N3147

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 838 OF 2001

BETWEEN

NIVANI LTD
Plaintiff

AND

CHINA JIANGSU INTERNATIONAL (PNG) LTD
Defendant

Kokopo: Lay J.

2007: 8 &18 May
10 August

CIVIL- construction contract - variation by conduct - conduct inconsistent with terms of written contract - intention of parties to be inferred.

CONTRACT - variation where no provision for variation - variation contract required.

REPUDIATION OF CONTRACT - contractor entitled to perform all works included in contract - termination of contract by employer before works complete is a repudiation.

DAMAGES - claim for delay caused by design change - claim for loss on repudiation of contract - claim for office overheads - all facts giving rise to calculation of claims must be proven.

Facts

The defendant was the principal contractor to the Waterboard for the construction of a building and an extension of a road. It sub-contracted the earthworks to the plaintiff for a lump sum not subject to alteration for variations in quantities. The sub-contract was a written agreement annexing drawings and specifications for the work. Shortly after the work commenced the defendant provided the plaintiff with revised drawings which, amongst other things, increased some of the earthworks. The defendant claimed payment on a rate for work done basis and was paid on the basis. Some six weeks after the contract commenced the defendant provided the plaintiff with further drawings and invited the plaintiff to provide a price for the work in those drawings which included thickening and widening the pavement, curb and channel, concrete footpath and bitumen sealing. The defendant did not accept the plaintiff's price and later performed this work itself and by others. The works being performed by the plaintiff were suspended when they were nearing completion and 11 months later the defendant informed the plaintiff that the sub contract was terminated. The plaintiff claimed damages, for unpaid completed work, for delay in the initial works because of the design change, for being prevented from completing the work contracted, and for office overheads during the period of suspension of the work. Some of the facts necessary for a proper calculation of damages were not proven.

Held

 1.	Parties may by agreement, vary a contract made by them;
 2.	 where a contract makes no provision for variation there must be a contract of variation to bind the parties;
 3.	a contract of variation can be formed by the conduct of the parties;
 4.	a contractor is entitled to perform all of the works contained in his contract but is not entitled to perform any new and additional works which the employer may decide upon, except by agreement;
 5.	all of the facts necessary to establish a claim for damages must be proven;
 6.	a claim for loss of profit or overheads must include proof of the actual percentage of profit or overhead applicable to the contractor as a percentage of gross turnover;
 7.	the facts established that the lump sum contract was amended by the conduct of the parties to be a contract to be paid by rates against measured work;
 8.	the contract included work which had not been completed when the works were suspended and subsequently the contract was terminated by the defendant. Consequently the defendant repudiated the contract.
 9.	The claim for work done but not paid for was not proven. The other heads of damage were only partially proven.
 10.	The court can make an award of damages where the evidence establishes that a loss has been sustained but the evidence is inadequate to calculate a specific figure.

Cases Cited

PNG Cases

National Housing Commission v Queensland Insurance (PNG) Pty Ltd [1988-89] PNGLR 474
Curtain Brothers v The State [1993] PNGLR 285 
Yange Langan v Independent State of Papua New Guinea, (1999) N1369

Overseas Cases Cited

Thorn v London Corporation (1876) 1 App. Cas. 120
Gallagher v Hirsch (1899) NY45 App. Div. 467
Morris v Barron and Company [1918] AC 1
Sunney v Cunard White Star [1940] 1 KB 740
Carr v J. A. Berryman Pty Ltd (1953) 27 ALJ 273
British and Bennington Ltd v NW Cocher Tea Co & Ors [1923] AC 48
Chittick & Tailor (1954) 12 WWR 653 (Canada) 655
Shore v Horwitz [1964] SCR 588 (Canada)
United Dominion Corporation (Jamaica) Ltd v Shocar [1969] AC 340
Jones v Schiffman (1971) 124 CLR 303
Commonwealth v Crothall Hospital Services (Australia) Ltd (1981) 54 FLR 439
Tallerand Co. Pty. Ltd v Nathans Merchandise (Victoria) Pty. Ltd [1957] 
Dai v Barclay Brothers Australia (1983) 57 ALJR 442
Integrated Computer Services Pty Ltd v Digital Equipment Corp., (Australia) Pty Ltd (1988) 5 BPR 11 110
HCA 10; 98 CLR 144
The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
Commissioner of Taxation V Sara Lee Household and Body Products (2000) 201 CLR 520
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
Eldridge Pty Ltd v BGC Construction Pty Ltd [2006] WASCA 264

References
Judicial Proceedings (Interest on Debts and Damages) Act
 Hudson's Building and Engineering Contracts, 10th edition by L. N. Wallace

Counsel 
D. Lidgett, for the Plaintiff
J. Latu, for the Respondent

10 August, 2007

1.	 LAY J.: The plaintiff China Jiangsu had a contract with the Papua New Guinea Water Board for the construction of a building and the extension of Adima Street in Kokopo East New Britain. On 14 March, 2000 it entered into a sub contract with the defendant Nivani to carry out certain earthworks for the building and for the Adima Street extension. It was a term of the sub contract that there would be no variation to the price if the earthwork quantities varied. Annexed to the sub contract were the drawings and specifications provided to Nivani by China Jiangsu.

2.	 A few days after China Jiangsu asked Nivani to commence the works under the sub contract, China Jiangsu gave Nivani revised drawings for the work, which had been given to it by its principal.

3.	 Nivani's case is that the whole basis of the contract was altered by the revised drawings provided at the end of March. Nivani, by letter dated 3 April 2000, told China Jiangsu that Nivani would have to use a different construction method, and that it would cost more. Nivani proceeded to construct the works in accordance with the new drawings, the work done was measured in accordance with the letter sent by Nivani to China Jiangsu, and an interim payment made based on rates provided by Nivani. This payment included quantities never contemplated in the original contract. In late April 2000, a further set of amended drawings making substantial changes to the works was given to Nivani by China Jiangsu. Part of the original works were completed by the 30th of April 2000. Works were suspended on the road to permit laying of drains by others and Nivani never received notice to resume the work. In March 2001, it received notice that the contract was terminated. It therefore lost amongst other things, the profit it would have earned for the balance of the contract. 

4.	 China Jiangsu, has argued that the contract was never varied, Nivani carried out all of the works required of it under the original sub contract agreement, those works were measured, agreed and paid for. Nivani submitted a price for the varied works but that price was never accepted. It argues Nivani has no claim.

5.	 It is necessary therefore for me to identify what were the terms of the contract between Nivani and China Jiangsu under which Nivani carried out the work, whether China Jiangsu is in breach of that contract and whether any sum is due to Nivani under the contract or in damages.

6.	 The first observation I make is that the main contention by China Jiangsu set out above cannot be right. The term of the written sub contract, that there would be no variation in price for variation in quantity of earthworks, cannot operate only to fix the price against Nivani. It must also operate to fix the price against China Jiangsu. There was no provision in the signed sub contract for payment by measurement of the works. That is, if as China Jiangsu claims, there was no variation and Nivani performed all of the work required of it under the signed sub contract, then Nivani must be entitled to the agreed contract price of K95,968.62 excluding VAT. Of that total amount K75,319.23 related to the Adima Street extension works. China Jiangsu on its own submissions only paid Nivani K 64,738.60, for all the works for the Adima Street extension. Therefore, if I accept China Jiangsu's contention that there was no variation to the original sub contract agreement, there must be due to Nivani the sum of K 10,580.63 being the balance of the agreed price for the sub contract. This I consider must follow from what I have said and from submission of counsel for China Jiangsu in which he said 

"... the price was fixed and would not vary regardless of actual quantity calculated. It follows that the variation which the plaintiff had experienced in the Adima Street extension earthworks would not in the defendants submission have had the effect to changing (sic) the price."

7.	 What is the evidence to support the contention that there was a variation to the signed sub contract? I will examine this question first by considering whether Nivani would be bound to the price in the sub contract if there was a variation to design, and then examine what evidence there is to support the contention that there was an agreed variation to the design.

8.	 First, it is necessary to identify the meaning of the provision in the signed written sub contract providing that there would be no variation in price for variation in quantity of earthworks. The contract is a simple two-page document. The actual words of the relevant provision are as follows:

"2.Scope of works includes:-

(i) the earthworks for the Water Board Office Building and adjoining Pump Station block to provide an area with levels and falls as detailed in CJIETCC request for quotation dated 29, February, 2000 copy of which is attached, marked Appendix "B" and forms part of the sub contract agreement and

(ii) Adima Street Extension road works as detailed in the main contract drawings and specifications, copies of which are attached marked appendix "C" and which form part of this agreement.

 3. The Prices Offered by Nivani and accepted by CJIETCC are fixed lump sum prices to carry out the works and are not adjustable for variations in quantity therefore rates are not applicable to the sub contract agreement."

9.	 What were "the works" which were to be carried out without adjustment to price for variations in quantity? A standard convention of interpretation is that where a subject is referred to it is a reference to the immediately preceding reference to the subject matter. The "works" in clause 3 must be the "Adima Street Extension road works as detailed in the main contract drawings and specifications" copies of which were annexed to the sub contract, referred to in clause 2 (ii). On a proper construction of clause 3 of the sub contract Nivani was bound to construct the works detailed in the drawings and specifications attached to the agreement for the agreed price, even if in constructing those works Nivani found the actual quantities were greater than the assumed quantities or the quantity shown on the drawings.

10.	 The sub contract cannot be interpreted as binding Nivani to construct any works on the Adima Street extension in accordance with any drawings supplied to it after the signing of the sub contract, for the agreed price. That must follow as a result of the application of ordinary methods of construction of the document, and it must follow as a matter of commercial commonsense. The wording of the contract cannot be held to cater for the situation of a substantial redesign.

11.	 It may be the case, as the witness for China Jiangsu said, that the principal contract, incorporated into the sub contract by reference, gave the employer power to vary the contract works. I would expect that to be the case. The terms of the principal contract were not put in evidence in this trial. In the absence of evidence that the parties were bound by the contract price in the sub contract, whatever the variation to the works might be, by the terms of the principal contract, I find that to be an extraordinary proposition which the wording of the sub contract agreement does not support in any way.

12.	 Counsel for China Jiangsu submitted that it is a fundamental principle of contract law that where terms of a contract are contained in writing, no evidence will be allowed to add, or subtracted from the written contract and he cited Curtain Brothers v The State [1993] PNGLR 285, a Supreme Court decision which is authority for that proposition. While I agree that is the law I distinguish that case because what I am dealing with is not an attempt to bring extrinsic aids to interpretation of what is contained in the contract, but rather how to interpret the actions of the parties which are not contemplated by the contract. China Jiangsu submission proceeded on what I considered to be a mistaken assumption, that Nivani's claim arises out of observations in its letter of 6 March 2002 to China Jiangsu that Nivani believed the actual existing levels varied considerably from those shown on the drawings. Thus it was argued that Nivani was attempting to use correspondence prior to the contract date to incorporate into the contract variations referred to in that correspondence. That is not the case and from the pleadings has never been part of Nivani's claim, which relates solely to variations to design made by China Jiangsu or its employer after signing of the sub contract on the 14th of March 2000.

13.	 What is the evidence that there was an agreed variation to the design as a consequence of the drawings submitted to Nivani by China Jiangsu at the end of March 2000? It is useful to set out Nivani's letter of Monday 3 April 2000 (exhibit P8) to China Jiangsu:

"The scope of works for the construction of Adima Street has been drastically altered since a sub contract agreement was signed on the 14th of March, 2000, and we will require a substantial renegotiation of the price to carry out the works. The rates submitted in our price submission date and 6 March 2000 will provide a good guide the calculation of the revised sub contract price. Works that are difficult to quantify such as tripping topsoil and borrow area, should be paid for on an hourly higher basis for plant and personnel.

We commenced work on Adima Street on Monday 20th March in accordance with our original construction method but had to stop work shortly afterwards due to the changes in levels and cross sections. We will require payment for excavation work carried out up until revised levels were issued and the revised till quantity should take into account feeling of areas which had been excavated prior to change of levels.

We will proceed with excavation and feel as necessary to bring the road up to the underside of curb levels. Will not be able to proceed any further until final drainage details are given.

For the record, we believe that the concrete lined drains should be constructed on the high side of the Street in the curb deleted on the sides where drains are located to allow rainwater run-off to fall straight into the drains. Colas will be required in at least two locations to bring stormwater under the Street in the two low-lying areas. We also await details of the construction from Chainage 350 to the eastern end of the street.

We have suffered some delays and disruptions to our work as a result of the changes in design but we wish to assure you that we will direct all our efforts towards completion of the fill and we hope that drainage and other outstanding details will be available by the time fill is complete."

14.	 The letter makes a number of important points, first that there were design changes which Nivani understood it was to implement, second, the design changes would require substantial changes to the work method, third that design changes would affect the price, fourth that the rates submitted by Nivani would be an appropriate method of calculation of the value of the works.

15.	 There was no written response from China Jiangsu to that letter. The next correspondence of relevance was a letter from China Jiangsu to Nivani dated 26 May 2000 asking "if you have completed the construction of Adima Street extension, please notice us to accept it as soon as possible". To which Nivani replied on the 29th of May 2000:

"... the following works have been completed ready for acceptance since 30 April 2000.
	
1.	Clear and grub	Ch. 112-Ch 411	
2.	Remove topsoil	Ch 112-Ch411	
3.	Embankment works (cut and fill)	Ch112-Ch360	

Our claim No. 1 dated 30 April 2000 constitutes notification of works completed to that date".

16.	 Attached to that letter was a document headed "Claim #1 Adima Street Extension 30/04/00" which applied a rate per cubic metre to a nominated quantity and made a claim for K 85,346.41 plus VAT at 10 percent a total of K93,881.05. It is significant that Nivani was making a claim based on rates and measured work. There was an exchange of correspondence about surveyed construction levels which is not relevant. On the 8th of June 2000 Nivani wrote to China Jiangsu relevantly advising:

"... Adima Street extension. Originally K 75,319.23 + VAT but design revised, and revised contract value expected to be about K92,000+VAT not including drainage or curb and Channel. It was originally expected that all work would be completed in three to four weeks but with increased scope of works, suspension of part of the works and completion now unable to be effected until after pipework is installed, we must claim payment for sections completed.
Clearing and grubbing, strip topsoil and cut too spoil items were completed in March and if we had known that works would be delayed so much, we would have submitted an invoice then for work completed to that stage."

17.	 The letter elicited the following response from China Jiangsu:

"we acknowledge receipt of your fax dated 08/06/2000, it is noted that the contract price of Adima Street extension is about K 92, 000+ VAT in your fax. We don't think it is correct, by checking, we think the price of works completed is K64,738.60 including VAT. We have checked the quantity of works completed with your engineer Mr William. If you have some different ideas on quantity of works completed, please submit the calculation process and data to us. In addition, we regret that at present we have no enough capital to pay you because of late payments from Waterboard, however, will pay you as soon as we can project payment from Waterboard".

18.	 What is of particular note about this exchange of correspondence is that Nivani has clearly put China Jiangsu on notice that it is proceeding on the basis of the revised drawings, it's tendered price for the previously agreed works was no longer applicable. And that it expected to be paid at the rates it had previously submitted. It then submitted a claim on that basis, and the only response this elicits from China Jiangsu is a disagreement over the measurement of the works with no reference to the works being carried out under a lump sum contract where measurement was irrelevant. Mr Xia Yigong conceded in his evidence for China Jiangsu that instructions to vary levels were given by way of providing new drawings. It was clearly his view that requiring Nivani to construct the works to new drawings which only changed the levels of the earthworks, would not change Nivani's commitment to the lump sum price. Subsequently China Jiangsu paid Nivani on the basis of measured work. As I have already found, the sub contract was for a lump sum, measurement was inappropriate to that contract, by measuring the works and paying for the works on the measured places the parties were acting outside the provisions of the original sub contract.

19.	 In a case where there is no specific instruction to carry out additional altered works, but the employer stands by knowing that the contractor is doing extra work and approves of the work that is being done that amounts to an implied instruction to the contractor to carry out those works: See Chittick & Tailor (1954) 12 WWR 653 (Canada) 655 per Egbert J. in the Alberta Supreme Court referred to in Hudson's Building and Engineering Contracts 10th edition by L. N. Wallace at page 544. In this case I find there was a specific instruction from China Jiangsu. It is also established law that if the work to be done by the contractor is so outside what was contemplated by the contract the work actually done cannot be regarded as done under it at all.

" if it is the kind of additional work contemplated by the contract, he (ie the contractor) must be paid for it and will be paid for it according to the prices regulated by the contract... if the additional or varied work is so peculiar, so unexpected and so different from what any person and calculated upon, it may not be within the contract at all, and he could either refused to go on or claim to be paid upon a quantum merit": Thorn v London Corporation (1876) 1 App. Cas. 120 at 127 per Lord Cairns.

20.	 I find from the provision of revised drawings by China Jiangsu to Nivani, the exchange of correspondence between the parties, particularly the letter of Nivani to China Jiangsu dated 3 April 2000 followed by the submission by Nivani of a claim based on quantities and rates and the payment by China Jiangsu on that basis, amounts to a confirmation of an implied instruction by China Jiangsu that the work should be carried out on the basis of the drawings provided at the end of March. As a specific example of the changes introduced by the new drawings from Mr Stein's evidence, the original drawings called for fill of 92 cubic metres, the revised drawings called for fill of 2219 cubic metres.

21.	 The sub contract agreement of 14 March 2000 did not provide for variations. There is some evidence that the head contract did so provide, but its terms are not before me. Nor is it clear from the manner in which the head contract has been incorporated into the sub contract, that the power for the Waterboard to vary the contract between it and China Jiangsu would translate to a power for China Jiangsu to vary the contract between it and Nivani. No argument was advanced by counsel on the point. However I am satisfied, that by a fresh contract formed by their conduct to each other the parties did agree on a variation.

22.	 In Commissioner of Taxation V Sara Lee Household and Body Products (2000) 201 CLR 520 Gleeson CJ Gaudron McHugh and Haynes JJ quoted with approval the statement of Taylor J. in Tallerand Co. Pty. Ltd v Nathans Merchandise (Victoria) Pty. Ltd [1957] HCA 10; 98 CLR@144:

"It is firmly established by a long line of cases... that the parties to an agreement may vary some of its terms by a subsequent agreement. They may of course rescind the earlier agreement altogether and this may be done either expressly or by implication, but the determining factor must always be the intention of the parties".

23.	 Their honours also noted "That passage was cited with approval by Wilson and Dawson J. J. in Dai v Barclay Brothers Australia (1983) 57 ALJR 442 @ 448-449. It accords with principal and with authority: Morris v Barron and Company [1918] AC 1; British and Bennington Ltd v NW Cocher Tea Co & Ors [1923] AC 48; United Dominion Corporation (Jamaica) Ltd v Shocar [1969] AC 340".

24.	 A further helpful passage on variation by conduct is found in the Western Australian Court of Appeal case of Eldridge Pty Ltd v BGC Construction Pty Ltd [2006] WASCA 264 Robert Smith, McClure and Buss JJ App. where McClure with whom Robert Smith and Buss agreed said:

[Where a variation of a contract is contended to have occurred] "there must be a contract of variation: Commissioner of Taxation (Commonwealth) v Sara Lee Household and Body Products (Australia) Pty Ltd (2000) 201 CLR 520 @ [22]. As with any contract it may be inferred from conduct: Commonwealth v Crothall Hospital Services (Australia) Ltd (1981) 54 FLR 439; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [71]-[80]; Integrated Computer Services Pty Ltd v Digital Equipment Corp., (Australia) Pty Ltd (1988) 5 BPR 11 110 @ 11, 117 per McHugh JA"

25.	 My view is that this is not a contract which has been varied so as to be out of all recognition from the original work contracted to be done so that the new agreement completely replaces the old. It was the same line of Road. However, I find the variation implemented by the drawings adopted at the end of March 2000 was substantial and I find that by their words and conduct the parties have agreed to vary the original lump sum contract for completion of Adima Street Extension so as to substitute for the drawings in the contract, the drawings delivered by China Jiangsu to Nivani at the end of March 2000 and to substitute for the lump sum price, rates remuneration using the rates quoted by Nivani in response to a request by China Jiangsu for provision of those rates, prior to signing of the sub contract of 14 March 2000. There must be consideration passing from each of the parties to the other to form a contract: National Housing Commission v Queensland Insurance (PNG) Pty Ltd [1988-89] PNGLR 474 Bredmeyer J. The parties were bound to the variation in the terms of the agreement by the consideration of Nivani performing the work to the new drawings and China Jiangsu paying for the work done to the new drawings on a rate basis. That can be the only intention of the parties.

26.	 The next question is, was there a variation of the contract by reason of the submission by China Jiangsu to Nivani of further amended drawings in late April 2000 deepening and widening the pavement and adding curb and channelling, bitumen sealing, concrete footpaths and drainage works, as pleaded by Nivani? Mr Stein's evidence on this point was that "towards the end of April there was quite a change to drainage works, there were negotiations between China Jiangsu and the Waterboard, we were asked to quote in June". There is no evidence that the parties agreed a price for this additional variation to the works. To the contrary Nivani submitted a price but the work was awarded to another contractor. There is no evidence that Nivani performed any of the additional work in respect of drainage or other changes with the knowledge or approval of China Jiangsu. There was no meeting of the mind demonstrated by an exchange of correspondence or conduct of the parties. I find that there was no contract to vary the sub contract agreement between Nivani and China Jiangsu in respect of those proposed changes to the works and that the additional work never became part of the contract between them. An employer is not bound to give additional work which he decides to do to the contractor then employed. However the contractor is entitled to perform all of the work included in the contract (an issue which becomes relevant later in the judgment). See the discussion in Hudson's Building and Engineering Contracts (supra) 10th edition at page 532-533.

27.	 Having established the contract was varied and that it was agreed to pay on a rates basis, the next issue is to inquire whether Nivani has established, as it claims, firstly that there was work done for which payment was not received, and secondly that there was work included in the varied contract which it did not complete because of the stoppage to lay the drainpipes, and which it was then prevented from completing by unilateral termination of contract by China Jiangsu.

28.	 Nivani claims K7545 for work done and not paid. Mr Willie Pikire gave evidence that he was the project engineer for Nivani. He prepared and submitted a claim to China Jiangsu totalling K93,881.0 5. He then met with China Jiangsu at their offices. After that meeting he revised the claim down to K 72,000. Two invoices were raised by Nivani to China Jiangsu totalling K 64,738.64 inclusive of VAT which was the amount China Jiangsu paid. The amount now claimed is the difference between the recalculated claim and the amount paid by China Jiangsu. By its letter dated 9 June 2000 (exhibit 14) Nivani gave notice that it disagreed with China Jiangsu 's calculations. Mr. Pikire was unsure as to whether China Jiangsu received a copy of the revised claim. There was never any joint measurement of the work done. China Jiangsu's evidence was that they met with Mr Pikire and agreed the total of K 64,738.64. A calculation sheet which arrived at that total was signed by both parties but cannot be found. When a similar sheet was shown to Mr Pikire he denied having ever seen it. China Jiangsu paid the invoices and considered the contract concluded. 

29.	 When a plaintiff claims damages, the onus is on the plaintiff to prove the loss. The following passage from McGregor on Damages is cited by Injia J. (as he then was) in Yange Langan v Independent State of Papua New Guinea, (1999)N 1369:

" The plaintiff has the burden of proving both the facts and the amount of damages before he can recover substantial damages. This follows from the general rule that the burden of proving a factor is upon him, who alleges it and not upon him who denies it so that where a given allegation forms an essential part of a person's case, the proof of such allegation falls on him. Even if the defendant failed to deny the allegations of damage or suffers default, the plaintiff must still prove his loss".

30.	 What I am faced with in this case is a claim calculated by the Nivani for K 93, 881, which was submitted to the China Jiang and Nivani invoice No. 25127 raised for that sum. After a meeting with China Jiangsu two things occur, first two invoices are raised by Nivani to China Jiangsu for K 64,738 which China Jiangsu eventually pays, and Nivani recalculate its claim and reduces it to K 72,000 odd; but there is no firm evidence that this figure was ever submitted to China Jiangsu at the time. All that happens is Nivani writes a letter saying it does not agree with the calculation and will submit its own calculations in due course. Mr Pikire said in evidence that he re-calculated the claim based on actual re measurement. If that is the case why is there not evidence of submission of a further invoice to China Jiangsu? Mr Stein said that he thought that the difference would be picked up later in the work. That may be so, but I am not satisfied on the balance of probabilities that Nivani has proven that it did the extra work and was not paid for it. Considering all of the evidence it seems to me more likely than not, that what occurred was as China Jiangsu said, there was a meeting with Mr Pikire, quantities and extensions were agreed and invoices raised and paid on that agreement. It has all the hallmarks of an accord. Mr Stein was no doubt unhappy about the agreed figures as he said in his letter to China Jiangsu. However in the absence of firm evidence that the claim of K72,000 was submitted to China Jiangsu and only part paid, I think Nivani has not proven its claim under this head. As the claim for that head of damage has failed the claim for interest upon it also fails.

31.	 The other heads of claim made by Nivani are all based on delays caused by the change of design introduced at the end of March 2000 and the assumption that the contract was not complete when work ceased to allow laying of pipes across the road. That there was still work to be done is clear from the various explanations of the payment made, prepared by China Jiangsu, which all show that the contract included pavement and spoon drains for which no claim was made, that is the work was not done. In addition, drawing number A1/W15-03-350, an annexure to the original sub contract, shows total Chainage for the road to be constructed was 411.5 and the claim submitted by Nivani to China Jiangsu for embankment work only went as far as Chainage 360. China Jiangsu says, and I accept, that it did the rest of the work itself with Shorncliffe and reopen the road after sealing to construct the drainage.

32.	 I am also satisfied that work stopped on the 30th of April 2000. It stopped because Nivani understood that it could not proceed on with the road until the drainage was constructed and China Jiangsu knew that was Nivani's understanding and the stoppage was by agreement to suit the convenience of China Jiangsu. Specific reference to that understanding is made in Nivani's letters of 30 May 2000 and 8 June 2000 to China Jiangsu. And Nivani's letter to China Jiangsu of 9 June 2000 makes it clear that Nivani does not consider the contract complete, which I find to be the fact.

Whether the works not completed were omitted from the contract?

33.	 Where a construction contract provides a specific power to vary the contract by omitting works, subject to the specific provisions of the contract, omissions means omissions completely from the work. The employer is not entitled to omit work from the contract in order to give it to another contractor or to perform them itself: Gallagher v Hirsch (1899) NY45 App. Div. 467 and Carr v J. A. Berryman Pty Ltd (1953) 27 ALJR 273. As I have mentioned elsewhere, the sub contract between the parties imported the provisions of the head contract but those provisions have not been placed before the court. Undoubtedly there would be provision in a standard FIDIC contract for the employer to vary the scope of works. However, the sub contract did not make provision that China Jiangsu would have the powers of the employer and that Nivani would have the obligations of the contractor in the head contract for the purposes of the sub contract. I am therefore of the view that to omit works from the sub contract required a contract of variation as the authorities at paragraph 22-24 hold. And I am satisfied that there was no such variation by agreement. Therefore the communication by China Jiangsu to Nivani dated 30 March 2001 (exhibit P 19) which advised "... the previous agreement is terminated (The project payment has been settled)" was correct only in that payment for work done to date had been made, but it was otherwise advice that China Jiangsu repudiated the balance of the sub contract. Nivani accepted the repudiation. China Jiangsu is therefore liable in damages to Nivani for that repudiation.

34.	 The claims Nivani makes are:

•	K10,000 delays in initial works;
•	K 26, 286. 86 for the balance of the agreed revised contract value;
•	K 65, 420.80 for delays from 30 May 2000 to 30 March 2001.

K10, 000 delays in initial works

35.	 This claim does not of course arise out of the repudiation, but out of the delay caused by substitution of drawings for the initial work. The only evidence justifying this claim is the evidence from Mr Stein that "it was agreed that the contract period should be three weeks, but there were delays. The claim is based on head office overhead as a percentage of the contract". No calculation is provided, no evidence of head office overhead costs is provided, no evidence of what percentage of total contract work over a period of 12 months this contract represented is provided. The court was not provided with evidence as to when the delay commenced and when it finished. It may have been about two weeks from shortly after signing of the sub contract until the revised drawings were provided at the end of the month. But that would be a guess. In short, Nivani is simply saying 'we want K 10, 000, trust as we have made a calculation'. That is not good enough. The facts on which the calculation has been made must be proven. The claim has not been made out and I refuse to make the award as claimed. I am satisfied that Nivani did suffer some delay by reason of the alterations to the drawings and the consequent variation to the contract.

36.	 There are occasions in the course of making an assessment of damages when a judge is required to adopt a figure which is little more than a guess, when the evidence for adopting a particular figure is very thin, but it would be wrong to use the paucity of evidence as a reason to value that head of damage at zero: Jones v Schiffman (1971) 124 CLR 303 at 308 per Menzies J. and The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83. In the absence of particulars established by evidence I am only prepared to make a token award of K2000.

K 26,286.86 for the balance of the agreed revised contract value

37.	 This claim is made on the basis that Nivani was prevented from completing the contract by China Jiangsu's termination of it. The first issue is, where is the evidence that there was an agreement as to the revised value of the contract? There is no evidence that the varied contract total value was agreed between the parties. I have already found that the parties conduct varied the contract to a rate for work performed contract. The only evidence before me which is consistent as to unperformed work for which a quantity is provided by both Nivani and China Jiangsu is 285 cubic metres for pavement, which at the quoted rate plus VAT totals K 25,390.37. That is the amount to which Nivani would be entitled if it had completed the contract and placed the pavement. To earn that amount Nivani would have had to spend money on wages, fuel, spare parts, general wear and tear on plant etc. It has not had to expend that money for those items. What it has lost is the profit that it would have made on the additional work if the contract had been completed. No evidence was led of the profit margin which Nivani would have made on this contract but for China Jiangsu's repudiation. 

38.	 However, it is quite clear from the evidence that Nivani was prevented from earning profit, at least on placing the pavement and probably also on performing the works required to complete the Chainage of road omitted from Chainage 360 to 411.50. I adopt the principle I mentioned at paragraph 36 and I will allow 25 percent of K 25,390 under this claim. I allow K 6347.

K 65,420.80 for delays from 30 May 2000 to 30 March 2001

39.	 There is no doubt that Nivani is entitled to damages for the suspension of works on the 30th of May 2000 to the date on which it was advised that China Jiangsu repudiated the balance of the contract on the 30th of March 2001. And the damages claimed can include overheads during the period of the delay: Shore v Horwitz [1964] SCR 588 (Canada). The question is, has the amount claimed been proven to the requisite standard.

40.	 Mr Stein gave evidence that this claim was based on "Hudson's formula, a percentage of company overhead as a percentage of turnover for the year. It represents the amount of the overheads which could have been recovered from that contract". In the text Hudson's Building and Engineering Contracts 10th edition (supra) at page 599 it is said "the formula usually used is as follows:

H.O./Profit Percentage x Contract Sum x Period of delay (in weeks)
 100 Contract Period (in weeks)"

41.	 That formula is used on the basis that the claim made is both for loss of profits and overhead incurred as a result of the increased period over which the contractor has had to stand ready to perform the work. Or put another way, the loss of the opportunity to earn the overheads during the period. If the claim involves a margin for profit, the authorities hold that it must be proven by evidence that the contract was profitable and evidence given of the level of profit: See Sunney v Cunard White Star [1940] 1 KB 740. If any formula is to be applied evidence has to be led of the factual basis of each of the elements of the formula. If a percentage is to be allowed as an average percentage cost of overheads to total turnover, then the party claiming must disclose evidence to establish the percentage to be applied and that the percentage is correct based on the books of the claimant. The facts on which the claim is based must be proven. No evidence was led of what the average percentage of turnover head office overheads have been for Nivani in a reasonable period prior to the events giving rise to the claim. In the absence of evidence to prove the calculation of the amount claimed, I adopt the principles I mentioned at paragraph 36 and will allow a modest amount, which I consider the evidence would support, of K5, 000.

42.	 Nivani has claimed interest, under the Judicial Proceedings (Interest on Debts and Damages) Act. I will allow 4 percent (in the absence of any evidence that a higher rate should be allowed) from issue of the writ until judgment, on the judgment sum. The judgment sum is K 2, 000 for delay in the initial works, K 6,347 for loss of profits for being prevented from completing the contract and K 5,000 for overheads lost due to suspension of the work. Total judgment is K13,347. Interest is K 3, 800. In accordance with the provisions of the Act I add interest to the judgment giving a total of K17,147. Costs follow the event. China Jiangsu shall pay Nivani's costs of the action.

43.	 ORDERS:

a)	judgement for the Plaintiff in the sum of K17,147;
b) Defendant to pay the plaintiff’s costs of the action. 
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Warner Shand: Lawyers for the Plaintiff
Latu Lawyers: Lawyers for the Defendant