Supreme Court New South Wales Medium Neutral Citation: Cenric Group v TWT Property Group [2018] NSWSC 1570 Hearing dates: 30/07/2018, 31/07/2018, 01/08/2018, 10/09/2018, 11/09/2018 and 12/09/2018 Date of orders: 18 October 2018 Decision date: 18 October 2018 Jurisdiction: Equity - Technology and Construction List Before: McDougall J Decision: See at [266]. Parties to bring in draft orders. Catchwords: CONTRACT – where parties entered into various contractual arrangements to harvest sandstone – which party is entitled to share in royalties from that harvesting – on what terms must the royalties be paid – when must payment of royalties be made. CONTRACT – whether an oral agreement or variation was made – enforceability and effect of that variation – whether contracts validly terminated – construction of the terms of contracts and subcontracts – importance of not using a hindsight view of commerciality to disregard the terms of the contract. BUILDING AND CONSTRUCTION – where milestone dates were missed – liquidated damages – application of prevention principle prevents award of such damages. Legislation Cited: Civil Procedure Act 2005 (NSW) Conveyancing Act 1919 (NSW) Environmental Planning and Assessment Act 1979 (NSW) Cases Cited: Armory v Delamirie (1722) 1 Strange 505; 93 ER 664 Beatty v Guggenheim Exploration Co (1919) 225 NY 380 Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 Fortescue Metals Group Ltd v Commonwealth (2013) 250 CLR 548 GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1 Hawcroft General Trading Co Pty Ltd v Hawcroft [2017] NSWCA 91 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41. Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 Jones v Dunkel (1959) 101 CLR 298 LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (No 2) (1990) 24 NSWLR 499 McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457. MWB Business Exchange Centres Ltd v Rock Advertising Ltd [2018] 2 WLR 1603 Peter Turnbull & Co Pty Ltd v Mundus Trading Co Australasia Pty Ltd (1954) 90 CLR 235 Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82 Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 Spiers Earthworks Pty Ltd v Landtec Projects Corp Pty Ltd (No.2) (2012) 287 ALR 360 Watson v Foxman (1995) 49 NSWLR 315 Category: Principal judgment Parties: Cenric Group Pty Ltd (First Plaintiff) TWT Property Group Pty Ltd (First Defendant) Bundanoon Sandstone Pty Ltd (Second Defendant) Representation: Counsel: CRC Newlinds SC / D Hughes / R Thrift (Plaintiff) B DeBuse (First Defendant) M Ashhurst SC (on 30/07/2018 – 01/08/2018) / F Corsaro (on 10/09/2018 – 12/09/2018) SC / G Gee (Second Defendant) Solicitors: File Number(s): 2018/99816 Judgment 1. HIS HONOUR: Many public buildings, in particular those dating from the 19th century, are built from sandstone. The repair and maintenance of those buildings requires fresh supplies of sandstone. Accordingly, sandstone (specifically, Sydney yellow block sandstone) is a valuable resource. The fundamental issue in these proceedings is: which of the three parties are entitled to share in royalties from the harvesting of sandstone at a development site in Pyrmont, and in what amounts? Background 1. The plaintiff (Cenric) is a construction company. Its activities include the management of large scale demolition and excavation works. The director of Cenric is Mr William Tambouras, but its activities are controlled, at least from day to day, by his son Mr Steven Tambouras. For convenience, and without intending to be patronising or disrespectful, I shall refer to them as "William" and "Steven" respectively. 2. The first defendant (TWT) is the developer of a site at Harris Street, Pyrmont. As I understand it, TWT is not the owner of the site (or, at least, of the whole of the site) but represents the owners. The proceedings were conducted on the basis that TWT was in practice, if not in law, the owner. 3. The chairman of TWT, and the person who appears to have substantial responsibility for controlling its activities, is a Chinese national, Mr Tian. Mr Gavin Zhang is a director of TWT, with responsibility for the day to day conduct of its activities in this state. 4. The second defendant (Bundanoon) has substantial experience in the harvesting and sale of sandstone. Its director, and the person who controls its activities, is Mr Troy Stratti. 5. TWT obtained approval to carry out a development on the site, involving the construction of a multi-dwelling building. It was a condition of the consent that TWT should investigate and assess the sandstone within the site boundaries to see whether there was any that could be salvaged and reused. 6. Cenric had tendered for the early works (demolition, removal of contaminated material, shoring and excavation). In April 2017, TWT invited Cenric to resubmit that tender. Cenric did so. At that time, TWT did not think that the sandstone on the site was of any value. Its development manager, Mr Nelson Silva, wrote to Cenric on 17 May 2017, confirming that Cenric would "assist [TWT] with the geotechnical reports that will be needed to confirm that the sandstone isn't suitable for harvesting". 7. Cenric and TWT signed the head contract on 20 June 2017. 8. Cenric's inquiries identified two potential subcontractors who could harvest the sandstone: Gosford Quarries and Bundanoon. On 26 June 2017, Bundanoon provided a proposal for a "full excavation package" (the precise content of that package is in dispute). Bundanoon's proposal included removal of overburden at specified rates per cubic metre, and harvesting and facilitating the sale of the underlying sandstone at its own cost. It offered to pay a royalty per cubic metre to Cenric. The amount of the royalty would depend on the classification of the sandstone. 9. Cenric provided Bundanoon's proposal to TWT. TWT agreed that Cenric could engage Bundanoon as a subcontractor. On 30 June 2017, Cenric and TWT agreed on a harvesting proposal and for a split of the royalties that would be payable. That was done by letter. It is common ground that the letter had the effect of amending the head contract. 10. Bundanoon started work on site in early July 2017. Mr Stratti said that it did so at day rates for labour and at the quoted rates for removal of spoil. The subcontract was not signed until about 6 November 2017. When Mr Stratti signed it for Bundanoon, he dated it 27 June 2017. 11. The harvesting methodology required the removal of overburden, which comprised both general solid waste (GSW) and, underneath it, virgin excavated natural material (VENM). Once sandstone was reached, at about RL 23, the proposal was to excavate it in three strata, or benches. Removal of overburden was substantially complete by 12 October 2017 and thereafter Bundanoon commenced the work of harvesting. The first block was removed on 3 November 2017 (that is, before the subcontract was signed). 12. The approved level to which excavation could be performed was RL 18.5. Geological testing suggested that there was further harvestable sandstone below that level. The parties referred to this as the fourth bench, or the s 96 sandstone (referring to the need for amendment to the development consent, pursuant to s 96 of the Environmental Planning and Assessment Act 1979 (NSW) (the EPA Act), to excavate below RL 18.5). 13. A number of disputes broke out. TWT expressed dissatisfaction with Cenric's rate of progress. Cenric, in turn, said that TWT had been responsible for various delays, and that otherwise responsibility for the delays lay with Bundanoon. TWT and Cenric became concerned at Bundanoon's failure to pay any royalties for sandstone that had been harvested. Bundanoon became unhappy because TWT had sought to ascertain the price at which Bundanoon was selling sandstone to the Department of Public Works and Services (DPWS) [1] . While all this was going on, the parties were considering whether, and if so how, to harvest the s 96 sandstone. 14. Everyone agrees that there was a meeting on 19 February 2018, attended by representatives of TWT, Cenric and Bundanoon, and that there was an agreement of some form reached at that meeting. There is a dispute as to what precisely was agreed. That is the subject of the first and second issues. 15. Stated very briefly, what happened after the meeting was this. TWT gave Cenric a show cause notice, based on Cenric's failure to reach practical completion by the required date. The notice required Cenric to show cause why TWT should not take the balance of the head contract works out of its hands. Cenric sought to show cause. TWT was not persuaded. It took the balance of the works out of Cenric's hands, and contracted with Bundanoon direct to perform them. It also contracted with Bundanoon direct for the harvesting of the s 96 sandstone. 16. There are very significant factual disputes as to those events. It will be necessary to return to the detail, but what I have said is, I think, sufficient to enable an understanding of the agreed issues. The agreed issues 1. The parties produced, late in the day, an agreed statement of the real issues in dispute. Unfortunately, despite the time taken to prepare that document, it remains somewhat repetitive. It could have been a lot more helpful had the parties paid more attention to its drafting. Having said that, I set out the issues substantially as they were agreed, although with some stylistic changes: Cenric's claim against TWT Did TWT, Bundanoon and Cenric agree on 19 February 2018 to extend the works under the Head Contract to include the harvesting of Bench 4, and if so, what other terms were agreed? If any agreement was formed on 19 February 2018, was the agreement unenforceable because it was not in writing? Did TWT validly issue a show cause notice and take the works out of Cenric's hands, and if not: is Cenric entitled to damages? in what amount? TWT's defence to Cenric's claim Was Cenric's failure to reach practical completion by the due date 28 November 2017 in relation to the Head Contract a substantial breach of that contract? At the time the works were taken out of Cenric's hands had all of the sandstone capable of being harvested down to the RL approved under the development determination been harvested? was Cenric entitled to claim a royalty in respect of any sandstone harvested portions of which lay below the RL approved under the development determination ? In relation to the alleged settlement agreement was such an agreement dependent upon: there being a variation to the contract given in writing in accordance with the contract; there being a variation to the royalty payable under the contract pursuant to an agreement between TWT and Bundanoon and Bundanoon and Cenric and did this happen. Cenric's claim against Bundanoon Are royalties for sandstone under the subcontract to be calculated on the gross volume of each block harvested from the site, or on the measurements of the stone made by the NSW DPWS for the purposes of purchasing the stone from Bundanoon? If 'gross volume' how is the gross volume of the (irregular shaped) blocks measured pursuant to the terms of the sub-contract. Was Bundanoon justified in terminating the subcontract? If Bundanoon validly terminated the subcontract on 19 March 2018 what effect, if any, does that have on Cenric's entitlement to a royalty? In particular: Is Cenric entitled to a royalty for sandstone: harvested prior to the termination? harvested and sold prior to termination? harvested and sold and for which funds have been received prior to termination? what volume of sandstone, and in what grade, was: harvested before termination? harvested and sold prior to termination? harvested and sold and for which funds have been received prior to termination? How are the blocks that have not been sold 'graded' under the terms of the sub-contract? Is Cenric entitled to a royalty for Bench 4 and, if so, what volume and grade of sandstone has been harvested from Bench 4? Once the harvesting of the sandstone has commenced: is Bundanoon entitled to be paid a rate by Cenric for the removal of crushed sandstone? is the crushed sandstone 'Third Class Sandstone' within the meaning of the subcontract? On a proper construction of the Subcontract, when is Cenric entitled to be paid royalties by Bundanoon? What are the terms of the trust upon which Bundanoon was: entitled to sell the sandstone; and required to hold any proceeds/royalties for Cenric? Is Bundanoon entitled to a set-off based on unpaid work under the subcontract? Does Cenric have any entitlement to liquidated damages against Bundanoon or an indemnity under clause 27 of the Subcontract? TWT's cross-claim against Cenric Did Cenric mislead TWT as to the appropriate sandstone subcontractor? If so, what is the remedy? Did Cenric owe or breach any fiduciary obligation to TWT? What royalty is Cenric obligated to pass on to TWT? Did Cenric breach the Head Contract, by: breaching its obligations under clause 28A; and/or failing to complete the WUC diligently and with due expedition and without delay and/or by the date for Practical Completion? What amount, if any, is TWT entitled to claim from Cenric for liquidated damages? What amount, if any, is TWT entitled to claim for the cost to complete the works? When is or was Cenric obliged to pay TWT for the sandstone harvested: two weeks after the individual block harvested was classified and identified at the site; when the whole of the sandstone was harvested; when the sandstone was sold and in respect of each sale that occurred; a reasonable time after the sale took place; when Cenric or Bundanoon received payment? Some other time? As a result of the variation in the 30 June letter agreement what is the maximum amount of royalties that Cenric is entitled to retain? What orders should be made as between Cenric Bundanoon and TWT in relation to the payment of money received by Bundanoon to Cenric and TWT in respect of any royalties determined to be owing Relevant terms of the head contract 1. The head contract comprised a formal Instrument of Agreement, General Conditions of Contract (adapted from AS4000-1997), a Schedule, and a number of "Parts" or annexures. 2. By cl 3 of the Instrument of Agreement, Cenric was obliged to "carry out and complete the WUC in accordance with the Contract". The contract sum was specified at $2,229,172 excluding GST but subject to adjustment. 3. The WUC (works under the contract) were described in Part E, but nothing of present moment turns on their precise description. 4. Clause 4 of the General Conditions required the WUC to be carried out in separable portions, each with its own scope, date for practical completion and liquidated damages. Those portions were defined in the Annexure Part A. Nothing turns on the detail. 5. Clause 5.1 required Cenric to give security in accordance with item 13 of the schedule. That item required two unconditional bank guarantees, with no expiry date, each for 2.5% of the contract sum, with a maximum security of 5% of the contract sum. Cenric provided security accordingly. 6. Clause 9.2 required TWT's consent (not to be unreasonably withheld) to subcontracting any part of the WUC. Cenric obtained TWT's approval to its subcontract with Bundanoon. 7. Clause 28A dealt with "Sandstone". It provided as follows: 28A Sandstone a) Part of the WUC will involve the excavation of sandstone. b) The Contractor must investigate the saleability of the sandstone, including the manner in which the sandstone should be excavated and otherwise handled so as to maximise the potential to sell the sandstone for the greatest possible price. c) Within 5 business days of the date of execution of the Contract, the Contractor must provide to the Project Manager a report (Sandstone Management Report) setting out: i) the findings of the investigation referred to in clause 28A(b); and ii) consistent with the findings of the investigation, the Contractor's methodology for the excavation and handling of the sandstone excavated in the course of the WUC. d) When sandstone is encountered in the course of the WUC, the Contractor must: i) promptly (and before distributing the sandstone) notify the Project Manager in writing; ii) excavate and otherwise handle the sandstone in accordance with the Sandstone Management Report; and iii) take all reasonable steps to promptly sell the sandstone that is excavated. e) The Contractor must report all such sales of sandstone to the Project Manager, providing details of the quantity sold, the purchaser and the price paid. f) Within 5 business days of any sale of the sandstone, the Contractor must pay to the Principal an amount equal to 50% of the net value of the sandstone sold, being the purchase price paid for the sandstone, less the Contractor's reasonable costs incurred in selling the sandstone (other than the costs that would have been incurred by the Contractor had the Contractor disposed of the sandstone rather than selling it). 1. It is common ground that cl 28A was amended by the letter of 30 June 2017. For convenience, I set out the text of that letter (omitting formal parts) at this point: With respect to clause 28A of the Contract we note that you have provided a Sandstone Management Report from Bundanoon Sandstone dated 26 June, 2017. Pursuant to the terms of the contract we direct the methodology and process proposed in that Report be adopted on the following terms and conditions: Quantities of sandstone referred to in the report are based on the excavation proposed and approved in the current Development Approval No. D/2016/916 Whilst the anticipated yield of sandstone will likely exceed the minimum quantities noted of 1,000 cubic metres of each of the First Class, Second Class and Third Class sandstone, the Principal is guaranteed this minimum yield. The rates to apply to the sale of the harvested sandstone is $1,000 per cubic metre of First Class Sandstone $700 per cubic metre for Second Class Sandstone $500 per cubic metre for Third Class Sandstone Any sandstone of each of the above classes that is harvested is to be sold and the same rates apply. In this respect we note that these quantities are minimum estimates only and greater quantities are anticipated. In addition the Principal may make an application for approval for modification to the DA to allow additional excavation, which may increase the quantity of sandstone or any or either of these classes, and in which case again the same rates will apply. Pursuant to clause 28A(f) of the Contract the Principal is entitled to receive a payment amount which will be calculated based on the applicable rates noted in this letter for sandstone excavated and is to be paid within 2 weeks after completion of the excavation of the sandstone. In circumstances where the quantity of sandstone is beyond current estimates, or the quantity of First Class or any of the other classes of Sandstone extracted exceeds current estimates, the maximum additional payment to the Contractor under Clause 28A of the Contract is the amount of $2million with the balance and/or all other amounts realised on the sale of the sandstone in its entirety to be paid to the Principal. We have agreed with you for a 3.5 week extension of the date for practical completion for the harvesting works to be conducted and completed, without any delay damages, prolongation cost or other payment being claimable or payable as a result of such extension of time. For the purposes of clause 28A(e) the Principal directs that a representative of the Principal must be present and agree and certify the quantity of sandstone and the class of that sandstone, before that sandstone is removed from the site. Please acknowledge receipt and your agreement with the above by signing and returning a copy of this letter. 1. The letter was signed by Mr Silva as TWT's development manager. William signed it to signify Cenric's acceptance of the terms set out in the letter. 2. Clause 34.1 of the General Conditions required Cenric to proceed diligently with the WUC, and to ensure that they reached practical completion by the date for practical completion. Clause 34.2 provided for notice of delay and cls 34.3 and following dealt with extensions of time. 3. Clause 34.7 dealt with liquidated damages. There were separate rates for the separate separable portions of the works (defined in part A; their definition is not of present importance). By cl 34.7(e), Cenric's total maximum liability for liquidated damages was limited to 10% of the contract sum. The parties agreed that the amount of liquidated damages is therefore capped at $222,917.20. 4. Clause 39 dealt with the topics of default and insolvency. By cl 39.2, if Cenric committed a substantial breach, TWT could give a written show cause notice. Substantial breach was defined (without limitation) to include failure to proceed with due expedition and without delay. Clause 39.3 dealt with the content of a show cause notice. Clauses 39.4 and 39.5 dealt with the consequences should Cenric fail to show reasonable cause in accordance with the notice. I set out cl 39.4 (the detail of cl 39.5 is of no present relevance): 39.4 Principal's rights If the Contractor fails to show reasonable cause by the stated date and time, the Principal may by written notice to the Contractor: a) take out of the Contractor's hands the whole or part of the work remaining to be completed and suspend payment until it becomes due and payable pursuant to subclause 39.6; or b) terminate the Contract. Upon either event, the Principal may require the Contractor to answer any questions and provide any information that the Principal may require in relation to any subcontractors of the Contractor including: i) the amount of work the subcontractors have completed; ii) the amount of money the Contractor has paid the subcontractor with regard to WUC; iii) any monies that have been claimed by the subcontractor but not yet paid and whether the Contractor considers that money to be due and owing or about to become due and owing; iv) whether the subcontractor has caused delay; and v) whether the subcontractor has carried out the WUC in a good and workmanlike manner and/or whether there are defects in the WUC undertaken by the subcontractor. This obligation survives any termination of the Contract. 1. Clause 40A gave TWT a right, exercisable "at any time and for any reason", to terminate the head contract for convenience on 10 days' notice. If TWT exercised that right, it was required to pay Cenric, in effect, the value of all work done and goods and materials ordered up to the time of termination, together with $5,000, and to release all security provided. Relevant terms of the subcontract 1. The subcontract is a difficult document. Part of the difficulty relates to the fact that it was signed about four months after work commenced, and at a time when some of its provisions might have been thought to have been overtaken by progress (or lack of it) on the site. There is, in addition, some internal inconsistency between important provisions of the subcontract. 2. Clause 3 dealt with performance of the Subcontract Works. I set it out: 3 Performance of Subcontract Works The Subcontractor agrees to perform and complete the Subcontract Works: (a) in accordance with this Subcontract including without limitation the Drawings and Specifications as may be varied pursuant to this Subcontract; (b) in a manner which is fit for the proper purpose of the Subcontract Works; (c) so as to ensure compliance with all Building Laws, WH&S Laws and all other laws and requirements of any authority or government agency having jurisdiction over the Subcontract Works; (d) in a timely manner and so as to: (i) achieve each Milestone by the applicable Milestone Date; and (ii) bring the Subcontract Works to Completion by the Date for Completion; (e) in co-operation with the Contractor and the work of other trade contractors engaged by the Contractor, and so as to minimise interference with their other work, and to secure the completion of the Project in the most efficient manner; (f) using good quality, proper and workmanlike construction practices; and (g) in accordance with all directions given by the Contractor's Representative. 1. By cl 1, the Subcontract Works are define to mean "the whole of the work described briefly in Item 3 of Schedule A". That item describes the works as "Demolition, Shoring Excavation and Sandstone Harvesting". Nothing in either the definition of Subcontract Works or in Item A refers to Schedule E, which sets out in more detail the scope of the Subcontract Works. 2. Clause 1 defined the Milestones to mean those activities "critical to the timely performance of the Subcontract Works specified in Schedule G". That schedule sets out some four Milestones, with their corresponding dates for achievement: * Commencement of excavation, 28 June 2017; * Completion of excavation, 6 September 2017; * Commencement of sandstone harvesting, 7 September 2017; and * Completion of sandstone harvesting, 1 November 2017. 1. Clause 17 dealt with time and extension of time. Paragraph (a) required commencement of works on the "Date for Commencement" specified in Schedule A. Helpfully, no such date was specified. 2. Paragraph (b) required Bundanoon to "perform the Subcontract Works to meet each Milestone by no later than the applicable Milestone Date". Paragraphs (c), (d) are relevant for a particular reason. I set them out: (c) If at any time the performance of the Subcontract Works is likely to be delayed, the Subcontractor shall immediately give written notice to the Contractor specifying the cause or causes of such delay and the likely length of the delay to any Milestone Date and the Date of Completion. (d) If any activities critical to the achievement of a Milestone by the applicable Milestone Date or of Completion by the Date for Completion are delayed by a Qualifying Cause of Delay and such activities are not concurrently delayed by another, non-qualifying cause of delay, and if within seven days after the Qualifying Cause of Delay of the delay first arising the Subcontractor gives the Contractor's Representative a written claim for an extension of time for Completion setting out the facts on which the claim is based, the Subcontractor shall be entitled to claim an extension of time to the affected Milestone Date(s) and to the Date for Completion. 1. Clause 27 deals with liquidated damages. I set it out: 27 Liquidated damages (a) If the Subcontractor fails to achieve a Milestone by the date required under the Construction Program or to bring the Subcontract Works to Completion by the Date for Completion, the Subcontractor shall pay or allow the Contractor liquidated damages at the rate specified in Item 15 of Schedule A for each calendar day that achievement of the Milestone is delayed or that Completion of the Subcontract Works occurs after the Date for Completion. (b) The Subcontractor acknowledges and agrees that the liquidated damages payable under clause 27(a) are a genuine and reasonable pre-estimate of the loss likely to be suffered by the Contractor as a consequence of delay to the Project if the Subcontractor fails to achieve a Milestone by the date required under the Construction Program or to bring the Subcontract Works to Completion by the Date for Completion. (c) If the Subcontractor fails to Complete the Subcontract Works by the Date for Practical Completion and the Contractor becomes liable for liquidated damages for delay in achievement of Practical Completion under the Head Contract, in addition to the Subcontractor's liability under clause 27(a), the Subcontractor shall also indemnify the Contractor for its liability for liquidated damages payable under the Head Contract (in the amount specified in Item 16 of Schedule A) to the extent that liability is caused by the delay by the Subcontractor in Completion of the Subcontract Works. 1. Schedule E divides the Subcontract Works into six elements. I set out cl 1.2: Outline Summary of the Work Elements This Scope of Works relates to the following elements of work: 1. Site Preparation & Environmental Controls; 2. Demolition; 3. Shoring 4. Excavation to nominated RL; 5. Sandstone Extraction 6. Reinstatement of Sandstone Wall adjacent to the Childcare 1. Work element 3 is curious. One might have thought from Schedule A (see at [34] above) that shoring formed part of the Subcontract Works. However, Schedule E suggests that it is not work to be done by Bundanoon. I set out what Schedule E says as to this work element: Work Element 3 – Shoring: a. Allow for co-ordination and co-operation with other contractor including, but not limited to the shoring subcontractor. b. The subcontractor is to excavate any loose fill to allow for the installation of the approved shoring system to be done by others. c. The subcontractor is responsible for removing all spoil from site in a safe manner which adheres to all authority requirements, relevant standards, the BCA and Cenric. d. The supply and installation of any reinforcement and concrete to be done by others for the shoring system. 1. Work element 4 comprises excavation to the nominated RL. It includes removal of excavated materials. There are two excavation rates quoted: one ($95 per m³) for "rigid transport no trailer" and another ($85 per m³) for "truck and trailer". I set it out: Work Element 4 – Excavation to Nominated RL: a. Before onsite works commence, the subcontractor will provide to Cenric an excavation plan prepared by a licenced excavation contractor who is registered with SafeWork NSW. A SafeWork NSW Permit must be obtained prior to any excavation taking place. b. The subcontractor is to allow for all bulk excavation and associated works in accordance with the contract documentation, BCA, authority requirements and relevant standards. c. Bulk excavation to basement variable RL's as per the Architectural plans listed in the tender documentation and as per the direction of the sandstone extracting subcontractor. d. Bulk excavation and grading of driveway as per architectural RL's where applicable and as per the direction of the sandstone extracting subcontractor. e. Cartage and disposal of bulk excavation material as per the tender documentation and the DA Conditions of Consent. f. Supervision of all labour, plant and equipment. g. The subcontractor is to allow for all works to be carried out in accordance with Construction Certificate No. 7072-01-2017-CC issued 9th March 2017. h. The subcontractor is to allow to make good any areas where over-excavated or pay for costs involved with the site remediation and bulk excavation. i. The subcontractor is to supply all labour, plant and equipment for the duration of the project. j. All bulk out material is to be removed by Bogie only unless arranged otherwise through the Contractor and relevant Authorities. The contractor is to assist in exploring the possibility of truck and trailer from Harris Street. k. Shall provide all dockets associated with the removal of any waste including all contaminated materials. A waste recycling report will be provided at end of excavation works. l. The subcontractor shall provide all site preparation necessary to enable the commencement of bulk excavation and any other ground works. m. The subcontractor is to notify the neighbours via letterbox drops of the planned excavation works and any asbestos removal if any. n. The subcontractor must ensure that it coordinates with the contractor/nominated shorting contractor, to assist with excavation, where necessary as requested by the nominated shoring subcontractor. o. Excavation Rates includes: i. $95 per cubic meter (rigid transport no trailer) 'Bogie only' ii. $85 per cubic meter (truck and trailer) p. The approximate time for the excavation component only is 8 to 10 weeks. 1. Work element 5 deals with sandstone extraction. I set out the whole of that work element: Work Element 5 – Sandstone Extraction: a. The full excavation package including the reinstallation of the sandstone wall adjacent to the childcare b. The subcontractor during the initial excavation works is to prepare the job site to conduct a salvage preparation period where essential information will be gathered in order to prepare the site for a successful yellow block harvest. c. The approximate time for the sandstone harvesting only is 6 to 10 weeks, in which these works run concurrently with the Excavation works. d. The proposed [sic] to harvest yellow block sandstone will need to adhere to the DPWS – Public Buildings Stone Program 'stone supply' requirements. e. The sale of the sandstone harvest to the Government or private buyer will be facilitated by Bundanoon Sandstone. f. The sandstone harvesting cost will be funded from the sale of the sandstone harvest and no claim will be submitted to Cenric or TWT for this process. g. The subcontractor anticipates that based on current geotechnical and building design information, sandstone harvest yield of 1000 – 2000 cubic meters of first class yellow block sandstone is estimated as a minimum. h. Royalty offer payable to Centric Group for the yellow block sandstone by Bundanoon Sandstone includes: i. First Class Sandstone: $1,000 per cubic metre ii. Second Class Sandstone: $700 per cubic metre iii. Third Class Sandstone: $500 per cubic metre i. 'First Class Sandstone' any stone which meets the standards for the DPWS in relation to engineering, aesthetic causes, empirical testing (and any other quality testing required by DPWS) as restoration quality, 'yellow block' sandstone. j. 'Second Class Sandstone' any stone suitable for restoration use either by DPWS or private parties but falling [sic] to meet the requirements of 'yellow block'. k. 'Third Class Sandstone' any other sandstone having commercial value but not suitable for restoration purposes. 1. It is convenient at this point to refer to a letter of 24 October 2017 from Bundanoon to Cenric. Although that letter was not a contractual document, it identified what it called the "Zone of Offer". That zone was said to be within the site. It was described as follows: The current Zone of Offer is located between RL23 and RL19.8 (within the Current DA Consent) consisting of two quarry block benches, approximately 1.25m deep per bench. Bundanoon Sandstone estimate the yield from the two benches within the current Zone of Offer to be approximately 1500 cubic meters per bench, with a total of 3000 cubic metres. Of these 3000 cubic meters available, Bundanoon Sandstone expect a yield of 1500 cubic meters (750 cubic meters per bench) of first grade quarry blocks. Please also see the 'Zone of Offer Model' (attached to the end of the document) which details the harvesting area and depth correlated in the core sampling areas. 1. The description was illustrated by reference to a computer-generated model, but there is no need to refer to that model. The witnesses 1. Each party called three witnesses of fact. Cenric's witnesses were William, Steven, and Mr Yanni Kouzinos. Mr Kouzinos is, and at the relevant time was, an engineer employed by Cenric. 2. TWT called Mr Silva, Mr Zhang and Mr Francis Lau. Mr Lau is a quantity surveyor. The firm for which he works was contracted to provide services in connection with TWT's development of the site. 3. Bundanoon called Mr Stratti, Mr Khalid Alali, and Mr Ronald Powell. Mr Alali is and was an engineer employed by Bundanoon. Mr Powell is a stonemason. He had worked for DPWS for a number of years. Of present relevance, he was contracted to provide services to DPWS in connection with the grading and acquisition of sandstone harvested from the site. 4. If there were an attack made on the credibility of Mr Kouzinos, it failed. I find that he was an honest witness who sought to tell the truth to the best of his ability, and whose evidence was accurate. There was no attack on the credibility of Messrs Alali and Powell (indeed, the latter was not required for cross-examination). I accept that each of them was an honest witness who sought to give accurate evidence to the best of his ability. 5. It is self-evident that each of William, Steven and Mr Stratti has a significant interest in the outcome of the litigation. I accept that in each case, that interest would tend, even if only unconsciously or subconsciously, to detract from the quality of their evidence. 6. Likewise, in my view, each of Mr Zhang and Mr Silva has an interest in the outcome of the litigation. That interest is not identical to the direct financial interest of the three that I have just discussed (through their respective companies) but it is nonetheless real. Again, the possibility of that interest to detract from the quality of their evidence must be acknowledged. 7. The credibility of William and Steven was attacked, on the basis that Steven had sought in effect to conceal the fact that he was the true directing mind of TWT, and that William was merely a front. That submission was based on the fact that Steven is, and at all material times was, an undischarged bankrupt. It was put to Steven that he had sought to create the illusion, in his contemporaneous emails, that William was the decision maker; but that the true position was that decisions were made by Steven. 8. I think that this attack rather miscarried. It is clear that Steven has and had the principal responsibility for the conduct of Cenric's operations. I do think that his attempts to deny this lacked credibility. To an extent, however, I think that Steven was seeking to show what might be thought to be appropriate deference to his father William. Whether or not that is so, there is no real connection between this aspect of Steven's evidence, and his evidence on matters that were directly in issue. 9. On the crucial events, I regard Steven as a witness who, in general, sought to give accurate and honest evidence. In particular, when it comes to the key disputes of fact, Steven's evidence is to be preferred to the contradicting evidence because in some cases it is supported by contemporaneous documents or otherwise corroborated, and in other cases it is consistent with the probabilities as they existed at the time, viewed objectively. In addition, for the reasons to which I will turn in a moment, the contradicting evidence is itself unsatisfactory. 10. I do not think that William had any great knowledge or memory of relevant events. His involvement in them was (despite his position as titular head of Cenric) relatively peripheral. I do not think that William sought consciously to mislead the court. But having said, that I do not regard his evidence as having any great weight. 11. There is a very real problem with the evidence of Messrs Zhang and Silva. Mr Zhang's evidence of the events of 19 February 2018, as contained in his first two affidavits, was inconsistent with a file note that he made at the time. I deal with this in more detail below [2] , when I consider the events of that meeting. The inference that I draw from the whole of the evidence is that Mr Zhang at first (that is, in his first two affidavits) sought to conceal the fact that he had prepared a file note, because he recognised that it was inconsistent with what he said in those affidavits. 12. The extent of the inconsistencies, and their impact on the quality and credibility of this aspect of Mr Zhang's testimony, were exposed in cross-examination. There is no need to set out the detail. 13. Mr Silva's evidence of the meeting of 19 February likewise suffers from the unfortunate fact that it is inconsistent, in important respects, with Mr Zhang's file note. Further, Mr Silva's evidence was inconsistent with what in my view was the truth of things as it was finally and reluctantly conceded by Mr Zhang in cross-examination. The inconsistencies between the truth so exposed and the fiction to which Mr Silva sought to adhere were also exposed in cross-examination; and again, there is no need to go to the detail. 14. That unsatisfactory and unacceptable aspect of the evidence of each of Messrs Zhang and Silva relates to what is really the key factual dispute between Cenric and TWT. In my view, their affidavits (the first two, in Mr Zhang's case) were misleading, and intended to be so. The result is that I have real difficulty in accepting either of them as a witness of truth. Where their evidence conflicts with that of Steven (in particular), I prefer Steven's. 15. Mr Stratti's evidence had a chameleon-like quality. Where it concerned events that were irrelevant to Bundanoon, he was an impassive and in my view truthful witness. However, where Bundanoon's interests were concerned, the quality of Mr Stratti's evidence changed significantly. That can be seen most clearly in evidence that Mr Stratti gave concerning an invoice that he sent Cenric on 5 March 2018, claiming among other things the return, or payment, of 50% of the retention that had been deducted from progress payments. Mr Stratti asserted stoutly that Bundanoon was entitled to the return of 50% of the retention because the works under the subcontract had reached practical completion. That explanation was in my view false, and was a spur of the moment invention in the course of cross-examination, designed to bolster what was clearly an unjustifiable demand. The evidence was flatly contradicted by Mr Alali, who said that the subcontract works had not reached practical completion at the time that invoice was issued. 16. I add that Bundanoon had not sought to comply with the contractual requirements for practical completion and the return of 50% of the retention. Mr Stratti was unable to explain this. The obvious explanation is the one I have given: practical completion had not been reached; no one (including Mr Stratti) thought at the time that it had been reached; and the assertion that it had been reached was false. 17. In my view, those parts of Mr Stratti's evidence that bear on the interests of his company Bundanoon ought not be accepted where they conflict with other testimony (including, specifically, that of Steven), unless they are supported by other acceptable evidence, or are consistent with the probabilities viewed objectively, or are against self-interest. However, where Bundanoon's interests were not affected, I think that Mr Stratti was a dispassionate and reasonably accurate witness. Issues 1, 2 and 6: the meeting of 19 February 2018 and its consequence(s) Events leading up to the meeting 1. As I have said, the subcontract was signed, and backdated to 27 June 2017, on 6 November 2017. By this time, the harvesting of sandstone blocks was well under way. 2. Shortly after the subcontract was signed, Mr Stratti asked Cenric to obtain what the parties called, and I shall call, a "letter of title" from TWT. That document was required to satisfy DPWS that Bundanoon had the authority of the owner of the site to sell the sandstone harvested from it, and that DPWS would get good title to that sandstone. 3. After some to-ing and fro-ing with the drafting, Steven sent a draft letter of title to Bundanoon. Bundanoon said, in an email dated 14 November 2017 from Mr Alali to Steven (copied to Mr Stratti) that "Troy has confirmed the [draft] letter is perfect and can be sent to TWT". If the draft varied from the document that was, ultimately, signed, the variations are insignificant. I set out the text of the signed letter of title at [72] below. 4. On 14 November 2017, and after Bundanoon had approved the draft letter of title, Steven forwarded it by email to TWT (Messrs Silva and Zhang). The covering email said, among other things, that "the Letter of Title for Yellow Block Standstone… has been prepared in order to facilitate the sale of the Yellow Block Standstone to the New Life Pyrmont Project by Bundanoon Sandstone". 5. Mr Silva replied the next day, saying that TWT would need to seek legal advice on the draft. He added: We would need the sale rates that the stone is being sold by Bundanoon to government to be inserted in the letter + any other changes which our lawyer may require. 1. Steven replied in turn, the same day, saying that "Troy has advised he has a meeting… and requires the document finalised and returned urgently". The email canvassed other matters. 2. Mr Silva replied, still on 15 November 2017, stating: We (ie TWT) are a bit concerned about this request Cenric is making. My gut feeling is that TWT lawyers will have some issues/concerns. There is no contract between TWT and Bundanoon, also Cenric are not an agent for TWT. Can you provide written justification from Government seeking this request as noted in your email. Also, very unlikely this will be resolved today or even tomorrow as if TWT layers [sic] have issues, then we will need to arrange for a debrief with them Gavin and myself. Very unusual that this request has only now popped up and all of a sudden its very urgent. As for the rate, my preference if [sic] to have this transparent which is what you have indicated on your email, so this should include a rate which the sandstone is being sold to government BUT no quantity. 1. Mr Silva followed that email up the next day, stating: Further to your email earlier yesterday, we have referred the draft letter attached to that email to our lawyer for his advice in relation to its contents. We advised for a variety of reasons, we cannot provide that letter nor can we provide the representations or warranties it expresses, as we do and will not have any knowledge of the sale terms and conditions. What we can warrant is that TWT is the owner of the site at 63-71 Harris Street, Pyrmont and has good title to that site in its current form and all the material excavated or removed from it. 1. Mr Stratti's reaction to these events was interesting. First of all, he sent (via Mr Alali) an email stating that "the letter… is no longer required". Then (on the evidence of Steven and Mr Kouzinos, which was neither controverted nor challenged) Mr Stratti threatened to destroy harvested blocks of sandstone and commenced to do just that. He used an excavator and a hammer attachment. Three blocks were destroyed. Mr Stratti refused to leave the site, and stayed overnight in the excavator. 2. Mr Newlinds of Senior Counsel, who appeared with Mr Hughes and Ms Thrift of Counsel for Cenric, characterised Mr Stratti's reaction and actions in a colourful way. Mr Corsaro of Senior Counsel, who appeared (for the last three days of the hearing) with Mr Gee of Counsel for Bundanoon, suggested that Mr Newlinds' characterisation was excessively colourful and inadequately accurate. It is not necessary to go to the detail. The unfortunate readers of these reasons can form their own opinion on the matter, if (and in my view it is not) characterisation is required. 3. It would seem that TWT took seriously Mr Stratti's threat and its partial implementation. Mr Zhang signed the draft letter, in his capacity as a director of TWT. Mr Donovan Sia of Argentum Group sent a copy of the signed letter of title by email to Bundanoon on 20 November 2017. Omitting formal parts, the letter stated: To whom this may concern, TWT Property Group Pty. Ltd (Principal) has engaged Cenric Group Pty. Ltd (Head Contractor) to carry out demolition, shoring, excavation works at 63 – 71 Harris Street, Pyrmont NSW, 2009. Part of those works includes the harvesting and sale of Yellow Block Sandstone (Sandstone), which The Principal owns. The Head Contractor has engaged Bundanoon Sandstone Pty. Ltd to facilitate the sale of the Yellow Block Sandstone to third parties, including by extracting, shaping, transporting and otherwise giving effect to the sale or transfer. Upon the sale of the sandstone, the proceeds of that sale are held on trust and distributed in accordance with the relevant terms of the agreements between TWT Property Group, Cenric Group and Bundanoon Sandstone. 1. The stipulation that the proceeds of sale should be held on trust and distributed in the manner set out had been included in the draft letter of title that, according to Mr Alali, Mr Stratti thought was "perfect". Although the meaning of that paragraph is clear enough objectively, it would appear that, subjectively, the parties (or at least Bundanoon) did not quite understand what was meant. I say that because Bundanoon appears to have taken the view that it was not obliged to pay any royalty until the sale of all harvested sandstone had been completed. 2. TWT was, or continued to be, concerned that although sandstone was being sold, it was not receiving any royalties. It became concerned also as to the price that DPWS was paying to Bundanoon. It made several attempts to ascertain the price that Bundanoon was receiving. It also met directly with Mr Stratti and pressed him for a higher royalty. 3. While all this was happening, TWT continued to deal with Cenric in relation to the proposed application pursuant to s 96 of the EPA Act that would be required (and approval of which would also be required) if a further bench of sandstone were to be harvested. 4. On 9 February 2018, TWT invited Cenric to tender for the further works. 5. Bundanoon became concerned at the inquiries that TWT was making in an attempt to find out more about the terms of sale as between Bundanoon and DPWS. On 16 February 2018, Bundanoon's solicitor Mr Ziv Ben-Arie of Mills Oakley sent an email to Steven, copied to among others Mr Stratti, which (omitting formal parts) stated: Further to discussions this evening, we are disturbed (on behalf of our client Bundanoon Sandstone Pty Ltd) because of the question of title/ownership of the sandstone which they extract and shape, and therefore request your urgent explanation as to why there is a disturbance in the completion of the transaction, thereby inhibiting the sale of material and requiring the cessation of communications with any third parties. We request your urgent response, or by any event by no later than midday Monday, 19 February 2018. 1. Steven forwarded that email to Messrs Zhang and Silva. Omitting formal parts, his email said: As discussed with you on the phone earlier, I have been made aware of discussions and correspondence sent to our contractors client questioning the right of sale and ownership of the sandstone harvested from the project. I have also attached correspondence received this evening from my contractors solicitor. On the 14th November 2017, you personally signed a letter of title giving Cenric and it's [sic] Contractor Bundanoon Sandstone, title over the stone. Through your correspondence with our contractors client, TWT's actions have now stalled the sale of sandstone and placed the current arrangement at risk. We refer to the letter of title signed by you in November 2017 and remind you that the right to extract, shape, transport and give effect to the sale or transfer of the sandstone has been given to Cenric and it's contractor Bundanoon Sandstone. We urgently request an explanation as to why the current contractual arrangement is being questioned and why this is been brought to my attention via a third party? Your urgent response to this matter would greatly appreciated. 1. Mr Silva replied to Steven's email. His reply stated: Your contractors client is the department of finance and to suggest or imply that no other party should have access to the government department is rather silly and raises some further concerns. The harvesting has being on now for some time, we have received no payment whatsoever, we have asked for confirmation from Cenric with regards to documentary evidence on what has been sold to the government. Again Cenric have failed to provide this, no doubt because your contractor is not willing to do so. Cenric through its contractor, promised that payment would be made within 2 weeks from the stone being removed, this was advised before the harvesting occurred, it's been months now and we are still no funds. Why has Cenric given us this incorrect information from the start? Please be aware that Cenric nor Bundanoon have exclusivity to department of finance. TWT agreed to enter this arrangement with Cenric only because Cenric advised TWT that there existing [sic] no other contractor capable of doing the harvesting other than Bundanoon stone, excluding Gosford quarries. Based on this advice from Cenric, that we proceeded. I am starting to feel that we have entered into this arrangement under very odd and unusual and what we now know, are empty commitments. We have a site that is over 2 months delayed on the PC date yet I can not see what mitigation steps have been taken by Cenric to reduce the financial exposure to TWT. Happy to discuss but again, we still have not revived [sic] any payment, noting only 2 weeks ago you advised mid to late feb, noting this was not what was originally agreed, we still have no confirmation from state government on their letter head on what has been purchased, again you noted that Cenric, via Bundanoon refuse to do this. We have asked for invoices, yet nothing again has been provided. 1. Steven replied at some length. I do not propose to set out the detail of his reply, but I note that he did "urge [Mr Silva] to carefully consider any future approaches as to Government or Bundanoon Sandstone". He also required "an immediate written retraction of any misleading or false statement/s to Government, Bundanoon and/or any other party in respect of the above matters, made by TWT…". 2. At the same time, Mr Silva was making inquiries of another sandstone contractor, Maroota Sandstone Quarry, to see if it could carry out harvesting works and provide a greater return to TWT. 3. On 18 February 2018, Steven sent a lengthy email to Mr Stratti. He set out his understanding of the relevant events of the last two days, and continued: If this alleged claim by TWT in their email to the Department of Finance is proven to have been made, I have put TWT on notice that providing to the Government false and deceptive and or incorrect information is an act of fraud and I have advised TWT of the consequences of making such false and misleading statements and the consequences for directors and offices holders of TWT in particular in this instance where it has place the current arrangement in jeopardy and at risk of termination. Such conduct from TWT is an intentional, reckless and malicious attempt to interfere with a binding confidential agreement between the relevant parties that will result in damages been [sic] suffered to both Cenric Group and Bundanoon Sandstone. As a result of its actions, TWT has been put on notice by Cenric Group that it reserves all of its rights in this regard. Given the fact that our interests are aligned on this matter and we have a common interest, I have copied Kon Nakousis Cenric Group's solicitor in to the correspondence. Can you please kindly cc him on all future correspondence on this issue. He has confirmed that his is happy to confer with your Senior Counsel if necessary as you will likely need evidence in support of any application. What happened at the meeting? 1. Five witnesses gave evidence of what had happened at the meeting of 19 February 2018. They were Steven, William, Mr Zhang, Mr Silva and Mr Stratti. William's evidence can be put to one side for the moment. 2. Steven's account of what happened at the meeting is substantially corroborated by three sources. The first is his file note. The second (although it does not correspond exactly to Steven's evidence) is Mr Zhang's file note. The third is Mr Stratti's evidence. 3. In my view, the first and third of those matters provide strong reasons for accepting the substance of Steven's account. I do not think that Steven's file note was anything other than an honest attempt to summarise accurately what had happened at the meeting. Mr Stratti's corroboration is powerful because, as between TWT and Cenric and in relation to what happened at the meeting, Mr Stratti is effectively neutral. 4. There were others present at the meeting: Mr Tian, his daughter Ms Tina Tian, and Mr Stratti's interpreter, who is described in the evidence only as "Frank". None of those people gave evidence. In relation to matters of present importance – what was discussed and agreed as between Cenric, TWT and Bundanoon – their absence from the witness box is not significant because it does not appear that any of them participated in the relevant conversations. 5. The accounts that Messrs Silva and Zhang gave of the meeting are unsatisfactory. The evidence of the meeting contained in Mr Zhang's first two affidavits is inconsistent, in significant ways, with the account given in his file note. He did not say anything about his file note in those affidavits, although it is clear that he referred to it for the purpose of preparing at least the first of them [3] . The inconsistencies are not insignificant or negligible. They cannot be said to relate to matters that are merely peripheral. 6. Mr Silva made one affidavit, and affirmed the truth of another (which had been served in draft) when he gave oral evidence. There are substantial inconsistencies between what he said in his draft affidavit and Mr Zhang's file note (and what Mr Zhang conceded in the course of his cross-examination). Again, those inconsistencies are neither insignificant nor negligible; nor cannot it be said that they relate to peripheral issues. 7. I am conscious that Steven has a significant stake in the outcome of this litigation. The same may be said, although perhaps for slightly different reasons, of Mr Zhang and Mr Silva. I accept that it is necessary to scrutinise Steven's evidence with care. Nonetheless, taking into account the very significant corroboration that it receives from the sources to which I have referred, I conclude that his account of the meeting is substantially accurate. To the extent that there are discrepancies of a significant nature between Steven's evidence and that of Messrs Zhang and Silva, I prefer Steven's. 8. I return to William's evidence. He does not corroborate Steven's account of what was said and agreed. However, it is clear that by the time those discussions took place, William felt that he had been treated disrespectfully, and that he was accordingly angry. It is equally clear from his cross-examination [4] that he did not participate in the discussion to any great extent and that, to the extent that he did, he did not appear to follow it. 9. There were several parts to the meeting. It started with some general discussion, which does not appear to have been particularly amicable. Steven's account of that part of the meeting is consistent with his file note, with Mr Zhang's file note, and in substance with Mr Stratti's evidence in cross-examination. The detail is of no present relevance. 10. Ms Tina Tian left the room and went to another room. Mr Tian, Mr Stratti and Frank joined her. The others stayed where they were for about 5 minutes. Messrs Zhang and Silva then left and went to another room (but not the room where Mr Tian, Ms Tina Tian, Mr Stratti and Frank were located). Some time passed. It is apparent that Steven and William were becoming angry at what they perceived (with some justification) to be disrespectful treatment. 11. Mr Tian, Mr Stratti and Frank emerged from their meeting. According to Steven, from whose evidence I take what follows, Mr Stratti said words to the effect [5] : The Chairman [Mr Tian] and I have reached a resolution regarding the royalty. I have agreed out of respect and good faith to the Chairman to increase the royalty rate, and I will write formally to Cenric outlining the agreement we have reached. 1. As Mr Stratti was speaking, Frank translated (presumably to Mr Tian) what he was saying. Mr Tian then left the room. 2. Steven said that the discussion continued between himself and Mr Stratti, in the presence of Messrs Zhang and Silva. Steven asked Mr Stratti what had been agreed with Mr Tian and Mr Stratti said that he had agreed to increase the royalty payable to Cenric from $1,000 to $1,200 [6] for bench 4 (or s 96) sandstone to a minimum quantity of 1000 m³. 3. Steven asked, in the presence of Messrs Zhang and Silva, whether there would be a new contract or whether the bench 4 works would be done as a variation to the existing contract. Mr Stratti said that there would be a variation because he was not prepared to sign a new contract. 4. Steven then asked "[a]nd what about liquidated damages". Mr Stratti replied, still in the presence of Messrs Zhang and Silva, saying "there will be no penalties or liquidated damages, like Nelson wanted to impose". 5. Steven said "[d]id everybody hear that? Does everybody agree with that". He said that Mr Zhang "nodded" and Mr Stratti said "yes, I'm cool". 6. Steven said that "Troy is going send me a letter about the new rate of $1,200 per m³", and that he would "prepare a revised variation 5". That was a reference to a variation seeking a further extension of time of 7 weeks. 7. It follows, and I find, that at the meeting of 19 February 2018, Cenric, TWT and Bundanoon agreed that: 1. the head contract between Cenric and TWT would be varied to include the bench 4 works; 2. by necessary implication, the subcontract between Cenric and Bundanoon would be varied likewise; 3. the subcontract would be varied further to provide for royalties to be paid on bench 4 sandstone at a rate of $1,200 per m³ (presumably for first class yellow block), with a minimum quantity of 1,000 m³; 4. TWT would not seek to recover liquidated damages from Cenric for delays up until 19 February 2018; and 5. TWT would grant the extension of time that Cenric had sought. Was the agreement enforceable? 1. TWT raises, by issue 6, two reasons why that agreement (if, contrary to its principal case, such an agreement was struck) was not enforceable. The first is that there were no oral modification (NOM) clauses: cl 4.3 of the Instrument of Agreement and cl 55(d) of the General Conditions. It may also be noted that by cl 36.1 of the General Conditions, Cenric was not entitled to vary the WUC except as directed in writing. 2. The short answer to that submission is that there is clear authority in this country that a NOM clause cannot prevent the parties to a contract containing it from agreeing orally to vary it. That principle, which is no more than an affirmation of the basic principle of contractual autonomy, may be traced back at least to the judgment of Cardozo J in Beatty v Guggenheim Exploration Company [7] . There is intermediate appellate court authority in this country affirming the principle: see for example Hawcroft General Trading Co Pty Ltd v Hawcroft [8] and GEC Marconi Systems Pty Limited v BHP Information Technology Pty Ltd [9] , to refer to two only of the numerous cases on this point. 3. I accept that there is contrary authority to be found in the decision of the Supreme Court of the United Kingdom in MWB Business Exchange Centres Ltd v Rock Advertising Ltd [10] . However, having regard to the consistent weight of authority in this country, I do not think that I am at liberty to reconsider the matter. It is therefore unnecessary to do more than state that, with the greatest of respect, I do not find the divergent reasons given by their Lordships [11] to be particularly persuasive. 4. The second ground of defence is that the agreement, if made, is an agreement for the disposition of an interest in land (which Mr DeBuse of Counsel, who appeared for TWT, identified as a profit à prendre), and is thus unenforceable for want of writing by reason of ss 23C and 54A of the Conveyancing Act 1919 (NSW). There are two answers to that point. 5. The first answer is that the head contract and the subcontract are contracts for the excavation of the site. It cannot be correct that every contract for excavation works is required to be evidenced in writing. The "right", or entitlement, of Bundanoon to sell the sandstone is given by the letter of title, which of course is in writing and signed on behalf of TWT. That letter makes it clear that Bundanoon's role is limited to facilitating the sale of sandstone, "including by extracting, shaping, transporting and otherwise giving effect to the sale or transfer". That statement, coupled with the requirement to hold the proceeds of sale in trust, would seem to make it difficult to argue that Bundanoon acquires any proprietary right, of the nature of a profit à prendre, in the sandstone that it harvests. 6. Alternatively, if the letter of title on its proper construction does give Bundanoon some right of the nature of a profit à prendre, the requirement for writing is satisfied. Issues 3 and 4: validity of the show cause notice 1. The show cause notice was dated 9 March 2018. It was based on an alleged substantial breach of the head contract, comprising two elements: substantial departure from the construction program, and failure to proceed with due expedition and without delay. The letter required Cenric to show cause in writing why TWT should not exercise its right to take the head contract works out of Cenric's hands. 2. Cenric submitted that there was three reasons why the show cause notice was not valid. The first was that the agreement of 19 February 2018 included, as a term, that TWT would grant Cenric a seven week extension of time. That must be correct. The obvious inference from the agreement for extension of time, bearing in mind the terms of cl 34.3(a) of the General Conditions and in circumstances where no one submitted that TWT or its project manager had directed a unilateral extension under cl 34.5(b), is that the parties accepted that a "qualifying cause of delay… on the critical path" had occurred. The italicised expression is defined to mean, in substance, something done or omitted to be done by TWT, Argentum Group (or Mr Silva) or contractors other than those engaged by Cenric. 3. The proposition that Cenric had failed to achieve completion by the date for practical completion cannot be sustained, because the effect of the agreement to grant an extension of time is to extend accordingly the date for practical completion. 4. Equally, the agreement for extension of time is fundamentally inconsistent with the proposition that Cenric had proceeded otherwise than diligently with due expedition and without delay. Mr DeBuse did not submit otherwise. 5. The second ground of invalidity for which Cenric contended was that the show cause notice was not issued in good faith, because Mr Zhang had determined, at the time the notice was issued, to take the work out of TWT's hands regardless of the substance of any cause that Cenric might show. That was indeed Mr Zhang's evidence [12] : Q. Just picking up from where we were before the break, by 9 March, you were having discussions were you not with Mr Stratti about whether Mr Stratti could actually continue doing work at the site notwithstanding that you had issued Cenric a stop work notice, that's right isn't it? A. Yes. Q. And what you said to Mr Stratti, was that you thought that he had seven days to continue working on the site before Cenric could stop, tell him to stop? A. Yes. Q. So what you actually wanted to happen as at 9 March, is you wanted Cenric to stop doing anything on the site correct, because you told them to? A. Yes. Q. But you wanted Mr Stratti's company to continue doing work on the site, yes? A. Yes. Q. And that's because you'd already decided that whatever the result of the show cause process, you were going to take this work out of Cenric's hands and give it to Bundanoon, correct? A. Yes. 1. In short, TWT, through Mr Zhang, had closed its mind on the subject. It was not prepared to accept as valid any cause that Cenric might show. It was determined to take the work out of Cenric's hands regardless. TWT's attitude is redolent of bad faith. 2. Were it necessary to do so, I would conclude that the show cause notice was invalid for this reason also. 3. The third reason given by Cenric for impugning the validity of the show cause notice is that it was issued for an ulterior purpose. That purpose was identified as being the wish to contract direct with Bundanoon for the level 4 works, and to receive the whole of the royalty payable by Bundanoon for itself. In my view, that analysis is correct. 4. The inference that I would draw from the whole of the evidence, were it necessary to do so, is that TWT regretted the bargain it had made with Cenric on 19 February 2018. It decided, instead, to get entirely for itself the benefit of royalties in respect of the level 4 sandstone. That was the true motivation for the show cause notice, and provides the true explanation for Mr Zhang's closed mind. I do not propose to set out the detail of the evidence that supports the drawing of that inference, since it is at most a further alternative reason for concluding that the show cause notice was invalid. I will simply note that Cenric's written submissions include a detailed chronology referring to all the evidence on this point. 5. Issue 3 also inquires whether Cenric has some entitlement to damages, and if so in what amount. As I understand it, the claim is based on the assumption that Cenric had lost its entitlement to royalties on any sandstone, either at level 3 or below, that had not been harvested as at the date the works were taken out of its hands (19 March 2018). That is because Bundanoon relied on the take-out notice as justifying its actions in terminating, or purporting to terminate, the subcontract, which it did on 20 March 2018. The ground of termination relied upon was that because the works had been taken out of Cenric's hands, Cenric had lost the right to engage Bundanoon as a subcontractor and to provide Bundanoon with access to the site. Cenric disputed the validity of that termination, but the reality is that it was effective at least in practice. 6. Cenric's argument, as against TWT, is that if for any reason it does not recover royalties from Bundanoon for sandstone (including level 4 sandstone), because of Bundanoon's termination of the subcontract, then it is entitled to recover from TWT damages equivalent to the amounts of those lost royalties. 7. Mr DeBuse accepted that if I were to conclude that the 19 February 2018 agreement had been made, then (among other things) Cenric would be entitled to its share of royalties both for all sandstone harvested down to and including level 3 and for sandstone harvested from level 4. On that basis, he submitted, there could be no additional claim for damages (except for an inconsiderable amount, of about $10,000, for loss of margin on the works taken out of its hands). In principle, I think, that submission is correct. 8. One of the difficulties of dealing with this claim is that it was not properly articulated in Cenric's Commercial List Statement, nor did it receive any great attention (save as a fall-back point) in Cenric's written closing submissions. 9. There does not seem to be any point in pursuing this argument further, because my conclusions on other issues lead, among other things, to the position that Cenric is entitled to its share of royalties, both for the original head contract works and for level 4 sandstone, on the terms of clause 28A of the head contract read in conjunction with the letter of 28 June 2017. Issue 5: Cenric's entitlement to royalties 1. This issue focuses on the factual situation at the time the works were taken out of Cenric's hands. That happened on 19 March 2018, when TWT gave Cenric a written take-out notice. There are two parts to the issue. The first concerns the extent of excavation down to and including the level 3 bench. The second raises the question of Cenric's entitlement to royalties on the level 4 sandstone. 2. The best evidence on the first question – whether excavation of the level 3 sandstone had been completed as at 19 March 2018 – comes from Mr Stratti. He said that as at 5 March 2018, all sandstone down to and including level 3 had been cut out from the bench; "the extraction was complete", although "there were some stones stockpiled on site" [13] . Mr Stratti was asked whether in those circumstances all the stones had been harvested. He replied "that's what cutting means" [14] . He accepted that not all the stone that had been cut out of the bench had been taken away and sold [15] . 3. As I understand it, the issue was intended to reflect some dispute in the other evidence as to whether there were "intermediate blocks" – blocks of sandstone that lay partly above RL18.5 (the base of the level 3 excavation) and partly below (that is, into the s 96, or bench 4, zone). Mr Stratti's evidence appears to be quite clear: all the bench 3 sandstone that could be extracted had been extracted (and of course, of necessity, all the sandstone in the overlying benches had been extracted). 4. On the basis that "harvesting" means getting in, or extracting, the sandstone from the solid mass, the proper inference from this aspect of Mr Stratti's evidence is that the work, down to and including level 3, was completed by 5 March 2018. 5. The second question under issue 5 turns, as Mr Newlinds acknowledged, on what was agreed on 19 February 2018. He submitted that if the agreement for which Cenric contended had been made, then Cenric was entitled to 50% of the royalty payable for each cubic metre of first class sandstone extracted from bench 4. That must be correct. I do not think that Mr DeBuse contended to the contrary. 6. Since I have found that the 19 February 2018 agreement was made, in substantially the terms for which Cenric contended, it follows that Cenric would have been entitled to royalties in respect of that sandstone. Issue 7: basis of payment of royalties. 1. The essential dispute is whether royalties are payable, in accordance with the rates stated in para (h) of work element 5 (see at [42] above) on the gross volume of the blocks harvested from the site, or on the volumes as accepted by a representative of DPWS. 2. Mr Newlinds relied on the language used in the description of work element 5, and on what he submitted was the ordinary meaning of "royalty": a payment for the right to exploit the property of another [16] . It was inherent in the concept of "royalty", Mr Newlinds submitted, that it was payable on exploitation, regardless of the profitability of that exploitation. 3. Mr Corsaro submitted that it was necessary to have regard to the surrounding circumstances. He referred in particular to Bundanoon's proposal of 26 June 2017 sent to Cenric and an email from Steven to Mr Silva and others, also sent on 26 June 2017, explaining how Steven understood the harvesting process would be managed on site. 4. I am not sure what the Bundanoon proposal adds to the discussion. As Mr Corsaro acknowledged, there is no substantive difference between the relevant part of that proposal and the description of work element 5 contained in the subcontract. Nor do I understand how Steven's subjective understanding of the process can bear on the proper construction of the subcontract that was subsequently negotiated and signed (and was backdated to 27 June 2017, the day following the despatch of the Bundanoon proposal and Mr Steven's email explaining his understanding of how the process would be managed). 5. Nonetheless, since Mr Corsaro put some reliance on the email, I set out the relevant part: 5. The stone / asset will be quantified, qualified and graded in the presence of a master Stonemason from DPWS, Troy Stratti and a client representative from Cenric and TWT. The stone needs to be recorded on site as it will need to be catalogued for future use so this will ensure transparency and that the stone is going to be use [sic] for the correct re use. 1. Mr Corsaro submitted, and I accept, that Steven had agreed in cross-examination that this email set out his understanding of how sandstone was to be measured for the purpose of calculating royalties [17] . Again, however, I have some difficulty in understanding how Steven's subjective understanding can bear on the proper construction of the written subcontract that, subsequently, the parties signed. It is relevant to note that cl 2(c) of the subcontract is an "entire agreement" clause, which in terms provides that "[a]ll prior discussions, offers, quotations, undertakings, agreements, representations, warranties and indemnities… are replaced by this document and have no further effect". 2. Bundanoon's pleadings do not suggest that the subcontract was anything other than wholly written. Nor did its submissions. 3. As a matter of language, the description of work element 5 identifies, relevantly, two processes. The first is the harvesting of the sandstone. The second is the sale of the sandstone that is harvested. Bundanoon is involved in each process. As the excavation subcontractor, it is required to harvest the sandstone. And, once the sandstone has been harvested, Bundanoon is to facilitate its sale "to the Government or private buyer". 4. Although Mr Stratti's evidence of what is meant by harvesting – i.e., "cutting", or extraction from the bench – is irrelevant to the process of construction, it sits readily enough with the functional division between the task of harvesting and the task of sale that is apparent in the description of work element 5. 5. It is self-evident that sandstone would be extracted from the benches in blocks. To the extent that it is legitimate to have regard to extrinsic material (and this does become significant for issue 8), Bundanoon's proposal was in effect to extract the sandstone by blocks cut on a rectangular grid. 6. The offer to pay royalties is an offer to pay royalties on a per m³ basis, with the amount varying according to the classification of the sandstone. That royalty is payable "for the yellow Block sandstone" that Bundanoon has harvested. In other words, as a matter of language, it is payable in respect of the blocks that are physically cut from the benches, when they are harvested. However, the manner and timing of payment must be determined by taking into account, as well as the subcontract, the letter of title. 7. Mr Corsaro relied on the references to DPWS in the descriptions of first and second class sandstone. However, that does not seem to me to be particularly significant. It does no more than show that, in the event of a dispute as to classification (as first, second or third class), application of the DPWS standards would determine the answer. 8. It may be accepted that the parties understood that a representative of DPWS would be on site for at least part of the harvesting process. That is entirely understandable. The representative would, no doubt, indicate the grading of the individual blocks (and indeed whether DPWS wanted them at all). It does not follow that the representative's decision as to the volume from within each block that DPWS would take and pay for was to have any bearing on the proper construction or application of the subcontract. 9. The interest that Cenric had was to be paid a royalty, at a fixed rate per m³ determined according to the grading of the sandstone, for all blocks harvested from the site. It was not concerned, in a contractual sense, with whatever arrangements Bundanoon might make for the sale of the sandstone. 10. The scheme of the agreement is clear. Leaving aside the letter of title, Bundanoon was required to pay the amounts of royalty fixed in accordance with work element 5, and could keep the balance of the proceeds of sale for itself. It might achieve a sale price of many multiples of the amounts of royalty. On the other hand, it might not succeed in selling some of the stone. Those matters were of no concern, again in a contractual sense, to Cenric. Its interest, and its contractual entitlement, was to be paid according to the volume of the blocks harvested. 11. Mr Corsaro submitted that it made commercial nonsense for Bundanoon to agree to pay a royalty on the basis of gross measurements, when it could only sell on the basis of net measurements. There are two difficulties with that submission. 12. The first difficulty is that there is no factual basis for it. Suppose, as Bundanoon said, that DPWS was only prepared to accept, as first or second class sandstone, about 2 m³ of each block, and that each block had a gross volume of something in excess of 4 m³. The commercial folly could only be demonstrated by showing that the return to Bundanoon, from selling only the 2 m³ net block, when coupled with the additional proceeds of selling the offcuts (presumably as crushed sandstone attracting a rate of $700 per m³) would not cover the cost of a royalty payable on a gross basis. There is however no evidence to make that good. 13. It was Bundanoon that had experience in harvesting sandstone. It was Bundanoon that had the contacts to enable it to sell sandstone. It was Bundanoon that knew what prices it could get, and how DPWS (or for that matter a private buyer) would assess the volumes on which it was prepared to pay those prices. There is nothing commercially absurd in the proposition that Bundanoon, knowing all those things, reckoned that it could make a sufficient profit from whatever net volumes might be sold, at whatever prices might be achievable, to enable it to cover the cost of harvesting and sale and the obligation to pay royalties measured on a gross volume basis. 14. The second difficulty is that protestations of commercial absurdity often reflect no more than the commercial interests of the parties who utter them. One person's commercial sense may be another's commercial nonsense. The court ought be slow to impose its own view, necessarily informed by hindsight, of "commerciality" so as to use the outcome to mandate a particular result of the process of construction. Having said that, there are (as always) cases where absurdity is so manifest that the court ought strain to reject the construction that leads to it unless there is truly no other alternative. But this is not one of them. 15. I conclude that Bundanoon is obliged to pay royalties on the basis of the gross volumes harvested, calculated at the rate applicable to the grading of the individual blocks. 16. Bundanoon at one stage suggested that there was an industry practice to the effect that royalties were only payable on the net volumes that could be sold. I am not sure that this argument was pressed in final submissions. If it was, the answer must be that there is no evidence of such notoriety that all those who contract must be taken to do so on the basis of the custom [18] . Issue 8: measurement of gross volume of the blocks 1. The parenthesised words "irregular shaped" in the full statement of this issue, although wanting in grammatical nicety, are intended I think to suggest that the blocks that have been harvested from the site are shaped in such a way, or are so irregular, that they cannot be measured. The evidence does not support that suggestion. 2. The benches of sandstone were laid out in rectangular grids. Harvesting was performed by cutting transversely and longitudinally using machinery brought to the site by Bundanoon. 3. Mr Alali said that the blocks were then split from the bench using a hydraulic hammer aimed at the base of each individual block. That process, he said, "usually resulted in the first block of sandstone of each bench being lost" [19] . 4. Thus, the blocks comprised cubic volumes with rectangular sides. It may be accepted that the sides were not perfectly straight and even. Nonetheless, in form, the blocks were masses that could be described with substantial accuracy as rectangular prisms. That description, which can be gleaned from the harvesting diagrams prepared by Bundanoon and sent to Cenric, is confirmed by photographs of the blocks taken after they were cut from the bench and "rolled". 5. Mr Stratti explained the process of rolling as follows [20] : Q. Mr Stratti, what do you mean by roll the stone? A. Sorry, so, we cut to shape the block in situ and then it's split from and separated from the ground. So, as it's split it's rolled, so it's rolled onto its side, picked up by a crane, so it's just a term, a technical term. 1. There is evidence of the gross volume of the blocks in a number of places. First, Steven said [21] that Mr Stratti told him, at the commencement of harvesting (but before the subcontract was signed), that the blocks would be cut with dimensions 1.5 m deep, 1.3 m wide and 2.4 m long, yielding a typical volume of 4.68 m³. 2. Mr Stratti denied that aspect of Steven's evidence. I prefer the evidence given by Steven on this point. In part, that approach reflects my conclusion set out at [61] above. However, it takes into account also that Mr Stratti sought to bolster his evidence by reference to the supposed physical impossibility of cutting blocks of the dimensions and volume suggested. As I point out at [158], [159] below, the evidence of supposed impossibility is inconsistent with other objective evidence. 3. Next, Mr Kouzinos made calculations of average block size using the known dimensions of the site, the numbers of columns and rows of blocks, and allowing for the width of the saw cuts. His calculations produced an average block size of 4.6 m³. That evidence was challenged in cross-examination, but for the reasons that follow, I accept its substance. 4. Mr Kouzinos also gave evidence of measurements of a number of harvested blocks. He measured 12 in the presence of a representative of Bundanoon, and sent his measurements to Bundanoon. The largest block he measured was 4.13 m³ and the smallest was 2.88 m³. Bundanoon did not, then or since, challenge the accuracy of those measurements. 5. Mr Powell, the stonemason retained for DPWS, spoke to the broadcaster Mr Alan Jones (for reasons that are not entirely clear to me, a transcript of the interview was included in the documents tendered, and there was no limitation put upon its use). Mr Powell told Mr Jones that the average block size was about 4 m³, and that the blocks weighed about 10 tonnes. The evidence is that sandstone has a density of 2.2 tonnes per m³. A ten tonne block would therefore occupy about 4.55 m³. 6. That is what might be called the positive evidence of block size. There are other matters to take into considerations. The first is that Mr Stratti asserted that the blocks could not be cut any wider than 1.25 m by 1.25 m (depth and width) by 2.4 m, giving a volume of 3.75 m³. He said that it would be "impossible", because of limitations inherent in the cutting machines, to cut at wider distances. That cannot be correct. 7. First of all, blocks have been measured that exceed the supposedly impossible dimensions. Secondly, Bundanoon's records show that there are a number of blocks having a net volume (which one assumes would be less than gross volume) exceeding what the supposedly impossible dimensions could yield [22] . Thirdly, there was machinery on site that, when used, allowed cuts at widths greater than 1.25 m to be made. Mr Kouzinos gave evidence of that, by reference to photographs. That is consistent with the evidence of Mr Alali [23] , which suggested that the benches could be cut with either a double bladed machine or a single bladed machine. 8. Finally, although Bundanoon was required by its contract with DPWS to keep records of gross volume [24] , it has led no evidence from the records that it must have kept. The obvious inference is that those records would not have assisted Bundanoon on this particular issue. 9. The most careful evidence is that given by Mr Kouzinos. It is generally consistent with the other evidence to which I have referred. In my view, its substance should be accepted. However, I do not think that the apparent precision of Mr Kouzinos' estimate of volume necessarily reflects reality Accordingly, and arbitrarily, I shall round it down. Doing so, I find that the average gross volume of the blocks harvested was 4 m³. Issue 9: termination of the subcontract 1. Cenric's case was simple. It accepted that if TWT had been justified in taking the head contract works out of Cenric's hands, then Bundanoon was justified in terminating the subcontract. However, Cenric submitted, since (as I have concluded) TWT was not justified in taking the head contract works out of its hands, the termination of the subcontract was invalid. 2. The written submissions for Bundanoon did not address the issues that the parties had agreed but, rather, what were said to be the "six primary issues in the proceeding between Cenric and Bundanoon" [25] . Those submissions did not address specifically the validity of the termination of the subcontract. Rather, they assumed that it had been terminated. I do not understand why, the parties having gone to the trouble to agree the issues for decision, the submissions for one party ignored what was agreed, proceeded on a different basis, and thus fail to address one of the agreed issues. I am left with the situation where the submissions for Cenric appear to be soundly based, and there is nothing to the contrary in the submissions for Bundanoon. 3. There may be a very difficult question concealed in all this. That is: even if TWT's decision to take the head contract works out of Cenric's hands were not justified, nonetheless does the fact that it did so mean that Bundanoon was entitled to terminate the subcontract? In other words, was the de facto loss of possession of the site sufficient to justify termination of the subcontract? Certainly, that is not the way that Bundanoon's notice of termination was put, but that may not be an insuperable obstacle: Shepherd v Felt & Textiles of Australia Ltd [26] . Since the question was neither raised by Bundanoon in its List Response nor argued, I say no more. Issue 10: royalties payable 1. In terms, this issue does not arise, because it postulates valid termination of the subcontract. It is enough to say that on Mr Stratti's evidence (to which I have referred at [124] above), all blocks down to and including bench 3 were harvested before the purported termination of the subcontract. Under the subcontract, the royalties became payable upon completion of harvesting [27] and Cenric's accrued right to payment would have survived the termination, even if it were valid: McDonald v Dennys Lascelles Ltd [28] . 2. Bundanoon admits that 1009 blocks were harvested from benches 1, 2 and 3 [29] . Some 25 of those blocks are said to be "TWT art blocks – Property of TWT". I do not know what this means. Mr Corsaro submitted [30] that these "were not of saleable quality". That submission is based on the same letter that gives the admission of quantities, and I think must be accepted. Cenric cannot have the benefit of the admission without the qualification that Bundanoon attached to it. 3. Mr Corsaro also submitted that three of the blocks lay at an intermediate level between benches 3 and 4, and thus in part were outside the scope of works of the head contract and subcontract prior to the s 96 variation. That submission overlooks Mr Stratti's evidence that everything had been excavated, down to the base of bench 3, by early March 2017. The admission as to the number of blocks harvested from the first three benches must be taken to accommodate this fact. 4. Mr Corsaro also submitted that some of the blocks had been sold and others earmarked for sale. I do not know what impact that has on the entitlement, as at the date of purported termination of the subcontract, to royalty. 5. In short, were it necessary to decide, I would conclude that as at the date of purported termination of the subcontract, Cenric was entitled to receive royalties on 984 blocks (the 1009 harvested less the 25 artblocks), having an average volume of 4 m³. The letter to which I have referred accepts that 597 of the blocks were first class. They would therefore attract a royalty of $1000 per m³. Resolution of the amount of royalties payable on the remaining 387 blocks would require proof of their classification. If there were direct evidence of classification, I was not taken to it. The written submissions for Cenric relied on inferences from other evidence to support the conclusion that all the blocks harvested were first class. 6. If all the 984 blocks were first class, the royalty payable would be $3,936,000 (984 x 4 x 1000). $547,882 has been paid over, pursuant to orders of the court. The balance (assuming first class classification) would therefore be some $3,388,118. 7. Mr Newlinds submitted that I should proceed on the basis that all 984 blocks (or on his approach, all 1009 blocks) were first class. He noted that all those sold, 597 or 61% of the total, were first class. He submitted that I could draw an inference from this. Mr Newlinds submitted, further, that I should be more comfortable in drawing that inference because Bundanoon, which could have led evidence of the grading, had chosen not to do so. 8. Mr Stratti said that blocks were measured and graded on site by DPWS (Mr Powell) and that this happened regularly [31] . Bundanoon adduced evidence from Mr Powell (as I have noted, his affidavit was read without his being required for cross-examination). He gave no evidence of grading. 9. Bundanoon has not explained why it did not adduce evidence of grading from Mr Powell. He was its witness. He was the person best placed to give evidence on this topic. In my view, the unexplained failure to adduce evidence from him justifies the drawing of an inference that his evidence would not have been favourable to Bundanoon [32] . However, that can only assist Cenric if, on all the evidence, there is a basis for inferring that all the harvested sandstone, including specifically the 387 blocks that were not sold (at least, on the last evidence available to the court) were of the same quality, namely first class, as the 597 that had been sold. 10. Mr Newlinds called in aid the principle attributed to Armory v Delamirie [33] , as explained by Hodgson J in LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (No 2) [34] at 508 and Handley JA in Houghton v Immer (No 155) Pty Ltd [35] at 59. The principle is generally explained as authorising the court to assess damages robustly, relying on the presumption against wrongdoers, the onus of proof and resolving difficult questions against the party whose actions have made precise assessment problematic. It appears from Hodgson J's explanation in LJP Investments at 508 that the court may take into account the failure of the wrongdoer to call any witnesses who could have shed light on the matter. 11. The difficulty with the submission is that Bundanoon is not in any relevant sense a wrongdoer. It is not a thief who converted property (Armory v Delamirie). It is not a trespasser who wilfully and without consent entered another's land for its own benefit (LJP Investments). It has not used its voting power to perpetrate a fraud on the minority (Houghton). It is, at most, a party in breach of contract. That is an everyday occurrence in commercial life. It does not call for application of Armory v Delamirie. 12. The court must take into account where the onus of proof lies. The onus of proof of the amount of royalties to which it is entitled lies squarely on Cenric. Bundanoon is not obliged to assist Cenric to prove its case. At most, the failure of Bundanoon to offer any evidence on the topic will attract the principle in Jones v Dunkel as applied, in a stronger form, in Ferrcom. 13. The question is, therefore, whether the evidence that the first 61% of blocks sold were of first class standard permits the court, taking into account all other relevant considerations, to draw an inference that the remaining 39% are likewise of first class standard. There is some evidence of geological testing, which suggested that the site would yield a rich harvest of first class yellow block sandstone. There is the obvious fact that although the sandstone has been extracted in benches, it is a relatively homogeneous mass (allowing, of course, for whatever particular geological features it may exhibit). 14. The key feature of the evidence is that, leaving aside the TWT art blocks that are apparently unsaleable, all the blocks that have been extracted and sold are first class. There were no second or third class blocks. In those circumstances, bearing in mind the geological evidence and taking into account the failure of Bundanoon to adduce evidence on the question of grading from Mr Powell, I conclude that there is a sufficient basis for inferring that the remaining 387 blocks are of first class standard. 15. It follows that the balance of the amount of royalties to which Cenric is entitled, in respect of the sandstone harvested from the first three benches, is in the indicative figure I have stated above: namely $3,388,118. Issue 12: royalty on bench 4 sandstone 1. Again, Cenric relied on the agreement of 19 February 2018, the effect of what was then agreed was, relevantly that: 1. the head contract would be varied to include the excavation of bench 4; 2. the subcontract would be varied accordingly; and 3. the royalty payable on first class sandstone harvested from bench 4 would be calculated at the rate of $1,200 per m³. 1. In this context also, Bundanoon's failure to address the consequences of a conclusion that its purported termination of the subcontract was unlawful may be significant. Again, I do not propose to deal with the issue on a basis that Bundanoon did not raise. 2. It is common ground that 146 blocks have been harvested from bench 4 (that comes from the same source as the figure of 1,009 blocks referred to earlier). On the assumption that those blocks were of first class quality (and in my view an inference should be drawn that they were, for the reasons just discussed), the royalty payable would be $700,800 (146 x 4 x 1200). Issue 13: removal of crushed sandstone during the harvesting process 1. The fundamental dispute is whether Bundanoon is entitled to be paid an excavation rate for crushed sandstone produced as part of the harvesting process, and thereafter removed from site. 2. Work element 4, set out at [41] above, deals with "Excavation to Nominated RL". In essence, it provides for excavation, relevantly, down to the level where sandstone of harvestable quality was found. In effect, for what Bundanoon called the "Zone of Offer", [36] work element 4 covered excavation down to the level where harvesting of sandstone was to begin. In other parts of the site, where there was no harvestable sandstone, work element 4 covered excavation down to whatever were to be the finished RLs. 3. Within the Zone of Offer, once the nominated RL has been reached (that is to say, once bulk excavation has exposed the harvestable sandstone), work element 5 effectively takes over. I accept that, to the extent that bulk excavation has not been completed outside the Zone of Offer, the remaining bulk excavation works are to be undertaken concurrently with the harvesting of sandstone. That is made clear by para (c) of work element 5, set out at [42] above. Of necessity, however, bulk excavation within the Zone of Offer must be complete before harvesting of sandstone can commence. 4. For work that falls within work element 4 (bulk excavation in the Zone of Offer necessary to expose the harvestable sandstone, and bulk excavation elsewhere to the nominated RLs), Bundanoon is to be remunerated at the rates set out in para (o) of work element 4. However, for work that falls within work element 5, the cost of harvesting is to be funded from the proceeds of sale. That appears from para (f) of work element 5. 5. Against that background, the essential question is whether crushed sandstone (or for that matter, other spoil) produced during the harvesting process is to be removed at Cenric's cost or at Bundanoon's cost, in the latter event to be funded out of the proceeds of sale of the harvested sandstone. When the work elements are considered together and the interrelationship between them is appreciated, it is apparent that the rates set out in para (o) of work element 4 apply only to excavation work that is the subject of that work element. That is because the cost of removing crushed sandstone that is produced as a result of the harvesting process is, as a matter of language, a cost of harvesting the sandstone. 6. That conclusion seems to me to follow simply from the plain language and structure of the subcontract. In my view, it is not necessary to have regard to extrinsic materials to support the conclusion. 7. Against the suggestion that the construction that I have advanced is in some way "uncommercial", or "commercially absurd", I shall refer to one piece of extrinsic evidence. Bundanoon's letter of offer of 12 October 2017 stated that: … [T]he excavation stage and the sandstone harvesting stage are completely separate stages, utilising different processes and machinery. The excavation stage is undertaken on a contractual cost per cubic metre rate whereas the sandstone harvesting stage consists of a royalty agreement. 1. Clearly, as at 12 October 2017 (3 weeks before the subcontract was signed), Bundanoon did not think that it was commercially absurd to restrict the per m³ rates specified in para (o) of work element 4 to bulk excavation only, and not to extend them to removing the byproducts of sandstone harvesting. 2. I add that there is some evidence to suggest that crushed sandstone has a commercial value. If that is so then, it seems to me, Bundanoon would be entitled to turn it to account, subject to payment of any royalty that might be applicable. Indeed, at one stage, Mr Newlinds submitted that Cenric would be entitled to a royalty on crushed sandstone generated as part of the harvesting process. Mr Corsaro objected, not without reason, that this claim had not been pleaded or otherwise flagged. I do not propose to entertain it. Issue 14: time for payment of royalties 1. I have dealt with this in connection with issues 1 to 3 and 6. In short, the effect of the letter of title is that the parties have agreed that royalties are to be paid upon sale of the sandstone, and out of the proceeds of sale. Issue 15: the trust 1. Bundanoon accepts that it is bound by a trust on the terms of the letter of title [37] . Although Bundanoon says that the trust is limited to payment of royalties, that is not a limitation that appears on the face of the letter. What are to be held in trust are the gross proceeds of sale. 2. There is some evidence that Bundanoon has mingled the proceeds of sale with its other funds. It is therefore appropriate, as Mr Newlinds submitted, to make a declaration that the proceeds of sale are held on trust in accordance with the terms of the letter of 14 November 2017. Issue 16: Bundanoon's set-off against Cenric 1. Cenric accepts that Bundanoon is entitled to a set-off. The position, which is to a large extent but not entirely agreed, is set out in exhibit PX1. 2. The evidence and submissions were scanty. The appropriate course is to note that the right of set-off is admitted in principle, and to leave it to the parties to agree on the figures. If the parties cannot agree then the question should be referred out for inquiry and report. Issue 17: liquidated damages or indemnity as between Cenric and Bundanoon 1. I have set out the relevant terms of the subcontract at [38] above. 2. Bundanoon raises three answers to Cenric's claim for liquidated damages or indemnity. The first is that Cenric is estopped from relying on cl 27 because, before the subcontract was signed, it represented to Bundanoon that Cenric would not rely on the milestone dates in the subcontract. The second reason is that time was at large because the subcontract has effect only from its date of execution, 6 November 2017. The third is that time was at large because, by reason of the "prevention principle", Cenric could not rely on cl 27. First answer: estoppel by representation 1. Mr Stratti said that either William or Steven (he was not sure who) represented to him, before he signed the subcontract on behalf of Bundanoon, that the milestone dates "don't matter". As a result, he said, he did not think that the reference to the milestone dates in the subcontract was significant, and thus he signed the document. 2. The difficulty with this proposition is that it requires acceptance of Mr Stratti as a witness of truth on an issue that affects Bundanoon's interests in a very direct way. The very fact that Mr Stratti cannot recall whether it was William or Steven who gave him the alleged assurance suggests that the court should be slow in accepting this aspect of his evidence. See for example McClelland CJ in Eq in Watson v Foxman [38] at 318 – 319; the relevant passage is too well-known to require more detailed reference. 3. I accept that it might be thought to be strange, in a commercial sense, that Mr Stratti, on behalf of Bundanoon, would accept a liability in respect of milestone dates when those dates had passed, unachieved, at the time the subcontract was signed. Equally, however, it is unlikely that William or Steven would have agreed to waive them, given that the milestone dates were operative as between Cenric and TWT, and Cenric's ability to meet them (or to gain appropriate extensions of time) was dependent on Bundanoon's efforts. 4. It is instructive to look at the history of the drafting of the subcontract. Cenric provided the first draft to Bundanoon. That draft included clauses equivalent to clauses 17, 18 and 27 of the executed subcontract. It also included Schedule G, setting out the very milestone dates that became those set out in Schedule G to the executed subcontract. 5. On 18 July 2017, Bundanoon wrote to Cenric. The letter said, among other things, that: Currently, several reasons are preventing Bundanoon Sandstone progressing at the required rate in order to meet contractual milestone dates. 1. On 24 July 2017, Bundanoon proposed alterations to the draft subcontract. They did not include any alterations to the draft clauses or Schedule to which I have referred. Cenric replied. The detail of its reply is irrelevant. 2. Bundanoon obtained legal advice on the subcontract. The evidence includes a marked up version annotated by Mr Stratti with the words: ALL MARKUPS VIA ZIV. 1. This referred to Mr Ben-Arie of Mills Oakley. 2. The marked up version also includes, in Mr Stratti's handwriting, the following: DATES: - START 28TH JUNE 2017 EXCAVATION WORK COMPLETED - 6 SEP 2017 SANDSTONE HARVESTING WORK START – 7/9/17 " " " END 1/11/17 1. It is obvious from this that the milestone dates were present to Mr Stratti's mind before he executed the subcontract on behalf of Bundanoon. It is equally obvious that, having sought legal advice on the draft subcontract, he had negotiated for such changes as he and his solicitors thought were required to protect Bundanoon's interests. 2. There is not a scrap of contemporaneous documentary evidence to support Mr Stratti's contention that he was induced to sign the subcontract, notwithstanding that it contained cls 17, 18 and 27 and schedule G, because of the representations that are now said to have been made. It is not credible that any competent lawyer could have advised Bundanoon to sign the subcontract, including those terms, on the basis of some undocumented oral representation to the effect of that now asserted. 3. In this context, it is not without significance that Bundanoon's list response filed on 11 May 2018 made no reference to the alleged representation. That came in a later version. 4. Even leaving aside my unfavourable view of Mr Stratti's credibility on matters that are relevant to his and his company's interests, I am not prepared to find, on a consideration of all the evidence and relevant circumstances, that the alleged representation was made. Second answer – subcontract operates prospectively 1. This answer runs into the problem that it is inconsistent with the document that the parties signed. The obvious inference from their execution of it is that they intended it, and it only, to govern their rights and liabilities. That is reinforced by the "entire agreement" provision in cl 2(c), which includes a supercession of prior representations and the like. 2. Not only did the parties sign the document, they backdated it to 27 June 2017. That was effectively the date of commencement of works. The obvious inference is that although the parties signed the document somewhat more than four months later, they intended, objectively, that it should be taken to have regulated their rights and liabilities from that date. 3. I accept that this means, in effect, that when Bundanoon signed the document, it agreed to assume the risk that it would become liable for delays in completion of the bulk excavation and sandstone harvesting. That must be assumed to have been a commercial risk that Bundanoon took, based on its assessment of the likelihood that TWT (or more accurately, its development manager), acting reasonably, would grant extensions of time, and of the likely profits to be garnered from the excavation and sale of the sandstone. Third answer – the prevention principle 1. In my view, this does provide a complete answer to Cenric's claim based on cl 27 of the subcontract. 2. The prevention principle holds, in effect, that a party to a contract cannot insist on the other's performance of an obligation in that contract if the first party itself is the cause of that non-performance. The principle, so stated, may be traced back at least to Peter Turnbull & Co Pty Ltd v Mundus Trading Co Australasia Pty Ltd [39] . It is frequently invoked in building, construction and infrastructure litigation. In Spiers Earthworks Pty Ltd v Landtec Projects Corp Pty Ltd (No.2) [40] , McClure P observed at [47] that the principle "may be regarded as a particular manifestation of the obligation to cooperate implied as a matter of law in all contracts". I add that it may also reflect the deeply entrenched proposition that a party may not take advantage of its own wrong. 3. There is no real need to consider the jurisprudential history of the principle. It is well established. McColl JA, with whom Beazley ACJ and Macfarlan JA agreed, dealt with the authorities and their applications in Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd [41] at [114] – [129], in a way that renders further exegesis unnecessary. 4. There is a debate, to which McColl JA referred in Probuild Constructions at [120] – [127], as to whether a contractor (or in this case subcontractor) may rely on the principle where the contract contained a provision for extensions of time, and the contractor did not avail itself of that provision. There is no need to go into this debate. On the view that I have just expressed as to the binding effect of the subcontract dating back to 27 June 2017, it was impossible, in any real or practical sense, for Bundanoon to avail itself of the subcontract's provisions dealing with extension of time. 5. Bundanoon submitted that the prevention principle applied, because it was Cenric's delay in completing (or procuring completion of) shoring works that had caused delay to Bundanoon's activities. Cenric submitted that shoring was part of Bundanoon's responsibility under the subcontract. I do not agree. 6. I have referred to schedule A to the subcontract at [34] above, and set out work element 3 at [40] above. The former refers in very general terms to shoring as being part of the "Subcontract Works". However, the more detailed description given in work element 3 makes it clear that Bundanoon's responsibility for shoring is limited to coordination and cooperation, and excavation "to allow for the installation of the approved shoring system to be done by others". In case there were any doubt about that, work element 3 also makes it clear that to the extent that reinforcement and concrete is needed for the shoring system, it is "to be done by others". 7. It follows that, as between Cenric and Bundanoon, Cenric was, and Bundanoon was not, liable for the shoring works. 8. Mr Stratti's evidence is to the effect that delay in completion of the shoring works delayed Bundanoon from proceeding with bulk excavation in the zone of offer, and thereafter harvesting of sandstone. Notwithstanding my reservations about Mr Stratti's evidence, I accept this. First of all, it is consistent with the probabilities, viewed objectively. Unless and until the side walls of the site were shored adequately, it would be unsafe (putting it mildly) for bulk excavation to proceed. 9. I take into account also the fact that Cenric did not really dispute this aspect of Mr Stratti's evidence. Its case was that it was Bundanoon, not Cenric, that had responsibility for shoring. If Steven or William did think that, they were mistaken. I add that it was a mistake that was perpetuated up until the time of final submissions. 10. This is a clear case for application of the prevention principle. It follows that the third ground of defence upon which Bundanoon relies, in answer to Cenric's claim for liquidated damages and indemnity in respect of liquidated damages payable to TWT, succeeds. Issue 18: misleading or deceptive conduct 1. TWT pleads three "Purchaser Representations" [42] . Slightly paraphrased, they are that Cenric represented to TWT that: 1. there were no contractors other than Cenric and Bundanoon that could harvest, and were qualified to harvest, the sandstone on the site; 2. Cenric had taken reasonable steps to investigate other ways of harvesting and selling that sandstone; and 3. engaging Bundanoon to harvest the sandstone, leading to its sale to DPWS, would maximise the price for the benefit of TWT. 1. The pleading seeks to construct a narrative in which TWT, an innocent wandering alone through the dense and gloomy woods of residential property development, was waylaid by a wicked wolf dressed in the habit of an honest and capable contractor and, unwisely over-trusting, was lured near to its commercial doom. The uncomfortable truth is that the evidence does not support any element of that characterisation. 2. Mr DeBuse did not address this issue in his written submissions. He said that it would be addressed orally. It is sufficient, in disposing of this issue, to set out the entirety of Mr DeBuse's oral submissions on the point [43] : DEBUSE: The next issue is did Cenric mislead TWT? I think the only remaining argument after Mr Newlinds devastating cross‑examination, was ‑ which is really just putting a couple of pieces of time together, but, the only bit that remains is that of Mr Silva and Mr Zhang say they were told and if you were to accept that it was the case, that Bundanoon was the only available government contractor. HIS HONOUR: That's just inconsistent with other things that they knew at the time. And it doesn't say a great deal for their credibility. DEBUSE: Yes, your Honour, it's the only issue that they actually advised to understand, understand. Speaking about that though, they, they spent ‑ they spent a fair bit of consistent correspondence with that over the time. I think I'll move on. I think I better adopt Mr Newlinds' other submission, that's not my best point. 1. The understatement in that concluding submission is striking. The more accurate way to characterise TWT's case of misleading or deceptive conduct is that, factually and legally, it was arrant nonsense. 2. Mr DeBuse is to be commended for performing his duty to the court under s 56 of the Civil Procedure Act 2005 (NSW) in the way he put this point. The same statutory command suggests that I need say no more about it. Issue 19: fiduciary duty 1. Although the pleading could be taken to suggest a more wide-ranging case, it is common ground that the allegation that Cenric owed TWT a fiduciary duty is limited to cl 28A of the General Conditions forming part of the head contract [44] . The first and obvious point is: why should the court strain to superimpose, onto a contract negotiated fully and at arm's length between parties of equal bargaining power, an additional obligation of a fiduciary character? Reference to cases such as Hospital Products Ltd v United States Surgical Corporation [45] and John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [46] suggests that the court ought be slow to do so. 2. Clause 28A imposed contractual obligations on Cenric, including to investigate the saleability of sandstone in the site, provide the findings of its investigation to Argentum Group (Mr Silva) and take steps to sell the sandstone, accounting TWT for half the sale price. 3. Clause 28A was amended by the letter of 30 June 2017 [47] . That letter reflected TWT's receipt and understanding of the Bundanoon proposal. It directed, on the terms set out in the letter, Cenric to engage Bundanoon. The specified terms included provision for division between Cenric and TWT of the royalty that Bundanoon had offered to pay. 4. TWT was at all times represented not just by Mr Zhang, who appears to have been a capable and experienced businessman in his own right, but by Mr Silva. Mr Silva was a capable and experienced development manager. TWT was more than sufficiently well equipped to consider and protect its own interests. After all, as cl 9.2 of the General Conditions recognised [48] , Cenric could not have contracted with Bundanoon without TWT's approval. 5. The effect of the letter of 30 June 2017, read in conjunction with cl 28A, is to recognise and agree that each party, Cenric and TWT, has a financial interest in the harvesting and sale of sandstone. Each was aware of the other's interest. There was no undertaking by Cenric to act exclusively or in precedence in the interest of TWT. There was no undertaking by Cenric to use such power as it had, by virtue of its position as head contractor, to the advantage of TWT ahead of its own advantage. 6. The reality is that the parties negotiated and settled upon the terms of their commercial bargain. Each understood that the other was to benefit from the sale of sandstone. Neither undertook to act in the interest of the other. There is no basis for the imposition of fiduciary obligations on either of them. Issue 20: royalties as between Cenric and TWT 1. Cenric accepts that it is obliged to pass on royalties to TWT in accordance with cl 28A as varied by the letter of 30 June 2017. Issue 21: breach of head contract 1. There are two aspects to this issue. The first asks whether Cenric breached its obligations under cl 28A. The second asks whether Cenric breached its obligation to proceed diligently etc and meet the date for practical completion. 2. The first aspect turns on the terms of cl 28A, recognising that for the most part, the letter of 30 June 2017 has no particular relevance to this issue. The obligations imposed by cl 28A are: 1. to investigate the saleability of sandstone, including the manner of harvesting, so as to obtain the best price; 2. to provide a sandstone management report; 3. to handle sandstone in accordance with that report and report sales to Argentum Group; and 4. to pay over within 5 business days 50% of the net value of the sandstone that had been sold after allowing for sales costs. 1. That last obligation can be put to one side because it has been qualified by the agreement recorded in the letter of 30 June 2017. 2. It is very difficult to understand TWT's case based on the alleged breach of cl 28A. Mr DeBuse did not deal with it in written submissions. He said that it would be addressed orally. I do not think that he did so. 3. I see no reason to spend a great deal of time on an issue that was not addressed in submissions. It is sufficient to say that the evidence supports the following conclusions: 1. Cenric obtained proposals for harvesting sandstone from Gosford Quarries and Bundanoon; 2. it analysed those proposals and made recommendations on them to TWT; 3. TWT asked a number of questions, and Cenric answered them; 4. Cenric then recommended the engagement of Bundanoon; 5. that recommendation was supported by grounds that, viewed objectively (although, I acknowledge, with the benefit of hindsight) were reasonable [49] ; 6. TWT thereupon authorised Cenric to subcontract the excavation and harvesting work to Bundanoon; and 7. Cenric did so. 1. There were of course alternatives. TWT could have sought to harvest the sandstone itself. It could have engaged Gosford Quarries to do so (notwithstanding Mr Silva's strong adverse view of that entity), and sought itself to sell the sandstone. It might have made more money. It might not. All that is speculation. The question is whether Cenric did enough to discharge its obligations under cl 28A(b)-(e). For the reasons I have given, it did so. 2. The second breach allegation – delay in achieving practical completion, stands or falls with the agreement of 19 February 2018. Issue 22: liquidated damages 1. The parties are in raging agreement. If there were an agreement reached on 19 February 2018, as Cenric alleges and I have found, nothing is payable. If there were not, $222,917.20 is payable. Issue 23: cost to complete 1. If the show cause notice or the take-out notice were invalid, nothing is payable. If TWT's actions in taking the works out of Cenric's hands were valid, then Cenric must pay the assessed cost to complete under cl 39.6. Cenric does not submit otherwise (on the assumption that its primary case, based on the agreement of 19 February 2018, fails). 2. The real difficulty is that the works are not complete. Mr Lau, TWT's quantity surveyor, said so [50] . I add that there seems to be an error of principle in Mr Lau's approach to his bulk calculations. He simply assessed the total volume of material excavated, including harvestable sandstone [51] . However, Bundanoon was only entitled to be paid for bulk excavation of GSW and VENM. It was required to excavate harvestable sandstone at its own cost. 3. Mr Newlinds submitted that the cost to complete could not be assessed, and in any event was not contractually payable, until the head contract work that had been taken out of Cenric's hands was completed. It must be correct to say that the final cost cannot be calculated until all the work has been done. 4. I see little point in carrying out hypothetical calculations based on incomplete and in part apparently inaccurate data. If this question arises, it is one that, failing agreement, ought be referred out for inquiry and report. But since on my findings it does not arise, I shall say no more. Issue 24: when must Cenric pay TWT for sandstone harvested? 1. As cl 28A stood originally, payment was due "[w]ithin 5 business days of any sale of the sandstone". That contemplated a "pay when paid" arrangement, of a kind not unfamiliar in the building and construction industry, but subject to Cenric's right first to recoup itself for the costs of harvesting and sale. 2. The letter of 30 June 2017 imposed a different regime. For convenience, I set out the relevant points: The rates to apply to the sale of the harvested sandstone is $1,000 per cubic meter for First Class Sandstone $700 per cubic meter for Second Class Sandstone $500 per cubic meter for Third Class Sandstone Any sandstone of each of the above classes that is harvested is to be sold and the same rates apply. In this respect we note that these quantities are minimum estimates only and greater quantities are anticipated. In addition the Principal may make an application for approval for modification to the DA to allow additional excavation, which may increase the quantity of sandstone or any or either of these classes, and in which case again the same rates will apply. Pursuant to clause 28A(f) of the Contract the Principal is entitled to receive a payment amount which will be calculated based on the applicable rates noted in this letter of sandstone excavated and is to be paid within 2 weeks after completion of the excavation of the sandstone. In circumstances where the quantity of sandstone is beyond current estimates, or the quantity of First Class or any of the other classes of Sandstone extracted exceeds current estimates, the maximum additional payment to the Contractor under Clause 28A of the Contract is the amount of $2 million with the balance and/or all other amounts realised on the sale of the sandstone in its entirety to be paid to the Principal. 1. The first of those bullet points refers to rates applicable "to the sale of the harvested sandstone", according to the classification of what is harvested. The second requires harvested sandstone to be sold. It then specifies TWT's entitlement "to receive a payment amount which will be calculated based on the applicable rates… and is to be paid within 2 weeks after completion of the excavation of the sandstone". 2. There are two quite separate concepts. Taking them in reverse but logical order, the first is the harvesting of sandstone and the second is its sale. Although the second bullet point extracted above refers to payment within two weeks of completion of excavation, it is reasonably clear that what is to be paid is the appropriate amount, based on cl 28A as modified by the letter of 30 June 2017, of the proceeds of sale. 3. As a matter of language, the clause contemplates that nothing is payable to TWT until the excavation of the sandstone – which appears to refer to the entirety of the harvestable sandstone at the site – is complete. That is the construction for which Cenric contended. TWT contended, to the contrary, that payment was due once the stone had been harvested and classified (so that the relevant rate per m³ could be determined) or, at the latest, within two weeks after Cenric had been paid. 4. The parties could have done more to make their intention clear. The extreme positions – that nothing is payable until the entirety of the stone has been harvested and sold, or that money is payable as soon as the sandstone has been harvested and classified – are commercially unappealing. The former would entitle Cenric to sit on the proceeds of sale until Bundanoon has completed all the work of harvesting and sale. The latter would require Cenric to pay even though it has received nothing from Bundanoon [52] , and may not do so for some time. 5. An important matter of context, known to the parties, is that Cenric incurred no cost in relation to the harvesting of sandstone. The removal of overburden (GSW and VENM) was to be done at Cenric's cost, and of course passed on to TWT. However, the harvesting and sale of sandstone was to be done at Bundanoon's cost, and it was to recoup its cost of harvesting out of the proceeds of sale. By contrast, Cenric had no costs of harvesting or processing or sale. 6. Although the letter of 30 June 2017 had a substantial effect on the provisions of cl 28A(f), it did not, I think, supplant them entirely. Thus, the primary obligation remained one to pay 50% of the royalties on sandstone harvested subject to the cap set out in the letter of 30 June 2017. 7. In my view, reading cl 28A(f) together with the letter of 30 June 2017, one arrives at a construction where Cenric is obliged to pass on to TWT 50% of the royalties payable by Bundanoon, as and when Cenric receives those royalties from Bundanoon, until the applicable cap is reached. Adapting phraseology from another field of jurisprudential endeavour, that seems to me to be the outcome of an instinctive synthesis of the language of cl 28A(f) with the relevant terms of the letter of 30 June 2017. 8. That construction takes the structure created by the former, and adapts to it the wording of the latter, to produce the view that the reasonable business person, knowing the relevant factual background, would take of what the parties had, by their combination of those two sources of contractual intent, agreed. And it makes sound commercial sense. Issue 25: cap on royalties 1. This issue too requires consideration of cl 28A(f) of the head contract and the relevant provisions of the letter of 30 June 2017. Mr Newlinds drew attention to the first two bullet points in the letter, as well as to the concluding sentence of the fourth bullet point. 2. I have set out the fourth bullet point recently, at [250] above. For convenience, I now set out once more the first two bullet points: Quantities of sandstone referred to in the report are based on the excavation proposed and approved in the current Development Approval No. D/2016/916 Whilst the anticipated yield of sandstone will likely exceed the minimum quantities noted of 1,000 cubic metres of each of the First Class, Second Class and Third Class sandstone, the Principal is guaranteed this minimum yield. 1. The cap deriving from the last sentence of the fourth bullet point becomes relevant in the circumstances defined by its opening words: "where the quantity of sandstone is beyond current estimates, or the quantity of First Class or any of the other classes of Sandstone… exceeds current estimates". The sentence then recognises that the amount payable to Cenric under cl 28A arising by reason of that event will be capped at $2 million. 2. The obvious construction is that: 1. Cenric is entitled to be paid 50% of the royalties payable on the "current estimates" of sandstone; and 2. for all sandstone harvested beyond those "current estimates", Cenric is entitled to be paid 50% of the royalties up to a maximum of a further payment of $2 million. 1. What, then, were the "current estimates"? The letter of 30 June 2017 does not identify them. It refers to a "minimum" estimate of 1000 m³ of each class of sandstone, which was thought likely to be exceeded. That minimum yield is guaranteed to TWT. However, in an email dated some four days earlier, the parties had identified the then known estimates [53] . Steven told Messrs Silva and Zhang that according to geotechnical investigations and other sources of information, the site was estimated to contain: 1. 1000 to 2000 m³ of harvestable first class sandstone; 2. 1000 m³ of harvestable second class sandstone; and 3. a small amount, less than 1000 m³, of harvestable third class sandstone. 1. It must be the case, in my view, that as at 30 June 2017, those were the "current estimates" of recoverable, or harvestable, sandstone that were the subject of cl 28A. It follows that Cenric is entitled to be paid 50% of the royalties received on the harvest of sandstone up to the limits of those estimates, and that there after it is entitled to be paid 50% of the royalties up to a maximum of $2 million. Issue 26: what orders should be made as between the three parties for the payment of royalties? 1. Those orders will follow the conclusions that I have expressed earlier. Summary of conclusions on the issues for decision 1. For convenience, I set out each of the agreed issues and my answer to it. 1. Did TWT, Bundanoon and Cenric agree on 19 February 2018 to extend the works under the Head Contract to include the harvesting of Bench 4, and if so, what other terms were agreed? Answer: Yes. The terms agreed were that: 1. the head contract between Cenric and TWT would be varied to include the bench 4 works; 2. by necessary implication, the subcontract between Cenric and Bundanoon would be varied likewise; 3. the subcontract would be varied further to provide for royalties to be paid on bench 4 sandstone at a rate of $1,200 per m³ (presumably for first class yellow block), with a minimum quantity of 1,000 m³; 4. TWT would not seek to recover liquidated damages from Cenric for delays up until 19 February 2018; and 5. TWT would grant the extension of time that Cenric had sought. 2. If any agreement was formed on 19 February 2018, was the agreement unenforceable because it was not in writing? Answer: No. 3. Did TWT validly issue a show cause notice and take the works out of Cenric's hands, and if not: (a) is Cenric entitled to damages? (b) in what amount? Answer: TWT was not entitled to issue the show cause notice. Cenric has an entitlement to damages but has not proved that it has suffered any damage. 4. Was Cenric's failure to reach practical completion by the due date 28 November 2017 in relation to the Head Contract a substantial breach of that contract? Answer: No, because of the agreement made on 19 February 2018. 5. At the time the works were taken out of Cenric's hands (a) had all of the sandstone capable of being harvested down to the RL approved under the development determination been harvested? Answer: Yes. (b) was Cenric entitled to claim a royalty in respect of any sandstone harvested portions of which lay below the RL approved under the development determination ? Answer: Cenric is entitled to royalties on all the sandstone so harvested. 6. In relation to the alleged settlement agreement was such an agreement dependent upon: (a) the being a variation to the contract given in writing in accordance with the contract; Answer: No. (b) there being a variation to the royalty payable under the contract pursuant to an agreement between TWT and Bundanoon and Bundanoon and Cenric and did this happen. Answer: The parties (Bundanoon and TWT) did agree that the royalty payable for sandstone would be increased. 7. Are royalties for sandstone under the subcontract to be calculated on the gross volume of each block harvested from the site, or on the measurements of the stone made by the NSW DPWS for the purposes of purchasing the stone from Bundanoon? Answer: Royalties are to be calculated on gross volume. 8. If 'gross volume' how is the gross volume of the (irregular shaped) blocks measured pursuant to the terms of the sub-contract. Answer: The gross volume is measured by taking the length, width and depth of the blocks in the manner proved by the evidence by Mr Kouzinos, and rounding the result down to 4 m³. 9. Was Bundanoon justified in terminating the subcontract? Answer: No. 10. If Bundanoon validly terminated the subcontract on 19 March 2018 what effect, if any, does that have on Cenric's entitlement to a royalty? In particular: (a) Is Cenric entitled to a royalty for sandstone: (i) harvested prior to the termination? (ii) harvested and sold prior to termination? (iii) harvested and sold and for which funds have been received prior to termination? (b) what volume of sandstone, and in what grade, was: (i) harvested before termination? (ii) harvested and sold prior to termination? (iii) harvested and sold and for which funds have been received prior to termination? Answer: Bundanoon did not validly terminate the subcontract and thus this issue does not arise. However: (1) Cenric is entitled to royalties on all sandstone harvested prior to the termination; and (2) that royalty is payable upon 984 harvested blocks having an average of 4 m³ and being first class yellow block sandstone. 11. How are the blocks that have not been sold 'graded' under the terms of the sub-contract? Answer: They are graded as first class yellow block sandstone. 12. Is Cenric entitled to a royalty for Bench 4 and, if so, what volume and grade of sandstone has been harvested from Bench 4? Answer: Yes. 146 blocks of first class yellow block sandstone, having an average volume of 4 m³, had been harvested to the latest date showed in the evidence. 13. Once the harvesting of the sandstone has commenced: (a) is Bundanoon entitled to be paid a rate by Cenric for the removal of crushed sandstone? Answer: No. (b) is the crushed sandstone 'Third Class Sandstone' within the meaning of the subcontract? Answer: Yes, but that does not have any relevant consequences. 14. On a proper construction of the Subcontract, when is Cenric entitled to be paid royalties by Bundanoon? Answer: Cenric is entitled to be paid royalties when the sandstone blocks are harvested: that is to say, when they are cut and split from the mass, rolled, and transported to storage either on or outside the site. 15. What are the terms of the trust upon which Bundanoon was: (a) entitled to sell the sandstone; and (b) required to hold any proceeds/royalties for Cenric? Answer: The terms are those set out in the letter of title dated 20 November 2017. 16. Is Bundanoon entitled to a set-off based on unpaid work under the subcontract? Answer: Yes. If the parties cannot agree on the amount of the set-off it should be referred out for inquiry and report. 17. Does Cenric have any entitlement to liquidated damages against Bundanoon or an indemnity under clause 27 of the Subcontract? Answer: No. 18. Did Cenric mislead TWT as to the appropriate sandstone subcontractor? If so, what is the remedy? Answer: No. 19. Did Cenric owe or breach any fiduciary obligation to TWT? Answer: No. 20. What royalty is Cenric obligated to pass on to TWT? Answer: Cenric is obliged, on receipt of royalties from Bundanoon, to make payments TWT in accordance with cl 28A of the head contract as varied by the letter of 30 June 2017. 21. Did Cenric breach the Head Contract, by: (a) breaching its obligations under clause 28A; and/or Answer: No. (b) failing to complete the WUC diligently and with due expedition and without delay and/or by the date for Practical Completion? Answer: No, because of the agreement made on 19 February 2018. 22. What amount, if any, is TWT entitled to claim from Cenric for liquidated damages? Answer: None. 23. What amount, if any, is TWT entitled to claim for the cost to complete the works? Answer: The amount cannot be determined until the works have been completed. If the parties cannot then agree on the amount, it should be referred out for inquiry and report. 24. When is or was Cenric obliged to pay TWT for the sandstone harvested: (a) two weeks after the individual block harvested was classified and identified at the site; (b) when the whole of the sandstone was harvested; (c) when the sandstone was sold and in respect of each sale that occurred; (d) a reasonable time after the sale took place; (e) when Cenric or Bundanoon received payment? Some other time? Answer: Cenric is obliged to pay TWT its share of royalties for sandstone harvested as and when Cenric receives payment from Bundanoon. 25. As a result of the variation in the 30 June letter agreement what is the maximum amount of royalties that Cenric is entitled to retain? Answer: 1. Cenric is entitled to be paid 50% of the royalties payable on the "current estimates" of sandstone; and 2. for all sandstone harvested beyond those "current estimates", Cenric is entitled to be paid 50% of the royalties up to a maximum of a further payment of $2 million. 26. What orders should be made as between Cenric Bundanoon and TWT in relation to the payment of money received by Bundanoon to Cenric and TWT in respect of any royalties determined to be owing. Answer: The parties are to formulate appropriate orders having regard to my conclusions on the preceding issues. Conclusion and orders 1. In substance, Cenric succeeds. The parties are to bring in draft orders to give effect to the reasons. In relation to issues 16 and 23, the orders should be to the effect that further consideration of those issues is to be reserved, and that if the parties cannot agree upon the outcome then they are to be referred out for inquiry and report. 2. I reserve all questions of costs. If the parties cannot agree on the appropriate costs orders to be made, it will be necessary to obtain a date for hearing of submissions on costs, and to make provision for the exchange of submissions before that date. 3. I list the matter before me at 10am on 25 October 2018 for the making of orders. ********** Endnotes 1. Although I will continue to refer to DPWS as the buyer, the legal position is that the contract for sale was made with the Secretary of the Department of Finance, Services and Infrastructure (DFSI) in effect as agent for DPWS. 2. At [87] and following. 3. T212.1-.8. 4. See generally T158-159. 5. Affidavit affirmed 12 July 2018, [197]. 6. This must relate to first class sandstone. 7. (1919) 225 NY 380 at 387 – 388. 8. [2017] NSWCA 91. 9. (2003) 128 FCR 1. 10. [2018] 2 WLR 1603. 11. Lord Sumption, giving the plurality judgment, and Lord Briggs, arriving at the same conclusion but for different reasons. 12. T218.28-.49. 13. T247.37-248.27. 14. T248.29-.30. 15. T248.35-.43. 16. See Hayne, Bell and Keane JJ in Fortescue Metals Group Ltd v Commonwealth (2013) 250 CLR 548 at [81]. 17. T118.5-.12. 18. Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226. 19. Affidavit sworn 24 July 2018, [22]. 20. T267.44-.47. 21. Affidavit affirmed 12 July 2018, [87]. 22. There was no evidence that this inconsistency could be explained away by reference to the length of the blocks. 23. Affidavit sworn 24 July 2018, [21]. 24. Supply agreement between the Secretary of the DFSI as principal and Bundanoon as supplier, schedule 2 cl 1.7. 25. Bundanoon's written final submissions, [46]. In fact, there were seven issues addressed in those submissions. 26. (1931) 45 CLR 359. 27. See at [138] above, but noting that the letter of title bears on the timing and manner of payment. 28. (1933) 48 CLR 457. 29. Letter of 7 June 2018 from Bundanoon to its lawyers Mills Oakley, tendered without objection. 30. Final written submissions, [66]. 31. T267.24-.36. 32. Jones v Dunkel (1959) 101 CLR 298, as discussed by Handley JA in Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419. 33. (1722) 1 Strange 505; 93 ER 664. 34. (1990) 24 NSWLR 499. 35. (1997) 44 NSWLR 46. 36. See at [43] above 37. See Bundanoon's list response to Cenric's amended list statement, [17F]. 38. (1995) 49 NSWLR 315. 39. (1954) 90 CLR 235. 40. (2012) 287 ALR 360. 41. (2017) 95 NSWLR 82. 42. Second cross-claim list statement, [9]. 43. T396.19-.33. 44. Set out at [25] above. 45. (1984) 156 CLR 41. 46. (2010) 241 CLR 1. 47. See at [26] above. 48. See at [24] above. 49. In this context, I include the fact that Mr Silva had expressed a strong negative view of Gosford Quarries: see his email to Mr Zhang of 20 June 2017 where he said that Mr Stratti had "confirmed that the information provided [to him or TWT] by Gosford Quarries on their role at Barangaroo was incorrect and a lie (which wasn't surprising to me)". 50. T232.37. 51. T238.30-.50. 52. That subject is governed by the letter of title; more accurately, by the terms of the trust which it is common ground, that letter created. 53. Email dated 26 June 2017 from Steven to, among others, Messrs Silva and Zhang. 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. Decision last updated: 18 October 2018