on the information supplied in this report and attachments concerning the limitation of MDA Option 2A, the potential contractual variations in constructing adjacent to and on the existing Administration Building and the indicative cost comparisons of both options, it is recommended that Council endorse MDA Option 2000 and that the balance of Stage 1 of the project proceed accordingly. 20 The Council resolved at its meeting on 16 September 1998 that: "Council endorse the principles of MDA Option 2000 for the completion of Stage 1 of the Civic Precinct Redevelopment project". Expression of Interest 21 On 23 September 1998 Mr Davies attended a "value management workshop" with representatives of the Council and Police Service. It was during that meeting that Mr Davies drafted a proposed advertisement to be published by the Council calling for expressions of interest. The advertisement that was published in the press was in the following terms: Expression of Interest CONSTRUCTION MANGER Auburn Council and the NSW Police Service are progressing the proposal for the possible co-location of Council's administration facilities and the Auburn Local Area Police Command on the site of the existing Council facilities at Susan Street, Auburn. Council is also considering the construction of a new central library, community facilities and a multistorey car park on the site, possibly as subsequent stages. The total project cost is likely to be around $15 million. Council has selected Michael Davies Associates as architects and design managers for the facility. Design is currently under way. Council now wishes to appoint a construction manager to undertake the management of the construction works on a cost-plus-fixed-fee basis with guaranteed maximum price. Work is expected to commence on-site in January 1999 and the facilities are to be operational by March 2000. An information package setting out expression of interest submission requirements and incorporating returnable schedules is available to potential registrants … Registrations of interest should be … placed in the Tender Box … prior to 2.00pm on Friday November 20, 1998. Council reserves the right not to accept any, or all expressions of interest pending formal project approvals from the relevant parties. 22 The information package for the expressions of interest referred to in the advertisement included the following: The following criteria are likely to be considered in Council's evaluation of Registrants and submissions should address the items set out. Registrants are however encouraged to provide information in any format which best illustrates their suitability: … · Proposed contractual arrangements and details of construction management services provided · Details of applicability of 'Guaranteed Maximum Price' (GMP), for example, is there a share of savings proposed? If so, on what basis? Under what circumstances will the GMP be varied? · Details of specific construction management experience and referees for same. 23 Mr Davies was cross-examined about the wording of the advertisement and the reference to the total project cost of "around $15 million". He gave evidence that the figure was provided by him and was used for "commercial reasons" (tr 45). In re-examination Mr Davies explained what he meant by "commercial reasons" as follows (tr 107-108): If you tell a contractor that a project is going to cost $20 million, it's very likely that the lowest tender will be $20 million or thereabouts. If you tell them on the other hand that it is $15 million, then you will probably get a price somewhere between 15 and 20 million dollars, in that example. 24 On 23 October 1998 the plaintiff received the Council's official purchase order dated 20 October 1998 that requested the plaintiff to supply "professional service & architectural services as per proposal dated 19/08/98". The order value was $189,800.00. Draft Updated Estimate 25 On 23 November 1998 DG Jones sent to the plaintiff a "draft updated estimate" advising that Mr James wanted a copy for a Council meeting on 24 November 1998. That updated estimate referred to a total preliminary cost of $24,307,326.00. On 24 November 1998 Mr James asked Mr Davies to prepare a presentation document similar to the "original" but based on the latest drawings. Mr James advised that he would have a quantity surveyor's estimate to go with that presentation. Austin Australia Pty Ltd expression of interest 26 Austin Australia Pty Ltd (Austin) submitted its expression of interest under cover of a letter dated 24 November 1998. Included with that letter was a document which included the following: 3.0 CONTRACTUAL ARRANGEMENTS/CM SERVICES We understand that the Council's preferred project delivery approach involves the appointment of a Construction Manager on a cost-plus-fixed-fee basis, with a Guaranteed Maximum Price for the construction of the new Facilities. Under a Construction Management Approach, the activities Austin Australia would be undertaking will include the following: 1. Monitor Design and Review Buildability Issues. 2. Prepare construction scheduling. 3. Prepare budget cost estimate. 4. Organise sub-contractors' and suppliers' tender packages. 5. Evaluate and recommend subcontractors and suppliers for Council's approval. 6. Organise regular site meetings. 7. Provide additional detail drawings which may be required. 8. Monitor and control construction program. 9. Monitor and control construction cost. 10. Using Council's Design Consultants, assess progress claims and recommend payment. 11. Provide architectural and engineering inspections and quality control. 12. Monthly written report to Council. 13. Provide final inspections and prepare defects lists. 14. Obtain certification of building on completion. Austin has often operated under a GMP Agreement and we foresee no difficulties in offering this approach to Council, given that the actual Form of Contract is an Industry Standard Document. The actual share of savings, the basis of any variations and suchlike can all be dealt with as part of the CM Tender process. 27 On 25 November 1998 Mr Davies attended a meeting with Mr Brownlee and Mr James and a representative of the Police Service at the Council offices. At this meeting the preferred tenderers were selected for the tendering process. DA Estimate Cost Summary 28 On 25 November 1998 DG Jones wrote directly to the Council and provided their "suggested scope of Quantity Surveying services … based on the proposed Construction Management form of delivery" that included: the Sketch Design Stage; the Design Development Stage; the Contact Documentation Stage; and the Construction Stage. That letter advised that DG Jones would submit its fee proposal "in due course". DG Jones also provided on 26 November 1998 a "DA Estimate Cost Summary" in the following terms: Ref Element % Job Cost/m2 Total ($) 1 Police Building 17.2 221.84 4,003,592 2 Administration Building 23.1 298.22 5,381,944 3 Multi-use Community Building 7.9 102.53 1,850,295 4 Library 13.5 173.81 3,136,750 5 Multi-storey Carpark Building 16.9 218.28 3,939,212 6 Fitout 10.9 140.65 2,538,266 7 Professional Fees 2.7 35.46 640,000 8 Temporary Accommodation & Relocation 2.1 27.71 500,000 9 Contingency @ 5% 4.7 60.92 1,099,503 10 Escalation – Nov 98 to March 99 1.0 12.79 230,896 TOTAL 100 $ 1,292 $ 23,320,458 Gross Floor Area 18,047 m2 Interim Fee Proposal – 1 December 1998 29 On 1 December 1998 the plaintiff wrote to Mr James in the following terms: Further to our various discussions we would like to confirm that we are proceeding with tender documentation for demolition work and construction management services. In addition to this and as you are aware we have prepared an expression of interest package, and advised and attended meetings in relation to selection of the construction management tenders. This work has been necessitated by Council's programme objectives and is not included in either Option a or Option b of our Professional Services Proposal dated 19 August 1998. MDA have also provided advice and assistance in connection with the proposed strata title subdivision. As you are also aware, Council staff have provided some assistance with reviewing of the brief and whilst it was not done as we would have done it, it has nonetheless saved us time at this stage of the project. With your agreement it would be our intention to offset the benefit provided by Council with the work we have done in relation to the preparation of the expression of interest package, consultation and assessment of expressions of interest, and advice on strata title subdivision. The preparation of the tender documentation for demolition work and construction management services will, unless you instruct otherwise, be charged for on a time basis in accordance with our Professional Service Proposal. However if Council proceeds beyond the Development Application Stage the fee will be absorbed in the next Stage (Option b). Please confirm that this meets with your approval. Report to Council for meeting 2 December 1998 30 Mr Brownlee prepared a Report for the Council Meeting on 2 December 1998 about a week prior to the Meeting (tr 173). It included the following: SUMMARY: This report details the outline costs and debt servicing arrangements for the Civic Precinct Redevelopment project. It provides an overview of the master plan, relocation strategies, staging options and details of expressions of interest for the selective tendering of a construction manager to construct the project. REPORT: … 04/02/98 … Council agreed in principal ( sic ) to proceed with the project subject to Council's final determination to detailed plans, costings and funding strategies and on the understanding that any additional costs associated with funding the project not be sourced from current budget allocations for services and in effect be cost neutral. … 20/05/98 … Council endorses Concept Option 2A as the preferred Option for the Auburn Civic Precinct Development and expressions of interest for the design and construction be sought. The General Manager seeks expressions of interest for financing options for funding the proposal and that an application be made to the Department of Local Government for the raising of the loan. … 02/09/98 Council accepted the tender of Michael Davies Pty Ltd for Stage 1 of the design and documentation for the Auburn Civic Precinct Redevelopment. In addition the police contribution for these works was 50% of the costs. 16/09/98 A workshop was held with Councillors and Councils Architect Michael Davies on 15 September 1998, to discuss the different options available to Council. Council resolved at its meeting of 16 September 1998 to endorse the principles of MDA Option 2000 for the completion of Stage 1 of the Civic Precinct Redevelopment project. MDA Option 2000 includes demolishing all existing structures and building new ones. 07/10/98 … The current status of the project is that Development Application for the Civic Precinct Redevelopment Project has been lodged, advertised and assessed by independent consultant Laidlaw Sheridan Partners. If Council resolves to approve the development application and the recommendations in this report the next stages are as follows: 1. Call selective tenders for a construction manager to construct the Civic Precinct Redevelopment project. 2. Complete detailed drawings and documentation of the project by Michael Davies Associates. 3. Acceptance of construction manager tender to construct the Civic Precinct Redevelopment project. 4. Demolition of existing structures to commence on 8 February 1999. 5. Commencement of staged construction works in March 1999. 31 This Report referred to the need to note two parameters that would have an impact on the Project. The first was the New South Wales Police Service's requirement to occupy their building by March 2000. The second was the proposed multi-storey carpark which required negotiations with adjoining property owners. As to the first matter the Report included the following: This requirement of the Police Service has facilitated the need to employ a procurement method of Construction Management to achieve this objective. Construction Management involves the engagement of a construction manager who will tender for a number of work packages, such as demolition, concreting, electrical, mechanical, etc. The advantage of this method is that it will achieve the construction timeframe while continually testing the market for each work package to ensure the most competitive prices are achieved. Each separately tendered work package will be reported to Council for endorsement to accept the tender. 32 The Report also included the following: Costs Council has employed the services of the Quantity Surveyors D.G. Jones Pty Ltd to determine the costings on the different components of the "worked up" Development Application drawings. The costings provided by the Quantity Surveyors are the best available information at this time. Only when tenders are called and received will Council know the final bottom line cost. In saying that, its ( sic ) is felt the submitted figures shown below are a realistic reflection on the costings of each component. Item Costs Police Service Building $4,003,592 Council Administration Building $5,376,944 Library $3,136,750 Community Centre $1,850,295 Contingency $1,579,503 Escalation Costs $ 235,896 Fitout Works $2,538,266 Professional Fees $ 640,000 Relocation $ 500,000 Total $19,861,246 The costings for the demolition of the existing carpark and reconstruction of a new multi-storey carpark is $3,939,212. As discussed it is proposed to defer this component of the works, until legal impediments are resolved. The quantity surveyors itemised cost estimates for the Civic Precinct Redevelopment Project are available for Councillors information. 33 The Report recommended that the Council proceed to call selective tenders for the Project from six preferred tenderers including Austin. Council Meeting 2 December 1998 34 The proceedings at the Council Meeting on 2 December 1998 are controversial. On the one hand the Council claims that Mr Davies gave a presentation and represented that, "the GMP is like a lump sum tender. It gives the Council surety that the costs will not go above $16.9 million". On the other hand the plaintiff claims that no such presentation or representation was made at this meeting. As there is quite a deal of evidence to analyse in respect of the competing claims in relation to this Meeting I will deal with this topic later in the judgment. Development approval 35 The Development Application for the Project was approved at the Council Meeting on 2 December 1998. That approval included the following: Approved Plans The development is to be carried out in accordance with the approved stamped plans prepared by Michael Davies & Associates, numbered DA01 - DA09 and dated 24 November 1998, except as otherwise provided by the conditions of this determination (Note:- modifications to the approved plans will require the lodgment and consideration by Council of a modification pursuant to Section 96 of the Environmental Planning and Assessment Act). Meeting - 3 December 1998 36 On 3 December 1998 Mr Davies attended a meeting with Mr Brownlee, Mr James and Robert Smith of the Police Service. Mr Davies recalled that at this meeting he spent considerable time discussing the layouts of the NSW Police areas of the Project. Mr Brownlee's affidavit evidence of 26 July 2006 in relation to this meeting included a claim that the following conversation took place: Brownlee: Michael, as you know, Council has resolved to undertake the Civic Precinct Project as the construction budget has increased to the $16.9 million. We need to agree on a fee. Davies: You are here to screw me now aren't you? Brownlee: I don't think so. I propose that we pro rata your fees from the $13.7 million to the $16.9 million. This appears to be the fairest way. Davies: That's fine. 37 Mr Davies denied that a conversation in these terms occurred at this meeting and gave evidence that there was no discussion of fees at this meeting (tr 61). Invitation to Tender – 14 December 1998 38 The Invitation to Tender for Construction Management Services dated 14 December 1998 that was issued by the Council included the following: The Principal requires a competent and experienced Construction Manager for the effective and economic completion of the project to the required quality, scope and function, on time and within the Budget. … The Principal anticipates the cost for the works to be managed as described above will be $17,000,000 (Seventeen million dollars). … It is a fundamental requirement of the Principal that completion of the Police Service and Council Administration components of the project be achieved by 9 February 2000. It is anticipated the successful Construction Manager will be appointed on 2 February 1999 and that work on the site will commence on or about 4 February 1999. … The tenders are to be submitted in two parts on two different dates as follows: Part A: Submission of Procedural Material Part B: Submission of Financial Proposal … The assessment criteria to be adopted for determination of the successful tenderer will be as follows: Part A Proposed contractual arrangements (to be reviewed by Council's legal advisers) Capability of site and office staff Management systems and methodology Perceived attitude and enthusiasm for the project Outline Plans Part B Tender Price(s) DOCUMENTS Documentation supplied previously entitled "Expression of Interest – Information Package" is relevant to this Invitation excepting that the drawings provided at the time have been superseded. Attached to and forming part of this Invitation to Tender are: · Tender Form Part A (Returnable) · Tender Form Part B (Returnable) · Architectural Drawings numbered 9809 DA01 to 9809 DA09 inclusive and 9809 DA11 · Demolition Drawing 9809 DW01 · Specification · Survey drawings · Asbestos Report (for information only) · Various drawings of existing buildings on the site (for information only) · Drawings of the existing car park structure adjacent the site (for information only) · Notice of Determination of Development Application · NSW Police Service Building Code 1998 (Numbered copy: must be returned with tender) Not attached, but also forming part of this Invitation to Tender is the Expression of Interest Package previously provided. … NATURE OF AGREEMENT … It is proposed that the Construction Manager will co ordinate and manage construction of the work and all construction related contracts. It is not intended that the Construction Manager will carry out any construction work. If the Construction Manager considers such action essential, then prior approval of the Project Manager must be obtained. The Project Manager will administer the Agreement between the Principal and the Construction Manager. Tenderers are to submit their proposed form of contract as part of Tender Part A. The agreed document will constitute the contract and may incorporate this Invitation to Tender, the Expression of Interest or any other document considered relevant. The Principal will consider any suitable contract submitted by the tenderer which may include: · Purpose-written document · Master Builders' Association CM1 · NSW Department of Public Works and Services Construction Management Agreement · AS2124-1992 with Special Conditions The agreement will embody the matters set out in this Invitation as a minimum requirement and will include proposals for the Principal's consideration in relation to the following:- · Insurances to be provided · Liquidated and Ascertained Damages · Hours of work · Delays and Extensions of time · Guaranteed Maximum Price · Variations · Retention and Security · Progress payments of fees to Construction Manager · Dispute resolution · Default and insolvency · Defects Liability Period Note that the agreement offered is part of the selection criteria to be adopted. 39 The Invitation to Tender included a section headed "Tender Part B" in which the following appeared: Financial Proposal Tender a fixed lump sum price (not subject to cost adjustment) and time for completion for the Demolition works not including site establishment. The Principal will accept a price for demolition works from the successful Construction Manager only. Tender a fixed lump sum (not subject to cost adjustment) for Preliminaries including site establishment, together with a percentage to be applied to any authorised increase in the Guaranteed Maximum Price. Tender a range of Guaranteed Maximum Prices for a range of shares of savings. The Principal does not require the total of the trade package cost estimates, the demolition price, the construction management fee and the price for preliminaries to equal the Guaranteed Maximum Price, however the cost of the risk implicit in the figures submitted will be considered in selecting the successful Construction Manager. In the evaluation of the financial proposal generally, emphasis will be given to the completeness of details provided as well as the figures themselves. 40 The Tender Form, drafted by Mr Davies, that was sent out with the Invitation to Tender included the following: Schedule of Guaranteed Maximum Price/Share of Savings I/we hereby tender the following guaranteed maximum price (GMP) for the works including demolition, preliminaries and construction management services. I/we guarantee that the total cost of the works will not under any circumstances (other than delays or substantial variations initiated by the Principal) exceed the sums set out below. The savings achieved below the GMP will be shared in the proportion set out below for the combinations selected by the Principal. SHARE OF SAVINGS GUARANTEED MAXIMUM PRICE ($) Principal Construction Manager Nil 100% 25% 75% 50% 50% 75% 25% 100% Nil Revised date for practical completion 41 On 21 December 1998 Mr James wrote to Mr Davies requesting him to advise the six construction manager tenderers that the revised date for practical completion of the police building was 1 June 2000 and that the original March 2000 date no longer applied. Mr James asked Mr Davies to give precedence to the internal layout of the police building and suggested that the dollar component on that item may have to be reduced. Mr James advised that he would discuss the matter with Mr Davies by phone. Mr Davies gave evidence in his affidavit of 23 November 2006 that shortly after receiving this letter he telephoned Mr James and a discussion in the following terms took place: Davies: Now that the Police can wait until 1 June 2000, there is no need to go down the construction management path. We could use the time to fully document the Project and then call traditional tenders. James: No, Ray [Brownlee] prefers the flexibility of the construction management methodology. The Police can actually wait until 18 June 2000. Tell the tenderers of this revised date. Davies: Okay. 42 Although Mr Davies' affidavit suggested that the conversation in these terms occurred with Mr James, Mr Brownlee accepted in cross-examination that a conversation in similar terms occurred between himself and Mr Davies. That evidence was as follows (tr 168-169): Q. 21 December 1998. The requirement of the New South Wales Police Service altered from being one which was apparently an early February date, to one which was apparently an early June date? A. Yes. Q. It was in that context, wasn't it, that there was then a conversation between yourself and Mr Davies about whether, having regard to that development, the council wouldn't be better advised to actually complete the plans and specifications before contracting for the project? A. Yes. Q. It was on about 21 December 1998, wasn't it, that Mr Davies said to you that given that the police could wait until 1 June 2000, there was no need to go down the construction management path? A. Yes. Q. He said to you, didn't he, that the time could be used to fully document the project and then call for additional tenders? A. He may have. I can't deny that. Q. You can recall at least this much, can't you, that very shortly after the New South Wales Police Service apparently revised its requirement as to completion, Mr Davies said to you, "It would be better for the council to actually finish the design before contracting"? A. Yes. There was words "better for the council", I remember the conversation raising – saying we should change the method. Q. One thing that you did understand was that Mr Davies was making a recommendation to you that instead of going down the construction management contract with a GMP path, the council, now that it had more time, ought to go back to completing the design and calling for additional tenders? A. Yes. Q. You rejected the recommendation? A. Yes. Q. You rejected that recommendation because you were concerned about the political implications of going back to the council, isn't that right? A. Yes. Notices to Tenderers 43 On 22 December 1998 the plaintiff issued Notice to Tenderers Number 1 advising, inter alia, that the closing date for the Part A tender had been extended to 2pm on Friday 15 January 1999 and that the date for practical completion of the project had been extended to 18 June 2000. 44 On 13 January 1999 the plaintiff issued Notice to Tenderers Number 4 (with the incorrect header of 13 December 1999) reminding tenderers of the closing date of 15 January 1999 for Part A tenders. That Notice also enclosed "additional (further developed) design documentation" and advised that an Outline Project Specification would be sent by courier or facsimile on 18 January 1999. It also advised that the documentation did not yet include details in relation to the fitout works and stated: It is anticipated that these details will be available on Monday 18 January 1999 in sufficient detail to enable tenderers to finalise their Guaranteed Maximum Price details. Alternatively, a schedule and provisional sum will be advised for all or part of this component of the works. 45 On 20 January 1999 the plaintiff issued Notice to Tenderers Number 5 in which the following appeared: 5.03 The Tender Form Part B Page 1 requires the provision of Estimated Trade Contract prices, which are to be added to the fixed lump sum prices for demolition, preliminaries and the construction management fee. The estimated trade contract prices are therefore net and exclusive of preliminaries and construction management. The estimates will no doubt influence the Schedule of Guaranteed Maximum Prices to be provided on Page 2. Tenderers are to extend the table on the Tender Form Part B Page 1 as required to accommodate the number of trade contracts proposed. The Estimated Trade Contract Price for Fitout Works is $2,568,502.00. "Fitout works" includes the item shown on the attached draft schedules (4 pages). Items not scheduled should be included in the base building works. Tenders too high 46 The tenders received by 22 January 1999 were between $18.5 million and $23.6 million. Sometime between 23 January 1999 and 27 January 1999 Mr Davies received a telephone call from Mr James who advised him that: The tenders are all too high. We need to find some savings to bring the cost of the Project down. Please call Barclay Mowlem and Fletchers and ask them to come in for a meeting on 27 January 1999 together with a list of suggested savings. Meeting – 27 January 1999 47 Mr Davies gave evidence that on 27 January 1999 he attended a meeting with Mr Brownlee, Ms Rosser and Mr James and Mr Smith of the New South Wales Police Service at the Council's temporary location. During the course of that meeting Mr Davies claimed that Mr James informed Mr Davies that, "Ray wants to bring the price of the Project down to $17 million. We need to find savings to achieve this". Mr Davies gave evidence that this was the first time that he had been informed that the cost of the works for the project "had to be managed for $17 million". 48 Mr Smith's file note of this meeting recorded that its purpose was "to discuss potential deletions from the proposed project to reduce the cost to the project budget of $M17.0". It was also noted that in discussions with two of the tenderers, it had been suggested that changes to the scope of works could produce savings of approximately $2 million. A meeting was arranged for 29 January 1999 to review the construction management tenders. GMP document – 29 January 1999 49 Following the meeting on 27 January 1999, Mr Davies prepared the following document dated 29 January 1999 (the 29 January document): GUARANTEED MAXIMUM PRICE The Invitation to Tender states that the cost of the works to be managed is anticipated to be $17 million. The work is stated to include demolition and fitout of Council's Administration Building and the Police Local Area Command. This figure was deliberately understated by MDA for commercial reasons and is therefore of no relevance to the tender assessment. At its meeting on 2 December 1998, Council adopted the costs set out below (report page 5). Item Costs Police Service Building $4,003,592 Council Administration Building $5,376,944 Library $3,136,750 Community Centre $1,850,295 Contingency $1,579,503 Escalation Costs $ 235,896 Fitout Works $2,538,266 Professional Fees $ 640,000 Relocation $ 500,000 Total $19,861,246 The guaranteed maximum prices offered by the construction managers are inclusive of the following: · Preliminaries (fixed) · Demolition (fixed) · Trade Contract Costs (including fitout unless stated otherwise) · Construction Management Fees (fixed) · Contingency (eg. Refer BM Culley tender page 1 attached) · Escalation to Completion From the estimate adopted by Council, the equivalent cost is $19,861,246 less professional fees and relocation costs, ie. $18,721,246. 50 Mr Davies gave evidence that he prepared the 29 January document because he did not understand why the costs of the works "had to be managed for $17 million" when, as he understood it, the Council's budget (leaving aside allowances for professional fees and relocation) was $18,721,246. He also claimed that he was concerned that the quality and integrity of the design that he had prepared for the Project would be unnecessarily compromised if the cost of the works was to be limited to $17 million. Meeting 29 January 1999 51 Mr Davies gave evidence that it was on about 29 January 1999 that he attended a meeting with Mr Brownlee and Mr James. Mr Brownlee agreed that a couple of days after Australia Day 1999 he attended such a meeting. Mr Davies' version of a conversation at that meeting, as set out in his affidavit sworn on 23 November 2006 was as follows: Davies: Alan tells me that you want to manage the costs of the works for $17 million. Brownlee: Yes that's right. We have to find savings and make changes to bring the project down to $17 million. 52 Mr Davies claimed that it was at this stage of the conversation that he handed to Mr Brownlee and Mr James a copy of the 29 January document. Mr Davies' evidence was that the conversation continued as follows: Davies: I don't know where you are getting $17 million from. I know the Invitation to Tender refers to $17 million, but I deliberately understated this figure for commercial reasons. At Council's meeting on 2 December 1998 it resolved to adopt a budget of $19,861,246.00. If you take out professional fees and relocation costs the budget is $18,721,246. This is the figure you should be aiming for. Now you want to change it to $17 million? Brownlee: Council's budget is $17 million. You are including contingency in your calculations. The contingency is for items such as latent conditions and should not be included. Davies: You have to allow contingency in the budget for things like escalation and design development. You know that we have not done full documentation and the design still needs further development. Most of the tenderers have allowed for this risk, hence the difference between the GMP and the estimated construction cost. Brownlee: I want the project to be brought down to $17 million. Davies: Well, if you want to do that, the building is going to suffer. Quality will be compromised. I suggest that you first speak with BuildCorp, who are the lowest tenderer, about suggested savings before you make any drastic decisions on what needs to be taken out. Brownlee: Okay. 53 Mr Brownlee's version of the conversation at this meeting as set out in his affidavit of 26 July 2006 was as follows: Brownlee: We have to find savings and make changes to bring the project down to $16.9 million otherwise it will not proceed. Davies: You've got a $1.8 million contingency, you can use that. Brownlee: No, the contingency is for items such as latent conditions. 54 In a further affidavit sworn on 22 February 2007 Mr Brownlee denied that he had any discussion at the meeting on 29 January 1999 as claimed by Mr Davies. He claimed that the first time he became aware that Mr Davies contended that he had understated the figure for commercial reasons was when he read Mr Davies' affidavit. He also claimed that the first time he "viewed" the 29 January document was when he read Mr Davies' affidavit. Meeting - 1 February 1999 55 On 1 February 1999 Mr Davies provided a copy of a table entitled "Assessment of Construction Management Tenders" to a group that he referred to as the "Tender Assessment Panel" which included Messrs Brownlee and James and Ms Rosser from the Council and Mr Smith of the NSW Police Service. He claimed that when he gave that document to the Panel he said: I have done an analysis of the tenders received and broken them down into their various components. The assessment down the bottom of the table gives the subtotal of the fixed fees for each tenderer and the total of the fixed fees and estimated trade costs – the estimated construction costs. The top half of the table details the various GMP's offered by the tenderers depending on the share of savings. The difference between the estimated construction cost and the GMP represents the risk. Once the project is complete, the difference between the final GMP and the actual construction cost is the amount to be shared between the construction manager and the Council depending on the share of savings agreed. 56 The File Note of that meeting records that one of the tenderers, Buildcorp Australia Pty Ltd, was present and explained its methodology of undertaking the project and discussed the possible changes that could be implemented to ensure the costs of the project would be "within the allocation". The File Note records that "Post Tender Instruction to be issued to all Tenderers" and that tenders were to close at 4 p.m. on 10 February 1999. Post Tender Notices 57 On 3 February 1999 the plaintiff issued Post-Tender Notice No 1 which included the following: Council's Tender Evaluation Committee met on 27 and 29 January 1999 and determined not to accept any tender and to make significant modifications to the design in order to reduce the Guaranteed Maximum Price to within the budget approved by Council and indicated in the Invitation to Tender issued previously. 58 That Post-Tender Notice advised that the documentation was being revised and updated with the intention of re-issuing the Tender Invitation on 5 February 1999. It was noted that due to "programme constraints" it was necessary that the Council receive the revised tenders by 10 February 1999. 59 On 5 February 1999 the plaintiff issued Post Tender Notice Number 2 (with the incorrect header of 5 November 1999) which included the following: Further to Post Tender Notice Number 1 we attach revised documentation containing variations intended to significantly to reduce the cost and hence the Guaranteed Maximum Price of the Project. 60 This Notice enclosed "additional (substantially amended) design documentation" and reminded tenderers that the revised "Part B Tender" had to be submitted by 10 February 1999. 61 On 9 February 1999 the plaintiff issued Post Tender Notice Number 3 attaching the Revised Tender Form, Further detailed schedule of amendments to documentation and a Revised Returnable Checklist of Inclusions. That Notice also included the following: In addition to the variations listed and shown on the drawings, Tenderers may consider the following additional potential savings provided same are reflected in the Guaranteed Maximum Price(s): · Delete Level 1 concrete floor slab, substitute bitumen paving. · Modification or deletion of roof over atrium. The latter would require waterproofing of walkways. 62 The Revised Tender Form included the following: Schedule of Guaranteed Maximum Prices/Share of Savings I/We hereby tender the following guaranteed maximum price (GMP) for the works including demolition, preliminaries, trade contracts, fitout works and construction management services. I/We guarantee that the total cost of the works will not under any circumstances (other than delays or substantial variations initiated by the Principal) exceed the sums set out below. The savings achieved below the GMP will be shared in the proportion set out below for the combinations selected by the Principal. Share of Savings Guaranteed Maximum Price ($) Principal Construction Manager Nil 100% 50% 50% The guaranteed maximum price may be reduced by the following items: 1. Deletion entirely of water feature including pumps, pump room, concrete profiling, trench, lining, etc. ($ ) (deduction in words) 2. Deletion entirely of all planting troughs in atrium and civic spine including concrete profiling below floor level. Planters to be elevation as walls above floor level. ($ ) (deduction in words) 3. Deletion entirely of (modified) sun control/covered way frame in civic spine including attachments to building, etc. ($ ) (deduction in words) 4. Modification of curtain walling as specified to comprise insulated steel framed spandrels faced with Vitrapanel or similar and aluminium framed powdercoated windows and shopfront systems configured as shown on the drawings in lieu. ($ ) (deduction in words) Austin's Revised Tender – 10 February 1999 63 On 10 February 1999 Austin submitted its revised Part B tender with a covering letter that included the following: Austin also offers an Alternative Guaranteed Maximum Price Proposal of $16,900,000 as itemised below . … Our clear understanding of the concept of a GMP is that the Principal need not allow any contingency as the only "variable" for the Principal is in fact for Savings as any cost overruns are borne by the Construction Manager. As itemised on the attached Tender Form(s), our conforming Offer to Council provides a Guaranteed Maximum Price of $18,650,000. However, Austin is fully aware of Council's objective to achieve the desired Facilities for $17 million and hence our alternative Offer. We feel the existing Michael Davis ( sic ) Associates' design has significant merit and any agreed deletions from the project scope of work at this time should not prevent their re-introduction at a later stage. Under the Austin construction management approach, any monies which accrue either out of savings during the course of construction or from other sources to which the Principal may have access, can be utilised to reinstate the elements deleted from the original design. To ensure this can happen at no cost "penalty", our offer includes the necessary services connections, structural provisions etc. for the re-introduction of these elements. Having reviewed the re-issued design documents, we believe there are a number of areas in which cost savings could be achieved whilst not jeopardising the function, quality and presentation of the completed buildings. Some of these issues have been nominated in the re-issued Tender Form, however, we believe there are additional design aspects worthy of re-consideration. One such area of saving involves the reduction of the rear (eastern) portion of the Atrium which would include associated modification to the lift location, fire egress, sprinklers etc (whilst always complying with the BCA). On the understanding that the design changes can be implemented to achieve nominated budgets, Austin is prepared to offer a Guaranteed Maximum Price as scheduled below: Tender Amounts 1. Demolition $426,300 2. Preliminaries $2,303,300 4. CM Fee $647,500 Trade Contract $15,272,900 $18,650,000 Principal Identified Reductions (Nos 1-4 incl) ($1,276,000) Reduced Atrium & Associate Work ($424,000) Miscellaneous Design Savings ($50,000) Austin GMP (based on a 50/50 share of savings with the Principal) $16,900,000 The implementation of these modifications to meet targeted cost budgets will necessitate all project team workers working closely together, with all trade contracts to be agreed to by both the Principal and Austin. It also critical that Council's Architects are able to continue their established project role, confident that the Construction Manager will respect the integrity of the Architect's design intent. 64 Austin's revised Tender Form included the following: Share of Savings Guaranteed Maximum Price ($) Principal Construction Manager Nil 100% not required 50% 50% $18,650,000 * Alternative as per Tender Letter $16,900,000 The guaranteed maximum price may be reduced by the following items: 1. Deletion entirely of water feature including pumps, pump room, concrete profiling, trench, lining, etc. One hundred and fifty thousand dollars ($ 150,000 ) (deduction in words) 2. Deletion entirely of all planting troughs in atrium and civic spine including concrete profiling below floor level. Planters to be elevation as walls above floor level. Thirty-two thousand dollars ($ 32,000 ) (deduction in words) 3. Deletion entirely of (modified) sun control/covered way frame in civic spine including attachments to building, etc. One hundred and ninety-one thousand dollars($ 191,000 ) (deduction in words) 4. Modification of curtain walling as specified to comprise insulated steel framed spandrels faced with Vitrapanel or similar and aluminium framed powdercoated windows and shopfront systems configured as shown on the drawings in lieu. Nine hundred and three thousand dollars ($ 903,000 ) (deduction in words) Other Revised Tenders 65 The revised tenders submitted to the Council included one from Hansen Yuncken Pty Limited whose covering letter included the statement, "Hansen Yuncken recognizes that the Council has a fixed budget expenditure of $17.0 million". That letter also recorded the opinion that, "the current design as represented, whilst enhancing civic design qualities and having undergone some changes, is still presently unable to meet the budget constraints." 66 The covering letter from Barclay Mowlem Construction Limited, referred to Council's "budget target" without specific mention of a figure. That letter indicated that its GMP was based upon "the final design being firmed up" within its estimated trade contracts price. The letters from the other tenderers did not refer to the Council's budget. Meeting – 11 February 1999 67 Mr Davies prepared a document entitled "Assessment of Resubmitted Construction Management Tenders" which set out in tabular form the GMPs offered by each of the tenderers in their revised tenders, ranging from $15.20 million to $19.39 million. Mr Davies attended a meeting with Mr Brownlee and Mr James of the Council, Mr Smith of NSW Police and representatives of Austin at the Council's new temporary location on 11 February 1999. Mr Davies claimed in his affidavit evidence of 23 November 2006 that he provided the tabular assessment to Messrs Brownlee, James and Smith and said (apparently in the absence of the Austin representatives): Here is my analysis of the revised tenders received. I think Austin's price is contrived. Austin's price allows for no risk at all and is in complete contrast to its first tender. Further, Austin's proposal to delete the sprinklers is flawed. If the sprinklers are deleted, the atrium left will not comply with the BCA which I think will lead to its eventual abandonment because of the significant cost of a fire engineered solution. 68 Mr Brownlee in his affidavit of 26 July 2006 denied that Mr Davies said anything about extra design fees for the deletion of the sprinklers at this meeting, however Mr Davies affidavit did not specifically make such a claim. Austin Letter - 16 February 1999 69 On 16 February 1999 Austin wrote to the Council referring to its meeting at the Council offices on 11 February 1999 and confirming that it "would consider a further alternative method of project delivery, being a Lump Sum Contract with savings and cost sharing arrangements". That letter also included the following clause 23: To this end, Austin would enter into a Lump Sum Contract with Council under AS2124 for the sum of $17,000,000 (Seventeen million dollars) based on the $16,900,000 in our proposal of 10th February plus $100,000 to cover the increased Insurance requirements and Administration, and we enclose a draft of the appropriate AS2124 Schedules. 70 The Schedules enclosed with that letter included the following clause 23: Council requires that the total cost of the project not exceed $16,900,000.00 and Austin undertakes to deliver the project for that sum provided that the design is modified and finalised by Council's Consultants (in conjunction with Austin) to match Council's total Construction budget sum, all as set out in Austin's letter of 10th February 1999 including attachments (copy attached). 71 Part B of those Schedules included paragraph 3 which provided that clause 23 as extracted above, amended to read $17 million instead of $16.9 million, had been added to AS2124-1986. Progress Claim – 17 February 1999 72 On 17 February 1999, the plaintiff submitted "Contract Progress Claim No CPC05" which was in the following terms: To professional services rendered in connection with the above project in accordance with our Professional Services Proposal dated 19 August 1998, your acceptance thereof dated 3 September 1998, as set out in our letter dated 1 December 1998, and as follows: Tendering/Construction Services Architectural and Multidisciplinary Engineering Services Interim claim pending finalisation of fees $30,000 73 Mr Brownlee approved the payment of this fee on 18 February 1999. Further Meetings 74 Mr Davies gave affidavit evidence by reference to his diary of a number of meetings with representatives of the Council throughout February 1999. However he was unable to recall the detail of the discussion at those meetings. Mr Davies claimed that in the week prior to 2 March 1999 in a telephone discussion Mr James said that to him, "Ray has asked that I get a revised proposal from you which should be based on the revised cost of $17 million". Advice on form of Contract 75 In early February 1999 Mr Brownlee and Mr James met with Abbott Tout, solicitors, who drafted various amendments to the standard CM1 Contract for the development of the Project. One of the matters on which the solicitors requested information in a letter dated 15 February 1999 to the Council (Ex B) was as follows: We note from Austin's letter of 10 February 1999 that the cost savings identified at the end of the letter which brought back the price from $18,650,000.00 to $16,900,000.00, whilst identified at the end of the letter, have not been reflected in the estimated trade contract amounts which, when added to the preliminaries etc total the higher amount. This raises again the issue discussed at our meeting. It seems to us that it is more than likely that some of the trade contracts will be in excess of the nominated amounts and some will be less. In the end, it is the total price upon which Council and the Police Service have agreed to proceed and it seems to us therefore that Council should not concern itself with how the total is reached, but rather just with the total. In the clause which we have drafted in relation to the guaranteed maximum price we have proposed that for the purpose of determining whether there have been any savings that the price of $16,900,000 will be adjusted by the costs of variations to the Contract in either direction, ie if the variation results in a saving the $16.9 million figure is reduced and if it results in a price increase then the $16.9 million is increased. 76 There is no suggestion that Mr Davies or the plaintiff had any involvement in the drafting of the contract that was ultimately entered into between the Council and Austin. However in its various claims against the plaintiff, the Council relies upon the documentation that was annexed to the Austin Contract that included the Tender Form Part B document drafted by the plaintiff. Professional Services Proposal – 2 March 1999 77 On 2 March 1999 the plaintiff submitted to the Council a Professional Services Proposal (PSP) of that date which contained a fee proposal including the following: Estimate of Cost $17,000,000 Fees The fees shall be a fixed lump sum of $1,000,000 (one million dollars only) as follows: NSW Police Service Building $274,000 Council Administration Building $380,000 Library and Community Centre $346,000 The fees applicable to the various stages of the work as follows: Schematic Design $166,700 Design Development $166,700 Contract Documentation $444,400 Construction Services $222,200 78 The covering letter submitting that PSP was in the following terms: We refer to our various discussions and in particular to our Professional Services Proposal dated 19 August 1998. As you are aware the Professional Services Proposal does not now reflect the value of the building to be constructed, the services that are to be provided, nor the procurement method initially intended by Council. Accordingly and at your request we now provide a new Professional Services Proposal which in general terms is based on the original PSP excepting that: 1. The Quantity Surveyor is to be employed directly by Council except for the development application stage which has been completed and which is our responsibility; 2. The original fee proposal was based on an estimated cost of $13,700,000 which you have instructed should now be increased to $17,000,000; 3. The building is now to be procured by construction management methods and the services required are therefore more detailed than required on the "design, novate, construct" method originally intended, where documentation detail would be determined by the contractor to suit its purposes. 4. You now require partial construction services, however the maintenance of contract financial records, negotiation and management of variations, issuing of payment certificates, etc, will be carried out by you in conjunction with the Quantity Surveyor. As you are aware, services are usually provided in stages and the total fee is proportioned according to stages as follows: Schematic Design 15% Design Documentation 15% Contract Documentation 40% Construction Services 30% Total 100% The original Professional Services Proposal was based on a scope of services, as follows: Schematic Design Stage 15% Design Development Stage 15% Partial Documentation to DA Stage 5% Total (Option a) 35% Contract Documentation Stage 32% Total (Options a and b) 67% We have assessed the break-up now proposed as being: Schematic Design 15% Design Development 15% Contract Documentation 40% Construction Services 20% Total 90% The scope of services anticipated in this latter break-up is in accordance with our documentation previously marked up by you and specifically excludes financial/contract administration of the works. This Scope of Services is detailed in the revised Professional Services Proposal. The total fee proposed for Options a and b, less the Quantity Surveyor's fee for contract documentation was $600,100 (ie, $639,600 - $39,500). As set out above, this represented 67% of total services based on an estimated cost of $13,700,000. This is the equivalent of a basic gross fee of 6.54% of the cost of the works for full architectural and engineering services. In accordance with Clause 3 of the Terms and Conditions, and proportioning this fee to the new scope (90%) and the new estimated cost ($17,000,000) results in a total fee of $1,000,276, say $1,000,000 (less of course fees previously paid for DA services (Option a)). This is also the equivalent of a basis gross fee of 6.54% of the cost of the works for full architectural and engineering services. You will probably see this as follows: Total fee Options a and b Scope $639,600 Less Quantity Surveyor's fee for Contract Documentation stage $ 39,500 $600,100 Add for increase in cost (600,100/13.7x17) - $600,100= $144,550 Plus original fee $600,100 Total revised fee (Option b Scope) $744,650 Add for additional Construction Stage Services required as set out above (90% of basic service rather than 67% included originally) ($744,650/67x90)-$744,650 = $255,626 Therefore, total revised fee $1,000,276 (say) $1,000,000 Less progress payments received or approved for payment $219,800 Therefore balance of revised fee remaining $780,200 As we have discussed, a percentage fee from the RAIA fee guide is based on a sliding scale and would diminish marginally as the cost increases. The difference between a project value of $13,700,000 and $17,000,000 would be a reduction of about 0.15% of cost (ie, about $25,000), however, we would be entitled to charge an additional amount for packaging the documentation to suit procurement by construction management and for interior design services. As we have previously advised, we have simply written one off against the others. The fees applicable to the various elements of the work based on the estimates approved by Council on 2 December 1998 would be as follows: Police Service Building $274,000 Council Administration Building $380,000 Library and Community Centre $346,000 The fees applicable to the various stages of the work are as follows: Schematic Design $166,700 Design Development $166,700 Contract Documentation $444,400 Construction Services $222,200 The revised formal Professional Services Proposal reflecting these amendments is attached. Please note that since the project value has already increased by more than the 5% threshold, any further increases in cost would result in our fees being pro-rata-ed concurrently with the increase. We hope this arrangement meets with your approval. Council Meeting - 17 March 1999 79 The Minutes of the Council Meeting held on 17 March 1999 are not in evidence. However a report prepared by Mr Brownlee for that meeting contains a recommended resolution that the Council accept the Austin tender for the GMP of $16.9 million. That report stated that all of the tenders submitted were "in excess of Council's budget of $16,905,847". This is the first time that any document referred to the Council's "budget" being $16,905,847. It is apparent that at this Meeting the Council resolved to accept Austin's tender. Meeting – 18 March 1999 80 On 18 March 1999 Mr Davies attended the meeting with Mr Brownlee and Mr James at which he said to Mr James, "can you please indicate which construction stage services you would like us to provide by marking-up these documents?" Mr Davies then handed a "Scope of Services" to Mr James and observed him marking up that document. Austin Contract 81 On 22 March 1999 the Council entered into a Construction Management Contract with Austin. That Contract included the following: 1. Definitions and Interpretations … "Consultant" – includes the Architect, Engineer, Surveyor and other persons (as appropriate) employed by the Principal to design the Works and to prepare the Drawings and Specifications. … "Drawings and Specifications" – are those documents including Bills of Quantity (if any) produced by the Consultants. "Estimated Total Cost of the Works" – that figure provided to the Principal by the Construction Manager pursuant to either or both of sub-clauses 3(e) and 6(p). "Final Completion" – Completion of the Works in accordance with the Drawings and Specifications and - (i) all defects in respect of the Works (carried out under Trade Contracts or by the Construction Manager pursuant to Clause 7) having been made good; (ii) all defects liability periods under the Trade Contracts having expired; and (iii) the Construction Manager having complied with the provisions of sub-clause 6(m). … " Revised Estimated Total Cost of the Works" – that figure which reflects the revised and updated projected end Cost of the Works provided by the Construction Manager to the Principal from time to time pursuant to clauses 6(q) or 14(c) … "Works" – the work required to construct the project set out and detailed in the Drawings and Specifications prepared by the Consultant. … Refer also to SCC Clause 23.1 2. Construction Manager Appointed Principal's Agent. The Principal hereby appoints the Construction Manager the agent of the Principal for the purpose of providing construction management services for the completion of the Works . The construction management services are to be provided by the Construction Manager as stated in this Contract. 3 Pre-construction Duties of the Construction Manager The Construction Manager (as part of his pre-construction duties) shall - (a) consult as necessary, with the Consultant in order to advise and make recommendations to the Project Team , for construction purposes, on - (i) the advantageous use of the site; (ii) selection of materials and their availability; (iii) building techniques and equipment; (iv) construction technique; (v) construction time; (vi) alternative designs or materials; (vii) preliminary budgets; (viii) possible economies, and (ix) labour and industrial relations, (b) develop a preliminary construction programme following detailed studies with all members of the Project Team ; (c) review and monitor the preliminary construction programme during the pre-construction stage of this Contract; (d) prepare a preliminary budget estimate based on the Drawings and Specifications ; (e) continue to review the budget estimates as the development of the Drawings and Specifications proceeds and, when they are completed, prepare a final cost estimate (to be called the Estimated Total Cost of the Works ) for approval by the Principal; (f) advise the Principal if it appears, to the Construction Manager , that the budgeted target for the Works will not be met and suggest ways, if possible, of overcoming any budgetary excess; (g) make recommendations to the other members of the Project Team regarding the division of work in the Drawings and Specifications so as to facilitate the calling of tenders; (h) examine and advise on the suitability and expertise of proposed Trade Contractors ; and (i) analyse all tenders received and recommend to the Principal which Trade Contractor , if any, should be awarded a Trade Contract . … 5. Principal's Warranties The Principal hereby warrants that- (a) the Construction Manager shall not be liable for - … (iii) the design of the Works . … Refer also to SCC Clause 23.3 6. Construction Duties of the Construction Manager At an agreed time, the Construction Manager shall organise commencement of the Works and, in consultation with the Principal , co-ordinate construction of the Works by the Trade Contractors so as to achieve Final Completion in accordance with the terms of this Contract The Construction Manager must - … (p) furnish to the Principal for the Principal's approval the Estimated Total Cost of the Works ; based upon those Drawings and Specifications that are completed; (q) if required by the Principal furnish to the Principal but not more than once per month, an updated cost plan showing - … (iv) the Revised Estimated Total Cost of the Works ; and … (r) institute a system of cost control and revise the approved budget to provide for changes to the Works as they occur; … (v) refer to the Consultant all questions for interpretation of the Drawings and Specifications and any other documents produced by the Consultant; (w) be available to the Principal at all reasonable times, (x) advise the Principal that the Works are at the stage of Completion ; and (y) advise the Principal that the Works are at the stage of Final Completion . Refer to SCC Clause 23.4 8. Principal's Responsibilities Principal shall - … (c) retain the services of the Consultant being a designer or a design team (architect, engineers and other qualified persons as by the Principal deemed necessary) in order to prepare Drawings and Specifications for the Works and to be responsible for the design; … (f) ensure that the Construction Manager is, without charge, provided with copies of all drawings, specifications and details reasonably necessary for the execution of the Works; (5 copies + 1 CAD disc. of each issue). (g) accept responsibility for the cost and expense and also for the accuracy and adequacy of the services information, drawings, specifications and other matters made known to the Construction Manger ( sic ) by the Project Team ; … (j) upon becoming aware of any fault or defect in the Works or non conformance with the Drawings and Specifications give the Construction Manager written notice thereof immediately, … 9. Payment of Trade Contractors (a) The Principal shall make prompt payments, in accordance with the Trade Contracts , directly to all Trade Contractors upon the recommendation of the Construction Manager . … Schedule 1 Description of the Works: The work involves demolition of the existing Council Administration Building, forecourt, town hall building and commercial premises fronting Auburn Road and the provision of Construction Management Services for the construction of a new central library building with basement storage/work room and retail component at Auburn Road, new basement car parking and loading area, new community building comprising town hall, council chamber and various multi-purpose spaces. New council administration building and new local command facilities for the NSW Police Servic4e (sic) including fitout. … Drawings and Specifications Revised Part B Tender submitted on 10 February 1999 – Annexure A Council D.A. 415/98 – Annexure B Preliminary Construction Programme – Annexure C Drawings and Specifications issued by Michael Davies Associates & Hyder for the preparation of tenders on 10th February 1999 – Appendix D … 23.0 SPECIAL CONDITIONS 23.1 Guaranteed Maximum Price The Guaranteed Maximum Price shall be $16,900,000 (Sixteen million nine hundred thousand dollars) as set out in Annexure A. Council requires that the total cost of the project not exceed $16,900,000.00 and Austin undertakes to deliver the project for that sum provided that the design is modified and finalised by Council's Consultants (in conjunction with Austin) to match Council's total Construction budget sum, all as set out in Annexure A (Austin's letter of 10th February 1999, including attachments) … 23.4 Project Specific Construction Management Services Design and Documentation Phase Upon signing of this Contract the Construction Manager shall organise commencement of the Works as per Clause 6 and shall also: · liaise with the Design Manager over relevant design matters; … · Provide the Principal and the Design Manager with value management input, advice and written reports as requested in regard to but not limited to the following: - material selection(s) - construction methodology and "buildability" issues - materials handling methods - advice on economic considerations - life cycle cost of materials and systems prepared in accordance with BS 75433 1992 … Construction Phase · Ensure the Project is constructed in accordance with the approved Development Application 415/98 as set out in Annexure B. … · Assist the Principal and the Design Team with co-ordination of all Drawings and Specifications, including shop drawings. … 23.11 Variations (a) Variations to the Work The Principal may direct the Construction Manager to arrange to: (i) increase, decrease or omit any part of the work under the Contract; (ii) change the character or quality of any material or work; (iii) change the levels, lines, positions or dimensions of any part of the work under the Contract; (iv) execute additional work; and/or (v) demolish or remove material or work no longer required by the Principal. The Construction Manager shall not vary the work under the Contract except as directed by the Principal or approved in writing by the Principal under this Clause. The Construction Manager is bound only to execute a variation which is within the general scope of the Contract. The Construction Manager shall not be bound to execute a variation directed after Completion unless the variation is in respect of rectification work referred to in Clause 23.10. Correspondence in relation to plaintiff's PSP of 2 March 1999 82 On 31 March 1999 the Council responded to the plaintiff's PSP of 2 March 1999 in the following terms: We refer to your letter of 2nd March 1999 concerning your fees for professional services. Council is pleased to advise that at its meeting held on 17th March 1999, it was resolved to proceed with the construction of the Civic Centre Redevelopment by accepting the tender submitted by Austin Australia for a guaranteed maximum price of $16,900,000. As part of this decision Council had given authority to proceed with full documentation of the work for the agreed fee which has been adjusted for the estimated cost budget being increased from $13,700.000 up to $16,900,000 and the deletion of the Quantity Surveyors fee for the option B proposal. The agreed fee is based on your advice that the building now be procured by using construction management methods and that the documentation provided be appropriate for this method of construction. The agreed fee is $744,650 (inclusive of Stage 1 and Stage 2). Council looks forward to working with you in the construction of the Civic Centre Redevelopment. 83 On 27 May 1999 the plaintiff responded to the Council's letter of 31 March 1999 in the following terms: Thank you for your letter of 31 March 1999 accepting our fees for the design and contract documentation of the above project. We acknowledge that you have decided that the works be procured by construction management and we will therefore prepare documentation progressively in subcontract packages as nominated by the construction manager. The contractual arrangements and calling of tenders for these packages will be the construction manager's responsibility. We note that in your letter you state "the agreed fee is $744,650 (inclusive of Stage 1 and Stage 2)." There appears to be some confusion as to the revised fees proposed by MDA, which are set out in our letter dated Tuesday, 2 March 1999, and in our Professional Services Proposal also dated 2 March 1999. Both the letter and the PSP state: "The fees applicable to the various stages of the work are as follows: Schematic Design $166,700 Design Development $166,700 Contract Documentation $444,400 Construction Services $222,200" The total for Schematic Design and Design Development (your Stage 1) and Contract Documentation (your Stage 2) is $777,800 not $744,650 as stated by you. The amount of $744,650 was set out in our letter of 2 March as part of a larger calculation, which itself was provided solely to demonstrate how the revised fees proposed were arrived at. We note also that you have not commissioned us for the construction services stage, even though the scope proposed is significantly less than we would normally expect to provide in a building of this scale. As you are aware this is contrary to our expectations based on advice previously received from your Project Manager, Mr Alan James. Our sole desire in this regard is to be satisfied on your behalf and for the sake of our own reputation that the design is executed in accordance with the agreed documentation and to ensure that the inevitable unforseen issues which come up during construction are dealt with faithfully. As you are aware this matter is currently the subject of ongoing discussions. In relation to your acceptance of our fees for Stages 1 and 2, would you be kind enough to issue a new letter of acceptance referring specifically to our Professional Services Proposal as a matter of urgency, as the issue seems to have delayed payment of our accounts. A copy of our PSP is enclosed for your information. Thanking you in anticipation for your prompt attention to this matter. If you have any queries please do not hesitate to contact me. 84 On 2 July 1999 Mr Davies wrote a personal letter to Ms Rosser in the following terms: Andy returned to the Office quite late yesterday, having met with your library consultants and had lunch with Alan James and told me of the impromptu meeting that was held with you. Andy also tells me that you are upset as the result of my letter of 23 June to Ray Brownlee and the reports you have heard of the meeting last Tuesday. If my comments at the meeting Tuesday have caused you any embarrassment, I sincerely apologise, as I would not knowingly take any action that would upset the excellent relationship we have all had to date. I especially would not want to offend you, as I have grown to respect your management style and your loyalty to those who advise and work with you. It is true that Ray and I had a heated meeting on 5 May in relation to our involvement in the construction phase of the project. There is a lot of background to this matter and perhaps you are not aware of the meeting between Ray, Alan and myself on 18 March held in the old Council Chamber. At that meeting we discussed in great detail our involvement in the construction phase of the project and marked up a comprehensive list of the services Council would require, so that we could present a fee proposal for the work. I was obviously very disappointed to then be handed Ray's letter dated 31 Mach accepting our fee for Stages 1 and 2 (these stages are unclear and Ray has never defined what they mean). It took me some time to absorb the importance of Ray's letter and indeed it was Vanessa who understood it first since she was able to define the intended scope of work from the fee Ray accepted. Vanessa wrote directly to Ray on 27 May and as yet has not had a response. My letter dated 23 June, which I have been told has caused you some anger, was in response to Council's having short paid us by about $33,000. You should be aware that this letter was faxed to Alan James last Friday 25 June in draft form and Alan and I discussed it the following day. I do not believe Alan had any problem with the contents. I understand that it is the second and third paragraphs of that letter that have offended you. The letter sent to Ray on the Monday had an additional fourth paragraph that Alan had not seen, but the offending paragraphs are unchanged from the draft. Lea, I have no wish to prolong these matters unnecessarily and my immediate intention is to apologise to you personally for any offence I may have caused, however there are a number of problems which we do need to address. Last Tuesday, Alan offered me the opportunity of a meeting with you and the "other" directors without Ray present. I declined the offer, since I believe this action would have been extremely discourteous to Ray, and further, we need time to put our position on paper for Ray's further consideration. I have said that I am not going to have another heated meeting with Ray, since clearly he has a view which he believes best serves Council's interests and I have a different view. The view we both have in common is that the community's interest as represented by the Council must prevail. I suspect Ray may think our interests are directly linked to our own financial reward, however, this is not so. Our major concern is for the quality and integrity of the building design if we are not involved throughout. Ray has also said to me that he knows that there is potential for the design quality and integrity to be compromised by not having us on board but seems prepared to accept this situation. Our concern is exacerbated by the decision to adopt construction management in association with a Guaranteed Maximum Price which was regrettably my idea and which I now fear will create an adversarial relationship later in the programme from which the building will inevitably suffer. I understand that Alan is fully supportive of our position, but has been unable to persuade Ray of the necessity of our being involved. When these matters first became apparent and given there has been no resolution, I offered Ray the opportunity of discussing these matters with Martyn Chapman who is a well known professional arbitrator and architect. My purpose in so doing was that Ray may be made independently more aware of the pitfalls likely to be encountered with the way he is intending to proceed. Alan has told me that Ray did not take up this offer since he doubted Martyn's independence. I suggested Martyn specifically because I respect his integrity and reputation and I know that he would not offer biased advice. I would also accept his opinion as an arbitrator. I have not spoken to Ray since our meeting on 5 May and I had thought of our involving Martyn in a further discussion with Ray once we had had a chance to put our position in writing. My reason for this approach is that I would like to resolve the situation to both Council's and our own satisfaction without another emotionally charged meeting. I must say that I think Andy's having involved you at this stage, without my having had the chance to meet with Ray again is a little premature. I have told Andy that I do not altogether approve of his actions, however, I am sure his motives were like my own perceived as being in the best interests of the project. Lea, with your agreement, and now that the major façade package has gone to tender, I would like to write to Ray and then meet with him again, maybe with Martyn Chapman to explain our position on a number of issues. If the meeting is not productive, I would like to think I could always talk to you anyway. Alternatively, you may wish to be involved sooner rather than later. In any event, you are the client and we will do whatever you think best. My apologies once again for any offence I have caused, 85 On 8 July 1999 the Council responded to the plaintiff's letter of 27 May 1999 in the following terms: I am writing in reference to your letter dated 27th May 1999, regarding the difference in fees for the completion of the full documentation of the work, between Michael Davies Associates and Auburn Council. The following is Council's understanding of this matter; 1. Michael Davies Associates submitted an offer on 19th August 1998, titled Professional Services Proposal for Auburn Civic Centre Redevelopment. Within this proposal Michael Davies Associates provided a "Synopsis of Fees", which outlined the total fees for: Option A – Development Application $189,800 Option B – DA, Design & Document to Novation $639,600 In a letter dated 3rd September 1998, Council advised Michael Davies Associates that they were engaged to complete Option A Development Application for $189,800. Council referred to this part of the works as Stage 1 within this letter. On the 2nd December 1998, Council resolved to undertake Option B, however, Michael Davies Associates had recommended to Council Officers prior to the 2nd December 1998 Council Meeting that the procurement method for delivering this project should be changed from 'Design Novate Construct' to Construction Management with a GMP and a 50/50 cost sharing arrangement. Michael Davies Associates recommendation was accepted and Council subsequently changed its method of procurement. This was reported to Council on 2nd December 1998. On the 3rd December 1998, a meeting was held in the 'old' Council Chambers between Ray Brownlee, Alan James and Michael Davies. It was agreed at this meeting that the following would occur; i) Council would independently engage the Quantity Surveyor, which would result in a $39,500 reduction in Michael Davies Associates fee proposal, as Michael Davies Associates was not required to provide this service. ii) The fees for the remainder of the documentation using construction management procurement method would be on a pro-rata basis on the competitive fees submitted by Michael Davies Associates in their 19th August 1998 submission. At its meeting on 17th March 1999, Council resolved to accept the tender of Austin Australia for the GMP of $16,900.00. Council subsequently advised Michael Davies Associates in writing on 31st March 1999 of the pro-rata-ed fee for the full documentation of the works. The pro-rata-ing was based on the following: Construction Costs ($) MDA Fee ($) % MDA 2000 Estimate (19/10/98) 13,700,000 600,100* 4.4 Austin GMP Tender (17/3/99) 16,900,000 744,650 4.4 * 639,600 - $39,500 (Quantity Surveyor) = $600,100 As such Council considers the total fee for full documentation of the works based on the procurement method of construction management is $744,650. This is made up of the following stages: Stage 1 - Development Application $189,800 Stage 2 - Remainder of full documentation of the works $554,850 TOTAL $744,650 2. As previously discussed and noted in your letter, Council will not be requiring the services of Michael Davies Associates for a significant component of the construction services stage. However, Council does desire that Michael Davies Associates still be involved in the architectural component of the project during the construction phase. The architectural services does not include civil and structural services, electrical services, lift services, mechanical services, hydraulic and fire services. It is proposed that all requests for information, advice or inspections would be undertaken on an hourly rate basis, as submitted in the Michael Davies Associates proposal on 19th August 1998. 3. It is Council's understanding that contractually it is the construction managers, Austin Australia responsibility as Council's agent to ensure that the design is executed in accordance with the agreed documentation, and that unforseen issues which come up during construction are dealt with faithfully. If you have any further enquiries in relation to this matter please do not hesitate to contact me on [telephone number]. 86 On 16 July 1999 Mr Brownlee wrote to Mr Davies in the following terms: I am writing in reference to the design meeting held in Michael Davies Associates office on 15th July 1999 at 9.00am. A number of issues discussed at this meeting need to be confirmed or clarified. 1. As discussed and agreed, the co-ordination of the design documentation of all the consultants engaged in the documentation process is the responsibility of Michael Davies Associates. Council was concerned at some of the comments made by attendees at the meeting, which it was felt reflected on the co-ordination process of the design documentation of the project. As you would be aware, design co-ordination problems can result in delays and additional costs during the construction phase, however Council is confident that Michael Davies Associates has systems in place to ensure Council is not exposed to these risks. 2. I would like to confirm, my comments at the above mentioned meeting, whereby I informed the meeting that the only party that can have any discussions with tenderers regarding this project, after the tenders have closed, is the construction manager Austin Australia. This measure is required to ensure the integrity of the tendering process for the Joint Venture parties is maintained, at all times. 3. Council seeks some clarification as to why the acoustics consultant was engaged so late in the design documentation process. The tenders closed for the mechanical service trade package on 30th June 1999. From discussions at the design meeting, it appears that significant changes to the mechanical services tender may be required. Council is concerned at the cost implications of these possible changes. 4. As discussed and noted in previous minutes of the design meetings, Michael Davies Associates have stated that when all the trade packages are completed, that the design documentation work for the construction management procurement method will be only 70% complete. Council seeks clarification as to what activities constitute the remaining 30% of the design documentation process. 5. On a personal note, I was disappointed with your comments regarding Austin Australia 'setting Council up'. On your advice Council changed the procurement method to construction management, of which the foundation is that a non-adverse relationship should exist between the parties. Council has embraced the spirit of a non-adverse relationship for the delivery of this project. I find it difficult to understand how your comments about Austin Australia, assist this non-adverse approach. Michael, please refrain from making these public comments. If you have any further enquiries in relation to this matter please do not hesitate to contact me on [telephone number]. 87 On 23 July 1999 Ms Rosser responded to Mr Davies' letter of 2 July 1999 in the following terms: Thank you for your letter dated 2 July 1999 regarding the Auburn Civic Centre Redevelopment Project. There seems to be three major issues of concern to you: 1) That Council has engaged you to undertake Stages 1 and 2 of the Project. You believe that you should also be awarded Stage 3. You also mention that these stages are unclear to you and that it has never been defined as to what is meant by Stage 1 and 2 2) You now have reservations about the construction management method in association with a Guaranteed Maximum Price – a methodology which you advocated to Council. 3) Various remarks that you have made, both at meetings and in correspondence, about the Project and personal remarks about some Council staff. In relation to the first issue, I have examined in some detail the Professional Services Proposal for Auburn Civic Centre Redevelopment, as well as various correspondences and related file notes. It is quite clear that Stage 1 is the same as what you have termed Option A – Development Application in the aforementioned Professional Services Proposal. It is also quite clear that Stage 2 is the same in principle as Option B as detailed in that same proposal. Obviously, in accordance with your recommendation to change from the Design Novate Construct procurement method to that of Construction Management with a GMP there may be some minor variations, in terms of the process of implementing Stage 2. However, as you assured us, any such variation would not have changed the principle nor intent of the definition of Stage 2 (Option B), being "Submission of Development Application … and preparation of construction/design documentation to the stage of novation to the design and construct contractor". You are obviously disappointed that Council has chosen not to engage your services for the construction services stage. Whether you are disappointed or not, this is Council's decision and I see no reason to give it any further reconsideration. Also Council's intent has been clearly conveyed to you. There has been no engagement of your organisation for Construction Services related activities. Accordingly, there has been no debit of $33,300 in relation to this item incurred by Council. In relation to the second issue you have expressed your reservations about the construction management method in association with a Guaranteed Maximum Price – a methodology which you advocated to Council. Please be advised that Council is finding this methodology to be satisfactory and that there is to date a non-adversarial relationship with our other Project partners – the NSW Police and Austins. In relation to the third issue, being the various remarks that you have made, both at meetings and in correspondence, about the Project and personal remarks about some Council staff I am very concerned. My concern arises more out of the reflection that makes on your professional behaviour which, as your client, reflects on Council. I would ask that you refrain from making any unprofessional remarks and behaviour when associated with Auburn Council related business. I understand that Ray is replying to your various other correspondences and trust that the Project will be completed professionally, amicably and on time. Michael, Council is more than happy to continue with your architectural services in relation to Stage 3 on an hourly basis. I hope that we can reach a satisfactory agreement and perhaps such an arrangement may allay some or ( sic ) your personal concerns. Should you wish to discuss any other matters please do not hesitate to contact me. 88 On 9 August 1999 the plaintiff wrote to Ms Rosser relevantly in the following terms: I refer to your letter dated 23 July 1999 received in our Office on 29 July 1999 and to our meeting on Monday last. I will attempt to answer your letter, together with the issues raised in our meeting in a general and global manner, referring as I go the ( sic ) both the discussions and to your letter. The response will necessarily be quite detailed and will revisit matters raised previously and for this apologise, however I think it important to establish the context as I see it my concerns which arise from this context and to try to establish a way forward. Firstly let me assure you that Michael Davies Associates are and have always been totally committed to the Auburn Council Civic Centre Redevelopment and I believe we have demonstrated this by our performance. This project is very well resourced within our Office and whilst it might not always be apparent, I have a continuing involvement on a day to day basis. There have been at least four, and sometimes five architects and other technical staff involved in the project almost continually since the contract documentation commenced – any more would be inefficient and probably counter productive. I am also at pains to point out that so far as I am concerned there is absolutely no personal issue between Ray Brownlee and myself. Notwithstanding this, so long as MDA are involved in the project, I believe I have a professional obligation to provide advice and to identify where things in my opinion are going or have the potential to go astray. It will be evident that I am currently very concerned about the direction the project is taking and the Council's exposure to risk on a number of fronts. I am also concerned that for no reason that I can understand MDA are being marginalised in the development process and our vision for the project is being progressively compromised. We understand that cost is an important issue and I believe we have an important contribution to make in balancing costs against benefits. This is becoming extremely difficult in an environment where the construction manager has "brought" the job and every decision is determined on the basis of cost alone. I was surprised to hear Alan James say in front of the construction manager last Monday that we are trying to deliver a project that should cost $23 million for $17 million. This is the sort of frankness for which I have been criticised, the only difference is that I have been more direct in seeking to allocate blame with a view to trying to get the project back on track. I have a responsibility to bring this to the attention of the various stakeholders. It seems to me that a design meeting or project control group meeting is an appropriate forum, however it is also evident that this has caused you some embarrassment with the NSW Police Service. I will now therefore restrict my advice to you and Ray, under which circumstances it will be in writing and will necessarily occupy time which would otherwise be spent on the project. In your letter, you have identified three "major issues of concern to (me)" and with respect, these are not the issues which concern me most, they are probably only symptomatic of my concerns: I think I should try to enunciate the issues which concern me most: 1. The quality of the building which will result from the management systems being adopted. In this context, I should emphasise that I am not talking about construction management as a procurement method I am referring to the management processes which have developed around it and what I perceive is a hard dollar building approach rather than that of a construction manager. Subsets of this management process are: (a) The design team is being marginalised by its being excluded from cost control/tendering review activities where belated design decisions are taken or proposed to be taken independently in relation to cost alone without input from the design team nor sufficient consideration of the environmental and architectural consequences. This is exacerbated by the construction manager's not fulfilling its obligations to be proactive in such things as material selection(s), "buildability" overall programming, overall and trade budgeting etc. before or during documentation rather than after tenders have been received and modifications due to cost are required: For example: · Deletion and subsequent reintroduction of the atrium with resultant compromise of fire protection systems. · Proposed deletion of the water feature. · Proposed total compromise of ecologically sustainable design principles by deletion of passive sunshading (refer PCG No 14 minutes item 4.02). · Proposed deletion of glass block walling to Council Chamber which was added in lieu of windows originally proposed in order to provide fire compartmentalisation and to obviate the need for external drenching sprinklers, the deletion of which was instructed by Alan James in order to reduce the atrium cost. (refer PCG No14 minutes item 4.02). · Proposed surface mounting of skirting duct prior to any consideration of the façade detailing which has been delayed by the failure of the tender process. · Routing of electrical and data cables through space poles in a long span prestressed slab, in circumstances where access is available from the floor below with little or no cost penalty. (b) Proposed consultant involvement in stage 3 being on a reactive "as needs" basis instead of a proactive continuing basis. This decision will inevitably lead to compromise of the design and quality of the work – "its no use crying over spilt milk – just get on with it" will become the norm. This response will become even more pronounced as the construction manager gets closer to the Guaranteed Maximum Price and the June 2000 completion date draws nearer. (c) I do not believe the construction manager is adequately fulfilling its obligations to Council, particularly in relation to programming: We have been asked on a number of occasions to provide a programme for delivery of our work. This is not our responsibility, it is the construction manager's. The invitation to tender for construction management services is quite clear about this and I have attached a synopsis of relevant responsibilities from that document with equally relevant comments for your consideration. The only proper programme we have ever been given is dated 29 April 1999. This programme indicated that we were required to prepare all the tender documentation for the project in 10 weeks flat. Our programme submitted with our August 1998 Professional Services Proposal indicates a rolled up period for this activity of 4.5 months (19 weeks). We subsequently told Alan James that it would take about 12 weeks to complete tender package documentation after the development application was approved and this was before we got waylaid by the variations and deletion of sprinklers etc. which resulted from the Austin atrium option. This estimate of time did not include preparation of "For Construction" documents which can only be delivered when the input of the various trade contractors has been received and coordinated. To date, we have no such input except in relation to the lift shaft sizes which were advised one day and changed the next and the position of the lift motor room, which Austin advised had to change and which following discussions with Hyder was found to be quite acceptable. I understand that Amit Bagga conveyed this to Roland Hammond on 29 July and is still waiting for confirmation from the subcontractor with whom we are forbidden from having conversations. On 2 August, we were handed a sheet of paper headed "Trade Package Procurement Dates" and "For Construction Requirement Dates". This document required completion of four major packages by 13 August 1999. This sheet could not in any (sic) be construed as a programme and we cannot see why partitions, ceilings, balustrades, handrails doors, door frames and door hardware are critical at this stage when expressions of interest for blockwork do not even close until that same day. A more cynical interpretation could be that the construction manager is setting dates well in advance of requirements so as to create a delay on the part of ourselves for which it can then claim costs from Council. The construction manager is on record as having said that delays can only be claimed in relation to the critical path of the construction programme, however without an up to date programme showing a critical path I fail to see how such a claim can exist. In this same context, we note from the programme dated 29 April 1999 that the tender packages for all the critical tasks up to and including roof sheeting have been completed. The next critical task is 100 shop dwgs. wall clad. windows glaz. etc. This task was scheduled to commence on 9 July and be completed (shop drawings approved?) by 20 August. How this can happen with public tenders closing on 18 August after only a 20 day tender period for the biggest and most important package in the project 2. Fees for "tendering and negotiation" work, usually included in the construction stage services stage were brought forward to suit the construction management procurement method adopted. Council has denied liability for payment in the amount of $33,330.00: As you have suggested, I will make this the subject of a separate and detailed letter to Ray with relevant attachments and if we cannot agree, we will seek mediation. You should however be aware that I have already offered the services of Martyn Chapman at our expense. Martyn is a well known arbitrator and whose integrity and impartiality is unquestionable. The offer was not taken up by Council. Martyn's CV is attached for your information. 3. Variations instructed by Council and payment therefore: Lea, I know you don't want to know about the "Post-it" episode, but it is nonetheless symptomatic of a more general attitude which concerns me greatly. Our position is simple, we gave Council a fixed fee, the design was substantially frozen at the time of calling the Construction Management tenders and save for design development, we are entitled to payment for variations initiated by Council particularly when such changes are initiated with the objective of saving money. We gave Alan James a copy of a letter/account from Hyder dated 13 May 1999 for $19,990.00 which we are liable for, the letter was returned with the note " Ring Andy, advise this a MDA problem" and "Discuss Andy Auburn Council advises this is between MDA & Hyder not Auburn" . Alan James has told me the notes were written by Ray Brownlee. Notwithstanding this episode, we have continued documentation in good faith with a number of further variations, instructed by Alan James with a view to deleting the sprinklers from the building and saving a portion of the $424,000.00 quoted by Austin for deletion of the atrium. We expect to be paid for this additional work in accordance with our Professional Services Proposal and we will write to Council separately with the details which will include details of the delay caused to the programme. We ask that the matter now be taken seriously and not treated in the off hand manner previously evident. If necessary this can also be the subject of mediation. Completion of the Project 89 The "Report on Final Estimated Total Cost of the Works & Trade Contract Reconciliations" (Ex 4) dated 5 April 2001 produced by Austin for the Council advised that the Final Estimated Total Cost of the Project was $19.65 million. The Report also advised that the completion dates were 17 July 2000 for the Council/Police Administration Building, 13 September 2000 for the Library and 27 September 2000 for the Multi--Function Centre. Arbitration proceedings 90 In May 2001 Austin commenced Arbitration proceedings against the Council claiming an entitlement to further payments on grounds including the following (Ex 12): 3A The Contract contained the promise of a guaranteed maximum price of $18.65 million ("GMP") based upon the then current drawings and specifications with a promise to reduce the GMP to $16.9 million only if the following conditions precedent or alternatively the following terms of the Contract (the "Conditions Precedent") were fulfilled: (a) that Auburn and its advisors would "work closely together" with Austin in relation to formulating and implementing design modifications to reduce the scope of work from the $18.65 million cost for the current design to the targeted cost budget of $16.9 million; (b) that the said design modifications would only be finalised by Auburn's consultants in conjunction and by agreement with Austin; (c) that Auburn would not enter into trade contracts for the project without the prior agreement of Austin; (d) that Auburn would complete the design development by 4 June 1999. Particulars i. Austin relies upon the whole of the Contract but especially annexures A and C and special condition 23.1 ii Austin relies upon the express representations by Auburn at the meeting on 11 February 1999 between Messrs Gervay and Hook of Austin and Rosser, Brownley and James of Auburn that the design changes would be directed by Auburn and made within 12 weeks. 3B The Conditions Precedent were not fulfilled in that: (a) Auburn and its advisors did not work closely with Austin for the purposes of achieving design modifications; (b) Austin was not consulted with and did not agree prior to the finalisation of design modifications by Auburn; (c) amendments to the project drawings were performed by Auburn and its consultants without consultation with Austin; (d) the design modification added to and did not reduce the scope of the works; (e) the design modifications of Auburn were not directed to and did not achieve a reduction of the scope of works to a cost budget of $16.9 million; (f) trade contracts were entered into by Auburn without the prior agreement of Austin; (g) The entire water feature referred to in para 1 page 2 of the Tender Form Part B forming part of Annexure A to the Contract was not deleted from the design in that only the pump and pump room were deleted but the concrete profiling trench and lining etc remained; (h) The planting troughs in the atrium etc referred to in para 2 page 2 of the Tender Form Part B forming part of Annexure A to the Contract were not deleted from the design; (i) the modifications to the curtain walling referred to in para 4 on page 3 of the Tender Form Part B forming part of Annexure A to the Contract were not fully made to the design so that there was a hybrid between the original design and the modifications referred to; (j) the reduced atrium and associated work referred to in page 2 of the Austin letter dated 10 February 1999 to Auburn being annexure A to the contract were not part of the design; (k) the miscellaneous design savings referred to in page 2 of the Austin letter dated 10 February 1999 to Auburn being annexure A to the contract were not part of the design; (l) the design development was not completed by 4 June 1999. 3C By reason of Auburn's failure to fulfil the Conditions Precedent: a) Auburn was in breach of the Contract; or a) Contract did not have a guaranteed maximum price of $16.9 million; a) The Contract had a GMP of $18.56 million as per Annexure A of the Contract; a) Austin was entitled to 50% of all savings on constructions costs below the GMP of $18.65 million as varied for variations which made net increases to the scope of works. 91 The Council made claims in its Second Further Amended Notice of Cross-Claim in the Arbitration proceedings that included the following (Ex 12): 43A. The claimant represented to the respondent that, if the respondent should award the contract to the claimant, then, as against the project scope of works and for the project building period, without any exception and without any qualification the cost of the project would not exceed the GMP and/or the cost to the respondent would not exceed the GMP. Particulars (i) Tender submission 10 February 1999. (ii) Documents included with claimant's expression of interest to respondent November 1999. 43B. The claimant represented to the respondent that, if the respondent should award the contract to the claimant, then as against the project scope of works and for the project building period, without any exception and without any qualification no circumstances then existed nor would exist whereby the project would cost more than the guaranteed maximum price and/or the cost to the respondent would not exceed the GMP. Particulars (i) Tender submission 10 February 1999. (ii) Documents included with claimant's Expression of Interest to respondent November 1999. 43C The claimant represented to the respondent that, for the project scope of works and for the project building period, if the respondent should award the contract to the claimant then, without any exception and without any qualification: (i) the respondent need not allow any contingency for increasing cost beyond the guaranteed maximum price; (ii) the only variation that could occur to the project cost would be savings to the respondent; and (iii) all cost over-runs would be borne by the claimant. Particulars (i) Tender submission 10 February 1999. (ii) Documents included with claimant's Expression of Interest to respondent November 1999. 43D The claimant further represented to the respondent that the claimant's expertise as estimator, cost controller, structural engineer, hydraulic engineer, mechanical engineer, architect, constructor and contract manager was of such high degree that, without any exception and without any qualification, the guaranteed maximum price included for all works, materials and expenses of any and every kind that were necessary to build and complete the project. Particulars The representation arises as a matter of inference from the documents particularised in paragraph 43A-43C above. 43E. Further, the claimant represented to the respondent that, pursuant to its formal estimation of costs, as estimator, cost controller, structural engineer, hydraulic engineer, mechanical engineer, architect, constructor and contract manager it had truly and accurately estimated for, or had made proper allowance for, the costs of every item of works, materials and expenditures of any and every kind that were necessary to rebuild and complete the project and that, without any exception and without any qualification it had included in the GMP all such estimated costs that were necessary to build and complete the project. Particulars The representation arises as matter of inference from the documents particularised in paragraphs 43A – 43C above and the matters in paragraph 45 of the first statement of Ray Brownlee, and from the claimant holding itself out to the respondent as an experienced structural engineer, hydraulic engineer, mechanical engineer, architect, constructor, contract manager, costs estimator and costs controller. 92 In paragraph 43F the Council claimed that the representations in paragraphs 43A to 43E were false because the Project could not be built for the GMP; that the works and costs necessary to build the Project would exceed the GMP; and the estimates were not true estimates. The Council also claimed that the falsity was to be inferred from the total cost of the Project and the nature, extent and timing of Austin's claims for contract variations. 93 The Arbitration proceedings have suffered a deal of delay for various reasons which are not relevant to detail. It is anticipated that those proceedings will be concluded some time in 2008. There was some debate during the present proceedings about the efficacy of these proceedings being heard whilst the Arbitration proceedings were still not finalised. However all parties pressed the Court to hear the present proceedings and to accommodate the outcome of the Arbitration proceedings (tr 686-687), with any conditional order that may be necessary to reflect any findings that the Arbitrator may make that will impact on the outcome of these proceedings. Mr Simpkins has provided an overview of the issues in the Arbitration proceedings (tr 686-687) the most relevant of which are: (1) whether the preconditions for the GMP of $16.9 million were fulfilled; (2) if not whether Austin is estopped from contending that they were not fulfilled; (3) whether the GMP was adjusted from $16.9 million to $15.583 million (as contended for by the Council) or adjusted from $18.65 million to $21.685 million (as contended for by Austin); and (4) whether the final cost of the Project was $19.766 million. The plaintiff submitted that if the Council is correct in its contention in the Arbitration proceedings that it achieved a lower GMP then no case could be made out against the plaintiff. However, if Austin is successful in the Arbitration proceedings, it is submitted that the plaintiff could only have any liability if some identified inadequacy in the GMP Documentation caused an upward adjustment to the GMP, and then only to the extent of that upward adjustment. 94 As can be seen from the claims made by the Council in paragraphs 3A-3C of its Points of Claim in the Arbitration proceedings, it is not alleged that the GMP Documentation produced by the plaintiff was inadequate in any particular way so as to increase the GMP. The claims made by Austin included a claim that the Council would "complete the design development" by 4 June 1999. That is a date well after the production of the GMP Documentation. There are also allegations that the Council failed to "work closely together" with Austin to achieve design modifications and a claim that Austin was not consulted with and did not agree to the finalisation of the design modifications. Importantly it is claimed that amendments to the project drawings (meaning amendments to part of the GMP Documentation) were performed by the Council and its consultants without consultation with Austin. It is alleged that the modifications made to the design added to the works rather than reducing their scope. 95 Mr Brownlee was cross-examined in the present proceedings in relation to the content of paragraphs 43A to 43E and gave the following evidence (tr 192-193): Q. Can we deal with each of the paragraphs in turn. I will take paragraph 43A first. Did you believe as a result of reading the Austin tender submission that if the council awarded the contract to Austin, then as against the project scope of the works, and for the project building period, without any exception and without any qualification the cost of the project would not exceed the GMP and/or the cost to the council would not exceed the GMP? A. Yes. Q. In relation to paragraph 43B, did you believe from the Austin tender submission that if the council awarded the contract to Austin, then as against the project scope of the works and for the project building period, without any exception and without any qualification no circumstances then existed or would exist whereby the project would cost more than the guaranteed maximum price and/or the bond would not exceed the GMP? A. Yes. Q. Did you believe from the Austin tender submission - this is dealing with paragraph 43C - that for the project scope of the works and for the project building period if the council awarded the contract to Austin, then without any exception and without any qualification the council did not need to allow a contingency for increasing costs beyond the guaranteed maximum price? A. Yes. Q. That the only variation that could occur to the project cost would be savings to the council? A. Yes. Q. That all costs over runs would be borne by Austin? A. Yes. Q. Turning to paragraph 43D, did you believe from the Austin tender submission that Austin's expertise as estimator, cost controller, structural engineer, hydraulic engineer, mechanical engineer, architect, constructor and contract manager was of such high degree that without any exception, and without any qualification the guaranteed maximum price included for all works materials and expenses of any and every kind that are necessary to build and complete the project? A. Yes. Q. Lastly, dealing with paragraph 43E, did you believe as a result of reading the Austin tender submission that pursuant to Austin's formal expertise as estimator, cost controller, structural engineer, hydraulic engineer, mechanical engineer, architect, constructor and contract manager it had truly and accurately estimated for and had made proper allowance for the cost of every item of works, materials and expenditures of any and every kind that were necessary to build and complete the project, and without any exception and without any qualification Austin had included in the GMP all such estimated costs that were necessary to build and complete the project? A. Yes. Q. Then if you could turn please to page 220, you will see that in paragraph 43I there is an allegation that relying upon the faith and truth of the representations, as has been pleaded in paragraphs 43A to 43E, the council entered into the Austin contract? A. That's correct. Q. Is it your evidence to her Honour that the reason that the Austin contract was entered into was the belief that you formed, and which is set out in paragraphs 43A to 43E? A. That's correct. 96 Mr Brownlee gave evidence in his affidavit of 26 July 2006 that had he been told "that the plans and drawings could not be built for $16.9 million in accordance with the specifications" he would not have recommended that Austin be awarded the construction management contract. He claimed that he would have recommended to Ms Rosser that they go back to the plaintiff and arrange further changes for the Project to reduce the cost to $16.9 million. He also claimed in that affidavit that had he known that the GMP Documentation was not suitable and appropriate to form the scope of works he never would have recommended to Ms Rosser to enter into the Austin contract. He claimed that he knew the GMP Documentation required "design development" but that he understood that to mean "design development in relation to possible savings only". These proceedings 97 The plaintiff commenced these proceedings by Summons filed on 26 February 2004 seeking the recovery of various amounts from the Council totalling $722,011.07. The parties have agreed on many of the claims and the only claims made by the plaintiff in the Summons that require determination are: (1) whether the plaintiff is entitled to an amount of $33,000 pursuant to its PSP dated 2 March 1999 for the provision of "contract documentation" services (Contract Documentation); (2) whether the plaintiff is entitled to make a claim in respect of "Variation CVC04-1" relating to the redesign occasioned by the decision to remove the sprinklers (Variation); and (3) whether the plaintiff is entitled to additional fees for an adjustment for increased costs pursuant to clause 3 of its retainer with the Council (Increased Costs). The parties have agreed that subject to the outcome of the Council's Cross-Claim, there is no longer any issue that the Council is liable to the plaintiff for construction services ($243,980.50); for excess documents and abnormal delivery charges ($19,954.59); and for the car park ($25,000). 98 The main issues for determination arise from the Council's Cross-Claim in which it is alleged that the plaintiff's conduct was misleading or deceptive in breach of s 52 of the TPA. Those allegations were refined during the course of the trial, the final version of which is found in the Further Amended Defence and Cross-Claim filed in Court on 24 April 2007 (the Cross-Claim). The Council claims that it retained the plaintiff on three separate occasions; the first on 3 September 1998 to provide services in relation to the Project referred to as the "DA Retainer"; the second on 3 December 1998 referred to as the "Construction Documentation Retainer"; and the third in about July 1999 to provide further services to be paid on an hourly rate basis referred to as the "Construction Services Retainer". Paragraph 5 of the Cross-Claim is in the following terms: On about 3 December 1998, the Council resolved that its budget for the project was $16.9 million. Mr Brownlee of the Council orally advised Mr Davies of Michael Davies about the Council's budget on or about 3 December 1998. At a Council meeting on 2 December 1998, Mr Davies gave a presentation to Council and said words to the following effect: 'The GMP is like a lump sum tender. It gives the Council surety that the costs will not go above $16.9 million'. 99 The Cross-Claim alleges that after the initial tenders were received in response to the 'Invitation to Tender for Construction Management Services' in the vicinity of a guaranteed maximum price (GMP) of $22 million the following occurred: 10. In early February 1999, Mr Brownlee of the Council again advised Mr Davies of Michael Davies that the Council's budget for the project was $16.9 million, and that unless savings were made to bring the project down to $16.9 million, it would not proceed. 100 The Cross-Claim alleges that on 3 February 1999 the plaintiff sent Post Tender Notice 1 to the tenderers and that on 5 February 1999 the plaintiff sent to the tenderers Post Tender Notice 2 together with further drawings and specifications prepared by the plaintiff and its consultant Hyder Consulting (Australia) Pty Limited, referred to as "The GMP Documentation" (par 12). It is claimed that the plaintiff knew or ought to have known that the tenderers would offer construction management services with a GMP on the assumption that the GMP Documentation set out either expressly or by implication all of the works and materials that were required to build and complete the Project (par 12B). It is alleged that at no time did any representative of the plaintiff advise the Council that the Project as set out in the GMP Documentation could not be built for $16.9 million (par 13). The Cross-Claim alleges that the Council entered into the Austin Contract "whereby Austin would provide construction management services" and "subject to the terms of the Austin Contract, deliver the project for the guaranteed maximum price (GMP) of $16.9 million" (par 14). It is also alleged that throughout the Project the Council entered into 42 trade contracts upon the recommendations of the plaintiff and also upon the documentation prepared by the plaintiff (par 15). It is alleged that the final cost of the project to the Council was $19,765,598.92 (par 17). The Cross-Claim refers to the commencement of the Arbitration Proceedings by Austin against the Council on 18 May 2001 in which it is alleged Austin claims an entitlement to certain payments upon grounds including that the plaintiff's GMP Documentation did not disclose the whole scope of works. As I have said the Arbitration Proceedings are part heard before the Arbitrator, Austin is now in liquidation and the parties are not expecting to finalise those Arbitration Proceedings until some time in 2008. 101 The Council claims that the plaintiff breached its retainers, in particular clause 4 of the Terms and Conditions which provided: "In providing the services, MDA shall exercise the degree of skill, care and diligence normally exercised by architects in similar circumstances" in that: the GMP Documentation did not set out all of the works and materials which were required to build and complete the Project; the GMP Documentation was not prepared with reasonable care and skill; and the GMP Documentation was inadequate to form the basis of a construction management contract with that GMP (par 20). It is also alleged that the plaintiff breached its retainer by: (a) failing to warn the Council at the time it entered into the Austin Contract that there was a real risk of a significant project cost increase because of the very early stage of the development of the GMP Documentation; and (b) putting forward the GMP Documentation as being adequate to form the scope of works for a construction management contract with a GMP (par 21). It is alleged that had the GMP Documentation been complete, set out all of the works and materials required and been prepared with reasonable care and skill, Austin's tender price would have been higher than $16.9 million and the Council would not have entered into the Austin Contract and would have reduced the scope of works to be included in that contract (par 23-24). It is also alleged that the Council would have required and made design alterations to ensure a reduction in the scope of works so that the cost of the Project was no more than $16.9 million. It is also alleged that the Council would not have been exposed to the risk of damages and costs claimed by Austin in the Arbitration proceedings (par 24). The Council claims damages in respect of the alleged breach of retainer. These same allegations are repeated in the claim that the plaintiff breached its duty of care to the Council in respect of which the Council claims damages (par 27-29). 102 The TPA claims made by the Council as finally pleaded are as follows: 31. In preparing and issuing the Tender Form Part B and The GMP Documentation to the tenderers and to the Council, in circumstances where Michael Davies knew that the Council would not accept a tender for more than $16.9 million, and in the circumstances set out in paragraphs 1-17 above, Michael Davies represented to the Council that: (a) The GMP Documentation had been prepared with reasonable care and skill; (b) The GMP Documentation set out, either expressly or by implication, all the works and materials which were required to build and complete the Project; (c) the Project was capable of being built for $16.9 million; (d) The GMP documentation gave the Council certainty that the cost of the project would not exceed $16.9 million, save for substantial variations initiated by the Council; (e) The GMP documentation was adequate to form the scope of works for a construction management agreement with a GMP; (f) A construction management contract with a GMP was like a lump sum tender and would give the Council surety that construction of the MDA Option 2000 (as described in MDA's professional services proposal dated 19 August 1998) would not exceed $16.9 million; (g) Construction of the MDA Option 2000 through a construction management agreement with a GMP, and based on documentation to be prepared by MDA, would not exceed $16.9 million. ('The Representations') 32. Acting in the course of performing its retainers referred to above, Michael Davies in 1998 and 1999 developed the design and specification for construction of the Project. 33. Acting on the faith and truth of the Representations, the Council entered into the Austin Contract. 34. Acting on the faith and truth of the Representations referred to in paragraph 31(f) and (g) above the Council: RESOLVED ON 2 DECEMBER 1998: (a) to adopt the Civic Precinct Redevelopment Master Plan as proposed by MDA and titled MDA Option 2000; (b) to proceed to undertake demolition of the existing Administration Building and Town Hall, and the construction of the Civic Precinct Redevelopment Project as outlined in the MDA Option 2000 document ('the Project'); (c) to engage MDA to complete design and documentation of Stage 2 of the Project; AND THEREAFTER: (d) engaged MDA to complete design and documentation of Stage 2 of the Project; (e) proceeded to demolish the existing Administration Building and Town Hall, and to construct the Project. 103 The Council claims that had the representations in paragraphs 31(f) and (g) not been made and/or had the Council known the falsity of those Representations it would not have: (a) resolved to proceed with the Project; (b) proceeded to undertake demolition of the existing Administration Building and Town Hall, and to undertake construction of the Project; (c) engaged the plaintiff to complete design and GMP Documentation of Stage 2 of the Project; and (d) entered into the Austin Contract (par 38A). The Council also makes an alternative claim that had the documentation been complete and/or prepared with reasonable care and skill and/or had the representations not been made and/or had the Council known the falsity of the representations it would not have been exposed to: (a) Austin's claims during the project that the scope of works was greater than those set out in the GMP Documentation; (b) Austin's assertions that there was no GMP or that the GMP had increased; (c) the extra cost to complete the project over and above the GMP; (d) numerous variation claims by trade contractors; and (e) the Austin Arbitration proceedings (par 39). 104 It is alleged that the plaintiff engaged in misleading or deceptive conduct contrary to s 52 of the TPA. It is also alleged that to the extent that the Representations were as to future matters the plaintiff did not have reasonable grounds for making those Representations. The Council claims damages pursuant to s 82 and s 87 of the TPA and seeks a declaration pursuant to s 87(1A) of the TPA that the damages and interest thereon be set-off against any amount found to be due to the plaintiff (par 40-44). 105 The proceedings were heard on 10 to 12, 16 to 19, 23, 24, 26 and 30 April 2007 and 1, 2 and 7 May 2007. Mr JB Simpkins SC appeared for the plaintiff and Mr ID Faulkner SC leading Mr HJA Neal appeared for the defendants. PLAINTIFF'S CLAIMS 106 Contract Documentation claim: The plaintiff makes a claim for $33,150. The covering letter of the plaintiff's PSP of 2 March 1999 included the following: 2. The original fee proposal was based on an estimated cost of $13,700,000 which you have instructed should now be increased to $17,000,000. 107 The letter referred to the fees applicable to the various stages of the work as follows: Schematic Design $166,700 Design Development $166,700 Contract Documentation $444,400 Construction Services $222,200 108 The total of the first three items is $777,800 and the Contract Documentation stage included tendering and negotiating services. In the original retainer constituted by the plaintiff's PSP of 18 August 1998 and the Council's response of 3 September 1998, the Council accepted only option (a) being for services to the DA stage which did not include option (b) being services to Contract Documentation stage. However the 18 August 1998 PSP provided an alternative price for option (b) that did not include tendering and negotiating services. The plaintiff submitted that its 1999 PSP was an attempt to explain how the fees it proposed related to the fees in the 1998 PSP. It was submitted that part of the explanation involved an analysis by the plaintiff of how the fees in the 1998 PSP would be affected by the increased cost of the Project, from $13.7 million to $17 million. That analysis commenced from the premise of the total fee in the 1998 PSP for both options of $600,100 and then added $144,550 to reflect the increase in the cost of the Project from $13.7 million to $17 million producing a total revised fee for option (b) of $744,650. 109 When the Council responded to the plaintiff's 1999 PSP on 31 March 1999 it advised that the "agreed" fee was $744,650 inclusive of Stage 1 and Stage 2. The plaintiff responded to the Council on 27 May 1999 advising it that the $744,650 was a figure provided solely to demonstrate how the plaintiff had arrived at the revised fee of $444,400 for the contract documentation item. The plaintiff claims that although the Council referred to the figure as "agreed" it was "plainly" not the figure advanced in the 1999 PSP for Contract Documentation. The Council has paid the plaintiff $744,650 and the plaintiff claims that it is entitled to the further amount of $33,150. 110 The practice that was adopted in relation to all of the plaintiff's progress claims was that Mr James would look at them, seek Mr Brownlee's approval and, if approved by Mr Brownlee, make arrangements for the claims to be paid. The plaintiff made a progress claim on 31 March 1999 in the following terms: To professional services rendered in connection with the above project in accordance with our Professional Services Proposal dated 2 March 1999, Council's acceptance thereof, and as follows: Schematic Design $166,700 Services now complete $166,700 Design Development $166,700 Services now complete $166,700 Contract Documentation $444,400 Services (say) 10% complete $44,440 Construction Services $222,200 Tendering and Negotiation $33,330 $411,170 Less Contract Progress Payments received $219,800 Therefore this Contract Progress Claim No CPC06 $191,370 ___________________________________________________________ AMOUNT NOW DUE AND PAYABLE WITHIN 30 DAYS (say) $150,000 ___________________________________________________________ 111 There are a number of matters to observe about this progress claim. The first is that the figures for each of the items, Schematic Design, Design Development, Contract Documentation and Construction Services are identical to the figures in the plaintiff's 1999 PSP. The second is that, at least at this stage, there was obviously a deal of goodwill between the plaintiff and the Council because the plaintiff either reduced its fee by $41,370 from $191,370 to $150,000 or only required payment of that partial amount within the 30 days. The final matter to observe is that the Council made no comment upon the plaintiff's claim that the Council had accepted the 1999 PSP. Mr Brownlee accepted in his evidence that Mr James spoke to him about this claim and that he advised Mr James that payment of the invoice was approved. The Council made payment without demur to the figure for contract determination of $444,400. 112 The plaintiff made a further progress claim dated 30 April 1999 in the following terms: To professional services rendered in connection with the above project in accordance with our Professional Services Proposal dated 2 March 1999, Council's acceptance thereof, and as follows: Schematic Design $166,700 Services now complete $166,700 Design Development $166,700 Services now complete $166,700 Contract Documentation $444,400 Services (say) 10% complete $88,880 Construction Services $222,200 Tendering and Negotiation $33,330 $455,610 Less Contract Progress Payments received $369,800 Therefore this Contract Progress Claim No CPC06 $85,810 ___________________________________________________________ AMOUNT NOW DUE AND PAYABLE WITHIN 30 DAYS $85,810 less 33,330 _______________________________________________________ $52,480 113 The last two entries on this Progress Claim, "less 33,330" and "$52,480" are handwritten and were obviously made the Council officers. It is clear that by this time controversy had arisen in relation to the plaintiff's involvement in what had been referred to as "Stage 3" relating to the "construction" phase of the Project. The correspondence extracted earlier indicates some friction between Mr Davies and Mr Brownlee in relation to this aspect of the matter. The reduction of $33,330 was a reduction relating to "construction services". Mr Brownlee discussed this progress claim with Mr James and Mr Brownlee wrote the words "Payment OK", signed and dated the authorisation. Mr Brownlee claimed in his evidence that in writing those words he was approving payment of the amount of $52,480 and that he intended to exclude the amount of $33,330 for construction services. The total of the figures in the plaintiff's PSP dated 2 March 1999 for Schematic Design, Design Development and Contract Documentation is $777,800 (exclusive of the $222,200 figure for Construction Services). The plaintiff claims that the Council has only paid it $744,650 for those first three items instead of $777,800, and claims that it owes the plaintiff $33,150. 114 The plaintiff submitted that by its conduct in authorising the payments in respect of the progress claims dated 31 March 1999 and 30 April 1999 the Council accepted that the fee for those three items was $777,800 rather than $744,650. In support of this claim reliance was placed on Empirnall Holdings Pty Limited v Machon Paull Partners Pty Limited (1988) 14 NSWLR 523 in which McHugh JA identified the ultimate issue as whether a reasonable bystander would regard the conduct of the offeree as signalling to the offeror that the offer had been accepted (at 535). The Council submitted that far from signalling acceptance of the plaintiff's 1999 PSP, it made very clear that all that it agreed to was a fee of $744,650 and that the plaintiff is not entitled to construct an agreement out of the correspondence between the parties, when that correspondence categorically deals with the alleged confusion with the Council maintaining that its agreement excluded the amount of $33,150. 115 The Council's letter of 31 March 1999 to the plaintiff in response to its 1999 PSP advised that the Council had given authority to proceed with full documentation of the work "for the agreed fee which has been adjusted for the estimated cost budget being increased" from $13.7 million up to $16.9 million and the deletion of the quantity surveyor's fee for the option (b) proposal. The Council resisted any suggestion that it had been confused about the plaintiff's letter and in its letter of 8 July 1999 purported to explain how it reached the figure of $744,650. It claimed that the plaintiff's fee on a project that would cost $13.7 million was 4.4% at $600,100 and that, on a pro-rata basis for a project that would cost $16.9 million, the plaintiff's fee at 4.4% would be $744,650. That was then broken down into Stage 1 fees of $189,800 and Stage 2 fees of $554,850, totalling $744,650. 116 The letter Mr Davies wrote to Ms Rosser on 9 August 1999 referred to the Council's denial of liability for the payment of $33,330 and did not mention the claim for $33,150. It is obviously unsatisfactory that these parties appear to have fallen out in relation to the plaintiff's fees, however I cannot be satisfied that there was a meeting of minds and an agreement to accept the plaintiff's fee proposal in its 1999 PSP, notwithstanding approval of the progress claims dated 31 March 1999 and 30 April 1999. The Council's letters of 31 March 1999 and 8 July 1999 seem to me to evidence an agreement only to pay the plaintiff the lesser amount of $744,650. 117 The plaintiff's claim for an order that the Council pay it $33,150 fails. 118 Variation claim: As I have said earlier, the only issue remaining for determination in relation to the large number of variation claims is whether the plaintiff is entitled to make a claim for variation CVC04-1. The question of the quantum ($33,000) is not in issue. Clause 13 of the plaintiff's Retainer was in the following terms: 13. If MDA's work is increased or protracted due to causes beyond its control and/or you request variations in the scope of services or to the approved design, a variation fee is payable. MDA will notify you when a variation fee is payable and shall not proceed with the variation until authorised by you. Variation fees will be charged for on a time basis as set out in the Professional Services Proposal unless you request some other basis of assessment, in which case the basis shall be agreed and authorised by you prior to MDA putting the work in hand. 119 One aspect of the plaintiff's entitlement to the fee for a variation is notification to the Council. The Council resists the plaintiff's claim on the basis that the plaintiff failed to give the Council notice of the work it did in relation to the removal of the sprinklers. The Council relied upon Rogers CJ Comm D's decision in Wormald Engineering Pty Limited v Resources Conservations Co International (1988) 8 BCL 158 at 162-163 in support of its submission that the requirement to give the Council notice was a precondition to recovery of the variation fee as opposed to providing an entitlement to the Council to damages for breach of retainer. The clause in that case (clause 40.2) involved the contractor forming an opinion about whether compliance with a superintendent's order was likely to prevent the contractor from, or prejudicing it in, fulfilling any of its obligations under the contract; and having formed such an opinion requiring it to "forthwith notify" the superintendent in writing of that opinion. Thereafter the superintendent was obliged "as speedily as is practicable" to determine whether or not the contractor had to comply with its order. 120 The plaintiff sought to distinguish Wormald on the basis that the clause in question in that case provided for: (a) a sufficiently timely variation order to enable re-programming and the formation of opinion as to value; (b) notice by the contractor of the likely effect of the variation order; and (c) a written direction to proceed with the variation order based upon an informed view about disruption and cost. Rogers J emphasised these "carefully constructed machinery steps" (at 161) that enabled potentially complex issues of disruption and cost to be addressed in advance of the instruction to proceed. It was also submitted that Wormald is limited to the construction of the clause in that contract and is accordingly of limited utility in this case. 121 In the present case clause 13 provided that the plaintiff would notify the Council when a variation fee was payable and that it would not proceed with the variation until it was authorised by the Council. The plaintiff submitted that clause 13 is quite different to the clause under consideration in Wormald in that there was no obligation on the plaintiff to advise the Council of the likely cost and its only obligation was to advise the Council that there would be a cost. The plaintiff also submitted that the failure to give a notice required by clause 13 is not destructive of the plaintiff's right to the fee, rather, it may entitle the Council to claim damages. It was further submitted that there is no implication from the express words of clause 13 that a variation that has been carried out without notice cannot be the subject of a later claim. 122 The plaintiff claims that in any event the Court should be satisfied that notice was given to the Council in the plaintiff's letter to Mr James dated 30 March 1999 which included the following: We cannot progress any of the documentation on the Council and Police building until fundamental decisions are made in relation to: … · Sprinklers and basement sprinkler storage tanks … These decisions, when made, may result in major abortive work involving extensive re-design and re-drafting. 123 The plaintiff claimed that there was no evidence supporting a damages offset from the amount claimed by the plaintiff and that in any event, the plaintiff was entitled to make the alternative quantum meruit claim. 124 The evidence in relation to the question of the deletion of the sprinklers is detailed in appendix A to the plaintiff's outline of submissions in chief. On 19 April 1999 the plaintiff wrote to Grubits advising that as of that afternoon it had received the "go-ahead" from the Council with regard to the Atrium. It stated that in the light of that decision the plaintiff was then "firmly locked into delivering to the Council, a sprinkler free building". There were numerous design meetings at which both the plaintiff and the Council were present and various discussions occurred about compliance with the Building Code of Australia (BCA) and the question of the deletion of the sprinklers. On 28 May 1999 the Council wrote to Austin confirming that it would proceed with the deletion of the sprinklers, subject to such deletion meeting BCA requirements. 125 The only issue in relation to whether the plaintiff is entitled to this variation is whether it was required to give notice pursuant to clause 13 prior to it performing the work relating to the removal of the sprinklers. I am satisfied that the letter of 30 March 1999 gave sufficient notice to the Council that if it made a decision to remove the sprinklers then additional work would have to be done by the plaintiff. That letter combined with the evidence in relation to the design meetings and discussions between the plaintiff, the Council, Grubits and Austin satisfy me that the Council was notified that the plaintiff would have to do additional work should the sprinklers be removed. Once the "go-ahead" was given to the plaintiff in relation to the design for the Atrium, I am satisfied that the Council effectively approved of the additional work for the removal of the sprinklers. In any event having regard to the distinguishing features of the clause in Wormald it does not seem to me that even if the plaintiff had failed to give notice such lack of notice was destructive of its entitlement to claim this variation at a later time. 126 The plaintiff is entitled to the payment of variation CVC04-1. 127 Adjustment for increased costs: This claim relates to the final cost of the Project being at least $19 million. The plaintiff claims that pursuant to clause 3 of the standard terms of its Retainer its fees should increase. Clause 3 of its Retainer provides: When MDA's fee is based on an estimate of cost or likely cost advised by you or your agent and the final cost or final estimated cost exceeds this amount by more than 5%, MDA's fee will be increased in proportion to the whole of the increase in cost, unless such fee was originally a percentage of the cost of the works. 128 This claim is subject to the outcome of the Arbitration Proceedings in which it may be found that the final cost of the Project was more or less than $19 million. Accordingly any finding in relation to this aspect of the matter must await that outcome. 129 There is an issue as to whether the plaintiff's fee was based on an estimate or cost that was "advised" by the Council or by the Council's agent. The Council claims that the figure was not advised by it but rather by the plaintiff itself and that clause 3 has no application. DG Jones was originally retained by the plaintiff, however the Council retained that firm directly from late November 1998. The Report to the Council for the Meeting on 2 December 1998 stated that, "Council has employed the services of the Quantity Surveyors DG Jones to determine the costings". Ms Rosser agreed that this was an accurate statement and in any event DG Jones was dealing directly with the Council by no later than 25 November 1998 when it provided its suggested scope of quantity surveying services and a "DA Estimate Cost Summary" of $23.3 million. Accordingly the estimate of cost was advised by the Council or its agent and clause 3 will apply to the final cost of the Project the subject of the Arbitration Proceedings. 130 Construction services claim: As I have already indicated there is no longer any issue that the amounts claimed by the plaintiff are owed to it by the Council, subject to the outcome of the Cross Claim. The Council has failed in its Cross-Claim and therefore the plaintiff is entitled to an award in its favour for these amounts. COUNCIL'S CROSS-CLAIM 131 The claims for determination on the Council's Cross-Claim are the alleged breach of retainer by the plaintiff's alleged failure to provide its services with the degree of skill, care and diligence normally exercised by architects in similar circumstances (breach of retainer); the claim in negligence on the same basis (the negligence claim); and the alleged misleading or deceptive representations made by the plaintiff in breach of s 52 of the TPA (the TPA claims). Amendment to Cross-Claim 132 As I have said earlier, the Council was granted leave on 24 April 2007 to file the Cross-Claim in Court. An order was made at that time that in respect of the causes of action in paragraphs 31(f) and 31(g), the date upon which such amendments were to take effect was to be decided after final submissions. The causes of action in those two sub-paragraphs are alleged breaches of s 52 of the TPA by reason of representations allegedly made by Mr Davies at the Council Meeting on 2 December 1998. Those representations as pleaded in the Cross-Claim are: (f) A construction management contract with a GMP was like a lump sum tender and would give the Council surety that construction of the MDA Option 2000 (as described in MDA's professional services proposal dated 19 August 1998) would not exceed $16.9 million; (g) Construction of the MDA Option 2000 through a construction management agreement with a GMP, and based on documentation to be prepared by MDA, would not exceed $16.9 million. 133 Section 64 of the Civil Procedure Act 2005 (the Act) confers a general power on the Court to permit amendments. Section 64(3) provides: (3) An order under this section may be made even if the amendment would have the effect of adding or substituting a cause of action that has arisen after the commencement of the proceedings but, in that case, the date of commencement of the proceedings, in relation to that cause of action, is, subject to section 65, taken to be the date on which the amendment is made. 134 Section 65(2)(c) of the Act provides that leave may be granted to make an amendment which introduces a new cause of action if it arises from the same, or substantially the same, facts as those giving rise to an existing cause of action in the pleading. However, s 65(2)(c) does not limit the Court's general powers under s 64 of the Act. The Council submitted that the amendment should not be permitted except upon terms that preserve the time bar. To determine this issue it is necessary to review the history of the Council's pleadings. 135 The Council filed its Defence and Cross-Claim on 14 May 2004. In that pleading there was no mention of any statement allegedly made by Mr Davies at the Council Meeting on 2 December 1998. Indeed, that pleading included the following: 5. On about 2 December 1998, the Council resolved that its budget for the project was $16.9 million. Michael Davies was in attendance at the Council Meeting on 2 December 1998. Mr Brownlee of the Council orally advised Mr Davies of Michael Davies about the Council's budget on 3 December 1998. 136 The only representations pleaded in the Defence and Cross-Claim filed on 14 May 2004 were as follows: 28. In preparing and issuing the Tender Form Part B and The GMP Documentation to the tenderers and to the Council, in circumstances where Michael Davies knew that the Council's budget for the Project was $16.9 million, Michael Davies represented to the Council that: (a) The GMP Documentation had been prepared with reasonable care and skill; (b) The GMP Documentation set out, either expressly or by implication, all the works and materials which were reasonably required to build and complete the Project; (c) the Project was capable of being built for $16.9 million. 137 On the first day of the trial, 10 April 2007, Mr Faulkner sought leave to file in Court an Amended Defence and Cross-Claim. Mr Simpkins indicated that he had been informed that this amended pleading was a draft that had been in circulation "for some while with some pretty minor recent corrections to it" (tr 26) and on that basis there was no objection to the filing of that pleading. Accordingly leave was granted to file that document in Court. That pleading amended paragraph 5 by adding the following words at the end of the paragraph: At a Council meeting on 2 December 1998, Mr Davies gave a presentation to Council and said words to the following effect: ' The GMP is like a lump sum tender. It gives the Council surety that the costs will not go above $16.9 million' . 138 An amendment was also made to the former paragraph 28 which, by reason of other amendments, became paragraph 31 and was in the following terms (with formatting indicating noting up): 31. In preparing and issuing the Tender Form Part B and The GMP Documentation to the tenderers and to the Council, in circumstances where Michael Davies knew that the Council's budget for the Project was $16.9 million Council would not accept a tender for more than $16.9 million , and in the circumstances set out in paragraphs 12A and 12B 1-17 above, Michael Davies represented to the Council that: (a) The GMP Documentation had been prepared with reasonable care and skill; (b) The GMP Documentation set out, either expressly or by implication, all the works and materials which were reasonably required to build and complete the Project; (c) the Project was capable of being built for $16.9 million. (d) The GMP documentation gave the Council certainty that the cost of the project would not exceed $16.9 million, save for substantial variations initiated by the Council; (e) The GMP documentation was adequate to form the scope of works for a construction management agreement with a GMP. 139 In this amendment the Council also claimed that "the representations" were false because the GMP documentation did not give the Council certainty that the Project would not exceed $16.9 million. 140 Mr Simpkins claimed that the Council had not pleaded that the plaintiff had represented that the GMP would give the Council surety that the costs of the Project would not go above $16.9 million. He accepted that the amendment to paragraph 5 included a claim that Mr Davies made such a statement at the Council Meeting on 2 December 1998, but submitted that such representation was not pleaded in paragraph 31 of the amended pleading (tr 359). Mr Faulkner relied upon the words "in the circumstances set out in paragraphs 1-17 above" in paragraph 31 to submit that it was clear that the statement alleged to have been made by Mr Davies as contained in paragraph 5 of the amended pleading was, by reference, included in paragraph 31 (tr 584). 141 On 24 April 2007 I allowed the Council to further amend its pleading to add representations (f) and (g) to paragraph 31 subject to the question of the date the amendment is to take effect. 142 The plaintiff submitted that the limitation period for the causes of action in sub paragraphs (f) and (g) is 6 years after the day on which the cause of action that relates to the conduct accrued, pursuant to s 82(2) of the TPA. Mr Simpkins referred to Keen Mar Corp Pty Limited v Labrador Park Shopping Centre Pty Limited (1988) ATPR 40-853 and Karedis Enterprises Pty Limited v Antoniou (1995) 59 FCR 35 and submitted that it is unclear whether the approach in the latter case, that the cause of action arose when it became reasonably apparent that the transaction was disadvantageous overruled the approach in the former case, that the cause of action arose at the time of entry into the relevant transaction. It was submitted that on either approach the limitation period has expired rendering the resolution of any inconsistency in these authorities unnecessary. 143 Mr Simpkins submitted that s 65(2)(c) of the Act does not apply because the new causes of action rely upon a different representation, allege different acts in reliance thereon and the facts are not substantially the same as for the existing causes of action. It was submitted that the new cause of action was raised at a time when memories have faded and in circumstances where there are no contemporaneous records that corroborate the claimed representation or any reliance upon it. It was submitted that it is now almost impossible to fairly test and evaluate the alleged representation having regard to the passage of 8 or 9 years before any of the witnesses who claim the representation was made had occasion to reflect back on what, if anything, Mr Davies said at the meeting on 2 December 1998. It was further submitted that the amendment was made late without any attempt to explain its lateness and there is no suggestion that the plaintiff was aware of this claim at any time during the limitation period. Accordingly, Mr Simpkins submitted that the amendment should only date from 24 April 2007, the date on which leave was granted to file the amended pleading. 144 Mr Faulkner submitted that when the Court granted leave on 10 April 2007 to file the pleading in which Mr Davies alleged statement at the Council Meeting of 2 December 1998 was included (par 5), no limitation point was raised. On 17 April 2007 the plaintiff filed a Defence to the amendment of 10 April 2007. That Defence did not raise any limitation point and included a denial that Mr Davies gave a presentation at the Council Meeting on 2 December 1998 and denied that he made the statement as alleged. It is true that the amendments made on 10 April 2007 are taken to have effect as from the date on which the original Cross-Claim was filed, 14 May 2004, thus it is clear that from 14 May 2004 the Council alleged that Mr Davies made the statement at the Council Meeting on 2 December 1998. 145 Mr Faulkner also relied upon the affidavit evidence filed and served in 2006, in particular that of Ms Rosser of 20 July 2006 in which she gave evidence that Mr Davies said the words as alleged in paragraph 5 of the amendment filed on 10 April 2007. Mr Faulkner submitted that all of the representations arise out of the same factual matrix concerning the parties' dealings between August 1998 and March 1999. It was submitted that the new causes of action pleaded in paragraph 31(f) and (g) arise from the same or substantially the same facts as those giving rise to the representations pleaded in paragraphs 31(a) to (e), including the statement allegedly made by Mr Davies at the Council Meeting on 2 December 1998. 146 The Council's pleading was infelicitous. The claim that Mr Davies made the representation as alleged in paragraph 5 of the pleading should have been included in the claims under the TPA with more precision. The use of the expression "and in the circumstances set out in paragraphs 1 to 17 above", although inclusive of the claim in paragraph 5 lacked clarity. However the plaintiff was aware that the Council was alleging that it had relied on the statement pleaded in paragraph 5 in fixing its budget for the Project at $16.9 million and deciding to go forward with the Project. That appears from the affidavit evidence of Mr Brownlee and Ms Rosser that was served on the plaintiff in 2006. It seems to me that the cause of action relied upon arises out of the same facts and circumstances as pleaded in the amendment made on 10 April 2007 to which the Council consented. 147 In all the circumstances I am satisfied that I should allow the amendment and it should take effect from 14 May 2004. Breach of Retainer/Negligence claim 148 In clause 4 of the Retainer the plaintiff agreed to exercise the degree of skill, care and diligence normally exercised by architects in similar circumstances. The Council's claims against the plaintiff for breach of retainer and in negligence are based on the allegations that: (1) the GMP Documentation did not set out all of the works and materials which were required to build and complete the Project: (2) the GMP Documentation was not prepared with reasonable care and skill; (3) the GMP Documentation was inadequate to form the basis of a construction management contract with a GMP; (4) the plaintiff failed to warn the Council at the time it entered into the Austin Contract that there was a real risk of a significant increase in the cost of the Project because of the very early stage of the development of the GMP Documentation; and (5) the plaintiff put forward the GMP Documentation as being adequate to form the scope of works for a construction management contract with a GMP. 149 The Council claims that had the plaintiff complied with the terms of the Retainer and/or its duty of care to the Council by producing adequate GMP Documentation, Austin's tender price would have been higher than $16.9 million and the Council would not have entered into the Austin Contract. The Council claims that it would not have been exposed to the risk of damages and costs claimed by Austin in the Arbitration Proceedings. There is no direct evidence, in particular from Austin, that it regarded the GMP Documentation as deficient and/or an impediment to its assessment of the level of GMP for which it would submit a tender nor was there any such evidence that had the GMP Documentation set out "all the works and materials" required to build the Project, its GMP would have been greater than $16.9 million. The Council relies upon the circumstance that the final cost of the Project of some $19 million (a figure still subject to the arbitral award) to submit that such an outcome is obvious. 150 Various expert opinions have been expressed with which I will deal shortly but, as I have said above, there is no claim pleaded by Austin in the Arbitration Proceedings that the GMP Documentation was inadequate for it to submit its tender with a GMP of $18.65 million with the alternative GMP of $16.9 million. Rather the claim by Austin in the Arbitration Proceedings is that the conditions precedent contained within the Austin Contract for the GMP of $16.9 million were not met. Austin claims that the deletions were not implemented and therefore the lower GMP of $16.9 million is not applicable. Those are matters for decision in the Arbitration Proceedings, although evidence on that topic was led in these proceedings. "All works and materials"/reasonable skill and care 151 The first basis upon which the Council make its claims of breach of retainer and breach of duty of care is that the GMP Documentation did not set out all of the works and materials which were required to build and complete the Project. There is no issue of fact in relation to this claim. It is clear that the GMP Documentation did not set out "all the works and materials" as claimed. The real issue is whether such absence from the GMP Documentation amounted to a breach of the plaintiff's retainer or a breach of the plaintiff's duty of care to the Council. This will depend upon what it was that the plaintiff was instructed to provide pursuant to its retainer and the ambit of the duty of care in all the circumstances of the case. 152 The 1998 PSP was in relation to the plaintiff's services to the DA stage. The DA was approved at the Council Meeting on 2 December 1998. The plaintiff's letter of 1 December 1998 confirmed that it was proceeding with "tender documentation for demolition work and construction management services". That letter also referred to the Council's awareness that the plaintiff had prepared an "expression of interest package, and advised and attended meetings in relation to selection of the construction management tenderers" which had not been included in either Option (a) or Option (b) in the 1998 PSP. In this letter the plaintiff advised that the preparation of the tender documentation (the GMP Documentation) would be charged for on a time basis in accordance with the PSP, but if the Council proceeded beyond the DA stage, that fee would be absorbed in the next stage Option (b). 153 The 1998 PSP is the relevant PSP pursuant to which the plaintiff prepared the tender/GMP Documentation. Option (b) was the development of the Project to DA stage and through to the novation and construction design documentation stage. The specific instruction that the plaintiff confirmed in its letter of 1 December 1999 was the instruction to prepare the "tender documentation". Under the 1998 PSP the plaintiff was entitled to charge for services on a "time basis" where such services were not included in the Scope of Services. The reason the plaintiff advised that it would charge for the service of preparing the GMP Documentation on a time basis was because it was a service that was not included in the Scope of Services. The parties intended that the terms of the 1998 PSP were to apply to the plaintiff's preparation of the GMP Documentation, in particular clause 4 of the Terms and Conditions which provided: "In providing the services, MDA shall exercise the degree of skill, care and diligence normally exercised by architects in similar circumstances". The expression "in similar circumstances" is pivotal to the determination of whether the plaintiff complied with its obligations under its retainer and/or its duty of care to the Council. It is therefore necessary to identify the "circumstances" under which the plaintiff was operating at the time it produced the GMP Documentation. 154 The history of the relationship between the plaintiff and the Council is of importance. It was the plaintiff who suggested that the Council may wish to adopt the construction management method of procurement. The Council was going to enter into a joint venture with the Police Service and there was the pressing need to accommodate the Local Command in the developed site in time for the Olympic Games. The plaintiff's letter of 26 August 1998 specifically tied the suggestion of the construction management method of procurement to the "time constraints". There is no doubt that there were time pressures on both the Council and the plaintiff from the outset of their relationship. Indeed, prior to awarding the tender to the plaintiff, the Council sought from the plaintiff an assurance that it had the capacity to start documentation "immediately". 155 The "tender documentation"/GMP Documentation was first sent out to the tenderers with the Invitation to Tender on 14 December 1998. There had previously been some "drawings" provided with the "Expression of Interest – Information Package", but the Invitation to Tender advised that those drawings had been "superseded". DG Jones estimate dated 22 January 1999 of $20.9 million was based on the GMP Documentation. In each section of that document there is reference to the particular page of the GMP Documentation to which the estimate relates. There is some correlation between this estimate produced by DG Jones and the tenders received in late January 1999. The range was between $18.5 million and $23.6 million with DG Jones' estimate at $20.9 million. After the tender responses were received, the plaintiff was requested to find savings and make changes to bring the Project down to $17 million and to complete that task in time for a further round of tenders by 10 February 1999. 156 Under the Austin Contract, the contract manager (Austin) had a role in the design of the Project. It was obliged to liaise with the Design Manager and to assist the Council and the design team with the coordination of all drawings and specifications, including shop drawings. It was also obliged to consult as necessary in relation to "alternative designs or materials" (3(a)). The Council's obligation included the retention of the architects, engineers and other qualified persons in order to "prepare Drawings and Specifications for the Works and to be responsible for the design" (8 (c)). That contract defined "Drawings and Specifications" as "those documents including Bills of Quantity (if any) produced by the Consultants". "Consultant" was defined to include the "Architect, Engineer, Surveyor and other persons (as appropriate) employed by the Principal to design the Works and to prepare the Drawings and Specifications". 157 A number of experts gave evidence in the proceedings and that evidence is analysed below in relation to other aspects of the Council's claims. However on this aspect of the matter the plaintiff's expert architect, Mr Bullen, gave evidence that under a construction management contract, tenders for construction management contracts are usually obtained on a "skeleton" set of design documents, long before the documentation is complete (Bullen Report October 2005 par 7.2). Mr Bullen reviewed the GMP Documentation and concluded that the "Contract Set" drawings were not "full contract set in the traditional sense but would be referred to commonly in the industry as a "skeleton set" of documents" (Bullen Report October 2005 par 9.2). The Council's expert architect, Mr Poiner, agreed that a "skeleton set" of drawings established a framework for construction documents but lacked "the fleshing out necessary for their full construction usefulness" (Poiner Report 19 July 2006 par 3.6). 158 Mr Poiner analysed the 1998 PSP on the assumption that what the plaintiff was doing prior to February 1999 was in the Scope of Services set out in that PSP. Mr Poiner assumed that in producing the GMP Documentation the plaintiff was providing the service within the description "Contract Documentation/Building Application Services". He referred to the description underneath that heading of "Documentation consisting of the preparation of documents based on Development Application Documents Setting out the Detailed Building Construction Requirements" and observed that there was no mention of limited or partial construction documentation (Poiner Report 19 July 2006 par 3.5). There was no cross-examination of Mr Poiner in relation to this observation, perhaps because of its limited import and/or particularly having regard to the fact that it was not really a matter for expert opinion. However I am satisfied that Mr Poiner proceeded upon an erroneous basis in making this observation. It is clear that the parties understood that when the plaintiff was instructed to produce the GMP Documentation, it was a service that was outside the Scope of Services in the 1998 PSP. That is evidenced by the plaintiff's claim in its letter of 1 December 1998 that it would charge for its services in this regard on a "time basis" and is also evidenced by the fact that when it submitted its claim in February 1999, the Council paid it without demur. 159 It was not until 31 March 1999, after the GMP Documentation had been submitted to the tenderers and the Council had entered into the Austin Contract, that the Council responded to the 1999 PSP dated 2 March 1999. It was in this letter that the Council advised the plaintiff that at its meeting on 17 March 1999 Council had given "authority to proceed with full documentation of the work". Although Mr Poiner observed that in this letter the Council gave the plaintiff those instructions, I am satisfied that he failed to appreciate the significance of the difference between the plaintiff's instructions in late 1998 and its instructions on 31 March 1999. The letter of 31 March 1999 supports the conclusion that the plaintiff was not instructed to produce drawings that set out "all works and materials" until that date. 160 Additionally, the provisions of the Austin Contract referred to above support the conclusion that it was not intended that the GMP Documentation would set out "all work and materials" required to construct the Project. The Council clearly envisaged that this would occur during the development of the Project as evidenced in the terms of its contractual arrangement with Austin and the instruction to the plaintiff to proceed with "full documentation" on 31 March 1999, after it had entered into the Austin Contract. 161 I am not satisfied that the plaintiff was instructed to prepare documents that included "all works and materials which were required to build and complete the Project." Accordingly the fact that the GMP Documentation did not include "all works and materials" was not in breach of the plaintiff's retainer and was not in breach of any duty of care owed to the Council. "Inadequate" 162 The Council claimed that the plaintiff put forward the GMP Documentation as adequate to form a proper basis for a construction management contract with a GMP and that it breached its retainer and its duty of care because it was not adequate to form a proper basis for a construction management contract with a GMP. 163 When the second round of tenders were called for in early February 1999, the plaintiff's Notices to Tenderers made clear that the GMP Documentation was being amended for the purpose of reducing the cost of the Project and "hence" the GMP. The documents that went to the tenderers for the second round of tenders included the Revised Tender Form Part B in which the proposed deletions of the four items (the pumps, the planting troughs, the sun control and the curtain walling) was included. By this time the Post Tender Notices had advised the tenderers that they may also wish to consider the additional potential savings by the deletion of the level 1 concrete floor slab and/or modification or deletion of the roof over the atrium which would require waterproofing of the walk ways. 164 The plaintiff submitted that the Council knew that the GMP Documentation was "substantially incomplete" and without further revision, incapable of being developed for construction at a cost of $16.9 million. It was submitted that so far as the "adequacy" of the GMP Documentation was concerned, the Council knew that all prospective tenderers had responded twice and that DG Jones had found it possible to cost the plans and specifications as late as 22 January 1999 at $20.9 million. 165 The Council submitted that the plaintiff's submissions conveniently overlook the critical fact that the Council did not know of the "inadequacies" of the GMP Documentation. It was submitted that the plaintiff's submissions attempt to merge the concept of "substantially incomplete" documentation and "inadequate" documentation. The Council submitted as follows: 77. The truth was that the documents were inadequate. That truth remained hidden. It was not revealed, or negatived, by Council's knowledge that to any extent the plans were "substantially incomplete" in the sense that further design work was needed to effect the savings proposed by Austin and the Architect. 166 In final submissions for the Council Mr Faulkner submitted that the GMP Documentation was not adequate for a tenderer to identify a scope of work and price a scope of work that had been prepared by way of design for a budget and instruction of $17 million. It was submitted that the plaintiff prepared the GMP Documentation in a "skeleton or very preliminary manner" because it believed it was not necessary to be adequate for fixed price contracting until much later at the trade contract stage (tr 716). 167 The plaintiff focused upon establishing the GMP Documentation was "incomplete" and that the Council knew that it was "incomplete". The Council took issue with the relevance of that approach on the basis that the claim it makes was that the GMP Documentation was "inadequate" and not merely "incomplete". A number of experts gave evidence in the proceedings and it is necessary to analyse their evidence on this aspect of the matter as well as for the purpose of determining the other claims the Council makes in its Cross-Claim. Mr Bullen - Architect 168 Mark Bullen, the Principal Architect and Director of Mark Bullen Architects Pty Limited, called by the plaintiff, provided expert opinion upon a number of aspects of the case. In his report of October 2005 Mr Bullen described "construction management" as a method of procurement that is particularly effective for 'fast-tracking' projects to early completion because it allows for the overlap of the traditional stages of design and documentation with construction. Mr Bullen claimed it was generally suitable where the principal is willing to take on a large part of the risk in a project and that it allows more flexibility in design, construction and scheduling of the works (7.1). He also expressed the view that under construction management type arrangements, construction is commenced as soon as the design is formulated and approved and, as I have said above, tenders for construction management contracts are usually obtained on a "skeleton" set of design documents, long before the documentation is complete (7.2). His opinion included the following: 7.5 In construction management type arrangements, it follows that architectural services of design and documentation overlap construction and are delivered concurrently, not sequentially as in other traditional methods of project delivery. At any particular time during construction under construction management, an architect can be designing sun shade devices to the façade of the building, while documenting toilet partitions and answering construction queries on concrete profiles. 169 In the section of his report of November 2006 entitled "Construction Management", Mr Bullen disagreed with the proposition that, "in order to have a GMP one required design documents fully describing the works" (23). In the section of his 2006 report entitled "Mechanical Services Variation" Mr Bullen expressed the following opinion in relation to the completeness of the GMP Documents relating to mechanical services: I agree that the documents prepared by MDA or on its behalf for the CM contract with GMP and dated February 1999 in relation to mechanical services did not detail all the work with respect to the mechanical services required for the building. I also agree that these documents were not adequate for fixed lump sum tendering and for construction. 170 Mr Faulkner cross-examined Mr Bullen in relation to the difference between a construction management contract with a GMP and a fixed-price or lump-sum contract. That evidence included the following (tr 435-439): Q. Is this correct Mr Bullen, that comparing a fixed price contract on the one hand with a construction management with GMP contract on the other, such as we have here, that first of all focusing on the fixed price contract to your understanding as an architect the builder will tender on the basis that the builder has the risk for all costs in excess of the agreed price? A. It depends on the terms and conditions tendered. Q. … You would expect, wouldn't you, that the tenderer is tendering on the basis, that he will carry a risk, a serious risk for all costs in excess of the agreed price? A. He will carry risk. Q. A serious risk to your understanding? A. Yes. Q. And that is why, isn't it, you hold the opinion that when dealing with a fixed price and/or lump-sum contract that the documentation that goes out to tenderers must be adequate for reliable costing, isn't that right? A. Yes. Q. But yet you say for a contract with construction management and a guaranteed maximum price that is to your understanding not necessary? A. I do. Q. Do you understand that in a construction management contract with a guarantee[d] maximum price that the construction manager carries a serious risk for all costs in excess of the guaranteed maximum price? A. No, not for all costs. Q. Just carries a serious risks ( sic ) of responsibility for all costs in excess of the guaranteed maximum price? A. There are costs that he may not take the risk on. Q. Mr Bullen, it is your position, isn't it, that the risk for costs at the end of the project, that is the risk that the contractor will take on, is no less, to your understanding, in a construction management contract with a guaranteed maximum price as it might be for a fixed price contract. It is no less, is it? A. It may not be. … Q. But at the moment he [a construction manager] guarantees that project can be delivered for a guaranteed maximum price, to your understanding he's carrying all the risk beyond that price? A. He's carrying the risks as they're set out in the contract, the CM contract. Q. The risks of the project going beyond that price? A. Yes. … Q. Your opinion as expressed in your reports here is, isn't it, that for a standard construction management contract it is not necessary to have documentation ready for fixed price contracting in until much later in the contract, that is at the time of trade contracts? A. It is my opinion. … Q. I put to you that both the lump sum contract and the construction management contract with a guaranteed maximum price have these common factors: Both promises to ensure that what is built is a defined scope of work. Do you agree? That is, the scope expressed within the terms of the contract? A. This is between a lump sum fixed lump sum and a construction management with a GMP? Q. Yes. A. I don't agree. Q. I suggest to you that they are both for a maximum fixed priced above which the contractor bears -- A. I'm sorry, I'd like to review that response. Where there's a defined scope of work with a GMP then I do agree. Q. That they're both promises to ensure that what is built is defined within the scope of the work? A. Yes, I agree with that. 171 Mr Faulkner then asked Mr Bullen to assume that: (a) the plaintiff was requested to prepare the GMP Documentation to a standard of accuracy and reliability for a construction management GMP contract with a predetermined cost; (b) that the plaintiff was expressly instructed that there was to be no contingency; and (c) the price must not exceed $17 million (tr 439-440). After those assumptions were made the following cross-examination occurred (tr 440): Q. … I've asked you to assume those matters. On the basis of those assumptions will you agree that from a[n] architect's point of view the only way to fulfil those instructions is to prepare documents for tender as for a fixed price contract, if those assumptions are true? A. If it's a predetermined cost, with no contingency and the architect is instructed expressly to prepare documents for a fixed or predetermined cost not to exceed a certain amount of money then I would say there was either the opportunity to document it for a fixed lump sum or to document it for a construction management with a GMP where the GMP was secured by the documents. Q. … that the only way, will you agree, from the architect's point of view that he can fulfil those instructions is to prepare documents for tender as though for a fixed price contract. That is, documents sufficiently developed for accurate tendering and for reliable fixed price contracting. Will you agree? A. I'd need a few minutes to think about that, thanks. No, I don't agree. Q. And on what basis do you not agree? A. In my opinion it's reasonable to consider a construction management contract with a GMP where the contractor takes the risk on the GMP for all the changes, apart from client directed variations, and with the documents for predetermined costs to be delivered later. HER HONOUR Q. I'm afraid I don't understand that. You're going to have to help me with that, Mr Bullen? A. Of course, your Honour. Q. If there's a predetermined cost and the construction management contract out to tender has the guaranteed maximum price what on earth does the later contract have to do with anything? A. I understand the question. Q. Could you give me an answer? A. I except that with a predetermined price the process of trade package tendering becomes redundant and of no particular purpose to the principal in managing costs during the process. I accept that. So I would agree. Q. And earlier you told me that you didn't agree with that proposition when Mr Faulkner put it to you that the trade contracts really had no application or became the irrelevant, but you do agree now? A. I see the point now, thank you FAULKNER Q. You are agreeing with the proposition that I put you upon those assumptions? A. I do 172 The assumptions Mr Faulkner asked Mr Bullen to make need to be analysed in the context of what actually occurred. When the GMP Documentation was sent out in December 1998 with the Invitation to Tender, there had been no instruction to the plaintiff that it had to prepare the documentation for a contract with a "predetermined cost". At that stage all that had been said relevantly to the tenderers was that the Council "anticipated" that the Project would cost $17 million. As I have said elsewhere, what subsequently happened after the tenders were received in late January 1999 was that an instruction was given to Mr Davies for the plaintiff to find savings by the deletion of certain items so that the Council could obtain a GMP from the tenderers within its then budget of $17 million. The Revised Tender Form Part B set out those various deletions and requested the tenderers to suggest other savings that could be made. It was not until February 1999 that Mr Davies was advised that the Project must be completed for no more than $17 million. 173 The Council was seeking to establish that on the assumptions put to Mr Bullen there was no difference between the tendering process for a fixed price contract and the tendering process that Mr Davies was instructed to proceed with in February 1999. However the reality of the circumstances in February 1999 is somewhat different to the bare assumptions put to Mr Bullen. The assumptions need to be understood in light of the fact that, although Mr Davies had suggested that the Project should be "fully documented", the Council rejected that advice. Other significant facts are that: (a) the Council knew that this was not the "traditional" way to call for tenders as for fixed price or lump sum contracts; (b) it knew that the GMP Documentation was not "fully documented"; (c) the successful tenderer was to have a role in the further modification and finalisation of the design in conjunction with it and its consultants; and (d) the plaintiff was yet to receive instructions to proceed with "full documentation of the work". Mr Poiner - Architect 174 The Council relied upon, inter alia, the expert opinion of John Frederick Poiner, a registered architect (non-practising). Mr Poiner expressed the following opinions in his report dated 19 July 2006 in relation to the GMP Documentation: 3.6 I refer to three parts of the Bullen Report. At sub-paragraph 9.2(d) the report provides the opinion that the Architect's 'contract set' of drawings (that is, the Building Contract Drawings - Architectural) of the type referred to commonly in the industry as a " skeleton set". I agree with this assessment and its implication that they establish the framework for construction documents but lack the fleshing out necessary for their full construction usefulness. At sub-paragraph 9.2(e) the Bullen Report explains that the preparation of a skeleton set of documents, by saving time on documentation early in the process, permits construction to start sooner than would otherwise be the case. I concur, subject to the nature and extent of the construction start being qualified by the documents' limitations and any advance beyond such a start being dependent upon the documents' content being increased. At sub-paragraph 10 (c) however the Bullen Report states 'In my opinion the Contract Set expressly and/or implicitly sufficiently described the works for construction …' . As well as finding it inconsistent with the earlier sub-paragraph 9.2 (d) quoted above I disagree with this opinion. The skeleton set falls short of the standard required to describe the works sufficiently for construction. Apart from documentary deficiencies referred to later herein there is a lack of information in the drawings. The Architect, at this stage, had not completed its undertaking to provide construction documentation. 3.7 Architectural building construction documents are documents, normally in drawn and written form, that seek to describe all of the works, materials and support tasks needed for the construction of a building or a building part. To be effective and to meet accepted architectural practice standards they must: · be clear and unambiguous; · be consistent with allied documents of other consultants; · faithfully reflect and confirm the building's approved design, translating the design into documentation that satisfies legal and industry construction standards; · inform building personnel of all materials and activities required for the construction and · permit accurate and detailed costings of the works and their component parts. 3.8 If for any reason a building construction document is incomplete at a time of its issue for any purpose such incompleteness must be clearly recorded on the document so that no contrary understanding can reasonably arise. This is normally achieved by an unfinished document being marked 'preliminary' or 'not for construction' or, as appropriate, being given a more specific and/or more detailed notation The Building Contract Drawings – Architectural/the Building Contract 3.9 … In my opinion, because of their state of incompletion, the drawings fall short of the necessary standard for architectural building construction documents described in paragraphs 3.7 & 3.8 above. Notwithstanding that they have been advanced sufficiently to show the layout of the building and effectively represent much of the proposed building works a number of wall elements are undefined on plans, sections and elevations, set-out dimensions (apart from column grids and floor-to-floor heights) are generally absent, door and window numbers are not shown and notations relating to elements and finishes are sparse. There is an evident lack of reference to detailed drawings that presumably at that time had not been drawn. Plan layouts of Council offices on plan levels three and four are almost entirely missing, as are the outer walls separating the offices from the atrium. Builders work associated with mechanical and other services plant is not shown. 3.10 I have examined also the remainder of documents attached to Post Tender Notice No.2, which I have been instructed formed together the set of documents contained in the Building Contract. It is my further opinion that these additional documents do not make good the documentary deficiencies I have described in paragraph 3.6 above. 3.11 In my opinion the Architect's Building Contract Drawings-Architectural together with other Post Tender Notice No 2 documents, were suitable for obtaining expressions of interest from construction management firms such as Austin, but did not permit an accurate detailed costing of the works and their component parts. For this reason I see the GMP in the Austin Tender and the Building Contract as unreliable. 3.12 In my opinion an ordinarily-competent architect, acting in accordance with accepted architectural practice standards and seeking to guard its client's interests in a matter such as that under report would have known at the times of construction management tendering and contracting that the architectural construction drawings were incomplete and that other tender/contract documents did not correct their deficiencies, that the documents were therefore unsuitable for accurate works costing and that a costing of the works based on those documents was unreliable. The architect would have known that if the said documents were used as a basis for a GMP contract between the Council and Austin and the scope of works then extended by their completion, Austin would have been in a position to claim further costs and charges beyond those provided for in the GMP. The architect would have advised its client accordingly, warned it of the danger of cost increases and hence of the inherent dangers of such a contract. 175 I have referred below to the advice Mr Davies gave to the Council in late December 1998 that it had the opportunity to document the Project "fully", the rejection of that advice by the Council and the reasons given for the rejection of that advice. Mr Poiner was advised during cross examination of these matters, of which he had been unaware, and was also advised that Mr Davies had advised the Council that Austin's alternative GMP of $16.9 million was "contrived". Mr Poiner then gave the following evidence in cross-examination (tr 385): Q. Are you aware, Mr Poiner, that Michael Davies Associates in or about early 1999 advised the council that it ought to proceed to finalise the design before it entered into any contract for the project? A. No, I'm not aware of that. Q. Do you accept that if the council, notwithstanding that advice, elected to proceed nevertheless with construction management with a GMP that has a material bearing upon the opinions that you've expressed? A. It would. Q. Because you would regard that advice, wouldn't you, as an appropriate caution for an architect to give to its client in this context? A. I do indeed. Q. Are you aware that Michael Davies Associates, after the receipt of the Austin tender response which included a GMP of $16.9 million, told the council that that figure was contrived because it made no allowance for any risk? A. I'm not aware of that. Q. Again may I take it you regard that as being material to any proper assessment of what it was that Michael Davies Associates ought properly have advised about or warned of? A. I think that's sound advice that he gave. Q. And a proper discharge of the architect's duty? A. Yes. 176 Mr Poiner accepted in his cross-examination that as a result of reviewing the GMP Documentation, Austin would appreciate that there were uncertainties and that they would have included some allowance for contingencies in the GMP (tr 383). It also became clear during Mr Poiner's cross-examination that he had not been made aware of the DG Jones estimate dated 22 January 1999 (tr 381). He gave the following evidence (tr 388): Q. Today you've been shown again the quantity surveyor's document that you saw and the subsequent quantity surveyor's document that you saw? A. Yes. Q. Have any of the documents today served to change any of the opinions that you have previously expressed? A. Well, I haven't examined the second one except briefly when I was shown it by Mr Simpkins. That may well have a bearing on some of the views I expressed. I'd need to consider that, but that may well have a bearing on it. I had no idea that that had been undertaken. 177 Mr Poiner did not identify the opinions that may have been affected by this knowledge and/or document, or the extent of the change, if any, to the opinions he had expressed. In those circumstances it is not possible to know what, if any, impact these matters may have had on Mr Poiner's opinions. It is not a matter for the Court to try and work out the nature or extent of any possible impact these matters may have had on Mr Poiner's opinions. Once Mr Poiner said in his evidence that the DG Jones' costs estimate of 22 January 1999 "may well have a bearing on some of the views" that he expressed, it was a matter for Mr Poiner to identify those views and what "bearing", if any, the costs estimate had on those views. I am of the view that this significantly diminishes the value of Poiner's opinions. Mr Alden – Structural Engineer 178 John Miles Alden is a civil & structural engineer with over 35 years experience as a consultant engineer. He provided two reports in these proceedings, one dated July 2006 and the other dated 11 February 2007. In the first report Mr Alden observed that at the time of submission of Austin's tender on 10 February 1999, the GMP Documentation clearly recognised that the design process was still incomplete (3.2.17) and that it was clear that at the time the Austin Contract was entered into, further design development work was required (3.2.23). Mr Alden also noted that in his experience, the process of finalising the design for a substantial building project such as the one the subject of this litigation, typically results in some changes to the design and hence the construction requirements and also involves the development and resolution of various design details. He expressed the view that the "final details often define construction requirements and associated costs which could not have been reliably anticipated prior to the development and resolution of the design details" (3.3.12). 179 Mr Alden considered the GMP Documentation to "see how well, in general terms" it "defined the work necessary to construct the building" (3.4.2). In particular he reviewed 16 architectural drawings, 6 structural drawings, engineering services drawings and specifications. He assessed the architectural drawings to be typical of drawings at the "Development Application or Preliminary Design stage, that is prior to the carrying out and documentation of the final detailed design" (3.4.12). He noted that the structural drawings were all marked "PRELIMINARY ONLY - NOT TO BE USED FOR CONSTRUCTION" (3.4.15) and assessed them as being "indicative of a stage in the design development process" that he would describe as being at the Concept Design Stage only (3.4.28). Mr Alden also noted that the engineering services drawings were marked "PRELIMINARY - NOT FOR CONSTRUCTION" and that they were still at an early stage of development. From the state of these drawings he concluded that either the services engineers had not had time to prepare drawings, or they were waiting for further design development and co-ordination to take place so that they could base their services drawings on the final architectural layouts (3.4.31). Mr Alden referred to a number of the specifications as "standard or reference" specifications that had not been modified to address any special requirements for this particular Project (3.4.33). In summary Mr Alden's assessment of the GMP Documentation was that it represented only partial completion of the "Preliminary Design" stage and that it was "quite apparent, from even a reasonably brief review of the drawings, that the drawings were not intended to be used for construction purposes" and that this was "specifically stated on the various engineering drawings" (3.4.40). Mr Alden's conclusions included that (3.6.1): g) The design documentation which formed the basis of the GMP of $18.65 million was at a very early stage. I have assessed this to be, as a whole, somewhere between Concept Design Stage and Preliminary Design Stages. I believe that the design was not yet at a stage which could be described as the end of the Preliminary Design Stage. h) As a result many of the design details required for the construction work to proceed had not yet been developed, and design changes were to be expected as the design progressed. 180 Mr Alden also reviewed the trade contract for structural steel. He compared the structural steel work drawings that formed part of the Austin Contract with the structural steel work drawings that were issued for the trade contract between the Council and the company known as Profab Industries Pty Ltd. He concluded that the structural steel work drawings were "typical structural steel design drawings, comprising marking plans, member sizes, and steel work design details" (4.2.16). He observed that the drawings were marked "ISSUED FOR TENDER" and that he had not seen any subsequent revisions of the drawings marked "For Construction". Indeed one of the drawings included the notation "HOLD" on one section of the roof framing which indicated that the design was not yet finalised (4.2.17-4.2.18). Having made the above-mentioned comparison Mr Alden concluded that the design contained in the GMP Documentation was "at a very early stage of development" (4.3.3). 181 Mr Alden claimed that it was clear to him that at the time the Austin Contract was entered into the structural and architectural drawings related to a different concept for the roof from that which was contained in the drawings for the trade contract. That suggested to him that there had not been sufficient time for the co-ordination of the architectural and structural designs. He thought that it was probable that the structural design development had not "caught up" with the architectural design development at the time the Council entered into the Austin Contract (4.3.8). He expressed the belief that any estimate of the extent, nature and cost of the structural steel construction works made for the GMP tender would have been largely irrelevant by the time of the trade contract tender (4.3.12). He also noted that the extent of work and cost for the concrete works trade package would be expected to reduce substantially due to the change from concrete roof structures to steel roof structures (4.3.13). 182 In this first report Mr Alden also addressed four questions: (1) Did the GMP Documentation prepared by the plaintiff or on its behalf in relation to structural steel show (either expressly or by inference) all work with respect to structural steel required to construct the building? (2) If not, what items of work were not shown? (3) Was the GMP Documentation prepared by the plaintiff or on its behalf in relation to structural steel prepared with reasonable care and skill? and (4) If not, in what ways was it deficient? 183 In respect of the first question Mr Alden concluded that the GMP Documentation did not show all the work required to construct a building (5.22). In this regard he noted again that the drawings were specifically and prominently marked "PRELIMINARY ONLY NOT TO BE USED FOR CONSTRUCTION" (5.2.8). He concluded that the GMP Documentation did not define the extent and nature of the structural steel work for the Project to a level that would "enable construction to proceed" (5.2.11). He also concluded that the inconsistencies between the GMP architectural drawings and the GMP structural steel work drawing, combined with the areas on the GMP structural steel work drawing where no information was shown and other areas where limited information was shown, was such that "no reliable estimate of the extent (or cost) of work necessary to construct the structural steel work for the project would have been possible" (5.2.12). He also concluded: 5.2.14 I also believe, on the basis of my experience in the industry, that it would have been apparent to a building professional (such as an architect, engineer, quantity surveyor, builder, construction manager etc) that the GMP structural steelwork design was at a very early stage of development, and hence that any contract based on the GMP documentation would be potentially subject to significant variation. 184 In respect of the second question Mr Alden dealt firstly with items of work not shown on the GMP drawings that he believed would have been reasonably apparent to a structural engineer at the time. These items included information on the roof framing for the atrium roof, steel work associated with the lack for restraint at the top walls and steel work for the support of box gutters and/or fascias (5.3.4). The second area included the items of work in the trade contract documentation that was different from the GMP documentation referred to earlier. The third area was the changes subsequent to the trade contract documentation (5.3.5-5.3.6). 185 In relation to the third and fourth questions Mr Alden clarified the nature of a lump-sum contract and the GMP contract as typically used in the building industry. That evidence was as follows: 5.4.3 A lump sum contract is in essence a contract whereby a builder or contractor undertakes to carry out certain works for a lump-sum price, based on the documents that comprise the contract. That is, the lump sum price is for the works defined by the documents. If the documents are varied so as to affect the extent or nature of the works to be carried out, then typically this would result in a corresponding variation to the lump sum price. 5.4.4 Similarly, for a GMP contract, the guaranteed maximum price relates to the works defined by the contract documents. If the documents are later revised so as to affect the extent or nature of the works to be carried out, then typically this would result in a corresponding variation to the guaranteed maximum price. 5.4.5 In effect, the guaranteed maximum price is only guaranteed by the contractor to the extent that the documents are also guaranteed by the principal not to change. 5.4.6 In this respect it is important to differentiate between a GMP (construction only) contract and the GMP (design and construct) contract. 5.4.7 In a GMP (design and construct) contract, the contractor accepts responsibilities for both design and construction activities, in order to satisfy the requirements of the contract. 5.4.8 However, for a GMP (construction only) contract, the contractor accepts responsibilities for only the construction activities, not for design activities. Hence in this situation, if variations to the GMP are to be avoided, the contract needs to be entered into by the contracting parties after the design is complete and the design documentation is finalised. 5.4.9 If the contract is entered into at an earlier stage, then there is a risk that further development of the design and design documentation will result in a variation to the extent and nature of the required construction works, and the corresponding variation to the guaranteed maximum price. 5.4.10 Hence in this situation, the GMP is only really "guaranteed" to be a maximum price if the design and design documents defining the project works are complete and final. 186 Having clarified those matters Mr Alden then concluded as follows: 5.4.11 As set out previously, the GMP documentation, namely the design and the design documentation prepared in relation to the structural steel, was not complete and was not final. 5.4.12 In my opinion the status of the documentation would have been evident (and indeed quite obvious) to a building professional (such as an architect, structural engineer, quantity surveyor, builder, construction manager etc). In fact the structural steelwork BP 60-02 explicitly noted that the drawing was neither complete nor final by placing "HOLDS" on the drawing and adding a note "PRELIMINARY ONLY - NOT TO BE USED FOR CONSTRUCTION" … 5.4.14 The prominent "PRELIMINARY ONLY" note on the structural drawing appears to be an attempt by the structural engineers to alert any party inspecting the drawing that it was not complete and not final, and hence by inference to alert any party inspecting the drawing to the fact that it would not be a suitable document to use as the basis of a lump sum (construction only) or a GMP (construction only) contract. 187 In his second report Mr Alden responded to Mr Bullen's report after reviewing additional documents and reiterated some of the conclusions that he had reached in his first report. He also said that he believed that the GMP Documentation for structural steel was at such an early stage that a prospective construction manager could only have offered a GMP "regardless of changes to the structural steel design documentation, by adding a very large contingency to this component of the work and thereby significantly increasing the overall GMP value" (3.2.34). Mr Alden also responded to Mr Davies' affidavit and his opinion included the following: 3.3.10 It stands to reason that where: a) the CM does not have control of the design process, and b) where there is a GMP, the status of the design documents is far more important than a situation where neither of these conditions apply. Accordingly, design documentation which might suffice when neither circumstance applies would not necessarily be appropriate or adequate where both circumstances apply, as was the case on this project. 188 The only cross-examination of Mr Alden was to establish that he was not an estimator and that he did not do either estimates or costings. His professional expertise was limited to preparing drawings for use by others who may wish to do estimates or costings but he did not do them himself (tr 362-363). This evidence in cross-examination calls into question Mr Alden's opinion expressed in his first report in 5.2.14 extracted above. That opinion needs to be assessed having regard to the fact that Mr Alden has no experience in either estimates or costings. 189 It is understandable that Mr Simpkins did not cross-examine Mr Alden on any other matters having regard to the very supportive evidence Mr Alden seemed to be giving in respect to the plaintiff's notations on the drawings. It is clear that Mr Alden regarded it as quite obvious that the GMP Documentation was at a very early stage and that this would have been obvious to anyone in the category of people identified by him. Far from being "hidden" as was submitted on behalf of the Council, the status of the drawings was very obvious. I do not accept that the plaintiff has confused the two concepts of "incomplete" drawings and "inadequate" drawings. Properly analysed, the evidence called by the Council from Mr Alden focused on the fact that the design was at a preliminary stage, which may be expressed otherwise as being "incomplete". It seems to me that the evidence in support of the Council's claim that the GMP Documentation was "inadequate" when analysed is evidence that the Documentation was "incomplete", or at a skeletal or preliminary stage, which, as the Council's experts observed, would have been obvious to any building professional. Certainly the Council was aware that it was incomplete. Mr Chow – Mechanical Engineer 190 The Council also relied upon the evidence of Joseph Chow, the Principal Mechanical Engineer with GHD Pty Ltd, who provided a report dated 31 July 2006. Mr Chow expressed the opinion that the GMP Documentation was "deficient" in the following ways: (1) Drawing numbers shown on sketches did not match those shown on specification; (2) Hand-marked sketches and generic specification did not specify the full extent of the scope of work; (3) details of locations of air-conditioning units and the areas they served, and duct routes were not clearly specified; and (4) the DDC/BMS Control System was not specific enough (2.2). Although Mr Chow expressed the opinion that the documentation was not prepared with reasonable care and skill, it is obviously a matter for the Court taking into account all the relevant circumstances of the matter. However Mr Chow observed that there was a note on the drawings that they were "preliminary sketch design" and that a fully detailed design would be provided at a later date. Mr Chow expressed the view that this "signified that the design has not been completed" (2.2). 191 Although the expression "deficient" was used by Mr Chow, three of the four alleged "deficiencies", the failure to show the full extent of the scope of work, the failure to clearly specify the air-conditioning and the lack of specificity in the Control System are complaints about incompleteness of the drawings. The complaint about the failure to match up the numbers with the specification needs to be understood in the light of the fact that the drawings were noted as preliminary sketch design drawings. The gravamen of Mr Chow's opinion was that the GMP Documentation was "incomplete". Indeed in the conclusion to his report Mr Chow's opinion was that the "hand-marked preliminary mechanical design sketches and sample specification in February 1999 included in the GMP contract were far from complete" (3). Mr Wyles – Electrical Engineer 192 The Council also relied upon the opinion of Neil Wyles, a consultant to GHD Pty Ltd in electrical engineering and mechanical building services who provided a report dated 31 July 2006. Mr Wyles expressed the opinion that the extent of electrical services was not clearly defined in the GMP Documentation. The examples of lack of clarity were identified as follows: (1) Power supply; the details of the proposed Energy Australia sub-station were not shown, making it hard to determine the size of cable and installation details of Consumer's Mains; (2) Segregation of supplies; the requirements for Council and Police power systems to be separated and two Main Switchboards were not clearly shown; (3) the supply and installation of smoke detectors and an Emergency Warning and Intercommunications System was not covered on the plans although alluded to in the legend; (4) the extent of work required by Specification Clause 3.2 (xiii) for "public address and radio broadcast system including room speakers and controls, for the NSW Police Services building" would be difficult to determine by an experienced contractor; (5) despite the coded symbols included in the Hyder Lighting Legend and other drawings it would be very difficult to be certain as to the number and required location of each type of light fitting, power, communications outlets or security device; and (6) despite notes on the drawings referring to CCTV cameras and door security systems it was difficult to determine the extent of work required (2.2). 193 Mr Wyles' complaints about the lack of detail or clarity in the GMP Documentation, is a complaint that it was incomplete. Indeed in the Joint Report of the Experts Mr Wyles expressed the opinion that the plaintiff failed to advise the Council that the information was "incomplete". 194 The claim made by the Council in its Cross-Claim does not allege that the plaintiff was obliged to produce GMP Documentation in December 1998 that would enable tenderers to cost the Project at no less than a GMP of $16.9 million. The claim is that Mr Brownlee instructed Mr Davies in early February 1999 to amend the GMP Documentation so that savings could be made to bring the Project down to $16.9 million. The original GMP Documentation that went out with the Invitation to Tender brought responses in the range of approximately $18 to $23 million. The Council knew at the time the original GMP Documentation was sent to the tenderers that it was not "fully documented". As I have already said, when Mr Davies advised Mr Brownlee and Mr James in December 1998, after the Invitations to Tender had been sent out, that there was no need to go down the construction management path because the Police were willing to wait until June 2000 for occupancy of their building, Mr Davies also advised that the time could be used to "fully document the Project and then call traditional tenders". At this time the Council had the choice of amending the GMP Documentation so that it set out more "fully" the extent or scope of the Project. It rejected Mr Davies advice and when the revised tenders were received, Mr Davies was not instructed to document the drawings more fully, but rather was instructed to find ways of deleting or reducing the scope or extent of the Project that had been documented in the original GMP Documentation so that savings could be found. 195 The reason Mr Davies' advice to document the Project "fully" was rejected was because Mr Brownlee was concerned about the "political implications" of going back to the Council. By the time Mr Davies gave this advice the Councillors had already spent a rather large amount of time assessing the Project both at the Workshop in September 1998, reviewing the Report received for the Council Meeting on 2 December 1998 and deciding to call selective tenders from six preferred tenderers for the Project. It had been a lengthy process and the resolution at that Meeting to proceed with the Project was only carried on the casting vote of the Mayor. It may be understandable that Mr Brownlee did not wish to go back to the Councillors at that time but that was the choice that was made in the face of advice from Mr Davies. It is clear beyond doubt that the Council was aware that the GMP Documentation did not fully document the Project or, put another way, the Council was aware that the GMP Documentation was incomplete. Having rejected Mr Davies advice to fully document the Project and call for traditional tenders, it ill behoves the Council to complain that the Project was not fully documented. 196 Quite a deal of time was spent during the trial in testing Mr Davies' claim that there was a difference between a fixed price or lump sum contract on the one hand and a construction management contract with the GMP on the other. The reason for that was because Mr Davies conceded that the GMP documentation was not adequate if tenders had been called for a fixed-price or lump sum contract and he also conceded that the plaintiff would not have complied with its duty of care or its retainer if the GMP Documentation was to be relied upon for tenders for a fixed price or lump sum contract. The Council set out to establish that there is no difference between a fixed price or a lump sum contract and a construction management contract with a GMP. 197 Mr Davies agreed that the documentation sent out to the tenderers in February 1999 was insufficient to enable the tenderers to accurately price the works for a fixed price contract (tr 95). He also agreed that the documentation was insufficient to price the works for a lump sum contract, however he claimed that the documentation was adequate for a construction management contract with a GMP. In his affidavit of 23 November 2006 Mr Davies responded to Mr Poiner's claim that the documentation prepared by the plaintiff did not permit an accurate detailed costing of the works. In paragraph 287 of his affidavit of 23 November 2006 Mr Davies gave the following evidence: In my opinion, as an architect with over forty-six (46) years experience, it would be entirely possible to draft contract terms and conditions which should protect the Principal from risk of increased costs beyond a guaranteed maximum offered by a Construction Manager, bearing in mind the Construction Manager's ability to assess and allow for risk and contingency based on its assessment of the project and level of project documentation. I therefore do not agree with the opinion that the documentation prepared by MDA … was unsuitable because it did not permit "an accurate detailed costing of the works". I accept that such matters might be relevant where the allegation is cast in terms of documentation for the purposes of a fixed price tender – however, that was not the case here. 198 Mr Faulkner cross-examined Mr Davies in respect of this claim in his affidavit as follows (tr 96-97): Q. … Do you contend that the difference between a fixed price contract on the one hand, and a construction management with guaranteed maximum price contract on the other hand is that in the GMP contract it's possible to draft terms sufficient to protect the principal? A. That's an awfully - they're different – they're different things. Q. Well, what I am asking you: Is that what you are endeavouring to convey here as being the difference between the two? A. Yes. … Q. Now, are you endeavouring to convey … that if this documentation had been issued for a fixed price trade package contract, then it would be fair to say that MDA had not exercised reasonable skill and care? A. Yes. 199 This admission was made specifically in relation to a "fixed price trade package". Mr Davies maintained that the plaintiff had exercised skill and care because the drawings enabled a tenderer to tender for a construction management contract with a GMP. Mr Davies' analysis of the difference between the various types of the contract was elicited in cross-examination as follows (tr 102-103): Q. Now, I have asked you a little while ago to consider three types of contracts – a fixed price contract, a lump sum contract, and a guaranteed maximum price for construction management contract; do you remember I asked you some questions about that? A. Yes. I don't know the difference between the first two. Q. To your understanding, a lump sum contract, itself, produces a maximum price, because it is the only price; is that right? A. At the beginning of the contract, yes. Q. When it is entered into, a lump sum contract has its own price which is by definition a maximum price? A. At that time? Q. At that time. Same with the fixed price contract? A. No, not necessarily. Q. I suggest to you, your understanding is, that absent variations during the contract, the fixed price contract will remain at that price? A. With the lump sum contract there is a possibility of a rise and fall occurring, but there is no rise and fall in a fixed lump sum contract, there could be variations. Q. But otherwise each of them has its own maximum price? A. At the end of the project or at the beginning of the project? Q. At the end of the project? A. Yes. Q. And I put to you that the only difference between those two contracts, and the one that we are considering here, that is a construction management with a guaranteed maximum price is, that, first of all, for the other two types, if the contract goes through to completion, you would expect the principal to pay the builder the price in the contract? A. Subject to variations and rise and fall, yes. Q. But for a contract with a guaranteed maximum price, that may not be the ultimate, the final amount that the principal has to pay, might it? A. Yes, with the same qualification, subject to variation. Q. I suggest to you there is a much more important qualification, which is, the contract may come in below the GMP? A. That's possible. Q. And if it does, as you mentioned and agreed with me this morning, where is a GMP, the usual regime is, that the parties share in those savings? A. That's right. Q. Except for the possibility that the final price may come in lower than the contract guaranteed maximum price, except for that, I put to you there is no difference, to your understanding, between these three types of contract – lump sum, fixed price, construction management with guaranteed maximum price? A. I would have to think about that. At the end of the contract, you mean? Q. I do mean that? A. No, there probably isn't any difference. Q. Because each of them, do you agree, has a maximum price? A. Yes. 200 Both Mr Bullen and Mr Poiner expressed the view that in construction management contracts, tenders may be called for on a "skeleton" set of documents. In the knowledge that the GMP Documentation was not complete the Council did not ask Mr Davies in February 1999 to amend the GMP Documentation so that it was "fully" documented. He was asked to reduce the scope of what was in the GMP Documentation and to find savings. It was not until 31 March 1999 that the plaintiff was instructed to proceed with " full" documentation. 201 The construction management procurement method is different from a lump sum or fixed price contract. Mr Davies conceded in his cross-examination that "at the end of the contract" there was "probably" no difference between the three types of contract. However there is obviously a difference at the beginning of the contract. The evidence establishes that the reason the construction management method, as opposed to the more "traditional" methods, was chosen was the time constraints under which the Council was operating. The construction management method enables the fast tracking of the development with concurrent design and construction. The terms of the Austin Contract clearly envisaged such a system. In the other form of contract the design is completed first and then followed by the construction of the project. The design is fully documented for the purpose of fixing the cost of the project so that a lump sum or fixed price is ascertained in reliance on detailed or "fully documented" drawings. 202 I do not accept that the plaintiff has confused the two concepts of "incompleteness" and "inadequacies" in the GMP Documentation. The plaintiff was instructed to adjust the documentation to reduce its scope and to find savings. It was not instructed to proceed with "full" documentation of the Project until nine days after the Austin Contract was signed. I am not satisfied that the GMP Documentation produced by the plaintiff pursuant to its instructions was "inadequate". I am satisfied that the GMP Documentation was "incomplete" or put another way, it was not fully documented, and that the Council was well aware of that fact. Indeed the Council rejected the plaintiff's advice to proceed with the full documentation and traditional tendering method. I am not satisfied that the plaintiff was in breach of its retainer or its duty of care in producing the GMP Documentation Should a warning have been given? 203 The Council alleged that a competent architect would have warned the Council that the GMP Documentation, if used as a basis for a GMP contract, may expose the Council to a claim of an increase in costs and expenses because the scope of works may need to be increased beyond that in the GMP Documentation. The Council relied upon Mr Poiner's opinion in this regard, however, as I have said earlier the value of Mr Poiner's opinions was significantly diminished as a result of his concession that the DG Jones 22 January 1999 estimate "may well have a bearing" on his opinions and the failure to identify those opinions. 204 Mr Poiner accepted that he had no experience in construction management with a guaranteed maximum price but claimed to have experience with many lump sum contracts (tr 367). He admitted that he had not taken any steps to acquaint himself with what was happening within the profession in relation to construction management contracts with GMPs (tr 368). His evidence was that any incompleteness of the Documentation would have an effect upon the estimate of costs "for whatever form of contract" (tr 369). His evidence in cross-examination included the following (tr 369-370): Q. I am asking you about your opinion, do you have the opinion, do you say that there was some time prior to the entry into the Austin contract where Michael Davies & Associates should have given some warning to the council? A. Should have given some warning to the council, I believe that if Michael Davies & Associates were aware that their documents were being used to establish an estimated cost of the building, of the building for whatever form of contract then the architect should have pointed out to their clients that the drawings were incomplete and therefore could not be accurately, the works could not be accurately costed. Q. Can I take that in steps: one aspect of the advice that you regard it as being appropriate to provide is advice of the drawings are incomplete? A. Yes. Q. And incompleteness is relevant because it may, depending upon the terms of the contract, impact upon the maintainability of the guarantee in relation to the maximum price? A. Well, what I said was that I believe that it would have an effect upon the estimate of cost for whatever form of contract. Q. But I am really just trying to get the extent to which, if at all, you have thought it important to reflect upon the actual wording of the guarantee, do you follow? And have you in forming your opinion about the appropriate advice had any regard to what Michael Davies & Associate ought to have thought the guarantee would provide for? A. After the contract was entered into, yes I think so and I think he had a duty to give advice before that as well. Q. But is it part of your thinking an expression of opinion that ought to have been given before the Austin contract, that Michael Davies & Associates ought to have reflected upon how an inaccurate estimate might impact upon the maintainability of a guaranteed maximum price? A. Amongst other things, yes. Q. The only relevance of incompleteness of design is a relevance to whether or not in the event that a contract was entered into the guaranteed maximum price could be maintained, isn't that right? A. Yes. Q. And therefore it would be an important part of any proper assessment, wouldn't it, of what proper architectural practice required to make some assumption about what Michael Davies & Associates might have understood the guarantee would provide for, do you accept that? A. If Michael Davies & Associates knew the form of contract that was being entered into, yes. 205 Mr Davies drafted the form of guarantee in the original and revised Tender Form Part B. The Tender Form contained a guarantee that the total cost of the works would not "under any circumstances (other than delays or substantial variations initiated by the Principal) exceed the sums set out below". Clause 23.1 of the Austin Contract provided that Austin "undertakes" to deliver the Project for $16.9 million "provided that the design is modified and finalised by Council's Consultants (in conjunction with Austin) to match Council's total Construction budget sum" as set out in Austin's letter of 10 February 1999, including its attachments. 206 The plaintiff was not involved at all in the preparation of the terms of the Austin Contract, albeit that the Tender Form that Mr Davies drafted was attached to and formed part of the Contract. The Council took advice from Abbott Tout in relation to the terms of the Contract and Mr Davies was not consulted about the terms of clause 23.1. The guarantee contained in clause 23.1 in the form of an undertaking, was conditional upon the Council's Consultants (a defined term referred to earlier) in conjunction with Austin, modifying and finalising the design of the Project to match the Council's budget for construction. 207 The Austin Contract required the Council, through its agents and employees, to work with Austin to modify and finalise the design that was in the GMP Documentation to delete the items referred to in Austin's letter of 10 February 1999. That requirement needs to be read with the instruction to the plaintiff on 31 March 1999 to proceed with "full" documentation. 208 I am satisfied that the Council knew that in February 1999 the GMP Documentation was not fully documented and that further modifications to the original design had to occur to obtain from the prospective tenderers a guarantee that matched the Council's budget of $17 million. I am satisfied that Mr Davies advised the Council that Austin's alternative GMP of $16.9 million was "contrived", that it failed to allow for any risk and that it was in complete contrast to its first tender. 209 The warning the Council claims the plaintiff should have given it was, that at the time that it entered into the Austin Contract, there was a "real risk of a significant increase in the cost of the Project because of the very early stage of the development of the GMP Documentation". At the time the Council entered into the Austin Contract it knew that Austin had submitted a tender based on the GMP Documentation of $18.65 million, $1.65 million higher than its budget of $17 million. When Mr Davies warned the Council that the alternative GMP of $16.9 million was contrived, the Council was on notice that Austin had not allowed for any risk and thus the Austin Contract would need to ensure that the Council was protected with an appropriate clause guaranteeing the maximum cost or price. 210 None of the experts gave evidence that there was a "real risk of a significant increase in the cost of the Project because of the very early stage of the development of the GMP Documentation". Mr Alden expressed the opinion that it would have been apparent to a building professional that the structural steelwork design was at a very early stage of development and hence any contract based on the GMP Documentation would be "potentially subject to significant variation" (5.2.14). Mr Alden did not address the specific terms of the Austin Contract in relation to this potential and he did not express the opinion that there was a "real risk" of a significant increase in the cost of the particular Project. There was no suggestion made to the tenderers or the Council that the GMP Documentation was in detailed or final form. The Council's own experts made clear that it would be obvious to the tenderers (and no doubt the Council) that the design was at the preliminary stage and was "not for construction". There is also no evidence to establish that any increase in the cost of the Project had anything to do with the nature or extent of the GMP Documentation at the time the Council entered into the Austin Contract. The claim made by Austin in the Arbitration Proceedings does not suggest that any incompleteness, let alone any inadequacies, in the GMP Documentation was the cause of any increase in the cost of the Project. Rather Austin claims that the Council failed to work in conjunction with it in modifying the design and failed to implement the deletions that were necessary to bring the GMP down from $18.65 to $16.9 million. There is no evidence in these proceedings that establishes that the final cost of the Project was causally related to the state of the GMP Documentation. 211 In all the circumstances of this case I am satisfied that the plaintiff was not required to give the warning to the Council. The Council has failed to establish that the plaintiff breached its retainer or its duty of care to the Council. The TPA Claims 212 The Representations pleaded in paragraphs 31(a), (b) and (e) are not dependant upon any findings in relation to what was said at the Council Meeting on 2 December 1998. The representations pleaded in paragraphs 31(c), (d), (f) and (g) are dependent upon whether Mr Davies made the alleged statement at the Council Meeting on 2 December 1998 and will be considered together. Were the pleaded representations made? Representation (a) The GMP Documentation had been prepared with reasonable care and skill. 213 The Council alleged that in preparing and issuing the Tender Form Part B and the GMP Documentation to the tenderers and to the Council, the plaintiff represented that the GMP Documentation had been prepared with reasonable care and skill. In its Defence to the Cross-Claim filed in Court on 1 May 2007, the plaintiff denied paragraph 31 of the Cross Claim. I am of the view that when the plaintiff issued the GMP Documentation to the Council and the tenderers in the circumstances outlined earlier, in particular having regard to the terms of the plaintiff's retainer with the Council, the plaintiff represented that the GMP Documentation had been prepared with reasonable care and skill. 214 For the reasons set out earlier I am satisfied that the GMP Documentation was prepared with reasonable care and skill. The representation was true. The Council's claim in respect of this representation fails. Representation (b ): The GMP Documentation set out, either expressly or by implication, all the works and materials which were required to build and complete the Project. 215 The evidence referred to in relation to the alleged breach of retainer and negligence claims establishes that the plaintiff did not make this representation. Far from representing that the GMP Documentation set out "all the works and materials which were required to build and complete the Project", the plaintiff warned against such an understanding. The use of the warnings on the drawings of "NOT FOR CONSTRUCTION" and "HOLD" reasonably conveyed the representation that the GMP Documentation did not set out all the alleged "works and materials". The other evidence referred to in the analysis of the Council's claims of breach of retainer and negligence also establishes that such representation was not made. The Council's claim in respect of this representation fails. Representation (e): The GMP documentation was adequate to form the scope of works for a construction management agreement with a GMP. 216 The Council claims that by issuing the Tender Form Part B and the GMP Documentation the plaintiff represented that the GMP Documentation was adequate to form the scope of works for a construction management agreement with a GMP. As I have said a number of times elsewhere, when it became clear that the Police Service did not need to occupy their premises until June 2000, Mr Davies suggested to Mr Brownlee that there was no need to go down the construction management path and that they could use the time to fully document the Project and then call traditional tenders. Mr Brownlee accepted that Mr Davies made this suggestion to him. Notwithstanding this conversation, once the construction management path was maintained and the plaintiff accepted instructions to prepare the GMP Documentation, the purpose of issuing the Documentation was to advise the tenderers of the extent, or scope, of works of the Project so that they could submit their tenders for the construction management contract at a guaranteed maximum price. This was clearly recognised by the plaintiff in its Post Tender Notices 1 to 3 in February 1999 in which it advised the design modifications and revised documentation, the stated purpose of which was to "significantly" reduce the cost and the GMP of the Project. 217 I am satisfied that the issuing of the GMP Documentation amounted to a representation by the plaintiff that such documentation was adequate to form a scope of works for a construction management agreement with a GMP. 218 The question is whether such a representation was false. There is no evidence that suggests that the GMP Documentation, although incomplete, was inadequate to form a scope of works for a construction management contract with a GMP. The "scope of works" in this context is not the same as in a traditional tendering process for a fixed price contract or a lump-sum contract. As I have said elsewhere, in the traditional method, full documentation or full design is completed prior to construction commencing, whereas in a construction management contract with the GMP, design is developed concurrently with construction in what has been referred to as a "fast track" method with a skeleton set of documents to be fully documented later. The "scope" for a fixed price contract includes all the materials and work that are necessary to construct the project the subject of the contract. The "scope" in this instance was different. All the materials and details of all the work were to be fully documented later. The adequacy of the scope in this instance is quite different to that which is required for a fixed price contract. Full documentation was not required to be produced by the plaintiff until it received its instruction on 31 March 1999 that the Council had decided at its meeting on 17 March 1999 that such should occur. The GMP was to be provided on the skeleton documents with the proposed deletions and/or savings. The "scope" that was identified in the GMP Documentation was adequate for the purposes of the tendering for a GMP with the scope to be identified in more detail in the "full" documentation, to be completed at a later time. I am not satisfied that the Council has proved that this representation was false or that it was misleading or deceptive. The Council's case in relation to this representation fails. Representation (c): The Project was capable of being built for $16.9 million; Representation ( d): The GMP documentation gave the Council certainty that the cost of the project would not exceed $16.9 million, save for substantial variations initiated by the Council; Representation (f) A construction management contract with a GMP was like a lump sum tender and would give the Council surety that construction of the MDA Option 2000 (as described in MDA's professional services proposal dated 19 August 1998) would not exceed $16.9 million; and Representation (g): Construction of the MDA Option 2000 through a construction management agreement with a GMP, and based on documentation to be prepared by MDA, would not exceed $16.9 million. 219 The issue of whether these representations pleaded in paragraphs 31(c), (d), (f) and (g) requires a determination of whether at the Council Meeting on 2 December 1998 Mr Davies made the statement alleged in paragraph 5 of the Cross-Claim that "the GMP is like a lump sum tender. It gives the Council surety that the costs will not go above $16.9 million". Although the preamble to paragraph 31 refers to the preparation and issuing of the Tender Form Part B and the GMP Documentation the representations are dependent upon Mr Davies knowing that the Council had fixed its budget at $16.9 million and having made the alleged statement at the Council Meeting of 2 December 1998. It is therefore necessary to review the evidence of the various witnesses who attended the Meeting and the documents produced either contemporaneously or otherwise. There are also other aspects of the evidence to be considered in deciding what, if anything, was said by Mr Davies at that Meeting. These include the evidence in relation to the meeting between Mr Davies and Mr Brownlee on 3 December 1998 and Mr Davies' evidence of his understanding of the Council's "budget" or as the Council submitted, the "pre-determined cost", for the Project. The Minutes 220 The Minutes of the Meeting (Ex E) record that those present were the Mayor Mr Keegan, Councillors Borluk (except for a period between 7.07pm to 7.33pm), Cassidy, Chantiri (from 6.31pm), Curtin (except during the period 7.07pm to 7.33pm), Donaldson, Hockley, Jones (except during the period 7.07pm to 7.33pm), Lam, Moore, Murray and Saddick. The Minutes record that the "officers" present were Ms Rosser, Mr D Ryan, Mr T Brown, Mr J Cumberford, Mr Brownlee, Mr P Donovan and Mr B Cockayne. 221 The Report that had been given to the Councillors for the Meeting included the recommendation as follows: THAT 1. Council adopt the Civic Precinct Redevelopment Masterplan. 2. Council proceed to undertake the demolition and construction of the Civic Redevelopment project as outlined in MDA Option 2000 for the following components: a) Police Service Local Area Command b) Council Administration Building. c) Library d) Multi-purpose Community Centre based on the costings outlined in the report. 3. Council adopt the funding strategy outline in the report, including the disposal of the existing assets as identified. 4. Council adopt the reclocation ( sic) strategy as outlined in the report. 5. Council call selective tenders for a construction manager for the Civic Precinct Redevelopment project from the six (6) preferred tenderers as outlined in the report 6. Council give the Mayor and General Manager delegated authority to complete negotiations for the Joint Venture Agreement between Auburn Council and the NSW Police Service. 7. Council's seal be affixed to any documents in relation to the Civic Precinct Redevelopment Project. 8. Council give the General Manager delegated authority to negotiate the sale of the assets identified in the report. 222 The Minutes of the Meeting record that the resolution was carried on the casting vote of the Mayor, Mr Keegan. The Minutes record the following: Superintendent B.Treharne, NSW Police Local Area Commander addressed the Council in support of the proposal. MOVED Councillor Lam, seconded Councillor Moore that: i) Council adopt the Civic Redevelopment Master Plan as proposed by Michael Davies Associates Pty Ltd and titled MDA Option 2000. ii) Council proceed to undertake the demolition of the existing Administration Building and Town Hall, and the construction of the Civil Precinct Redevelopment Project as outlined in the MDA Option 2000 document for the following components, based on the costings as outlined below: a) Police Local Area Command b) Council Administration Building c) Library d) Multi Purpose Community Centre, and that further - the demolition of existing multi-storey carpark and the construction of a new multi-storey car park be deferred until the legal and other issues related to access can be satisfactorily negotiated and the matter has been the subject of a further report to the Council. iii) the funding strategy, including the disposal of the existing assets as identified below be adopted:- a) Funding Police Service Contribution $5,400,000 Asset Sales $3,100,000 OCA Contributions-Library $180,000 OCA Contributions - Community Centre $70,000 1998/99 Budget Funds $952,000 Loan Funds $10,159,000 TOTAL $ 19,861,000 b) Asset Sale Items Sale of Existing Library Sale of three houses in North Parade and sale of two lots in Susan Street Sale of Social Centre iv) The relocation strategy as indicated below be adopted:- Administration Building staff complement (other than those personnel as below) · Oriole Park Building Customer Service Centre – One Stop Shop (Customer Service Personnel plus duty officers as necessary) · rented premises at 36 Auburn Road Council Chambers · Lidcombe Community Centre on an as required basis for each meeting. Mayor's Office and Councillor Rooms · rented premises in Auburn Road Existing Town Hall Users · Lidcombe Community Centre v) Council call selective tenders for a construction manager for the Civic Precinct Redevelopment Project from the six (6) preferred tenderers as follows:- Buildcorp Barclay Mowlem Fletcher Construction B.M Culley & Assoc. Hansen Yuncken Pty Ltd Austin Australia vi) Council give the Mayor and General Manager delegated authority to complete negotiations for the Joint Venture Agreement between Auburn Council and the NSW Police Service. vii) approval be given for the affixing of the Council's Common Seal as necessary to any documents in relation to the Civic Precinct Redevelopment Project. viii) The General Manager be given delegated authority to negotiate the sale of the assets as detailed in iii) (b) above, on the proviso that a report be provided to the Council prior to the disposal of those assets ix) Without effecting the subject consent as it effects the other components of the Development, Council call for Expressions of Interest for a residential flat building development above public and private carparking, to a maximum height of 7 storeys, on the site of the Susan Street multi storey carpark, for Council's subsequent determination. … RESOLVED on the motion of Councillor Curtin, seconded Councillor Moore, that Council engage Michael Davies Associates Pty Ltd to complete the design and documentation of Stage 2 of the Civic Precinct Redevelopment project, for the sum of $451,000 subject to variations. 223 The Report for the Council Meeting referred to the "costings outlined in the report". When the resolution was minuted those words changed to "costings as outlined below". The only costings in the Report were those supplied by DG Jones totalling $19.8 million. Although the Minutes suggested that the "costings" were referred to "below" the only amounts referred to "below" were in the section headed "Funding" as outlined above totalling $19.8 million. There is no mention in the Minutes of any presentation made by Mr Davies or any statement made by Mr Davies that the Project could be built for $16.9 million let alone any mention of any reliance by the Council upon any statement made by Mr Davies. The figure of $16.9 million does not appear anywhere in the Minutes. There is also no mention of a "guaranteed maximum price" or "GMP" in the Minutes. The Minutes specifically refer to other persons giving presentations at the Meeting: Mr R Donovan of the Olympic Media Village Project; Dr S Shah of the Health Care Education and Research Unit; Superintendent B Treharne of the NSW Police Local Area Command; and Mr R Smyth. It is of note that the Minutes actually record Superintendent B Treharne addressing the Council in relation to the Project. There is no documentary record of any kind of the alleged presentation or representation by Mr Davies. 224 The only witness for the plaintiff who gave evidence of what occurred at the Meeting was Mr Davies. The witnesses for the Council on this aspect of the matter were Mr Brownlee, Ms Rosser, Mr Saddick , and Mr Keegan. Mr Davies 225 It was submitted that Mr Davies was an unimpressive witness and that his denial that he made the alleged statement at the Council Meeting on 2 December 1998 should be rejected. It was submitted that Mr Davies would not answer questions and that this prompted several "interventions" from the Court. It is necessary to analyse those passages in the transcript relied upon by the Council in support of this submission. The first passage relied upon related to a series of questions about a letter dated 30 July 1998 that appeared at page 14 of Exhibit 1. That letter was sent to Ms Kragh who attended the pre-tender meeting with the Council on 28 July 1998 on the plaintiff's behalf. The letter enclosed various documents that included the minutes of the meeting that contained a statement that at a public Council meeting various options were presented to Council and the "figure given" to the Council for Option 2A for the construction costs was $14.7 million. The passage relied upon is as follows (tr 37 – 38): Q. Document number 14 at the bottom? A. Document 14 or page 14? Q. Page 14? Q. Yes. There is also, I might point out -- HER HONOUR: Just wait for the next question. Mr Simpkins is your barrister. If he decides something needs to be cleared up, he can ask a question in re-examination. FAULKNER Q. Looking at page 14, you saw this letter shortly after it was written on 30 July 1998, and the materials sent with it, didn't you? A. Just let me read it. Q. Looking at page 14, I am asking you, did you receive that and the materials referred to in it, at about that time? A. Yes. Q. Now, Mr Davies, a little while ago I asked you had you at any time learned of the council's estimate of the price for construction of $14.7 million; do you remember I asked you that? A. You did. Q. Is it your evidence that you never became aware of that? A. That is not the estimate. Q. Is it your evidence that you never became aware that the council had that figure? A. I was aware that there were two figures in the brief. Q. Just answer my question. Do you say that you never became aware that the council had that estimate? A. I was aware of that figure. 226 This passage of evidence was very early in Mr Davies' cross-examination, which commenced at page 35 of the transcript. The so-called "intervention" of the Court in this passage was not prompted by any observed lack of willingness by Mr Davies to answer the question but rather to give him guidance as to the rules that applied in an attempt to have him focus on the question rather than make observations as he appeared to be about to provide. 227 The next passage of transcript relied upon related to the budget figure that Mr Davies included in material sent out to tenderers. Mr Davies agreed that he was prepared to send material out that was "inaccurate" in so far as it was "erroneous" in respect of the budget price (tr 51). The passage relied upon is as follows (tr 52): Q. Would you first weigh up whether you should or should not do it? A. I weighed it up and I did it. Q. You expected that the tenderers would rely on you to be totally accurate to the best of your ability in what you were giving them, didn't you? A. I didn't expect that. Q. You didn't expect that? A. No, doesn't happen. Q. Do you say that you expected that the tenderers might consider that you had deliberately given them some misleading information? A. They could. Q. Do you say that you expected that, that the tenderers might think that you had given them some misleading information? A. No, they wouldn't rely on it. Q. You say that they wouldn't rely on anything that you gave them? A. That's not what I said. I said they wouldn't rely on the figure that you are referring to. Q. Mr Davies, you are focusing on a figure. I am not. Can you forget about the figure for the time being? A. Okay. HER HONOUR: Listen very carefully to Mr Faulkner's questions -- A. Yes HER HONOUR: -- and just answer those. 228 I am not satisfied that this passage of evidence warrants the drawing of an adverse view about Mr Davies' evidence generally. It is true that Mr Faulkner was focusing on the fact that Mr Davies had included a figure in the documents that he sent out to tenderers. It is also true that Mr Davies had admitted that the figure he provided to the tenderers was not the true Council budget. The fact that he was focusing on a figure rather than the general question that Mr Faulkner asked is not something that persuades me that he was deliberately attempting to avoid answering the question. Certainly the "intervention" was not precipitated by such a view. To be fair, the question that was asked was very broad and on reflection it was not unreasonable for Mr Davies to inject the focus on the figure at this stage. 229 The Council relied upon the following evidence to suggest that the evidence extracted above demonstrates an unwillingness to answer questions (tr 76): Q. You were aware when you put this document out that tenderers would rely upon it as a statement coming from you, as accurate as you could make it, didn't you? A. Yes. 230 This evidence does appear to be inconsistent with Mr Davies' earlier evidence that such reliance "doesn't happen" and needs to be taken into account when assessing Mr Davies' other evidence. 231 The next passage relied upon is as follows (tr 60): Q. Now the next day was 3 December 1998 and on that day you had a meeting with Mr Brown, didn't you? A. I don't recall. There were lots of meetings. HER HONOUR: Q. You've actually told me you did in your affidavit, so if you have a look at paragraph 65 you said you did have a meeting on 3 December with him? A. Well, it would have been -- HER HONOUR: Just accept that and Mr Faulkner will ask the next question. Yes, Mr Faulkner? FAULKNER Q. Do you remember that you had a meeting with Ray Brownlee on 3 December 1998 and Mr James? A. Yes. 232 There is nothing in this exchange that warrants an adverse view being taken of Mr Davies' evidence. In fact it is quite the opposite. The events about which he was being asked had occurred eight and a half years ago and it is true that there were many meetings. His affidavit evidence in relation to dates of meetings and the identity of attendees relied upon his diary entries and were thus more focused. The reminder of his affidavit evidence was not an "intervention" that was prompted by any adverse view of what Mr Davies was doing but was rather to remind him of the evidence that he had given in an affidavit. 233 The next passage relied upon in the transcript was at a time that Mr Faulkner was seeking to have Mr Davies address the contents of a letter dated 8 July 1999. Mr Davies had a folder in front of him and started looking through it. A contretemps occurred between Mr Faulkner and Mr Davies with Mr Faulkner asking Mr Davies rather firmly to stop looking through the documents and Mr Davies responding rather firmly that he was trying to find out the date of the letter to which Mr Faulkner was referring. The following then occurred in the passage relied upon (tr 66): HER HONOUR: Stop this please. Q. All you are being asked is why you didn't say to Mr Brownlee, look, this is wrong. This did not happen on 3 December; that is the question? A. Why I didn't say? Q. Why didn't you say to Mr Brownlee, look, you have got it wrong. I didn't agree with this? A. I was probably very busy doing other things. FAULKNER Q. That is just an answer you have made up while in the witness box, isn't it? A. I said "probably". Q. It is no answer at all, is it, to your knowledge, Mr Davies? A. I don't have any reason to not having answered this letter. 234 It is always unfortunate when a witness and counsel clash, however this sometimes happens in the heat of litigation. Mr Davies was in the obviously uncomfortable position of having his professional judgment and work being seriously questioned and having to deal with the suggestion that his evidence was "made up". The approach adopted by Mr Davies in giving his evidence needs to be viewed in this context. 235 The next passage relied upon in the transcript requires some explanation. The question and answer are recorded without interruption, however it is clear that Mr Davies spoke over the top of Mr Faulkner, albeit that the court reporter was apparently able to record the evidence without difficulty. That passage is as follows (tr 74): Q. Do you now remember that you did have a discussion with him that day about pro-rata-ing of your files? A. I have already said this, the discussion did not take place. There was no such discussion. HER HONOUR: Mr Davies, the rules are, counsel asks the questions. My court reporter is very competent and takes down everything that is said. If you would be kind enough to wait until the question had been asked, then answer. Thank you. 236 The final passage relied upon in this regard related to some questions in cross-examination about reducing the price to $17 million and the various deletions or reductions in scope that were made to the GMP Documentation (tr 84-85). The passage relied upon is as follows (tr 85-86): Q. And you must have had in your mind when you were doing that, the extent to which you should make such reductions in scope, didn't you? A. We are not cost consultants, quantity surveyors or builders and those - any changes were proposed to be agreed ultimately with the construction manager. *Q. Now, Mr Davies, when you had been told that the budget is $17 million, as you put it, and we will use your figure for the purposes of this cross-examination, you, based on your experience and in the knowledge of the prices that had been received which we looked at at page 211, were aware in your judgment of matters that you could reduce in design scope -- *A. Yes. *Q. -- weren't you? And it would be the same, wouldn't it, if somebody came to you today to ask you to design something for a figure of say $10 million, you were able on your experience and judgment to begin a concept that is aimed towards that budget; that is part of your experience? *A. Yes *Q. That is what you were doing here after 29 January, wasn't it? *A Well, if I can add -- *Q. No, would you just answer-- *A. -- we also interviewed some builders -- *Q. Mr Davies -- HER HONOUR: Mr Davies FAULKNER Q. Please just answer my question? A. You are only getting half the facts. HER HONOUR: Mr Davies, would you please control yourself. I have told you what the rules are. WITNESS: Thank you, your honour. HER HONOUR: You have an experienced senior counsel sitting at the Bar table. If he wishes to tidy up matters, he will do so. He is the Counsel. You are the witness. Please answer the questions. ABOVE QUESTIONS AND ANSWERS MARKED * READ HER HONOUR Q. The question is that is what you were doing after 29 January. Yes, Mr Davies, could you answer that question? A. Yes 237 Mr Faulkner's cross-examination was measured, professional and forensically focused. Mr Davies' obvious irritation with the cross-examiner was not impressive, particularly after the number of times he had been counselled to let his own counsel provide the advocacy services whilst he should answer the questions. The Council would have me form the conclusion that this outburst is indicative of a witness seeking to avoid making an admission, however that is not the conclusion that I formed about Mr Davies. I formed the view that his conduct in the witness box was similar to the way in which he usually conducts himself. One need only read the detailed letters he wrote in 1999 to Ms Rosser and Mr Brownlee to appreciate that Mr Davies has the tendency to argue the point. I will however take this conclusion into consideration when assessing Mr Davies' evidence about the Council Meeting on 2 December 1998. 238 Mr Davies denied giving any presentation to the Council at the Meeting or referring to a figure of $16.9 million. His account of the Meeting on 2 December 1999 in his affidavit of 23 November 2006 was as follows: 63. On or about 2 December 1998, I attended Auburn Council's Ordinary Meeting at Auburn Council … I did not make any presentation to Auburn Council at that meeting. I had previously made a presentation to Auburn Council on 15 September 1998 (see paragraph 40 above) on the various options for the redevelopment of the Auburn Civic Centre and possibly a further meeting on 29 October 1998 (see paragraph 48 above). I recall that I only attended the meeting to see whether Auburn Council approved the development application for the Auburn Civic Centre redevelopment and to be "on call" to answer any questions in relation to the same if necessary. I recall that the development application for the Auburn Civic Centre redevelopment was approved at this meeting with very little debate, and with no questions being asked of me. 239 The meeting on 15 September 1998 that Mr Davies referred to was the Councillor Workshop, the purpose of which was for the plaintiff "to discuss the different options available to Council and for Councillors to make comments and debate these options" (Ex 1 - 79; Ex PD – 369). It is obvious that there was a detailed presentation given to the Councillors on that occasion and in paragraph 40 of his affidavit of 23 November 2006 Mr Davies refers to the "overhead presentation" that he provided during the meeting. The "Bottom Line Cost Comparison" provided to the Councillors as part of the presentation at that meeting compared the costs of the various options available to the Council for the redevelopment of the Civic Centre. Those figures range between $13.08 million and $15.79 million for the total building works and between $20.9 million and $24.4 million for the total cost including professional fees, escalation costs and the like. The report of the Workshop noted that a further report would be presented to the Council that would outline the "costs of the project". It was noted that as the "preferred option is developed further the costings will become firmer". The report makes no mention of any discussion about a GMP nor is there any mention of that concept in the overhead documents produced by Mr Davies at the Workshop. 240 The other meeting referred to by Mr Davies in his affidavit was a "possible" meeting on 29 October 1998. His memory of the possibility of that meeting was triggered by a reference in his diary for that date which recorded "Presentation to Council. Auburn Civic Centre". Mr Davies' evidence was that he had no independent recollection of such a meeting or presentation. There are no Minutes in evidence recording the fact of such meeting nor the nature of the proceedings at such a meeting. 241 Mr Davies gave the following evidence in cross-examination in relation to the Council Meeting on 2 December 1998 (tr 59- 60): Q. And you were asked to come forward when the council agenda reached this development project, weren't you? A. No. Q. And you came forward to - - A. I said no. Q. And you came forward and stood at the head table, didn't you? A. No. Q. And I suggest to you that you did and you spoke to councillors about the building project? A. That's not true. Q. I suggest this: That one of the councillors asked you, "What will be the all-up cost of the building?" A. That didn't happen. Q. And I suggest that you said words to the effect, "the gross maximum price more or less gives the council assurance that the cost of the project will not go above $16.9 million"? A. That is completely untrue. Q. I suggest at this same meeting Councillor Moore asked you a question about a decorative walkway. Do you remember that? A. No. Q. Do you deny that? A. Yes. Q. I suggest Councillor Moore asked you words to the effect, "Will it be possible to put a decorative walkway through to Auburn Road?" A. We already had a civic walkway in the design. Q. Just tell me did he say it or not? A. No, I don't even know who Councillor Moore is. Q. And I suggest you answered to him, "Well, look, if there is any money left over out of the $16.9 million we'll certainly look at it"? A. That's completely untrue. Q. At that meeting you were wearing a bow tie, weren't you? A. Perhaps, yes. I used to wear bow ties, a lot. 242 The question in relation to the bow tie was asked no doubt because Ms Rosser recalled in her affidavit (20 July 2006; par 14) that when Mr Davies made his presentation he was wearing a bow tie. Mr Brownlee 243 Mr Brownlee gave affidavit evidence that Mr Davies gave a presentation at the Meeting on the design of the Project and that he said to the Councillors: The GMP is like a lump sum tender. It gives the Council surety that the costs will not go above $16.9 million. 244 In cross-examination Mr Brownlee gave evidence that Mr Davies' presentation was entirely oral, that he spoke for approximately five minutes and that after the presentation there was a question and answer session of approximately five to ten minutes (tr 158-159). He claimed that Mr Davies spoke about how he had incorporated the requirements of the Police Service and the Council into the design and the interaction between those two aspects of the design. He claimed that Mr Davies also spoke about the "civic spine" and the Auburn Road frontage and that during the question and answer session there was a question by Councillor Emile Chantiri, who asked "how much is this going to cost?" (tr 159). Mr Brownlee gave the following further evidence in cross-examination (tr 160-161): Q. What did Mr Davies say? A. $16.9 million. There was a response - he then - Emile Chantiri then spoke about how all projects go over two million dollars, it was a figure he used. That's the time when Mr Davies told the Council that the GMP is like a lump sum contract and it gives them the surety that the price won't go over $16.9 million. … Q. It is correct to understand, is it, that at the time of this question and answer session that you have just told her Honour of, each of the councillors in attendance had received prior to the meeting a copy of this council report? A. That would be the normal practice. Q. In which you had disclosed that there was a quantity surveyor that the council had employed? A. In this report, yes. Q. And in which you had disclosed the costings that had been provided by such quantity surveyor to the council? A. Yes. … Q. Although the councillors had a report which identified the costings as totalling $19.861 million and coming from a cost surveyor, that one of the persons present actually asked Mr Davies the question, "How much will this cost?" A. Yes. Q. Did you respond to that by saying, "It's in the report"? A. No. Q. Did you respond to that by saying, "We have a quantity surveyor who has looked at that"? A. No. … Q. You don't claim, do you, that prior to 2 December 1998 you had had any oral communication with Mr Davies in which he had provided a cost for the project of $16.9 million? A. I believe I did, but I can't say that categorically. 245 Councillor Chantiri did not give evidence. After Mr Brownlee was given the opportunity to check his affidavit he accepted that there was no account of a conversation in the terms suggested in the last question extracted above with Mr Davies prior to 2 December 1998 (tr 162). He also accepted that: (1) he could not identify any document passing between himself and Mr Davies prior to 2 December 1998 in which Mr Davies had referred to a cost of the project of $16.9 million; and (2) he had not made any reference in his report to Council for the Meeting to a cost of $16.9 million for the Project. There was no written record made of Mr Davies having mentioned the $16.9 million figure, or the statement that Mr Brownlee claims Mr Davies made that Council would have a "surety" that the costs would not go above that figure (tr 162). Mr Brownlee admitted that prior to his affidavit of 26 July 2006 he had never given an account to anyone of a conversation involving Mr Davies on 2 December 1998 in which he allegedly referred to a Project cost of $16.9 million. He accepted that the first time he gave such an account was when he made his affidavit, seven and a half years after the subject Meeting, unaided by any reference to any document or other record (tr 162). Ms Rosser 246 Lea Joanne Rosser, the General Manager of the Council in 1998 and up until June 2001, was also present at the Meeting. In her affidavit sworn on 20 July 2006 Ms Rosser gave evidence that prior to the Meeting she had a conversation with Mr Brownlee in relation to the guaranteed maximum price for the Project in which Mr Brownlee said: MDA should be engaged to complete the design and documentation of stage 2 of the Project as they will agree on a GMP of $16.9m and this is the amount of the Council's budget for the construction and management of the Project. 247 Ms Rosser claimed in her affidavit that Mr Davies gave a presentation at the Meeting and that she recalled Mr Davies saying to the Councillors: The GMP is like a lump sum tender. It gives the Council surety that the cost will not go above $16.9m. 248 In evidence-in-chief Ms Rosser claimed that at the Meeting, Mr Davies was in the gallery area and came forward to the head table where the Mayor and senior members of the Council were sitting. She claimed that Mr Davies first gave an overview that took no more than five to ten minutes and then answered questions that took no more than "five or so" minutes. She recalled that Mr Davies was asked, "can you guarantee that the construction of this will not cost more than 16.9 million dollars" and that he responded, "yes, that is why [I] suggested a guaranteed maximum price methodology" (tr 209-210). Ms Rosser's evidence-in-chief also included the following (tr 210): Q. At the end of the, towards the end of the meeting after Mr Davies had spoken did you make a recommendation to the council? A. Yes I did. Q. Can you remember was that recommendation in writing or was it oral? A. The recommendation was in writing. Q. Can you tell us what that document was? A. It was a report to the council meeting regarding the civic precinct redevelopment. 249 In cross-examination Ms Rosser said that the only documents that she reviewed for the purposes of giving instructions for the preparation of her affidavit were the Reports and Minutes of the Meeting and the Report and Minutes of the Council Meeting on 17 March 1999. Ms Rosser admitted that the conversation recorded in her affidavit that she claimed she had with Mr Brownlee was based entirely on her recollection (tr 211-212). On this topic Mr Simpkins cross-examined Ms Rosser as follows (tr 213): Q. Was there something in particular, was there, about this conversation with Mr Brownlee that causes you to have a recollection of it? A. Yes. Q. And is the thing which causes you to have a recollection of it the fact that in a discussion with Mr Brownlee you became aware for the first time of a proposal that there might be something called a guaranteed maximum price? A. No. Q. You had prior to this conversation with Mr Brownlee heard of a proposal, had you, that the council might enter into arrangements with something called a guaranteed maximum price? A. No. Q. Was the first time that you heard of such a thing being described as guaranteed maximum price in a conversation some time with Mr Brownlee? A. Yes. Q. And was it the first time that you heard of it in this conversation you told her Honour about this morning? A. Yes. Q. And isn't that part of why you recall having a conversation with Mr Brownlee in the lead up to the meeting of 2 December? A. It is a part of, yes. Q. Because you can recall being told by Mr Brownlee about a proposal involving a guaranteed maximum price some time prior to the actual council meeting on 2 December 1998? A. Yes. Q. You were also speaking to Mr Brownlee, weren't you, in the lead up to this meeting about the various costing information that was being obtained by the council concerning what it was likely to actually cost to engage in this redevelopment of the civic centre? A. Yes. 250 Mr Simpkins returned to this topic and Ms Rosser gave the following further evidence (tr 220): Q. As I understand what you tell her Honour in this conversation with Mr Brownlee that took place in about the period of two weeks before 2 December 1998 he made reference to a price of no more than $16.9 million? A. Yes. Q. And what I'm putting to you is that you've got no particular reason, have you, for recalling in particular that that was the precise amount that Mr Brownlee then referred to? A. Yes, I do. Q. What is your reason? A. The original design methodology was a matter of interest that Mr Brownlee and I had discussed at some length when the project began and so I was very interested, from a professional development viewpoint, to understand the concept and the principle of guaranteed maximum price. And then also bearing in mind that if we weren't able to reduce the proposed cost significantly that the project would not be proceeding and $16.9 million was exactly at the figure that we required in order for me to be able to put the project forward to council. 251 Ms Rosser agreed that she authorised the advertisement seeking the expressions of interest in which the total Project cost was stated to be around $15 million and that the invitation to tender referred to a price of $17 million (tr 220-221). Having been shown those two figures, Ms Rosser gave the following further evidence in cross-examination (tr 221-222): Q. But you want to adhere, do you, to evidence that you've given of not speaking to Mr Brownlee about an amount of $15 million or $17 million but rather an amount of $16.9 million? A. Yes. Q. And you say, as I understand it, that you adhere to that figure because it was - is this right - what you understood the council's budget to be? … A. No. … Q. What is your basis for asserting that the figure which was discussed with Mr Brownlee was $16.9 million? A. It was a figure that was in the area that the council could afford given that there were a number of other projects that it had under way that needed to also be funded. Q. But you don't want to suggest, do you, that as at even 14 December 1998 the $16.9 million was the council's budget, do you? A. The budget was allocated on 2 December in the council meeting. Q. I will take you to the document first. Can you go to page 151. The council's budget adopted as at 2 December 1998 consisted of the various cost elements one sees at that page totalling to about $19.861 million; correct? A. That was for more than the civic development project, the construction component. Q. Well, it certainly included things like fit out works and professional fees and relocation? A. Yep. Q. But you identify all of those as not strictly being construction costs; is that your point? A. That's correct. Q. But the rest would be the construction costs? A. The component that adds up to 16.9 are the construction costs. Q. Well, what are the amounts that you added together, do you say, in around December 1998 to arrive at the view that the budget for the construction cost was $16.9 million? A. It's the actual physical construction which is the police service building to an amount of 4,003,592, the council administration building for 5.3 mil, the library for 3.1, the community centre for $1.85 million and the fit out works of 2.538. Q. And the escalation costs? A. No, they're not included. Q. And the contingency costs? A. Certainly not included. Q. So the amounts that you tell her Honour you excluded in your assessment of what the budget was in about December 1998 were amounts relating to contingency, escalation costs, professional fees and relocation? A. Yes. 252 Ms Rosser agreed that the Report to Council for the Meeting reflected material that she had approved for inclusion in the Report. She was referred to the section entitled "Costs" in that Report (extracted earlier) and said that the Report was "correct" when it recorded that DG Jones had been employed by the Council as at 2 December 1998. Ms Rosser also gave the following further evidence in cross-examination (tr 215-216): Q. And you can recall, can't you, being aware in late November 1998 that according to the quantity surveyors the cost of the project if all the elements of it were undertaken, including the multistorey carpark building, would cost a total something in excess of 23 million dollars? A. I don't recall the exact, the exact figure or that discussion. Q. Whether you can recall the exact figure you can recall being aware, can't you, through discussion with Mr Brownlee in late November 1998 about the information coming from the cost consultant was that the projected cost of this redevelopment of the civic centre was going to exceed and substantially exceed 20 million dollars? A. At that time, yes, at that time. Q. In this account that you give of a conversation with Mr Brownlee some time in the two weeks prior to 2 December 1998, as I understand it, you say he referred to a price of no more than 16.9 million dollars? A. Yes. Q. Do you currently have any knowledge of any document prior to 26 November 1998 which refers to a projected cost for this redevelopment of the civic centre of in the order of 16.9 million dollars? A. No. Q. Well, is it your evidence then that when Mr Brownlee spoke to you in the period of about two weeks prior to 2 December 1998 and referred to a price of no more than 16.9 million dollars that that was the first time that you had heard of any such price? A. Yes. Q. Did you on the basis of that conversation with Mr Brownlee ask him about the source of information that led him to make the statement that the price was going to be no more than 16.9 million dollars? A. Yes I did. Q. What did you ask him? A. I asked him what was the difference given that the prices that we had received earlier were in excess of that and he indicated that Mr Davies had said that if we pursue guaranteed maximum price methodology that the price would come in for 16.9 million dollars. Q. When you were having that discussion what were the prices in excess of the price of 16.9 million dollars that you were alluding to? A. That some indication had been arrived 20 million dollars. Q. Being indication from whom? A. From the indicative architects from an earlier presentation. 253 Ms Rosser claimed that she was unaware when she spoke to Mr Brownlee prior to the Meeting that what was proposed to be recommended to the Council was that it proceed with construction management (tr 217). However, she subsequently agreed that she knew that expressions of interest from construction managers had been sought as a result of what she had recommended to the Council (tr 217). She then gave the following evidence (tr 218): Q. And you knew, didn't you, when you were speaking with Mr Brownlee in any conversation in the two weeks prior to 2 December 1998 that the probability was that if this development proceeded there would be a construction manager? A. Yes. Q. And when Mr Brownlee referred to something called a guaranteed maximum price you understood, didn't you, from what he was saying to you that this guaranteed maximum price would be something the construction manager would stipulate for? A. Yes, it is included in the, yes it would be. Q. And you understood, didn't you, when speaking to Mr Brownlee that the guarantee would only be as good as the actual wording of it? A. The guarantee from the construction manager? Q. Yes? A. Yes. 254 In later evidence Ms Rosser demonstrated some confusion in relation to this guarantee. That evidence was as follows (tr 233-234): Q. You understand, may I take it, on 2 December 1998 that a guaranteed maximum price if obtained by the council would be a guarantee from the construction manager? A. No, I did not understand that to be the case. Q. You say, do you, that you thought it was a guarantee from Michael Davies Associates? A. Yes. Q. Mr Brownlee had spoken to you, hadn't he, prior to 2 December 1998 about this concept of guaranteed maximum price? A. Yes, he had. Q. Hadn't he in his discussions with you told you that the guaranteed maximum price would be something stipulated for by the construction manager? A. No, I don't have that recollection. … Q. You say, do you, that you continued at the time the Austin contract was entered into to believe that there was a guarantee being given to the council by Michael Davies Associates? A. Yes. … Q. Didn't you understand that the way in which the $16.9 million or any other figure was to be secured was by a guarantee of some kind? A. It wasn't – no, it wasn't put in those terms. The guarantee was in terms of the design of the actual project which guaranteed the outcome of the $16.9 million. Q. This is a guarantee you contend was given to you directly by Mr Davies; is that right? A. It was given to council by Mr Davies. Q. On the occasion of the meeting on 2 December 1998? A. Yes it was. Mr Saddick 255 Mohamed Saddick was a Councillor with the Council for a period of 8 ½ years from September 1995 to March 2004. Mr Saddick swore an affidavit on 24 February 2007, consisting of three paragraphs including the following: 2. In or around late 1998, I recall being present at Council's ordinary meeting. On the Council's agenda was the new Auburn Civic Precinct Project that was a joint venture between the Council and the NSW Police Service. 3. The architect discussed the costs involved in the Civic Precinct Project and said words to the following effect: "The cost of the project will be within the vicinity of 16 million to 17 million dollars. Any variations will increase the cost by approximately 10%. Council can be assured that the cost will not go above that." 256 Mr Saddick's evidence in chief included the following (tr 259-261): Q. Do you remember a meeting at the council on 2 December – sorry in late 1998? A. Yes. Q. And do you remember a meeting when Mr Davies, the architect, was present? A. Yes. Q. Was that the meeting in late 1998? A. I believe there is two meeting. Q. Yes? A. In September and in December. Q. Of 1998? A. Yes. Q. Having regard to the meeting in December 1998 do you recall Mr Davies being present? A. There was a group of architect. I don't know which one Mr Davies – I don't recall Mr Davies in particular, a group of architect came to council with the folder and the plans. Q. Did an architect speak to the council meeting? A. Yes. Q. And how did he come to address the meeting? Did he stand where he was or did he walk to a particular place in the council chambers? What did he do? A. He been called to the front to address the Council and answer the concerns of the councillor or question from councillor. … Q. And do you remember for how long he spoke? A. I don't recall the time. Q. Can you tell us, was it for many hours or a shorter time? A. Shorter time. Half an hour, something, yes. Q. Do you recall any questions asked of him about any councillors? A. Yes. I recall one of the councillor ask about cost and if there's any variation. Q. Can you say in words to the effect what that councillor asked of the architect? A. I believe Mr David mention a figure and the councillor ask if that figure will be [varied] or it is fixed. Q. And did the architect reply? A. Yes. Q. What did he say to the best of your recollection? A. To my recollection I believe he say it is fixed, it wouldn't go more than. … Q. When he said that did he give a figure? A. I didn't recall but it is around 17 million. The exact figure I didn't recall it. Q. Do you say that he gave a figure or did not? A. He gave a figure. Q. But you don't exactly recall? A. Yes. 257 There seemed to be a degree of confusion in Mr Saddick's mind as to what was actually discussed at the Meeting. He remembered two meetings and it may be that his memory has blurred or transposed the occurrences at those two meetings. He gave evidence that he was not able to recall the detail of what occurred at the first meeting separately from what occurred at the second meeting and thought that there was a meeting at the beginning of December and "maybe another meeting after [the] middle of December". He said that in both meetings the options available to the Council of renovating and extending the old building or of building a new building as a joint venture with the Police Service were discussed (tr 267). He gave the following further evidence in cross-examination (tr 267-269): Q. Do you tell her Honour that these are options being discussed at one or other or both of the council meetings in December 1998; is that right? A. No, not in December. In December the price, the cost was discussed, not which option. Q. You accept, don't you, that some months prior to December 1998 the council had decided to go with the option of demolition and reconstruction? A. Yeah. Q. Well, what is it that you can recall being discussed at either or both of the meetings held in December 1998? Anything? A. Mainly the cost and the – shows the councillor some drawing. Q. Do you recall being given an estimate of costs said to have been put together by a quantity surveyor at one or other or both of these meetings held in December 1998? A. Look, there was a team coming with the architect, three, four, more than one, and they have a drawing and folder and they talk about it. Not only one man at that meeting. Q. Does that answer mean, Mr Saddick, that at one or other or both of these meetings there was discussion about a cost estimate apparently provided by a quantity surveyor? A. I don't know at that time who was a quantity surveyors. There was a discussion about the cost and one of the councillor ask about it. … Q. If something was said at the meeting about cost your recollection is, is it, that it included a reference to what might happen by way of variations? A. I recall one of the councillor ask about variation and the answer came back from the architect who was giving the presentation, say it is a fixed price, it wouldn't be a variation. Q. Weren't you told that variations might be in the order of 10 per cent? A. That's what one of the councillors say, usually or normally they put 10 percent variation and the answer was no, it is a fixed cost, a fixed price. Q. I see. It's your evidence, is it, that Mr Davies said words to the effect that any variations will not increase the costs? A. It is not exactly what Mr Davies saying. Mr Davies talk about there is no variation. The variation, where it comes from is one of the councillor ask if there is any variation. He mentioned 10 per cent and the answer was no. Q. But didn't Mr Davies say words to the effect of any variations will increase the costs by approximately 10 per cent? Didn't he say that? A. It didn't come from Mr Davies. The variation came from one of the councillor ask if there is any variation because usually they leave a room for 10 per cent variation. The answer was no. 258 This evidence is inconsistent with paragraph 3 of Mr Saddick's affidavit. When this was pointed out to Mr Saddick by Mr Simpkins he gave the following evidence (tr 270-271): Q. And they're words that you chose carefully when giving instructions for this affidavit, weren't they? A. Yes. Q. And they' re words that you tell her Honour are wrong, do you? A. It is not wrong. There is a figure and the figure – anything between 16 to 17 million. Q. Do you tell her Honour now that the architect on this occasion said words to the effect of, "The cost of the project will be within the vicinity of $16 million to $17 million"? A. For 10 times I am saying no, not the architect. The architect mentioned a figure. I don't recall what is the figure. Q. And do you see that in the words that you go on to include in paragraph 3 you say, "The architect said words to the effect of, 'Any variations will increase the cost by approximately 10 per cent'." Do you see that? And those words are also wrong, are they? A. Again, I said it from where that word comes. One of the councillor ask about the price and if there is any variation left because there is a 10 per cent usually left for variation. The answer comes from the architect was no variation. Q. And can I suggest to you that whatever the conversation was which took place with the architect in late 1998 the architect did not say words to the effect of, "Council can be assured that the costs will not go above that." Those words weren't spoken, were they? Were they? A. There was some sort of assurance in replying to the councillor who ask about variation about the costs that it wouldn't go more than the figure has been mentioned. Mr Keegan 259 Terrence Herbert Keegan was the Mayor of the Council for a period of 15 years from around 1974 to 1988 and from 30 September 1998 to 22 September 1999. Mr Keegan swore two affidavits in the proceedings, the first on 22 February 2007 and the second on 17 April 2007. The first affidavit, apart from the formal parts, was in the following terms: 3. In or around August 1998, I recall that Auburn Council ("the Council") were in the process of planning a new Auburn Civic Precinct together with the NSW Police Service. 4. I recall that the Council had received an Expression of Interest from a firm of architects by the name of Michael Davies & Associates ("MDA") in relation to the supply of design services for the Civic Precinct Project. I further recall the principal of MDA, Michael Davies, giving a number of presentations to the council throughout the end months of 1998. 5. In or around early December 1998, I recall Michael Davies spoke to the Council at their Ordinary Meeting which was held at Council chambers. I was present at this Ordinary Meeting together with the other Councillors and a number of Officers and I recall Michael Davies saying at the meeting words to the following effect: "The gross maximum price more or less gives the Council assurance that the cost of the project will not go above 16.9 million dollars." 260 In his second affidavit Mr Keegan claimed that since swearing his first affidavit he had recalled further matters about the Council Meeting on 2 December 1998 "and the Architect's involvement in that meeting". His second affidavit was in the following terms: 2. I was present as mayor, and I chaired the meeting. Mr Davies was, at first, in the public gallery. When asked to speak and to answer questions, Mr Davies walked to the end of an elevated long table at which I and 5 or 6 other persons (including the general manager Ms Lea Rosser) were seated. He stood and spoke to councillors about the proposed building project. 3. The words spoken by Mr Davies, as stated in paragraph 5 of my affidavit of 22 February 2007 to the effect that: "The gross maximum price more or less gives the Council assurance that the cost of the project will not go above $16.9 million", was in answer to a question from a councillor in words to the effect: "What will be the all up cost of the building?" 4. I made a note of the Architect's words on my business paper, but I discarded that note long ago. 5. Councillor John Moore said to Mr Davies words to the effect: "Will it be possible to put a decorative walkway through to Auburn Road?" Mr Davies replied in words to the effect: "Well, if there is any money left over out of the $16.9 million we will certainly look at it." 6. Had I been told of any risk that the building project might cost Council more than $16.9 million, I would have opposed it. 261 Mr Keegan accepted in cross-examination that his evidence was based entirely on his recollection and was unaided by any record or document (tr 291). He knew in December 1998 that the Council had received information from a costs consultant about the likely cost of the Project being something in the order of $20 million and that prior to the Council Meeting no one had suggested that the Project would cost no more than $16.9 million. Mr Keegan gave the following evidence in cross-examination (tr 294-295): Q. You understood, did you, at this meeting in early December 1998 that there would be a gross maximum price stipulated for in any arrangement with a construction manager? A. No, I didn't. Q. Well, as at early December 1998 what do you say you thought the method of procurement by construction management involved? A. Well, the method was, to me, strange. Q. I didn't ask you that. What do you say you thought it involved in early December 1998? A. The cost. Q. I'm asking about the method of procurement described as construction management and I'm asking you to tell her Honour, if you could, what you thought that method involved as at early December 1998? A. I believe it involved putting up the shell of the building and building the offices, internal offices, and those sort of structures and it's done on a square – the cost is done on a square metre basis so that if you put a building up, we'll decide later the offices, where they're going, the other facilities, and they give a quote on a square metre basis. That was my idea of what was going to happen. Q. It was your understanding, was it, that whoever the construction manager was would assist in the completion of the design of the project? A. Well, my belief was that it was going to be constructed in construction – in consultation with the council people because they were the ones that were going to decide virtually where offices and all those other facilities were to go. 262 Although in both of his affidavits Mr Keegan claimed that it was Mr Davies who said that the cost of the Project would not go above $16.9 million, in cross-examination the following occurred (tr 299-300): Q. Your recollection is, is it, that one of the councillors present asked Mr Davies something about a price not exceeding 16.9 million dollars? A. No, he asked what would the cost be, that's when Mr Davies made that remark. Q. Didn't the councillor say can you give an assurance that the cost will not exceed 16.9 million dollars? A. Yes. Q. So it was the councillor who made reference to the 16.9 million dollars? A. Because Mr Davies - - Q. Please, can you answer that question, it was a councillor, was it, who made the first reference to the 16.9 million dollars? A. Yes. … Q. Mr Keegan I still want to ask you some questions about this discussion with Mr Davies at the meeting in early December 1998. What is the first question you can recall anyone asking Mr Davies at that meeting? A. What's the cost, can you assure council that the cost of the building will not exceed 16.9 million as in his, his discussion. 263 Mr Keegan was asked whether the words "as in his discussion" was a reference back to what Mr Davies had said at an earlier time during the Council Meeting. Mr Keegan claimed that it was and that he had a recollection of the address that Mr Davies gave to the Council. His evidence was that during the earlier part of the meeting the following occurred (tr 301): He went back on to the other projects that they had discussed originally. There was three ideas and one was to keep the building and do a few alterations and then he got some of these fancy, he had a projects 2000 or something, Project 2000 M, if I can recall now. There was three projects and he started off with that because all those projects were over budget to blazes. He started off by saying he had a new proposal there it was, he can do it for that amount of money and give council what they require, that was basically the crux of his, he spoke for probably five minutes, something like that, might be a little longer. 264 Mr Keegan claimed that the $16.9 million was something that Mr Davies came up with. He agreed it was not a Council budget but said that if "it had gone over" it would not have been approved (tr 301). Meeting – 3 December 1998 265 The meeting between Mr Brownlee and Mr Davies on 3 December 1998 is a relevant circumstance for consideration in determining the probabilities of what occurred at the Council Meeting on 2 December 1998. Once again Mr Brownlee and Mr Davies gave competing versions of the conversation that occurred on 3 December 1998 (extracted earlier). The letter dated 31 March 1999 makes no mention of a meeting on 3 December 1998 or any conversation between Mr Brownlee and Mr Davies on that date. The letter that does refer to that meeting is the letter dated 8 July 1999 from Mr Brownlee to Mr Davies which claims that there was an agreement reached that: (1) the plaintiff's fee would be reduced by $39,500 because Council was engaging the quantity surveyor directly; and (2) the plaintiff's fees would be on a pro-rata basis on the competitive fees submitted in the PSP of 19 August 1998. 266 The original cross-claim filed by the Council on 14 May 2004 claimed that Mr Brownlee advised Mr Davies on 3 December 1998 "about the Council's budget". Mr Brownlee's version of the conversation in his affidavit sworn on 26 July 2006 suggests that he said something to Mr Davies that is quite inconsistent with the Council Minutes of the Meeting on 2 December 1998. He claimed that he informed Mr Davies that the Council had "resolved" to undertake the Project because the construction budget had "increased to $16.9 million". There is no such resolution recorded in the Minutes. 267 Mr Davies' diary refers to a meeting at the Council on 3 December 1998 when Mr Smith of the NSW Police Service was in attendance. His recollection of that meeting as recorded in his affidavit of 23 November 2006 was that there was discussion about the layout of the proposed Police Service premises and he denied that any discussion occurred in relation to his fees. Mr Brownlee accepted in cross-examination that Mr Davies had proposed an interim fee regime in the plaintiff's letter of 1 December 1998 and that the plaintiff had made a progress claim on 17 February 1999 consistently with the interim regime proposed in that letter. He accepted that there was nothing in the progress claim dated 17 February 1999 to reflect the conversation that he alleged had occurred on 3 December 1998 about the plaintiff's fees being charged on a pro-rata basis (tr 180-181). Mr Brownlee approved payment of this progress claim and did not write to Mr Davies asserting any different arrangement until the Council's letters of 31 March 1999 and 8 July 1999. The plaintiff submitted that importantly the letter of 8 July 1999 does not include a suggestion that an amount of $16.9 million was discussed on 3 December 1998. 268 The letter of 8 July 1999 referred to a meeting of the Council on 17 March 1999. Mr Brownlee prepared a report for that meeting in which he traced some of the history of the Project. In that report he referred to the Council resolution on 2 December 1998 to proceed with the Project but made no mention of the Council having adopted at that meeting a budget of $16.9 million. However, the report did refer to the fact that the tenders that were submitted in late January 1999 were all in excess of the "Council's budget of 16,905,847". Mr Brownlee accepted that the plaintiff's PSP of 2 March 1999 referred to a revised cost of $17 million (tr 176). 269 If it had been agreed on 3 December 1998 that the plaintiff's fees were to be paid on a pro-rata basis of an increase in cost from $13.7 million to $16.9 million then it is reasonable to expect that Mr Brownlee would not have approved the payment of the progress claim of 17 February 1999 and would have corrected Mr Davies' claim in his letter of 2 March 1999 that the cost had increased to $17 million rather than $16.9 million. These may appear to be relatively small matters, however when official Council documents do not record what two former Councillors and two former Council employees claim to have occurred at a Council meeting, it is important to look at the surrounding circumstances and documents produced at that time to assess the probabilities of what actually occurred at that meeting. Pre-determined cost 270 Another aspect of the evidence relied upon by the Council in support of its submission that the evidence of the witnesses for the Council ought to be preferred over Mr Davies' evidence of what occurred at the Council Meeting on 2 December 1998, is the question of whether the Council instructed the plaintiff that the GMP Documentation had to be prepared for a "pre-determined cost". 271 The plaintiff submitted that the Council "never instructed that the contract documents had to be prepared for a "pre-determined cost." It was submitted that what the Council required was completion at a pre-determined cost, via a GMP and that this was something quite different. 272 The Council relied upon the Expression of Interest Information Package issued in November 1998 in which one of the Council's objectives was stated as: "The project nonetheless must be completed at an affordable and predetermined cost, and especially within the time allocated for construction". The Council submitted that the plaintiff's submission that there were no instructions that the Contract had to be prepared for a "pre-determined cost" borders on the absurd. It was submitted that Mr Davies admitted that he intended that by using the words "predetermined cost" in the "Expressions of Interest" document, he intended to convey that the cost had to be determined before building works commenced (tr 49). It was also submitted that at the end of January 1999, after Mr Davies was instructed that the works had to be completed for $17 million, he carried out all his duties as an architect on the basis that the Council's budget for the Project was in fact $17 million (tr 84). The Council claimed that the acceptance of that instruction from the Council was an acceptance to proceed on the basis of a "pre-determined cost". Alternatively it was submitted that at the very least, it is confirmation that Mr Davies was aware of the Council's requirement that his duties were to be carried out on the basis that documentation was to be prepared to ensure that the Project was able to be completed for the $17 million pre-determined cost. The Council also relied upon the Post-Tender Notice in which Mr Davies advised the tenderers that the Council had determined to make significant modifications to the design "in order to reduce the Guaranteed Maximum Price to within the budget approved by Council". 273 The Council submitted that Mr Davies' claim that in December 1998 he had an understanding that the Council's budget would have been $19.5 million should be rejected. It was submitted that Mr Davies knew at that time that the Council's budget was $17 million, as is evident from the following (tr 87): Q. Can you tell me, please, in the previous invitation to tender where the budget approved by the Council is indicated? I will take you back to a page. You might go back and look at page 185? A. Sorry, one--? Q. 185. It may or may not be that document, Mr Davies, but you, at page 214, referred to the budget approved by Council and indicated in the invitation to tender issued previously. Is there a budget approved by Council, to your understanding, on page 185? A. It says: "The principal anticipates the cost of the works to be managed and described above will be $17 million." Q. Is that the figure that you were referring to at page 214, line 3? A. Yes. Q. Now, Mr Davies, earlier this morning, if you can go back to page 185, I suggested to you that you were aware when you wrote this document at page 185 that the Council's budget was $17 million and you would not agree with me. Do you remember? A. And I still don't agree with you. Q. And when you wrote the document at 214, you are now referring these tenderers back to what you called the budget approved by Council and you are referring them back to the $17 million figure? A. Well, that's poor terminology. Q. That is what you were doing, wasn't it, with that terminology? A. That's what - that's what it says. Q. Mr Davies, you are not being frank with the Court with your answers, are you? A. I am. I am under oath. Q. And I suggest to you that at page 185 when you gave the answer this morning that you would not agree that your understanding of the Council's budget being $17 million, that that answer was false to your knowledge? A. My understanding of Council's budget is as set out on that sheet to which we referred a little while ago. 274 It was submitted that in this evidence Mr Davies was seeking to avoid revealing that his knowledge in December 1998 was that the Council's budget was $17 million. The document at page 214 to which Mr Faulkner was referring in this cross-examination was Post-Tender Notice Number 1 in which the tenderers were advised that the Tender Evaluation Committee had met and determined not to accept any tenders and to make significant modifications to the design "in order to reduce the Guaranteed Maximum Price to within the budget approved by Council and indicated in the Invitation to Tender issued previously". 275 By at least late January or early February 1999 the Council had decided that it did not wish to spend any more than $17 million on the construction costs of the Project. When it instructed Mr Davies to change the GMP Documentation to facilitate the reduction in the tender amounts so that they were no greater than $17 million, it was an instruction that had built in it the position that the Council wished to obtain a tender for what otherwise might be referred to as a pre-determined cost of $17 million. That much is evident from the wording of Mr Davies' Post-Tender Notice 1 that the "significant" modifications to the designed had been made "in order to reduce" the GMP "to within the budget approved by Council". 276 I am of the view that when he drafted the Post-Tender Notice 1 Mr Davies understood that there was a budget for the Project and that he was to produce the "significant modifications to the design" in order to reduce the GMP. However that does not mean that Mr Davies knew in December 1998 that the Council's budget for the Project was $17 million. When the Invitation to Tender was issued in December 1998 the Council had resolved to proceed with the Project and had resolved to obtain funding for $19.8 million. The document prepared by Mr Davies on 29 January 1999 reflected DG Jones' figures that were included in the report to the Council for its Meeting on 2 December 1998. When Mr Davies drafted the Invitation to Tender in December 1998 he included the figure of $17 million for what he described as "commercial reasons" so as "not to convey to the tenderers what the council's budget was, in order that they would tender a figure somewhere below the budget, and it is not an unusual practice" (tr 76-77). Did Mr Davies make the alleged statement at the Meeting? 277 Mr Faulkner submitted that it is "odd" that there is no reference in the Minutes to Mr Davies making a presentation or the alleged statement and that it was also "odd" that there is no express reference in those Minutes to the fact that the Council resolved that its construction budget was $16.9 million. He submitted that "it is explainable simply on the basis that Council records were not as accurate as they might have been" and that "some imprecision and lack of detail in the minutes is hardly surprising". 278 Even if it is accepted that "some imprecision" is to be expected and/or tolerated in Council Minutes, the lack of any mention of Mr Davies' presentation and/or alleged assurance that the Council could complete the Project for no more than $16.9 million in my view is not mere "imprecision". Neither is the failure to record an alleged resolution to adopt a budget of $16.9 million for the construction of the Project. The Minutes of the Council Meeting record the resolution that the plaintiff's fees were $451,000 subject to variations. It is odd, to use Mr Faulkner's expression, that the Minutes should record the resolution to engage the plaintiff to complete the design and documentation stage of the Project at a particular price and yet not record the alleged resolution that the budget for the Project was fixed at $16.9 million. The motion that was carried included the funding arrangement not for $16.9 million but for $19.861 million. It is reasonable to expect that such significant matters would be recorded in the Council Minutes if they occurred. Indeed it is presumed that the Minutes accurately record the official business of the Council until the contrary is shown: Minister for Natural Resources v New South Wales Aboriginal Land Council & Anor (1987) 9 NSWLR 154 at 164 per McHugh JA. It is not appropriate to dismiss these absences on the basis of mere imprecision and I am satisfied that the absence of any mention of these matters in the Council Minutes is a significant factor to be taken into account in determining whether Mr Davies made the alleged statement at the Meeting. 279 Mr Faulkner submitted that it was far more difficult to explain why four independent witnesses would come to Court and give sworn evidence that Mr Davies made the alleged presentation and statement and all be mistaken. He submitted that it is glaringly improbable that they could all be mistaken. Although Mr Faulkner described these witnesses as "independent", each had a significant role within the Council at the time of the events. Both Mr Brownlee and Ms Rosser still work within local government, however Mr Keegan and Mr Saddick are no longer involved in local government and to that extent they are presently independent. I apprehend that Mr Faulkner's use of the term "independent" was to suggest that the witnesses are no longer employed by, or have an association with, the Council. It must be remembered that these witnesses for the Council did not provide affidavit evidence of what allegedly occurred at the Council Meeting until at least seven years after it occurred. It must also be remembered that the witnesses were reliant upon their recollections unaided by any minute, record or other form of document referring to the alleged presentation or statement. 280 When the Council filed its Cross-Claim on 14 May 2004 it claimed that Mr Davies was present at the Meeting on 2 December 1998 and it made the positive claim that it was Mr Brownlee who advised Mr Davies on 3 December 1998 that the Council's budget for the project was $16.9 million. This was quite the opposite of the claim now made by the Council in its amendment first filed on 10 April 2007 (reflecting affidavit evidence of July 2006) that at the meeting on 2 December 1998 Mr Davies was the source of the statement referring to $16.9 million as a GMP and as a "surety" for the Council. The original Cross-Claim filed on 14 May 2004 was certified by the solicitor for the Council pursuant to s 198L of the Legal Profession Act 1987. 281 Mr Brownlee claimed that Mr Davies' presentation was five minutes with a question and answer session of five to ten minutes. Ms Rosser claimed that Mr Davies' presentation was no more than five to ten minutes with a question and answer session of five or so minutes. Mr Saddick thought that the presentation took about half an hour. Mr Keegan claimed that Mr Davies spoke for "probably five minutes, something like that, might be a little longer" (tr 301). Mr Brownlee and Mr Keegan claimed that Mr Davies spoke about the various construction options that were available to Council. Mr Saddick denied that such options were discussed at this meeting and claimed that only the costs of the Project was discussed. 282 The plaintiff referred to the fact that Mr Brownlee and Ms Rosser gave identical versions of what Mr Davies said in that each claim he said "The GMP is like a lump sum tender. It gives the Council surety that the costs will not go above $16.9 million" and submitted that it is quite extraordinary that these two witnesses could recall exactly the same words eight years after the event without any assistance from any document or record of any kind. It does present as rather extraordinary, particularly in the absence of any record in the Council Minutes. There is no doubt that both Mr Brownlee and Ms Rosser have analysed the figures that were contained in the report for the Council Meeting on 2 December 1998 to exclude various figures to reach the total of $16.9 million. In fact this exercise was done by Mr Brownlee in his affidavit sworn on 26 July 2006 which included the following: 25. It was my understanding that the GMP gave the Council certainty in relation to the cost. The Council's budget for the construction and management of the project was $16,905,847. The total budget was $19.8 million, which is set out on page 6 of the Council's Report dated 2 December 1998 (at [265 to 266] in Volume 1 of Exhibit "RB-1" ). Contained within the total budget of $19.8 million was the contingency of $1,579,503, escalation costs of $235,896, professional fees of $640,000 and relocation costs of $500,000, which left the Council with a budget for the construction and management of the Project in the sum of $16,905,847. The professional fees figure was a budget allocated for the fees of the architect, quantity surveyor and other consultants. The construction management fees were apportioned and contained within the budget allocated for the Police, Council, library and community centre buildings. 283 That analysis was also referred to by Ms Rosser in her evidence extracted earlier. Both Mr Brownlee and Ms Rosser have given evidence in the Arbitration Proceedings, the transcript of which is in evidence in these proceedings. In that evidence Mr Brownlee claimed that the instruction that he gave to Mr Davies in 1999 was that "the GMP of $16.9m is what council has approved and that we need to stick to that" and that items 1 to 4 in the Revised Tender Form Part B came out as soon as the Council accepted the $16.9 million (ex PD, Vol 25, 8709-8710). 284 Ms Rosser was cross-examined in the Arbitration Proceedings about a conversation she had with Mr Brownlee in 1999 in relation to clause 23.1 of the Austin contract. Ms Rosser was cross-examined on 25 November 2003 and was asked whether she had any recollection of what was said in that conversation. She gave evidence that she had a "general recollection" but not a recollection of "specific words". Her evidence included the following (Ex PD, Vol 26, 9069): There was a general discussion in terms of by this clause are we guaranteed that the maximum price will not increase above $16.9m for – for this particular project. And then we had a general discussion in terms of the meaning of this clause given the circumstances at that time. 285 In the Arbitration Proceedings Ms Rosser was cross-examined about the Council Meeting on 2 December 1998 as follows (ex PD, Vol 26, 9073-9074): Q. Now, $16.9m was in fact not the budget; it was a larger budget, wasn't it? A. No, that's not correct. It was the guaranteed maximum price, construction for $16.9m for the guaranteed maximum price of the building Q. But didn't council approve the relevant budget at a meeting held on or about 2 December? A. I would need to look at the minutes. There was a resolution that went to Council that comprised – it would have comprised of a couple of components: one was the guaranteed maximum price; and then there was also an amount for a contingency vote which didn't form part of the GMP. Q. But it was part of the construction budget? A. It was part of a contingency amount outside of the guaranteed maximum price. Q. I understand that. It was part of the construction budget, though, wasn't it? A. I don't have a copy of the minutes. I would need to look at the minutes to see the wording of the report. … Q. … you knew, didn't you, that the contingency was part of what had been approved with the budget on 2 December? A. You need to clarify by what you mean by budget, I'm sorry, and I'd have to ask you to provide a copy of the minutes to clarify that, which I haven't seen since I left council. Q. Is this your evidence seriously: you cannot remember now whether the budget for this job in fact included the contingency? That's your evidence, is it? A. That's not what I'm saying. Q. Well, what are you saying? A. I'm saying to you that there was a report that went to council that included a guaranteed maximum price for the project and there would have also been included a contingency amount for council's usage in terms of unders and overs and any of the additions and deletions that council required given that this was a guaranteed maximum price contract. Q. When the budget was set, you didn't have, did you, the benefit of Austin's tender? A. We didn't have the benefit of Austin's tender. We had, however, an allocation of money that council could afford and we had an indication from the architect of the cost of the project and that was - - Q. Is the answer to my question no? A. Could you ask the question again, please. Q. At the time that council determined the budget for this project, you didn't have the benefit of Austin's tender, did you? A. No, that's correct. 286 Ms Rosser was not asked any further questions about the so-called "indication" from the architect, however it is apparent that in 2003 her memory was that there had been such an "indication". The difference between the architect giving an "indication" and the architect giving a "guarantee" as referred to in her evidence in these proceedings is of course a significant difference. The evidence in the Arbitration Proceedings extracted above demonstrates that in 2003 Ms Rosser did not have a specific recollection of a number of things including the terms of a conversation with Mr Brownlee and what actually occurred at the Council Meeting on 2 December 1998. Her memory was that there was a guaranteed maximum price contained in the report that went to Council for the Meeting on 2 December 1998. There was no such guaranteed maximum price in that report. Indeed there was no reference to a guaranteed maximum price. In these proceedings Ms Rosser claimed that it was Mr Davies who said to the Council that there was a GMP of $16.9 million, an alleged statement that has never been documented anywhere (except in the affidavits sworn seven and a half years later). 287 Ms Rosser claimed in her evidence in these proceedings that Mr Brownlee informed her that Mr Davies had advised him prior to the Council Meeting on 2 December 1998 that if the guaranteed maximum price methodology was pursued "the price would come in for 16.9 million dollars" (tr 215-216). Mr Brownlee was unable to corroborate this evidence. 288 It is difficult to accept that Ms Rosser's memory could have improved with time. Her lack of precision in recall at the time of her evidence in 2003 in the Arbitration Proceedings of the particular matters discussed at the Council Meeting of 2 December 1998 and/or the contents of the report to Council for that Meeting and the conversations with Mr Brownlee in 1999, means that the assessment of her precise recall some years later of what Mr Davies said at the Meeting should be approached with caution. 289 The delay in raising this matter or suggesting that Mr Davies made such a statement is a significant matter in considering whether Mr Davies made the statement at the Council Meeting on 2 December 1998. The delay is particularly relevant having regard to the fact that the very topic of when it was that the $16.9 million was discussed was the subject of correspondence between Mr Brownlee and Mr Davies in 1999, much closer to the time at which it is alleged Mr Davies made the statement. The correspondence extracted earlier in relation to the confusion about the fees in the plaintiff's 1999 PSP was at times lengthy and/or combative. Mr Brownlee took the opportunity in his letter of the 8 July 1999 to set out what he stated to be the "Council's understanding". That included the recounting of some history including the following: On the 2nd December 1998, Council resolved to undertake Option B, however, Michael Davies Associates had recommended to Council Officers prior to the 2nd December 1998 Council Meeting that the procurement method for delivering this project should be changed from 'Design Novate Construct' to Construction Management with a GMP and a 50/50 cost sharing arrangement. Michael Davies Associates recommendation was accepted and Council subsequently changed its method of procurement. This was reported to Council on 2nd December 1998. 290 There was no suggestion that at this meeting the Council resolved to adopt a budget of $16.9 million. There was no suggestion that at this meeting Mr Davies had given a presentation and an assurance to the Council in relation to a GMP of $16.9 million. The letter then referred to the meeting held on 3 December 1998, with no mention of any discussion of $16.9 million. The first mention of that figure was in the final paragraphs of the letter in which Mr Brownlee advised Mr Davies that Council resolved on 17 March 1999 to accept the tender from Austin for the GMP of $16.9 million. The letter then stated that Council subsequently advised the plaintiff in writing on 31 March 1999 of the "pro-rata-ed fee for the full documentation of the works" based on that figure. 291 If Mr Davies had given an assurance as claimed at the meeting on 2 December 1998 with reference not only to a GMP but also to the figure of $16.9 million, it is very strange that Mr Brownlee did not refer to this fact in his history of the matter in his letter of 8 July 1999. The absence of this reference in this particular letter is also a significant matter to be taken into account in deciding whether Mr Davies made the alleged statement at the Council Meeting on 2 December 1998. 292 It seems to me that Mr Saddick was somewhat confused about what occurred at the Council Meeting on 2 December 1998. The cross-examination extracted earlier demonstrates that although he claimed positively that the architect had said that any variations would increase the cost by 10%, he was unwilling to endorse such sworn evidence in his cross-examination. It is difficult to have any confidence in Mr Saddick's version of events at the Council Meeting. 293 Mr Keegan's affidavits were only sworn shortly before trial. He accepted that there was no "budget" for $16.9 million, but he claimed that if the amount had "gone over" such a figure it would not have been approved. He recalled Mr Davies giving a number of presentations in the latter half of 1998. His version of what Mr Davies said has some important differences to the identical claims made by Ms Rosser and Mr Brownlee. He did not suggest that Mr Davies likened the GMP to a lump sum contract. He claimed that Mr Davies qualified the assurance by the words "more or less" but claimed that Mr Davies did mention the figure of $16.9 million. Mr Keegan's claim that approval would not have been granted if the figure was greater than $16.9 million is very difficult to accept when it is remembered that less than two weeks later the Council issued the Invitation to Tender with a figure of $17 million within it. 294 The Invitation to Tender issued by the Council on 14 December 1998 referred to the Council's "anticipation" that the cost of the works to be managed would be $17 million. That Invitation did not stipulate that the costs had to be guaranteed at that figure nor was it suggested that this was the Council's budget. It was referred to only as an "anticipation". I accept Mr Davies' evidence that the figure of $17 million was used for commercial reasons and I also accept that this was a device used to attempt to bring tenders in at less than the Council's then total budget of $19.8 million. If the Council had decided that its construction/management budget was $16.9 million, commercial commonsense would suggest that it would not invite tenders at an "anticipated" figure $100,000 greater than its budget. The wording of this document militates against the Council having adopted a budget of $16.9 million at the Meeting or Mr Davies giving an assurance that the cost would not go above $16.9 million. 295 Mr Faulkner's submission that it is glaringly improbable that these witnesses could all have been mistaken must be assessed in the light of the contemporaneous and other relevant documents. There is simply nothing in any document over all the years since 2 December 1998 to suggest that Mr Davies ever made the alleged presentation or statement at the Council Meeting on 2 December 1998. Indeed the documents seem to me to militate against Mr Davies having made such a statement. 296 After the tenders came in at around $22 million in January 1999, over $1 million more than the quantity surveyor's estimate of $20.9 million, Mr Brownlee, on his version of the conversation, informed Mr Davies that savings had to be found to bring the Project down to $16.9 million otherwise it would not proceed. The file note of the Meeting on 27 January 1999 noted that its purpose was to discuss potential deletions from the Project "to reduce the cost to the project budget of M$17.0". Mr Brownlee was present at that meeting as was Mr Davies. If the budget was $16.9 million and not $17 million it is reasonable to expect that there would be recorded somewhere between 2 December 1998 and 27 January 1999 the fact that the Council had adopted such a budget. I find it very difficult to accept in the light of the absence of any document in all those weeks referring to such a figure, that such a figure was in fact mentioned, let alone adopted, by the Council at the Meeting on 2 December 1998 as its budget or that Mr Davies was given an instruction that the budget was $16.9 million. I prefer the evidence of Mr Davies that the figure referred to by Mr Brownlee was $17 million. 297 I do not accept that Mr Brownlee said to Mr Davies on 3 December 1998 that the Council's budget for the Project was $16.9 million. I do not accept that Mr Brownlee informed Mr Davies on 3 December 1998 that the plaintiff's fees were to be adjusted on a pro-rata basis for an increase of costs to $16.9 million. I am satisfied that it is more probable than not that when the tenders were received in late January 1999 the Council reviewed the position before it gave instructions to Mr Davies to issue the Post Tender Notices and/or to attempt to bring the costs of the Project down. 298 Mr Faulkner's submission that it is glaringly improbable that four witnesses could all be mistaken is, prima facie, powerful. The witnesses appeared to be trying to do their best in the extraordinary circumstances of having to recount what occurred at an obviously very busy Council Meeting almost nine years after the event and then without any record of the alleged statement to assist their memories. It is obvious that there were a number of presentations made by Mr Davies in relation to the Project. It is probable that in August/September 1998 after he raised it in his August letter, Mr Davies spoke with officers of the Council to explain the nature of the construction management method of procurement with a guaranteed maximum price. However, I am not satisfied that this occurred at the Council Meeting of 2 December 1999. Mr Keegan's emphasis that if the cost had gone over $16.9 million he would not have voted in favour of the Project is in my view a reconstruction. It could hardly have been Mr Keegan's position as at 2 December 1998 that $16.9 million was the figure above which the costs could not go, when the Invitations to Tender went out with the "anticipation" of the cost at $17 million. The burden on these witnesses was in my view quite intense. Some of them had been subjected to cross-examination in other proceedings where a myriad of suggestions had been made to them about the Project. Memory is a complex phenomenon. The impact of delay and the intrusion of suggestions made in prior cross-examination do little to assist clarity. When these factors exist, reliance on documentary material that is contemporaneous or closer to the time of the alleged events is to be preferred. 299 There was obviously some discussion about the nature of a GMP with the Council officers at some time and there was obviously discussion about the Council's budget of $17 million, rather than $16.9 million, in late January 1999. However I am satisfied to the requisite standard of proof that Mr Davies did not make the alleged statement at the Council Meeting on 2 December 1998. Accordingly the Council's claims in relation to these representations also fail. The Council's Cross-Claim will be dismissed. Conclusion 300 The plaintiff is entitled to judgment in its favour to include the amounts referred to earlier in these reasons together with the amounts the subject of agreement between the parties in respect of the variations. The plaintiff will have liberty to make application in respect of any increase in its fees consequent upon the arbitral award. The Council's Cross-Claim is to be dismissed. The parties are to file Short Minutes of Order reflecting these findings together with agreed orders on interest and costs. If the parties are unable to agree on those orders I will hear argument when the matter is listed for the filing of Short Minutes, such listing to be arranged with my Associate by no later than 31 August 2007. ******************** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.