In Payce Communities Pty Ltd v Canterbury-Bankstown Council [2021] NSWSC 331, a case that turned on its facts, Justice Stevenson allowed Payce to recover damages for variations it said were directed by Council.

Under a "Fit Out Agreement" (FOA), executed by the parties on 4 December 2015, Payce agreed to construct the shell of a library at its own cost and pay the first $1.52 million of the library fit-out costs. Shortly after execution of the FOA, the Independent Certifier provided an estimate of the fit out costs (2015 Estimate). In May 2016, Council retained its own quantity surveyor to provide an estimate for the fit out works (2016 Estimate). The difference between these two estimates was $346,425, and on 24 February 2017, the parties agreed to split the difference between the two estimates which resulted in a FOA Contract Price of $2.171 million. The part of this FOA Contract Price above $1.52 million was to be paid by the Council to Payce progressively.

The central issue was whether subsequent fit out works were the result of a series of variations or whether the works were included in the agreed scope and contract price. In determining this issue, Justice Stevenson considered:

  • the scope of works covered by the agreed FOA Contract Price;
  • whether it was necessary for Payce to have pointed to written directions to vary the works in order that it be entitled to variations; and
  • the amount of Payce's entitlement for any variations.

In relation to the first issue, Payce claimed that although the FOA Contract Price was to be determined by reference to the agreement between the parties on 24 February 2017, the scope of works for that price was based upon the design drawings prepared in 2015.

The Council, on the other hand, alleged that the price was based on that 2015 design but "as amended" by subsequent discussions and agreements between the parties. Justice Stevenson held that as both the Independent Certifier and Council's quantity surveyor based their opinions on the same identified elements making up the 2015 design, those elements defined the scope of work to be done for the FOA Contract Price.

In relation to the second issue, while a clause of the FOA required a direction in writing if Payce initiated a variation, there was no such requirement for a Council-directed variation. Justice Stevenson held that if there is a document that contains information that fits within the definition of "direction", that suffices to constitute a direction. In this case, minutes of a meeting between Council, Payce and the builder, which recorded agreements to Council's requests for additional scope, sufficed.

As to the third issue, Payce's calculation of its entitlement was based on the actual cost of the variations. Citing Justice Giles from Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313, Justice Stevenson found that where the work has been carried out and the actual cost is known then "that provides sound evidence of reasonable cost and should ordinarily provide the basis for damages".