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09/04/20

Claims that started and finished in the sewer

Claims that started and finished in the sewer

Claims that started and finished in the sewer

White Constructions v PBS Holdings

White was developer of a site in New South Wales. It appointed Cleary Bros (Bombo) Pty Ltd as contractor, Mr Trevor Unicomb as project manager, a sewer designer and a water services coordinator. Completion overran by eight months. White blamed the sewer designer and coordinator, and sued them as co-defendants.

The case1 was heard by Mr Justice Hammerschlag in the New South Wales Supreme Court. Other commentaries on the judgment focus on issues in relation to delay analysis. However, it also provides some lessons in relation to quantum. On both, it is interesting to note what the judge said about the burden of proof. Unsurprisingly, this was on White and on the balance of probabilities. However, significantly he also said:

“This is not the type of subject upon which precise evidence cannot be adduced. It is not a subject which involves the Court having to make an estimation or engage in some kind of guesswork. It is not the kind of case where it is necessary for the Court to do its best, in the absence of evidence which White was capable of adducing.”

Delay analysis

White’s expert applied an as-planned versus as-built windows analysis. His counterpart criticised this as: not properly considering additional time required to do non-sewer works or delays unrelated to the sewer design; assuming unjustifiable logic links; and factually and analytically flawed.

The defendants’ expert applied a collapsed as-built analysis. His counterpart criticised this as: defying common sense; containing unsustainable and unjustified logic links; and hiding the defendants’ failures.

The experts reached very different results which could not both be right, but, the judge noted, it was not inevitable that either was right. He described their reports as impenetrable “to the unschooled”. He appointed his own expert, Mr Ian McIntyre, whose evidence was “... invaluable” and demonstrated “that the complexity that has been introduced is a distraction”. Mr McIntyre applied a fact-based approach examining what was actually happening - “ ... the common law common sense approach to causation ...”.

The judge noted that the party experts’ methods were derived from the SCL Protocol2. He followed Mr McIntyre’s opinion that the fact of a particular delay analysis method being in the Protocol “did not give it any standing”, and vice versa.

For its view of the facts, White relied on the evidence of Cleary’s foreman, but the judge considered this “... couched in generalities ...” and “... incapable of founding any specific findings of delay”.

The judge preferred Cleary’s site diary. Whilst comprehensive and well kept, this was “... more significant for what it does not say than what it does”. The court had repeatedly emphasised the importance of such records, but White placed little reliance on this diary, which the judge inferred reflected “... the paucity of relevant entries evidencing relevant delay”. Where the diary referred to delay, it did not identify what was being delayed, and recorded significant other problems on site.

The judge concluded that White had not established its case.

Disruption Costs

This claim relied on White’s establishing that the project was delayed by the sewer works, but the judge considered it had not established this or that the amounts claimed were linked to relevant delay.

The fact that amounts for disruption had been certified and paid to Cleary did not establish White’s entitlement to claim them from the defendants. 

Of specific heads of disruption costs claimed by White, he found that:

  • A claim for additional work to a road base said to be eroded by longer exposure due to delays, failed to evidence how much erosion would have occurred anyway. 
  • A claim for repairing kerbs damaged by machinery carrying out sewer works that should have been installed first, did not establish that damage was caused by the delay or that avoidance steps were not available.
  • A claim for 10% addition paid to Cleary to manage the contractor carrying out electrical installations because of “site constraints caused by the delay in sewer approval”, did not make clear what this meant or why that contractor did not manage itself.
  • A claim for additional costs paid to Cleary for rock excavation valued on dayworks failed to establish Cleary’s contractual entitlement to such valuation.
  • A claim for modifications to drainage, kerbs and guttering completed out of sequence due to delays to the sewer did not establish that the delay caused such disruption or that it was a necessity or advantageous to change sequence. White had also provided no foundation for an alternative claim on the basis of mitigation. 

Prolongation Costs

White claimed $547,000 paid to Cleary for the overrun, calculated at a daily rate of $2,500.

White relied upon the evidence of its director that he had agreed to pay Cleary $175,000 at that rate, with the balance payable once the number of days of delay was known, and which he would pay whatever the outcome of White’s claims.  The judge did “not believe him”. The judge considered the alleged agreement with White uncommercial for Cleary, who had been stood out of its money for two years and who had provided no witness to evidence it. He also noted that Cleary rendered two inconsistent invoices on the same day one year after completion, the second not mentioning delay costs.

Regarding the daily rate, the judge explained that this was in the construction contract as a cap on White’s recoveries. Furthermore, rather than Cleary assert a claim for prolongation costs, Unicomb had asked Cleary to provide an estimated rate. This was calculated in a letter from Cleary, which the judge stated “… does not prove that any costs were necessarily incurred or the amount of such costs”.

The judge was “not persuaded that this claim is genuine. I consider it to be a contrivance ...”.

Consultant Fees

The judge described a $100,000 “Retention fee” paid to Unicomb to not retire but stay on the project through the overrun period as “untenable, and borders on the eccentric”. He considered it not caused by the defendants.

He also noted that Unicomb had still not retired at the date of the judgment and worked on other projects for White during the overrun period. 

This undermined a further claimed $102,300 for Unicomb’s services in the overrun period. In addition, the judge considered it difficult to see how the activities described on the period’s invoices would not have been required anyway. He concluded that “It is not the obligation of the Court to sift through these invoices” and that White had not established them as attributable to the sewer delay.

Conclusions

The judge dismissed the case.

Many of the heads of claim considered in this judgement will be familiar to practitioners.  The burden and standard of proof imposed by the judge will be familiar to those in common law jurisdictions. However, the refusal of the court to estimate, guess or do its best in relation to quantification, where the claimant had not satisfied its burden, is notable. As ever, such variables as the express terms of the contract, applicable law, and particular tribunal are important considerations, but the judgement should be of interest to anyone putting claims to tribunals anywhere.

All of the subjects illustrated by this judgment (such as the relevance of the Protocol, different methods of delay analysis and their merits, proving disruption claims, passing on third party costs, and claiming additional consultants’ fees) are considered in much broader detail in the new edition of Evaluating Contract Claims3.


  1.  White Constructions Pty Ltd v PBS Holdings Pty Ltd [2019] NSWSC 1166
  2.  The Society of Construction Law Delay and Disruption Protocol, second edition (February 2017)
  3.  Mullen J and Davison RP (2019) Evaluating Contract Claims. Third Edition. Wiley, Oxford, UK
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