1.Distributed Modular Generation (UK) Limited (DMG(UK)Ltd) is a UK company which converts plastic wasteinto synthesis gas from which it extracts hydrogen for a variety of uses. It wants to build its first New Zealand plant at Wiri, South Auckland. It has made a scale model of the plant as below:

First plastic-to-hydrogen plant to be built at Wiri

2.DMG(UK)Ltd's subsidiary company in New Zealand, Distributed Modular Generation (NZ) Limited (DMG(NZ)Ltd) wants a contractor to build Phase 1 buildings of the proposed plant, as shown in the bottom left hand corner of the picture above.

3.The drawings and specifications for design of the Wiri plastic-to-hydrogen plant are being supplied from the UK by DMG(UK)Ltd.

4.Shed Builders Limited (SBLtd) is a contractor which designs and builds low rise commercial and industrial buildings in the Auckland region.

5.Pete Sampras (Pete)isan architectural draftsperson qualified as alicensed building practitioner under s286 Building Act 2004.He is a full-time employee of SBLtdand is registeredunder s298of the Act, with a Design Licence AoP 3. He is competent to design and sign off any work that SBLtdperforms as being compliant with the building codeor the building consent.

6.MartineMacron(Martine), another full-time employee of SBLtd, isa licensed building practitioner. She holds a Site Licence AoP 3,and is competent to supervise and sign off any work that SBLtdperforms as complying with the building consent. Martinealso does planning, and she calculates how long it should take SBLtdto construct any new projects it tenders for.

7.Jim Lin (Jim), a chartered professional engineer, is competent to design and sign off any structural work SBLtdperforms as being compliant with the building codeor the building consent.SBLtdemploys Jimas an independent consultant on a job by job basis, and pays him according to the time he spends on whatever project SBLtd engages him to work on.

8.Lorna Doone (Lorna ) is one of two partners in the quantity surveying firm of Doone and Oot(D&O). The other partner is Jane Oot(Jane). Lornaand Janeare both quantity surveyors.

9.When SBLtdtenders for a new project D&O is responsible for estimating costs and preparing risk analysis reports. Roger Sheffield(Roger) is SBLtd's contracts director. Rogeradds a percentage figure toD&O's cost estimate to cover SBLtd's overheads and profit and submits that as SBLtd's tender price offer.

10.After securing a project, D&O is responsible for placing orders for materials and subcontracts with the necessary suppliers and trade contractors. It also manages payment claims tothe client employing SBLtdto carry out its project, and agrees payment claims SBLtdreceives fromsubcontractors and suppliers.

11.If a client wants changes to a design and build project that has started, Rogerhas to approve the change, Martinedetermines its impact on the project's time for completion, D&Oagrees the cost of the change with the client, and Peteredesigns any architectural work in consultation with Jimwho does the structural design work including any necessary calculations. Petedeals with theconsent authorityregarding any changes that must be notified to theconsent authority forbuilding consent purposes.

12.SBLtd pays D&Ofor its services on a scale of fees based mainly on a percentage of the contract price for a project which takes into account any design changes.

13.SBLtdengages a chartered accountancy firmto deal with actualmoneymovement, payments received and payments made, and is also responsible for accounting services including dealings with the Inland Revenue Department (for the purpose of answering EXAM questions, this aspect of business management is NOT included).

14.Rogeris responsible for securing work for SBLtdand he signs on behalf of SBLtd: [1]every contract which commits SBLtdto the performance of work in excess of $30,000 in value; and [2]every subcontract which SBLtd enters into including suppliers in excess of $5,000 in value.

15.Lorna andJane arebothauthorisedto sign off all and any other contract less than $5,000 in value on behalf of SBLtd.

16.Lorna and Janeare responsible for the administrative off-site aspect of all construction work carried out by SBLtd including financial control and progress of the work on site .

17.Roger nominatesMartineas SBLtd's site located agentwith the title project managerfor the Wiri plastic-to-hydrogen plant with authority to represent SBLtd as its principal*to "supervise" as defined by s7 Building Act 2004all aspects of on-site construction work.

*the 'law of agency' principle i.e. SBLtdis the principal and Martineis the agent for SBLtd

18.Additional site supervisory staff is engaged by Rogerfor SBLtdas required to cope with its workload.

19.After a project starts and D&Obegin to receive prices for materials and subcontract work, Rogerdecides which offers to accept. Lornaor Janeplace orders for materials and make simple written agreements with subcontractors in letter form [see 20. below] which are signed off by Roger, Lorna, or Janedepending on their $ value.

20."We accept your price of $X excl.GST to carry out (relevant trade inserted)work as

shown on the drawings and specification as the attached list (list inserted)

for the (name inserted)project.

Conditions of contract where applicable to be as the main contract conditions.

A full set of drawings, specifications, and contract conditions are available

for your inspection at our head office by appointment and upon your request.

Please carry out the work in accordance with a programme to be agreed.

Yours faithfully

Shed Builders Limited

LornaDooneorJane Oot orRoger Sheffield

All SBLtdprojects whether they are done under a traditional contract or a design and

build contract are carried out this way.

21.Distributed Modular Generation (NZ) Limited representatives negotiate with Rogerand Lorna. After their negotiations conclude, Shed Builders Limitedenters into an Agreement with DMG(NZ)Ltdto build the Phase 1 buildings for the Wiri plastic-to-hydrogen plant for an agreed lump sum price of $35,000,000.

22.Under separate contracts with specialist suppliers and subcontractors, Distributed Modular Generation (NZ) Limited will install the necessary plant and equipment in the buildings constructed by Shed Builders Ltd that will recycle the plastic waste.

23.Contract documents for the construction contract between DMG(NZ)Ltdand SBLtd includeplans and specification with the critical dimensions and locations for the recycling plant and machinery to be installed under the DMG(NZ)Ltdseparate contracts in the buildings that will house it.

24.DMG(UK)Ltd had permission from theOverseas Investment Officeof New Zealand tobuyland at Wiri for the plastic-to-hydrogen plant. The plant was to built through DMG(NZ)Ltdwhich got a necessary resourceconsentas required by the Resource Management Act 1991 before DMG(NZ)Ltdentered into the construction contract with SBLtd.

25.Pete typically designs the buildings which are the subject of a usual design and build contract performed by SBLtd. Jimassists Peteon structural issues. Jimprovidesstructural calculations and design detail but he has no involvement with the work done on site.

26.The Wiri plastic-to-hydrogen plant is more complex than the type of construction work SBLtdtypically undertakes. SBLtd is experienced in both designing and constructing warehouse type buildings, but requirements for the Wiri project are more complicated particularly the machinery and pipework to be installed under separate contracts.

27.DMG(NZ)Ltd employed Site Investigations (2019) Limited (SI(2019)Ltd) a geotechnical survey company to investigate the ground at the Wiri site. SI(2019)Ltdboredseveral trial holes and tested the soil for its strength. It recorded its findings in a soils report which it gave to DMG(NZ)Ltd who passed it on to DMG(UK)Ltd to use for their design of the plant.

28.DMG(NZ)Ltd also gave a copy of the soils report to Rogerto help SBLtd prepare its lump sum price for building the Wiri plant. Rogergave a copy of the soils report to Jim. SBLtd did no further site investigation work at the Wiri site before entering into a lump sum price construction contract with DMG(NZ)Ltd.

29.DMG(NZ)Ltd gets a building consent from the territorial authority (s12 Building Act 2004) in the name of Distributed Modular Generation (UK) Limited ( s14B(a) Building Act 2004 and s7"owner" defined).

30.Shed Builders Ltd starts work on site.

The costings for the plastic-to-hydrogen plant prepared by D&O and presented to Rogerto add the necessary margins for on-site plant and SBLtd's profit etc. were calculated entirely by Lorna. Janewas busy working on other D&Oprojects.

The figures were prepared in the usual way and presented to Rogeron sheets of A4 paper, in this case 34 sheets of A4 paper. In the bottom right hand corner of each sheet the sheet numbers were written by hand i.e. 1 of 34; 2 of 34; 3 of 34; and so on, up to and including sheet 34 of 34.

On the last sheet i.e. sheet number 34, were written the subtotals for each of the 33 preceding sheets with the grand total of Cost at the bottom of the list. All calculations for SBLtd projects were presented to Rogerin this manner.

A 'junior' person in the D&O office, not Lornaor Jane, had brought the 33 individual costs forward to sheet number 34 so as to advise Rogerof the total cost of the plastic-to-hydrogen project, a figure in excess of $30 million to which Rogeradded SBLtd's and other costs to produce the lump sum offer of $35,000,000, which DMG(NZ)Ltd eventually agreed to accept as the Contract Price.

Rogerwas very busy when D&O presented its costings to him and he mainly focussed on the sum total on page 34. After work has started on site Rogerlooks closer at the list on page 34 and notices that the subtotal on one of the sheets has been brought forward to page 34 twice, and one page total does not appear on page 34 at all.

The difference in the total is in excess of$100,000 which lowered the price that SBLtdagreed with DMG(NZ)Ltd by the same amount. The mistake by D&O has effectively lost SBLtdover $100,000.

If SBLtddecided to go to court to recover its loss, advise: [1] the legal grounds for suing the following parties; [2] what would have to be proved for a claim to succeed; and [3] whether or not a claim would be likely to succeed against:

(i)The quantity surveying firm Doone and Oot

(ii)The partner Lorna Doone

(iii)The partner Jane Oot

(iv)The 'junior' in the quantity surveying firm

(v)Roger Sheffield

Law: Partnership Act 1908...