Newell v Sam Pemberton Civil Limited [2023] NZHC 2676 (26 September 2023)

Last Updated: 13 October 2023

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2019-019-813 [2023] NZHC 2676

BETWEEN	WAYNE WILLIAM NEWELL and DENISE MARION NEWELL Plaintiff
AND	SAM PEMBERTON CIVIL LIMITED Defendant

Hearing:	17-21 July 2023
Appearances:	M D Talbot for the Plaintiff V A Whitfield for the Defendant
Judgment:	26 September 2023

JUDGMENT OF ANDERSON J

This judgment was delivered by me on 27 September 2023 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules 2016.

....................................

Registrar/Deputy Registrar

Solicitors: Talbot Law Ltd, Hamilton

Bluett Legal, Hamilton

NEWELL v SAM PEMBERTON CIVIL LIMITED [2023] NZHC 2676 [26 September 2023]

TABLE OF CONTENTS

Para No

INTRODUCTION [1]

WITNESSES [5]

LANDSDALE CLAIM [7]

Issues [7]

Factual and technical background [12]

Placement of suitable fill [24]

Geotechnical specifications [31]

Discovery of non-compliant fill [37]

Engineer’s decision on cause of fill failing specification [67]

Contractual obligations [84]

Preliminary [84]

When were the Addendum Specifications provided? [91]

Contractual position on the Addendum Specifications [96]

Breach of contract [101]

Breach of obligation to meet Addendum Specifications [101]

Breach of implied obligations [103]

Damages for breach of contract [115]

Remediation costs [118]

Right to remedy defective works [119]

Mitigation [123]

Liquidated damages [136]

Legal fees [151]

Tort claim [156]

Conclusion on the Landsdale claim [158]

Interest [159]

RANGITAHI CLAIM [162]

Item (a) – Deduction of $21,625.52 [164]

Item (b) – Deduction of $3,910 [172]

Item (c) – Deduction of $4,260.75 [178]

Conclusion [182]

OVERALL CONCLUSION [183]

INTRODUCTION

• [1] Mr and Mrs Newell operated a partnership (the Partnership) providing bulk earthmoving services from 1979 until Mr Newell’s recent retirement. Sam Pemberton Civil Limited (SPC) is a civil works and earthworks contractor. SPC and its predecessor company had engaged the Partnership as subcontractor on numerous projects over approximately 18 years.

• [2] The present case arises due to disputes between the parties under two such projects, both residential subdivisions – the Landsdale development in Horsham Downs, Hamilton and the Rangitahi development in Raglan. Until these disputes the parties had a good working relationship.

• [3] The dispute in relation to the Landsdale development (the Landsdale Claim) arises because the Partnership claims it should be paid outstanding retentions of

$140,139.62¹ whereas SPC says it is entitled to set-off and counterclaim for losses

suffered due to the Partnership’s defective works. Specifically, Lots 71–74 at the site contained fill which was unsuitable and failed to meet specifications. The net total of SPC’s claim is for $108,775.66. SPC claims in contract or alternatively in tort for negligence by the Partnership in carrying out the earthworks.

• [4] The dispute in relation to the Rangitahi development (the Rangitahi Claim) is relatively modest. The Partnership claims a net sum of $25,543.06 involving certain disputed deductions made by SPC to an invoice issued by the Partnership. The primary deduction relates to an asserted overclaim of quantities for works undertaken by the Partnership.

WITNESSES

• [5] The Partnership called only one witness being Mr Newell himself. Mr Newell read his first brief of evidence plus a brief of evidence responding to the evidence of SPC.

• [6] SPC called five witnesses:

¹ All figures are GST inclusive as they were presented this way by the parties.

(a) Samuel Pemberton, a director and shareholder of SPC. Mr Pemberton gave evidence of the contractual arrangements between the parties and the events giving rise to the disputes.

(b) Anthony Burman, Chief Financial Officer for SPC. Mr Burman provided calculations of amounts owing and amounts paid by SPC. His evidence was taken as read (with a minor correction being made) and these numbers as corrected are now undisputed.

(c) Nathan Sweetman, a contractor manager employed by SPC. Mr Sweetman assessed the correct quantities and amount owed to the Partnership in response to its invoice on the Rangitahi development.

(d) Andrew Holland, a geotechnical engineer and director and shareholder of HDG Geo Ltd (HDG). He was involved in relevant events and provided expert views on technical aspects including why the Landsdale lots required remediation.

(e) Stephen Crawford, an independent geotechnical engineer. Mr Crawford gave evidence on his views of the most likely cause of the deficient fill and on what can be expected of a reasonable earthworks contractor.

LANDSDALE CLAIM

Issues

• [7] Broadly the issues I need to decide are:

(a) What was the scope of the Partnership’s obligations in contract or tort in respect to the cut to fill earthworks?

(b) Was the Partnership in breach of those obligations?

(c) If so, what damages are recoverable?

• [8] The trial proceeded on the basis that the Partnership contested that it had placed fill that failed to meet the specifications (non-compliant fill). Essentially, Mr Newell’s

evidence was that when the Partnership placed the fill it was compliant but subsequently became non-compliant. He said this was due to deficiencies in the sub-soil drainage design or installation and/or because compliant fill had degraded due to the deposit by SPC of unsuitable materials on the surface of Lots 72–74 at the instruction of Landsdale. In closing submissions, the Partnership advised that it no longer sought to advance these hypotheses for how the site came to need remediation. It conceded that it placed non-compliant fill. That was a responsible concession. Neither of the hypotheses advanced by Mr Newell were technically or factually credible.

• [9] The Partnership’s concession did not go so far as to accept SPC’s evidence as to the mechanism by which the Partnership placed non-compliant fill. That is because the mechanism does or might bear on whether there was any breach of the Partnership’s obligations in undertaking the earthworks.

• [10] The scope of the concession means that I still need to outline the factual background relating to the non-compliant fill and give some consideration to how the fill came to be non-compliant. However, the concession also means that the only evidence before me on why the fill failed to meet specification are the explanations advanced by SPC.² It is potentially open to me to reject SPC’s expert and fact evidence, although that would leave me in a vacuum without alternative explanations. I return to the facts and my conclusions on the evidence later.

• [11] First, I need to provide some technical and factual context to enable the issues to be addressed.

Factual and technical background

• [12] The Landsdale development is a large residential development on the corner of Kay and Horsham Downs Roads on the outskirts of Hamilton (Landsdale Development). There are four stages. Stage one comprises 37 building lots, stage two comprises 36 building lots, and stages three and four comprise 28 building lots.

2. That is because Mr Newell’s evidence at trial as to why the fill was non-compliant is inconsistent with the concession because he was contending that it was other than because the Partnership deposited non-compliant fill.

• [13] SPC entered into two contracts with Landsdale Developments Ltd (the Principal):

(a) A contract dated 15 January 2015 for earthworks for stages one to four, and civil works for stage one (the Stage One Contract).

(b) A contract dated 3 October 2016 for civil construction works for stages two to four (the Stage Two Contract).

• [14] In late 2014, SPC subcontracted the Partnership to complete the cut to fill bulk earthworks on the Landsdale Development. Cut to fill earthworks involve fill (soil) being taken (cut) from one area of an earthworks site to build up (fill) in another area so that in both cases the designed ground level is achieved. Fill is placed in layers approximately 200 millimetres to 300 millimetres thick by being spread using a bulldozer with a scoop. Each layer placed is then compacted using a soil compactor to achieve appropriate compaction.

• [15] The Partnership owned a bulldozer and compactor whereas SPC did not. SPC owned a digger (excavator) whereas the Partnership did not. Mr Newell did not have the experience to operate the latter machinery.

• [16] The parties have never dealt with each other on the basis of detailed written contracts and there is a dispute between the parties as to precisely what documents Mr Newell was provided with and which form part of the contract. It is common ground however that he provided priced unit rates against scheduled quantities for works.

• [17] In respect to cut to fill, the schedule of quantities quoted against required the Partnership to:

Cut from formation alignments to subgrade level Roads, Row’s [sic], berms, footpath, batters, vehicle crossings and building platforms. Spread and compact on site as controlled fill where shown on the plans, and as directed by the Geotechnical Engineer.

• [18] It is not in dispute that the Partnership contracted on the basis that SPC would retain 10 per cent of any invoices issued for a period of 12 months after practical completion for the relevant works.

• [19] The particular part of the site relevant to the Landsdale Claim is known variously as “Gully 2” and “Lots 71–74”. Lots 71–73 were fill areas whereas Lot 74 was both a cut and fill area. The delineation of roles between SPC and the Partnership was as follows: SPC first stripped the site using its equipment. It then installed subsoil drainage in the bottom of the gully. Once the swampy bottom of the gully area was dug out SPC placed a layer of geo filter cloth on the cleaned out fill area, then placed imported rock followed by another layer of geo filter cloth over the rock. This is what is described as a rock blanket. On completion of the rock blanket the site was handed over to Mr Newell to bring his bulk earthwork equipment on site to cut and fill the area as required. Once the site had been brought up to the required finished level, either SPC or the Partnership would spread topsoil when and where instructed by the Principal or its representatives.

• [20] It is worth emphasising that the Partnership carried out all cut to fill operations on site and the payment for these works was passed through to it. This was confirmed by Mr Pemberton’s evidence:³

We never placed any cut to fill on this job. Everything that we were paid by the engineer of the contract as certified quantities within the payment certificates was handed straight through to [the Partnership].

• [21] The rock blanket and subsoil drainage had two functions. The first was a temporary purpose. There needed to be a sufficiently stable platform for the bulk machinery to work on. The subsoil drainage and rock blanket created a building platform. Secondly, the subsoil drainage and rock blanket provided a permanent drainage infrastructure. Specifically, they fulfilled a function of reducing the water pressure in the site. The function was not to prevent water entering engineered fill placed on top of it for the long term. The expert evidence (which I accept) was that ingress of water is inevitable and expected. If suitable fill is laid, water ingress has no more than a 10 per cent effect on the strength of the soil. In contrast, where soil is

³ Notes of Evidence (NoE), page 174, lines 34 and 35, page 175, line 1.

placed too dry or too thick, air voids are created and will absorb the water, causing the soil to lose strength.

• [22] Gully 2 was on the northern border of the site at a point where the Waikato Expressway was to be constructed adjacent. At the time of the earthworks the construction of this had not started. The neighbouring land was still a paddock. Along the northern border, but still within the subdivision, was a temporary sediment pond required for Regional Council purposes. When this was decommissioned for a period there was a five-metre unfilled strip adjacent to where the Expressway was to be constructed on the border of the Landsdale site.

• [23] The Partnership completed the cut to fill earthworks on site in January and February 2015 other than the filling of this five-metre strip. Mr Newell came back to undertake this in January 2016. At that time there was an incident that caused Mr Newell concern as to the robustness of the geotechnical services being provided and the sufficiency and design of the drainage. The incident was relevant to liability when the Partnership was asserting his theories for why the remediation work to Gully 2 was later required. In light of the concession made in closing, it now only has some relevance to a position taken by Mr Newell as to whether he would have carried out the remedial works in Gully 2 had he been given the opportunity (relevant to damages). Accordingly, I come back to the facts around that in the context of considering damages issues.

Placement of suitable fill

• [24] Fill must not be placed too wet or too dry. That means that it may require conditioning by the earthworks contractor before being placed (i.e. wetting or drying it on site). Mr Newell accepted that an experienced contractor can assess in general terms whether material is too wet or too dry. There are three ways this can be done without technical measuring tools.

• [25] First is a visual assessment of the material. Secondly, an experienced contractor can use feel to assess whether the fill is appropriate. When it is in a workable condition, it is like a pliable plasticine. When it is too dry it is too granular

and does not bind. When it is too wet it is too sloppy (and unworkable with machinery).

• [26] Thirdly, and most practically for the earthworks contractor, a check can be made as the fill is deposited. The methodology is as follows: each scoop load of fill is spread at approximately 200–300 millimetres deep over an area approximately three metres wide and 45 metres long. The next scoop load continues from where the last finished until the area to be filled is covered. While placing fill the soil compactor works continuously on the fill already placed leaving the outside tyre mark on the spread untouched as the guide for the next lot of fill to be spread.

• [27] After about six or eight passes of the compactor, each layer of fill is compacted to the appropriate thickness. The operator’s observation of the compactor wheels and pads is a guide to the quality of the fill. The compactor pad indent left on the fill is ideally a constant 30 millimetres, meaning the fill will be within the required specifications. Indents that are shallower mean the fill is getting drier than the optimum required moisture content and air voids in the material will start to climb above the maximum allowable. If indents get deeper than 30 millimetres, this indicates fill is wetter than the optimum required moisture content and the shear strength of the material will begin to fall.

• [28] There are also tools used to test the fill for moisture content and for compaction. A shear vane is the tool used generally to measure fill to ensure it is not too wet or soft. This tests the strength of the material in kilopascals (kPa). The other tool used is a nuclear densometer which is used to test for air voids. This determines whether fill is too dry and whether it is sufficiently compacted. It is a more sophisticated device and is usually employed by a geotechnical engineer or similarly qualified person. The samples are taken from the soil using an augur and tested using the densometer. Samples are then oven baked before being further tested to complete the testing procedure.

• [29] Neither SPC nor Mr Newell owned a nuclear densometer. Both owned and used a shear vane. Mr Newell used a shear vane for his internal purposes to confirm whether a particular area needed reworking. He did not record the results of these

tests and has never been required by SPC or any other head contractor to provide those test results, including on the Landsdale Development.

• [30] Appropriate compaction is achieved with soil of the required strength (kPa) and low air voids. As noted above, air voids are a problem because when water enters the soil (which, as discussed at [21], it inevitably will) soil with high air voids will absorb the water and lose its strength. Air voids will occur where fill is placed too dry and/or in too thick layers.

Geotechnical specifications

• [31] HDG was engaged by the Principal as geotechnical engineer to the project. Clauses 17.1.14 and 17.1.15 of the Stage One Contract stated:

• 17.1.14 [HDG] has been engaged as Geotechnical Engineers for the contract. Earthworks operations are to be carried out under their direction. Contact details will be provided to the successful tenderer.

• 17.1.15 To remove any doubt please note that the appointment of the Geotechnical Engineer does not remove the responsibility of the contractor to undertake all necessary testing to ensure compliance with the relevant standards and specifications in a uniform manner across the full extent of works. The Geotechnical Engineer has been appointed to observe and certify works for the principle [sic], not to demonstrate that the contractor has met their obligation under this contract.

• [32] Earthworks specifications prepared by HDG formed part of the head contract between SPC and the Principal. At trial these were referred to as the “Addendum Specifications” to distinguish them from other specifications in that contract. There is a dispute about when the Addendum Specifications were provided to Mr Newell which I will return to. A coloured version of the material pages of this document were among the Partnership’s discovered documents. Mr Newell accepted that he received this at the latest during undertaking the earthworks.

• [33] The Addendum Specifications recorded in their “Introduction” that “HDG has been engaged by [the Principal] to provide earthworks design and construction

observation for the Landsdale Development”.⁴ The document provided for HDG to undertake independent inspection and acceptance testing to enable completion reporting and to assist the Engineer in determining whether the placed fill met specification.

• [34] The Addendum Specifications provided that:

The Contractor is required to do sufficient testing to ensure that they are meeting the specification in relation to compaction. [HDG] will be undertaking independent testing to enable completion reporting and to assist the Engineer in determining if the placed fill meets the Specification. During fill construction each lift may be subject to inspection and approval by the Engineer to confirm that the required compaction standards have been achieved. This testing is completed as a check in addition to the testing completed by the contractor.

• [35] In accordance with the Addendum Specifications, HDG visited the site virtually daily to undertake representative testing at every 600 millimetre “lift.” The specific requirements in the specification for fill included:

Cohesive material

• Cohesive fill material is to be compacted with a sheeps foot roller.

• Testing will be required in 0.5m lifts for the first 1m of fill and average 1m lifts above this.

• Maximum air voids of 10% and average of no more than 8% over 10 consecutive tests.

• [36] There was also a table of shear vane requirements (minimum and average requirements). These specifications also set out optimum moisture content that fill was required to meet.⁵

4. Mr Newell said in evidence that: “Until [the Partnership] received discovery documents in this proceeding, I understood HDG was the Geotechnical Engineer to the contract responsible for all testing. I did not know that HDG was working for the developer Landsdale, not for SPC, so I did not know that SPC was also responsible for a tier of testing in the contract.” If this is intended to suggest Mr Newell did not have the document until then, it is incorrect, given that the material pages of the document were produced in the Partnership’s discovery.
5. Specifications [307.1455]. Refer also email to Mr Newell with table setting out requirements [303.0410].

Discovery of non-compliant fill

• [37] HDG had carried out testing as fill was deposited as indicated by the Addendum Specifications. This led to fill being reworked at times, where the testing showed that fill was non-compliant. In addition, HDG carried out completion testing for the purposes of obtaining Council sign off in November 2016. On 8 November 2016, HDG informed SPC that some poor material had been discovered below compliant fill placed towards the centre of Lot 74. Within the fill area, at depths of

1.2 metres and 1.4 metres, there were low shear vane readings of 34 kPa and 65 kPa. These are extremely low readings. The specifications required average strength of 150 kPa. By the same communication, HDG told SPC that “we will need a digger to do some pot holing in this area to chase out the soft material”.

• [38] On 25 November 2016, CKL Surveys Ltd (CKL) issued formal notice under the head contract to SPC requiring it to remediate the defective fill; and advising that if it failed to do so, the Principal had the right to instruct others to do so at SPC’s cost. SPC commenced work on Lot 74. It was subsequently discovered that the area of non- compliant fill extended to Lots 72 and 73 and subsequently Lot 71.

• [39] It is significant to the issue of damages to note that the earthworks in Lot 74 were works in Stage 1b, the last works to be completed under the Stage One Contract. The earthworks for Lots 71–73 (the other lots in Gully 2) were being completed under the Stage Two Contract. Completion date under the Stage One Contract was 31 December 2016. Completion date for the separable portion for the Lot 72 and Lot 73 earthworks under the Stage Two Contract was originally 16 January 2017 but later assessed as 3 March 2017 due to a delay in commencement. Liquidated damages payable by SPC accrued at $20,000 per week for late completion under the Stage One Contract and at $10,684.64 per week for late completion of the relevant stage under the Stage Two Contract.

• [40] At the start of the defective fill issue arising, the size or cause of the problem was not known. It was in SPC’s interests to have the work required characterised as a variation rather than work for which it was responsible. This affected both who would pay for the remediation, and whether any resulting delay would be covered by an extension of time or involve liquidated damages for late completion under one or both

contracts. SPC notified its insurers with a view to seeking to claim under its liability policy.

• [41] On 29 November 2016 SPC advised the Principal that it had started chasing out the soft material in Lot 74. As the term suggests “chasing out” describes finding and following the unsuitable material. “Find and follow” is the term Mr Newell used. By the same communication, SPC advised that the non-compliant material was observed to be 400 millimetres thick and not changing in condition (not getting much better). SPC advised that it intended to deal with the material in Lot 74 first so as not to hold up the Stage 1b lots (with its 31 December completion date) before moving on to Lot 73 and so on. SPC informed the Principal that it had spoken to Mr Newell who they reported was “coming to site in the next couple of days to hopefully shed some more light on this”.⁶ In evidence, Mr Newell accepted that he had had a discussion with SPC at about this time.

• [42] On 13 December 2016 John Sheppard, the then Contracts Manager of SPC, emailed Mr Newell referring back to their conversation a few weeks prior in regard to the fill in Gully 2 and said:

... can you please make yourself available ASAP to come to site to discuss the filling and compacting you undertook there. It looks like at this point the wet, failing material is chasing out over multiple lots and may end up being a rather large issue. There may be some significant remediation work involved. We are keen to try and get to the bottom of it prior to doing too much work, that way everyone knows where we are all at before commencing. At this stage it is difficult to ascertain where the problem lies, with the client and ground conditions being the issue, with the Geotechs and their testing or with yourself and the placement of the fill. We have also engaged another Geotech engineer to review all of the test results and he has been to site to view the material, which will have a cost associated. We are also awaiting his determination. If you are available over the next few days to look at the area let me know when would suit you. If you have any diary notes from instructions given by the [HDG] guys, this may be beneficial to pull out and bring along.

• [43] Mr Newell had responded that he regarded the issue as a design problem. He concluded with:⁷

Will call you next time we are rained off and come have a look.

⁶ Email 29/11/16 [304.0669].

⁷ Email 13 02/16 [304.0677].

• [44] Mr Sheppard emailed back on 14 December 2016 asking whether Mr Newell had time to head out to the site, noting that the weather was starting to turn a bit that day and the next.⁸

• [45] The next communication from Mr Newell came on Friday 16 December. He recorded:⁹

The area that you guys dug out was filled in the 14/15 season. Andrew and Emily did the inspections and testing. The first season the fill was mainly on the dry side. The gully was filled to design and the preload placed. The areas to be filled were inspected by [HDG] before any fill was placed. The fill was placed in 200/300 mm layers and compacted, every 600 mm a compaction test was then done. When the tested layer was confirmed to be within spec more fill was then placed. The size of the area and the shear strength of 30 kPa, a soft area would have been easily noticed The problem is water moving from the natural ground into the fill. Your photo of water in the hole after excavating the soft area goes a long way to confirming that. As there was no attempt to prevent water from getting into the new fill placed, a test in say 12 months’ time will be further confirmation.

• [46] The email did not respond to the request to head out to the site. It is important to note here the Mr Newell is accepting in his email that an area of fill with such a low shear strength would have easily been noticed.

• [47] On 20 December 2016 SPC outlined its position in relation to the non- compliant fill issue to CKL as engineer to the Principal, advising that it did not accept liability for the material encountered. It sought an urgent resolution of the issue. SPC asserted that the most glaring issue was photos showing there was water pooling at the bottom of the digout, indicating water down at that level with fill above and below hard and dry. The email recorded that the earthworks contractor (the Partnership) had placed fill at 300 millimetre lifts and testing was done at 600 millimetre lift intervals and suggested that it would be unlikely that testing would miss these areas. The email concluded that the fill was placed dry and met compaction criteria but water had infiltrated afterwards.¹⁰ This email in substance relayed Mr Newell’s views on the issues that had arisen. However, Mr Newell’s views on the issue reflected misconceptions he held as to the function and nature of infrastructure that had been designed and installed. It was not correct to say there was a design issue. As discussed

⁸ Email 14/12/16 [304.0679].

⁹ Email 16/12/16 [304.0678].

¹⁰ Email 20/12/16 [304.0682].

at [21], water moving into soil above the rock blanket is intended and not an issue, provided the fill placed is compliant fill.

• [48] It is now accepted that the Partnership placed non-compliant fill. Having heard the expert evidence and having regard to this concession, the view that the non- compliant fill was caused by water infiltrating after the fill was placed was incorrect.

• [49] SPC reported to Mr Newell on 21 December 2016 that there had been a site meeting the previous day in which SPC had outlined its position on the Gully 2 fill issue. This advised:¹¹

Will keep you in the loop how things proceed. At this stage once we chase more of the wet material out and see how far it goes / possibly find the cause, a determination will be made then. So looking at early next year.

...

[Stage Two] is due to be completed in early Feb and as with the 1^st stage Liquidated damages will apply for late completion. We would like to get to the bottom of the issue in this area ASAP, as this area will need remediated [sic] and completed prior to the end of Jan 2017. Do you have gear available for this?

Again I will be onsite during this week if you would like to head out, and we will be happy to dig a couple of test pits for inspection.

• [50] Mr Newell stated in evidence that he then went out to the site, but provided no details as to when, or how many times.

• [51] On 22 December 2016, after the remediation works for Lot 74 were completed, practical completion under the Stage One Contract was certified prior to its contractual completion date.

• [52] The next communication between Mr Newell and SPC was on 31 January 2017. Mr Sheppard was about to go away. He said:¹²

I am leaving in a couple of weeks and thought I would get something on email in relation to the couple of issues we have encountered at Landsdale with the earthworks. I have had a conversation with Josh in regards to these couple of issues as he wants to get these sorted ASAP, but understand given the nature of them may not be sorted until after I go.

¹¹ Email 21/12/16 [304.0684].

¹² Email 31/01/17 [304.0702].

• [53] In respect to the Gully 2 issue he said:

Wet material in lot 74 (and continuing into lot 73 etc) at a depth of approx 2-3 m. At this stage we have lodged an insurance claim with our insurers who have appointed another geotech company to investigate. We are awaiting their report but should be through in the next few days fingers crossed. We have to date used our machinery to remediate lot 74 as this lot was in stage 1B which had a fast completion date and liquidated damages applying to it. In hindsight an insurance claim with your insurance company might have been the better way to go as you were the earthworks contractor. It maybe [sic] something you might like to look into as although we are fighting the fight so to speak in regards to what the issue is down there we don’t know how that will end and what decision will be made. To date in this area we have kept our hours and costs and is currently sitting at $20,140 ex GST. We are hoping the wet material yet to chase out isn’t a large amount more. To remediate this work looks to be digger and roller work which we will keep the hours on.

• [54] The email concluded:

Happy to meet again on site to discuss further if you wish. Given that im [sic] taking off in a couple of weeks probably a good idea that we get Josh along too so the next person knows whats [sic] going on. He’s currently working in Auckland a bit so might need a day or so notice to come out. Let me know what you’d like to do.

• [55] There was then an exchange between Mr Sheppard and Mr Newell in which Mr Sheppard interposed comments to an email. Mr Newell continued to contend (incorrectly) that the problem was nothing to do with earthworks but to do with poor or insufficient drainage design. Specifically, Mr Newell asserted that the design failed to take the rock blanket to a level that would collect and stop water getting into the fill. He referred back to having seen water entering the natural ground and the photo taken of this in January 2016. He also emphasised that fill areas had been inspected by HDG before fill was placed. Mr Newell stressed that there was no sign of moisture when the fill was placed. He said that the issue did not lie between himself and HDG.

• [56] Mr Sheppard responded that he agreed HDG signed off the tests and carried out the inspections so should hold some responsibility. He relayed that HDG had said that it was employed to do scattered testing and not to sign off every cubic metre of fill installed. The email response recorded that the unsuitable material excavated was about one-and-a-half metres above the rock blanket to the base, with good hard clay placed in between this unsuitable layer and the rock blanket which did not need to be removed. Mr Sheppard also noted that Mr Sam Pepper, a representative of the Principal, had a theory that the haul road was pushed in without compaction.
• [57] Mr Sheppard subsequently advised on 1 February 2017:¹³

The bottom line is on this issue, is that once the problem was raised through [HDG] doing the lot validation testing in their completion report, we had a matter of days to complete the remediation of this unsuitable in lot 74 in stage 1. Otherwise [liquidated damages] of $21,369.27 per week would apply. We were instructed by the client in accordance with our contract NZS:3910 to make good and had 5 days to commence. You don’t have the appropriate equipment to remediate this issue, as it is isolated and confined and is digger work, so we have done this work. We still have lots 73 and beyond to excavate and remediate at this point, but they are in the next stage and still to be done.

You may be getting the wrong end of the stick from my emails. We have already been battling this with all parties for the last three months, and have got to the point of getting our insurer involved. What we are after is the support from you in the form of records, photos, reports, emails etc to come out the other end of this at the very least covering our costs, as we think it will end in court with Pepper/[HDG] as the costs are building fast. The issue does lie between you and [HDG], as you are the earthworks contractor, however we are the meat in the sandwich trying to achieve an outcome to resolve this at no cost to either of us.

• [58] Mr Newell responded that he supported SPC in the battle with the Principal and HDG saying:

I fully understand what you are going through its not nice arguing about these things. I don’t keep records etc when placing fill, all emails on tests and inspections are sent to you and me this is all we have.

• [59] Mr Newell then emailed again on 3 February 2017 and described concerns he had had when he was filling up the five-metre strip by the expressway in January 2016. Wet material was found, and he said HDG were then suggesting it was because the Partnership had placed unsuitable fill. On that occasion Mr Newell had refuted this. He had confirmed his stance that the reason for this was that the fill was sitting in water on the drainage blanket by having one of SPC’s staff use SPC’s digger to dig down to the rock blanket where it was observed that 200–300 millimetres of fill on the blanket was wet. Mr Newell reported that Mr Holland refused to accept that water had got into the fill or that the drainage blanket was the problem.

• [60] He reported that Mr Holland said it was an isolated area and so recommended to fill the hole in. This was the gist of Mr Newell’s contention that the drainage blanket design was the problem. He recorded:¹⁴

¹³ Email 1/02/17 [304.0712].

¹⁴ Email 3/02/17 [304.0717].

You say you have engaged your insurance co and a geotech and it could end up in court it might be a good idea to pass this info on to them I am happy to meet with your Geotech and show him where he can augur down to confirm this

You say in your email that I might have the wrong end of the stick on something in all of this

The info and comments from me are as it happened, as the work was done, no more no less, and for your use as you see fit

• [61] A 7 February 2017 team site meeting was held in which the earthworks were discussed:¹⁵

Earthworks continuing within lots 70-73. Pot hole observed within Lot 73 to determine extent of unsuitable material. Material generally looked consistent and hard. [HDG] to complete augers around area to determine if all unsuitables have been removed.

• [62] The remediation works continued into February and March. SPC continued to dispute its liability in respect to the remediation works with CKL as engineer. SPC asserted in early March that HDG was holding up obtaining reports from SPC’s insurer by not providing its reports or answers to questions. The Principal was contending that liquidated damages would be payable under the Stage Two Contract.

• [63] On 23 March 2017 SPC provided a practical completion letter for Stage Two. In response CKL advised that there were several items still outstanding for Stage Two completion:¹⁶

These items include cut to fill within lots 69-73/remediation of lots 72/73, Topsoil and seed within 69-73, removal and replacement of dish channel damaged within both parking bays on Road 1, chip seal and hot mix of parking bays within Road 1, Road Markings and street signs for the stage.

• [64] The letter recorded that practical completion could not be issued until those works were complete.

• [65] Mr Pemberton replied saying, among other things:¹⁷

Dishchannel [sic] won’t be removed I’ve view [sic] the repairs and am happy, [L]ance was also happy with this on the last stage.

¹⁵ Minutes 7/02/17 [304.0722] at [304.0724].

¹⁶ Email 24/3/17 [305.0778].

¹⁷ Email 24/03/17 [305.0778].

Go and view the site, I did yesterday and it looks great.

Please issue practical completion and start this process with HCC.

• [66] Practical completion for the relevant works in Lots 71–73 was certified on 16 May 2017. This was beyond the contractual completion date of 3 March 2017.

Engineer’s Decision on cause of fill failing specification

• [67] As outlined above at [9], while the Partnership concedes it placed the non-compliant fill, it does not concede the mechanism by which this occurred.

• [68] On 13 December 2016 Mr Holland of HDG set out his summary of what he had observed and views on probable causes. He then updated this in an email dated 28 March 2017.

• [69] Mr Holland outlined that the non-compliant fill that was chased out in Lots 70-74 was not an isolated layer in the base of the fill, but layers of varying thickness throughout the fill placed in this area. When HDG undertook testing in the area of Lot 74 (and later Lots 70–73), it found generally good fill with layers in zones of wet, soft material. These were not isolated to the base of the fill but scattered throughout the fill. Mr Holland’s initial assessment of the probable causes of the soft material being encountered in his email of 13 December 2016 and update on 28 March 2017 was that it was more likely that fill was placed dry and therefore wetted up and lost strength after placement. He concluded it was possible but less likely that the fill was placed wet initially.

• [70] Mr Holland’s conclusion was:¹⁸

While it is not possible to definitively identify the cause of the soft fill in the area of Lot 74, there are a number of observations that suggest possible/probable causes. The contractor who placed the majority of the fill in gully 2 typically favoured a dry, hard fill and was often struggling with the air voids specification. Lot 74 is in a transition area from fill to natural, and lift control appears to be less accurate than in the layers above the soft fill (where the transition is buried). My opinion is that these factors combined to create an area with thicker lifts, sometimes uncontrolled, minimal compaction in some layers and high voids that was placed below specification and in some places has been able to soften significantly with an increase in moisture

¹⁸ Email 13/12/16 [305.0781] at [305.0783].

content. It may have been put in place wet, and further softened, or dry and hard with high voids and subsequently softened. It is likely a combination of both mechanisms for the various layers.

• [71] In terms of the observations on site of this material, Mr Holland observed:

(a) The material found as at 13 December 2016 was typically a mix of ash soil with layers of what appeared to be swamp deposits (unsuitables in the base of the gullies).

(b) Soft material was encountered in layers and often observed in large thicknesses. He noted that directly above the subgrade was the thickest mass which included a large portion of swamp material. The soft material then extended into layers, the most significant being approximately one metre thick.

(c) He observed at least two layers of significant unsuitable material in the overall layer of soft material with a few isolated layers at shallower depths. Layers of swampy soft material were encountered in layers up to 100 millimetres thick within hard “EC Fill”. In the lower part of the excavated area, the soft material (ash mixed with swamp deposits) was more than one metre thick. The main layers of swamp material were up to 200 millimetres to 300 millimetres thick and within soft ash.

(d) Natural subgrade exposed was hard and relatively dry.

(e) Engineered fill above and below was high strength with obvious thin layering.

• [72] HDG postulated that the main layers of swamp material could have been dropped as the gully was cleared out and covered over by fill material. It also noted that Lot 74 is on the edge of the Gully 2 fill area. Mr Holland referred to the numerous temporary access tracks in the area and the transition from fill to natural land nearby.

• [73] In his later email on 28 March 2017 Mr Holland referred to continuation of the soft material encountered in Lot 74 towards Lot 73 and that this was dug out to continue chasing out the thick layer of soft material (being approximately a bucket-width removed). He considered that all observations made were consistent

with the original opinion expressed on 13 December. He referred to isolated areas within Lots 72–73 noting that soft material was encountered at a shallower depth to the initial Lot 74 excavation containing a large amount of unsuitable alluvial material mixed with ash.

• [74] Mr Holland noted that a soft area around the settlement marker was encountered and expressed his belief that hand compaction or compaction of fill with small plant was not undertaken around the pin. He also noted a soft layer at the back of Lots 72–74 which he believed was caused from an old haul track that had not been cleared before placing fill. He advised that soft material underlying a stockpile of unsuitable material that had been placed on site was continuing to be encountered and chased out.

• [75] On receipt of Mr Holland’s updated report on the Lot 74 soft fill issue on 28 March 2017, CKL requested any further response from SPC before the engineer moved to decide whether SPC had responsibility for the issue. SPC continued to refute HDG’s position both factually and legally. At that point, additional costs on remedial work to date were $44,148 excluding GST and rising.¹⁹

• [76] Mr Newell was provided with Mr Holland’s observations and continued to reject the conclusions.²⁰ He was angry at the accusations of poor quality control and rejected the opinions. Mr Pemberton responded advising that SPC was going to pull together HDG site visit dates, instructions, test results and the like and once they had done this they would get Mr Newell in for an hour to pin some dates on when some of the more critical meetings/instructions would have taken place. He observed that he would need more concrete evidence “so if we all collectively try and pull some of this together – I am sure we have a solid case”. Mr Pemberton advised he had been told that the Principal was taking six weeks of liquidated damages from SPC.

• [77] There were further exchanges between SPC and CKL regarding the rework in Lots 71–74 with SPC maintaining its position that it was not liable. As part of SPC’s case that responsibility for fill being within specification was with HDG, SPC referred

¹⁹ Email 28/03/17 [305.0780].

²⁰ Email 29/03/17 [305.0786].

to a pre-start meeting held on site in which it was recorded that SPC did not own a nuclear densometer and that therefore shear vanes would be carried out for indicative kPa testing only and recorded daily. SPC sought to tie this into clauses of the contract relating to the respective responsibility between the parties.²¹

• [78] The final inspection of the excavation for Lots 70–73 was completed on or about 4 May 2017.

• [79] On 21 June 2017 CKL issued its engineer’s decision in respect to the Gully 2 remediation works.²² This concluded that the defect was likely a result of SPC not achieving the required specifications. It recorded:

It is important to note that no physical evidence, testing results or expert analysis was provided with the Contractors [sic] arguments. As [HDG] are experts in the field of soils and have provided information based on investigations, sampling and testing a level of weighting to their findings has been given.

• [80] The decision effectively adopted the information HDG had provided.²³ It also rejected the contention SPC was advancing that it was not contractually responsible for the fill meeting specification. The decision noted that the material described as swamp deposits or unsuitables was clearly visible as soft darker material in layers during remediation works and that this had been backed up by low shear vane results within the material.

• [81] The decision was provided to Mr Newell. Mr Pemberton commented in his covering email:²⁴

Well I’ve done my best.

Its lawyers now, if we want to go any further. What’s your thoughts?

• [82] Mr Newell continued to deny that the issue was one for which he bore any responsibility.

²¹ Email 1/05/17 [305.0819].

²² Letter 21/06/17 [305.0918].

²³ Mr Holland’s reports reference to above.

²⁴ Email 22/06/17 [305.0923].

• [83] By letter dated 5 July 2017 SPC formally recorded to the Principal that it disputed CKL’s findings. There then followed some engagement between the lawyers on the issue. Ultimately SPC did not pursue any continued objection through the contractually available steps.

Contractual obligations

Preliminary

• [84] The first issue is what contractual obligations were owed by the Partnership. The Partnership accepts that it owed a number of implied obligations, which I address later. Here I deal with disputed issues relating to obligations on the Partnership to comply with the Addendum Specifications referred to above at [32]–[36].

• [85] It is common ground that Mr Newell was provided with a schedule of quantities and quoted based on providing his proposed cut to fill rate on these. The schedule included the following:

Spread and compact [fill] on site as controlled fill where shown on the plans,

and as directed by the Geotechnical Engineer.

• [86] The parties agree that these words form part of the contract but disagree about what they convey.

• [87] The Partnership says the words “as directed by the Geotechnical Engineer” meant that it was to do what was directed by HDG but that it did not itself have any obligation to comply with the Addendum Specifications (or more particularly, the specifications contained within the Addendum Specifications as to air voids and optimum water level). Rather, it says this was the job of HDG to ensure compliance using the testing it was undertaking. This required a nuclear densometer, which everyone knew neither the Partnership nor SPC owned.

• [88] Mr Talbot submitted that if SPC took on the risk of ensuring compliance with the specifications in the Addendum Specifications despite not having a nuclear densometer, this risk was not passed through to the Partnership. The Partnership also says it was not provided with the Addendum Specifications until it was on site doing the work and they do not form part of the contract for that reason. As noted at [32], it

is common ground that Mr Newell did receive the Addendum Specifications at some point, as the document was provided on discovery by the Partnership.

• [89] SPC says that the words “as directed by the Geotechnical Engineer” required the Partnership to place fill that met specifications provided by HDG and it was for the Partnership to ensure that this was so. SPC pointed to Mr Newell’s acknowledgment that he could tell when fill was too wet or dry by the various non- technical methods in his standard methodology. While HDG undertook scatter testing at the surface of each 600 millimetre lift, this did not and could not ensure all fill met specification, nor did it detract from an obligation to meet specifications.

• [90] SPC says for this purpose it is irrelevant whether the Addendum Specifications were provided to the Partnership before or after the contract was formed. However, it says these were provided by Mr Pemberton at a first walkover of the site (back when the Partnership provided its rates) and if that is not accepted, then prior to work commencing.

When were the Addendum Specifications provided?

• [91] As referred to above, the parties differed in their recollections on the documents provided at the outset. They also differed on the circumstances in which SPC came to tender on the contract. Mr Newell said he obtained the schedule of quantities for the project from Schick Construction (Schick), another earthworks contractor, who had been invited to tender. Mr Newell said it was he who approached SPC to enquire whether it was going to tender for the earthworks contract, and it is through this that SPC was introduced to the work. Mr Newell’s evidence was that he had not obtained any other material documents at this time.

• [92] Mr Pemberton does not recall Mr Newell introducing SPC to the project. He said that this was unlikely given that SPC was a preferred contractor for CKL. In particular, SPC had worked for CKL on the very substantial Huntingdon development. Also, Mr Pemberton said that he recalled walking around the site with Mr Newell and providing him with the contract documents, which included the Addendum Specification. He said it was the usual course to provide Mr Newell with the contract

documents, and also noted that at the time Mr Newell’s daughter was working with SPC so it was no issue retrieving them.

• [93] I accept Mr Newell’s evidence that he did obtain the schedule of quantities from Schick and that he went into Schick’s offices and viewed some documents on screen. This is such a specific memory and Mr Newell had no particular reason to invent this scenario. However, I also accept Mr Pemberton’s evidence that SPC was asked to tender independently, so was not introduced to the project by Mr Newell. More significantly, I accept that Mr Pemberton walked with Mr Newell around the site and gave him the contract documents which included the Addendum Specifications. Mr Talbot was critical that this particular scenario (walking around the site and providing the documents) was not put to Mr Newell. I do not agree that it was necessary to do so given Mr Newell’s recollection was that he had received no documents from SPC and he was cross-examined generally about this.

• [94] I conclude on the facts that the Addendum Specifications were provided to Mr Newell at or about the time that he quoted on the work. I also conclude that the particular copy of the Addendum Specifications discovered by the Partnership was provided before Mr Newell started work on the site. I agree with Ms Whitfield that on any view it is much more likely he received them prior to commencing.

• [95] In my view, the Addendum Specifications form part of the contract between the Partnership and SPC as the specification to which the works were to be undertaken.

Contractual position on the Addendum Specifications

• [96] The Addendum Specifications placed ultimate responsibility on the contractor, not HDG to place compliant fill, notwithstanding that testing was being undertaken by HDG. It is correct that HDG undertook testing and required reworking by the contractor where tests failed as it went along. It tested fill at each 600 millimetre lift at the surface of that lift. Its testing was random and completed after the fill was placed. I accept the proposition that this testing was not intended to be, nor was it able to be, a confirmation that all fill met specification. HDG could not and did not observe the fill placement on a continual basis.
• [97] I do not agree that this obligation was negated by the prior site meeting where it was acknowledged that SPC/the Partnership did not own a “nuke” (nuclear densometer). I agree with the finding of CKL in the engineer’s report that it was for the contractor to meet the specifications and it was up to it how this was done. My conclusion on this matter is supported by the evidence I heard from both parties that from a practical perspective a competent contractor can tell whether fill is too wet or too dry.

• [98] In my view, the Partnership stood in SPC’s shoes insofar as the Addendum Specifications obligations are concerned. The Partnership was to undertake (and did undertake) all the cut to fill works, with a straight pass through of all payments received by SPC for those works. The fact that the whole of these works were subcontracted to the Partnership which received the full payments for them supports that the Partnership as compared to SPC assumed the obligations for those works under its subcontract. Moreover, if the Partnership was not responsible for fill meeting specification, this would deprive the Partnership’s acknowledged obligations (discussed below at [103]) to exercise reasonable care and to act in a proper and competent manner of any sufficient content.

• [99] In summary, the Partnership was obliged to comply with the Addendum Specifications. This obligation is unaffected by HDG’s testing.

• [100] There is a suggestion that the Partnership was not required to undertake testing and that therefore it cannot be liable. I agree with SPC’s submission that this is a red herring. The Partnership’s contractual obligations were to achieve the standards set out in the Addendum Specifications, that is, not to place fill that was too wet or too dry. How it achieved these was a matter for them.

Breach of Contract

Breach of obligation to meet Addendum Specifications

• [101] I have concluded that the Partnership was contractually obliged to meet the Addendum Specifications. The Partnership concedes that it deposited non-compliant fill. Therefore the Partnership was in breach of contract.
• [102] I note that my conclusions on the disputed issue of the status and applicability of the Addendum Specifications are not determinative of the Partnership’s liability. That is because, as discussed below, I also find that the Partnership was in breach of the suite of implied obligations that the Partnership acknowledges it owed.

Breach of implied obligations

• [103] The Partnership admits that it owed the following contractual duties:

(a) To exercise reasonable skill and care when performing its services.²⁵

(b) To undertake its work in a proper and competent manner.

(c) To use the “placement and compaction” methodology referred to in the “CKL specification” to the head contract.²⁶ In closing, Mr Talbot described this as an obligation to use the “industry standard placement and compaction methodology” described in Mr Newell’s evidence, being the methodology he had used for 40 years as follows:

3. I do not accept that the Partnership placed any unsuitable fill. I used the same methodology I have used for 40 years on this job. Each scoop load of carefully selected fill is spread at approximately 200-300 millimetres deep over an area approximately 3 metres wide and 45 metres long. The next scoop load continues on from where the last spread finished and so on until the area to be filled is covered. As we are placing the fill, our soil compactor works continuously on the fill that has already been placed, leaving the outside tyre mark on the spread untouched as the guide for the next lot of fill to be spread. Any area of fill before compaction that appears thicker than 200- 300 millimetres is trimmed by the compaction blade.

4. Each layer of fill, after about 6 or 8 passes of the compactor, is compacted to approximately 200 millimetres thick. My observation of the compactor wheels and pads is a constant guide to the quality of the compaction. The compactor pad indent left on the fill is ideally a constant 30 millimetres, meaning the fill will be within the required compaction specifications. Indents any shallower than 30 millimetres means the fill material is likely to be getting drier than the optimum required moisture content, and air voids will start to climb above the maximum allowable 8%. If fill appears drier than the optimum required moisture content, that fill needs to be reworked and wet.

25. Para 14 of the Reply by Plaintiffs to Defendant’s Statement of Defence and Counterclaim dated 30 June 2023 [101.0026].

²⁶ Refer 2.17.1-2.17.8 at [302.0106].

5. If the indents left by the compactor are getting deeper than 30 millimetres, this indicated fill wetter of the optimum required moisture content and the sheer strength will begin to fall. I monitor these areas of plus or minus of the 30 millimetres with my own shear vane. This methodology has served me well over my 40 years of earthmoving as it did in the placement of 122,000 cubic metres of fill at Landsdale.

6. I do have a shear vane, which I use on site to test areas that may not appear to have passed our own compaction requirements. These shear vane tests are carried out for our internal purposes only to confirm whether a particular area needs reworking. We do not record the results of these tests and we have never on the Landsdale contract, or on any other contract, been required by SPC or any other head contractor to provide our test results.

7. When we placed each 600 millimetre layer, so 3 layers of 200 millimetres, the filling process stopped, and we had to notify the SPC that a layer is ready for testing. SPC then requested HDG to complete the testing. All instructions to me or from me were through SPC. We always had a good working relationship with HDG and always enacted any recommendations and instructions regarding the placement of the fill. There is fill that is either too dry or too wet according to the Geotech tests on all cut to fill jobs, and we have always managed these to the Geotech’s satisfaction by reworking the fill as instructed.

• [104] Because Mr Newell’s position until closing was that the fill the Partnership placed was compliant, in his evidence-in-chief and cross-examination he rejected that the Partnership, as a competent and experienced contractor, could have done this. In particular:

(a) He accepted that an experienced earthworks contractor would be able to identify where fill is too dry.²⁷ He said that fill could be placed dry of optimum moisture but still be within specification. The operator looks at how the compactor is operating but that this does not regulate two to three per cent out of specification, for which he said he relied upon HDG testing every 600 millimetre lift.²⁸

(b) Mr Newell’s evidence was that it was impossible for the Partnership to place fill too thick, adopting the industry standard placement and compaction methodology.²⁹ More specifically, he was referring to the fact that when the

²⁷ NOE page 39 at line 30.

²⁸ NOE 57-58.

²⁹ NOE page 93 at line 23 – page 94 at line 1.

scoop is set at the 200–300 millimetres required, the fill cannot come out thicker.

(c) In his evidence Mr Newell rejected that the Partnership could have been responsible for an area of unsuitable fill,³⁰ a subject of the failed fill noted by Mr Holland in his observations (and visible in a photograph that was produced). Mr Newell said:

Based on my significant experience in earthworks, it is not possible that we placed organics/unsuitable material like swamp material in gully 2. It is not credible to suggest a person with my knowledge and earthworks experience of earthworks material would do this.

• [105] When the issue of non-compliant fill in Lot 74 emerged in December 2016, Mr Newell had also rejected that this could have been non-compliant when it was placed by the Partnership. He commented on the low shear strengths of the non- compliant fill that had been identified:³¹

The size of the area and the shear strength of 30 kPa, a soft area would have been easily noticed.

• [106] Once the Partnership accepts (as it now has) that it deposited the non-compliant fill in issue, by the above evidence Mr Newell is acknowledging in substance that:

(a) The Partnership has in fact placed fill that is too dry by such a margin that it would be something an experienced contractor can identify.

(b) A competent contractor, acting with reasonable care, should have noticed the non-compliant fill in Lot 74.

(c) The Partnership has placed fill too thick (described by Mr Holland as one metre thick in places).

(d) The Partnership did place organic or unsuitable fill despite this being extraordinary for an experienced earthworks contractor.

³⁰ Brief of Evidence (BoE) of Wayne Newell , para 33 [201.0013].

31. Email of Wayne Newell to John Sheppard regarding the Landsdale Gully 2 Fill (16 December 2016), set out above at [45].

• [107] These are plainly breaches of the Partnership’s admitted obligations to exercise reasonable skill and care, to undertake its work in a proper and competent manner and to use the “placement and compaction” methodology. Although probably inadvertently, something has gone wrong in the Partnership’s implementation of their standard work methodology, and it was not complied with.

• [108] In his contemporaneous reports and in evidence, Mr Holland provided his views on how these things could have occurred. For example, he hypothesised that the inorganic/unsuitables may have been a contamination of the surface of the fill as unsuitables were trucked across it. He referred to Lot 74 being on the edge of a gully where there had been numerous access tracks in the area and a transition from fill to natural ground. He suggested that these may have inadvertently been left in place by the contractor.

• [109] Mr Crawford referred to the most probable cause of the non-compliant fill as being an overly thick zone of excessively dry and/or uncontrolled fill (possibly from a ramp created and left behind and buried, probably inadvertently, at the then current edge of the permanent fill). Given the significantly low strength observed in this fill, it was not a marginal failure caused simply by a few layers of fill placed a little dry of optimum water content.

• [110] I agree with SPC that the evidence shows that there was not simply one mechanism involved. The key point is that the explanations seek to explain how plainly non-compliant fill came to be deposited. In my view the explanations provide the probable causes and whether the hypotheses are correct or not, in placing such material, the Partnership has failed to meet the standards of a competent earthworks contractor.

• [111] I emphasise that it was not necessarily Mr Newell himself who deposited non-compliant fill (given that the Partnership had a number of workers). I also acknowledge that it is common ground that the Partnership works generally had been to a good standard. However, in this instance the work fell below the standard of a reasonably competent contractor.
• [112] Finally on the issue of liability, Mr Talbot placed some emphasis on communications between SPC and CKL/the Principal in which SPC was advancing the contractual position that the head contract did not place liability on SPC for ensuring fill complied with specification and which adopted and advanced Mr Newell’s arguments as to why there should be no responsibility on the facts.

• [113] As SPC said in some of its communications with Mr Newell it was “fighting the fight” for that purpose. It was also, as it said, “the meat in the sandwich” between the Principal and the Partnership. In those circumstances, the contentions SPC was advancing to the Principal do not amount to some sort of admission by SPC, nor does it preclude SPC taking an inconsistent position now. SPC, in reliance on assertions the Partnership now accepts were incorrect, was pragmatically seeking to avoid any liability for the issue that had arisen.

• [114] These attempts failed, with the Engineer’s decision concluding that, factually and technically, the defects in Gully 2 were likely because the earthworks specifications had not been met, for which SPC as contractor was liable. SPC did not go on to pursue the matter to mediation or arbitration. It did continue to advance a case that there was no liability in communications passing between the parties’ lawyers, but ultimately did not pursue further legal process in that direction. It cannot be criticised for that course. In my view it did not have any reasonable prospects of success in taking the matter further.

Damages for breach of contract

• [115] Having concluded that the Partnership is liable in contract, I now consider damages for breach of contract. The usual position in contract is that SPC is entitled to be put in the position it would have been had the Partnership not breached the contract.³²

• [116] SPC claims:

(a) costs to undertake the remedial work of $133,212.93;³³

³² Stirling v Poulgrain [1980] 2 NZLR 402 (SC & CA) at 419 per Cooke J.

³³ Brief of Evidence of Sam Pemberton, paras 85 to 87 [201.0073].

(b) liquidated damages of $109,899.15 that it was required to pay the Principal for delays said to be caused by having to remediate the Partnership’s defects;³⁴ and

(c) legal costs of $5,803.20.

• [117] Once these are set-off against the retentions outstanding on Landsdale the net amount claimed by SPC is $108,775.66.³⁵

Remediation costs

• [118] The Partnership’s position is that the remediation costs claimed by SPC are excessive. In substance, Mr Newell said he was entitled to be given the opportunity to remedy the defective works, he was not, and had this happened he would have taken up the opportunity. He says in that event he could have completed remediation for around $10,000.

Right to remedy defective works

• [119] SPC says that the Partnership did not plead any implied term or principle that the Partnership was entitled to be given reasonable opportunity to remedy defective works. If there is such an obligation, I agree that it can only be by an express or implied term or alternatively as a facet of a party’s obligation to mitigate loss.³⁶ Neither was pleaded, nor was an application to amend made, despite the issue being raised by SPC in opening submissions. I do not need to rely on any pleading point because of my views on the substance of the matter.

• [120] Where there is an express term providing for the contractor to remedy defects during a defects liability period, it is generally implicit that they are entitled to the opportunity to return to remedy them.³⁷ If the principal denies the contractor of that right, it is usually unable to recover damages of any greater value than what the works

³⁴ BoE of Sam Pemberton, paras 73 to 84 [201.0072].

³⁵ BoE of Anthony Burman, para 21 [201.0059].

36. See Stephen Furst and Vivian Ramsey Keating on Construction Contracts (11th ed, Sweet & Maxwell, London, 2022) at [11-031].

³⁷ Pearce & High Ltd v Baxter & Baxter [1999] EWCA Civ 789; [1999] BLR 101 (CA).

would have cost had the contractor completed them.³⁸ However, here there is no express term between the parties entitling the Partnership to remedy defects, nor an express term entitling the Partnership to notice giving the opportunity to remedy them. It is common ground that there is an express provision for payment of retentions of 10 per cent but that says nothing about any right to remedy defects arising. Retentions can be held for security to either secure performance, or to pay others to remedy the defects.³⁹

• [121] The Partnership relied upon Smeaton Construction Ltd v Garrett Pasquale Ltd⁴⁰ as supporting some general principle or implied term in the context of an oral contract. That case does not assist. The basis for the High Court’s decision in Smeaton that the head contractor could not recover the costs of rectifying an issue with sealing the decks of a house was because there was no breach of contract by the subcontractor in the first place.⁴¹ That is a different proposition to contending, as the Partnership does here, that in the event of a breach, there is an implied right to be given an opportunity to rectify.

• [122] The correct legal assessment requires a consideration of SPC’s conduct through a lens of the duty to mitigate. That is, where one party breaches a contractual term, the other party to whom the obligation is owed has a duty to mitigate their loss.⁴² The Partnership did not plead a failure to mitigate, but in any event, I accept SPC’s submission that there is no breach of that duty for the reasons set out below.

38. Pearce & High Ltd v Baxter & Baxter, above n 37. Compare Maersk Oil UK Ltd v Dresser-Rand (UK) Ltd [2007] EWHC 752 (TCC) at [649]–[651].

³⁹ Compare the definition of “retention money” in the Construction Contracts Act 2002, s 18A.

⁴⁰ Smeaton Construction Ltd v Garrett Pasquale Ltd [2012] NZHC 3079.

⁴¹ At [31] and [35]–[36].

⁴² Wu v Body Corporate 366611 [2014] NZSC 137, [2015] 1 NZLR 215 at [134]. This seems to me to be the effect of Owners – Strata Plan 89041 v Galyan Pty Ltd [2019] NSWSC 619 at [20]–[21], referred to me by the Partnership; and see Smeaton Construction Ltd v Garrett Pasquale Ltd, above n 40, at [35].

Mitigation

• [123] A party need only act reasonably in mitigation.⁴³ It is for the Partnership to establish that SPC did not meet this obligation.⁴⁴ It is a difficult burden to discharge, even where a party has acted badly.⁴⁵ The onus on the defendant is not met simply by demonstrating that it would cost less in nominal terms if different steps were taken.⁴⁶

• [124] The plaintiff’s response to the defendant’s wrong is judged, not in hindsight, but according to the circumstances as they appeared at the time.⁴⁷ The Court will not scrutinise too closely a plaintiff’s actions to mitigate taken reasonably and in good faith for this purpose, and will avoid the temptation to judge by hindsight. Moreover, if mitigating steps are in fact reasonably taken, the claimant is entitled to recover as damages any additional expenditure incurred in pursuing those reasonable steps.⁴⁸

• [125] I set out at [42]–[65] the communications between the parties during December 2016 and into the following year as remediation continued. In summary, the position was this: following identification of the unsuitable fill issue and as it was being remediated, SPC endeavoured to keep Mr Newell up to date and sought his input. Mr Newell’s position continued to be that the issue was one of poor design. He was asked on 13 December 2016 to “make [himself] available ASAP to come to site to discuss the filling and compacting [he] undertook there.” Mr Newell’s immediate response on that same day was to outline why he regarded the issue as a design problem and he did not respond to the request to head out to the site. Mr Newell said: “Will call you next time we are rained off and come have a look.” Following these communications, SPC wrote to Mr Newell on 21 December providing an update of a meeting with the Principal and other parties on site. It was obvious that SPC was taking steps to remediate in the meantime, given the upcoming completion date for

⁴³ Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11, [2012] 2 NZLR 726 at [55] per Elias CJ citing British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Company of London Ltd [1912] UKLawRpAC 43; [1912] AC 673 (HL) at 689.

⁴⁴ Payzu Ltd v Saunders [1919] 2 KB 581 (CA) as cited in Pipes NZ Ltd v Steel Co Ltd [2014] NZHC 1216 at [102].

⁴⁵ Pilkington v Wood [1953] 1 Ch 770.

⁴⁶ White v Rodney District Council (2009) 11 NZCPR (HC) at [30]–[32].

⁴⁷ Hooker v Stewart [1989] NZCA 407; [1989] 3 NZLR 543 (CA) at 547 affirmed in Frucor Beverages Ltd v Blumberg [2019] NZCA 547, [2020] 2 NZLR 51 at [96].

⁴⁸ White v Rodney District Council, above n 46, at [30]. See also Pipes NZ Ltd v Steel Co Ltd, above n 44, at [103] citing Andros Springs (Owners) v World Beauty (Owners) [1970] P 144 (CA) at 156.

Stage One and the risk of an adverse finding that it was responsible for the delay resulting.

• [126] When Mr Sheppard became more direct about the Partnership’s potential liability for the non-compliant fill that was being discovered (in February 2017) Mr Newell continued to say that the issue lay between HDG and SPC. Mr Newell was aware remediation work was ongoing.

• [127] Reading the chain of communications as a whole, I have formed the view that this is not a situation where a contractor has been denied the opportunity to remediate when it otherwise would have. Nor is there any issue of SPC acting unreasonably. Rather, as some of the SPC emails convey, SPC was seeking Mr Newell’s engagement and was keeping him in the loop. Mr Newell was aware that SPC was undertaking the works required to remediate.

• [128] Accordingly, even if there was an implied contractual obligation to offer the Partnership an opportunity to remediate, or seen another way, that this was appropriate as a mitigating step by the Partnership, there has been no breach of those duties. The Partnership was kept appropriately informed and could have stepped in to undertake the work, had it wished to.

• [129] Before moving on I note a further issue raised. The Partnership says that its conduct in January 2016 is relevant to the issue of whether it would have remediated the defective work. Mr Talbot submitted that when water was observed in the pit when Mr Newell came back to fill in the five-metre expressway area, Mr Newell did in fact get a digger in to look into this and remediate despite his position at the time that this was an issue caused by defective infrastructure design and implementation. Mr Talbot submitted that this shows he would have remediated the defective fill in 2016/2017 if given the opportunity. I disagree that the January 2016 incident provides any particular evidential assistance. The matters in issue here relate to ongoing remediation being undertaken over a course of months. Moreover, as Ms Whitfield submitted, the work done in January 2016 was using SPC’s digger and operator, not work done by Mr Newell/the Partnership.
• [130] I now turn to the contention that the Partnership could have done the remediation work for only $10,000 in the space of a week. Mr Newell’s proposition was that his bulk earthwork machinery (bulldozer) was appropriate and that he could have applied an approach of “find and follow” using that equipment. The issue here is not with the rates charged for SPC’s equipment, but that the bulldozer would have done the job much more efficiently in terms of cost and time.

• [131] I reject this assertion. First, it is made in hindsight. Secondly, I heard evidence on how a digger operates relative to a bulldozer. The former can work in a more confined space or isolated area and I accept the evidence that use of a digger was more appropriate for the work than the bulldozer Mr Newell said he would have used. In particular:

(a) When an issue with Lot 74 was first identified, HDG told SPC that “we will need a digger to do some pot holing in this area to chase out the soft material”.

(b) The failed fill was originally thought to be limited to Lot 74 but as SPC sought to chase out the fill it became apparent it extended further. The full scope was not something that could have been known in advance. In substance, what started as an exploratory process in a small area expanded as remediation played out into a much bigger issue.

(c) While Mr Newell said he could have chased out fill with the bulldozer by pushing material around, Mr Pemberton said that by the time this work was being undertaken the area surrounding it included finished footpaths and a reserve, installed utilities and services, a road and a finished right of way. It was a situation where care needed to be taken not to damage any completed areas, nor was it appropriate to push material into those areas. I accept that evidence.

(d) The proposition that the work could have been done far more effectively using a bulldozer suggests that SPC, as an experienced contractor faced with the events as they unfolded, was not endeavouring to remediate as cost effectively as possible. Although it was seeking to avoid any liability for the remediation

work and any basis for liquidated damages, it was in SPC’s interests to minimise the costs and time in the event its argument did not prevail.

• [132] Accordingly, there was nothing unreasonable or irrational about SPC’s use of a digger for the remediation work on Lot 74 or then on the other affected lots. To the contrary, I accept it was the appropriate equipment for the job.

• [133] Mr Newell did not own a digger, nor could he operate one. Had he recognised a digger was needed and was faced with undertaking remediation, he would have needed to engage a third party (no doubt, SPC). Therefore, if Mr Newell did take up an opportunity to remediate, in my view, in effect, the appropriate course would have been for SPC to undertake that role in any event.

• [134] In evidence, Mr Newell said he offered to meet with the geotechnical engineer appointed by SPC’s insurer and is critical that this offer was not taken up. With due respect to Mr Newell, he does not have geotechnical expertise. He was advancing a position that was contrary to expert views. He continued to maintain that position contrary to the expert evidence until the last day of trial. Mr Pemberton advised that the geotechnical engineer appointed by SPC’s insurer confirmed it had no claim. I do not consider SPC can be criticised, or can be regarded as acting unreasonably for mitigation purposes, for not taking up Mr Newell’s offer.

• [135] The costs of remediation are recoverable.

Liquidated damages

• [136] The Partnership says that the liquidated damages paid by SPC to the Principal are not recoverable as damages from the Partnership because they are too remote.

• [137] SPC was subject to an obligation to pay liquidated damages under the Stage One Contract if Lot 74 was not complete by the end of 2016 at a rate of $20,000 per week. Had remediation works been ongoing on Lot 74 after that date, these would have become payable. However, remediation works on that lot were completed in time.
• [138] The Principal did apply liquidated damages of $109,899.15 to SPC under the Stage Two Contract relating to delay in completing Lots 71–73. SPC claimed that these were due to delay due to the remediation works. Liquidated damages applied at a rate of $10,684.64 per week. SPC sought to resist this but failed. The deductions were made under the Stage Two Contract not the Stage One Contract because it is under the former contract that the Lots 71–73 earthworks were undertaken.

• [139] The Partnership asserts that liquidated damages ought not to have been incurred in any event because remediation could have been done by Mr Newell in a week at a cost of $10,000. I have rejected this contention above. It further says that it has not been established that the delays were only attributable to the remediation of the non-compliant fill. For this contention, the Partnership refers to communications about practical completion between CKL and SPC where CKL identifies other matters that needed to be attended to before practical completion being:⁴⁹

Topsoil and seed within 69-73, removal and replacement of dish channel damaged within both parking bays on Road 1, chip seal and hot mix of parking bays within Road 1, Road Markings and street signs for the stage.

• [140] SPC responded to this email that the site was ready for practical completion to be issued.⁵⁰ But in any event, I accept Mr Pemberton’s evidence that to the extent outstanding matters had any materiality, they were matters requiring SPC’s attendance consequent on the remediation works that had been required.

• [141] Moving to the legal basis for recoverability, in denying liability for the liquidated damages, the Partnership pleaded the fact that there was no provision for liquidated damages in SPC’s contract with the Partnership. That is not however the key legal issue. If the liquidated damages SPC paid to the Principal are recoverable here, it is by usual remoteness principles.⁵¹

• [142] I need not rehearse the long-established principles cited to me on the test for remoteness of damage in contract.⁵² SPC referred me to Steel Co Ltd v Pipes NZ Ltd.⁵³

⁴⁹ Email 24/3/17 [305.0778].

⁵⁰ Email 24/03/17 [305.0778].

⁵¹ Furst and Ramsey, above n 36, at [13-093].

52. Hadley v Baxendale (1854) 9 Exch 341 at 345; Koufos v C Czarnikow Ltd (The Heron II) [1969] 1 AC 350.

⁵³ Steel Co Ltd v Pipes NZ Ltd [2016] NZCA 175.

There the defendant’s delay in supplying pipes to the plaintiff resulted in the plaintiff failing to meet strict time constraints in its contracts to on-supply the pipes to two third parties. The Court of Appeal upheld the High Court’s conclusion that liquidated damages payable by the plaintiff to the third parties were not too remote on the facts of that case. The Court of Appeal recognised that whether these were recoverable depended on the defendant’s knowledge that the end purpose involved the use of the pipes in the head contract and that the defendant would be liable to the third parties.⁵⁴

• [143] A head contractor’s liability to pay liquidated damages to the principal for delay due to the subcontractor’s breach is not a natural consequence of delay and hence requires special knowledge within the second limb of the principle in Hadley v Baxendale. However, depending on the factual context, a head contractor’s liability for delay caused to the principal may be damage that a subcontractor should have contemplated as a result of its breach under the first limb. Losses flowing from such delay may in many cases be no less than the liquidated damages payable under the head contract and hence recoverable.⁵⁵

• [144] Here, Mr Newell said he did not know at the time of contracting with SPC the details of the head contract so he did not have special knowledge that liquidated damages were payable or at what rate. However, I find that under the first limb of Hadley v Baxendale it was in the reasonable contemplation of the parties that SPC was likely to become liable for the consequence to the Principal of delays in achieving practical completion due to the Partnership’s breach of contract. That is underlined by the fact that the parties are experienced in the industry and had worked together for 18 years.

• [145] The Partnership contended that the sums paid for liquidated damages were not reasonably foreseeable by it because they were paid under the Stage Two Contract, being a contract between the Principal and SPC entered into two months after the Partnership had finished its works.

⁵⁴ At [76]–[77].

55. Furst and Ramsey, above n 36, at [13-093]. The earlier edition of the same text was cited by the Court of Appeal in Steel Co Ltd v Pipes NZ Ltd, above n 53, at [73].

• [146] Mr Newell said he was not aware of the details of the relationships. But accepting that to be correct, he did know that all work done by the Partnership would in turn be work that SPC was contracted to do for the Principal. ⁵⁶ Moreover, the parties had arranged for 10 per cent retentions to be held by SPC for 12 months following practical completion of the relevant works. The “relevant” works are the earthworks in question, here being those under the Stage Two Contract.

• [147] Where all work by the Partnership was being done under subcontract, I do not consider it makes a difference that SPC became liable for delay under the Stage Two Contract not the Stage One Contract. In my view, SPC’s liability to the Principal for damages for delay in completion is loss flowing in the ordinary course of things on the present facts.

• [148] That being the case, is the sum paid in liquidated damages recoverable as damages for delay? Liquidated damages provisions are commonly imposed in a contract to remove the need to prove actual loss. They are payable provided they are not a penalty. Until relatively recently, that has been answered by reference to the question of whether they are a genuine pre-estimate of a loss likely to flow from the breach – which in the present context, is the consequence of delay.⁵⁷

• [149] In Steel Co Ltd v Pipes NZ Ltd, the defendant sought to contend in the Court of Appeal that the plaintiff had failed to lead evidence to satisfy an onus on it to prove the liquidated damages it had paid to the third parties were reasonable. The Court of Appeal considered that there was force in the submission that if Party A (in this case SPC) seeks to recover damages from Party B (the Partnership) equating to the liquidated damages Party A has paid to a third Party C (the Principal) then Party A has to prove the reasonableness of the damages it paid. However, the Court did not need to determine that issue because it was too late to raise this evidential issue in the Court of Appeal.

⁵⁶ Newell [201.0003] at [7].

⁵⁷ The test now is whether the consequence is out of all proportion to the legitimate interests of the innocent party in performance of their primary obligations. 127 Hobson Street Ltd v Honey Bees Preschool Ltd [2020] NZSC 53, [2020] 1 NZLR 179 [Honey Bees] at [56].

• [150] Here, the Partnership did not place in issue before me whether the liquidated damages payable by SPC to the Principal were a genuine pre-estimate of the loss the Principal would suffer due to delay.⁵⁸ In my view I am entitled to take the view that the liquidated damages payable are a reasonable assessment of damages recoverable by the Principal from SPC for delay. Hence, the liquidated damages are recoverable from the Partnership.

Legal fees

• [151] SPC claims legal fees of $5,803.20 paid to its lawyers, CMC, which were seeking to contest SPC’s liability for the non-compliant fill in communications with the Principal’s lawyers.⁵⁹ The Partnership rejects that legal costs incurred by SPC are recoverable in damages.

• [152] CMC’s total costs are $11,606.40 but no breakdown of the invoices was provided to SPC by CMC to identify fees relating to attendances on this dispute and an unrelated dispute being addressed in the correspondence between the lawyers. The claimed amount represents half of the invoiced fees to reflect the costs likely relating to communications over the non-compliant fill which is the subject of this proceeding.

• [153] The fees are for SPC contesting a position that I have found to be correct, that SPC was liable under the head contract factually and legally for the non-compliant fill discovered in Lots 70–74. These fees are recoverable for similar reasons to the liquidated damages claim, being the Partnership’s knowledge that SPC is subject to contractual obligations to the Principal to complete the works. It is within the reasonable contemplation of the parties that if the Partnership failed to meet its obligations, that could well involve SPC seeking to contest that liability for the benefit of both parties.

⁵⁸ The fact that the test in Honey Bees, above n 57, does not rely on whether the amount payable is a genuine pre-estimate of loss has no bearing on my analysis. The point under consideration here is whether it is appropriate to regard the liquidated damages as in substance equivalent to damages/reasonable as payable for the usual consequences of delay on the present facts.

⁵⁹ BoE of Anthony Burman, para 17. The invoices and time records of CMC are at [307.1439], [307.1440], [307.1441], [307.1442] and [307.1443].

• [154] Alternatively, I consider that SPC contesting liability was a step reasonably incurred by SPC attempting to mitigate its loss. In my view, the legal fees incurred by SPC would therefore be recoverable from the Partnership on this basis.

• [155] I also consider the allocation of half of the fees is appropriate. This claim succeeds.

Tort claim

• [156] I need say relatively little about the cause of action on tort given my findings on the contract cause of action. The tortious duty to take reasonable care is the same as pleaded in the contract claim, with the applicable standard of care that of a reasonable and prudent earthworks operator in the particular circumstances. The Partnership admits they owed this duty. For the same reasons I identify above in respect to the contract claim, the Partnership was in breach of their duty to take reasonable care.

• [157] SPC differentiated the test for foreseeability and remoteness in contract and tort. On the issue of damages, the Partnership argued instead that because the causes of action in contract and negligence lie concurrently, only the contractual test is applicable to both claims. That was on the basis that where responsibility is assumed under a contract it would be anomalous if a party could say that the defaulting party had assumed a responsibility for a wider range of damage in tort. ⁶⁰ I have found the contractual test met so it is not necessary for me to address this submission. All three heads of loss would be recoverable in tort as in contract.

Conclusion on the Landsdale Claim

• [158] SPC suffered loss in the amount of $248,915.28 ($109,899.15 for liquidated damages, $133,212.93 for remedial costs and $5,803.20 in legal fees). ⁶¹ Once these amounts are set-off against the retention value outstanding on Landsdale, the amount owing to SPC is $108,775.66.⁶²

⁶⁰ Wellesley Partners LLP v Withers LLP [2014] EWHC 556 (Ch) at [68.].

⁶¹. BoE of Mr Pemberton at 85 to 87 [201.0073].

⁶² BoE of Mr Burman at 21 [201.0059].

Interest

• [159] SPC seeks interest in accordance with section 24 of the Interest on Money Claims Act 2016 (IMCA) which applies to contracts that were entered into prior to 1 January 2018. This section provides that for pre-judgment interest, s 10 of the IMCA is not to be used, rather the matter of interest is left to the Court’s discretion.

• [160] Under s 24, the Court has a wide discretion to award interest. Even when the IMCA does not apply, the Courts have frequently used the internet site calculator of interest maintained under s 13 of the IMCA.⁶³ I accept SPC’s submission that this is appropriate here as it is predictable and based on sound rationale.

• [161] Interest should run from 30 November 2016 being the date upon which the cause of action arose.⁶⁴ I therefore award interest in accordance with the calculator maintained under s 13 of the IMCA from 30 November 2016 to the date of payment.

RANGITAHI CLAIM

• [162] I move now to the Rangitahi Claim. The dispute relates to whether SPC was entitled to make three deductions from an invoice issued by the Partnership in September 2018 for works undertaken in May 2018. The deductions total $29,796.27. However, SPC overpaid the Partnership from the amount invoiced in the sum of

$4,253.21 so the net amount in dispute is $25,543.06. The issues in relation to Rangitahi are modest relative to a contract value to the Partnership of over $1.2 million.⁶⁵

• [163] There was disproportionate oral and documentary evidence devoted to these issues given their monetary value. I have considered all this evidence but have not explicitly addressed all of it in this judgment. Rather, I express my views in relatively conclusionary form by reference to the facts as I find established.

63. See, for example Blumberg v Frucor Beverages Ltd [2018] NZHC 1876, [2018] 3 NZLR 672 at [76].
64. Interest on Money Claims Act 2016, s 9(1)(a)(i). CKL’s notice on 25 November advised that if the earthworks were not completed in 5 days (so by 30 November), the reasonable costs of the

works undertaken by others shall be recoverable by the contractor, and it was therefore from that date that costs began to accrue: 304.0666.

⁶⁵ BoE of Anthony Burman, para 16.

Item (a) – Deduction of $21,625.52

• [164] SPC says that the Partnership wrongly invoiced $21,625.52 for cut to fill volumes that relate to fill actually placed by SPC not the Partnership in the month of May 2018.

• [165] Mr Newell left the Rangitahi project part way through a month, on 16 May 2018. I accept SPC’s evidence that it continued to undertake cut to fill works after the Partnership left.⁶⁶ However, the invoice issued by the Partnership reflects the full certified volumes for the whole month. I agree that a deduction needs to be made so as to allocate the sum claimed between the volume of works undertaken by the Partnership and the volume of works undertaken by SPC.

• [166] The way this came about needs some explanation. It is common ground that until this invoice, the Partnership invariably invoiced on the basis of topographical information provided by SPC from which the Partnership worked out quantities of fill it had placed.⁶⁷ In this instance, SPC was dilatory in providing any topographical information. Mr Newell was pressing for the information so he could invoice for the works he had done in May. It is part of the context for the dispute that by this time the parties were falling out and there was significant distrust by Mr Newell.

• [167] Mr Newell obtained screenshots of topographical information for May from his daughter, who at that time, was working with SPC. I accept SPC’s evidence that these convey that the total quantity moved in May 2018 was 8,689 m³.⁶⁸ Mr Newell says that he then invoiced for 8,660 m³ and that this was derived from the load counts that he had recorded in his notebook for May 2018, and which he produced. This volume is in effect the whole of the certified quantities for May, not just those moved up until 16 May 2018.

• [168] The evidence was that load counts are an inaccurate means of measurement, given that loads are not necessarily full loads, and that it relies on manual recording. Mr Newell acknowledged this in communications with SPC. The Partnership says

⁶⁶ BoE of Nathan Sweetman, para 7.1.

⁶⁷ NoE, page 165, lines 19 to 25.

68. Calculated by adding the 3,018.7m³ (measured in the cut); 2,542.7m³ (measured in the fill); 3,127.6m³ (measured in the cut).

that in this instance the load counts in Mr Newell’s notebook are an accurate measure. It says that if SPC completed any work after Mr Newell left the site, it was in addition to the cut to fill volumes placed by the Partnership.

• [169] However, the certified amounts for the month cannot be disputed. I accept SPC’s evidence that it took over with further works when Mr Newell left. That is supported by whiteboard daily activity information referred to by Mr Sweetman recording cut to fill by SPC. It is also supported by Mr Pemberton’s evidence, which I accept, that SPC continued work on the site.

• [170] I also accept Mr Sweetman’s evidence that the allocation in the invoice between the work done by the Partnership and SPC was undertaken based on the topographical information. He confirmed the area of work undertaken by SPC by the use of topographical survey using Leica equipment.⁶⁹ He referred to the software that could run a volume report on a surface comparing to another surface, or could run an area report, so that it would have been an area report used.⁷⁰ He said, and I accept, that he erred on the side of caution and was more generous to the Partnership.⁷¹ The allocations made were reasonable.

• [171] Accordingly, the Partnership is entitled to be paid for 6,148 m³ (being the certified volume of 8,724 m³ less 2,576 m³ calculated as being undertaken by SPC). This is reflected in the deduction made to the Partnership’s invoice.

Item (b) – Deduction of $3,910

• [172] SPC made a deduction of $3,910.00 for remedial works undertaken by SPC to remove fill placed by the Partnership that was too wet.

• [173] The Partnership acknowledges that fill it placed had become wet due to the weather and did not pass compaction testing. However, it says that SPC is not entitled to charge for this work as the weather caused the issue, and standard practice would be to wait for the weather to get better, dry the fill and recompact it.⁷²

⁶⁹ BoE of Nathan Sweetman, para 9.

⁷⁰ NoE, page 188, lines 1 to 3.

⁷¹ BoE of Nathan Sweetman, para 9.

⁷² [201.0001], para 59(e).

• [174] Mr Newell said the Partnership left the site due to bad weather with the agreement of SPC rather than abandoning the site. I do not see that anything turns on whether he is correct.

• [175] The cost to remove the wet fill was calculated by using a rate of $6.80 per m³, being the rate that Mr Newell used for “cut to stockpile” as evidenced in his May 2018 invoice. Mr Pemberton’s evidence was that:⁷³

This was a comparable rate because it reflected the same scope of work to be carried out. We did not consider it fair to use the rate that we would have charged to Rangitahi because this included a margin, so we used Wayne’s own rates for this rework.

• [176] Remediation of the failed fill was required. The quantity of failed fill is included in the quantities the Partnership has claimed payment for. It should not have been as it was fill that, to Mr Newell’s knowledge, had failed specification and was going to require remediation. Accordingly, in my view the deduction is appropriately characterised as a deduction to remove a fee for the placement of non-compliant fill that should not have been charged for. If a deduction is not made, the Partnership is being paid in full for fill which needed to be remediated, that is, the work by the Partnership was of no benefit to SPC.

• [177] Mr Sweetman’s evidence was that the deduction is significantly less than justified given that it reflected a quantity of non-compliant fill of 500 m³ not 1,030.4 m³. He believes that it was because Mr Wright of SPC was trying to err on Mr Newell’s side of the equation. SPC’s deduction is fair and reasonable (that is, lower than contractually justified) and I accept it.

Item (c) – Deduction of $4,260.75

• [178] SPC made a deduction of $4,260.75 for works SPC says it undertook to rectify topsoil that was placed too thick by the Partnership.

• [179] The Partnership invoiced for spreading topsoil in an area of the site. The topsoil was spread too thickly. This was recognised by Mr Newell. In the invoice the

⁷³ BoE of Mr Pemberton, para 116.

Partnership had charged $5.00 per m³, not his usual rate of $5.30 per m³. In an email of 3 October 2018, he explained: “Trimming of topsoil. Extra thick in some areas in my a/c you will see I charged some at stockpile rate this covers extra work”. By this Mr Newell meant he charged less than his usual rate for spreading topsoil (which is

$5.30 per m³) and instead charged $5.00 per m³, his stockpiling rate, to leave

30 cents per m³ for someone to remove the additional thickness to stockpile or some other use.

• [180] Rather than accepting this approach to dealing with the excessively thick layer of topsoil deposited by the Partnership, SPC instead adjusted the amount invoiced to pay the Partnership for the full thickness of topsoil at the Partnership’s full rate of

$5.30 per m³ but SPC then deducted the actual costs it incurred to trim the topsoil so that it was to the right thickness.

• [181] In my view SPC’s approach is correct. It pays for the work done at the charge for spreading, but appropriately deducts from the invoice a sum reflecting the cost of remediation required due to the topsoil being placed too thickly.

Conclusion

• [182] I acknowledge Mr Newell’s frustrations with the delays he experienced in SPC providing information for him to produce his invoice. I also acknowledge that Mr Newell has come to be highly distrustful of SPC with the breakdown of what had previously been a positive and mutually respectful relationship. However, in my view on the evidence before the Court the deductions are appropriate. Moreover, the evidence demonstrates that SPC was seeking to be reasonable in the way it approached the May invoice. It halved its claim for the area of remediation of the failed fill. It also provided a higher amount for the compactor and diesel than Mr Newell himself had allowed. The overall result is fair to the Partnership, if not favourable.

OVERALL CONCLUSION

• [183] I award judgment in favour of SPC on liability in the sum of $108,775.66 on the Landsdale Claim plus interest in accordance with the calculator maintained under s 13 of the IMCA from 30 November 2016 to the date of payment.
• [184] I dismiss the Partnership’s claim for deductions from its Rangitahi invoice.

• [185] SPC has been successful. I will receive submissions on costs and as to interest calculation by SPC within 14 days and from the Partnership within a further 14 days.

Anderson J