Paul Vagenas Painting Pty Limited v Concrete Constructions (ACT) Pty Limited [1993] ACTSC 114 (21 December 1993)

SUPREME COURT OF THE ACT

PAUL VAGENAS PAINTING PTY LIMITED v. CONCRETE CONSTRUCTIONS (ACT) PTY LIMITED
No. SC331 of 1989
Number of pages - 23
Construction of Contracts - Contract - Without Prejudice

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
HIGGINS J

CATCHWORDS

Construction of Contracts - building and engineering contracts - determination of money due to painter - calculation of allowances.

Contract - interpretation of.

Without Prejudice - offer made in negotiation by defendant - whether defendant could counter-claim for contractual over-payments not exceeding the offer made.

Scott v Uxbridge and Rickmansworth Railway Co (1866) LR 1 CP 596

Greenwood v Sutcliffe (1892) 1 Ch 1

Cutts v Head [1983] EWCA Civ 8; (1984) 1 All ER 597

Williams v Boag (1940) 4 All ER 246

Singer v Gilchrist Watt and Sanderson Pty Ltd (1950) 67 WN (NSW) 89

HEARING

CANBERRA, 14-18 October, 25-26, 28 November 1991, 22-24, 28-30 April, 1, 14 May, 10 August 1992 and 27 May 1993
21:12:1993

The Plaintiff appeared for himself

Counsel for the Defendant: Mr F Corsaro

Instructing solicitors: Corrs Chambers Westgarth

ORDER

The Court orders that:
1. There be judgment for the defendant on the claim.

2. There be judgment for the plaintiff on the counter-claim.
3. Both the claim and the counter-claim be dismissed.

DECISION

Preamble
HIGGINS J The defendant, a Project Manager, was engaged to carry out refurbishment of the Hyatt Hotel Canberra, formerly the historic Hotel Canberra.

2. The plaintiff was engaged by the defendant to paint both the existing refurbished building and the extensions subsequently erected which greatly expanded the hotel in size.

3. This action was brought by the plaintiff ("Vagenas") claiming, in effect, that it had been paid less than it was entitled to for the painting of the hotel ("the Hyatt"). The defendant ("Concrete") claimed that, if anything, Vagenas had been paid more than it was entitled to, and, in any event, some work done by it was defective so that it was entitled to set-off the value of that defective work against Vagenas' claim and recover any surplus.

Background
4. Vagenas was the corporate vehicle for Mr Paul Vagenas. He and his wife were the sole shareholders in Vagenas. He had, as at mid-1986, extensive experience in the painting industry. He was managing director of Vagenas.

5. In mid-1986 he met Mr John Finlay at the construction site at the Hyatt. Mr Finlay was the Construction Manager employed by Concrete in respect of the Hyatt construction. Mr Finlay had some conversations with Mr Vagenas concerning the carrying out of painting works. These discussions were not for the purpose of arranging for the performance of the main painting works, but to obtain a quote for minor painting work which might be required before the main painting work was to be done. Mr Vagenas says that he gave Mr Finlay the name of his Canberra foreman, Mr Kevin Pocock. He invited Mr Finlay to consult with Mr Pocock concerning such work.

6. Between mid 1986 and the beginning of 1987, some work was performed by Vagenas for Concrete on sample areas and site sheds. Vagenas was paid for this work separately and no dispute has arisen in respect of that work.

7. Concrete then decided to approach Vagenas to perform the painting works in respect of the main buildings.

8. Mr Finlay denied that he met Mr Vagenas before December 1986. However, nothing turns on this.

9. Mr Vagenas says that he had a conversation about painting the main buildings with Mr Tony Payne, an employee of Concrete whose job it was to call for and analyse tenders for approval by Concrete.

10. That there was a conversation between Mr Vagenas and Mr Finlay is common ground. Whether it was December 1986, as Mr Finlay says, or 5 January 1987, as Mr Vagenas says, does not matter very much.

11. It is clear enough that Vagenas was initially requested to submit a tender to paint the exterior of the original buildings. That was not an easy task. The original buildings had been constructed circa 1927. The buildings had been re-painted on a number of occasions without the original paint being removed.

12. Nevertheless, on 12 January 1987, Mr Vagenas prepared a quotation for the work in question.

13. The initial quote was $192,127.00, plus "rise and fall" as from 31 October 1986. The "builder" (that is, Concrete) was to provide "storage and amenities". The quotation also stated,

"Cleaning down of walls will be done as per our discussion on
5.1.87. Removal of existing cracking paintwork only."

14. After discussion with Mr Payne on (or about) 13 January 1987, the quotation was amended to a "firm price" by adding 4% for Rise and Fall up to June 1987. That increased the price to $199,812.00.

15. There was further discussion as to terms of payment and provision of scaffolding. Vagenas completed a form of contract on 18 February 1987 and gave it to Mr Payne for acceptance by Concrete.

16. Under cover of a letter of 30 March 1987 an amended document was submitted to Vagenas for approval. It was signed by both parties on 22 June 1987.

17. In the meantime there had been discussions concerning the priming of untreated timber. Vagenas agreed to do such work as required to such timber before installation in accordance with a schedule of rates dated 5 March 1987.

18. At the same time, there were also discussions as to the performance of internal painting to the existing pavilion areas and other areas of the Hyatt project. Vagenas was advised that a firm called W T Partnership was preparing a Bill of Quantities for such work.

19. Mr Payne gave Mr Vagenas a specification of finishes required by the architects for various internal surfaces. Mr Vagenas then prepared and gave to Mr Payne the schedule of rates dated 5 March 1987. He proposed that the schedule would apply to such work.

20. There was a discussion about an item referred to as "preambles", also known as "preliminaries". Mr Vagenas told Mr Payne he had not included an allowance for preambles in the schedule as the scope of the required work had not then been assessed. As a result of that discussion, Mr Vagenas prepared a revised schedule of rates dated 30 March 1987. The provision for preliminaries proposed by Vagenas was expressed in the following terms,

"As Bill of Quantities is not available for calculation of
preliminary charges a rate of 11.2% (80% of 14% as agreed) will
apply over the above rates as agreed."

21. Repairs and repainting were not to be included in the price.

22. The rates quoted were to be applied to the existing pavilion areas but it was understood that the interior of the existing main building was not then part of the work to be done.

23. By a Site Instruction (no. 546) dated 29 April 1987, Concrete directed Vagenas to proceed with painting the interiors of the existing pavilions, as refurbished, in accordance with the schedule of rates of 30 March 1987.

24. That schedule was revised further, following a discussion between Mr Payne and Mr Vagenas, by the addition of further rates. That discussion was documented by a letter from Vagenas dated 6 May 1987. The rates as so revised were accepted on 6 May 1987.

25. At the same time Vagenas was asked to quote for the painting of the interior of the new building. The new building was a five storey extension to the existing single storey main building. Vagenas did so by advising the rates applicable. Those rates were also accepted.

26. In the meantime, a bill of quantities for the exterior of the new building had been prepared and given to Vagenas. A quote was prepared for that work. It was dated 22 April 1987 and quoted $155,864.00 as the price for that work.

27. On 12 May 1987 that figure was revised downwards to $152,212.00. Concrete then accepted that amended quotation and gave a Site Instruction (no. 633) for work to commence accordingly.

28. By the end of May 1987, Vagenas had, by virtue of various separate contracts, been engaged to paint all areas of the Hyatt other than the interior of the existing main building.

29. On 6 August 1987, a meeting was held for the apparent purpose of rationalising these arrangements.

30. Vagenas prepared a letter dated 14 August 1987 setting out what had, as Mr Vagenas understood it, been agreed. The proposal was for the painting of all of the Hyatt, including the lobby area inside the existing main building, but excluding other areas of it.

31. It is important to set out the terms of this document as, in my view, it sets out the terms upon which Vagenas was to proceed with the works referred to in it. The terms of the offer it represented were accepted by Concrete in a document referred to as "Contract Adjustment No. 7".

"We refer to the meeting held at your office on Monday, 10th August,
1987, which was attended by yourself, Mr Steve Schutt representing
the Hyatt and Paul Vagenas representing our Company. The purpose of
that meeting was to discuss the painting contract of the
abovementioned project.
As a result of our meeting and after taking into account various
inclusions and exclusions as detailed in this letter we confirm the
contract price for the painting of the abovementioned project to be
One million five hundred and forty thousand dollars ($1,540,000.)
In arriving at the contract price the following items have been included
by mutual agreement of the abovementioned meeting.
1. Painting of existing exterior as originally agreed, including the
agreed margin of 6% and your contract adjustments No. 1 to 5 inclusive
$249,300.00
2. Painting of new building exterior as originally agreed (refer to bill
of quantities) including the agreed margin of 6%
161,400.00
3. Painting of Pavilions interior - refer to our letter of 29.7.87 which
details our measurements of this section, adjusted to 6% margin as
agreed and including your contract adjustments 1, 2, 3
252,420.00
4. Painting of main existing building interior (lobby etc.) (Refer to
list of exclusions)
77,380.00
5. Painting of new building interior
530,000.00
6. General priming of woodwork for new and existing building to the
extent detailed in our letter dated 29th July 1987 adjusted to the 6%
agreed margin not 11.20% as previously submitted
96,315.00
7. Filling of screwholes to woodwork at new and existing buildings
36,630.00
8. Painting of timber moulding to bathrooms (black) (new and existing
building) to the extent as detailed into our measurement list page 3
item C dated 10th July, 1987 and our letter dated 29th July, 1987
adjusted to 6% margin as agreed not 11.20% as submitted previously
3,875.00
9. Removal of existing wallpaper from walls to the extent as detailed
into our measurement Page 6 dated 18th May 1987 and our letter dated
29th July, 1987 adjusted to the 6% agreed margin not 11.20% as
previously submitted
3,263.00
10. Removal of existing calsomine coating from walls to the extent as
detailed into our measurement Page 7 Item A and our letter dated 29th
July, 1987, adjusted to the 6% margin as agreed
1,672.00
11. Application of binder to walls to the extent as detailed into our
measurement Page 8 Item A and Page 7 Item B adjusted to the 6% margin as
agreed
818.00
12. Allowances for acceleration sum (penalty ratesetc.(sic)) as agreed
61,160.00
13. Allowances for Rise and Fall to 31.12.87 as agreed
65,767.00
TOTAL $1,540,000.00
In relation to Items 6 to 11 inclusive - We stress that the
abovementioned contract price includes only the work done as per our
previous submissions. All future work in these areas will be subject to
charge in accordance with the agreed schedule of rates.
The negotiated contract price has been prepared on the basis that walls
and ceilings are to be either plasterboard, villaboard or cement
rendered surfaces. Any changes in the type of surfaces used will lead
to a claim being submitted for the additional cost incurred in painting
the new surface calculated in accordance with the agreed schedule of
rates plus a 6% margin.
In accordance with our agreement the following invoices submitted by our
Company will be cancelled. These invoices are not included in the
contract price and a new submission will be made for the work covered by
these invoices and will be charged in accordance with the agreed terms
and conditions.
INVOICE NO. DATED AMOUNT
10595 20.7.87 635.00
10596 20.7.87 1158.72
10597 20.7.87 68.25
10598 20.7.87 978.00
10600 20.7.87 3166.00
10601 20.7.87 1956.00
10605 20.7.87 330.00
10606 20.7.87 2501.00
10625 31.7.87 1463.17
10627 31.7.87 1564.14
The following items are specifically excluded from the contract price
and will be charged according to the agreed schedule of rates and
conditions plus the margin of 6%.
1. General priming of timber surfaces for new and existing buildings.
2. Installation of wall fabric and associated work.
3. Painting of walls in the Club, Club Bar, Manager's Office, Seminar
Room(s) and the complete Presidential Suite.
4. Painting of walls in the Banquet Hall below the picture rail to the
floor level.
5. All Autriums (sic) and fittings and handrails attached thereto.
6. All joinery items including office furniture, cupboards, bars etc.
7. All doors to built-in wardrobes in all suites.
8. All internal handrailings throughout.
9. All plant rooms with the exception of the entry doors and door
frames.
10. All service pipes and duct works including gas pipes, sprinkler
system, ventilation ductwork etc.
11. Any areas specifically not mentioned in the Schedule of Finishes as
originally provided by your Company.
12. Any texture application.
13. Preparation of existing surfaces in the old building generally.
14. All stain applications to timber surfaces.
15. As per our discussion concerning colour selections for the various
rooms and areas in the development - each individual room and area will
have the following applications:
(a) Ceilings and cornices - one colour only.
(b) Walls including all trims attached thereto - one colour only.
(c) Skirting boards, doors, door frames and timber windows - one colour
only.
Should any room or area require the use of two or more colours in any of
the sections detailed in 15 (a-c) above the additional charges for this
work will be negotiated at the time instructions are given to our
Company to undertake this work.
16. Any additional work which may arise from time to time which is not
specifically included in items 1 to 13 of this letter.
We advise that all charges are subject to 6% margin as was agreed at the
recent meeting. We further advise that where an hourly rate is
applicable that rate will be $29.00 per hour, this rate will stand until
31st December, 1987.
We request that you thoroughly review the various inclusions and
exclusions which have been detailed above and used by our Company in
arriving at the contract figure. Should you not agree with any of the
inclusions or exclusions we would appreciate your early response."

32. The effect of this agreement was to increase the total contract sum to $1,540,000.00, subject, of course, to the qualifications expressed in it.

33. There were requests subsequently for Vagenas to perform some additional work from time to time. That work was to be done "in accordance with the agreed schedule of rates".

34. As I read it, the "agreed schedule of rates" is a reference to the letters of 30 March 1987 and 6 May 1987 from Vagenas to Concrete. Those provisions were, however, subject to the penultimate paragraph of the letter of 14 August 1987 which increased labour charges (where specified as less) to $29.00 per hour. All rates were subject to a surcharge of 6% (for "preliminaries"). The rates were "firm" until 31 December 1987, "then it will be subject to Rise and Fall".

35. The defendant submitted that the term "acceleration sum (penalty rates etc) as agreed", used in paragraph 12 of the letter of 14 August 1987 was intended as a true "allowance". That is, the agreed sum allowed for additional labour costs attributable to penalty rates (and similar imposts) payable by Vagenas to accelerate completion of the works referred to. It would be payable whether or not such increased cost was incurred. Vagenas contended that if more was expended than allowed, it was entitled to the excess. Vagenas did not address the possibility of the allowance being unexpended and, to that extent, not payable by the defendant.

36. The question is whether, if Vagenas' costs for "penalty rates etc" exceeded $61,160.00, it could claim the difference (up to 31 December 1987). Similarly, if "Rise and Fall" exceeded $65,767.00, the question arises whether Vagenas could claim the difference.

Allowances - acceleration sum and rise and fall
37. It should be noted that the agreement between the parties signed on 22 June 1987, concerning the painting of the original building's exterior, included a term that,

"Sufficient men will be employed to complete the work with all
reasonable speed but if in the opinion of (Concrete) the work is not
proceeding methodically it may employ at the cost of (Vagenas) or cause
(Vagenas) to employ a sufficient number of men which in (Concrete's)
opinion will complete the work by the estimated date of completion."

38. There was no specific "date of completion". Indeed the only reference to it in the "Acceptance of Tender and Subcontract" of 22 June 1987 is,

"Programme Requirements: In accordance with the Construction Manager's
Programme and Site Manager's instructions."

39. It was inevitable that the performance of the painting work would be subject, to some extent, to the vagaries of other trades. At times more, and at other times less, labour would be required. At times, overtime would be required of the available work force.

40. The "allowance" for rise and fall was clearly intended to pre-estimate Concrete's liability for that eventuality (at least up to 31 December 1987). I interpret it to mean that if the allowance was exceeded, Vagenas would have to absorb the cost. If, as I believe Vagenas expected, it was not exceeded, Concrete would not be entitled to any reduction in the agreed price.

41. I conclude that the same expectation existed with respect to the "allowance" for "penalty rates etc".

42. I am fortified in that conclusion by the terms of Concrete's acceptance of the terms contained in the letter of 14 August 1987. It was couched in terms which viewed the existing, largely lump sum contracts, as having been increased to $1,540,000.00. That sum included the allowances in question.

43. Vagenas contended, however, that there was a subsequent variation of the contract which called for a recalculation of the contract sum ab initio, so as to "add-on" the actual acceleration costs incurred. I will deal later with that submission.

Events after 14 August 1987
44. It is common ground that after 14 August 1987 there were "variations" to the contract requiring extra work to be performed. There was other work which was not included in the lump sum of $1,540,000.00. That work was also regarded as extra and to be paid for when performed in accordance with the letter of 14 August 1987.

45. On 14 October 1987, Vagenas complained, in a letter to Concrete,

"We have been requested by your Company to complete the work in a much
shorter period of time than originally agreed which means more money in
labour has to be provided weekly. We advise that we will be doing the
best we can but cutting our claim (of 21 September 1987) by $96,629.28
(from $191,368.00) does not help very much."

46. However, this was not a claim, as I read it, to increase the total payable by Concrete but rather an exhortation to keep up the cash flow from progress payments to enable the accelerated incidence of labour costs to be met.

47. Indeed, by agreeing to work to Concrete's programme, such an eventuality was a risk that Vagenas assumed.

48. On 26 October 1987, Vagenas submitted to Concrete a summary of work done to that date, including variations. That summary estimated the value of "work done" including the "allowances" at 65.67% of the total sum of $1,540,000.00. An additional sum of $147,243.97 was claimed to have been the value of extra work performed pursuant to "Variations" requested up to that time. The total value of authorised "variations" (including those varying or deleting previous variations) was $158,750.83 of which 92.75% had been completed. It follows that Vagenas was, by this document, acknowledging that $1,698,750.80 was the total sum it was entitled to on completion of the original work and the authorised variations issued (numbered 1-42) up to that time.

49. By the time the works had been completed the number of variations requested by Concrete had risen to "333" (including some numbered within some numerals, for example, "65A").

50. There was prior to this time, Mr Vagenas claimed, a conversation between him and Mr Payne, about September 1987. The conversation was, he says, as follows:

"Vagenas: You know the allowance for penalty
rate hours is going to be exceed (sic) very soon.
Payne: Yes I know. How much are you going to
charge for penalty rates?
Vagenas: The same as for Riverside Plaza
(another project of Vagenas at Queanbeyan, New South Wales),
$16.00 extra over per hour."
Payne: Okay."

51. He says that later he told Mr Payne,

"The money set aside for penalty rates in last month's agreement has
already been spent and I don't mind helping Concrete out by working
more overtime but I expect to get paid for it."

52. Then followed a request by Mr Vagenas for Mr Payne to ensure that Concrete's foremen signed dockets acknowledging work done as variations without reluctance or argument.

53. I do not construe this conversation as setting aside the original agreement. I take it to be a warning to Concrete that penalty rates were to be included in the price of variations and were not to be absorbed in the allowance made for the original works.

54. It had been agreed that where penalty rate costs were incurred due to the accelerated pace of the program, they would be charged out at $16.00 per hour. The rate to May 1987 had been $10.00 per hour.

55. I do not construe Mr Payne's response, assuming it to be as Mr Vagenas deposed in his affidavit of 16 April 1991, to be an agreement to renegotiation of the previous agreement or any previous variation of it. Indeed, I doubt that Mr Payne had authority to bind Concrete in such circumstances, especially in such a casual way.

56. However, Mr Vagenas also alleges that he reported this conversation to Mr Finlay. He was Mr Payne's superior. He says Mr Finlay approved of his proposal. Mr Vagenas says the conversation then continued,

"Vagenas: From what I can see around here, the requests that are
being made for variation work and the requests to work outside
normal working hours will come to a large amount of money and it
worries me.
Finlay: I'm aware of that. We're currently talking to the client
about it. Your (sic) not the only one with this problem. Everyone
has it. You'll get paid. No worries."

57. Mr Finlay denies that was the conversation although he agrees that he did speak to Mr Vagenas about the subject of overtime. His account of the conversation was as follows,

"I said: 'If we request you to work any abnormal overtime and give
you an instruction in writing to that effect and you work that
overtime, we'll pay you.'
Paul Vagenas said: 'Okay.'" (affidavit 7 May 1991)

58. I am sure that neither account is likely to be totally accurate. However, I accept Mr Finlay's account as the more accurate. Both deponents were cross-examined. As I indicate later, I formed an unfavourable impression of Mr Vagenas' credibility.

59. It seems to me that Mr Vagenas, on any view of it, obtained a promise from Mr Finlay only to raise his concerns with "the client" (that is, the developer). Mr Finlay did no more than express confidence that he would be successful in covering the mounting costs of "variation work" and of requests to work "outside normal working hours".

60. The only effect of this conversation was that, in pricing requested variations, additional sums for any overtime involved in effecting the work would be added to the price.

61. Following that conversation Mr Vagenas forwarded a letter dated 14 October 1987 to Concrete. The terms of that letter are consistent with my construction of the conversation between Messrs Finlay and Vagenas.

62. Shortly after 14 October 1987, Mr Vagenas claims to have had another conversation with Mr Finlay about alleged underpayments to Vagenas. However, nothing further seems to have been agreed as a result of that conversation.

63. There was also a discussion with a Mr Schrivener about the variations requested. As a result, he sent to Concrete a written summary of work done dated 26 October 1987.

64. Following that letter, Vagenas received a cheque for $66,897.70. This was less than Mr Vagenas expected and accordingly he went to see Mr Finlay. Mr Vagenas protested that he kept getting requests for additional work, but was not receiving prompt payment. Mr Finlay told him that the developer (Kumigai-Gumi) had not yet provided sufficient funds to pay for the variations already authorised.

65. As to the completion date, Mr Vagenas says that he spoke to Mr Finlay in the following terms,

"And another thing we just received programmes which indicates (sic)
we'll be well and truly working here in 1988. We won't be finished
this year ... If the last two months is any indicating (sic), we'll
be here the best part of 1988 wouldn't we?"

66. Mr Finlay agreed with that proposition, but advised that some areas had to be handed over to the Hyatt by December 1987.

67. Mr Vagenas protested further about the lack of prompt payment for variations in a meeting with both Mr Finlay and Mr Spring (a director of Concrete). He complained that he had tax commitments that he could not then pay.

68. Mr Spring, he says, then stated,

"You'll be right. If you get really stuck we'll do something about
it."

69. Mr Vagenas threatened to pass on any penalties he had to pay. Spring said,

"She'll be right mate. I'll do that if it should be the case."

70. Even if this accurately sets out the conversation with Mr Spring, it does not seem to me to alter the arrangement already in place. It certainly does not commit Concrete to pay such tax penalties as Vagenas, or Mr Vagenas, might incur.

71. I note that Mr Finlay says in his affidavit, that at this time, he drew to Mr Vagenas' notice that after December 1987 he would be entitled to a further sum for "Rise and Fall".

72. That statement does not, however, indicate any intention to change the pre-existing basis for calculating payments due to Vagenas.

73. I do accept that Concrete was anxious to hurry the project along. A notice dated 8 December 1987 given by it indicated an intention to work over the Christmas/New Year shut-down period.

74. As at 7 December 1987, 98 variation requests had issued and a list of them was compiled. The total value of the variations to that point was shown as $374,788.64.

75. The notice of 8 December 1987 was understood, Mr Vagenas says, to be a request to him to increase his work force. He says Mr Finlay acknowledged this. Mr Finlay says that the notice was intended merely to request work to continue over the shut-down period. The latter meaning is indeed what the notice conveys. I do not accept that Mr Finlay intended it to convey a request to increase the work force. However, neither version of the conversation effects any change in the prior arrangements between the parties.

76. The next relevant event was a meeting between Mr Finlay and Mr Vagenas between 7 January 1988 and 14 January 1988. Mr Vagenas again protested about non-payment for variations.

77. He said he told Mr Finlay,

"We've already done 1.5m work (sic) of work and there's plenty more to
go. The amount of work involved in this job is in my opinion likely to
be more than $3m."
Finlay: Yes, I'm going to talk to the cost
controller about a remeasure of the works.
Vagenas: What short (sic) of remeasure have you in mind?
Finlay: The making of a proper bill of quantities."

78. Mr Finlay's account of this is a little different. He deposed that he said,

"We are going to get a remeasure and a proper bill of quantities.
When you get that you will include all the variations that you've
done where they are not specifically measured in the bill of
quantities. The variations can then be added to the measurements
on the bill of quantities. That will come up with a lump sum
which can then be submitted to the client for approval."

79. The conversation has to be construed in context.

80. Mr Finlay had the problem of persuading the developer to pay more. Mr Vagenas was concerned to obtain payment for the work Vagenas had done but Concrete had not been given sufficient funds by the developer to pay for that work. The primary purpose of the bill of quantities was to persuade the developer that it should pay more for the painting works.

81. That does not suggest that there was to be a change in the contractual arrangements between Concrete and Vagenas. Rather the bill of quantities was intended to facilitate accelerated payment to Vagenas for the work it had performed pursuant to the existing contractual arrangement.

82. The number of variations was a source of obvious difficulty. A few days after the foregoing conversation, Mr Vagenas spoke to Mr Finlay about the large number of claims Vagenas had submitted for work done on variations. There is a different account of that conversation given by each of those persons. Notwithstanding that, the net result of those accounts is remarkably similar.

83. It is clear that the process of agreeing on the price for each variation was becoming administratively unwieldy. W T Partnership had been requested to prepare the Bill of Quantities that had previously been discussed. According to Mr Vagenas, Mr Finlay proposed that future variations should be verified by reference to the proposed Bill of Quantities. However, the Bill of Quantities would not address "penalty rates, preliminaries and rise and fall and the like".

84. Accordingly, Mr Vagenas asked for a 10% surcharge for "Rise and Fall". He represented to Mr Finlay that was the basis for the existing allowance to 31 December 1987. That representation was clearly wrong. The price of the work included in the offer of 14 August 1987 was $1,413,073.00 before allowances. Allowances for "acceleration sum" and "Rise and Fall" brought the price up to $1,540,000.00. At $65,767.00 the allowance for rise and fall represents a surcharge of a little less than 5%. Nevertheless, Mr Finlay invited Mr Vagenas to submit a claim for the bill of quantities using 10% for work done before 31 December 1987 and, thereafter, an increase to the rates by the "CPI" increase (if any). Mr Finlay says the claim was to be for whatever cost increase there had been by the relevant time. On either account of the conversation there was no agreement to allow a surcharge of 10% for "Rise and Fall".

85. The conversation did not constitute an agreement to alter the 6% surcharge for "preliminaries" even though, according to Mr Vagenas, Mr Finlay agreed that it would be fair to allow extra for any remeasuring work Vagenas might need to do over and above the measuring work to be done by W T Partnership.

86. Even on Mr Vagenas' account of the discussion with Mr Finlay, no final agreement was reached to alter the existing agreement. Indeed the last comment Mr Vagenas attributes to Mr Finlay, in relation to "extension of time costs" was, simply, "When the job is finished make a claim about it."

87. In my view, that comment characterises the effect of the entire discussion.

88. There was, of course, a serious difficulty in the proposition that the bill of quantities would solve any dispute between Vagenas and Concrete.

89. A request for a variation calling for a price calculated according to agreed rates would, if the work was done, lead to an agreed sum being due from Concrete to Vagenas. However, it would be inherently impossible to identify repainting costs in any objective manner, or to identify authorised as opposed to unauthorised variations, from the bill of quantities. Nor could the bill of quantities address claims by Vagenas for additional allowances for items such as "preliminaries" or "acceleration costs".

90. On 10 January 1988 Vagenas purported to notify Concrete that in future (as from 1 January 1988) its "charge out rate" would be,

"ORDINARY TIME $32.50 PER HOUR
PENALTY RATES WEEKENDS $16.50
" " PUBLIC HOL. $25.00."

91. By 22 February 1988, Vagenas was still complaining about insufficient payments and the large volume of variation work which had been requested. The bill of quantities was still not been prepared by W T Partnership.

92. On 27 February, Vagenas sent an invoice to Concrete claiming that work done up to 27 February 1988 was worth $2,219,678.54. Vagenas acknowledged that payments totalling $1,664,944.51 had been made. It requested payment of the difference, being $554,734.03.

93. At that point, the number of variations claimed to have been received was 217, numbered 1-125 inclusive (including some multiple numbers). If the estimate made by Vagenas as to percentage completion was accurate, $214,875.20 was the value of work remaining to be completed.

94. In April 1988, some preliminary measurements were received from W T Partnership. Mr Vagenas had a discussion with Mr Finlay as a result of which Vagenas submitted what was described as "a rated bill of quantities". Mr Vagenas says that when he presented it, he complained that it understated Vagenas' true entitlement, although it appeared to state its entire claim.

95. There was detailed discussion then between the representatives of the parties concerning the content of the bill. That discussion did not, in my view, resolve any issues. Indeed, Mr Vagenas states that he told Mr Finlay that he had not included "extension of time costs" and other allowances claimed were merely "estimated figures". He intended to submit a revised claim.

96. The painting work on the Hyatt was completed in late June 1988 (apart from maintenance work).

97. In July 1988, Vagenas presented a revised rated bill of quantities to Concrete. It claimed a total of $3,933,871.13. At that time $3,050,000.00 had been paid leaving a difference allegedly outstanding of $888,871.13.

98. The subsequent work for maintenance or "touch-ups" was charged out on seven subsequent invoices dated between 10 October 1988 and 25 May 1989. All of those except two were paid as charged. The two allegedly unpaid were, 9 November 1988, no. 10901 ($1,385.00) and 25 May 1989, no. 10979 ($1,031.50).

99. There was a major disagreement, however, over the amount claimed by Vagenas in the rated bill of quantities.

100. On 1 July 1988, Mr Finlay, for Concrete, wrote to Vagenas rejecting the claim. He pointed to a report by W T Partnership which, he said, was not consistent with the claim.

101. Vagenas replied on 5 July 1988. It is clear that, although "additional works" and "repaints" claimed by Vagenas exceeded W T Partnership's estimate by $220,766.00, the main area of disagreement was Vagenas' claims for "penalty rates" ($350,000.00), "rise and fall" ($200,000.00), "preminaries" (sic) ($150,000.00) and "head office overheads" ($60,000.00).

102. A further meeting took place in August 1988 in an attempt to reach an agreement between Vagenas and Concrete. Although agreement was not reached, Concrete paid an additional $225,000.00. By the time the Statement of Claim issued on 5 June 1989, Vagenas had amended its claim to $4,152,141.31 and acknowledged payment of $3,320,000.00.

103. By 29 October 1990, Vagenas had revised its claim down to $3,976,464.99. To this sum was added a claim for the balance of $2,416.50 for work following completion. This reduced the total claim to $658,881.49 after allowance for the sum paid before the action was commenced.

104. By its defence to that claim, Concrete asserted that no more was due to Vagenas than had been paid already. It also made a counter-claim for allegedly defective workmanship. The total claimed by it was $245,650.00.

105. On 8 October 1991, Vagenas further amended its particulars of claim. The price claimed for work done rose to $4,079,552.05 and the balance due after allowance for payments rose to $759,552.05. That balance did not, however, include the $2,416.50 mentioned above.

106. On 9 October 1991, Concrete also added a claim for a return of any overpayment found to have been made by it to Vagenas.

107. Battle lines being thus joined, combat commenced on 14 October 1991.

The Evidence
108. Evidence was presented primarily by affidavit. Nevertheless, 17 days of hearing were devoted to the reading of those affidavits and cross-examination of deponents. It is sufficient to refer to that part of the evidence which relates to the resolution of issues between the parties.

Living Away from Home Allowance
109. There was a sum claimed by the plaintiff for money paid to employees for "Living Away from Home Allowance" ("LAHA"). This sum was part of the cost claimed under the heading "penalty rates". It allegedly comprised sums paid to employees, and sums paid to the Queanbeyan Hotel and others on behalf of employees, for their accommodation and meals. It was suggested that $110,920.21 fell into the former category and $70,455.16 was paid to the Queanbeyan Hotel (and some other landlords).

110. There were a number of difficulties with this claim. A question was raised as to whether the claimed payments were made because the plaintiff was obliged to do so or whether they were made for some other reason. It is obvious that only expenses of that kind necessarily incurred could validly have been charged against the defendant. There was, of course, an issue as to whether such expenses were refundable by the defendant in any event. I will, however, examine the issue of the bona fides of the claim.

111. Mr Manuel, one employee in respect of whom LAHA was paid, was paid as a result of a decision by the plaintiff to pay "over-award". He had no other entitlement to LAHA. Asked about that, Mr Vagenas could only say,

(T.633) "What is bona fide in one hand and what reality is in
another. It is decisions we face everybody at that period of
time have to make."

112. Whatever entitlement the plaintiff had to be reimbursed for LAHA actually paid, it would not extend to payments made, described as LAHA, which in reality were a bonus or incentive to engage or retain labour.

113. There was, however, a more serious difficulty faced by the plaintiff in relation to this part of its claim.

114. The documents which purported to verify the claims that payments of LAHA had actually been made, revealed some of the payments in question to have been made by the plaintiff to American Express. The American Express statements which detailed the items for which payment was made were not connected in any way with payments to workers. Mr Vagenas sought to explain this anomaly in the following terms,

(T.684) "In a lot of occasions, sir, yes, in a lot of occasions,
money has been directed out of my pocket to certain employees. And
at a later stage I use the same amount of money and if I make a
cheque made to various organisations, like American Express of this
period of time. That's about it."

115. This was a fairly breathtaking claim. In effect Mr Vagenas was saying that he made payments in cash to workers. Those payments were not recorded in the plaintiff's books. They were not shown on the workers' group certificates. They were then written up as payments to American Express for unrelated, but apparently tax deductable, purposes.

116. Some of those records had been altered. For example, a payment made to a Mr Todd Healey, originally described as a "bonus" for Area 2A (that is, New Parliament House) was given an altered description of "Hyatt - LAHA".

117. Mr Vagenas (T.694) could not explain this anomaly. Time sheets for the Hyatt failed to demonstrate Mr Healey's presence at that site. Mr Vagenas conceded, "It does not appear he was there".

118. In another instance, a payment for $1,511.63 was made on 21 July 1987 to American Express. It had, originally, been written in the books of the plaintiff as being for "Accommodation and travel, Yass, Goulburn". That would have been a tax deductible payment but not one apparently related to the Hyatt. That entry was covered by "whiteout", and "Hyatt Hotel" written in.

119. Even that did not represent the truth of the matter. When the original American Express account so paid was produced, it detailed expenses incurred in Singapore, Greece, Dubai (UAE) and Melbourne.

120. Mr Vagenas had given evidence that the record, as finally written, was accurate. He was asked to explain the apparent alterations which had produced them. He said,

(T.734) "The answer I gave to his Honour, it wasn't exactly false.
Into the face of it - as look at it - it was correct from the best
of my knowledge. But on the other hand, none of this amounts that's
claimed from (the defendant) - but on the other hand, the Hyatt
expenditure shown in the certificate, it probably shows the amount
of money of $1,511.63 spent from amounts to (the defendant) - to
Hyatt Hotel."

121. He conceded that his previous evidence had been "misleading". The reason for the falsification of and creation of misleading records was, Mr Vagenas agreed, so that he could create the appearance of tax deductable expenditures where none had been made. He did so to cover unrelated payments in cash to workers which would not be disclosed as such to the Australian Taxation Office. Those "cash" payments would, of course, have been deductible if properly recorded and claimed. They would also have been assessable income in the hands of the employees to whom such payments were made. Of course, that assumes that the claim that such payments were made to workers was true.

122. There was a record of monies paid to "Queanbeyan Hotel". Mr Vagenas claimed to have given a cheque for $6,156.10 dated 29 June 1988, to Mr King, the hotelier for expenses incurred on behalf of Vagenas employees.

123. However, bank records revealed that the cheque in question was not paid to the Queanbeyan Hotel or any person on behalf of that Hotel. It was, in fact, used to obtain an ANZ bank cheque for that sum. Why?

(T.755) Vagenas "... probably because cheques have been bounced
before that I have to do the cashing myself."

124. Not even that explanation withstood further scrutiny. Mr Vagenas next had his attention drawn to an endorsement on the back of the cheque. That endorsement disclosed that the cheque has been used to provide $3,006.10 by way of bank draft and $3,150.00 in cash.

125. Documents produced by the bank made it clear that the bank draft was sent to Greece. It was clearly not paid to the Hotel Queanbeyan. Nevertheless, as to the cash component, Mr Vagenas claimed it was paid to Mr King. He was asked to explain why a Queanbeyan hotelier would be paid at Wollongong where the cheque had been cashed. He said,

(T.756) "It is that King who was coming very often down to
Wollongong. I would not be surprised if he was down there that
day, if it was Mr King which cashed the cheque out."

126. It is noteworthy that Mr King was not asked to give evidence supporting Mr Vagenas' evidence. I have no doubt that the explanation was, in fact, false.

127. It also became apparent that entries in the wages records purporting to show payments to workers, being those claimed to have been made in cash, could not be reconciled with cash drawn from the plaintiff's account. The alleged payments greatly exceeded such withdrawals even had all of them been used for that purpose.

128. Mr Vagenas explained this anomaly, asserting that he had borrowed money from friends to make such payments. There were some cheques which appeared to have been drawn but not cashed. He said that he intended to pass the cheques on to those friends who had lent him money in repayment of their loans as funds became available.

129. Needless to say, none of these generous friends were produced as witnesses.

130. The examples given above and of false records could be multiplied over and over. It is clear that the wages records produced by the plaintiff have been falsified to add entries suggesting payment of "LAHA" to workers. The false entries can easily be distinguished from the (much fewer) genuine instances of LAHA payments. The latter appear to the left of the total paid to the relevant worker for the payment period in question. They are reflected in the total so paid. The former are recorded to the right of the total paid and are not reflected in that total.

131. In addition, a number of workers said to have been paid cash in respect of LAHA denied they had received any such cash in hand payments from Mr Vagenas whether as cash in hand or otherwise.

132. I do not believe that any of the payments recorded but not reflected in the amounts shown as paid to individual workers were, in fact, made. I do not believe, having seen and heard Mr Vagenas, that his testimony on any issue could be accepted as truthful where it is contradicted or disputed unless corroborated from some trustworthy source.

133. Doubt as to Mr Vagenas' veracity did not end there. A number of examples were pointed out to him where sums he had claimed for LAHA was not recorded at all. There were also instances where the workers to whom payments were allegedly made were not recorded on contemporaneous time sheets as working at the Hyatt. Thus, even where I could be satisfied that workers received LAHA, it appears that only some of them were contemporaneously employed on the Hyatt project.

134. Accordingly, it is not possible for me to be satisfied that the payments claimed by Vagenas were in fact made, irrespective of whether it was open to the plaintiff under the terms of its agreement with the defendant to claim them.

Travelling Allowances
135. There was a claim for reimbursement of sums allegedly paid to workers for travelling to and from Canberra using their own vehicles. Vagenas claimed that the award obliged it to make such payments and that they should be added to the "acceleration costs".

136. However, the award, as Mr Vagenas agreed, provided for payment of a travelling allowance only for travel between sites during working hours. That was not the basis upon which the claim was formulated.

137. In any event, Mr Vagenas claimed that he simply reimbursed petrol expenses by cash payments to workers. Even if Concrete had agreed to reimburse such payments, the claim was not corroborated in any trustworthy respect. I reject it.

Overtime Allowances
138. Where overtime was a cost component specified in a site docket, it would, obviously enough, be recoverable from the defendant. Overtime payments could, however, have become necessary as a result of union problems, wet weather, illness of workers, changes of work schedules by the builder, damage to work done by other trades or defects requiring remedy. Overtime costs would be recoverable from Concrete only if they were incurred at the request of Concrete, whether that request was express or to be implied.

139. The original system was to be that if extra work was required by the defendant, a signed docket would specify the work and the cost would be acknowledged, including any overtime component, by a representative of the defendant. Unfortunately, this system was not always followed.

140. Given the lack of credibility of Mr Vagenas and of the records of the plaintiff, it is only where the defendant has acknowledged liability for overtime payments that I am satisfied that they should be allowed as being payable to the plaintiff.

141. The next matter, however, is to determine what the agreement between the parties was as to recovery by the plaintiff in respect of penalty rates paid by it.

Allowance for acceleration and penalty rates
142. Up to 31 December 1987, allowances were, in my view, payable only as fixed by the agreement of 14 August 1987. Additional amounts to be paid for penalty rates or other allowances, including overtime, were to be as specified in signed (or otherwise acknowledged) work dockets.

Rise and Fall
143. $65,767.00 was allowed for this contingency in the agreement of 14 August 1987. The works were expected to be completed by 31 December 1987. Rises in costs in fact were slight. The award rate for a painter at 14 August 1987 was $10.40 per hour. As at 5 February 1988 it had risen to $10.51 per hour. Of course, that does not, necessarily, reflect the actual rates being paid in the industry. Labour costs were, of course, only one component of rise and fall.

144. The plaintiff's contention was that the rise and fall allowance (to be added for the period after 31 December 1987) should be allowed at a rate proportionate to the contract price as if the allowance of $65,767.00 applied only to work done between 14 August 1987 and 31 December 1987.

145. If that was so, the parties would have agreed to a rate for rise and fall of approximately 40% per annum. That is plainly an untenable proposition. It seems to me that the allowance agreed on 14 August 1987 was intended as an estimate for rise and fall over the whole period of the contract up to 31 December 1987.

Preambles
146. This was to be an allowance for setting up site equipment and administrative costs. It was calculated as a percentage to be added on top of the agreed rates. It was originally agreed to be a margin of 11.2%. From 14 August 1987 it was agreed that all work done thereafter would be subject to a 6% margin over the agreed rates to cover such expenses.

Costs after 31 December 1987
147. This was an issue which was difficult to resolve in the case. Some of the work required under the agreement of 14 August 1987 was still being completed in 1988. Some documented extra work properly requested and recorded was still being done. Some of that extra work had already had penalty rates and preambles added to the agreed price for it insofar as it was appropriate to do so.

148. Then there came a time when it was agreed to abandon the practice as to the issue and approval of site dockets. The parties agreed that a bill of quantities would be prepared. At the conclusion of the works, the parties would consider the plaintiff's claims and, if they were accepted, include them in the bill.

149. That was, of course, a recipe for the confusion and uncertainty which followed.

150. For example, the plaintiff claimed $93,833.00 as the cost, at agreed rates, of repaints to the pavilions and covered ways. The original allowance for painting them was $39,982.20. That rectification of damage by other trades could have been more than double the original allowance is, prima facie, a startling proposition. However, without proper records, the plaintiff's claim could not be confirmed or denied.

Claim for defective work
151. The defendant made a claim for defective workmanship.

152. The defendant's expert, Mr Bartlett, conceded that despite a difference in what he would regard as ideal methods,

(T.1238) "... it was a very very good finish, a good and flat
finishes (sic) throughout ..."

153. However, some external areas, including both original timber work and some new timber work, had deteriorated more quickly than Mr Bartlett considered appropriate.

154. He agreed that the condition of the original woodwork had not been ideal for the purpose of painting. It had been badly weathered and was already in a deteriorated state. It was possible, he conceded, that the deterioration he noticed was a result of the state of the timber rather than bad workmanship.

155. The cause for the deterioration of at least some of the areas of new timber was, Mr Bartlett felt, due to the silicon treatment it had been given before it was painted by the plaintiff's employees. The timber should have been left to weather for longer. That was not something for which the plaintiff was responsible. As a result, weather stress had a greater effect in causing early deterioration.

156. Mr Bartlett also conceded that the deterioration he observed on new areas might well have been due to treatment of the timber used, not to inadequate priming.

157. Mr Bartlett had had no real experience of Canberra weather conditions. That was a disadvantage. He conceded that the great extremes of temperature experienced locally could explain why some external areas had deteriorated more rapidly than others.

158. The coats of paint he had measured, he agreed, conformed to specifications.

159. I am not satisfied that there was any failure by the plaintiff to conform to the required standards of workmanship. There is no support for the contention that any materials provided by the plaintiff were below standard.

160. Mr Dennis Berry, a relevantly qualified expert called by the plaintiff, supported this conclusion.

The Agreement
161. The letter from the plaintiff to the defendant dated 17 August 1987, purported to set out their agreement for the painting of both the existing and new buildings.

162. The agreed price of $1,540,000.00 included allowances for penalty rates ($61,160.00), rise and fall ($65,767.00) and a 6% margin for "preliminaries".

163. Additional works were to be charged for at the agreed rates (including, where appropriate, allowances for overtime and penalty rates) plus 6% for preliminaries. The items set out on page three of the letter were all to be charged for on that basis.

164. The existing agreed rates were to be regarded as fixed until 31 December 1987.

165. There was a discussion in January 1988 about the basis for charging for work done after 31 December 1987. Mr Finlay deposed, and I accept, that it was then agreed between himself and Vagenas that such work would be paid for at the agreed rates but with additional allowances for penalty rates and rise and fall. Those allowances were to be calculated at a similar percentage increment as provided in the August 1987 agreement. I take that to include the 6% overhead or "preliminaries" allowance.

166. I should add that, during the hearing, I asked Mr Curlewis QC, then appearing for the plaintiff, as to the plaintiff's attitude to that interpretation of the agreement. His reply was, (T.1385) "I am content with that".

167. I am, therefore, of the opinion that the agreement between the parties was that, for extra work done after 31 December 1987, the schedule of rates would be applied, plus an allowance for penalties and rise and fall. A surcharge of 6% would then be added to the remainder to cover overhead costs and other "preliminaries".

168. The plaintiff has selectively misconceived this arrangement. It has contended that the whole arrangement was converted, retrospectively, to a "cost plus" arrangement.

169. I find no support for that view. It strikes me as being inherently absurd. It would open the way for the plaintiff to do as Mr Vagenas obviously did, namely, to falsify records to exaggerate the plaintiff's costs, whether as a deliberate fraud, or to compensate for unrecorded costs or a combination of those objectives.

170. The plaintiff did accept that it was work done extra to the original contract which would be charged for as a lump sum.

171. The agreed arrangement did not, in my view, depend on what was the actual expenditure by the plaintiff on penalty rates or overtime. It did not directly address the difficulty of greater than anticipated overtime being required or of unanticipated delay in completion. Neither did that arrangement make it any easier to identify repainting work made necessary by the activity of other trades.

172. The factual difficulties can only be resolved by reference to the burden of proof. Where the records produced admissions made by or on behalf of the defendant, it appears that the plaintiff was requested to do certain work. I can be satisfied that the plaintiff has satisfactorily completed that work. It is then entitled to be paid for the work at the agreed rates.

173. The most recent amended bill of quantities alleged by the plaintiff to set out its claims, seeks $4,072,522.05 less $3,320,000.00 paid following the negotiations between the parties. This represented a total claim, which, apart from "Rise and Fall" (39B), "penalty rates" (39C), "preambles (preliminaries or margin)" (39D), extension of time costs (39E), head office overheads (39F) and tax penalties (39G), amounted to $2,822,660.25.

174. The Scott Schedule, as amended during the course of proceedings, reduced the figure claimed before those "add-ons" to $2,797,923.19.

175. Of that figure, the original contract sum before the allowances were added on (but including the 6% margin) was $1,413,073.00. The sum of $2,822,660.25 referred to above included some claims which were duplicated and some claims which already included both penalty rates and the 6% margin.

176. If the 6% margin is separated out from the figure of $1,413,073.00, the original contract value of the works before allowances and preliminaries was agreed at $1,333,087.70.

177. On the assumption that each of the plaintiff's claims is accepted at face value, without any reduction for the inclusion of preambles, penalty rates and other allowances, the value of the extra work as so claimed is $1,464,835.49. As I have already found, the agreement between the parties was to then add on (unless already included) 6% for preliminaries (as was the method adopted on 14 August 1987). That would increase the value of the extra work to no more than $1,552,725.60. It was agreed that allowances would be added in proportion to the additions made to the original contract sum. The acceleration sum (that is, overtime, penalty rates, allowances) would then be more than $67,204.30. The allowance for rise and fall would be no more than $72,266.65.

178. The contract value of the extra work could, therefore, not have exceeded $1,692,196.50. The total cost of the works as claimed should not have exceeded $3,152,266.60.

179. In its written submissions, the plaintiff took account of some of the errors which had been highlighted in the courses of the evidence. It reduced the total contract value of the work done from $4,072,522.05 to $3,904,623.48.

180. Deducting therefrom the allowances specified in the original contract, the sum reduces to $3,395,846.50. That figure includes the sums claimed for rise and fall etc. They have also been recalculated. Their total is $1,134,889.33.

181. The contract value of the work, exclusive of all those allowances, is, therefore, $2,769,734.15. The 6% margin would add $166,184.05 to this sum. The proper sum for allowances for acceleration and rise and fall is thus $263,713.85 in total. The total sum due, therefore, even accepting in full the plaintiff's submissions as to the actual rated contract value of the work it claims to have done, cannot exceed $3,199,632.05.

182. This is still $120,368.00 less than the defendant has already paid to the plaintiff.

183. In my opinion there was no agreement whereby other "Extension of time costs", "head office overheads" or "tax penalties" could be claimed.

184. Of course, it would have been open for the plaintiff to have claimed, as it seems it did, that implicit obligations on the defendant to proceed with due diligence had been breached causing damage by reducing its contractual expectations. That was not the way the case was pleaded or run.

185. To the figure of $120,368.00 could be added the value of any duplications or inclusions of allowances in the base figure for work done which has not been conceded by the plaintiff.

Counter-claim of defendant for over-payment
186. The defendant counter-claims for whatever sum it has paid which exceeds the plaintiff's proved entitlements.

187. There were extensive "without prejudice" negotiations between representatives of the parties following completion of the painting work. I excluded evidence of the detail of those negotiations as no concluded agreement was reached. It was clear, however, that the plaintiff claimed there had been repaints not accounted for and work done not disclosed on documentation. It was also apparent that the plaintiff had some valid complaint that the defendant, in "fast-tracking" the works, had caused additional expense not contemplated in the original agreement.

188. As a result of those discussions the defendant made an "open offer" of, and tendered, $3,320,000.00. It was accepted on the understanding that the plaintiff could litigate its claims to further payment if it chose. Clearly, the defendant was seeking to set up a defence of tender. It was, quite properly, seeking to gain, pre-litigation, the forensic advantage it could have gained by payment into court after an action was commenced. It also avoided possible liability for prejudgment interest.

189. The consequence of such a payment, ordinarily, is an admission that the sum tendered was then due and owing. The admission so made need not be an admission, however, that the claim is well-founded (see, for example, Scott v Uxbridge and Rickmansworth Railway Co (1866) LR 1 CP 596; Greenwood v Sutcliffe (1892) 1 Ch 1). The position of advantage the defendant achieved was similar to that it would have achieved by an early payment into court (see, for example, Cutts v Head [1983] EWCA Civ 8; (1984) 1 All ER 597).

190. An admission for the purposes of a case or an unaccepted open offer can be withdrawn. Generally, however, some mistake or change of circumstances justifying such a course needs to be demonstrated (see, for example, Williams v Boag (1940) 4 All ER 246; Singer v Gilchrist Watt and Sanderson Pty Ltd (1950) 67 WN (NSW) 89).

191. In my view, the defendant had ample opportunity to assess the sum due to the plaintiff. Its assessment was a calculated one partly directed by commercial considerations and partly by forensic considerations.

192. There is no evidence that the payment in question was induced by any fraud on the part of the plaintiff. Mr Vagenas did create false records but I believe his motive was to verify claims he believed the plaintiff to have had. I do not know if those records influenced the defendant's decision to pay the sum that it did.

193. In my opinion, the defendant ought not be permitted now to resile from the ordinary consequences of its payment to the plaintiff.

194. It follows from the above that both the claim and the counter-claim are dismissed. There will be judgment for the defendant on the claim and for the plaintiff on the counter-claim.

195. I will hear the parties as to costs.