Brooking on building contracts [5th edition.] 9780409329216, 0409329215

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BROOKING ON BUILDING CONTRACTS Fifth edition The law and practice relating to building and engineering agreements

Dr Damien J Cremean LLB (Hons), MA (Melb), PhD (Mon) Barrister-at-Law

Michael H Whitten LLB, BCom (UQ) Barrister-at-Law

Michael F Sharkey JD, Post-Grad Dip Creative Arts (Melb), B Teach, BA (Deakin) Solicitor, Sharrock Pitman Legal

LexisNexis Butterworths Australia 2014

AUSTRALIA

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National Library of Australia Cataloguing-in-Publication entry Author: Title:

Cremean, Damien J. Brooking on building contracts.

Edition: ISBN: Notes: Subjects: Other Authors/Contributors: Dewey Number:

5th edition. 9780409329216 (hbk). 9780409331721 (ebk). Includes index. Construction contracts — Australia. Whitten, Michael H, author. Sharkey, Michael F, author. 343.940786928

© 2014 Reed International Books Australia Pty Limited trading as LexisNexis First edition, 1974; Second edition, 1980; Third edition, 1995; Fourth edition, 2004 This book is copyright. Except as permitted under the Copyright Act 1968 (Cth), no part of this publication may be reproduced by any process, electronic or otherwise, without the specific written permission of the copyright owner. Neither may information be stored electronically in any form whatsoever without such permission. Inquiries should be addressed to the publishers. Typeset in Bembo and FrizQuadrata. Printed in Australia. Visit LexisNexis Butterworths at www.lexisnexis.com.au

FOREWORD TO FIFTH EDITION Nearly 40 years have passed since the first edition of Brooking on Building Contracts was published in 1974. In that time the law on building contracts has changed considerably. As with many areas of law, it is now one dominated by statute. That is not to say that case law is no longer relevant. Almost every day, some new decision is handed down somewhere around Australia, or perhaps in New Zealand, altering in some way or adding to our understanding of the law. This is, of course, a problem confronting any author’s account of law: trying to present a comprehensive, authoritative and up to date account of a body of law which is forever changing. The authors of this, the 5th edition, of Brooking on Building Contracts have achieved this in my view. This edition comprehensively deals with the law relating to building contracts in a clear and understandable way — and in a way which will ensure that the book remains the standard text on the subject in Australia. I can do no better than to quote the words of the Hon Robert Brooking AO QC himself writing the Foreword to the 3rd edition which were quoted by the Hon Justice Murray Kellam when writing the Foreword to the 4th edition published in 2004: … on going through the book I found it at once comfortingly familiar and agreeably new, like a building that had been renovated and extended with skill and care.

I congratulate Dr Damien Cremean, Mr Michael Whitten and Mr Michael Sharkey on a fine renovation and commend them for the evident skill and care they have shown in producing it. Justice Stephen Gageler High Court of Australia December 2013

FOREWORD TO FIRST EDITION by SIR NINIAN STEPHEN, KBE Justice of the High Court of Australia The author of any Australasian legal text which is more than an annotation of local legislation is confronted by a problem little understood in jurisdictions which do not share our native taste for case law exotica. An Australasian textbook on any general legal topic must extract the principles of the law from the decisions of the Supreme Courts of New Zealand, six states and two territories of Australia and the High Court of Australia and do all this against the background of the whole developing body of English case law and a great variety of relevant statute law. The profession must be grateful indeed to Mr Brooking who has undertaken this task in the difficult field of building and engineering contract law and has accomplished it with elegance, producing the first modern Australasian work on the topic. It is said of Mr Jarman that he worked much standing ‘at a desk under a tree in one of his fields with law books all round him’; Mr Brooking, 130 years later, has no doubt been denied the delights of such rustic surroundings for his own task of composition but, like the author of Hudson on Building Contracts, his writing reflects his own considerable experience in litigating disputed building and engineering contracts. This has given to the basic work of careful research and schematic analysis a practical realism which must make it of particular use both to the practitioner who ventures into this field and to the judge who finds himself precipitated into it. While the work concentrates particularly upon the Victorian scene, each chapter has much of relevance throughout Australasia and the detailed examination of the various standard forms of agreement currently in use may lighten the burden of those who are concerned in their interpretation. Perhaps, too, the familiar cry ‘There must be some decision on this point!’ will find a more fruitful response now that a whole new stockpile of local decisions has been sifted and the fines and aggregates duly classified.

It is indeed a pleasure to herald the advent of Brooking on Building Contracts. Judges’ Chambers 450 Law Courts Place Melbourne June 1974

PREFACE In the writing of this edition, Damien Cremean had responsibility for Chapters 1–6, 9–11, 13, 16 and 17; Michael Whitten for Chapters 7, 8, 15, 18 and 19; and Michael Sharkey for Chapters 12 and 14. Toby Shnookal SC was unable to participate in this new edition but was responsible for Chapters 9, 11, 12, 14, 16 and 17 in the last edition. We should like to thank the Hon Justice Stephen Gageler of the High Court of Australia who found time, in a busy round of duties, to write the foreword to this fifth edition. The Hon Murray Kellam QC, formerly of the Victorian Supreme Court, wrote the foreword to the fourth edition, published in 2004. Also we thank again the Hon Robert Brooking QC, formerly of the Court of Appeal of the Victorian Supreme Court, for agreeing to write the foreword to Damien Cremean’s third edition, published in 1995. The work was his originally, of course. We also must thank Mr David Bennett QC who prepared the second edition of this work. Mention must be made as well of various LexisNexis Butterworths personnel including Hayley Moore and Eleanor O’Connor, and Philippa Findlay of Puddingburn Publishing Services. Thanks are due to each of them. The law is as stated 1 November 2013. Dr Damien J Cremean (Adjunct Professor, University of Queensland) Mr Michael Whitten Mr Michael Sharkey

TABLE OF CASES References are to paragraphs 1–5 Grantham Street Pty Ltd v Glenrich Builders Pty Ltd [2008] VSCA 228 …. 8.5 470 St Kilda Road Pty Ltd v Reed Constructions Australia Pty Ltd [2012] VSC 235 …. 8.7 500 Burwood Highway Pty Ltd v Australian Unity Ltd [2012] VSC 596 …. 9.13, 17.5 526 Olive Street Pty Ltd (rec & mgr appt) v Westpac Banking Corporation (SC(NSW), Giles J, 7 July 1994, unreported) …. 18.30 620 Collins Street Pty Ltd v Abigroup Contractors Pty Ltd (No 2) [2006] VSC 491 …. 8.5

A A & P Parkes Constructions Pty Ltd v Como Hotel Holdings Pty Ltd (2006) 22 BCL 45; [2004] NSWSC 588 …. 18.10 A C Robertson Pty Ltd (in liq) v Costa Brava Investments Pty Ltd (1961) 78 WN (NSW) 656 …. 18.39 A Smith & Son (Bognor Regis) Ltd v Walker [1952] 2 QB 319 …. 3.5 A T & N R Taylor & Sons Pty Ltd v Brival Pty Ltd [1982] VR 762 …. 18.10 A Vigers & Co Ltd v Swindell [1939] 3 All ER 590 …. 14.4, 14.16 ABB Power Generation Limited v Chapple (2002) 18 BCL 229 …. 14.4 ABB Power Plants Ltd v Electricity Commission of NSW t/as Pacific Power (CA(NSW), 8 February 1995, unreported) …. 18.29 ABB Service Pty Ltd v Pyrmont Light Rail Company Ltd [2010] NSWSC 831 …. 18.40 Abdullah M Fahem & Co v Mareb Yemen Insurance Co & Tomen (UK) Ltd

[1997] 2 Lloyd’s Rep 738 …. 18.21 Aberdine Pty Ltd v Vineyard Estate Management Pty Ltd [2001] SASC 442 …. 14.5 Abigroup Contractors Pty Ltd v BPB Pty Ltd [2000] VSC 261 …. 18.10 — v Peninsula Balmain Pty Ltd (2002) 18 BCL 15; 18 BCL 322 …. 7.10, 17.4 — v River Street Developments Pty Ltd [2006] VSC 425 …. 8.7 — v Transfield Pty Ltd [1998] VSC 103 …. 18.21 Abrahams v Flynn [1996] ANZ ConvR 149 …. 19.42, 19.44 ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896 …. 18.32, 18.33 ACN 002 804 702 (formerly Brooks Building) v McDonald [2009] NSWSC 610 …. 8.1 ACN 068 628 268 Pty Ltd v Dubsky Timber Pty Ltd (2000) 76 SASR 571 …. 14.5 Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (2000) 16 BCL 353 …. 2.1, 2.5, 2.8, 2.10, 2.15 Acrow Pty Ltd v Allen C Smith Pty Ltd (SC(NSW), Street CJ, 22 March 1994, unreported), …. 12.17 Adam Wood Group Pty Ltd v Procon Builders Pty Ltd [2012] VCC 2001 …. 18.49 Adams v Quasar Management Services Pty Ltd [2002] QSC 223 …. 12.6 Addis v Burrows [1948] 1 KB 444 …. 2.7 Adelaide City Corporation v Jennings Industries Ltd (1985) 156 CLR 274 …. 14.16 Adelaide Oil Exploration Co Ltd v Goldfields Diamonds Drilling Co (Pty) Ltd [1932] SASR 390 …. 8.6 Adicho v Dankeith Homes Pty Ltd [2012] NSWCA 316 …. 1.1 Administration of the Territory of Papua and New Guinea v Daera Gub (1973) 130 CLR 353 …. 2.18

AGC (Advances) Ltd v R Lowe Lippmann Figdor & Franck (1990) 4 ACSR 337 …. 8.15 Age Old Builders Pty Ltd v Swintons Pty Ltd [2002] VCAT 1489 …. 18.49 Agius v Sage [1999] VSC 100 …. 11.17 Agricultural and Rural Finance Pty Limited v Gardiner (2008) 238 CLR 570 …. 7.4, 8.6 Aintree Holdings Pty Ltd v Corderoy (1996) WAR 416 …. 18.45 Aiton Australia Pty Ltd v Transfield Pty Ltd (1999) 16 BCL 70 …. 3.3, 7.10 Ajit v Sammy [1967] 1 AC 255 …. 6.1 Ajzner v Cartonlux Pty Ltd [1972] VR 919 …. 17.5 Al-Atabi v Zaidi [2009] NSWCA 433 …. 10.8 Alcatel Australia Limited v Scarcella [2001] NSWCA 401 …. 7.6 Aldridge v Wright [1929] 2 KB 117 …. 19.42, 19.44 Alex Finlayson Pty Ltd v Armidale City Council (1994) 123 ALR 155 …. 16.5 Alexander v Cambridge Credit Corp Ltd (1987) 9 NSWLR 310 …. 11.16, 16.7 Alexiadis v Zirpiadis (2013) 302 ALR 148; [2013] SASCFC 64 …. 8.1 Alfred McAlpine Construction Ltd v Panatown Ltd [2000] 3 WLE 946; [2000] 4 All ER 97; [2001] 1 AC 518 …. 11.14, 13.1, 13.10 Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd (1998) 14 BCL 215 …. 8.5, 8.6, 9.16, 9.18 Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd (2013) 296 ALR 465; [2013] FCAFC 29 …. 2.16 Allied Constructions Pty Ltd v Novacoal Australia Pty Ltd (1991) 25 NSWLR 54 …. 18.29 Allied Finance and Investments Ltd v Haddow & Co [1980] 2 NZLR 428 …. 5.8 Allison, Johnson & Foster Ltd, Re; Ex parte Birkenshaw [1904] 2 KB 329 …. 7.10, 8.9 Allmore Constructions Pty Ltd v Failli [2002] VSC 483 …. 18.45

Allpike v Lang (1993) 82 LGERA 373 …. 2.20 Alpenstow Ltd v Regalian Properties plc [1985] 1 WLR 721 …. 3.3 Alstom Ltd v Yokogawa Australia Ltd (No 7) [2012] SASC 49 …. 1.3, 1.4, 2.1, 2.6, 2.8, 2.10, 8.6, 10.8 Alucraft Pty Ltd v Costain Australia Ltd (1990) 7 BCL 179 …. 14.14 Alucraft Pty Ltd (in liq) v Grocon Ltd (No 2) [1996] 2 VR 386 …. 11.14, 11.14, 14.11, 18.1 — v — [1994] VSC 246 …. 8.4 Alvaro v Temple [2012] WASC 98 …. 18.13 Amadio Pty Ltd v Henderson (1998) 81 FCR 149 …. 8.15 Amcor Packaging (Australia) Pty Ltd v Baulderstone Pty Ltd [2013] FCA 253 …. 18.21 AMEC Australia Pty Limited (formerly known as AMEC Construction Pty Ltd) v Pacific Power (1996) 13 BCL 210 …. 18.41 AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 …. 6.4 Amuri County (Chairman, Councillors and Inhabitants) v Thomas (1891) 10 NZLR 430 …. 8.12 Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) WASCA 27; 22 WAR 101 …. 1.3, 2.2, 3.1, 3.3, 3.5, 7.9 Anaconda Operations Pty Ltd v Fluor Daniel Pty Ltd (2000) 16 BCL 230 …. 14.10 — v — [2003] VSC 275 …. 18.45 Ancher, Mortlock Murray & Woolley Pty Ltd v Hooker Homes Pty Ltd [1971] 2 NSWLR 278 …. 17.9 Anderson v Mackellar County Council (1968) 87 WN (Pt 2) (NSW) 308 …. 19.60, 19.66 Andreae v Selfridge & Co Ltd [1938] Ch 1; [1937] 3 All ER 255 …. 19.18, 19.19, 19.22 Andrew Shelton & Co Pty Ltd v Alpha Healthcare Ltd [2002] VSC 248 …. 8.8

Andrews v Australia and New Zealand Banking Group Ltd (2012) 290 ALR 595; [2012] HCA 30 …. 6.3 — v Schooling [1991] 1 WLR 783 …. 4.10 Andriolo v G & G Constructions Pty Ltd [1988] ACTSC 41 …. 14.12 Anglo Group plc v Winther Browne & Co (2000) 72 Con LR 118 …. 4.6 Ankay Pty Ltd v Erley Pty Ltd (SC(WA), White J, 9 November 1994, unreported.) …. 2.2 Annie Fox v P G Wellfair Ltd (in liq) [1981] 2 Lloyd’s Rep 514 …. 18.7, 18.37 Anns v Merton London Borough Council [1978] AC 728 …. 16.11 Ansett Transport Industries (Operations) Pty Ltd v Alenia Aeritalia & Selenia SPA (1991) 105 FLR 169 …. 8.8 Anthoness v Bland Shire Council [1960] SR (NSW) 659 …. 19.67 Antisell v Doyle [1899] 2 IR 275 …. 15.2 Antonelli Investments Pty Ltd v Campbell (2004) 35 SR (WA) 281 …. 7.15 Apache Energy Ltd v Alcoa of Australia Ltd (No 2) [2013] WASCA 213 …. 8.15, 16.5 Apex Realty Pty Ltd v Walker Bros (1958) 76 WN (NSW) 34 …. 11.2 Appleby v Myers (1867) LR 2 CP 651 …. 4.16, 8.5 Aquagenics Pty Ltd v Tasmanian Water and Sewerage Corporation (Southern Region) Pty Ltd [2013] TASSC 13 …. 18.44 Aquatec-Maxcon Pty Ltd v Minson Nacap Pty Ltd (2004) 8 VR 16; [2004] VSCA 18 …. 8.5 Arbitration between Bailey and Hart, Re (1883) 9 VLR (L) 311 …. 18.39 Arbitration between Carr and Shire of Wodonga, Re an [1925] VLR 238 …. 10.13 Arbitration between Mitchell and Brassey, Re [1939] VLR 371 …. 9.14, 9.15 Arbitration between Modern Road Construction Co Pty Ltd and Melbourne Harbour Trust Commissioners, Re [1931] VLR 214 …. 9.10, 18.44 Arbitration between Taylor Woodrow International Ltd and the Minister of

Health, Re an (1978) 19 SASR 1 …. 2.14, 2.14, 7.2 Architectural Installations Services Ltd v James Gibbons Windows Ltd (1989) 46 BLR 91 …. 12.15 Arcos Industries Pty Ltd v Electricity Commission of NSW [1973] 2 NSWLR 186 …. 1.7, 10.14 Arenson v Casson Beckman Rutley & Co [1997] AC 405 …. 17.5 Aristoc Industries Pty Ltd v R A Wenham (Builders) Pty Ltd [1965] NSWR 581 …. 14.14 Armidale City Council v Alec Finlayson Pty Ltd [1999] FCA 330 …. 16.11 Arnwell Pty Ltd v Teilaboot Pty Ltd [2010] VSC 123 …. 18.40 Ashjal Pty Ltd v Alfred Toepfer International (Australia) Pty Ltd [2012] NSWSC 1306 …. 18.21 Ashton v Pratt (No 2) [2012] NSWSC 3 …. 3.1, 3.5 Association of Professional Engineers, Scientists and Managers Australia (APESMA) v Skilled Engineering Pty Ltd (1994) 122 ALR 471 …. 12.7 Astley v Austrust Ltd (1999) 197 CLR …. 16.2, 16.7 Atlantic Civil Pty Ltd v Water Administerial Corporation (1992) 39 NSWLR 468 …. 9.15 Attorney-General v Blake [2001] 1 AC 268 …. 19.6 — v McLeod (1893) 14 LR (NSW) 246 …. 3.9, 8.5, 8.6, 10.6, 10.12, 9.18 — v PYA Quarries Ltd [1957] 2 QB 169 …. 19.9 — v Whangarei City Council [1987] 2 NZLR 150 …. 19.49, 19.50 Auburn Municipal Council v ARC Engineering Pty Ltd [1973] 1 NSWLR 513 …. 11.4, 11.6 Aurel Forras Pty Ltd v Graham Karp Developments Pty Ltd [1975] VR 202 …. 6.8 Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1 …. 19.22, 19.23 Austman Pty Ltd v Mount Gibson Mining Ltd (2013) 29 BCL 154; [2012] WASC 202 …. 7.9, 8.3, 8.4, 8.8

Austotel Pty Ltd v Franklins Sefserve Pty Ltd (1989) 16 NSWLR 582 …. 5.5 Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) (1978) 22 ALR 1 …. 12.16, 14.4 Australia and New Zealand Banking Group Ltd v Compagnie D’Assurances Maratimes Aeriennes Et Terrestres [1996] 1 VR 561 …. 2.17 — v Frost Holdings Pty Ltd [1989] VR 695 …. 3.1 Australia Pacific Airports (Melbourne) Pty Ltd v The Nuance Group (Australia) Pty Ltd [2005] VSCA 133 …. 18.21 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 …. 2.5, 2.10, 7.9, 7.12 Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301 …. 2.12 — v CG Berbatis Holdings Pty Ltd (2003) 197 ALR 153 …. 1.12 — v Channel Seven Brisbane Pty Ltd (2009) 239 CLR 305 …. 5.15 — v Radio Rentals Ltd (2005) 146 FCR 292 …. 7.14 — v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253 …. 2.12 — v TF Woollam & Son Pty Ltd (2011) 285 ALR 236; [2011] FCA 973 …. 5.15 Australian Co-operative Foods Ltd v Norco Co-operative Ltd (1999) 46 NSWLR 267 …. 2.17 Australian European Finance Corporation Ltd v Sheahan (1993) 60 SASR 187 …. 5.6 Australian Foods Co Pty Ltd v Pars Ram Brothers (Australia) Pty Ltd [2002] NSWSC 1180 …. 18.13, 18.30, 18.45 Australian Goldfields NL (in liq) v North Australian Diamonds NL (2009) 40 WAR 191; [2009] WASCA 98 …. 11.14 Australian Horizons (Vic) Pty Ltd v Ryan Land Co Pty Ltd [1994] 2 VR 463 …. 3.8 AW Ellis Engineering Pty Ltd v Malago Pty Ltd [2012] NSWSC 55 …. 2.2

B B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman and Associates Pty Ltd (1994) 35 NSWLR 227 …. 2.15 Baber v Kenwood [1978] 1 Lloyd’s Rep 175 …. 9.15 Bade v Rural City of Murray Bridge [2008] SASC 9 …. 19.2 Bailey v Hart (1883) 9 VLR (L) 66 …. 12.13 — v Namol Ltd (1994) 125 ALR 228 …. 17.9 — v Redebi Pty Ltd [1999] NSWSC 918 …. 16.7, 17.10 Bainbridge v Chertsey Urban District Council (1914) 84 LJ Ch 626 …. 19.18 Bains Harding Construction & Roofing (Aust) Pty Ltd v McCredie Richmond & Partners Pty Ltd (1985) 4 BCL 258 …. 15.17 BakLife Assurance Co 1892] 1 QB 144 …. 18.21 Ballantyne v Electricity Trust of South Australia (1994) 62 SASR 133 …. 18.43 Baltic Shipping Co v Dillon (1993) 176 CLR 344 …. 8.1, 11.16 Bamford v Albert Shire Council (1996) 93 LGERA 335 …. 19.67 — v Turnley (1860) 2 F & F 231; 122 ER 27 …. 19.16 Bank of Australasia v Palmer [1897] AC 540 …. 2.15 Bank of New Zealand v Harry M Miller & Co Ltd (1992) 26 NSWLR 48 …. 13.5 Banning v Wright [1972] 1 WLR 972 …. 3.8 Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502 …. 2.16, 5.6 Barac (t/as Exotic Studios) v Farnell (1994) 125 ALR 241 …. 3.5 Barbagallo v J & F Catelan Pty Ltd [1986] 1 Qd R 245 …. 19.24, 19.27 Barclay v Penberthy (2012) 246 CLR 258; [2012] HCA 40 …. 8.15, 16.5 Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 …. 3.3 Barter v Mayor etc of Melbourne (1870) 1 AJR 160 …. 1.9, 10.13

Bartercard Ltd v Myallhurst Pty Ltd [2000] QCA 445 …. 6.4 Barton t/as Freeform Builders v Stiff [2006] VSC 307 …. 4.7 Bartos v Scott (1993) 26 IPR 27 …. 6.1 BASF Coatings Aust Pty Ltd v Akzo Nobel Pty Ltd [2013] VSC 31 …. 18.45 Baskett v Bendigo Gold-Dredging Co (Ltd) (1902) 21 NZLR 166 …. 6.9 — v Gibbs Beach Gold Dredging Co (Ltd) (1902) 21 NZLR 201 …. 6.8 Bass v Gregory (1890) 25 QBD 481 …. 19.48 Batrouney v Elliott [2000] VCAT 22 …. 6.10 Baulderstone Hornibrook Engineering Pty Ltd v Kayah Holdings Pty Ltd (1997) 14 BCL 277 …. 18.21 — v State Constructions Pty Ltd (1993) 61 SASR 94 …. 18.20 Baulderstone Hornibrook Pty Ltd v Qantas Airways Ltd [2003] FCA 174 …. 9.12, 9.15, 18.3 Baulkham Hills Shire Council v AV Walsh Pty Ltd [1968] 3 NSWR 138 …. 19.16, 19.18 Baylis v City etc of Wellington (1886) 4 NZLR 84 …. 6.10 Bayliss v Lea [1961] NSWR 1002 …. 19.18 Bayview Quarries Pty Ltd v Castley Development Pty Ltd [1963] VR 445 …. 13.5 BBB Constructions Pty Ltd v Aldi Foods [2010] NSWSC 1352 …. 5.5, 12.1 Bearman v ARTC Ltd [1949] 1 KB 540 …. 9.26 Beaufort Developments (NI) Ltd v Gilbert-Ash NI Ltd [1999] AC 266 …. 9.15, 9.16 — v — [1998] 2 All ER 778 …. 9.15 Beck v Montana Constructions Pty Ltd (1963) 80 WN (NSW) 1578 …. 17.9 Bedford v Borough of Cudgegong (1900) 16 WN (NSW) 142 …. 10.6 Beech v Building Appeals Board [2005] VSC 231 …. 18.50 Behmer & Wright Pty Ltd v Tom Tsiros Constructions Pty Ltd [1996] VSC 523

…. 7.13, 14.15 Belcher Food Products Ltd v Miller & Black [1999] SLT 142 …. 9.26 Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 70 ACSR 1; [2008] WASC 239 …. 1.2, 1.3, 2.18, 8.6 — v — (No 9) (2013) 298 ALR 666 …. 1.3 Bell v Greenland Design Pty Ltd [1994] QSC 9 …. 8.2 Bellamy v Davey [1891] 3 Ch 540 …. 14.4 Belle River Community Arena Inc v W J C Kaufmann Co Ltd (1978) 87 DLR (3d) 761 …. 5.7 Bellefield Computer Services Ltd v E Turner and Sons Ltd [2000] All ER 84 …. 16.11 Bellgrove v Eldridge (1954) 90 CLR 613 …. 11.4, 11.5, 11.6, 11.12, 11.14 Bendal Pty Ltd v Mirvac Project Pty Ltd (1991) 23 NSWLR 464 …. 19.2, 19.3, 19.5 Benedetti v Sasvary [1967] 2 NSWR 792 …. 18.37 Beneficial Finance Corporation Ltd v ABW Nominees Pty Ltd [1996] FCA 1475 …. 15.17 Bennett v Minister for Community Welfare (1992) 176 CLR 408 …. 11.16, 16.7 Bennetts v Honroth [1959] SASR 170 …. 19.16 Berata Air Systems v FAI Insurance Ltd (SC(NSW), 17 February 1995, unreported) …. 13.12 Beregold v Mitsopoulos (1999) 15 BCL 290 …. 11.6 Besser Industries (NT) Pty Ltd v Steelcon Constructions Pty Ltd (1995) 129 ALR 308 …. 8.5 Best & Less Pty Ltd v Divergent Technologies Pty Ltd [2002] FCA 43 …. 2.17 Bevan Investments Ltd v Blackhall and Struthers (No 2) [1973] 2 NZLR 45 …. 17.18 — v — [1978] 2 NZLR 97 …. 11.6, 11.7, 17.19 Bevelon Investments Pty Ltd v Kindsley Air Conditioning Pty Ltd [1971]VSC

220 …. 7.9, 7.10, 7.12, 7.13, 8.9 Beveridge v Dontan Pty Ltd (1991) 23 NSWLR 13 …. 18.2, 18.10, 18.37 BGC Construction Pty Ltd v Minister for Works [2009] WASC 398 …. 5.7 BHP Coal Pty Ltd v O and K Orenstein & Koppel AG [2008] QSC 141 …. 17.15 BHP Petroleum Ltd v British Steel plc (2000) 74 Cons LR 63 …. 2.14 Bienstein v Bienstein [2003] HCA 7 …. 18.37 Biggin & Co Ltd v Permanite Ltd [1951] 2 KB 314 …. 14.13 Birchall Constructions Pty Ltd v Jape Nominees Pty Ltd (1982) 14 NTR 6 …. 14.5 Birmingham Construction Ltd v Moir Construction Co Ltd (1959) 18 DLR (2d) 505 …. 14.15 Birti v SPI Electricity Pty Ltd [2011] VSC 566 …. 18.6 Bishopsgate Insurance Australia Ltd v Commonwealth Engineering (NSW) Pty Ltd [1981] 1 NSWLR 429 …. 3.11 Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9; [2006] NSWCA 238 …. 14.5 Black Creek Deer Farm Pty Ltd v ANZ Banking [1997] ANZ ConvR 16 …. 19.67 Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 3 All ER 25 …. 5.4 Blair v Osborn & Tomkins [1971] 2 QB 78 …. 17.9 Bleathman v Peterson’s Industrial Paint Services [2001] TASSC 128 …. 19.54 Blewman v Wilkinson [1979] 2 NZLR 208 …. 19.49, 19.50 Bluechip Development Corporation (Gladstone) Pty Ltd v Sunstruct Pty Ltd [2013] FCCA 141 …. 15.12 Blyth v Company of Proprietors of the Birmingham Waterworks (1856) 11 Exch 781; 156 ER 1047 …. 16.3 Blythe Green and Jordain (Trading) Pty Ltd v Sienna Pty Ltd (1986) 38 NTR 1

…. 14.5 BMD Constructions Pty Ltd v Golding Contractors Pty Ltd [2000] QSC 057 …. 18.45 BMD Major Projects Pty Ltd v Victorian Urban Development Authority [2009] VSCA 221 …. 8.14 Body Corporate 202254 v Taylor (2008) 12 TCLR 245 …. 5.8 Body Corporate 396711 v Sentinel Management Limited [2012] NZHC 1957 …. 7.14 Body Corporate No 41342R v Sheppard [2008] VSCA 118 …. 19.46 Bognuda v Upton & Shearer Ltd [1971] NZLR 618 …. 19.58, 19.60, 19.61 Bold Park Senior Citizens Centre & Homes Inc v Bollig Abbott & Partners (Gulf) Pty Ltd (1998) 19 WAR 281 …. 18.10 Bolot v Capper (1957) 75 WN (NSW) 316 …. 17.6 Bolton v Clutterbuck [1955] SASR 253 …. 19.44 — v Mahadeva [1972] 2 All ER 1322 …. 8.1 Boncristiano v Lohmann [1998] 4 VR 82 …. 11.1 Bond Corp Pty Ltd v Thiess Contractors Pty Ltd (1988) 17 FCR 487 …. 9.15 — v Frederick (SC(Vic), 1952, unreported) …. 3.5 Bone v Seale [1975] 1 All ER 787 …. 19.16, 19.26 Bookville Pty Ltd v O’Loghlen [2007] VSC 67 …. 19.37, 19.38 BOS International (Australia) Ltd v Babcock and Brown International Pty Ltd [2011] NSWSC 1382 …. 3.1 Bostel Bros Ltd v Hurlock [1949] 1 KB 74 …. 3.5 Botros v Freedom Homes Pty Ltd (1999) 15 BCL 351 …. 6.1, 12.6, 12.8 Bow v McGrath Builders Ltd [1974] 2 NZLR 442 …. 12.6 Bowen Investments Pty Ltd v Tabcorp Holdings Ltd [2008] FCAFC 38 …. 19.67 Bowen v Paramount Builders (Hamilton) Ltd [1975] 2 NZLR 546 …. 16.11

— v — [1977] 1 NZLR 394 …. 4.7, 11.7 Bower v Peate (1876) 1 QBD 321 …. 19.54 Boyce v Paddington Borough Council [1903] 1 Ch 109 …. 19.9 BP Australia Pty Ltd v Nyran Pty Ltd [2003] FCA 520 …. 2.17 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363 …. 4.2 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 …. 1.2, 1.3, 2.17, 2.18 Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833 …. 1.2, 2.15, 2.16, 3.5 Breen v Williams (1996) 70 ALJR 772 …. 4.1 Bremer Handelsgesellschaft mbH v Westzucker GmbH (No 2) [1981] 2 Lloyd’s Rep 130 …. 18.41 Brenmar Building Co Pty Ltd v University of Newcastle (1999) 15 BCL 467 …. 12.10 Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221 …. 5.5, 8.4, 8.8, 8.16, 14.4 Brewarrina Shire Council v Beckhaus Civil Pty Ltd (2003) 56 NSWLR 576; [2003] NSWCA 4 …. 8.5 Brian James Coleman v Gordon M Jenkins & Associates Pty Ltd (1988) 9 BCL 292; (1989) 23 FCR 38 …. 15.17, 17.7 Brickhill v Cook [1984] …. 17.10, 17.15 — v Young [1984] 3 NSWLR 396 …. 16.2 Bride v KMG Hungerfords (1991) 109 FLR 256 …. 8.15 Bridgewater v Leahy (1998) 194 CLR 457 …. 2.12 Brisbane Board of Waterworks v Hudd [1910] QWN 11 …. 5.7 Briscoe and Co Ltd v Victorian Railways Commissioners [1907] VLR 523 …. 17.5 Bristol, Cardiff and Swansea Aerated Bread Co v Maggs (1890) 44 Ch D 616 ….

5.7 British Bank for Foreign Trade Ltd v Novinex Ltd [1949] 1 KB 623 …. 3.1 British Basic Slag Ltd Agreements, Re [1963] 1 WLR 727 …. 5.15 British Steel Corp v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504 …. 5.5, 8.9 British Thomson Houston Co Ltd v West Brothers (1903) 19 TLR 493 …. 6.9 British Waggon Co and the Parkgate Waggon Co v Lea & Co (1880) 5 QBD 149 …. 13.9 British Westinghouse v Underground Railways [1912] AC 673 …. 11.4 Brodie v Corp of Cardiff [1919] AC 337 …. 10.11 Brookhollow Pty Ltd v R & R Consultants Pty Ltd [2006] NSWSC 1 …. 8.7 Brooks Robinson Pty Ltd v Rothfield [1951] VLR 405 …. 8.3, 12.8 Brouwers v Street [2011] 1 NZLR 645 …. 19.58 Brown & Doherty Ltd v Whangarei County Council [1988] 1 NZLR 33 …. 9.13 Brown Falconer Group Pty Ltd v South Parklands Hockey and Tennis Centre Inc (2005) 91 SASR 152; [2005] SASC 75 …. 11.5, 11.6, 17.19 Brown v Johnson (1842) 10 M & W 331; 152 ER 497 …. 6.4 Bruce v R (1866) 2 WW & a’B (L) 193 …. 6.8, 10.6 — v — (1867) 4 WW & a’B (L) 101 …. 10.6 — v Tyley (1916) 21 CLR 277 …. 13.7, 13.9 Brumby v Pearton (1991) 10 BCL 291 …. 16.6, 16.8, 16.10 Brunswick Construction Ltd v Nowlan (1974) 49 DLR (3d) 93 …. 4.7 Bryan v Maloney (1995) 182 CLR 609; 128 ALR 163 …. 8.15, 16.5, 16.10, 17.10, 17.15 — v — (1995) 182 CLR 609 …. 11.8, 17.19 BTR Engineering (Aust) Ltd v Dana Corp [2000] VSC 246 …. 18.32, 18.44 Building and Engineering Constructions (Aust) Ltd v Property Securities No 1

Pty Ltd [1960] VR 673 …. 2.7, 12.7 Building Contract between Blandhurst Pty Ltd and Graham-Hall (Contractors) Pty Ltd, Re (1984) 1 BCL 48 …. 7.8, 7.11 Built Environs Pty Ltd v Tali Engineering Pty Ltd [2013] SASC 84 …. 6.5, 6.8, 8.7 Bulic v Melbourne City Nominees Pty Ltd [1998] VSC 11 …. 8.4 Bulli Coal Mining Co v Osborne [1899] AC 351 …. 19.2 Bunney v South Australia (2000) 77 SASR 319 …. 19.35, 19.36 Bunting Cabinets Pty Ltd v Halperin (1986) 4 SR (WA) 75 …. 8.1 Burdis v Livsey [2002] EWCA Civ 510 …. 11.14 Burgchard v Holroyd Municipal Council [1984] 2 NSWLR 164 …. 11.7 Buring and Chapman, Re; Ex parte Gibson (1941) 13 ABC 72 …. 13.4 Burke v Frasers Lorne Pty Ltd [2008] NSWSC 988 …. 19.40 — v Lunn [1976] VR 268 …. 11.16 Burnett Transport Ltd v Davidson [1991] 1 NZLR 121 …. 18.39 Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520; 68 ALJR 520 …. 8.15, 16.6, 19.10, 19.12, 19.22, 19.54 Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 …. 11.3, 11.10, 12.18 Burton v Spragg [2007] WASC 247 …. 19.2, 19.53 — v Winters [1993] 1 WLR 1077 …. 19.27 Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd [1979] 1 All ER 965 …. 1.4 Butler v Capel (1823) 2 B & C 251; 107 ER 377 …. 13.1 Byrne Australia Pty Ltd and the Companies Act, Re (No 2) [1981] 2 NSWLR 364 …. 5.5 Byrne v Australian Airlines Ltd (1995) 185 CLR 410 …. 4.2, 4.3 — v Castrique [1965] VR 171 …. 19.50, 19.53

Byrnes v Jokona Pty Ltd [2002] FCA 41 …. 19.23 Bysouth v Shire of Blackburn and Mitcham (No 2) [1928] VLR 562 …. 3.9, 6.4, 6.6, 9.13, 10.8, 10.12, 12.5, 12.15, 12.17, 17.5

C C W Norris & Co Pty Ltd v World Services and Construction Pty Ltd …. 18.6, 18.12 Cable (1956) Ltd v Hutcherson Bros Pty Ltd (1969) 123 CLR 143 …. 4.7 Cadoks Pty Ltd v Wallace Wesley & Vigar Pty Ltd (2000) 2 VR 569; [2000] VSC 16 …. 14.11 Cadoroll Pty Ltd v Mauntill Pty Ltd [2000] ACTSC 79 …. 18.32 Caf-Grains, Re [1994] 2 Qd R 252 …. 18.41, 18.45 Caledonian Collieries Ltd v Spiers (1957) 97 CLR 202 …. 16.11 Caltex Oil (Australia) Pty Ltd v Dredge Willemstad (1976) 136 CLR 529 …. 16.5, 17.13 Caltex Refineries (Qld) Pty Limited v Stavar (2009) 75 NSWLR 649 …. 8.15 Cambridge Water Co v Eastern Counties Leather Plc [1994] 2 AC 264 …. 19.25 Cameron Bunning Bros v Manea (1911) 13 WALR 148 …. 6.8 Cameron v UBS AG [2000] VSCA 222 …. 6.3 Camp v King (1887) 14 VLR 22 …. 13.4 Campbell v Edwards [1976] 1 WLR 403 …. 9.15 Campbelltown City Council v Mackay (1989) 15 NSWLR 501 …. 16.8 Cana Construction Co Ltd v The Queen (1973) 37 DLR (3d) 418 …. 5.8 Canberra Hire Pty Ltd v Koppers Wood Products Pty Ltd [2013] ACTSC 162 …. 11.17 Candetti Constructions Pty Ltd v M & I Samaras (No 1) Pty Ltd [2011] SASC 165 …. 8.5, 8.8 Caneebie Engineering Services Pty Ltd v Drummond [2001] QSC 318 …. 18.37

Cant Contracting Pty Ltd v Casella [2006] QCA 538 …. 8.7 Canterbury Pipe Lines Ltd v Christchurch Drainage Board [1979] 2 NZLR 347 …. 9.18, 18.1 — v — [2012] VSC 596 …. 9.13 Caparo Industries plc v Dickman [1990] 2 AC 605 …. 8.13, 8.15 Cape Crusaders Pty Ltd v Stuart Saw Constructions & Cooktown Property Developments Pty Ltd [2008] QCCTB 226 …. 7.12 Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd (2013) 298 ALR 666; [2013] WASCA 66 …. 1.3 — v — [2012] WASC 228 …. 18.21, 18.29, 18.32 Cape v Maidment (1991) 103 FLR 259 …. 18.10 Capebay Holdings Pty Ltd v Sands [2002] WASC 287 …. 19.3 Carey v Hastie [1968] NZLR 276 …. 3.5 Carosella v Ginos & Gilbert (1981) 27 SASR 515 …. 11.5, 17.10, 17.15 — v — (1982) 57 ALJR 315 …. 11.4 Carpaolo Nominees Pty Ltd v Marrosan Nominees Pty Ltd (1997) 136 FLR 328 …. 18.45 Carr and the Shire of Wodonga, Re [1925] VicLawRp 33; [1925] VLR 238 …. 8.12 Carr v Brisbane City Council [1956] St R Qd 402 …. 7.10 — v J A Berriman Pty Ltd (1953) 89 CLR 327 …. 4.12, 10.14, 12.6, 12.8, 18.23 Carrington Constructions Pty Ltd v Fiore Holdings Pty Ltd (CA(NSW), 1 May 1992, unreported) …. 4.5 Carroll v Azolia Pty Ltd [1998] ANZ ConvR 485 …. 19.50 Carter v Murray [1981] 2 NSWLR 77 …. 19.25 Cartwright v McLaine & Long Pty Ltd (1979) 143 CLR 549 …. 19.9 Cassidy v Engwirda Construction Co (No 2) [1968] Qd R 159 …. 11.1, 12.6 Cassisi v CFC Holdings (1990) ASC 55-999 …. 14.6

Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 …. 4.1 CBD Investments Pty Ltd v Ace Ceramics Pty Ltd (1992) 10 BCL 437 …. 16.5 CBD Prestige Property Holdings No 3 Pty Ltd v Metropolitan Local Aboriginal Land Council [2013] NSWSC 1005 …. 13.8 CC (Victoria) Pty Ltd and Concrete Constructions Group Pty Ltd v State Electricity Commission of Victoria, [1993] Vic SC 523; (1993) 12 Aust Cons LR 158 …. 7.3, 7.4 CCH Canadian Ltd v Mollenhauer Contracting Co Ltd (1974) 51 DLR (3d) 638 …. 4.5 Ceccattini v ICM 2000 Pty Ltd [1999] NSWSC 453 …. 18.37 Cedar Meats Pty Ltd v Five Star Lamb Pty Ltd [2013] VSC 164 …. 3.8, 6.3, 6.4 Central Exchange Ltd v Anaconda Nickel Ltd [2001] WASC 128 …. 4.6 CG Monkhouse Pty Ltd (in liq), Re (1968) 88 WN (Pt 2) (NSW) 238 …. 14.4 CH2M Hill Australia Pty Ltd v State of NSW [2012] NSWSC 963 …. 13.7 Chadmax Plastics Pty Ltd v Hansen and Yuncken (SA) Pty Ltd (1985) 1 BCL 52 …. 4.2 Chalet Homes Pty Ltd v Kelly [1978] Qd R 389 …. 8.1, 8.5 Challenge Charter Pty Ltd v Curtain Bros (Qld) Pty Ltd [2004] VSC …. 7.9 Chandler Bros Ltd v Boswell [1936] 3 All ER Rep 179 …. 12.18, 14.15 Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 …. 18.28 Chaplin v Hicks [1911] 2 KB 786 …. 12.18 Charles Dalton v Henry Angus & Co (1881) 6 App Cas 740 …. 19.50, 19.61, 19.62 Charltons CJC Pty Ltd v Fitzgerald [2013] NSWSC 350 …. 3.8 Charter v Sullivan [1957] 2 QB 117 …. 12.18 Chas Drew Pty Ltd v J F & P Consulting Engineers Pty Ltd (1989) 10 BCL 48 …. 11.4, 11.6, 16.8, 17.10, 17.15

Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393; [2010] NSWCA 190 …. 8.7, 14.5 Chase v de Groot [1994] 1 NZLR 613 …. 11.12, 16.10 Chattis Nominees Pty Ltd v Norman Ross Homeworks Pty Ltd (Receiver Appointed) (in liq) (1992) 28 NSWLR 338 …. 2.13 Chen v Kevin McNamara & Son Pty Ltd [2012] VSCA 63 …. 18.49 — v — [2013] VSC 539 …. 18.45 Chermar Productions Pty Ltd v Prestest Pty Ltd (1989) 7 BCL 46 …. 4.14, 12.17 Chittick and Taylor, Re (1954) 12 WWR (NS) 653 …. 10.8 Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60 …. 18.10 Christiani & Neilson Pty Ltd v Goliath Portland Cement Co Ltd (1993) 2 Tas R 122 …. 5.5, 7.10, 12.18, 14.8 Christiansen v Klepac (2001) 10 BPR 18,955 …. 12.8 Christopher John Denton and Mary Jane Denton v Dama Pty Ltd t/as Design and Management Associates (1984) 3 BCL 143 …. 11.5 Citicorp Australia Ltd v Hendry (1985) 4 NSWLR 1 …. 6.3 City Developments Pty Ltd v Registrar-General of the Northern Territory [2001] NTCA 7 …. 19.39, 19.47 City of Box Hill v E W Tauschke Pty Ltd [1974] VR 39 …. 5.10 City of Camberwell v Camberwell Shopping Centre Pty Ltd [1994] 1 VR 163 …. 4.6 City of Richmond v Scantelbury [1991] 2 VR 38 …. 19.14, 19.26 Clancy v Davis (1882) 3 LR (NSW) 299 …. 19.66 Clarey v The Principal and Council of the Women’s College (1953) 90 CLR 170 …. 19.19 Clark v Woor [1965] 2 All ER 353 …. 11.7 Clay v A J Crump & Sons Ltd [1964] 1 QB 533 …. 17.13 Clifton Developments (Vic) Pty Ltd v Owners Corporation 1 Plan No

PS510766U [2012] VCC 695 …. 19.2 Clos Farming Estates Pty Ltd v Easton [2001] NSWSC 525 …. 19.32, 19.39, 19.47 Clough Engineering Ltd v Oil and Natural Gas Corporation Ltd (2008) 249 ALR 458; [2008] FCAFC 136 …. 9.25 Clyne v DCT (1981) 35 ALR 567 …. 13.5, 13.6 Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 …. 1.1, 3.1, 3.3, 7.10 Coco v R (1994) 179 CLR 427 …. 19.2 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 …. 2.5, 2.15, 2.16, 4.1, 4.2, 7.4, 7.12, 8.12, 12.1, 19.25 Cohen v City of Perth [2000] WASC 306 …. 19.18 — v Roche [1927] 1 KB 169 …. 5.14 Colby Corporation Pty Ltd v Commissioner of Taxation (2008) 100 ALD 244; [2008] FCAFC 10 …. 2.16 Cole v Wellington Dairy Farmers’ Co-operative Association [1917] NZLR 372 …. 13.7 Coleman v Gordon M Jenkins & Associates Pty ltd (1989) 11 ATPR 40–960 …. 17.10 Coles Supermarkets Australia Pty Ltd v FKP Ltd [2008] FCA 1915 …. 2.2 Collier Constructions Pty Ltd v Foskett Pty Ltd (1990) 97 ALR 460 …. 17.9 Collins Hill Group Pty Ltd v Trollope Silverwood & Beck Pty Ltd [2002] VSCA 205 …. 2.16 Colls v Home & Colonial Stores Ltd [1904] AC 179 …. 19.32, 19.33 Colonial Ammunition Co v Reid (1900) 21 LR (NSW) 338 …. 5.12 Comalco Fabricators Ltd v Dillingham Constructions Pty Ltd (1977) 17 SASR 82 …. 5.1 Comandate Marine Corp v Pan Australia Shipping Pty Ltd (2006) 157 FCR 45 …. 18.33

Comco Constructions Pty Ltd v Leisure Holdings Australia Pty Ltd (1986) 3 BCL 259 …. 1.1, 2.1 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 …. 2.11, 7.14 Commissioner for Main Roads v Reed & Stuart Pty Ltd (1974) 131 CLR 378 …. 1.9, 4.12, 4.15, 6.8, 10.14, 15.4 Commissioner for the ACT Revenue v Alphaone Pty Ltd (1994) 34 ALD 324 …. 18.37 Commissioner of Public Works v Hills [1906] AC 368 …. 6.6 Commonwealth Bank of Australia v Begonia Pty Ltd (1993) 11 ACSR 609 …. 12.8 — v TLI Management Pty Ltd [1990] VR 510 …. 5.6 Commonwealth of Australia and Citra Constructions, Matter of the Contract Between (1985) 2 BCL 235 …. 4.2 Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 …. 11.4, 12.8 — v Citra Constructions Ltd (1986) 2 BCL 235 …. 8.13 — v Cockatoo Dockyard Pty Ltd (1995) 36 NSWLR 662 …. 18.35, 18.36, 18.40 — v Jennings Construction Ltd (1985) 1 BCL 252 …. 18.28 — v Registrar of Titles for Victoria (1918) 24 CLR 348 …. 19.32, 19.33, 19.39, 19.47, 19.48 — v T J Watkins Ltd (1975) 49 ALJR 213 …. 7.12 — v Verwayen (1990) 170 CLR 394 …. 3.8, 8.6, 10.12 Computershare Ltd v Perpetual Registrars Ltd (No 2) [2000] VSC 223 …. 3.2, 3.3, 7.10 Con Kallergis Pty Ltd (t/as Sunlighting Australia) v Calshonie Pty Ltd Hayne JA (1997) 14 BCL 201 …. 1.2 Conagra International Fertiliser Co v Lief Investments Pty Ltd (1997) 141 FLR 124 …. 14.15 Concrete Constructions Group Ltd v D v P Engineering Pty Ltd (1997) 14 BCL 168 …. 18.45

Concrete Constructions Group Pty Ltd, Re [1997] 1 Qd R 6 …. 8.5, 9.16, 9.18 Concrete Pty Ltd v Parramatta Design and Developments Pty Ltd (2006) 229 CLR 577 …. 17.9 Concut Pty Ltd v Worrell (2000) 176 ALR 693 …. 1.3 Connor v Stainton (1924) 27 WALR 72 …. 8.2, 8.10 Consolidated Constructions Pty Ltd v Saipem Australia Pty Ltd (1999) 15 BCL 64 …. 18.39 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 …. 4.3 Construction Planning and Management Pty Ltd v Nikolaou (1988) 4 BCL 255 …. 18.32 Construction Services Civil Pty Ltd v J & N Allen Enterprises Pty Ltd (1985) 1 BCL 363 …. 8.5, 8.6, 9.18 Conway v Critchley [2012] NSWSC 1405 …. 3.1 Cook Islands Shipping Co Ltd v Colson Builders Ltd [1975] 1 NZLR 422 …. 5.8, 5.12 Cook’s Constructions Pty Ltd v Stork Food Systems Australia Pty Ltd [2008] QSC 179 …. 1.7, 7.1 Cooper & Oxley Builders Pty Ltd v Bunnings Group Ltd [2008] WASC 63 …. 18.32 Cooper v Australian Electric Co (1922) Ltd (1922) 25 WALR 66 …. 8.4 Cooper, Re; Ex parte Smith (1965) 10 FLR 369 …. 14.4 Co-ordinated Construction Co Pty Limited v Climatech (Canberra) Pty Ltd [2005] NSWSC 312 …. 7.2 Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd (2013) 29 BCL 329; [2012] NSWCA 184 …. 8.1, 8.2, 8.3, 8.4 — v — [2010] NSWSC 1073 …. 8.11, 11.4 Corio Guarantee Corp Ltd v McCallum [1956] VLR 755 …. 8.1 Cossill v Strangman [1963] NSWR 1695 …. 13.4

Costa Vraca Pty Ltd v Berrigan Weed and Pest Control Pty Ltd (1998) 155 ALR 714 …. 4.4 Council of the City of Campbelltown v Mackay (1989) 15 NSWLR 501 …. 11.15 Council of the Shire of Noosa v JE Farr Pty Ltd [2001] QSC 060 …. 17.13 Council of the Shire of Sutherland v Heyman (1985) 157 CLR 424 …. 16.5, 16.10, 16.11 County Personnel (Employment Agency) Ltd v Alan R Pulver & Co (a firm) [1987] 1 WLR 916 …. 11.3 Courtney and Fairbairn Ltd v Tolaini Bros (Hotels) Ltd [1975] 1 WLR 297 …. 3.2 Covecorp Constructions Pty Ltd v Indigo Projects Pty Ltd [2002] QSC 322 …. 4.6, 6.8 Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605 …. 4.12, 12.17 Cox v Franz (SC(NSW), BC7700005, Carmichael J, 22 June 1997, unreported) …. 12.15 CPC Energy Pty Ltd v Bellevarde Constructions Pty Ltd [2007] NSWSC 1397 …. 18.10 Crafter v Singh (1990) 2 ACSR 1 …. 14.14 Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305; on appeal [1922] AC 541 …. 3.9 Craven Ellis v Canons Ltd [1936] 2 KB 403 …. 5.5, 7.10, 8.9 Crimmins v Stevedoring Industry Finance Committee [1999] HCA 59 …. 16.11 Cross v Moreton Bay Regional Council [2013] QSC 215 …. 16.7 Crowshaw v Pritchard and Renwick (1899) 16 TLR 45 …. 3.4, 4.10, 5.11, 6.1 Crump v Lambert (1867) LR 3 Eq 409 …. 19.18 Cubbitt v Porter (1828) 8 B & C 257; 108 ER 1039 …. 19.52 Cufone v Cruse [2000] SASC 17 …. 18.33 Cunningham, Re [1966] ALR 26 …. 13.4

Curtin University of Technology v Woods Bagot Pty Ltd [2012] WASC …. 7.13 Cusack v Commission of Taxation 920020 120 FCR 520; [2002] FCA 1012 …. 7.1 Cuzeno Pty Limited v The Owners Strata Plan 65870 [2013] NSWSC 1385 …. 19.41 Cyril Smith & Associates Pty Ltd v The Owners — Strata Plan No 64970 [2011] NSWCA 181 …. 11.8

D D & F Estates Limited v Church Commissioners for England [1989] AC 177 …. 14.8, 14.16 D Galambos & Son Pty Ltd v Mclntyre (1974) 5 ACTR 10 …. 11.5, 11.16, 13.5 D J Hill & Co Pty Ltd v Walter H Wright Pty Ltd [1971] VR 749 …. 2.13 D Phillips Constructions (Vic) Pty Ltd v R F Mullavey and J F Adams [1980]VR 171 …. 18.43 Daar Pty Ltd v Feza Foundation Ltd [2001] NSWSC 949 …. 19.41 Dackfield Pty Ltd, Ex p [1983] Qd R 10 …. 9.22 Daily Telegraph Ltd v Stuart (1928) 28 SR (NSW) 291 …. 19.22 Dalcon Constructions Pty Ltd v Chu [2002] WASCA 290 …. 18.45 Daley, Re; Ex parte National Australia Bank Ltd (1992) 37 FCR 390 …. 13.4 Dalton v Henry Argus & Co (1880–81) LR 6 App Cas 740 …. 19.54, 19.60 Damon Compania Naviera SA v Hapag Lloyd International SA [1985] 1 WLR 435 …. 12.8 Dancorp Developers Ltd v Auckland City Council [1991] 3 NZLR 337 …. 8.15 Danidale Pty Ltd v Abigroup Contractors Pty Ltd [2007] VSC 391 …. 7.1 Daniell Ltd v Kebbel [1919] GLR 156 …. 5.11 Danthanarayana v GR8 Constructions Pty Ltd (2012) 201 FCR 347; [2012] FCA 231 …. 8.4

Darlington Futures Ltd v Delco Australia Ltd (1986) 161 CLR 500 …. 2.14 Darwin Fibreglass Pty Ltd v Kruhse Enterprises Pty Ltd (1998) 124 NTR 1 …. 2.20 Das v Linden Mews Ltd [2002] EWCA Civ 590 …. 19.3 Dasreef Pty Ltd v Hawchar [2011] HCA 21 …. 18.8 Davidson v JS Gilbert Fabrications Pty Ltd [1986] 1 Qd R 1 …. 11.10 Davie v Kemp and Denning Home Improvements Centre Pty Ltd (1987) 64 LGRA 400 …. 4.11 Davis Contractors Pty Ltd v Fareham Urban District Council [1956] AC 696 …. 5.2, 12.1 Davis v Hedges (1871) LR 6 QB 687 …. 8.6 Dawmac Industries Pty Ltd v Anson [2001] NSWCA …. 19.54 Dawnays Ltd v F C Minter Ltd [1971] 1 WLR 1205 …. 8.5, 9.18 Day v Ocean Beach Hotel Shellbarbour Pty Ltd [2013] NSWCA 250 …. 19.55 — v O’Leary (1992) 57 SASR 206 …. 11.4 — v Ost [1973] 2 NZLR 385 …. 14.4 Daysea Pty Ltd v Watpac Australia Pty Ltd (2001) 17 BCL 434 …. 8.5 De Garis v Neville Jeffress Pidler Pty Ltd (1990) 95 ALR 625 …. 17.9 De Pasquale Bros Pty Ltd v Cavanagh Biggs & Partners Pty Ltd (1998) 16 BCL 116 …. 4.4 — v — [1999] QSC 171 …. 17.15 — v — (2000) 16 BCL 116 …. 17.15, 17.19 Dean v Gibson [1958] VR 563 …. 2.19, 4.11 Dearle v Hall (1828) 3 Russ 1; 38 ER 475 …. 13.4 Decor Ceilings Pty Ltd v Cox Constructions Pty Ltd [2006] SASC 85 …. 18.45 Deepcliffe Pty Ltd v Council of the City of Gold Coast [2001] QCA 342 …. 19.22 Deer Park Engineering Pty Ltd v Townsville Harbour Board. [1975] VR 338 ….

5.10 Delaware Mansions Ltd v Westminster City Council [2002] 1 AC 321 …. 19.14 Delohery v Permanent Trustee Co of New South Wales (1904) 1 CLR 283 …. 19.32, 19.48 Deloitte Touche Tohmatsu v JP Morgan Portfolio Services Ltd (2007) 240 ALR 540; [2007] FCAFC 52 …. 13.7 Denton v Dama Pty Ltd 1984) 3 BCL 143 …. 11.16 — v Phillpot (1990) NSW Conv R 55–543 …. 19.31 — v Ryde Municipal Council (1953) 19 LGR (NSW) 152 …. 3.2, 7.10, 8.9 Department of the Environment v Thomas Bates and Son Ltd [1991] 1 AC 499 …. 16.11 Devaugh Pty Ltd v Lamac Developments Pty Ltd (2000) 16 BCL 378 …. 14.15 Devefi Pty Ltd v Mateffy Pearl Nagy Pty Ltd (1993) 113 ALR 225 …. 13.7, 17.9 DF McCloy Pty Ltd v Taylor Thomson Whiting Pty Ltd [2000] NSWSC 1142 …. 18.10 DG Whelan Rentals Pty Ltd v Australian Building Construction Employees and Builder’s Labourers Federation (1983) 46 ALR 339 …. 12.17 Dial D Pty Ltd (as trustee for Smith Street Unit Trust) v Kingston Building (Australia) Pty Ltd [2013] NSWCA 27 …. 8.5, 8.7 Die Elbinger Actien-Gesellschafft Fur Fabrication Von Eisenbahn Materiel v Armstrong (1874) LR 9 QB 47 …. 14.11 Dikstein v Kanevsky [1947] VLR 216 …. 4.1 Dillon v Jack (1903) 23 NZLR 547 …. 6.8 Dimond v Moore (1931) 45 CLR 159 …. 12.6 Director of War Service Homes v Harris [1968] Qd R 275 …. 11.12 District Road Board and Ratepayers of the Road District of Broadmeadows v Mitchell (1867) 4 WW & a’B (L) 101 …. 10.6 Dixon v SA Railways Commissioner [1923] HCA 45; (1923) 34 CLR 71 …. 9.12, 9.15, 17.4

DJC v Detective Senior Constable Burg [1998] VSCA 139 …. 18.37 Dodd Properties (Kent) Ltd v Canterbury City Council [1979] 2 All ER 118 …. 11.7, 11.10 Dodd v Churton [1897] 1 QB 562 …. 6.8 Dodwell v Phillips [1940] St R Qd 185 …. 14.4 Dollar Sweets Pty Ltd v Federated Confectioners Association of Australia [1986] VR 383 …. 19.25 Dominion Mosaics and Tile Co Ltd v Trafalgar Trucking Co Ltd [1990] 2 All ER 246 …. 11.3, 11.5 Don Brass Foundry Pty Ltd v Stead (1948) 48 SR (NSW) 482 …. 19.18 Donoghue v Stevenson [1932] AC 562 …. 16.3, 16.5 Doran Constructions Pty Ltd v University of Newcastle (SC(NSW), Giles J, 16 December 1994, unreported) …. 4.14 — v Beresfield Aluminium Pty Ltd [1999] NSWSC 1198 …. 18.43 Doug Rea Enterprises Pty Ltd v Hymix Australia Pty Ltd [1987] 2 Qd R 495 …. 3.5, 4.7 Douglas Gafford v A H Graham And Grandco Securities Limited [1998] EWCA Civ 666 …. 19.3 Dover Beach Pty Ltd v Geftine Pty Ltd [2008] VSCA 248 …. 3.5 Downer EDI Mining Pty Ltd v Wambo Coal Pty Ltd [2012] QSC 290 …. 3.1, 18.44 Drexel London (a firm) v Gove (Blackman) [2009] WASCA 181 …. 17.19 Driver v War Service Homes Commissioner (1923) 44 ALT 130 …. 12.18 Dronpool Pty Ltd v Hunter (1984) 3 IPR 310 …. 17.9 Drummoyne Municipal Council v Page (1974) 30 LGRA 237 …. 9.22 Du Toit v Vale (1993) 9 WAR 138 …. 18.37, 18.39., 18.47 Duffy v Salvation Army (Vic) Property Trust [2013] VSCA 253 …. 14.12 Duncan v Shrigley (1870) 1 VR (L) 139 …. 10.6

Dunedin Water Works Co v Bassett (1868) 1 NZCA 141 …. 4.10, 6.1 Dunlop & Ranken Ltd v Hendall Steel Structures Ltd Pitchers Ltd (Garnishees) [1957] 3 All ER 344; 1 WLR 1102 …. 14.9, 14.15 Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 …. 6.4 Dunstan v Simmie & Co Pty Ltd [1978] VR 669 …. 18.6 Dunton v Warrnambool Waterworks Trust (1893) 19 VLR 84 …. 5.7, 6.5 Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 3) (2013) 29 BCL 19; [2012] VSC 99 …. 12.3, 12.5, 12.10, 12.12, 18.8 — v Vilacon Corporation Pty Ltd [1999] VCAT 44 …. 8.5 Durkin v Pioneer Permanent Building Society Ltd [2003] FCA 419 …. 2.12 Dutton & Stone v Jalapen Pty Ltd (1991) 10 BCL 338 …. 16.2, 16.8 Dutton v Bognor Regis Urban District Council [1972] 1 QB 373 …. 16.11 DVP Engineering Pty Ltd v Concrete Constructions Group Ltd [1997] VSC 368 …. 15.13 Dymocks Book Arcade Pty Ltd v Capral Ltd [2013] NSWSC 343 …. 11.4, 16.2, 17.4, 17.5, 17.10

E E A Negri Pty Ltd v Technip Oceania Pty Ltd [2009] VSC 543 …. 18.6 E J Armstrong v Wellington-Manawatu Railway Co (Ltd) (1885) NZLR 3 (SC) 441 …. 5.10 E Kontek v Daveyduke Industries Mimivic Nominees Pty Ltd [1987] Vic SC 81 …. 18.37 Eagle Sea Pty Ltd v Radford [2012] TASSC 41 …. 8.4, 8.8, 8.11 Earth and General Contracts Ltd v Manchester Corp (1958) 108 LJ 665 …. 12.6 East Ham BC v Bernard Sunley & Sons Ltd [1966] AC 406 …. 9.15, 9.26, 11.7 Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [1999] WASC 167 …. 18.35

Easyfind (NSW) Pty Ltd v Paterson (1987) 11 NSWLR 98 …. 2.8 EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd (No 3) [2013] WASC 183 …. 13.7 Eccles v Bryant & Pollock [1948] Ch 93 …. 5.10 Eden Constructions NSW Pty Ltd v Haines (SC(NSW), Giles J, 21 July 1989, unreported) …. 8.13 Edward Ward & Co v McDougall [1972] VR 433 …. 13.5 Egan v State Transport Authority (1982) 31 SASR 481 …. 11.7, 11.10 Eggleston v Marley Engineers Pty Ltd and B K and J G Mewett (1979) 21 SASR 51 …. 2.13 Eko Investments Pty Ltd v Austruc Constructions Ltd [2009] NSWSC 208 …. 18.2 Elanora Country Club Ltd v VJ Summersby & Pearce & Sons (Excavations) Pty Ltd (1988) 4 BCL 309 …. 11.2 Electra Air Conditioning BV v Seeley International Pty Ltd ACN 054 687 035 [2008] FCAFC 169 …. 18.21 Electrical Installations at Exeter Hospital Agreement, Re [1970] 1 WLR 1391 …. 5.14 Elizabeth Bay Developments Pty Ltd v Boral Building Services Pty Ltd (1995) 36 NSWLR 709 …. 3.3 Elizabeth Bibby v Carter (1895) 4 H &N 153; 157 ER 795 …. 19.58 Elkhoury v Farrow Mortgage Services Pty Ltd (in liq) (1993) 114 ALR 541 …. 3.8, 12.8 Ellenborough Park, Re [1955] 3 All ER 667 …. 19.28 Ellis v City of Bendigo (1983) 56 LGRA 250 …. 11.15 Elspan v Eurocopter [1999] NSWSC 555 …. 18.42 Elston v Dore (1982) 149 CLR 480 …. 19.18 Eminent Forms Pty Ltd v Formosa [2004] SASC 192 …. 8.2 Energy Brix Australia Corp Pty Ltd v National Logistics Coordinators (Morwell)

Pty Ltd [2002] VSCA 113 …. 18.45 Engineering Construction Pte Ltd v Sanchoon Builders Pte Ltd [2010] SGHC 293 …. 8.5 Enterra Pty Ltd v ADI Ltd [2002] NSWSC 700 …. 18.39 Entick v Carrington (1765) 2 Wils 275; 95 ER 807 …. 19.2 Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498; [2012] HCA 7 …. 3.6, 8.8, 8.9, 13.7 Erica Vale Pty Ltd v Thompson & Morgan (Ipswich) Ltd (1994) AIPC 38315 …. 17.9 Eriksson v Whalley [1971] 1 NSWLR 397 …. 12.9, 12.10, 12.11 Ermogenous v Greek Orthodox Community of SA Inc (2002) 187 ALR 92 …. 1.2, 1.3 Esanda Finance Corp Ltd v Peat Marwick Hungerfords (Reg) (1997) 142 ALR 750 …. 5.8, 8.15 — v Plessnig (1980) 166 CLR 131 …. 6.4 Esso Australia Resource Ltd & BHP Petroleum (NW Shelf) Pty Ltd [1997] 1 VR 332 …. 18.39 Esso Australia Resources Ltd v Plowman (Minister for Energy & Minerals) (1995) 183 CLR 10 …. 18.35, 18.36 — v — [1994] 1 VR 1 …. 4.1, 18.35 Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228 …. 3.3, 4.6 Esso Petroleum Co Ltd v Mardon [1976] QB 801 …. 8.15, 14.8 Ettridge v Vermin Board of the District of Murat Bay [1928] SASR 124 …. 10.3 Evans Deakin Industries Ltd v Commonwealth [1983] Qd R 40 …. 18.6 Evans v Bolag [1976] 1 NSWLR 36 …. 19.67 Excomm Ltd v Ahmed Abdul-Qawi Bamaodah [1985] 1 Lloyd’s Rep 403 …. 18.21 Expectation Pty Ltd v Pinnacle VRB Ltd [2002] WASCA 160 …. 4.6

F F and E Davey v Mayor, Aldermen and Burgesses of the Borough of Gravesend (1903) 67 JP 127 …. 9.17 F E Cleary & Sons Pty Ltd v Buckland Building Group Pty Ltd (CA(NSW), 12 February 1976, unreported) …. 2.1 F & G Sykes (Wessex) Ltd v Fine Fare Ltd [1967] 1 Lloyd’s Rep 53 …. 3.1 F Jones & Co Pty Ltd v CG Grais & Sons Pty Ltd (1961) 78 WN (NSW) 955 …. 14.6 Factory 5 Pty Ltd (in liq) v State of Victoria (No 2) [2012] FCAFC 150 …. 1.3 FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343 …. 2.18 Fairyglen v Lunsmann [2003] NSWSC 696 …. 18.45 Fanigun Pty Ltd v Woolworths Ltd [2006] QSC 28 …. 19.6 Farrow Mortgage Services Pty Ltd (in liq) v Edgar (1993) 114 ALR 1 …. 3.5 Fatur v IC Formwork Services Pty Ltd (2000) 158 FLR 136 …. 14.12 FE Cleary & Sons Pty Ltd v Buckland Building Group Pty Ltd (CA(NSW), 12 February 1976, unreported) …. 14.15 Federal Airports Corporation v Makucha Developments Pty Ltd (1993) 115 ALR 679 …. 6.6 — v Rheem Australia Ltd (1992) 11 Aust Cons LR 171 …. 18.28 Fennell v Robson Excavations Pty Ltd [1977] 2 NSWLR 486 …. 19.26, 19.53, 19.54 Fenridge Pty Ltd v Retirement Care Australia (Preston) Pty Ltd [2013] VSC 464 …. 11.7 Fensom v Cootamundra Racecourse Reserve Trust [2000] NSWSC 1072 …. 5.5 Fercometal SARL v Mediterranean Shipping Co SA [1989] AC 788 …. 12.6 Ferguson v Cole [2002] FCA 1411 …. 18.37 Fermentation Industries (Aust) Pty Ltd v Burns Philp & Co Ltd [2000] NSWCA 71 …. 7.9

Ferris v Plaister; Stap v Grey (1994) 34 NSWLR 474 …. 18.2, 18.13, 18.17, 18.33, 18.44 FFE Minerals Australia Pty Ltd v Vanadium Australia Pty Ltd (2000) 16 BCL 305 …. 9.17 Filippini v The Real Estate Institute of Queensland Ltd [2008] QSC 113 …. 18.45 Finance Ltd v Austin (1986) 162 CLR 170 …. 6.3, 6.4 Findlay v Cameron (1878) 4 VLR (L) 191 …. 6.8 Finesky Holdings Pty Ltd v Minister for Transport for Western Australia [2002] WASCA 206 …. 19.3 Fink v Fink (1946) 74 CLR 127 …. 12.18 Finola Moorhead v Paul Brennan (t/as Primavera Press) (1991) 20 IPR 161 …. 4.6 Fiona Trust & Holding Corp v Privalov [2007] EWCA Civ 1329 [2007] 4 All ER 951 …. 18.44 Fiorelli Properties Pty Ltd v Professional Fencemakers Pty Ltd (2011) 34 VR 257; [2011] VSC 661 …. 6.5, 6.6 Fisher v Howe [2013] NSWSC 462 …. 16.6, 17.12 Fitzgerald v Masters (1956) 95 CLR 420 …. 3.2 Fitzroy Services Pty Ltd v Commissioner of Taxation [2013] FCA 471 …. 13.8 Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566; [2001] FCA 1628 …. 18.45 Flannagan v Mate (1876) 2 VLR (L) 157 …. 17.7 Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd 134. [1998] 3 VR 812 …. 9.25 Flinn v Flinn [1999] 3 VR 712 …. 3.8 Florida Hotels Pty Ltd v Mayo (1965) 113 CLR 588 …. 17.11, 17.12, 17.13 Foley Bros v McIlwee (1918) 44 DLR 5 …. 12.18 Foley v Classique Coaches Ltd [1934] 2 KB 1 …. 3.1

Ford Motor Co of Aust Ltd v Arrowcrest Group Pty Ltd [2002] FCA 1156 …. 1.2, 2.7 Forestry Commission of NSW v Stefanetto (1976) 8 ALR 297 …. 6.3, 6.6, 12.17 Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; [2012] HCA 39 …. 8.13 — v Chairman Councillors and Inhabitants of Ohinemuri County (1909) 29 NZLR 401 …. 9.13 Forsayth NL v Australasian Gold Mines NL (1992) 7 WAR 549 …. 17.5, 18.21 — v — (No 3) (1992) 8 WAR 176 …. 18.45 Foster v A T Brine & Sons Pty Ltd [1972] WAR 157 …. 4.4, 4.8 — v Frassetto (SC(NSW), 55057/97, Rolfe J, 17 December 1997); [1998] NSWSC 793 …. 12.6 Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160 …. 18.32 Frank W Clifford Ltd v Garth [1956] 2 All ER 323 …. 3.5 Fraser v Evans [1946] VLR 382 …. 6.3 — v Mayor etc of Hamilton (1912) 32 NZLR 205 …. 9.11 Fraser Williams v Prudential Holborn Ltd (1993) 64 BLR 5 …. 3.3 Frederick W Nielsen (Canberra) Pty Ltd v PDC Constructions (ACT) Pty Ltd (1987) 71 ACTR 1; 3 BCL 74 …. 14.8, 16.2, 16.5 Fripp v Upton (1884) NZLR 3 (SC) 237 …. 5.7 Frontenac Air Systems Ltd v Parmac Construction Ltd (1978) 87 DLR (3d) 277 …. 4.5 Fuji Seal Europe Ltd v Catalytic Combustion Corp [2005] EWHC 1659 …. 14.6 Fulham Partners LLC v National Australia Bank Ltd [2013] NSWCA 296 …. 18.1 Fust, In Marriage of (1991) 105 FLR 124 …. 18.11 Fyvie v Anand (1994) 6 BPR 13,743 …. 19.6, 19.61

G G C Dickson & Yorston (Builders) Pty Ltd v Hattam [1935] VLR 168 …. 3.5 G H Myers and Co v Brent Cross Service Co [1934] 1 KB 46 …. 4.5 G Hawkins & Sons Pty Ltd v Cable Belt (Aust) Pty Ltd (1986) 3 BCL 217 …. 18.43 G Percy Trentham Ltd v Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25 …. 2.1, 3.1 Gabriel v Sea & Retaining Wall Constructions Pty Ltd (1987) 3 BCL 162 …. 8.9, 8.11, 12.18 Gaffney v Ryan [1995] 1 Qd R 19 …. 3.5, 3.6 Gagner Pty Ltd trading as Indochine Cafe v Canturi Corporation Pty Ltd [2009] NSWCA 413 …. 19.67 Gala v Preston (1991) 172 CLR 243 …. 16.5 Galaxy Homes Pty Ltd v The National Mutual Life Association of Australasia Ltd (2013) 116 SASR 41; [2013] SASCFC 34 …. 2.14 Gale v Council of the Shire of Douglas [2000] QSC 44 …. 4.18 Gallagher v Rainbow (1994) 179 CLR …. 19.39 Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 …. 8.5, 8.6, 14.5 Garcia v National Australia Bank Ltd (1998) 155 ALR 614 …. 2.12 Gardner v McKenzie Winter Homes (1985) 3 BCL 278 …. 9.13, 17.5 — v Smith [2001] WASCA 116 …. 8.1 Gartner v Kidman (1962) 108 CLR 12 …. 19.16, 19.25 Gas & Fuel Corp of Victoria v Wood Hall Ltd & Leonard Pipeline Contractors Ltd [1978] VR 385 …. 18.36, 18.37 Gascor t/as Gas & Fuel v Ellicott [1995] Vic SC 625 …. 18.39 Gaut v Patterson (1931) 31 SR (NSW) 612 [1957] SASR 90 …. 2.19 GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003)

128 FCR 1; [2003] FCA 50 …. 1.2, 8.1, 8.3, 8.4, 8.5, 18.3 Gee v Burger [2009] NSWSC 149 …. 19.31 — v Sumner Borough Council (1893) 12 NZLR 63 …. 8.12 Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14551 …. 2.5, 3.1 George Feros Memorial Hostel Committee Incorp v Hammat Constructions Pty Ltd (2001) 17 BCL 66 …. 14.5 George Wimpey and Co Ltd v Territory Enterprises Pty Ltd (1970) 45 ALJR 398 …. 8.12 Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40 …. 18.29 Gesellschaft Burgerlichen Rechts v Stockholms Rederiaktiebolag Svea [1967] 1 QB 58 …. 2.7 GHP Piling Ltd v Leighton Contractors Pty Ltd [2012] NZHC 1695 …. 5.1, 5.3, 5.4, 5.10 Gianfriddo v Garra Constructions Pty Ltd [1971] VR 289 …. 12.16 Gibson Motorsport Merchandise Pty Ltd v Forbes [2006] FCAFC …. 8.16 Gigliotti Constructions Pty Ltd v Jalili [1998] NSWSC 182 …. 10.8 Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 …. 8.5, 9.18 Giles v GRS Constructions Pty Ltd (2002) 81 SASR 575 …. 18.39 Gimtak v Cathie [2001] VSC 88 …. 11.4 Gino D’Alessandro Constructions Pty Ltd v Powis [1987] 2 Qd R 40 …. 3.6, 12.7 Giumelli v Giumelli (1999) 196 CLR 101 …. 3.8 Giustiniano Nominees Pty Ltd v Minister for Works (1995) 16 WAR 87 …. 18.37 Glenbrook Nominees Pty Ltd and City of Perth [2009] WASAT 3 …. 19.3 Gloucestershire County Council v Richardson (t/as W J Richardson & Son)

[1969] 1 AC 480 …. 4.5 Glynn v Margetsen & Co [1893] AC 351 …. 2.5 GNB Battery Technologies Ltd v Nichicon (Singapore) Pte Ltd [1994] Vic SC 353 …. 8.13 Gold Coast Oil Co Pty Ltd v Lee Properties Pty Ltd (1984) 1 BCL 63 …. 4.10, 6.1, 12.6 Goldflax Pty Ltd v Reefield Pty Ltd [1999] QSC 211 …. 18.45 Goldtaper Pty Ltd v Berda Ltd [2001] QSC 104 …. 4.6 Goliath Portland Cement Company Ltd v Gardiner Willis & Associates (a firm) [1996] Vic SC 369 …. 18.10 Gomm v England (1899) 5 ALR (CN) 78 …. 5.14 Goodman Holdings v Hughes [2009] NSWSC 682 …. 18.43 Goodwin v La Macchia [1999] NSWSC 1184 …. 7.9 — v Yee Holdings Pty Ltd (1997) 8 BPR 15,795 …. 19.6 Goodwins Jardine & Co v Brand & Son (1905) 13 SLT 329 …. 14.15 Goodyear v Mayor, Aldermen & Burgesses of the Borough of Weymouth and Melcombe Regis (1865) 35 LJCP 12 …. 10.9 Gorczynski v Leichhardt Municipal Council (2001) 113 LGERA 422 …. 18.10 Gordian Runoff Ltd v Westport Insurance Corporation [2010] NSWCA 57 (2010) 267 ALR 74 …. 18.41 Gordon v Australian Securities and Investments Commission [2002] FCA 1155 …. 18.37 — v Body Corporate Strata Plan 3023 (2004) 15 VR 557 …. 19.46, 19.49 Gorringe v Irwell India Rubber and Gutta Percha Works (1886) 34 Ch D 128 …. 13.4 Goss v Lord Nugent (1833) 5 B & Ad 58; 110 ER 713 …. 10.8 Government of Newfoundland v Newfoundland Railway Co (1888) 13 App Cas 199 …. 13.5 Graham v K D Morris & Sons Pty Ltd [1974] Qd R 1 …. 19.6

— v Portacom New Zealand Ltd [2004] 2 NZLR 528 …. 14.14 Graham Evans Pty Ltd v Stencraft Pty Ltd [1999] FCA 1670 …. 2.5 — v — [1999] FCA 290 …. 18.3 Graham H Roberts Pty Ltd v Maurbeth Investments Pty Ltd [1974] 1 NSWLR 93 …. 4.14 Grahame Allen Earth-moving Pty Ltd v Woodwark Bay Development Corp Ltd (1988) 13 Aust Cons LR 14 …. 8.5 Granit SA v Benship International Inc [1994] 1 Lloyd’s Rep 526 …. 3.3 Great Northern Railway Co v Witham (1873) LR 9 CP 16 …. 5.12 Greaves and Co (Contractors) Ltd v Baynham Meikle and Partners [1975] 1 WLR 1095 [1975] 3 All ER 99 …. 4.4, 4.7, 4.9, 11.6, 17.19 Greenberg v Meffert (1985) 18 DLR (4th) 768 …. 9.15 Grocon Constructors Pty Ltd v Planit Cocciardi Joint Venture [2009] VSC 339 …. 14.5 Grocon Constructors v Planit Cocciardi Joint Venture (No 2) (2009) 26 VR 172 …. 8.7 Groutco (Aust) Pty Ltd v Prince Constructions Pty Ltd (1986) 3 BCL 372 …. 14.14 Gruzman Pty Ltd v Percy Marks Pty Ltd (1989) 99 FLR 116 …. 17.9 Gunnersen v Henwood [2011] VSC 440 …. 16.5, 17.13, 17.15 19.26

H H Dakin & Co Ltd v Lee [1916] 1 KB 566 …. 8.1 H Dengate and Son, Re (1921) 21 SR (NSW) 619 …. 13.4 Haddon v Lynch [1911] VLR 230 …. 19.16 — v — [1911] VLR 5 …. 19.18 Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145 …. 11.3, 12.18, 14.11 Half Court Tennis Pty Ltd v Seymour (1980) 53 FLR 240 …. 17.9

Halki Shipping Corporation v Sopex Oils Ltd (The Halki) [1997] 3 All ER 833 …. 18.28 Hall v Busst (1960) 104 CLR 206 …. 3.1 Halliday v Nevill (1984) 155 CLR 1 …. 19.1 Halsey v Esso Petroleum Co Ltd [1961] 1 WLR 683; [1961] 2 All ER 145 …. 19.11, 19.16, 19.18, 19.26 Hamilton v Joyce [1984] 3 NSWLR 279 …. 19.33 Hammond v Wolt [1975] VR 108 …. 18.29 Hampton v Glamorgan County Council [1917] AC 13 …. 14.4, 14.16 Hanak v Green [1958] 2 QB 9 …. 13.5 Hancock Prospecting Pty Ltd v BHP Minerals Pty Ltd [2002] WASC 224 …. 2.5 — v Wright Prospecting Pty Ltd (2012) 294 ALR 550; [2012] WASCA 216 …. 3.1, 13.1 Hancock v B W Brazier (Anerley) Ltd [1966] 1 WLR 1317 …. 4.5, 4.9 Hannan v Fyfe and Fyfe [1957] SASR 90 …. 2.19, 4.9 Hansen v Gloucester Developments Pty Ltd [1992] 1 Qd R 14 …. 19.7, 19.67 Hardie v Cuthbert (1988) 4 BCL 279 …. 2.20 Hargrave v Goldman (1963) 110 CLR 40 …. 19.18 Harkness v Mayor of Maryborough (1872) 3 AJR 26 …. 13.8 Harmon CFEM Facades (UK) Ltd v Corporate Officer of the House of Commons (1999) 67 Cons LR 1 …. 5.1, 5.3 Harper v GN Haden & Sons Ltd [1933] Ch D 298 …. 19.9 Harris v Briggs (1994) Aust Torts Rep 81301 …. 16.5 — v Carnegie’s Pty Ltd (1917) 23 ALR 75 …. 19.26 — v — [1917] VLR 95 …. 19.11, 19.16, 19.22 Harrison v Southwark and Vauxhall Water Co [1891] 2 Ch 409 …. 19.22 Harrod v Palyaris Construction Pty Ltd (1973) 8 SASR 54 …. 2.8, 2.10

Harrop v Thompson [1975] 1 WLR 545 …. 5.14 Hart v Duke (1862) 32 LJQB 55 …. 18.39 Harvey v Lawrence (1867) 15 L T 571 …. 9.26 Hawke v Lagal (1913) 16 WALR 6 …. 8.6 Hawker Noyes Pty Ltd v NSW Egg Corp (SC (NSW), unreported 11 November 1988) …. 9.15 Hawker Pacific Pty Ltd v Casair Pty Ltd [2011] WASC 152 …. 2.17, 2.18 Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185 …. 19.22, 19.23 Hawkins v Clayton (1988) 164 CLR 539 …. 4.2, 11.8 Haxton v Equuscorp Pty Ltd (2010) 28 VR 499 …. 8.10 Hayes v Cable [1961] NSWR 610 …. 3.5 Haynes v Sutherland Shire Council (1996) 83 WN (Pt 1) NSW 428 …. 7.10 Hayter v Nelson and Home Insurance Co [1990] 2 Lloyd’s Rep 265 …. 18.28 Hayward v Planet Projects Pty Ltd [2000] NSWSC 1105 …. 3.4 Heart Research Institute Ltd v Psiron Ltd [2002] NSWSC 646 …. 7.10, 18.12, 18.17 Heather v Vita Pacific Ltd (1996) 6 Tas R 52 …. 1.2 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 …. 5.8, 8.13, 8.15, 14.8 Heery v Criminal Justice Commission [2001] 2 Qd R 610 …. 18.6 Heimann v Commonwealth of Australia (1938) 38 SR (NSW) 691 …. 4.1 Hela Pharma AB v Hela Pharma Australasia Ltd [2005] BCL 202 …. 13.8 Helicopter Sales (Australia) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1 …. 4.5, 11.2, 14.16 Helstan Securities Ltd v Hertfordshire County Council [1978] 3 All ER 262 …. 13.11, 13.12 Hely v Sterling [1982] VR 246 …. 7.6, 7.9

Henderson’s Automotive Technologies Pty Ltd (in liq) v Flaton Management Pty Ltd (2011) 32 VR 539; [2011] VSCA 167 …. 8.4 Hennessey Glass & Aluminium Pty Ltd v Watpac Australia Pty Ltd [2002] QCA 24 …. 2.17 Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] EWCA Civ 814 …. 10.11 Henry Kendall & Sons (a firm) v William Lillico & Sons Ltd [1969] 2 AC 31 …. 2.13 Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 …. 11.16 Hercules Motors Pty Ltd v Schubert (1953) 53 SR (NSW) 301 …. 14.6 Hescorp Italia SpA v Morrison Construction Ltd (2000) 75 Con LR 51 …. 1.1 Hewett v Court (1983) 149 CLR 639; 57 ALJR 211 …. 11.17, 14.14 Hewitt v Municipality of Broken Hill (1893) 10 WN (NSW) 85 …. 9.26 Heyman v Darwins Ltd [1942] AC 356 …. 18.33 Hickman & Co v Roberts [1913] AC 229 …. 9.12 Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd (2009) 26 VR 112 …. 8.7 Hicks v Lake Macquarie City Council (No 2) (1992) 77 LGRA 269 …. 16.11 Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 …. 2.5, 2.18 Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (1996) 150 ALR 54 …. 18.32 — v — (1997) 145 ALR 500 …. 18.33 — v — (2000) 173 ALR 263 …. 11.4 Higgins v Betts [1905] 2 Ch 210 …. 19.32 — v Board of Land and Works (1895) 16 ALT 158 …. 10.13 — v Dawson [1902] AC 1 …. 2.14 Highfield Property Investments Pty Ltd v Commercial and Residential Developments (SA) Pty Ltd [2012] SASC 165 …. 2.11, 2.20

Highgrove Bathrooms Townsville Pty Ltd v Serobotto Nominees Pty Ltd [2011] QSC 109 …. 1.3 HIH Casualty and General Insurance (NZ) Ltd (in liq) v General Reinsurance Australia Ltd [2004] NSWSC 659 …. 18.45 Hill & Sons v Edwin Showell & Sons Pty Ltd (1918) 87 LJKB 1106 …. 12.18 Hill v Van Erp (1997) 188 CLR 159 …. 17.19 Hillas and Co Ltd v Arcos Ltd (1932) 147 LT 503 …. 2.5, 3.1, 7.9 Hillcoat v Keymon Pty Ltd [2002] QCA 527 …. 19.54 Hoare & Co v McAlpine [1923] 1 Ch 167 …. 19.18 Hodgson and Lee Ltd v A P Little Pty Ltd (CA (NSW), 10 March 1977, unreported) …. 7.11 Hoenig v Isaacs [1952] 2 All ER 176 …. 8.1, 8.2 Hogan v BPW Transpec Pty Ltd (No 2) [2013] VSC 372 …. 13.5 Holland-Stolte Pty Ltd v Bill Acceptance Corp Ltd (1992) 11 Aust Cons LR 181 …. 13.3, 13.7 — v Murbay Pty Ltd (1991) 105 FLR 304 …. 18.21, 18.39 Hollis v Vabu Pty Ltd (2001) 207 CLR 21 …. 19.54 Holloway v Newcastle City Council [2013] NSWDC 62 …. 19.6, 19.11, 19.14 Hollywood Homes Pty Ltd, In the matter of [1964] SASR 116 …. 14.5 Hollywood Silver Fox Farm Ltd v Emmett [1936] 1 All ER 825 …. 19.19 Holman Construction Ltd v Delta Timber Ltd [1972] NZLR 1081 …. 5.8 Homburg Houtimport BV v Agrosin Private Ltd [2003] 2 WLR 711 …. 2.5 Hometeam Constructions Pty Ltd v McCauley [2005] NSWCA 303 …. 6.1 Hong Jing Co Ltd v Zhuhai Kwok Yuen Investment Co Ltd [2013] 1 HKLRD 441 …. 3.3 Hoogerdyk v Condon (1990) 22 NSWLR 171 …. 18.10 Hooker Constructions Pty Ltd v Chris’s Engineering Contracting Co [1970] ALR 821 …. 12.13

Hooker Town Developments Pty Ltd v Director of War Service Homes (1973) 47 ALJR 320 …. 3.11 Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194 …. 3.3, 18.16 Hoppe v Titman [1996] 1 WLR 841 …. 8.6 Horton v Jones (No 2) (1939) 39 SR (NSW) 305 …. 8.9 Hortons’ Estate Ltd v James Beattie Ltd [1927] 1 Ch 75 …. 19.32 Hosie v Robison (1874) 5 AJR 176 …. 4.7 Hoskins v Woodham [1938] 1 All ER 692 …. 4.9 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 …. 4.2 Hounslow London Borough Council v Twickenham Garden Developments Ltd [1971] Ch 233 …. 4.14, 9.13, 12.14, 17.5 Howard v Pickford Tool Co Ltd [1951] 1 KB 417 …. 12.7 Howarth v Armstrong (1897) 77 LT 62 …. 19.44 Howtrac Rentals Pty Ltd v Thiess Contractors (NZ) Ltd [2000] VSC 415 …. 8.9 Huddart Parker Ltd v The Ship Mill Hill (1950) 81 CLR 502 …. 18.44 Hudson Crushed Metals Pty Ltd v Henry [1985] 1 Qd R 202 …. 12.6 Hughes v Dormley Pty Ltd [2001] WASC 83 …. 12.6 Hughes Aircraft Systems International v Airservices Australia (1997) 146 ALR 1 …. 5.3 Hughes Bros Pty Ltd v Telede Pty Ltd (1989) 7 BCL 210 …. 2.8, 12.8, 12.11 — v — (1991) 7 BCL 204 …. 4.2, 4.14 — v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 10 BCL 355 …. 12.12 Humphries v Southern Cross Ski Club [2012] VSC 232 …. 4.14 Hungerfords v Walker (1989) 171 CLR 125 …. 11.4, 16.8 Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10 …. 16.12

Hunter v Canary Wharf Ltd [1997] AC 655; [1997] 2 All ER 426 …. 19.9, 19.18, 19.26 — v Council of Municipality of West Maitland (1923) 23 SR (NSW) 420 …. 8.1, 8.4 Hurlock v Council of the Shire of Johnstone [2002] QCA 256 …. 14.13 Hutchens v Deauville Investments Pty Ltd (1986) 68 ALR 367 …. 13.7 Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd (2002) 18 BCL 122; [2001] NSWCA 313 …. 11.4, 11.5, 19.67 Hydraulic Engineering Co Ltd v McHaffie Goslett & Co (1878) 4 QBD 67 …. 14.11 Hydrofibre Pty Ltd v Australian Prime Fibre Pty Ltd [2013] QSC 163 …. 4.2 Hyne and Sons v Podosky [1905] St R Qd 147 …. 13.4

I Iacullo v Remly Pty Ltd [2012] NSWSC 191 …. 1.1 Ian Delbridge Pty Ltd v Warrandyte High School Council [1991] 2 VR 545 …. 9.26 IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 …. 18.12, 18.32, 18.33 Ibrahim v Davis [2013] VSCA 238 …. 16.5, 16.6 Idoport Pty Ltd (in liq) (recs apptd, Re) [2012] NSWSC 524 …. 13.10 Iezzi Constructions Pty Ltd v Currumbin Crest Development Pty Ltd [1995] 2 Qd R 350; (1994) 13 ACLR 29 …. 8.3, 8.8, 14.9 Igloo Regeneration (General Partner) Ltd v Powell Williams Partnership [2013] EWHC 1718 …. 16.6 Ikic v Evans (1989) 7 BCL 114 …. 19.16 Imperial Leatherware Co Pty Ltd v Macri & Marcellino Pty Ltd (1991) 22 NSWLR 653 …. 18.33, 18.35, 18.40 Inala Enterprises Pty Ltd v Associated Enterprises Pty Ltd [1960] Qd R 562 ….

17.9 Independent Broadcasting Authority v EMI Electronics Ltd and BICC Construction Ltd (1980) 14 BLR 9 …. 4.5, 4.7, 14.8, 14.16 Independent Grocers Co-operative Ltd v Noble Lowndes Superannuation Consultants Ltd (1993) 60 SASR 525 …. 5.5 Indigo Mist Pty Ltd v Palmer [2012] NSWCA 239 …. 17.13 Industrial Affairs, Minister for v Civil Tech Pty Ltd [1999] SASC 22 …. 18.21, 18.39 — v — (1998) 70 SASR 394; (1998) 196 LSJS 247 …. 18.45 — v — (1997) 69 SASR 348 …. 18.45 Industrial Conveying (Aust) Pty Ltd v SKM Recycling Pty Ltd [2012] VSC 278 …. 8.13 Inform Design and Construction Pty Ltd v Boutique Homes Melbourne Pty Ltd (2008) 77 IPR 523; [2008] FCA 912 …. 17.9 Inglis v Buttery (1878) 3 App Cas 552 …. 2.15 Inntrepreneur Pub Co v East Crown Ltd [2000] 2 Lloyd’s Rep 611 …. 2.1 Insight SRC IP Holdings Pty Ltd v Australian Council for Educational Research Ltd (2013) 101 IPR 484; [2013] FCAFC 62 …. 13.7 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11, 110 …. 1.2 Interbulk Ltd v Aiden Shipping Co Ltd [1984] 2 Lloyd’s Rep 66 …. 18.39 International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 15 …. 2.1 International Fibre Syndicate v Dawson (1901) 84 LT 803 …. 13.7 Interoffice Telephones Ltd v Robert Freeman Co Ltd [1958] 1 QB 190 …. 12.18 Interwest Hotels Pty Ltd (in liq), Re (1993) 12 ACSR 78 …. 2.16 Invercargill City Council v Hamlin [1994] 3 NZLR 513 …. 11.8, 16.5 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98 …. 2.5, 2.16

Ipex ITG Pty Ltd (in liq) (recs apptd) v State of Victoria [2012] VSCA 201 …. 5.3 Irwin v Poole (1953) 70 WN (NSW) 186 …. 14.6 Isca Construction Co Pty Ltd v Grafton City Council (1962) 8 LGRA 87 …. 17.5

J J & J C Abrams v Ancliffe [1978] 2 NZLR 420 …. 5.8, 5.11, 16.5 J M Hill & Sons Ltd v London Borough of Camden (1980) 18 BLR 31 …. 12.9, 12.14 J Matheson and Co Ltd v Invercargill City Corp [1975] 2 NZLR 226 …. 6.4 J W Esson & Co v Murray (1904) 23 NZLR 802 …. 14.15 Jackson Stransfield and Sons v Butterworth [1948] 2 All ER 558 …. 3.5 Jacobsen Holdings Ltd v Drexel [1986] 1 NZLR 324 …. 19.6 Jaensch v Coffey (1984) 155 CLR 549 …. 16.5 Jaggard v Sawyer [1995] 1 WLR 269; [1995] 2 All ER 189 …. 19.3, 19.26 James Birrell Mack and Partners v Evans (1984) 1 BCL 344 …. 8.2 James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 …. 2.18 Jandon Constructions v Lyons (1999) 16 BCL 309 …. 11.5 Jarvis v Pitt Ltd (1935) 54 CLR 506 …. 5.10, 5.12 JEA Holdings (Aust) Pty Ltd v Registrar-General (NSW) [2013] NSWSC 587 …. 19.29, 19.32 Jeffries v Williams (1850) 5 Exch 792; 155 ER 347 …. 19.58 Jemena Gas Networks (NSW) Ltd v Mine Subsidence Board (2011) 85 ALJR 666 …. 19.50 Jennings v Tavener [1955] 1 WLR 932 …. 4.9 Jeune v Queens Cross Properties Ltd [1974] 1 Ch 97 …. 11.17

JJ Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435 …. 14.6 JM Kelly (Project Builders) Pty Ltd v Toga Development No 31 Pty Ltd [2008] QSC 311 …. 9.12, 15.17 Jobbins v Capel Court Corporation (1989) 25 FCR 226 …. 11.8 Jobson v Johnson [1989] 1 WLR 1026 …. 6.3, 6.6 John Holland Construction & Engineering Pty Ltd v Kvaerner R J Brown Pty Ltd & C M P S & F Pty Ltd (1996) 13 BCL 262 …. 17.10 — v Majorca Projects Pty Ltd (1996) 13 BCL 235; [1995] VSC 26 …. 9.10, 9.11, 9.12, 15.17, 17.1, 17.4, 17.5, 17.13 — v Schneider Electric Buildings Australia Pty Ltd [2010] QSC 159 …. 9.12 — v World Services and Construction Pty Ltd (1993) 12 Aust Cons LR 116 …. 4.1, 4.2, 4.6, 10.8 John Holland Pty Ltd v Hunter Valley Earthmoving Co Pty Ltd [2002] NSWSC 131 …. 18.35, 18.37, 18.40 John Nelson Developments Pty Ltd v Focus National Developments Pty Ltd [2010] NSWSC 150 …. 8.5 John R Keith Pty Ltd v Multiplex Constructions (NSW) Pty Ltd [2002] NSWSC …. 1.3 Johns and Son v Webster and Tonks [1916] NZLR 1020 …. 9.14 Johns v Delaney (1890) 16 VLR 729 …. 19.50, 19.53, 19.57, 19.60 Johnson v Agnew [1980] AC 367 …. 12.8 — v Perez (1988) 166 CLR 351 …. 11.7, 11.10 Johnson Matthey Ltd v AC Rochester Overseas Corp (1990) 23 NSWLR 190 …. 2.6 Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 212 …. 16.2 — v — (2003) Aust Torts Reports 81-692 …. 8.15 Johnston Mathey Ltd v AC Rochester Overseas Corporation (1990) 23 NSWLR 190 …. 2.17 Jones v Bartlett (2000) 75 ALJR 1 …. 19.54

— v North (1875) LR 19 Eq 426 …. 5.14 — v Stroud District Council [1998] 1 All ER 5 …. 11.8, 11.14 Joscelyne v Nissen [1970] 2 QB 86 …. 3.11 Jotham Property Holdings Pty Ltd v Cooperative Builders Pty Ltd [2013] VSC 552 …. 8.7 Jovista Pty Ltd v Pegasus Gold Australia Pty Ltd (1999) 149 FLR 199; 8 NTLR 171 …. 14.5 Jukes v Larter [2012] NSWSC 369 …. 19.62 Junior Books Ltd v Veitchi Co Ltd [1983] 1 AC 520 …. 14.8, 14.16

K K M Young v Cosgrove [1963] NZLR 967 …. 5.8 K/S Norjarl A/S v Hyundai Heavy Industries Co Ltd [1991] 3 WLR 1025 …. 18.30, 18.31, 18.36 Kakara Estate Ltd v Savvy Vineyards 3552 Ltd [2013] NZCA 101 …. 13.8 Kakavas v Crown Melbourne Ltd [2013] HCA 25 …. 7.14 Kallis Hire Pty Ltd v Consulere Design and Construction Pty Ltd [1990] VSC 161; 10 Aust Cons LR 73 …. 12.17, 14.14 Kalmac Property Consultants Ltd v Delicious Foods Ltd [1974] 2 NZLR 631 …. 19.22 Kamel v Australia Brick Co Pty Ltd [2001] NSWSC 133 …. 18.37 Kane Constructions Pty Ltd v Sopov (2006) 22 BCL 92; [2005] VSC 237 …. 8.8, 9.11 Karacominakis v Big Country Developments Pty Ltd (2000) 10 BPR 18,235; [2000] NSWCA 313 …. 11.10 Karevski v SSS Builders [2002] VCAT 608 …. 18.49 Kaye v Hosier [1972] 1 All ER 121 …. 11.1 Kazas & Associates Pty Ltd v Multiplex (Mountain Street) Pty Ltd [2002] NSWSC 840 …. 19.22, 19.23

Kaze Constructions Pty Ltd v Housing Indemnity Australia Pty Ltd (1990) 10 BCL 63 …. 16.8 KBH Constructions Pty Ltd v PSD Development Corp Pty Ltd (1990) 21 NSWLR 348; (1991) 7 BCL 183 …. 6.12, 9.15, 14.10 Keams v Fair Trading Tribunal of NSW [2001] NSWSC 951 …. 18.37 Kebewar Pty Ltd v Harkin (1987) 9 NSWLR 738 …. 19.42, 19.51 Keddell v Regarose Pty Ltd [1995] 1 Qd R 172 …. 19.67 Keegan v Young [1963] NZLR 720 …. 19.58 Keeley v State of Vic [1964] VR 344 …. 8.9 Kelly v Caledonian Coal Co (1898) 19 LR (NSW) 1 …. 5.12 — v Galafassi [2013] NSWSC 680 …. 6.10 Kemp v Baerselman [1906] 2 KB 604 …. 13.7 — v Rose (1858) 1 Giff 258; 65 ER 910 …. 9.11 Kennedy v Collings Construction Co Pty Ltd (1989) 7 BCL 25 …. 3.10, 3.11, 11.15, 12.5, 12.15 Kenneth McMahon & Partners Pty Ltd v Domain Investments Pty Ltd (1973) 47 ALJR 240 …. 9.23 Ketteman v Hansel Properties Ltd [1988] 1 Al ER 38 …. 11.8 Kev Leahman Earthmovers Pty Ltd v Hammond Villagers Pty Ltd (1998) 19 Qld Lawyer Reps 10 …. 8.9 Khoompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 …. 12.3, 12.5 Khoury v Government Insurance Office of NSW (1983) 165 CLR 622 …. 12.8 Kidman v Page [1959] Qd R 53 …. 19.18, 19.25 Kimberley v Dick (1871) LR 13 Eq 1 …. 9.11 King v Stolberg, Gower et al (1969) 8 DLR (3d) 362 …. 17.19 Kinnane v Zee Homes Pty Ltd [2003] SASC 187 …. 18.45 Kira Holdings Pty Ltd v Liverpool City Council [2004] NSWLEC 81 …. 18.11

Kirsch v HP Brady Pty Ltd (1937) 58 CLR 36; [1937] HCA 20 …. 9.15, 9.22, 9.23 KL Tractors Ltd, Re [1954] VLR 505 …. 13.5 Kleinwort Benson Ltd v Malaysia Mining Corp Bhd [1989] 1 All ER 785 …. 5.6 Knorr v Commonwealth Scientific and Industrial Research Organisation (CSIRO) (No 2) [2012] VSC 268 …. 18.6 Kocak v Wingfoot Australia Partners [2012] VSCA 259 …. 18.41 Kojima v Australian Chinese Newspapers Pty Ltd [2000] NSWSC 1153 …. 18.37 Kollman v Watts [1963] VR 39 …. 14.11 Kolodziejczyk v Grandview Pty Ltd [2002] NSWCA 267 …. 19.54 Kondis v State Transport Authority (1984) 154 CLR 672 …. 19.54 Korin v McInnes [1990] VSC 267 …. 18.37, 18.39 Kraemers v Attorney-General (Tas) [1966] Tas SR 113 …. 19.16 Kriketos v Livschitz (2009) 14 BPR 26,717; [2009] NSWCA 96 …. 2.18 Kronenberg v Bridge [2013] TASSC 57 …. 8.3 Krulow v Glamorgan Spring Bay Council [2013] TASFC 11 …. 8.6 Kudeweh v T & J Kelleher Builders Pty Ltd [1990] VR 701 …. 18.30 Kvaerner Oil & Gas Pty Ltd v Egis Consulting Australia Ltd [2003] NSWSC 36 …. 18.32

L L G Thorne & Co Pty Ltd v Thomas Borthwick & Sons (A/Asia) Ltd (1955) 56 SR (NSW) 81 …. 2.15 L Schuler & Co v Wickman Machine Tool Sales Ltd [1974] AC 235 …. 2.18 L U Simon Builders Pty Ltd v H D Fowles [1992] 2 VR 189 …. 8.5, 9.18, 18.1 La Rosa v Nudrill Pty Ltd [2013] WASCA 18 …. 4.3 Labracon Pty Ltd v Cuturich [2013] NSWSC 97 …. 13.7

Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273 …. 17.9 Lagan Navigation Co v Lambeg Bleaching, Dyeing and Finishing Co Ltd [1927] AC 226 …. 19.27 Lahodink v Pace [2013] NSWSC 512 …. 7.9 Lamac Developments Pty Ltd v Devaugh Pty Ltd [2002] WASCA 245 …. 18.45 Lambert v Lewis [1978] 1 Lloyd’s Rep 610 …. 14.6 Lamont v Heron (1970) 126 CLR 239 …. 5.10 Lamos Pty Ltd v Hutchison (1984) 3 BPR 9350 …. 19.44 Lamprell v Guardians of the Poor of the Billericay Union (1849) 18 LJ Ex 282 …. 8.5, 9.18 Lancashire and Cheshire Association of Baptist Churches Inc v Howard & Seddon Partnership (a firm) [1993] 3 All ER 467 …. 16.2, 16.5 Lang & Morrison-Knudson v Aegon (1997) 86 BLR 70 …. 12.15 Lang Parade Pty Ltd v Peluso [2005] QSC 112 …. 19.6 Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd [2011] NSWSC 1331 …. 18.46 Latham v Foster’s Australian Fibres Ltd [1926] VLR 427 …. 6.4 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 …. 12.5, 12.6 Lax v Glenmore Pty Ltd (1969) 90 WN (Pt 1) (NSW) 703 …. 6.4 Lazaway Pools & Spas Pty Ltd v Caldarera (1996) 12 VAR 207 …. 2.20 Le Mans Grand Prix Circuits Pty Ltd v Ilidis [1998] 4 VR 661 …. 2.5 Leading Edge Events Australia Pty Ltd v Km Te Kanawa (2007) Aust Contract R 90-250; [2007] NSWSC 228 …. 5.5, 8.16 LED Builders Pty Ltd v Eagle Homes Pty Ltd (1996) 13 BCL 320 …. 17.9 Leda Holdings Pty Ltd v Vasilakis Holdings Pty Ltd; MEPC Australia Ltd v Vasilakis Holdings Pty Ltd (1997) Q ConvR 54-489 …. 18.37 Lee Gleeson Pty Ltd v Sterling Estates Pty Ltd (1991) 23 NSWLR 571 …. 3.6

Lee Kong Nelder Nominees Pty Ltd v John Holland Engineering & Construction Pty Ltd [1998] WASCA 135 …. 15.12 Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 …. 9.15 Legione v Hateley (1983) 152 CLR 406 …. 2.11 Leibler v Air New Zealand Ltd (No 2) [1999] 1 VR 1 …. 3.11 Leichhardt Municipal Council v Montgomery [2007] HCA 6 …. 19.9 Leighton Contractors (SA) Pty Ltd v Hazama Corp (Australia) Pty Ltd (1991) 56 SASR 47 …. 18.10 Leighton Contractors Pty Ltd v East Gippsland Catchment Management Authority (2001) 17 BCL 35; [2000] VSC 26 …. 2.14, 8.8, 8.9, 8.11 — v Kilpatrick Green Pty Ltd [1992] 2 VR 505 …. 18.42, 18.45 — v Page Kirkland Management Pty Ltd [2006] FCA 288 …. 8.13 — v Public Transport Authority of Western Australia (No 6) [2008] WASC 193 …. 7.1, 7.3, 7.11, 7.12 Lennon v Scarlett & Co (1921) 29 CLR 499 …. 12.6 Lester v White [1992] 2 NZLR 483 …. 11.4 Lester-Travers v City of Frankston [1970] VR 2 …. 19.16 Letizia Building Co Pty Ltd v Redglow Asset Pty Ltd [2013] WASC 171 …. 5.6 Lewis Construction (Engineering) Pty Ltd v Southern Electric Authority of Queensland (1976) 11 ALR 305 …. 7.12 Lewis v Cook [2000] NSWSC 191 …. 3.8 — v Lamb [2012] NSWSC 244 …. 13.7 Liaweena (NSW) Pty Ltd v McWilliams Wines Pty Ltd [1991] ASC 56,616 …. 2.13 Lidcombe Developments Pty Ltd v Warringal Shire Council (1980) 41 LGRA 420 …. 9.22 Liebe v Molloy (1906) 4 CLR 347 …. 10.8, 10.12 Lightsource Technologies Australia Pty Ltd v Pointsec Mobile Technologies AB

[2011] ACTSC 59 …. 18.33 Limin James Chen and Mei Fang Xu v Kevin McNamara and Son Pty Ltd [2009] VSC 294 …. 10.13 Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 …. 13.8, 13.10, 13.12, 18.1 Lines MacFarlane & Marshall v Fletcher Construction Australia Ltd [2000] VSC 358 …. 17.13 Linfox Transport (Aust) Pty Ltd v Arthur Yates & Co Ltd [2004] NSWSC …. 1.3 Linklaters Business Services (formerly Hackwood Services Company) v Sir Robert McAlpme Ltd [2010] EWHC 1145 …. 16.11 Lintest Builders v Roberts (1980) 13 BLR 38 …. 11.1 Lister v Hong [2006] NSWSC 1135 …. 19.14 — v Romford Ice & Cold Storage Co Ltd [1957] 1 All ER 125 …. 17.10 Litchfield-Speer v Queen Anne’s Gate Syndicate (No 2) Ltd [1919] 1 Ch 407 …. 19.32 Liverpool & London and Globe Insurance Co Ltd v Hartley & Ford [1927] VLR 523 …. 13.4 Livesey v NSW Bar Association (1983) 151 CLR 288 …. 18.37 Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 …. 11.3 LJP Investments Pty Ltd v Howard Chia Investments (1989) 24 NSWLR 491 …. 19.6, 19.51, 19.61 Lloyds Bank Ltd v Dalton [1942] Ch 466 …. 19.57 LMI Australia Pty Ltd v Baulderstone Hornibrook Pty Ltd (2001) 18 BCL 57 …. 2.2 Lockhart v Collingwood Co-Op Dairy Co Ltd [1920] NZLR 412; [1920] GLR 521 …. 4.16, 8.5 Lodder v Slowey [1904] AC 442 …. 8.3, 8.9, 12.8, 12.18 Logounov v Federal Commissioner of Taxation [2000] FCA 1745 …. 18.37

Lombok Pty Ltd v Supetina Pty Ltd (1987) 14 FCR 226 …. 12.1 London Congregational Union Inc v Harriss & Harriss (a firm) [1985] 1 All ER 335 …. 11.8, 11.10 London Export Corp Ltd v Jubilee Coffee Roasting Co Ltd [1958] 1 WLR 271 …. 18.37 — v — [1958] 1 WLR 661 …. 18.39 Londsdale Investments Pty Ltd v OM (Manganese) Ltd (No 3) [2012] WASC 185 …. 8.13, 17.19 Lord Mayor etc of Sheffield v Barclay …. 4.18 Louth v Diprose (1992) 175 CLR 621 …. 7.14 Love v Brien [2012] WASC 457 …. 3.1 Lowden v Lewis [1989] Tas R 254 …. 4.9, 16.8 Lubhman Fidelities and Investments v South Pembrook Shire District Council (1986) 33 BLR 39 …. 9.12 Lucantonio v Kleinert [2011] NSWSC 753 …. 16.7 Lucas Drilling Pty Ltd v Armour Energy Ltd [2013] QCA 111 …. 9.25 Lucas Stuart Pty Ltd v Council of the City of Sydney [2005] NSWSC 840 …. 8.7 Lucas v Borough of Drummoyne (1895) 16 LR (NSW) 55 …. 8.1, 8.4, 8.10 Lucke v Cleary [2011] SASFC 118 …. 3.1 Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635; [2008] HCA 27 …. 8.4, 8.8 Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 …. 12.6 Lynch v Thorne [1956] 1 WLR 303 …. 4.9 Lyon v Creati (1892) 18 VLR 629 …. 13.9 Lyons v Jandon Constructions (a firm) [1998] WASC 222 …. 11.15 — v — [1998] WASC 224 …. 11.5

— v Winter (1899) 25 VLR 464 …. 19.42 Lysaght Building Solutions Pty Ltd (t/as Highline Commercial Construction) v Blanalko Pty Ltd (No 3) [2013] VSC 435 …. 8.5, 18.44

M M A Sassoon and Sons Ltd v International Banking Corp [1927] AC 711 …. 2.8 M R Hornibrook (Pty) Ltd v Eric Newham (Wallerawang) Pty Ltd (1971) 45 ALJR 523 …. 3.11 M T Associates Pty Ltd v Aqua-Max Pty Ltd [1999] VSC 286 …. 18.37 McCaffrey v Council of the Shire of Port Stephens (1992) 11 BCL 68 …. 18.32 McClelland v Burning Palms Surf Life Saving Club (2002) 191 ALR 759 …. 18.37 McCourt v Cranston [2012] WASCA 60 …. 7.4 McCulloch v Mackie (1868) 5 WW & a’B (L) 1 …. 8.10 McCutcheon v David McBrayne Ltd [1964] 1 WLR 125 …. 2.13 McDonald v Dennys Lascelles Limited (1933) 48 CLR 457 …. 8.3, 12.8 — v Mayor etc of Workington (1893) 9 TLR 230 …. 8.12 McDonnell & East Ltd v McGregor (1936) 56 CLR 50 …. 13.5 McElroy v Australian Forge and Engineering Co Pty Ltd (1899) 24 VLR 953 …. 13.9 McFadzean v Construction, Forestry, Mining and Energy Union [2007] VSCA 289 …. 19.9 McFee Engineering Pty Ltd (in liq) v CBS Constructions Pty Ltd (1979) 44 FLR 340 …. 5.10 McGellin v Mount King Mining NL (1998) 144 FLR 288 …. 5.6 McGrath v Campbell [2006] NSWCA 180 …. 19.52 McKay v Hudson [2001] WASCA 387 …. 11.10 Mackay v Dick (1881) 6 App Cas 251 …. 4.6

Mackay Sugar Ltd v Sugar Australia Pty Ltd [2013] QSC 233 …. 18.41 McKeand v Thomas (2006) 12 BPR 23; [2006] NSWSC 1028 …. 4.14 McKell v Rider (1908) 5 CLR 480 …. 19.16 McKenry v White [2003] NSWSC 131 …. 1.3 McKone v Johnson [1966] 2 NSWR 471 …. 4.7 McLachlan v Nourse [1928] SASR 230 …. 8.4 MacMahon Construction Co v Crestwood Estates [1971] WAR 162 …. 6.8 MacPherson & Kelley v Kevin J Prunty & Associates [1983] VR 573 …. 17.10 McQuade v Solchek Pty Ltd (1988) 5 BCL 131 …. 4.7 Macquarie Generation v CNA Resources Ltd [2001] NSWSC 1040 …. 5.7 MacRobertson Miller Airline Services v Commr of State Taxation (WA) (1975) 133 CLR 125 …. 1.1 Magazzu v Business Licensing Authority [2001] VSC 5 …. 18.37 Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 …. 2.5 Magill v National Australia Bank Ltd [2001] NSWCA 221 …. 2.18 Main Roads Construction Pty Ltd v Samary Enterprises Pty Ltd [2005] VSC 388 …. 8.5 Mainteck Services Pty Ltd v Stein Heurtey SA and Stein Heurtey Australia Pty Ltd [2013] NSWSC 266 …. 3.1, 4.2 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 …. 18.8 Malago Pty Ltd v AW Ellis Engineering Pty Ltd [2012] NSWCA 227 …. 3.1, 3.3 Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 …. 11.4 Manchester Corp v Farnworth [1930] AC 171 …. 19.16, 19.18 Manfal Pty Ltd v Longuet (1987) 3 BCL 105 …. 3.3 — v — (1986) 8 IPR 410 …. 17.9 Manningham City Council v Dura (Australia) Constructions Pty Ltd [1999] 3 VR 13; [1999] VSC 63 …. 18.20, 18.29, 18.44

Mantec Thoroughbreds Pty Ltd v Batur (2009) 25 VR 507 …. 19.40 Manufacturers Mutual Insurance Ltd v Withers (1988) 5 ANZ Ins Cases 60-853 …. 2.14 — v — (1988) 5 ANZ Ins Cases 75,336 …. 2.16 Marburg Management Pty Ltd v Helkit Pty Ltd (1990) 100 FLR 458 …. 4.12 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 …. 11.16, 16.7 Mareva Building Consultants v Zevon [2012] ACTSC 18 …. 1.3 — v — [2013] ACTCA 28 …. 12.2 Margil Pty Ltd v Stegul Pastoral Pty Ltd [1984] 2 NSWLR 1 …. 19.35, 19.36 Marist Brothers Community Inc v Shire of Harvey (1995) 14 WAR 69 …. 1.2, 2.2 Maritime Services Board of NSW v Australian Shipping Commission (1991) 27 NSWLR 258 …. 18.10 Mark Blake Builders Pty Ltd v Davis (SC(NSW), Giles J, 14 November 1994, unreported) …. 18.45 Mark Sensing (Aust) Pty Ltd v Flammea [2003] VSCA 41 …. 13.3, 13.12 Markbys Renaissance Pty Ltd, Re [1999] 3 VR 851 …. 18.10 Markholm Construction Co Ltd v Wellington City Council [1985] 2 NZLR 520 …. 5.7 Markos v Autor [2007] NSWSC 810 …. 19.31, 19.40 Marks v GIO Australia Holdings Ltd (1996) 63 FCR 304 …. 2.165 Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11 …. 11.4 Maroubra Pty Ltd v Murchison Queen Pty Ltd [2002] WASC 98 …. 1.3 Martel Building Ltd v Canada [2002] 2 SCR 860 …. 5.3 Martin v McNamara [1951] St R Qd 225 …. 4.5 — v Worthmore Homes Pty Ltd (2002) 29 SW (WA) 250 …. 7.15 Marton Club House Buildings Co Ltd, Re (1908) 10 GLR 582 …. 13.8

Matania v National Provincial Bank Ltd [1936] 2 All ER 633 …. 19.22 Matter of Turner Corp Ltd (in liq) (1995) 17 ACSR 761 …. 13.10 Matthews v Carter (1955) 55 SR (NSW) 347 …. 8.9 Mattila v Gardner (No 2) [2013] NTSC 32 …. 5.5, 8.16 Max Cooper & Sons Pty Ltd v Sydney City Council (1980) 29 ALR 77 …. 3.2, 7.8, 7.12 — v University of NSW (SC(NSW), 13 December 1977, unreported) …. 7.2 Maxitherm Boilers Pty Ltd v Pacific Dunlop Ltd [1998] 4 VR 559 …. 2.13 Maxstra Constructions Pty Ltd v Gilbert (t/as A J Gilbert Concrete) [2013] VSC 243 …. 4.4 Maxwell Contracting Pty Ltd v Gold Coast City Council [1983] 2 Qd R 533 …. 5.1 — v Highway Hauliers Pty Ltd [2013] WASCA 115 …. 2.14, 4.1 May and Butcher Ltd v R [1934] 2 KB 17 …. 3.1 Mayfield Holdings Ltd v Meana Reef Ltd [1973] 1 NZLR 309 …. 2.10, 4.1, 4.14 Mayor Councillors and Burgesses of Borough of Stratford v J H Ashman (NP) Ltd [1960] NZLR 503 …. 8.6, 9.14 Mayor, Aldermen and Burgesses of Wolverhampton v Emmons [1901] 1 QB 515 …. 11.17 Mays v Roberts [1928] SASR 217 …. 2.19 Mazelow Pty Ltd v Herberton Shire Council (2002) 18 BCL 272 …. 12.1, 12.3, 12.15 M’Carthy (administratrix) v Cunningham (1877) 3 VLR (L) 59 …. 19.35 Media Online Ltd v Queensland Investment Corporation [2001] FCA 809 …. 5.5 Medlin v State Government Insurance Commission [1995] HCA 5; (1995) 182 CLR 1 …. 11.16 Meehan v Jones (1982) 149 CLR 571 …. 3.3

Melaleuca Estate Pty Ltd v Port Stephens Council [2006] NSWCA 31 …. 19.25 Melbourne Class Pty Ltd v Coby Constructions Pty Ltd (1998) 14 (5) BCLC 409 …. 8.6 Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570 …. 1.8, 3.9, 6.11, 10.7, 10.12, 10.14 Merewyn Pty Ltd v Simeon Wines Ltd [2002] NSWSC 207 …. 2.18 Merrill Lynch International (Australia) Ltd v Commissioner of Taxation (2001) 191 ALR 420 …. 4.6 Mersey Steel and Iron Co v Naylor Benzon & Co (1884) 9 App Cas 434 …. 12.5, 12.6 Metacorp Australia Pty Ltd v Andeco Construction Group Pty Ltd (No 2) (2010) 30 VR 141 …. 8.7, 14.5 Metcalf v Bouck (1871) 25 LT 539 …. 5.14 Metro Plating v NQEA Australia Pty Ltd (FCA(Qld), Q9162 of 1995, 3 May 1996, unreported) …. 11.2, 11.11 Metroland Funds Management Ltd v Skyrise Consultants Pty Ltd [2011] NSWSC 343 …. 2.13 Metropolitan Brick Co v Hayward [1938] SASR 462 …. 14.5 Metropolitan Fire & Emergency Services Board v Churchill [1998] VSC 51 …. 18.37 Metropolitan Properties Co (FGC) Ltd v Lannon [1969] 1 QB 577 …. 18.37 Meyer v Gilmer (1899) 18 NZLR 129 …. 10.12 Michael Davies Associates Pty Ltd v Auburn Council [2007] NSWSC 877 …. 7.1 Michael v Andrews (1925) 21 QJPR 30 …. 10.8 Michallef v Galea [2001] NSWSC 984 …. 19.18 Midland Bank Plc v Bardgrove Property Services Ltd (1992) 60 BLR 1 …. 19.52 Miell v Hatjopoulos (1985) 2 BCL 258; (1987) 4 BCL 226 …. 11.8, 16.10 Mihaljevic v Eiffel Tower Motors Pty Ltd [1973] VR 545 …. 14.6

Miller v Miller (2011) 242 CLR 446 …. 8.15 Miller Construction Ltd v Olsen [1973] 1 NZLR 265 …. 4.4, 17.11 Milne v Benjafield [2002] NSWSC 1126 …. 18.10 — v Municipal Council of Sydney (1912) 14 CLR 54 …. 4.15, 5.12 Minchillo v Lanes Ford Trucks Pty Ltd [1992] ASC 56–156 …. 16.5 Minister for Main Roads for Tasmania v Leighton Contractors Pty Ltd (1985) 1 BCL 381 …. 18.22 Minster Trust Ltd v Traps Tractors Ltd [1954] 3 All ER 136 …. 17.1 Mir Brothers Developments Pty Ltd v Atlantic Constructions Pty Ltd (1984) 1 BCL 80 …. 18.32 Mitsui Construction Co Ltd v A-G of Hong Kong (1986) 33 BLR 7 …. 15.13 MJB Enterprises Ltd v Defence Constructions (1951) Ltd (1999) 15 Const LJ 455 …. 5.3 MM Constructions (Aust) Pty Ltd v Port Stephens Council (No 7) (2012) 191 LGERA 292; [2012] NSWCA 417 …. 8.15, 16.11 Mobil Oil Australia Ltd v Kosta [1970] ALR 253 …. 2.8 — v Lyndel Nominees Pty Ltd (1998) 153 ALR 198 …. 5.10, 5.11 Modern Building Wales Ltd v Limmer & Trinidad Co Ltd [1975] 1 WLR 1281; 2 All ER 549 …. 3.2, 14.3 Modern Engineering (Bristol) Ltd v Gilbert-Ash (Northern) Ltd (1973) 71 LGR 162 …. 8.5 Molinari v Westralian Finance Corporation Ltd (SC(WA), Civ 2151/93, 23 October 1998, unreported) …. 17.10 Molloy v Liebe (1910) 102 LT 616 …. 10.8 Mond & Mond v Berger [2004] VSC 45 …. 18.37, 18.47 Money v Ven-Lu-Ree Ltd [1989] 3 NZLR 129 …. 3.3 Monk v Australia and New Zealand Banking Group Ltd (1994) 34 NSWLR 148 …. 13.4 Monroe Schneider Associates Inc v No 1 Raberem Pty Ltd (1991) 104 ALR 397

…. 11.10 Montana Hotels Pty Ltd v Fasson Pty Ltd (1986) 61 ALJR 282 …. 19.10, 19.14 Montefiore v Parkin (1907) 26 NZLR 1317 …. 5.12 Moon v Guardians of the Poor of the Witney Union (1837) 3 Bing NC 814; 132 ER 624 …. 15.2 Moorabool Shire Council v Taitapanui (2006) 14 VR 55; [2006] VSCA 30 …. 8.15, 16.5, 17.13 Moorcock, The (1889) 14 PD 64 …. 4.2 Moore v Ferguson (1892) 18 VLR 266 …. 4.19 Morgan Equipment Co v UMW Corporation Sdn BhD [2002] NSWCA 193 …. 2.9 Morgan v Allen [1971] Tas SR 285 …. 9.24 — v Lake Macquarie City Council (NSW Court of Appeal, 2 September 1993, Clarke JA, unreported) …. 19.60 — v S & S Constructions Pty Ltd [1967] VR 149 …. 8.1 Morrison v Grovenor (1884) 5 LR (NSW) 195 …. 8.4 Morrison-Knudsen International Co Inc v Commonwealth (1972) 46 ALJR 265 …. 8.15 Morrow v Chinadotcom [2001] NSWSC 209 …. 3.3 Morton v Douglas Homes Ltd [1984] 2 NZLR 548 …. 11.6, 16.2 — v Hampson [1962] VR 364 …. 3.8 Mostia Constructions Pty Ltd v Cox and Labivolo Pty Ltd [1994] 2 Qd R 55 …. 3.6, 8.8 Mottram Consultants Ltd v Bernard Sunley & Sons Ltd [1975] 2 Lloyd’s Rep 197 …. 2.8 Mowby Pty Ltd v Moose Property Services Pty Ltd [2007] VSC 111 …. 18.45 Mrocki v Mountview Prestige Homes Pty Ltd [2010] VSC 624 …. 1.4 Muirfield Properties Pty Ltd v Hansen 6 Yuncken Pty Ltd [1987] VR 615 …. 18.48

Mulgrave Central Mill Company Ltd v Hagglunds Drives Pty Ltd [2002] 2 Qd R 514 …. 18.219 Mulley v Jim Wilson Builder Pty Ltd [2007] QCCTB 79 …. 8.4 Mulligan v Coffs Harbour City Council [2005] HCA 63 …. 16.11 Multiplex Constructions Pty Ltd v Abgarus Pty Ltd (1992) 33 NSWLR 504 …. 6.4, 6.7, 7.14 — v Amdel Ltd (1991) 10 BCL 115 …. 16.7 — v SOR Pty Ltd (2001) 17 BCL 174 …. 9.12, 17.1, 17.4, 17.5, 17.13 — v Suscindy Management Pty Ltd (2000) 16 BCL 436 …. 18.37 — v Trans Australian Constructions Pty Ltd [1995] NTSC 14 …. 18.33 Mulvenna v Royal Bank of Scotland [2003] EWCA Civ 1112 …. 16.7 Munday and Shreeve v State of Western Australia and Western Australian Transport Board [1962] WAR 65 …. 5.12 Municipal Council of Sydney v Evers & Kennedy (1881) 2 LR (NSW) 151 …. 9.26 Munro v Southern Dairies Ltd [1955] VLR 332 …. 19.18 Murphy v Acumen Design & Development (1995) 11 BCL 274 …. 9.23 — v Brentwood District Council [1991] 1 AC 398 …. 16.5, 16.11 — v City of South Melbourne (1987) 27 APA 404 …. 19.33 Murray & Roberts Australia Pty Ltd v G B Lifestyles Pty Ltd [2013] WASC 345 …. 18.37 Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 …. 1.2

N Nagle v Rottnest Island Authority (1993) 177 CLR 423 …. 16.5 Najjar v Haines (1990) 7 BCL 145 …. 18.10 National Australia Bank Limited v Anderson [2004] VSC 193 …. 7.14 National Coal Board v William Neill & Co (St Helens) Ltd [1985] 1 QB 300 ….

8.6, 9.26 National Insurance Co of New Zealand Ltd v Espagne (1961) 105 CLR 569 …. 16.7 National Museums and Galleries on Merseyside (Trustees of) v AEW Architects and Designers Ltd [2013] EWHC 2403 …. 15.8 National Mutual Life Association of Australasia v Coffey & Partners Pty Ltd [1991] 2 Qd R 401 …. 16.10 National Union of Workers v Graincorp Operations Ltd (2002) 117 IR 163 …. 7.12 Nauru Phosphate Royalties Trust v Matthew Hall Mechanical & Electrical Engineers Pty Ltd [1994] 2 VR 386 …. 18.32, 18.37, 18.40 Nelson Carlton Construction Co Ltd (in liq) v A C Hatrick (NZ) Ltd [1964] NZLR 72; [1965] NZLR 144 …. 9.13, 17.5 Nelson v Hughe [1947] VLR 227 …. 19.33 — v Walker (1910) 10 CLR 560 …. 19.35 Nemer v Whitford (1982) 31 SASR 475 …. 17.7 Nene Housing Society v National Westminster Bank (1980) 16 BLR 22 …. 11.1 Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (in liq) (2005) 64 NSWLR 462 …. 8.7 Nepean Highway Pty Ltd v Abnote Australasia Pty Ltd [2009] VSCA 308 …. 18.30 Netanya Noosa Pty Ltd v Evans Harch Constructions Pty Ltd [1995] 1 Qd R 650 …. 18.10 New South Wales Racing v TAB [2002] NSWSC 742 …. 18.33 New South Wales v Banobelle Electrical Pty Ltd [2002] NSWSC 178 …. 3.1, 4.6 — v Lepore [2003] HCA 4 …. 19.54 New Zealand Structures & Investments Ltd v McKenzie [1979] 1 NZLR 515 …. 10.13 Newark Pty Ltd v Civil & Civic Pty Ltd (1987) 75 ALR 350 …. 18.10

Newell v Moulden (1911) 11 SR (NSW) 539 …. 13.9 Newman, Re (1876) 4 Ch D 724 …. 6.4 News of the World Ltd v Allen Fairhead and Sons Ltd [1931] 2 Ch 402 …. 19.37 Newton v Stewart [2013] NZHC 970 …. 5.8 Nguyen & Le v Davies [2011] SADC 63 …. 19.27, 19.33 Nguyen v Luxury Design Homes Pty Ltd (2005) 21 BCL 46; [2004] NSWCA 178 …. 8.1, 8.2, 8.4, 8.5 Nibaldi v Downes [1993] VSC 668 …. 12.5, 12.13 Nicholls v Stamer [1980] VR 479 …. 18.10 Nicholson v Burnett (1922) 25 WALR 101 …. 8.10 — v Hilldove Pty Ltd [2012] VSC 598 …. 1.3 Nickerson v Barraclough [1981] Ch 426 …. 19.43 Nicolazzo v Harb (2009) 22 VR 220; [2009] VSCA 79 …. 2.15 Nielson v Dysart Timbers Ltd [2009] NZSC 43 …. 4.2 Nigel Wilson v Kirk Contractors Pty Ltd (1991) 7 BCL 284 …. 12.6 Nikolic v Commonwealth Accommodation & Catering Services Ltd (1992) 106 FLR 413 …. 19.54 Nocton v Lord Ashburton [1914] AC 932 …. 5.11 Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014 …. 13.9 Noonan v Martin (1987) 10 NSWLR 402 …. 13.4 Nordern v Blueport Enterprises Ltd [1996] 3 NZLR 450 …. 19.22 Nordic Holdings Ltd v Mott Macdonald Ltd (2001) 77 Cons LR 88 …. 2.5 Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 …. 13.1, 13.3, 13.4, 13.6 Norris v Sibberas [1990] VR 161 …. 8.13, 8.15, 15.17 North v Bassett [1892] 1 QB 333 …. 15.1

North West Metropolitan Regional Hospital Board v TA Bickerton & Son Ltd [1970] 1 WLR 607 …. 14.16 North Western Shipping and Towage Company Pty Ltd v Commonwealth Bank of Australia Ltd (1993) 118 ALR 453 …. 14.14 Northbuild Constructions Pty Ltd v Discovery Beach Project Pty Ltd [2008] QCA 160 …. 18.21 — v — [2010] QSC 94 …. 18.45 Northcliffe Constructions Pty Ltd v Stein (2001) 17 BCL 135 …. 18.28 Northern Regional Health Authority v Derek Crouch Construction Co Ltd [1984] 1 QB 644 …. 9.15, 9.16, 18.19 Northern Sandblasting Pty Ltd v Harris (1996) 188 CLR 313 …. 19.54 Northern Territory of Australia v Deutscher Klub (Darwin) Inc (1994) Aust Torts Rep 81,275 …. 16.11 Nouvelle Homes Pty Ltd v G & M Smargiassi [2008] WASC 127 …. 11.16 Novawest Contracting Pty Ltd v Taras Nominees Pty Ltd [1998] VSC 205 …. 8.5 Novta Wallpapers (Ireland) Ltd v John Sish & Sons (Dublin) Ltd [1978] IR 114 …. 14.16 NRMA Insurance Ltd v F R Coyle Pty Ltd (1994) 13 Aust Cons LR 210 …. 19.54 NSW Racing Pty Ltd v TAB (2003) 19 BCL 386 …. 7.13 NSW v Coya (Constructions) Pty Ltd (1993) 10 BCL 152 …. 18.32 Nunkuwarrin Yunti of SA Inc v AL Seeley Constructions Pty Ltd (1998) 72 SASR 21 …. 8.8 Nye Saunders and Partners (a firm) v Alan E Bristow (1987) 37 BLR 92 …. 15.2, 15.17, 17.7 NZI Capital Corp Pty Ltd v Child (1991) 23 NSWLR 481 …. 2.8

O

O’Brien v McKean (1968) 118 CLR 540 …. 11.7 O’Carroll v Potter (1929) 29 SR (NSW) 393 …. 3.5 Ocean Marine Insurance Co Ltd v CSR Ltd [2012] NSWSC 1229 …. 13.10, 13.12 O’Connor v S P Bray Ltd (1937) 56 CLR 464 …. 16.11, 19.65 Oddy v Fry [1998] 1 VR 142 …. 18.10 Official Assignee of Palmer v Sharpe [1921] NZLR 460 …. 13.3 Offord v Davies (1862) 12 CBNS 748; 142 ER 1336 …. 5.12 Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 …. 6.10 Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346 [2007] VSCA 255 …. 18.41, 18.45 Oldfield Knott Architects Pty Ltd v Ortiz Investments Pty Ltd [2000] WASC 141; [2000] WASCA 255 …. 18.35, 18.37, 18.40 Oliver v Lakeside Property Trust Pty Ltd [2005] NSWSC 1040 …. 8.4 Olsson v Dyson (1969) 120 CLR 365 …. 13.8 O’Neale v Barra Rosa Pty Ltd (1989) 96 FLR 436 …. 4.4 O’Neill & Clayton Pty Ltd v Ellis & Clark Pty Ltd (1978) 20 SASR 132 …. 14.15 OneSteel Manufacturing Pty Ltd v United KG Pty Ltd (2006) 94 SASR 376; [2006] SASC 119 …. 1.10 — v BlueScope Steel (AIS) Pty Ltd [2013] NSWCA 27 …. 3.1 Onus v Telstra Corporation Ltd [2011] NSWC 33 …. 19.9, 19.18, 19.25 Opat v National Mutual Life Association of Australia Ltd [1992] 1 VR 283 …. 16.5, 16.10, 16.11 Opie v Collum [1999] SASC 376 …. 11.17 Origin Energy Resources Limited v Benaris International NV (No 2) [2002] TASSC 104 …. 18.28 Osburn v Leggett [1930] SASR 346 …. 14.15

Otis Elevator Co Pty Ltd v Girvan (Qld) Pty Ltd (1990) 9 Aust Cons LR 107 …. 4.16, 14.14 Overlook Management BV v Foxtel Management Pty Ltd (2002) Aust Contract R 90-143; [2002] NSWSC 17 …. 1.2, 2.12, 4.6 Owen v Gadd [1956] 2 QB 99 …. 19.22 Owners Strata Plan 30339 v Torada Pty Ltd [2008] NSWSC 1154 …. 19.27 Owners Strata Plan 32735 v Heather Lesley-Swan [2012] NSWSC 383 …. 19.27 Owners Strata Plan 4085 v Mallone [2006] NSWSC 1381 …. 19.2 Owners Strata Plan No 61288 v Bookfield Australia Investments Ltd [2013] NSWCA 317 …. 8.15, 16.5, 16.10, 17.13, 17.19 Ownit Homes Pty Ltd v Batchelor [1983] 2 Qd R 124 …. 4.7, 4.16, 8.5, 8.12, 8.13, 9.18, 11.7 — v D & F Mancuso Investments Pty Ltd (1987) 4 BCL 50 …. 17.9 Oxford Clothing Co Pty Ltd v GIO (Tas) (1994) 4 Tas R 1 …. 18.37

P P & M Kaye Ltd v Hosier & Dickinson Ltd [1972] 1 WLR 146 …. 9.15, 9.26 P Baer Investments Pty Ltd v University of New South Wales [2007] NSWLEC 128 …. 19.16 P M T Partners Pty Ltd v Australian National Parks & Wildlife Service (1995) 184 CLR 301 …. 18.22, 18.29 P & E Phontos Pty Ltd v NSW Land and Housing Corp (1987) 4 BCL 45 …. 12.17 Pacific Associates Inc v Baxter [1990] 1 QB 993 …. 16.5, 17.1, 17.4, 17.5, 17.13 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 …. 2.16 Pacific Hydro Group Two Pty Ltd v Argyle Diamond Mines Pty Ltd [2003] VSC 443 …. 7.9 Pacific Power & Elcom Collieries Pty Ltd v Cumnock No 1 Colliery Pty Ltd [2001] NSWSC 1100 …. 1.1

Pacifico (Timber) v Berlian Timbers (1997) 8 BPR 15,785 …. 11.17 Packham v Board of Land and Works (1874) 5 AJR 37 …. 8.12 Page v City of Castlemaine (1988) 5 BCL 126; 66 LGRA 296 …. 11.8 — v Home Team Constructions Pty Ltd [2008] NSWSC 613 …. 8.4 Paharpur Cooling Towers Ltd v Paramount (WA) Ltd [2008] WASCA 11 …. 18.32 Painter v Reed [1930] SASR 295 …. 19.19 Palermo Nominees Pty Ltd v Broad Construction Services Pty Ltd (1998) 15 BCL 20 …. 4.2, 17.1 Palmerston (Qld) Pty Ltd v Fogl [1983] 2 Qd R 700 …. 4.5 Palyaris Constructions Pty Ltd v Kauri Timber Co Ltd (1979) 24 SASR 41 …. 14.5 Pan Foods Company Importers & Distributors Pty Ltd v Australia and New Zealand Banking Group Ltd (2000) 170 ALR 579 …. 2.5 Pan Ocean Shipping Co Ltd v Creditcorp Ltd [1994] 1 WLR 161 …. 8.8 Pan Orient Shipping Services Pty Ltd v Basell Australia Pty Ltd [2077] VSC 215 …. 7.1, 7.4 Panamena Europea Navigacion (Compania Limitada) v Frederick Leyland & Co Ltd [1947] AC 428 …. 4.6, 6.8 Panmal Constructions Pty Ltd (ACN 002 797 417) v Warringah Formwork Pty Ltd (ACN 002 797 417) [2004] NSWSC 204 …. 18.45 Pantalone v Alaouie (1989) 18 NSWLR 119 …. 19.9, 19.50, 19.51, 19.52, 19.53, 19.54, 19.61, 19.67 Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (1993) 43 FCR 439 …. 18.32 Park Lane Homes Pty Ltd v Enrik Corporation Pty Ltd [2002] VCAT 607 …. 18.49 Park Rail Developments Pty Ltd v R J Pearce Associates Pty Ltd (1987) 8 NSWLR 123 …. 18.10, 18.12 Parker v Muir Family Investments [2002] NSWSC 240 …. 18.10

Parkinson (Sir Lindsay) & Co Ltd v Commissioners of His Majesty’s Works and Public Buildings [1949] 2 KB 632 …. 8.9, 10.4 Parkinson v Lord [1925] VLR 22 …. 8.1, 8.10 Parle v Leistikow (1883) 4 LR (NSW) 84 …. 3.1 Parliament House Construction Authority v C L D Meares and Lumo Constructions Pty Ltd (1987) 3 BCL 367; [1987] ACTSC 35 …. 7.8 Parramatta City Council v Lutz (1988) 12 NSWLR 293 …. 16.11, 19.67 Patel v W H Smith (Eziot) Ltd [1987] 1 WLR 853 …. 19.3 Pavex Constructions, Ex parte [1979] Qd R 318 …. 14.5 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 …. 3.6, 5.5, 7.10, 8.3, 8.4, 8.8, 8.9, 14.4 PCH Melbourne Pty Ltd v Break Fast Investments Pty Ltd [2007] VSC 87 …. 19.3, 19.6, 19.7 Pearce v Tucker (1862) 3 F & F 136; 176 ER 61 …. 4.4 Pearl Hill Pty Ltd v Concorp Construction Group (Vic) Pty Ltd (2011) 32 VR 247 …. 8.7 Peet Limited v Richmond (2011) 33 VR 465; [2011] VSCA 34 …. 8.4 Pekel v Humich (1999) 21 WAR 24 …. 19.48 Pemberton v Bright [1960] 1 WLR 436 …. 19.16 Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd (2002) 18 BCL 322; [2002] NSWCA 211 …. 8.5, 8.13, 9.10, 9.11, 9.12, 17.5 Percival Ltd v London County Council Asylums and Mental Deficiency Committee (1918) 87 LJKB 677 …. 5.12 Perini Corporation v Commonwealth [1969] 2 NSWLR 530 …. 9.12, 9.15, 17.1 Perpetual Trustee Company Ltd v Westfield Management Ltd [2006] NSWCA 337 …. 19.39 Perre v Apand Pty Ltd (1999) 198 CLR 180 …. 8.15, 16.5, 16.11, 17.19 Philips Hong Kong Ltd v A-G of Hong Kong (1993) 12 Aust Cons LR 20 …. 6.4

Philips v Ward [1956] 1 All ER 874 …. 11.7 Phillips Fox (a Firm) v Westgold Resources NL [2000] WASCA 85 …. 8.1 Phillips v Ellinson Bros Pty Ltd (1941) 65 CLR 221 …. 8.1, 8.2, 8.9, 8.10 — v Tobias Partners Pty Ltd [2013] NSWSC 496 …. 8.1, 8.2 Phoenix Bessemer Steel Co, Re (1875) 44 LJ Ch 683 …. 2.9 Phoenix International Group Pty Ltd v Resources Combined No 2 Pty Ltd [2009] VSCA 309 …. 8.7 Pigott Construction Co Ltd v W J Crowe Ltd (1961) 27 DLR (2d) 258; (1963) 38 DLR (2d) 9 …. 12.6 Piling Contractors (Qld) Pty Ltd v Prynew Pty Ltd [2008] NSWSC 118 …. 19.54, 19.62, 19.66, 19.67 Piling v Prynew Nemeth [2008] NSWSC 118 …. 19.51 Pine Top Insurance Co Ltd v Unione Italiana Anglo Saxon Reinsurance Co Ltd [1987] 1 Lloyd’s Rep 476 …. 14.15 Pines Living Pty Ltd v O’Brien [2013] ACTSC 156 …. 8.7 Pioneer Shipping Ltd v BTP Tioxide Ltd [1982] AC 724 …. 18.4 Piper v Walsh (1874) 5 AJR 13 …. 19.60 Pirelli General Cable Works Ltd v Oscar Faber & Partners (a firm) [1983] 1 All ER 65 …. 11.8 Pirone v Craig J Roberts (Solicitor) Pty Ltd (2006) 244 LSJS 284; [2006] SASC 134 …. 7.9 Pirt Biotechnologies Pty Ltd v Pirtferm Ltd [2000] WASC 28 …. 3.1 Pitcaithly & Co v John McLean & Son (1911) 31 NZLR 648 …. 5.12 Pitt v Curotta (1931) 31 SR (NSW) 477 …. 6.5 Pittalis v Sherefettin [1986] 1 QB 868 …. 18.29 Pizzey Noble Pty Ltd v H D Fowles [1994] 1 VR 371 …. 18.6 Place v Rees & Co (1894) 13 NZLR 610 …. 14.15 Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257

…. 12.1, 15.4, 15.11 Planche v Colburn (1831) 8 Bing 14; 172 ER 876 …. 12.18 Planet Securities Unit Trust v Dalrymple [1997] QSC 204 …. 7.14 Plastec Australia Pty Ltd v Plumbing Solutions Pty Ltd [2012] FCA 510 …. 18.3 Plenary Research Pty Ltd v Biosciences Research Centre Pty Ltd [2013] VSCA 217 …. 18.12, 18.17 Plenty v Dillon (1991) 171 CLR 635; 98 ALR 353 …. 19.1, 19.2 Plucis v Fryer (1967) 41 ALJR 192 …. 18.28 Pohlmann v Harrison (1993) 12 Aust Cons LR 80 …. 3.6, 8.9 Pondcil Pty Ltd v Tropical Reef Shipyard Pty Ltd (1994) ATPR 53,647 …. 2.13 Porter v Board of Land and Works (1870) 1 VR (L) 207 …. 5.7 — v Hannah Builders Pty Ltd [1969] VR 673 …. 4.14 — v Montrose Ltd [1958] NZLR 261 …. 17.6 POS Media Online Ltd v Queensland Investment Corp [2001] FCA 809 …. 8.16, 8.17 Poseidon Ltd v Adelaide Petroleum NL (1994) 68 ALJR 313 …. 12.18 — v — (1991) 105 ALR 25 …. 4.1 Pourzand v Telstra Corp Ltd [2012] WASC 210 …. 11.14 Powell General Sheet Metal Pty Ltd v Autopak Nominees Pty Ltd [2011] NSWSC 321 …. 3.11 Powercor Australia Ltd v Thomas [2012] VSCA 87 …. 11.14 Precision Fabrication Pty Ltd, Re (1987) 49 NTR 1 …. 18.21 Precision Products (NSW) Pty Ltd v Hawkesbury City Council [2008] NSWCA 278 …. 16.11 Premium Nafta Products Ltd v Fili Shipping Co Ltd [2007] 4 All ER 951; [2007] UKHL 40 …. 18.21 Presmist Pty Ltd v Turner Corporation Pty Ltd (1992) 30 NSWLR 478; 9 BCL 265 …. 3.8, 12.12, 18.10

Priestley v Stone (1888) 4 TLR 730 …. 15.17 Primary Yield Finance Pty Ltd v Meyer [2012] VSC 595 …. 13.6 Prince of Wales Dry Dock Co (Swansea) Ltd v Fownes Forge and Engineering Co Ltd (1904) 90 LT 52 …. 14.11 Pritchett & Gold and Electrical Power Storage Co Ltd v Currie [1916] 2 Ch 515 …. 14.4 Progressive Pod Properties Pty Ltd v A & M Green Investments Pty Ltd [2012] NSWCA 225 …. 8.4 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 …. 7.10 Promenade Investments Pty Ltd v NSW (1991) 26 NSWLR 203 …. 18.45 Proprietors of Strata Plan 20297 v G & S Developments Pty Ltd [2008] NSWSC 257 …. 19.5 Proprietors of Strata Plan No 14198 v Cowell (1989) 24 NSWLR 478 …. 19.14, 19.27 Prospect County Council v Cross (1990) 21 NSWLR 601 …. 19.31 Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248 …. 8.7 Provident Capital Ltd v Papa (No 2) [2013] NSWCA 156 …. 11.3 Prynew Pty Limited v Nemeth [2010] NSWCA 94 …. 19.54 PT Ltd v Maradona Pty Ltd (No 2) (1992) 27 NSWLR 241 …. 13.4 Pukallus v Cameron (1982) 43 ALR 243 …. 3.11 Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1 VR 27 …. 11.8, 16.2, 16.9, 17.10, 17.15 Purcell, Ex parte (1982) 47 LGRA 433 …. 19.31 Purton-Smith v Telstra Corp Ltd [2006] VSC 197 …. 8.15 Pwllbach Colliery Co v Woodman [1915] AC 634 …. 19.18, 19.43 Pyrenees Shire Council v Day (1998) 192 CLR 330; [1998] HCA 3 …. 8.15, 16.11

Q Qantas Airways Ltd v Joseland & Gilling (1986) 6 NSWLR 327 …. 11.2, 18.45 Qenos Pty Ltd v Mobil Oil Australia Pty Ltd (No 2) [2002] VSC 524 …. 18.37, 18.39 QH Tours Ltd v Ship Design & Management (Aust) Pty Ltd (1991) 105 ALR 371 …. 7.13, 18.33 Queanbeyan Leagues Club v Poldune Pty Ltd (1996) 7 BPR 15,078 …. 19.32 Queensland Electricity Commission, In the matter of an Application by (1991) 10 BCL 143 …. 1.7 Queensland Electricity Generating Board v New Hope Collieries Pty Ltd [1989] 1 Lloyd’s Rep 205 …. 2.5, 3.1, 3.2 Queensland Power Co Ltd v Downer Edi Mining Pty Ltd [2009] QSC 6 …. 2.16 Queensland University of Technology v Project Constructions (Aust) Pty Ltd [2002] QCA 224 …. 8.5 Queensland v Pioneer Concrete (Qld) Pty Ltd [1999] FCA 499 …. 5.15 Quick v Alpine Nurseries Sales Pty Ltd [2010] NSWSC 1248 …. 19.10, 19.12, 19.13, 19.15, 19.16, 19.18, 19.24, 19.25

R R v City of Hobart; Ex parte Beck (1988) 4 BCL 286 …. 2.20 — v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546 …. 18.37 — v Demers [1900] AC 103 …. 5.12 — v Henrickson & Knutson (1911) 13 CLR 473 …. 4.18 — v Inhabitants of Hermitage (1692) Carth 239; 90 ER 743 …. 19.35 — v Lloyd (1870) 1 AJR 78 …. 8.4 — v Magistrates Court at Lilydale; Ex parte Ciccone [1973] VR 122 …. 18.37 — v Murphy [2001] VSC 319 …. 18.11

— v National Joint Council for the Craft of Dental Technicians (Disputes Committee); Ex parte Neate [1953] 1 QB 704 …. 18.19 — v Rimmington [2006] 1 AC 459 …. 19.9 — v Ron Engineering & Construction Eastern Ltd (1981) 119 DLR (3d) 267 …. 5.7 — v Tasmanian Gaming Commission [2001] TASSC 77 …. 18.37 — v Walter Cabott Construction Ltd (1975) 69 DLR (3d) 542 …. 4.13 — v War Pensions Entitlement Appeal Tribunal; Ex parte Bott (1933) 50 CLR 228 …. 18.36, 18.37 R J Grills Pty Ltd v Dellios [1988] VR 136 …. 4.16, 8.5, 12.17, 12.18, 14.14 R M Turton & Co Ltd (in liq) v Kerslake & Partners [2000] NZCA 115 …. 5.8 R P Robson Constructions Pty Ltd v D & M Williams (1989) 6 BCL 219 …. 12.7, 18.41 Raciti v Hughes (1995) 7 BPR 14,837 …. 19.18 RACV Insurance Pty Ltd v Unisys Australia Ltd [2001] VSC 300 …. 8.13, 11.4 Radford v de Froberville [1978] 1 All ER 33 …. 11.7 Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1983) 48 ALR 361 …. 5.15 Raguz v Sullivan (2000) 50 NSWLR 236 …. 1.2 Ranger v Great Western Railway Co (1854) 5 HLC 72; 10 ER 824 …. 6.6 Rarere v Phildagap Ltd [2011] NZHC 1810 …. 19.41 Rawlings v General Trading Co [1921] 1 KB 635 …. 5.14 Ray v Hazeldine [1904] 2 Ch 17 …. 19.33, 19.44 Ready Mixed Concrete (SA) Pty Ltd v Constructions (Broken Hill) Pty Ltd [1963] SASR 340 …. 14.5 Reardon Smith Line Ltd v Hansen-Tangen [1976] 3 All ER 570 …. 2.16 Redland Bricks Ltd v Morris [1970] AC 652 …. 19.25 Redowood Pty Ltd v Mongoose Pty Ltd [2005] NSWCA 32 …. 1.1 Redwood Anti-Ageing Pty Ltd v Knowles [2013] NSWSC 508 …. 3.5, 3.6, 17.9

Rees v Skerrett [2001] EWCA Civ 760 …. 19.51 Refrigerated Express Lines (A’asia) Pty Ltd v Australian Meat and Livestock Corp (No 2) (1980) 29 ALR 333 …. 5.15 Regalian Properties PLC v London Docklands Development Corporation [1995] 1 WLR 212 …. 5.5 Relative Mirait Services Pty Ltd v Midcoast Under Road Boring Pty Ltd [2013] NSWSC 107 …. 4.2 Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 …. 4.1, 4.2, 6.3, 8.3, 8.8, 8.9, 9.15, 12.12 Rennie Golledge Pty Ltd v Ballard (2012) 82 NSWLR 231 …. 8.13 Reservoir Hotel Pty Ltd v E S Clementson (Victoria) Pty Ltd [1961] VR 721 …. 18.28 Resort Condominiums International Inc v Bolwell [1995] 1 Qd R 406 …. 18.37 Resources Ltd v Leighton Contractors Pty Ltd (1998) 15 BCL 49 …. 4.6 Reynolds v Strelitz (1901) 3 WALR 143 …. 6.4, 6.8 Rhodes v Fletcher [2000] NSWSC 797 …. 18.37 Riccard v Prichard (1855) 1 K & J 277; 69 ER 462 …. 13.4 Rich v Queensland (2003) 195 ALR 412 …. 19.54 Richards v Rose (1853) 9 Exch 218; 156 ER 93 …. 19.44 Richardson v Graham [1908] 1 KB 39 …. 19.35 — v Motuhora Stone Quarries Co Ltd (1918) 20 GLR 518 …. 6.6 Rickard v Allianz Australia Insurance Ltd [2009] NSWSC 1115 …. 19.13 Ridgecrest New Zealand Ltd v IAG New Zealand [2013] NZCA 291 …. 11.5 Rinaldi & Patroni Pty Ltd v Precision Mouldings Pty Ltd [1991] [1986] WAR 131 …. 2.13 Rinbridge Marketing Pty Ltd v Rinbridge Pty Ltd (1996) 12 BCL 213 …. 18.28 Rinehart v Welker [2012] NSWCA 95 …. 18.21, 18.44 Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656; [2005] HCA 71

…. 6.4 Riseda Nominees Pty Ltd v St Vincent’s Hospital (Melbourne) Ltd [1998] 2 VR 70 …. 4.3 Riverside Motors Pty Ltd v Abrahams [1945] VLR 45 …. 4.4, 8.8, 8.9, 8.11 Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd (2012) 287 ALR 315; [2012] WASCA 50 …. 7.13, 18.33 Road & Traffic Authority of NSW v Welling [2003] NSWCA 14 …. 18.10 Road Regenerating & Repair Services v Mitchell Water Board [1990] VSC 267 …. 18.19 Roading & Asphalt Ltd v South Waikato District Council [2012] NZHC 1284 …. 5.3 Robert Joseph Ryan and Martha Maria Ryan v Maxwell George McLachlan (1987) 4 BCL 155 …. 12.5 Robert Salzer Constructions Pty Ltd v Elmbee Pty Ltd (1990) 10 Aust Cons LR 64 …. 4.14, 12.8 Roberts v Karr (1809) 1 Taunt 495; 127 ER 926 …. 19.43 — v Rodier [2006] NSWSC 282 …. 19.24, 19.54 — v Rodney District Council [2001] 2 NZLR 402 …. 19.3 Robinson v Harman (1848) 1 Ex 850; 115 ER 363 …. 11.3, 11.6, 11.7, 12.18 — v Podosky [1905] St R Qd 118 …. 13.4 Robson v Leischke [2008] NSWLEC 152 …. 19.10, 19.11, 19.18, 19.32 Robt Jones (363 Adelaide Street) Pty Ltd v First Abbott Corporation Pty Ltd (1997) 14 BCL 282 …. 4.5, 11.4, 17.10 Rodriguez v Telstra Corp Ltd [2002] FCA 30 Allmore Constructions Pty Ltd v Failli [2002] VSC 483 …. 18.36 Rogers v Whitaker (1992) 175 CLR 479 …. 16.6, 17.12, 17.15 Rolls and Son (Produce) Ltd v J Alastair McGregor & Co Pty Ltd (1973) 6 SASR 358 …. 18.21 Roman Catholic Trust v Van Driel [2001] VSC 310 …. 11.6, 11.14

Romeo v Conservation Commission of the Northern Territory [1998] HCA 5 …. 16.11 Ron Englehart Pty Ltd v Enterprise Constructions (Aust) Pty Ltd (2012) 95 IPR 64; [2012] FCAFC 4 …. 17.9 Rose v Sakkara Properties Pty Ltd [2009] FCA 304 …. 2.12 Roux v Langtree [1985] VR 799 …. 18.21 Rover International Ltd v Carron Film Sales Ltd [1989] 1 WLR 912 …. 12.8 Row Dal Constructions Pty Ltd, Re [1966] VR 249 …. 13.4 Rowlands v Collow [1992] 1 NZLR 178 …. 16.6, 17.18 Roxborough v Rothmans of Pall Mall Australia Pty Ltd (2001) 185 ALR 335 …. 4.2 Royal Botanic Gardens and Domain Trust v South Sydney Council (2002) 186 ALR 289 …. 2.16, 4.6 Royal Brompton Hospital NHS Trust v Hammond (No 7) (2001) 76 Con LR 148 …. 6.12 Rural Insurance (Aust) Pty Ltd v Reinsurance Australia Corp Ltd [2002] NSWSC 156 …. 1.3 Russell and Co Ltd v Fryers (1909) 25 TLR 414 …. 13.7 Ruxley Electronics and Construction Ltd v Forsyth [1995] 3 All ER 268 …. 11.16 RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1992) 11 BCL 74 …. 14.8 RWE Npower Renewables Ltd v JN Bentley Ltd [2013] EWHC 978 …. 15.12 Ryan v McLachlan (1987) 4 BCL 155 …. 6.1 Rylands v Fletcher (1868) LR 3 HL 330 …. 19.10

S S & S Constructions Pty Ltd v Fulop [1966] VR 401 …. 8.1 S C Molineaux & Co Pty Ltd and Board of Trustees of Sydney Talmudical College, Re (1965) 83 WN (NSW) 458 …. 3.1, 10.6

S C Taverner and Co Ltd v Glamorgan County Council (1940) 57 TLR 243 …. 10.6, 10.8, 10.13 SA Railways Commissioner v Egan (1973) 47 ALJR 140 …. 2.10 Sabemo Pty Ltd v de Groot (1990) 8 BCL 128; (1991) 8 BCL 132; (1991) 10 Aust Cons LR 116 …. 8.5, 8.6, 9.18, 10.4, 18.21, 18.44 — v North Sydney Municipal Council [1977] 2 NSWLR 880 …. 5.5, 8.16, 8.17, 12.1 Sabemo (WA) v O’Donnell Griffin Pty Ltd (1984) 3 ACLR 35 …. 14.9 Saif Ali v Sidney Mitchell & Co (a firm) [1980] AC 198 …. 16.2 Saitta Pty Ltd v Commonwealth [2003] VSC 346 …. 19.65 Salcombe Investments Pty Ltd v Cement Aids (Q) Pty Ltd [1987] ASC 57 292 …. 2.13 Saleh v Romanous (2010) 79 NSWLR 453; [2010] NSWCA 274 …. 2.15 Salter v Building Appeals Board [2013] VSC 279 …. 18.50 Salvin v North Brancepeth Coal Co (1874) LR 9 Ch 705 …. 19.16 Sampson v Quaine Constructions (2001) 26 SR (WA) 55 …. 18.28 Samson & Samson Ltd v Proctor [1975] 1 NZLR 655 …. 11.12 Samy Saad v City of Canterbury [2012] NSWSC 389 …. 19.45 Sanders Constructions Pty Ltd and Eric Newham (Wallerawang) Pty Ltd, Re [1969] Qd R 29 …. 7.12, 8.5, 9.18 Sandford v D v Building & Constructions Co Pty Ltd [1963] VR 137 …. 13.4, 13.6 Sandhurst Engineering Ltd v Citra Constructions Ltd (1986) 3 BCL 198 …. 18.28 Sandtara Pty Ltd v Longreach Group Ltd [2008] NSWSC 373 …. 8.4 Sanko Steamship Co Ltd v Sumitomo Australia Ltd (No 2) (1995) 63 FCR 227 …. 2.8 Santos Ltd v Pipelines Authority of South Australia (1996) 66 SASR 38 …. 18.21, 18.28

Sargent v ASL Developments Ltd (1974) 131 CLR 634 …. 3.8, 12.8 Savcor Pty Ltd v New South Wales and Cooinda Ceramics Pty Ltd (2001) 17 BCL 341 …. 18.21 — v State of New South Wales (2001) 52 NSWLR 587 …. 18.2, 18.44 Savory Holdings Ltd v Royal Oak Mall Ltd [1992] 1 NZLR 12 …. 9.13, 9.18 Schiffer v Pattison (2000) 177 ALR 754 …. 18.37 — v — [2001] FCA 1094 …. 18.37 Schwartz v Hadid [2013] NSWCA 89 …. 3.1, 3.3 Scott v Avery (1856) 5 HLC 811 …. 18.48 — v Page (1886) 31 Ch D 554 …. 19.37 — v President, Councillors and Ratepayers of the Shire of Numurkah (1954) 91 CLR 300 …. 18.11 SDR Australia Pty Ltd v Leighton Contractors Pty Ltd [2012] WASC 434 …. 7.1 Sea Containers Ltd v ICT Pty Ltd [2002] NSWCA 84 …. 18.30, 18.31, 18.36 Seabay Properties Pty Ltd v Galvin Construction Pty Ltd (2011) 27 BCL 244; [2011] VSC 183 …. 14.5 Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 …. 4.6 Sedleigh-Denfield v O’Callaghan [1940] AC 880 …. 19.8, 19.9, 19.10, 19.14, 19.15, 19.19 Seirlis v Bengtson [2013] QSC 240 …. 15.17 Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157 …. 19.27 Semayne v Gresham (1604) Yelv 29; 77 ER 194 …. 19.1 Semple v City of Geelong [1937] VLR 28 …. 8.9 Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324 …. 19.40 Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 117 ALR 393 …. 4.2, 4.6

Seton Contracting Co Ltd v A-G [1982] 2 NZLR 368 …. 4.2 …. 4.2 Sevastopoulos v Spanos [1991] 2 VR 194 …. 3.6, 10.1, 10.7 Seven Cable Television Pty Ltd v Telstra Corporation Ltd (2000) 171 ALR 89 …. 1.1 Seven Network (Operations) Ltd v Brown [2013] NSWSC 372 …. 2.16 — v Warburton (No 2) (2011) 206 IR 450 …. 7.9 Shaft Drillers International LLC v Australian Shaft Drilling Pty Ltd [2013] QSC 79 …. 5.5, 8.16 Shakibee v Chan [2001] WASC 60 …. 21.165 Shanklin Pier Ltd v Detel Products Ltd [1951] 2 KB 854 …. 14.6, 14.7 Sharp v Cossack Pearls Pty Ltd [2011] FCA 1477 …. 8.1 — v — [2012] FCAFC 110 …. 2.5 Shaw v Melbourne and Metropolitan Board of Works (1898) 24 VLR 70 …. 9.12 Sheldon v McBeath (1993) Aust Torts Rep 81-209 …. 17.11 Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287 …. 19.6, 19.18 Shelmerdine v Ringen Pty Ltd (1993) 1 VR 315 …. 19.38 Shepard v Felt & Textiles of Aust Ltd (1931) 45 CLR 359 …. 12.6, 12.9 Shevill v Builders Licensing Board (1981) 149 CLR 620 …. 12.5 Shilkin v Jagem Pty Ltd [2013] WASC 113 …. 2.10 Shiloh Spinners Ltd v Harding [1973] AC 691 …. 6.6 Shubrook v Tufnell (1882) 46 LT 886 …. 19.44 Siddons v Short Harley & Co (1877) 2 CPD 572 …. 19.42 Sigma Constructions (Vic) Pty Ltd v Maryvell Investments Pty Ltd (2005) ATPR 42-048; [2004] VSCA 242 …. 4.14 Simeone v Pesatura General Contractors Pty Ltd (1993) 60 SASR 453 …. 11.4, 16.8 Simonius Vischer v Holt [1979] 2 NSWLR 322 …. 11.16

Simpson and Pritchard v Steward & Steward [2011] NSWSC 491 …. 1.10 Simpson v Bannerman (1932) 47 CLR 378 …. 19.2 Sinclair & Lindsay Sinclair Pty Ltd v Bayly & Earle (1994) 11 BCL 439 …. 18.10 Sinclair v Logan [1961] SLT 10 …. 5.5 — v Rankin (No 2) (1908) 10 WALR 126 …. 8.9 Siple v Blow (1904) 8 OLR 547 …. 19.31 Sissons v Oates (1894) 10 TLR 392 …. 18.21 Sist Constructions Pty Ltd v State Electricity Commission of Victoria [1982] VR 597 …. 5.13, 15.13 SJ Weir Ltd v Bijok (2011) 112 SASR 127; [2011] SASCFC 165 …. 19.11, 19.50, 19.52 Skilled Group Ltd v CSR Viridian Pty Ltd [2012] VSC 290 …. 1.2, 8.5, 8.8 Skinner & Edwards (Builders) Pty Ltd v Australian Telecommunications Corp (1992) 27 NSWLR 567 …. 18.10 Skywest Aviation Pty Ltd v Commonwealth of Australia (1995) 126 FLR 61 …. 2.17 Slaveski v State of Victoria [2010] VSC 441 …. 19.1 Slee v Warke (1949) 86 CLR 271 …. 3.11 Slim v Kabra [2005] NSWSC 1190 …. 18.37 Smail (as trustee of the assigned estates of LM Wilson and GR Wilson) v DL Starbuck Pty Ltd [1971] VR 449 …. 11.11, 12.16 SMEC Australia Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd (No 3) [2012] VSC 557 …. 8.13 Smith v Brown (1887) 4 WN (NSW) 44 …. 9.16 — v Jones (1924) 24 SR (NSW) 444 …. 8.1 Smith & Smith Glass Ltd v Winstone Architectural Cladding Systems Ltd [1992] 2 NZLR 473 …. 14.9 SMK Cabinets v Hili Modern Electrics Pty Ltd [1984] VR 391 …. 6.8, 18.13

Smyth v The Queen (1884) 1 NZLR 80 …. 10.6, 10.9 Sopov v Kane Constructions Pty Ltd (2007) 20 VR 127; [2007] VSCA 257 …. 8.5, 9.11, 12.5, 18.1 — v — [2008] HCATrans 209 …. 8.9 — v — [2009] HCATrans 338 …. 8.3 — v — (No 2) (2009) 24 VR 510; [2009] VSCA 141 …. 8.3, 8.8, 8.9 South Australian Railways Commissioner v Egan (1993) 130 CLR 506 …. 9.10 South Australian Superannuation Fund Investment Trust v Leighton Contractors Pty Ltd [1994] 2 VR 386 …. 18.35 — v — (1996) 66 SASR 509 …. 18.43 South Seas Drilling Co v Esso Australia Ltd [1988] VSC 498 …. 14.2 South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 …. 4.1, 4.6 Southern British National Trust Ltd (in liq) v Pither (1937) 57 CLR 89 …. 13.5 Southern Foundries (1926) Ltd v Shirlaw [1940] AC 701 …. 4.12 Southern Region Pty Ltd v Minister for Police and Emergency Services (No 3) (2002) 18 BCL 211 …. 9.14, 9.18, 9.26 Southport Corp v Esso Petroleum Co Ltd [1954] 2 QB 182 …. 19.8 Southwark London Borough Council v Mills [1998] 3 WLR 49 …. 19.22 Southway Group Ltd v Wolff (1991) 57 BLR 33 …. 14.1 Spankie v James Trowse Constructions Pty Ltd [2010] QCA 355 …. 8.7 Sparham-Souter v Town and Country Developments (Essex) Ltd [1976] 1 QB 858 …. 11.8 Spathis v Hanave Investment Co Pty Ltd [2002] NSWSC 304 …. 19.22 Specialised Transport Pty Ltd v Dominiak (1989) 16 NSWLR 657 …. 13.8 Spectra Pty Ltd v Pindal Pty Ltd [1974] 2 NSWLR 617 …. 3.4 Spencer v Harris (1890) 11 LR (NSW) 21 …. 8.9 — v Silva [1942] SASR 213 …. 19.25 Spiers Earthworks Pty Ltd v Landtec

Projects Corporation Pty Ltd (No 2) [2012] WASCA 53 …. 9.11 Spiteri v Roccisano [2009] VSC 132 …. 15.17 Sportsvision Australia Pty Ltd v Tallglen Pty Ltd (1998) 44 NSWLR 103 …. 2.5, 2.18, 3.1 Springfield Land Development Corporation (As Trustee) v Melisavon Pty Ltd [2013] QSC 228 …. 11.8 Squires v SA Steel and Sheet Pty Ltd (1987) 45 SASR 142 …. 13.4 St Helen’s Smelting Co v Tipping (1864) 4 B & S 616; 11 ER 1483 …. 19.16, 19.18 St John Shipping Corp v Joseph Rank Ltd [1957] 1 QB 267 …. 3.5 Stafford v Mayor, Councillors and Citizens of South Melbourne [1908] VLR 584 …. 5.7 Stanley Young Kai Yung v Hong Kong Shanghai Banking Corporation [1905] AC 392 …. 4.18 Stanwell Park Hotel Co Ltd v Leslie (1952) 85 CLR 189 …. 7.1 State Asphalt Services Pty Ltd v Leighton Contractors Pty Ltd [2013] NSWSC 528 …. 8.7 State Authorities Superannuation Board v Property Estates (Qld) Pty Ltd (1991) 11 BCL 28 …. 18.10 State Electricity Commission of Victoria v CC (Victoria) Pty Ltd [1994] VSC 2 …. 7.3 State of South Australia v Simionato [2005] SASC 412 …. 19.7 State of Victoria v Seal Rocks Victoria (Australia) Pty Ltd (2001) 3 VR 1 …. 18.35, 18.40 — v Tymbrook (Palais Theatre) [2006] VCAT 2298 …. 8.5 State of Western Australia v Ward (2002) 213 CLR 1 [2002] HCA 28 …. 19.6 State Rail Authority of NSW v Baulderstone Hornibrook Pty Ltd (1988) 5 BCL 117 …. 10.11 Staunton and King v Wellington Education Board (1909) 28 NZLR 449 …. 3.5, 4.11

Steele & Tardiani (1946) 72 CLR 386 …. 8.4, 8.5 Steele v Evans (No 2) [1949] NZLR 548 …. 18.39, 18.44 Steggles Ltd v Yarrabee Chicken Co Pty Ltd [2012] FCAFC 91 …. 2.5, 2.10 Stein v Anderson [1937] NZLR 491 …. 4.7 Stereff v Rycen [2010] QDC 117 …. 19.2, 19.7 Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 …. 19.54, 14.12 Stevenson v Stephens (1989) 7 BCL 218 …. 2.210 Stewardson Stubbs & Collett Pty Ltd and Bankstown Municipal Council, Re [1965] NSWR 1671 …. 12.10, 12.11, 12.13 Stewart, Re (1943) 13 ABC 229 …. 13.4 Stimson v Gray [1929] 1 Ch 629 …. 3.2 Stockport Metropolitan Borough Council and British Gas Plc v Reddish Vale Golf Club [2001] EWCA Civ 212 …. 19.51 Stocks v Dobson (1853) 4 De GM & G 11; 43 ER 411 …. 13.4 Stockwell v State of Victoria [2001] VSC 497 …. 19.26, 19.65 Stoddart v Union Trust Ltd [1912] 1 KB 181 …. 13.5 Stoelwinder v Southern Health [2001] FCA 115 …. 2.5 Stojkoski v Belconnen Concrete Pty Ltd [2013] ACTSC 13 …. 17.10 Stoneman v Lyons (1975) 133 CLR 550 …. 19.2, 19.3, 19.54, 19.55, 19.60, 19.61, 19.66 Stork Electrical Pty Ltd v Leighton Contractors Pty Ltd [2000] QCA 517 …. 8.13 Stork Wescon Australia Pty Ltd v Morton Engineering Co Pty Ltd (1999) 15 BCL 278 …. 2.20 Stovin-Bradford v Volpoint Properties Ltd [1971] Ch 1007 …. 17.9 Straits Exploration (Aust) Pty Ltd v Murchison United NL (2005) 31 WAR 187 …. 18.17 Strategic Property Reservoir Pty Ltd v Condec Pty Ltd [2012] VSC 634 …. 1.2

Stratford v J H Ashman (NP) Ltd [1960] NZLR 503 …. 9.15 Streamline Travel Service Pty Ltd v Sydney City Council (1981) 46 LGRA 168 …. 5.10 Streeter v McLennan [1959] Qd R 136 …. 4.9 Strongman (1945) Ltd v Sincock [1955] 2 QB 525 …. 3.5 Stuart Pty Ltd v Condor Commercial Insulation Pty Ltd (2008) 24 BCL 255 …. 12.18 Sturges v Bridgman (1878) 11 Ch D 852 …. 19.18, 19.19 Sturt v Cusack (1989) 12 Qld Lawyer Reps 84 …. 12.2 Subway Systems Australia v Ireland [2013] VSC 550 …. 18.44 Sulco Ltd v E S Redit and Co Ltd [1659] NZLR 45 …. 17.12 Sullivan v Department of Transport (1978) 1 ALD 383 …. 18.37 — v Moody [2001] HCA 59 …. 16.5 Sumieski Materials Co Ltd v Wambo Coal Pty Ltd [2013] NSWSC 235 …. 3.10 Summers v Commonwealth (1918) 25 CLR 144 …. 3.9, 12.1, 12.6, 12.15 Summit Design & Construction Pty Ltd, Re (1999) 33 ACSR 301 …. 14.5 Sumpter v Hedges [1898] 1 QB 673 …. 8.4 Sunshine Retail Investments Pty Ltd v Wulff [1999] VSC 415 …. 19.33 Super Pty Ltd (formerly known as Leda Constructions Pty Ltd) v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 …. 18.21 Surrey County Council v Bredero Homes Ltd [1992] 3 All ER 302 …. 12.18 Surrey Heath Borough Council v Lovell Construction Ltd & Haden Young Ltd (1988) 42 BLR 25 …. 11.1 Sutcliffe v Thackrah [1997] AC 727 …. 9.13, 16.6, 17.5, 18.19 Sutherland Shire Council v Becker (2006) 150 LGERA 184; [2006] NSWCA 344 …. 19.10, 19.15, 19.51 SVI Systems Pty Ltd v Best & Less Pty Ltd (2001) 187 ALR 302 …. 14.6 SW Hart and Co Pty Ltd v Edwards Hot Water Systems (1985) 159 CLR 466

…. 17.9 Swanson Bros Pty Ltd v Stardawn Investments Pty Ltd [1967] VSC 71 …. 10.4, 10.6, 10.10 Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699 …. 10.6, 12.6 Swick Nominees Pty Ltd t/as Swick Drilling Australia v Norncott Pty Ltd (No 3) [2013] WASCA 173 (S) …. 11.3, 11.7 Swintons Pty Ltd v Age Old Builders Pty Ltd [2005] VSCA 217 …. 18.49 Sydney Attractions Group Pty Ltd v Schulman [2013] NSWSC 858 …. 4.6 Sydney Organising Committee for the Olympic Games v Zhu [2002] NSWCA 380 …. 2.9 Sydney Water Corporation v Asset Geotechnical Engineering Pty Ltd [2013] NSWSC 1274 …. 16.12

T T & M Buckley Pty Ltd v 57 Moss Rd Pty Ltd (2010) 27 BCL 280 …. 8.7 T J Watkins Ltd v Cairns Meat Export Co Pty Ltd [1963] Qd R 21 …. 2.8 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8 …. 11.3, 11.5, 11.7 Talacko v Talacko [2009] VSC 98 …. 18.10 Tamawood Ltd v Habitare Developments Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed (No 3) (2013) 101 IPR 225; [2013] FCA 410 …. 17.9, 17.10 — v Henley Arch Pty Ltd (2004) 61 IPR 378; [2004] FCAFC 78 …. 17.9 Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 …. 2.11 Tarangau Game Fishing Charters Pty Ltd v Eagle Yachts Pty Ltd [2013] QSC 16 …. 5.8 Tasmanian Copper Co Ltd v Metals Extraction Co Ltd (1912) 8 Tas LR 57 …. 18.21

Tautau v Ministry of Transport [1991] 2 NZLR 204 …. 19.59 Taylor v Browning (1885) 11 VLR 158 …. 19.42 — v Chapman [2003] NSWSC 992 …. 8.12 — v Hall (1870) 4 IRCL 467 …. 15.16 — v Yielding (1912) 56 Sol Jo 253 …. 18.21 Taypar Pty Ltd v Santic (1989) 17 IPR 146 …. 17.9 TC Whittle Pty Ltd v T & G Mutual Life Society Ltd (1997) 18 AR 431 …. 7.7, 7.8, 7.12 TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia [2012] HCATrans 277 …. 18.20 TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 …. 12.18 Tea Tree Gully Builders Co Pty Ltd v Martin (1992) 59 SASR 344 …. 3.6, 8.8 Tehidy Minerals Ltd v Norman [1971] 2 QB 528, 553 …. 19.38 Telecomputing PCS Pty Ltd v Bridge Wholesale Acceptance Corp (Aust) Ltd (1991) 24 NSWLR 513 …. 18.10, 18.37 Telesto Investments Limited v UBS AG (2013) 94 ACSR 29; [2013] NSWSC 503 …. 7.13 Tellamist Pty Ltd v Port Stephens Shire Council [2003] NSWSC 234 …. 19.67 Telstel Australia Pty Ltd v KRG Electrics Pty Ltd [2013] SASC 91 …. 4.6 Tenth Vandy Pty Ltd v Natwest Markets Australia Ltd [2012] VSCA 103 …. 19.23 — v — (No 2) [2010] VSC 70 …. 18.45 — v — [2010] VSC 2 …. 2.11, 2.12 Tepco Pty Ltd v Water Board (2001) 178 ALR 634; [2001] HCA 19 …. 5.8, 18.6 Tergeste, The [1903] P 26 …. 4.16, 8.5 Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486 …. 3.8

Terrex Resources NL v Magnet Petroleum Pty Ltd (1988) 1 WAR 144 …. 1.3, 3.1 Thackwray v Winter (1880) 6 VLR (L) 128 …. 10.8 Thaler v Amzalak (No 2) [2013] NSWSC 632 …. 18.37, 18.41 Thannhauser v Westpac Banking Corp (1991) 31 FCR 572 …. 17.12 Tharsis Sulphur and Copper Co v M Elroy (1878) 3 App Cas 1040 …. 8.5, 9.18 Theocharis Polykarpou (1985) 18 A Crim R 288 …. 18.11 Thermoplastic Foam Industries Pty Ltd v Imthouse Pty Ltd (1990) 5 BPR 11,181 …. 3.10 Thiess Constructions Pty Ltd v Pavements and Excavations Pty Ltd (2000) 16 BCL 42 …. 9.14 Thiess Contractors Pty Ltd v Placer (Granny Smith) Pty Ltd (2000) 16 BCL 255; [2000] WASCA 102 …. 1.7, 12.1 — v Water Corporation of Western Australia (SC(WA), Parker J, 28 October 1997, unreported) …. 18.36, 18.45 Thiess Services Pty Ltd v Mirvac Queensland Pty Ltd (2006) 22 BCL 437; [2006] QCA 50 …. 8.12 Thomas Cook Pty Ltd v Commonwealth Banking Corporation (1986) 4 BPR 9185 …. 17.5, 18.21 Thompson (WL) Ltd v Robinson (Gunmakers) Ltd [1955] Ch 177 …. 12.18 Thompson v Sydney Municipal Council (1938) 14 LR (NSW) 32 …. 19.16, 19.18 Thompson-Schwab v Costaki [1956] 1 All ER 652 …. 19.18, 19.24 Thorn v Mayor and Commonalty of London (1876) 1 App Cas 120 …. 8.9, 8.12, 10.4 Tibbits v George (1836) 5 Ad & El 107; 111 ER 1107 …. 13.4 Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353 …. 18.1 TNT Australia Pty Ltd v Christie [2003] NSWCA 47 …. 19.54 Tod Group Holdings v Fangrove Pty Ltd [1998] QCA 404 …. 17.15

Todd v Flight (1860) 9 CB NS 377; 142 ER 148 …. 19.16 Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660; [1903] AC 414 …. 13.7, 13.8 — v Cleary Bros (Bombo) Pty Ltd [2008] NSWCA 181 …. 19.54 Tomko v Palasty [2007] NSWCA 258 …. 2.18 Tonkin v Cooma-Monaro Shire Council (2006) 145 LGERA 48; [2006] NSWCA 50 …. 7.10, 8.9 Toomey v Scolaro’s Concrete Constructions Pty Ltd (in liq) [2001] VSC 279 …. 16.6, 17.13, 17.18, 19.60, 19.65 Top Performance Motors Ltd v Ira Berk (Qld) Pty Ltd (1975) ATPR 40-004 …. 5.15 Torette House Pty Ltd v Berkman (1940) 62 CLR 637 …. 19.14 Torpey Vander Have Pty Ltd v Mass Constructions Pty Ltd [2002] NSWCA 263 …. 8.8 Totalisator Agency Board of Western Australia v Rosendorff [2000] WASCA 227 …. 18.37 Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 …. 1.2, 3.1, 7.9 TR Nominees Investments Pty Ltd v Multiplex Constructions Pty Ltd (1996) 12 BCL 219 …. 12.17 Tracomin SA v Gibbs Nathaniel (Canada) Ltd [1985] 1 Lloyd’s Rep 586 …. 18.37 Tradax Export SA v Volkswagenwerk AG (‘La Loma’) [1970] 1 QB 537 …. 18.30 Trade Indemnity Australia Ltd v Parkinson Air-conditioning Pty Ltd (1994) 11 BCL 39 …. 14.9 Trade Practices Commission v Collings Construction Co Pty Ltd (1994) ATPR 41-350; (1996) 142 ALR 43 …. 18.3, 18.30 — v CC (NSW) Pty Ltd (1994) 125 ALR 94 …. 4.2, 7.13 Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW)

632 …. 12.3 Tranquility Pools and Spas Pty Ltd v Huntsman Chemical Co Australia Pty Ltd [2011] NSWSC 75 …. 4.5, 11.3 Transfer of Land Act 1885, Re Application by Schultze (1894) 13 NZLR 605 …. 19.37 Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd t/as ‘Uncle Ben’s of Australia’ (1992) 27 NSWLR 326 …. 3.1, 3.3, 12.6 Trent and Humber Co, Re; Ex p Cambrian Steam Packet Co (1868) LR 6 Eq 396 …. 11.10 Trewin v Felton [2007] NSWSC 851 …. 19.31 TRFCK Pty Ltd v O’Brien Holdings (Townsville) Pty Ltd [2012] QSC 356 at [41] …. 8.15 Triden Contractors Pty Ltd v Belvista Pty Ltd (1986) 3 BCL 203 …. 8.5, 8.6, 9.18 Trident General Insurance Co v McNiece Bros Pty Ltd (1988) 165 CLR 107 …. 11.14 Trifid Pty Ltd v Ratto [1985] WAR 19 …. 7.6, 7.9 Trimis v Mina (1999) 16 BCL 288; [1999] NSWCA 140 …. 8.4, 10.8 Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601 …. 6.8 Tropeano v Monogram Pty Ltd [1992] 2 Qd R 324 …. 18.10 Truss v Brazier (1990) 96 ALR 767 …. 8.13 Trustees of the Christian Brothers v Cardone (1995) 57 FCR 327 …. 18.37 Tryer v Shaw (1858) 27 LJ Ex 320 …. 18.37 Tsu v Nemeth [2012] NSWCA 29 …. 19.54 Turner Corp Ltd v Austotel Pty Ltd (1992) 27 NSWLR 592 …. 18.29 Turner v Californian Cars & Sports Trucks Pty Limited [2002] NSWSC 666 …. 8.1 Turriff Construction Ltd and Turriff Ltd v Regalia Knitting Mills Ltd (1971) 9

BLR 20 …. 5.6 Tuta Products Pty Ltd v Hutcherson Bros Pty Ltd (recs appd) (1972) 127 CLR 253 …. 4.17, 10.6, 14.17, 18.45 Tyneside Property Management Pty Ltd v Hammersmith Management Pty Ltd [2013] NSWSC 635 …. 15.14 Tyrer v District Auditor for Monmouthshire (1973) 230 EG 973 …. 15.17

U Ucak v Avente Developments Pty Ltd [2007] NSWSC 367 …. 19.2 ULV Pty Ltd v Scott (1990) 19 NSWLR 190 …. 17.12 Un v Schroter [2002] NTSC 2 …. 17.10 Unisys Australia Ltd v RACV Insurance Pty Ltd [2004] VSCA 81 …. 8.13 United Group Rail Services v Rail Corp (NSW) (2009) 74 NSWLR 618 …. 7.10, 7.13 Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603 …. 14.13 Unley Property Development Pty Ltd v Lelio Bibbo Pty Ltd [2000] SASC 388 …. 18.10 Unsted v Unsted (1947) 47 SR (NSW) 495 …. 18.11 Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251 …. 10.8, 10.12, 12.18, 18.13 Update Constructions Pty Ltd v Rozelle Child Care Centre Pty Ltd (1990) 20 NSWLR 251 …. 8.9 Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 …. 3.1, 3.2, 7.9 Utiger v Brown [2002] VSC 306 …. 18.6

V Valherie v Strata Corporation No 1841 [2004] SASC 170 …. 19.15

Van Son v Forestry Commission of New South Wales (1995) 86 LGERA 108 …. 19.18, 19.22, 19.26 Varley v Spatt [1955] VLR 403 …. 3.5 Velik v Steingold [2013] NSWCA 303 …. 12.6 Vella v Owners of Strata Plan 8670 [2007] NSWLEC 365 …. 19.16 Velvet Glove Holdings Pty Ltd v Mount Isa Mines Ltd [2011] QCA 312 …. 2.16 Ventura v Svirac [1961] WAR 63 …. 11.4 Verve Constructions Pty Ltd v Visser [2012] VCAT 284 …. 8.12 Verwayen v Commonwealth [1988] VR 203 …. 18.6 Vic Mill Ltd, Re [1913] 1 Ch 465 …. 12.18 Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528 …. 11.3, 11.4 Victoria Park Racing and Recreation Grounds Co Ltd v Taylor (1937) 58 CLR 479 …. 19.8 Victorian Railways Commissioners v James L Williams Pty Ltd (1969) 44 ALJR 32 …. 13.3, 14.4 Vidovich v Scalzi & Scalzi (1986) 3 BCL 85 …. 10.3 Villani v Delstrat Pty Ltd [2002] WASC 112 …. 18.36 Vincent v Peacock [1973] 1 NSWLR 466 …. 19.16, 19.18 Vitol SA v Norelf Ltd [1994] 4 All ER 109 …. 12.8 Vivian Fraser & Associates Pty Ltd v Shipton [1999] FCA 60 …. 5.5, 7.10, 8.4, 8.8 Voli v Inglewood Shire Council (1963) 110 CLR 74 …. 17.4, 17.10, 17.13, 17.15 Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 …. 1.2, 3.1, 4.2

W W & F Lechner Pty Ltd v Drummond & Rosen Pty Ltd (2001) 38 ACSR 42;

[2001] NSWSC 275 …. 8.4, 8.5 W I Bishop Ltd v James Maclaren Co [1937] 2 DLR 625 …. 10.13 W Jeffreys Holdings Pty Ltd v Appleyard & Assocs (1990) 10 BCL 298 …. 11.6, 18.10 W Curl & Sons Regd v Buck Industries Pty Ltd and Dillingham Constructions Pty Ltd (1972) 2 SASR 335 …. 14.5 Wagdy Hanna and Associates Pty Ltd v National Library of Australia (2012) 7 ACTLR 70; [2012] ACTSC 126 …. 5.13 Wakim v Mathiew Pty Ltd t/as Dove Migration Services [2002] NSWSC 405 …. 18.37 Wakim, Re; Ex parte McNally [1999] HCA 27 …. 18.3 Walford v Miles [1992] 2 AC 128 …. 3.3, 7.10 Walker v Corporation of the City of Adelaide (2004) 88 SASR 225 …. 19.55 — v Council of the Municipality of Randwick (1929) 30 SR (NSW) 84 …. 8.12, 10.13 Walker Civil Engineering (Qld) Pty Ltd v F A Pidgeon & Son Pty Ltd (1986) 3 BCL 345 …. 2.16 Wallis, Re; Ex parte Jenks [1902] 1 KB 719 …. 13.4 Walpole Pty Ltd v Rangeville Manor Pty Ltd [2000] VCAT 11 …. 14.10 Walsh v Ervin [1952] VLR 361 …. 19.26 — v Westpac Banking Corp (1991) 104 ACTR 30 …. 3.4 Walter Construction Group Ltd v Walker Corporation Ltd (2001) 47 ATR 48; 17 BCL 364 …. 9.22, 12.1 Walter v Selfe (1851) 4 De G & Sm 315; 64 ER 849 …. 19.18 Walton Construction Co Pty Ltd v Illawarra Hotel Co Pty Ltd [2011] NSWSC 1188 …. 18.19 Walton v Illawarra (2012) 28 BCL 202; [2011] NSWSC 1188 …. 9.15 Wang v Garland Lot 3 Pty Ltd [2013] NSWSC 1112 …. 11.3 Ware v Lyttelton Harbour Board (1882) NZLR 1 SC 191 …. 6.2

Warley Pty Ltd v Adco Constructions Pty Ltd (1988) 8 BCL 300 …. 18.45 Warne v Nolan [2001] QSC 053 …. 19.22 Warwicker Assessments v Zadow (1989) 1 WAR 307 …. 16.5, 16.6 Watcham v A-G of East Africa Protectorate [1919] AC 533 …. 2.18 Watpac Construction (NSW) Pty Ltd v Austin Corp Pty Ltd [2010] NSWSC 168 …. 8.7 Watson v Cowen [1959] Tas SR 194 …. 19.2 Watts v Morrow 1991] 4 All ER 937 …. 11.15, 11.16 Webb’s Lease, Re [1951] Ch 808 …. 19.42 Weemah Park Pty Ltd v Glenlaton Investments Pty Ltd [2011] QCA 150 …. 2.1 Wegan Constructions Pty Ltd v Wodonga Sewerage Authority [1978] VR 67 …. 8.12, 10.4 Wellington City Council v Body Corporate 51702 [2002] NZCA 191 …. 7.10 Wells (Merstham) Ltd v Buckland Sand and Silica Ltd [1965] 2 QB 170 …. 14.6 Wenco Industrial Pty Ltd v W W Industries Pty Ltd [2009] VSCA 191 …. 18.10 Wentworth v Rogers [2002] NSWSC 709 …. 8.9 — v — [2005] NSWSC 143 …. 8.10 Wenzel v Australian Stock Exchange Ltd [2002] FCA 95 …. 2.12 West v Ian Finlay & Assoc (a firm) [2013] EWHC 868 …. 16.7 West’s Plumbing Services Pty Ltd v Trade Indemnity Australia Ltd (1994) 8 ANZ Ins Cases 61,214 …. 3.10 Western Electric Ltd v Welsh Development Agency [1983] 1 QB 796 …. 4.7 Western Export Services Inc v Jireh International Pty Ltd (2011) 282 ALR 604; [2011] HCA 45 …. 2.16, 7.4 Westfal-Larsen & Co A/S v Ikerigi Compania Naviera SA [1983] 1 All ER 382 …. 18.28 Westfield Management Ltd v AMP Capital Property Nominees Ltd (2012) 293 ALR 241; [2012] HCA 54 …. 2.16

— v Perpetual Trustee Company Limited (2007) 233 CLR 528; [2007] HCA 45 …. 19.32, 19.39, 19.40 Westgold Resources NL v St George Bank Ltd [1998] WASC 352 …. 13.4, 13.6 Westpac Banking Corporation v The Bell Group Ltd (In liq) (No 3) (2012) 89 ACSR 1; [2012] WASCA 157 …. 2.16 — v Newey [2013] NSWSC 847 …. 7.9 Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37 …. 18.41, 18.45 WesTrac Pty Ltd v Eastcoast OTR Tyres Pty Ltd (2008) 219 FLR 461 …. 7.13 Westralian Farmers Co-Operative Ltd v Southern Meat Packers Ltd [1981] WAR 241 …. 13.3 Wheeldon v Burrows (1879) 12 Ch D 31 …. 19.41, 19.43 — v — [1874–80] All ER Rep 669 …. 19.52 Whelan Kartaway Pty Ltd v Donnelly [2012] VSC 45 …. 18.3 Wherry v K B Hutcherson Pty Ltd (1986) 4 BCL 164 …. 19.19, 19.22 — v Trustees of the Sisters of Charity of Aust (2000) 111 LGERA 216 …. 19.41, 19.42 White v Ensor (1892) 11 NZLR 586 …. 6.9 White Constructions (NT) Pty Ltd v Commonwealth (1990) 7 BCL 193 …. 18.10 White Industries (Qld) Pty Ltd, Re (1990) 7 BCL 200 …. 12.10 White Industries Ltd v Piling Contractors Pty Ltd (1986) 2 BCL 353 …. 1.4, 3.1, 14.15 White Property Developments Ltd v Richmond Growth Pty Ltd [1998] FCA 26 …. 8.16 Whiteby v Hodge [2000] NSWSC 866 …. 2.16 Whitlock v Brew 1968) 118 CLR 445 …. 3.1, 7.10 Wickham v City of Gosnells (1984) 55 LGRA 102 …. 4.9 Wilcox v Richardson (1997) 43 NSWLR 4 …. 19.41

Wildtree Hotels Ltd v London Borough of Harrow [1998] EWCA Civ 978 …. 19.22 Wilke v Astra Pharmaceuticals Pty Ltd [2001] NSWCA 135 …. 19.54 Wilkinson v Clements (1872) 8 Ch App 96 …. 11.17 William Brandt’s Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 …. 13.4 William Lacey (Hounslow) Ltd v Davis [1957] 1 WLR 932 …. 5.5 William McCausland v Surfing Hardware International Holdings Pty Ltd [2013] NSWSC 902 …. 7.10 William Thomkins & Sons v Parochial Church Council of Saint Michael (1990) 6 Const LJ 814 …. 11.1 Williams v State Transit Authority of NSW [2004] NSWCA 179 …. 19.32 — v Trimview Roof Restoration Pty Ltd [2001] WASCA 414 …. 19.54 Williamson v Murdoch (1912) 14 WALR 54 …. 6.4 Wilson Constructions Pty Ltd and Council of the Shire of Noosa, Re [1970] QWN 18 …. 18.30 Wilson v Kirk Contractors Pty Ltd (1991) 7 BCL 284 …. 12.5, 12.6, 12.11, 12.15 Wimmera-Mallee Rural Water Authority v FCH Consulting Pty Ltd (No 2) [2000] VSC 193 …. 14.8, 14.16 Windsor Rural District Council v Otterway & Try Ltd [1954] I WLR 1494 …. 9.15 Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 111 ALR 649 …. 5.5, 12.5 WM Adams & Co Ltd v Symonds (1925) 25 SR (NSW) 204 …. 14.4 WMC Resources Ltd v Leighton Contractors Pty Ltd (1999) 16 BCL 53 …. 9.12, 9.15, 10.11 — v — (2000) 16 BCL 53 …. 9.14 Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551 …. 6.3, 6.4

Wollongong City Council v Fregnan [1982] 1 NSWLR 244 …. 11.7 Wood Hall Ltd v Pipeline Authority (1979) 141 CLR 443 …. 9.25 Woodard v Wimpey Constructions UK Ltd [1980] 1 WLR 571 …. 12.6 Woodcock v Oxford and Worcester Railway Co (1853) 1 Drew 521; 61 ER 551 …. 10.10 Woodside Offshore Petroleum Pty Ltd v Atwood Oceanics Inc [1986] WAR 253 …. 3.3, 12.6 Woolcock Engineering Pty Ltd v SWF Hoists & Industrial Equipment Pty Ltd [2000] SASC 120 …. 6.1 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; [2004] HCA 16 …. 8.15, 17.15, 17.19 Woollerton & Wilson v Richard Costain Ltd [1970] 1 All ER 483 …. 19.3, 19.6 Woolworths Ltd v Herschell Constructions Pty Ltd (in liq) (1992) 11 Aust Cons LR 18 …. 18.20, 18.29 WorkCover Queensland v AMACA Pty Ltd [2012] QCA 240 …. 13.7 Worrall v Commissioner for Housing for the ACT [2002] FCAFC 127 …. 19.22, 19.23 Worthmore Homes Pty Ltd v Martin (2002) 29 SW (WA) 250 …. 7.15 Wren v Emmett Contractors Pty Ltd (1969) 43 ALJR 213 …. 1.10, 10.4, 10.10, 12.1 Wright v Langland’s Foundry Co (1874) 5 AJR 11 …. 14.11 Wringe v Cohen [1940] 1 KB 229 …. 19.16 WTE Co-Generation v RCR Energy Pty Ltd [2013] VSC 314 …. 3.3, 18.14, 18.44 Wulduru Heights Pty Ltd v Merritt Cairns Constructions Pty Ltd [1999] 13 BCL 37 …. 9.14

X X (Minors) v Bedfordshire County Council [1995] 2 AC 718 …. 19.65

Xpress Print Pty Ltd v Monocrafts Pte Ltd [2000] 3 SLR 545 …. 19.51 Xu v Jinhong Design and Constructions Pty Ltd [2011] NSWCA 277 …. 10.12 Xuereb v Viola (1988) 18 NSWLR 453 …. 18.37

Y Y P Barley Producers Ltd v E C Robertson Pty Ltd [1927] VLR 194 …. 6.10, 12.8 Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 …. 3.5 Yara Australia Pty Ltd v Oswal (No 2) [2013] WASCA 187 …. 13.8 Yared v Glenhurst Gardens Pty Ltd (2002) 10 BPR 19; [2002] NSWSC 11 …. 19.25, 19.48, 19.50, 19.62 Yarrabee Chicken Co Pty Ltd v Steggles Ltd (No 4) [2013] FCA 604 …. 3.11 Yendex Pty Ltd v Prince Constructions Pty Ltd (1988) 5 BCL 74 …. 12.10 Yerkey v Jones (1939) 63 CLR 649 …. 2.12 Yesodei Hatorah College Inc v The Trustees of the Elwood Talmud Torah Congregation [2011] VSC 622 …. 18.45 Yogesh Enterprises Pty Ltd v Jury [2011] NSWSC 131 …. 6.9 York Bros (Trading) Pty Ltd v Commissioner of Main Roads [1983] 1 NSWLR 391 …. 19.27 York v General Medical Assessment Tribunal [2002] QCA 519 …. 18.37 Young v Ballarat and Ballarat East Water Commissioners (1879) 5 VLR (L) 503 …. 1.8, 6.11, 10.6, 10.9, 10.13 — v — (1878) 4 VLR (L) 502 …. 6.11 — v Kitchin (1878) 3 Ex D 137 …. 13.5 — v Wheeler (1987) Aust Torts Reports 80-126 …. 19.26, 19.27 Young & Marten Ltd v McManus Childs Ltd [1969] 1 AC 454 …. 4.4, 4.5, 14.16

Z Zamperoni Decorators Pty Ltd v Lo Presti [1983] 1 VR 338 …. 8.1 Zauner Construction Pty Ltd v No 2 Pitt Street Pty Ltd (2001) 17 BCL 357; [2001] VSC 154 …. 8.5 Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 550 …. 2.9 Ziliotto v Hakim [2013] NSWCA 359 …. 18.1 Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445 …. 7.14 Zorba Structural Steel Company Pty Ltd v Watco Pty Ltd (1993) 115 FLR 206 …. 8.4, 14.16 Zullo Enterprises Pty Ltd v Sutton (1998) 15 BCL 283 …. 3.6 Zumpano v Montagnese (1997) 2 VR 525 …. 16.10 Zurich Australian Insurance Limited v The Workers Compensation Nominal Insurer [2013] NSWSC 915 …. 7.10

TABLE OF STATUTES References are to paragraphs

COMMONWEALTH Airports Act 1996 s 131D …. 19.8 Australian Consumer Law …. 2.11, 4.4, 4.7, 7.14, 8.13, 9.23, 13.12, 18.3, 18.49 Pt 2-2 …. 7.14 s 18 …. 5.8, 15.17, 16.5, 17.7, 18.3 s 20 …. 7.14 s 21 …. 7.14 s 22 …. 7.14 s 236 …. 15.17 s 243 …. 2.10 Competition and Consumer Act 2010 …. 11.2 Pt IV …. 5.15 s 18 …. 8.13 ss 45–45E …. 5.15 s 45(2) …. 5.15 s 54 …. 4.7 s 60 …. 4.7 s 61 …. 4.7 Sch 2 …. 2.10, 2.11, 4.4, 4.7, 5.8, 7.14, 8.13, 9.11, 13.12, 15.12, 18.3, 18.32 Copyright Act 1968 s 10(1) …. 17.9

s 13 …. 17.9 s 14(1)(b) …. 17.9 s 15 …. 17.9 s 21(3)(a) …. 17.9 s 31 …. 17.9 s 31(1)(a)(i) …. 17.9 s 31(1)(a)(ii) …. 17.9 s 31(1)(a)(vi) …. 17.9 s 36(1) …. 17.9 s 66 …. 17.9 s 73(2) …. 17.9 s 115(1) …. 17.9 s 115(2) …. 17.9 s 134 …. 17.9 Corporations Act 2001 …. 14.5 Evidence Act 1995 …. 18.8 Fair Work Act 2009 …. 7.11 Federal Circuit Court of Australia Legislation Amendment Act 2012 s 10 …. 18.3 s 18 …. 18.3 Federal Circuit Court Rules 2001 …. 18.4 Pt 25 …. 18.7 Pt 27 …. 18.9 Div 15.2 …. 18.8 Federal Court of Australia Act 1976 s 19(1) …. 18.3

Federal Court Rules 1979 …. 18.4 O 34 …. 18.10 Federal Court Rules 2011 …. 18.4 Pt 23 …. 18.10 Pt 28 …. 18.9 Div 23.2 …. 18.8 Federal Magistrates Act 1999 …. 18.3 International Arbitration Act 1974 …. 18.20 International Arbitration Amendment Act 2010 …. 18.20 Jurisdiction of Courts (Cross-Vesting) Act 1987 …. 18.3 Northern Territory Acceptance Act 1910 s 7(1) …. 14.5 Personal Properties Securities Act 2009 …. 14.14 Supreme Court Act 1933 …. 18.3 Trade Practices Act 1974 …. 9.11, 18.3, 18.32, 18.49 Pt v …. 13.12 s 51AA …. 7.14 s 51AC …. 7.14 s 81 …. 8.13

AUSTRALIAN CAPITAL TERRITORY Architects Act 2004 …. 17.3 Building Act 2004 s 42(1)(c) …. 4.4 s 88(2)(a) …. 4.8 s 88(2)(c) …. 4.5

Building and Construction Industry (Security of Payment) Act 2009 …. 4.16, 14.1, 14.9 Civil and Administrative Tribunal Act 2011 …. 18.49 Civil Law (Property) Act 2006 s 205 …. 13.6 Civil Law (Wrongs) Act 2002 Ch 4 …. 16.12 Ch 7A …. 16.12 s 40 …. 16.3, 16.12 Commercial Arbitration Act 1986 …. 18.20 Construction Occupations (Licensing) Act 2004 s 8 …. 3.7 s 17 …. 3.7 s 18 …. 3.7 Court Procedures Rules 2006 …. 18.4 Pt 2.10 …. 18.7 Pt 2.12 …. 18.8 Div 2.11.7 …. 18.9 Div 2.15.4 …. 18.10 Fair Trading (Australian Consumer Law) Act 1992 Pt 2 …. 8.13 s 6 …. 15.17 Limitation Act 1985 s 11(1) …. 11.9, 16.9 s 40(1) …. 11.9 Magistrates Court Act 1930 s 257 …. 18.3

NEW SOUTH WALES Access to Neighbouring Land Act 2000 …. 19.46 Architects Act 2003 …. 17.3 Builders Licensing Act 1971 s 45 …. 3.6 Building and Construction Industry Security of Payment Act 1999 …. 4.16, 14.1 s 7 …. 4.9 s 13 …. 14.5 s 13(1) …. 14.5 s 15 …. 14.5 Building and Construction Industry Security of Payment Amendment Act 2002 …. 14.9 Building Legislation Amendment (Quality of Construction) Act 2002 …. 18.50 Building Professionals Act 2005 s 5 …. 3.7 s 5A …. 3.7 s 10 …. 3.7 Civil and Administrative Tribunal Act 2013 …. 18.49 Civil Liability Act 2002 Pt 1A …. 16.12 Pt 4 …. 16.12 s 5 …. 16.12 s 5B …. 16.12 s 5D(1) …. 16.7, 16.12 Civil Procedure Act 2005 Pt 4 …. 18.9

Pt 5 …. 18.9 Commercial Arbitration Act 2010 …. 18.20 Consumer, Trader and Tenancy Tribunal Act 2001 …. 18.49 Contractors Debt Act 1997 s 5 …. 14.5 Contracts Review Act 1980 s 4(1) …. 2.12 s 7(1) …. 2.12, 4.1 Conveyancing Act 1919 s 12 …. 13.6 s 88B …. 19.28 s 88B(3)(c)(iii) …. 19.35 s 88BB …. 19.52 s 88K …. 19.44, 19.46 s 89 …. 19.38 s 177 …. 19.49, 19.53, 19.54, 19.60, 19.62 s 179 …. 19.33, 19.48 s 181B …. 19.51 Conveyancing Amendment (Law of Support) Act 2000 …. 19.53 District Court Act 1973 s 44 …. 18.3 Environmental Planning and Assessment Regulation 1994 s 78 …. 19.66 s 78F …. 19.66 Evidence Act 1995 …. 18.8 Fair Trading Act 1987 …. 7.14

Pt 3 …. 8.13 Fair Trading Amendment (Australian Consumer Law) Act 2010 Pt 3 …. 15.17 Home Building Act 1989 …. 7.14, 18.49 s 18B(a) …. 4.4 s 18B(b) …. 4.5 s 18B(c) …. 4.8 s 18B(f) …. 4.7 s 18D …. 4.4 s 18E …. 11.9 s 18G …. 4.4 s 83B …. 18.50 Home Building Regulations 2004 …. 19.63 Land and Environment Court Act 1979 s 40 …. 19.46 Limitation Act 1969 s 4(1)(a) …. 11.9 s 4(1)(b) …. 11.9 s 14(1) …. 16.9 Local Court Act 2007 s 29 …. 18.3 Local Court Rules 2009 …. 18.4 Local Government Act 1919 …. 7.10 s 318(8) …. 19.66 Local Government (General) Regulations 2005 …. 19.63 Pharmacy Act 1964

s 25 …. 3.5, 3.6 Protection of the Environment Operations Act 1997 s 268 …. 19.8 Real Property Act 1900 s 46A …. 19.28 s 47(7) …. 19.35 Supreme Court Act 1970 …. 18.3 Supreme Court Rules 1970 …. 18.4 Sydney Improvement Act 1879 s 59 …. 19.66 Uniform Civil Procedure Rules 2005 …. 18.4 Pt 20 Div 3 …. 18.10 r 45.7 …. 18.5 r 45.11 …. 18.5 r 51 …. 18.7 r 51.47 …. 18.8

NORTHERN TERRITORY Architects Act …. 17.3 Building Act s 4 …. 3.7, 15.15 ss 12–19 …. 18.50 s 22 …. 3.7, 15.15 s 23 …. 3.7 s 24 …. 3.7 s 25 …. 3.7

s 54B(1)(b) …. 4.7 s 54B(1)(c) …. 4.7 s 54B(1)(d) …. 4.8 ss 77–99 …. 19.60 s 160 …. 11.9 Construction Contracts (Security of Payments) Act …. 4.16, 14.1, 14.9 s 48 …. 14.5 Consumer Affairs and Fair Trading Act Pt 4 …. 8.13 s 27 …. 15.17 Land Title Act Div 4 …. 19.48 Law of Property Act s 162 …. 19.49, 19.51 ss 163–164 …. 19.46 s 182 …. 13.6 Law Reform (Miscellaneous Provisions) Act …. 16.12 Limitation Act s 12(1) …. 16.9 s 12(1)(a) …. 11.9 s 12(1)(b) …. 11.9 Local Courts Act s 3 …. 18.3 s 14 …. 18.3 Local Courts Rules …. 18.4 Pt 20 …. 18.7

Pt 24 …. 18.8 Personal Injuries (Liabilities and Damages) Act …. 16.12 Proportionate Liability Act 2005 …. 16.12 Small Claims Act …. 18.49 Supreme Court Act …. 18.3 Supreme Court Rules …. 18.4 O 26 …. 18.6 O 44 …. 18.8 r 50.01 …. 18.10

QUEENSLAND Architects Act 2002 …. 17.3 Building Act 1975 …. 18.50, 19.63 Building and Construction Industry Payments Act 2004 …. 4.16, 14.1, 14.9 s 4 …. 14.5 Builders Registration and Home-owners Protection Act 1979 s 58(1)(a) …. 3.6 s 75 …. 3.6 Building Regulations 2006 …. 19.63 Civil and Administrative Tribunal Act 2009 …. 18.49, 18.50 Civil Liability Act 2003 Ch 2 Pt 1 …. 16.12 Ch 2 Pt 2 …. 16.12 s 9(1) …. 16.5 Sch 2 …. 16.5 Commercial Arbitration Act 2013 …. 18.20

District Court Act 1967s 68 …. 18.3 District Court Rules 1968 …. 18.4 Domestic Building Contracts Act 2000 …. 4.7, 7.15 s 11 …. 7.15 s 42(1) …. 4.5 s 43 …. 4.8 s 44 …. 4.4, 4.7 s 45 …. 4.4 s 46 …. 4.5 s 49(1) …. 4.4 s 56 …. 7.15 s 79 …. 10.7 Environmental Protection Act 1994 s 15 …. 19.8 s 440 …. 19.8 Fair Trading Act 1989 …. 7.14 Pt 3 …. 8.13, 15.17 Interdict Act 1867 …. 18.23 Land Title Act 1994 s 88 …. 19.35 Limitation of Actions Act 1974 s 10(1)(a) …. 11.9, 16.9 Magistrates Courts Act 1921 s 2 …. 18.3 s 4 …. 18.3 Property Law Act 1974

s 178 …. 19.33 s 179 …. 19.49, 19.51, 19.62 s 180 …. 19.6, 19.46 s 198A …. 19.48 s 199 …. 13.6 Queensland Building Services Authority Act 1991 s 4 …. 2.20 s 4(1) …. 3.7 s 30 …. 3.7 s 31 …. 3.7 s 32 …. 3.7 s 33 …. 3.7 s 34 …. 3.7 s 42 …. 3.6 Queensland Civil and Administrative Tribunal Act 2009 Pt 2 …. 18.49 Subcontractors Charges Act 1974 …. 14.5 s 5 …. 14.1 Supreme Court of Queensland Act 1991 …. 18.3 Uniform Civil Procedure Rules 1999 …. 18.4 Pt 4 …. 18. Pt 7 …. 18.10 s 353 …. 18.7

SOUTH AUSTRALIA Architectural Practice Act 2009 …. 17.3

Building and Construction Industry Security of Payment Act 2009 …. 4.16, 14.1 Building Work Contractors Act 1995 Pt 4 …. 18.50 Pt 5 …. 18.50 s 6 …. 3.7 s 7 …. 3.7 s 8 …. 3.7 s 9 …. 3.7 s 29 …. 7.15 s 29(3) …. 7.15 s 29(4) …. 7.15 s 29(10) …. 7.15 s 32(2)(a) …. 4.4 s 32(2)(b) …. 4.5 s 32(2)(c) …. 4.8 s 32(2)(f) …. 4.7 s 32(3) …. 4.4 s 32(5) …. 11.9 Civil and Administrative Tribunal Act 2013 …. 18.49 Civil Liability Act 1936 Pt 6 …. 16.12 s 3 …. 16.3 Commercial Arbitration Act 2011 …. 18.20 Development Act 1993 s 60 …. 19.63 Development Regulations 2008

reg 75 …. 19.63 District Court Act 1991 s 8 …. 18.3 s 32 …. 18.9 s 33 …. 18.9 District Court Civil Rules 2006 …. 18.4 Pt 9 …. 18.8 Pt 11 …. 18.7 r 41 …. 18.7 r 82 …. 18.10 r 208 …. 18.10 r 213 …. 18.10 Fair Trading Act 1987 Pt 3 …. 8.13, 15.17 Law of Property Act 1936 s 15 …. 13.6 s 22 …. 19.33, 19.48 Limitation of Actions Act 1936 Pt 3 …. 16.12 s 35(a) …. 11.9 s 35(b) …. 16.9 s 35(c) …. 11.9 Magistrates Court Act 1991 s 8 …. 18.3 s 27 …. 18.9 s 28 …. 18.98

Magistrates Court (Civil) Rules 1992 …. 18.4 r 55 …. 18.7 r 69 …. 18.8 Magistrates Court (Civil) Rules 2013 …. 18.4 r 55 …. 18.7 r 69A …. 18.10 Real Property Act 1886 s 90C(2) …. 19.35 Supreme Court Act 1935 …. 18.3 s 65 …. 18.8 Supreme Court Civil Rules 2006 …. 18.4 Pt 9 …. 18.8 Pt 11 …. 18.7 r 208 …. 18.10 r 213 …. 18.10 Worker’s Lien Act 1893 …. 14.5

TASMANIA Architects Act 1929 …. 17.3 Australian Consumer Law (Tasmania) Act 2010 Pt 2 …. 8.13 s 18 …. 15.17 s 37 …. 15.17 Building Act 2000 …. 18.50 Pt 9 …. 19.63 s 23A …. 3.7

s 23B …. 3.7 s 23C …. 3.7 s 23E …. 3.7 s 28 …. 3.7 s 255 …. 11.9 Building and Construction Industry Security of Payment Act 2009 …. 4.16, 14.1 Civil Liability Act 2002 Pt 6 …. 16.12 Pt 9A …. 16.12 s 9(1)(a) …. 16.5 Commercial Arbitration Act 2011 …. 18.20 Conveyancing and Law of Property Law 1884 s 9A …. 19.35 s 34B …. 19.51 s 84C(1) …. 19.48 s 84J …. 19.46 s 86 …. 13.6 Evidence Act 1995 …. 18.8 Housing Indemnity Act 1992 s 7(a) …. 4.4 s 7(b) …. 4.5 s 7(c) …. 4.8 s 7(e) …. 4.7 s 8(1) …. 4.4 Land Titles Act 1980 s 108 …. 19.38, 19.48

s 109 …. 19.35 s 110(4)–(12) …. 19.46 ss 138J–138L …. 19.33 Limitation Act 1974 s 4(1)(a) …. 11.9, 16.9 Magistrates Court (Civil Division) Act 1992 …. 18.49 s 3 …. 18.3 s 7 …. 18.3 Magistrates Court (Civil Division) Rules 1998 …. 18.4 Pt 4 …. 18.9 Pt 5 …. 18.7 Prescription Act 1934 s 9 …. 19.48 Resource Management and Planning Appeal Tribunal Act 1993 s 5 …. 18.50 Supreme Court Act 1959 …. 18.3 Supreme Court Rules 2000 …. 18.4 Pt 9 …. 18.7 Pt 19 …. 18.8 Pt 20 …. 18.9 Pt 22 Div 5 …. 18.10

VICTORIA Architects Act 1991 s 4(1) …. 17.3 s 9 …. 17.3

s 10 …. 17.3 Building Act 1993 …. 4.8, 17.14, 17.18, 18.49, 18.50, 19.8 Pt 4 …. 11.9 Pt 7 …. 19.64 Pt 10 …. 18.50 Pt 12A Div 12 …. 18.49 s 9 …. 4.8 s 10 …. 4.8 s 84(1) …. 19.64 s 85(1) …. 19.64 s 85(2) …. 19.64 s 87(1) …. 19.64 s 88(1) …. 19.64 s 90(1) …. 19.64 s 93(1) …. 19.64 s 94(1) …. 19.64 s 95 …. 19.64 s 98 …. 19.64 s 99 …. 19.64 s 134 …. 11.9, 16.9 ss 169–171 …. 3.7 s 176(1) …. 3.7, 15.15, 17.14 s 177 …. 17.14 Building and Construction Industry Security of Payment Act 2002 …. 4.16, 14.1, 14.9 Div 1 …. 9.20 Div 4 …. 14.5

s 3(1) …. 9.20 s 3(2) …. 9.20 s 3(3) …. 9.20 s 3(4) …. 9.20 s 4 …. 9.20 s 5 …. 9.20 s 7 …. 9.20 s 7(1) …. 9.20 s 7(2)(b) …. 9.20 s 7(6) …. 14.9 s 9 …. 9.20 s 9(1) …. 9.20 s 9(2) …. 9.20 s 9(2)(a)(i) …. 9.20 s 10(1)(a) …. 9.20 s 10(2) …. 9.20 s 10(3) …. 9.20 s 10A …. 9.20 s 10B …. 9.20, 14.5 s 12A(1) …. 9.20 s 13 …. 14.9 s 14 …. 14.5 s 14(1) …. 9.20 s 14(2) …. 9.20 s 15(1) …. 9.20 s 15(2) …. 9.20

s 15(4) …. 14.5 s 18(1) …. 9.20 s 18(2) …. 9.20 s 18(3) …. 9.20 s 21 …. 9.20 s 22 …. 9.20 s 23(1)(a) …. 9.20 s 23(1)(b) …. 9.20 s 23(1)(c) …. 9.20 s 23(3) …. 9.20 s 28A …. 9.20 s 28B …. 9.20 s 28D …. 9.20 s 28O …. 9.20 s 28Q …. 9.20 s 28R(1) …. 9.20 s 32 …. 14.5 s 33 …. 14.5 s 35 …. 14.5 Sch 1, item 7a …. 9.24 Sch 1, item 27 …. 9.22 Sch 1, item 28 …. 9.22 Sch 1, item 29 …. 9.22, 9.24 Building Regulations 1994 …. 17.18 Building Regulations 2006 Pt 6 …. 19.64

Civil Procedure Act 2010 s 1 …. 18.4 s 8 …. 18.4, 18.6 s 29 …. 18.4 s 49 …. 18.6 Commercial Arbitration Act 2011 …. 18.9, 18.20 Pt 6 …. 18.41 Pt 7 …. 18.45 s 1AD …. 18.21 s 5 …. 18.36 s 6 …. 18.40 s 7 …. 18.21 s 8 …. 18.44, 18.48, 18.49 s 8(1) …. 18.44 s 10 …. 18.30 s 11 …. 18.30 s 11(3) …. 18.40 s 11(4) …. 18.30, 18.40 s 11(5) …. 18.30 s 12 …. 18.30, 18.39 s 12(2) …. 18.39 s 12(3) …. 18.39 s 12(4) …. 18.39 s 13 …. 18.30, 18.39 s 13(4) …. 18.39, 18.40 s 14 …. 18.30, 18.39

s 14(2) …. 18.40 s 15 …. 18.30 s 16 …. 18.33 s 16(9) …. 18.40 s 17 …. 18.40 s 17A …. 18.40 s 17D …. 18.40 s 17E …. 18.40 s 17F …. 18.40 s 17G …. 18.40 s 17H …. 18.40 s 17I …. 18.40 s 17J …. 18.40, 18.41, 18.44 s 18 …. 18.37 s 19 …. 18.35, 18.36 s 19(6) …. 18.40 s 20 …. 18.36, 18.41 s 21 …. 18.36 s 23 …. 18.36 s 23(1) …. 18.38 s 24 …. 18.36 s 24B …. 18.31, 18.38 s 25 …. 18.38 s 25(2)(a) …. 18.32, 18.41 s 26 …. 18.36 s 27 …. 18.40

s 27(1) …. 18.36 s 27A …. 18.36, 18.40 s 27B …. 18.36, 18.40 s 27C …. 18.32 s 27D …. 18.34 s 27E …. 18.35, 18.36 s 27F …. 18.36 s 27G …. 18.36 s 27H …. 18.36, 18.40 s 27I …. 18.36, 18.40 s 27J …. 18.36, 18.40 s 28 …. 18.41 s 29 …. 18.41 s 30 …. 18.41 s 31 …. 18.41 s 32 …. 18.41 s 33 …. 18.41, 18.45 s 33A …. 18.41 s 33B …. 18.43 s 33B(4)(c) …. 18.43 s 33D …. 18.40, 18.43 s 33E …. 18.42 s 34 …. 18.40, 18.43, 18.45 s 34(2) …. 18.45 s 34(3) …. 18.45 s 34A …. 18.40, 18.41, 18.45

s 35 …. 18.46 s 36 …. 18.46 s 36(1)(a)(i) …. 18.40 s 36(1)(a)(ii) …. 18.40 s 36(1)(a)(iii) …. 18.40 s 36(1)(a)(iv) …. 18.40 s 36(1)(b)(i) …. 18.41 s 36(1)(b)(ii) …. 18.41 s 38(5) …. 18.45 s 39 …. 18.47 Commercial Arbitration Act 1984 …. 18.9, 18.10, 18.20 s 14 …. 18.35 s 24(2)(a)(ii) …. 18.37 s 31(2) …. 18.32 s 34 …. 18.31 s 34(5) …. 18.43 s 34(6) …. 18.43 s 44 …. 18.39 s 47 …. 18.41 s 51 …. 18.47 s 53 …. 18.11 s 55(1) …. 18.48 County Court Act 1958 s 3(1) …. 18.3 s 37(1) …. 18.3 s 39(2) …. 18.3

s 47A …. 18.9 County Court Civil Procedure Rules 2008 …. 18.4 O 26 …. 18.7 O 50.01 …. 18.10 r 34A.06(1)(e) …. 18.5 r 47.04 …. 18.6 r 50.04 …. 18.10 r 50.07 …. 18.9 r 50.08 …. 18.9 Courts (Case Transfer) Act 1991 …. 18.3 Domestic Building Contracts Act 1995 …. 7.14, 9.20, 18.49 s 5 …. 18.49 s 6 …. 18.49 s 8(a) …. 4.4 s 8(b) …. 4.5 s 8(c) …. 4.8 s 8(d) …. 4.5 s 8(e) …. 4.5 s 8(f) …. 4.7 s 9 …. 4.4, 4.5 s 10 …. 4.4, 4.5 s 14 …. 18.49 s 19(1) …. 4.12 s 19(2) …. 4.12 s 31 …. 1.4 s 40 …. 4.16

s 53 …. 18.49 s 53(2)(e) …. 4.1 s 57 …. 18.3, 18.49 Domestic Building Contracts Regulations 2077 …. 7.14 Evidence Act 1995 s 79 …. 18.8 Fair Trading Act 1999 …. 7.14, 18.49 s 159 …. 15.17 Fair Trading Act 2012 …. 18.49 House Contracts Guarantee Act 1987 …. 18.49 s 19(1) …. 3.6, 10.7 s 19(3) …. 3.6 Instruments Act 1958 s 126 …. 14.4 Jurisdiction of Courts (Cross-Vesting) Act 1987 …. 18.3 Limitation of Actions Act 1958 s 5(1)(a) …. 11.9, 16.9 Magistrates Court Act 1989 s 3(1) …. 18.3 s 100(1) …. 18.3 s 100(1)(c) …. 18.3 Magistrates Court General Civil Procedure Rules 2010 …. 18.4 O 15 …. 18.7 O 19 …. 18.8 r 50.01 …. 18.9 r 50.04 …. 18.9

Owners Corporations Act 2006 Pt 6 …. 18.49 Pt 11 …. 18.49 Div 1 …. 18.49 Div 2 …. 18.49 Div 3 …. 18.49 Div 4 …. 18.49 Property Law Act 1958 s 134 …. 13.6 s 195 …. 19.33 s 196 …. 19.48 Public Health and Wellbeing Act 2008 …. 19.8 Rules of the Supreme Court 1996 r 47.04 …. 18.6 Stamps Act 1958 …. 13.4 Subdivision Act 1988 s 12(2) …. 19.45, 19.46 Supreme Court Act 1986 …. 18.3 Supreme Court (General Civil Procedure) Rules 2005 …. 18.4 O 26 …. 18.7 O 44 …. 18.8 O 50.01 …. 18.10 O 50.07 …. 18.9 O 50.08 …. 18.9 Supreme Court (Miscellaneous Civil Proceedings) Rules 2008 O 3 …. 18.5

O 44 …. 18.8 Transfer of Land Act 1958 …. 19.33 s 73 …. 19.38 s 73A …. 19.38 Uniform Building Regulations cl 511 …. 3.5 Victorian Civil and Administrative Tribunal Act 1998 ss 40–44 …. 18.49 ss 83–93 …. 18.49 s 94 …. 18.49 s 95 …. 18.49 s 97 …. 18.49 s 98 …. 18.49 s 148 …. 18.49 Victorian Civil and Administrative Tribunal Rules 1998 Pt 2 …. 18.49 Sch 1 …. 18.49 Water Act 1989 s 16(2) …. 19.8 Wrongs Act 1958 Pt IVAA …. 16.12 Pt X …. 16.12 s 14F …. 16.2 s 43 …. 16.5

WESTERN AUSTRALIA

Architects Act 2004 …. 17.3 Building Act 2011 …. 18.50, 19.63 s 3 …. 4.4 s 37 …. 4.4 Building Regulations 2012 Pt 4 …. 4.7 Pt 7 …. 19.63 Building Services (Registration) Act 2011 s 9 …. 3.7 s 10 …. 3.7 s 11 …. 3.7 s 12 …. 3.7 s 13 …. 3.7 Civil Liability Act 2002 Pt 1A …. 16.12 Pt 1F …. 16.12 Commercial Arbitration Act 2012 …. 18.20 Construction Contracts Act 2004 …. 4.16, 14.1, 14.9 s 13 …. 14.5 s 25 …. 14.5 s 46 …. 14.5 District Court of Western Australia Act 1969 s 50 …. 18.3 District Court Rules 2005 …. 18.4 Pt 4.2 …. 18.9 Pt 5A …. 18.8

r 6 …. 18.7 r 26 …. 18.10 Fair Trading Act 2000 s 19 …. 15.17 Fair Trading Act 2010 Pt 3 …. 8.13 Home Building Contracts Act 1991 s 9(2) …. 4.6 s 13 …. 7.15 s 13(4) s 15(1)(b) …. 2.12, 4.1 Limitation Act 2005 s 13 …. 11.9, 16.9 Magistrates Court (Civil Division) Rules 1998 r 105 …. 18.8 Magistrates Court (Civil Proceedings) Act 2004 s 4 …. 18.3 s 5 …. 18.3 s 6 …. 18.3 Magistrates Court (Civil Proceedings) Rules 2005 …. 18.4 Pt 11 …. 18.9 Pt 12 …. 18.7 r 72 …. 18.8 Property Law Act 1969 s 20 …. 13.6 s 121 …. 19.33, 19.48

Rules of the Supreme Court 1971 …. 18.4 O 24 …. 18.7 O 24A …. 18.7 O 35 …. 18.10 O 36A …. 18.8 State Administrative Tribunal Act 2004 …. 18.49, 18.50 Supreme Court Act 1935 …. 18.3 Pt 6 …. 18.9 Transfer of Land Act 1893 s 229A(2) …. 19.38

NEW ZEALAND Building Act 2004 s 14E(2) …. 4.4, 4.8 Copyright Act 1962 …. 17.9 Copyright Act 1994 …. 17.9 Personal Property Securities Act 1999 …. 14.14

UNITED KINGDOM Arbitration Act 1979 s 1(6) …. 18.41 Contracts (Rights of Third Parties) Act 1999 …. 13.12 Defective Premises Act 1972 …. 4.9 Restrictive Trade Practices Act 1956 …. 5.14 Sale of Goods Act 1893 s 14 …. 4.5

CONTENTS Foreword to Fifth Edition Foreword to First Edition Detailed Contents Preface Table of Cases Table of Statutes CHAPTER 1 CHAPTER 2 CHAPTER 3 CHAPTER 4 CHAPTER 5 CHAPTER 6 CHAPTER 7 CHAPTER 8 CHAPTER 9 CHAPTER 10 CHAPTER 11 CHAPTER 12 CHAPTER 13 CHAPTER 14 CHAPTER 15 CHAPTER 16 CHAPTER 17 CHAPTER 18 CHAPTER 19

BUILDING CONTRACTS CONTRACT DOCUMENTS CONTRACTUAL DOCTRINES IMPLIED TERMS TENDERS TIME FOR COMPLETION RISE AND FALL CLAUSES PAYMENT APPROVAL AND CERTIFICATES VARIATIONS DEFECTS AND DAMAGES DETERMINATION ASSIGNMENT SUBCONTRACTS BILLS OF QUANTITIES NEGLIGENCE: BUILDERS, LOCAL AUTHORITIES AND OTHERS ARCHITECTS AND ENGINEERS BUILDING DISPUTES BUILDING OPERATIONS

Index

DETAILED CONTENTS Foreword to Fifth Edition Foreword to First Edition Contents Preface Table of Cases Table of Statutes CHAPTER 1

BUILDING CONTRACTS INTRODUCTION Need for agreement Mutual manifestation of assent Objective nature of agreement Principal types of contract LUMP SUM CONTRACTS Nature of contract Types of lump sum contract SCHEDULE OF RATES CONTRACTS Nature of contract Contents of schedule of rates Essential characteristics COST PLUS CONTRACTS Nature of contract Bonus or penalty provision

CHAPTER 2

CONTRACT DOCUMENTS DOCUMENTATION Building contracts



Kinds of contract documents



Main standard forms



Other standard forms INTERPRETATION OF CONTRACT DOCUMENTS General approach Internal aids to construction





CHAPTER 3

CONTRACTUAL DOCTRINES UNCERTAINTY Generally Standard form contracts Indefinite agreements Blanks not completed ILLEGALITY Contracts contrary to statute Restitution Registration of builders

Effect of printed word Words struck out Conflicts in and between documents Reasonableness Unconscionability Oral contracts and printed conditions Contra proferentem rule Parol evidence rule Surrounding circumstances Prior negotiations Subsequent conduct Terms describing building to be erected Meaning of buildings



WAIVER



Concept of waiver Contractual provisions RECTIFICATION



Generally Requirements for rectification

CHAPTER 4

IMPLIED TERMS IMPLICATION OF TERMS GENERALLY General position Business efficacy Trade custom or usage PARTICULAR IMPLIED TERMS Workmanship Materials Best endeavours Efficacy of works Compliance with regulations Sale of house to be erected Time for completion Permits Possession of site Sufficient working space Revocation of contractor’s licence To employ contractor Progress payments Ancillary work by public authority Builder’s entitlement to indemnity Architect’s availability

CHAPTER 5

TENDERS TENDERS GENERALLY



Meaning of ‘tender’



Tender documents TENDERING Invitation to tender Conforming and non-conforming tenders



Cost of tendering Letters of intent WITHDRAWAL OF TENDER By tenderer By subcontractor RECALL AND ACCEPTANCE OF TENDERS Recalling tenders Acceptance of tender ESTIMATES AND STANDING OFFERS Estimates Standing offers COLLUSIVE TENDERING Practice of collusive tendering Common law cases Statutory position

CHAPTER 6

TIME FOR COMPLETION GENERALLY Time requirement Bonus or damages LIQUIDATED DAMAGES PROVISIONS Liquidated damages or penalty



Doctrine of penalties FORFEITURE CLAUSES



Forfeiture of deposit Other forfeitures



LOSS OF RIGHT TO LIQUIDATED DAMAGES Generally



Prevention by proprietor Waiver Determination of contract STANDARD FORM PROVISIONS Suspension of works Time extension for delay Recovery by builder of damages or costs and expenses due to delay

CHAPTER 7

RISE AND FALL CLAUSES GENERALLY Principle of rise and fall Rise and fall clauses Origins and purposes Interpretation Advantages KIND OF CLAUSES Two kinds of clause Cost-based clauses Formula-based clauses UNCERTAINTY Doctrine of uncertainty Effect of uncertainty Drafting rise and fall clauses



Cases on rise and fall Arbitration clauses



UNCONSCIONABILITY Statutory regulation

CHAPTER 8

PAYMENT ENTIRE CONTRACTS Doctrine of entire contracts Substantial performance Repudiation Taking benefit of work Progress payments Payments and acceptance Security of payment QUANTUM MERUIT Generally When quantum meruit arises Entire contract Onus of proof INACCURATE INFORMATION SUPPLIED TO CONTRACTOR Contractual liability Other liability Contractual provisions Negligent misrepresentation WASTED PRE-CONTRACT EXPENDITURE Principle of restitution Relation to doctrine of unjust enrichment

CHAPTER 9

APPROVAL AND CERTIFICATES



APPROVAL Overriding requirement



As condition precedent Dishonest disapproval CERTIFICATION



Actual certification



Certifying by implication Certification or reasons for refusal Progress certificates Final certificates Fraud or collusion Other disqualifying circumstances Secret agreement Subservience and independence Right to be heard Arbitration clause Court’s power to reopen Certificate attacked as erroneous Withdrawal or amendment of certificate PROGRESS CERTIFICATES Progress payments Interest Security of payment legislation Progress claims: standard ABIC clauses CERTIFICATE OF PRACTICAL COMPLETION Meaning of ‘practical completion’ Importance of practical completion date Occupancy before practical completion: standard provisions



Performance or guarantee bonds FINAL CERTIFICATES

CHAPTER 10

VARIATIONS GENERALLY



Terminology Contractual provisions



ORDERING VARIATIONS Power to order variations Power not unlimited Valuation of variations; contract adjustments Orders in writing Absence of written order and recovery Implied promise to pay Certification Drafting guarantees Arbitration clause Waiver EXTRAS AND OMISSIONS Extras Omissions

CHAPTER 11

DEFECTS AND DAMAGES GENERALLY Defects and defects liability periods Builder relieved of liability by instructions DAMAGES Purpose of damages Measure of damages Demolition or repair costs



Design engineers Date when damages should be assessed



DAMAGES RELATED ISSUES Time a cause of action arises Extinguishment of cause of action Mitigation



Different work undertaken Profit on sale Plaintiff s use of damages award Repairs paid for by others Damages for stress Damages for inconvenience OTHER REMEDIES Specific performance

CHAPTER 12

DETERMINATION INTRODUCTION Kinds of determination Abandonment EXPRESS POWERS OF DETERMINATION Proprietor’s powers Builder’s powers REPUDIATION Meaning of ‘repudiation’ Instances of repudiation Effect of repudiation Acceptance of repudiation and damages ISSUES IN DETERMINATION OF CONTRACTS Method of giving notice Contents of default/show cause notice



Premature notice of determination Reasonableness in assessing whether cause has been shown



Reasonable diligence Notice of determination given unreasonably or vexatiously Power to determine and to accept repudiation Completion at builder’s cost



Ousting contractor from site and use of builder’s plant Measure of damages where proprietor repudiates

CHAPTER 13

ASSIGNMENT ASSIGNMENT GENERALLY Nature of assignment Rights and liabilities ASSIGNMENT OF RIGHTS Generally Formalities for equitable assignments Assignee takes subject to equities Statutory assignments Nature of rights assignable ASSIGNMENT OF LIABILITIES Assignment of liabilities Vicarious performance PROHIBITION OF ASSIGNMENT Contractual provisions Issue of ‘final say’ Effect of prohibition on assignment

CHAPTER 14

SUBCONTRACTS



SUBCONTRACTS GENERALLY Subcontracts



Meaning of ‘subcontractor’ Types and form of subcontracts RELATIONSHIP BETWEEN PROPRIETOR AND SUBCONTRACTOR Payment of subcontractor



Issues in statutory schemes for payment Warranties





Express warranties Negligent misrepresentation OTHER ASPECTS OF SUBCONTRACTS Pay when paid clauses Retention moneys Liability under subcontract to head contractor for breach of contract Liability of head contractors to employees of subcontractors Compromises Materials on site Incorporated terms of the head contract Nominated subcontractors Prime cost and provisional sums

CHAPTER 15

BILLS OF QUANTITIES INTRODUCTION Nature of a bill Quantity surveying SECTIONS OF A BILL Preliminaries





Measured work Provisional items



Total of tender Function of bill PREPARING A BILL Formulating a bill



Quantities not furnished PRICING THE BILL Estimators Amount of tender



CONTRACTS AND QUANTITIES Contracts incorporating quantities Quantities when not part of contract Guarantee of quantities QUANTITY SURVEYORS Profession of quantity surveyors Work of quantity surveyors Liability of quantity surveyors

CHAPTER 16

NEGLIGENCE: BUILDERS, LOCAL AUTHORITIES AND OTHERS INTRODUCTION Building cases generally Trend towards negligence NEGLIGENCE Meaning of negligence Elements of cause of action Duty of care Breach of duty Loss caused by the negligent act





Measure of damages Limitation period



BUILDERS, LOCAL AUTHORITIES AND OTHERS Builders Local authorities Statutory provisions

CHAPTER 17

ARCHITECTS AND ENGINEERS



GENERALLY Architects Engineers and superintendents



ARCHITECTS Registration Duality of role Duty in certification Remuneration Estimates Appointment of substitute Copyright Duty to client Duty of supervision Practice of other architects Duty to third parties ENGINEERS Role of engineer Duty to client Copyright Negligent certification Departure from design standard



Duty to third parties

CHAPTER 18

BUILDING DISPUTES INTRODUCTION Disputation



Avenues for resolution LITIGATION Jurisdiction of courts







References out of court Special referee View ALTERNATIVE DISPUTE RESOLUTION Growth in ADR Types of ADR Executive meetings Mediation Conciliation Other forms of ADR Arranging mediators/conciliators ARBITRATION Nature of arbitration Governing legislation Arbitration agreement Standard form clauses ABIC MW

Procedure Specialist building cases lists Separate or preliminary questions Offer of compromise Expert evidence



FDIC contracts ‘Dispute’





Option to arbitrate Appointment of arbitrator Arbitrator’s remuneration Ambit of jurisdiction





Determining the validity of the contract Non-arbitral settlement Procedure Conduct of arbitration Natural justice Duties of parties Removal of arbitrator



Interlocutory orders Award Interest Costs Stay Judicial review Enforcement Liability of arbitrator Scott v Avery clauses STATUTORY TRIBUNALS Victorian civil and administrative tribunal Building appeals board

CHAPTER 19

BUILDING OPERATIONS ISSUES RAISED Adjoining owners and occupiers TRESPASS



Generally Airspace



Remedies for trespass NUISANCE Nuisance generally Private nuisance







Creation of a nuisance Adopting or continuing a nuisance Interference resulting in material damage to land Interference with amenity or personal enjoyment of land Noise, vibration and dust Remedies Damages EASEMENTS Easement formation Interference with easements Easements of light Extinguishment by unity of seisin Abandonment What constitutes infringement? Implied easements and the rule in Wheeldon v Burrows Implied easements supplementing a formal grant of land Easements of necessity Easement of air RIGHTS OF SUPPORT Nature of right Support of buildings



Interference with right of support



New building on dominant land Stranger liable without easement Duty of care when excavating UNDERPINNING





Index

Generally Victorian statutory scheme Breach of statutory duty Damages

[page 1]

1

BUILDING CONTRACTS

INTRODUCTION Need for agreement 1.1 Every contract, be it a building contract or not, is constituted by agreement.1 It is conventional to speak of agreement in terms of consensus ad idem. It is conventional also to speak of consensus ad idem in terms of offer and acceptance. However, as Stephen J pointed out in MacRobertson Miller Airline Services v Commr of State Taxation (WA),2 this ‘doctrine, of the formation of contracts by offer and acceptance, encounters difficulties when sought to be applied, outside the realms of commerce and conveyancing, to the everyday contractual situations which are a feature of life in modern urban communities’. This was echoed by Bergin J in Pacific Power & Elcom Collieries Pty Ltd v Cumnock No 1 Colliery Pty Ltd3 who said she did ‘not much like the analysis in the textbooks of enquiring whether there was an offer and acceptance or a counter-offer and so forth’. It was also mentioned by Black J in Iacullo v Remly Pty Ltd4 who acknowledged ‘that the question whether a commercial arrangement constitutes a contract is not necessarily to be approached by strict analysis of whether, for example, there was offer and acceptance in accordance with classical contract theory’. For, as Tamberlin J observed in Seven Cable Television Pty Ltd v Telstra Corporation Ltd,5 when ‘parties are negotiating in order to arrive at a contract to govern their legal relations the process is often complex, especially in cases of detailed and wide ranging agreements intended to endure over many years’. And as Kirby P observed in Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd6 courts and lawyers may expect the agreements of business people to be clear and complete but unfortunately, in the market place, agreements often fall short of these lawyerly desires.

[page 2] Despite misgivings expressed from time to time with conventional analysis, or so called ‘classical contract theory’, it remains trite law, said Tobias JA in Redowood Pty Ltd v Mongoose Pty Ltd,7 that ‘offer and acceptance must precisely correspond’ in order for a contract to be formed and that ‘any departure by the acceptance from the terms of the offer results in the purported acceptance being ineffective’. Without some major paradigm shift in our law, this remains the rule: offer and acceptance must coincide but the courts have some flexibility in this regard in deciding whether, on the facts of some case, they have indeed coincided or not. It is possible that there may be no intention to create legal relations, notwithstanding that a transaction takes the form of a legally effective one, if the parties’ expressed intention is that it should not have its apparent or any legal consequences.8

Mutual manifestation of assent 1.2 One question dealt with in recent authorities is whether a contract may be held to exist by reason of a mutual manifestation of assent. In Vroon BV v Foster’s Brewing Group Ltd9 Ormiston J said that, subject to further analysis of decided cases, he was prepared to accept that agreement, and thus a contract, can be extracted from circumstances where no acceptance of an offer can be established or inferred and where the most that can be said is that a ‘manifestation of mutual assent’ must be implied from the circumstances. Likewise in Heather v Vita Pacific Ltd10 Zeeman J said that even ‘though it may not be possible to identify an offer and an acceptance, the conduct of the parties may be such as to make it possible to discern a sufficient consensus to justify the conclusion that a concluded contract has come into existence’. Likewise also in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd11 Finn J said: ‘Conduct engaged in for the purposes of ongoing commercial arrangements is not always readily susceptible to the traditional forms of analysis employed by common lawyers for the purpose of determining whether a contract has been formed’ and he said this ‘can be particularly the case when dealings are analysed on an offer and acceptance basis’. He then quoted from Ormiston J’s judgment in Vroon BV v Foster’s Brewing Group

Ltd. Ormiston J’s judgment was also referred to by Almond J in Strategic Property Reservoir Pty Ltd v Condec Pty Ltd.12 [page 3] In Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd13 Tadgell J, however, reminiscent of Tobias JA, seemed to doubt whether an agreement can be discerned in the absence of offer and acceptance while in Con Kallergis Pty Ltd (t/as Sunlighting Australia) v Calshonie Pty Ltd Hayne JA,14 with whom Charles and Callaway JJA agreed,15 referring to the decision in Vroon BV v Foster’s Brewing Group Ltd, said he did not think it necessary to explore what, if any, might be the limits to the circumstances in which a ‘manifestation of mutual assent’ will be implied. As against this Heydon JA in Brambles Holdings Ltd v Bathurst City Council,16 citing the decision in Vroon BV v Foster’s Brewing Group Ltd amongst others (having said that ‘[o]ffer and acceptance analysis does not work well in various circumstances’) referred to the ‘limited recognition [which] has been given to the possibility of finding that contracts exist even though it is not easy to locate an offer and acceptance’. Also citing Vroon BV v Foster’s Brewing Group Ltd and other cases, Spigelman CJ and Mason P, in a joint judgment in Raguz v Sullivan,17 said that an agreement may be enforceable ‘notwithstanding traditional notions of offer and acceptance’. To similar effect are remarks of Allsop J (with whom Drummond and Mansfield JJ agreed) in Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd.18 There seems, therefore, to be growing support for a view that agreement may be constituted by a manifestation of mutual assent. This would be consistent also with a view that the search for intention in contract is an objective one.19 In Skilled Group Ltd v CSR Viridian Pty Ltd20 Vickery J in the Victorian Supreme Court, dealing with this question, held that a reasonable person in the position of one party, and a reasonable person in the position of the other, would have considered, in the circumstances of that case, concluded bargains between them existed. But at the same time, as Owen J pointed out in The Bell Group Ltd (In liq) v Westpac Banking Corporation (No 9)21 the ‘authorities are clear that inferring a contract (or a term) from conduct’ on this basis ‘will not be done lightly’. Arguably though, and in any event, in deciding whether an offer has been accepted the courts often do engage in an intellectual process of deciding in effect

whether there has been ultimately a manifestation of mutual assent between the parties. So perhaps in reality this doctrine is not as far removed from classical theory as one might think. [page 4]

Objective nature of agreement 1.3 The question whether agreement exists or not is one of objective fact. This was made clear by Kirby J in the High Court, in Concut Pty Ltd v Worrell.22 The issue usually is whether the parties by their external manifestation (essentially written communications and discussions) reached a binding agreement and intended to create legal relations.23 Both individual clauses and the agreement as a whole must be construed objectively said Martin CJ in Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd24 in reference to an arbitration agreement. Problems of the present kind are usually resolved by the law of contract by reference to the imputed intention of the parties to the contractual arrangements. Of course, that ‘intention’ is to be ascertained objectively. Intention is not found in the uncommunicated subjective motives of intentions of the parties.25 It is a rule, however, made clear also in numerous other authorities.26 Since the existence of a contract has to be decided objectively, a failure to cross-examine someone as to their understanding is of no consequence because ‘subjective understanding is irrelevant’.27 A different rule would introduce significant uncertainty in commercial dealings. Therefore, whether a party thinks that an agreement existed or not is irrelevant, unless an estoppel arises in the circumstances.28 Thus, as Owen J said in The Bell Group Ltd (In liq) v Westpac Banking Corporation (No 9),29 the objective theory of contract ‘is not a search for the subjective state of mind of each party, even if shared but not communicated’; rather, ‘it is a search for the “objective intention” of each party to be inferred from what is manifested by its communications and other conduct’. He then said that his task in that very complex case was ‘to decide whether looking at the entire body of conduct of the parties, [he could] infer a real intention to be bound by [the] term’ in question.30 ‘The parties’ subjective intention is irrelevant’ said Katzmann J in Mareva Building Consultants v Zevon.31

[page 5] The courts will not lend their aid to the enforcement of an incomplete agreement, because it is no more than an agreement of the parties to agree at some time in the future.32 And agreements to agree generally are not enforceable. It is entirely possible, however, as Ipp J has pointed out in Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd33 for parties to be held to have entered into a binding contract, considered objectively, in the expectation that at a later date a further contract will be arrived at containing additional terms facilitating and clarifying the initial contract. Often that initial contract is in the form of ‘heads of agreement’. So-called heads of agreement may be enforceable as a contract on the ground that to be valid and enforceable a contract does not have to be worked out in meticulous detail.34 It clearly is open for parties to agree upon essential terms and add additional terms later on. An existing informal contract may be binding even though further negotiations and activity regarding other terms is still to take place.35 On the other hand, it may be clear, but not without some difficulty, that, until the preparation and exchange of formal contracts, the parties do not intend to be bound as was held to be so by Hamilton J in McKenry v White,36 a case concerning a sale of farmland and not a building case and as was also held to be so in the Queensland Supreme Court by Byrne SJA in Highgrove Bathrooms Townsville Pty Ltd v Serobotto Nominees Pty Ltd,37 a case involving an unsigned lease.

Principal types of contract 1.4 One purpose of a written contract is to record the benefits, obligations and expectations of the parties to it.38 There are three principal types of formal building agreement: the lump sum contract; the schedule of rates contract; and the cost plus contract. Each of these usually follows a standard form.39 In other cases, there may be what has been called a ‘battle of forms’ where agreement may only follow a

[page 6] protracted exchange of documents.40 On the other hand the contract may be contained in the one single, large and lengthy document.41 The standard form for a contract may be that prescribed under, or affected by, state or territory legislation such as in Victoria the Domestic Building Contracts Act 1995 (Vic) which, in s 31, specifies what must be contained in a ‘major domestic building contract’ being any contract for carrying out domestic building work for $5,000 or more or any higher amount fixed.

LUMP SUM CONTRACTS Nature of contract 1.5 A lump sum contract is one whereby the builder is to complete the works for a lump sum. This is perhaps the most common of the three principal types of formal building agreement.

Types of lump sum contract 1.6 There are two kinds of lump sum contract. The first is the fixed or firm price contract, which has no provision for variations in price due to fluctuations in costs. The second type does provide for variations, and is commonly described as a contract which is subject to ‘rise and fall’: see 7.1–7.15. Lump sum contracts may also be divided into contracts without bills of quantities and those with bills of quantities. Contracts with bills of quantities in turn fall into more than one class. As to bills of quantities, see Chapter 15. Again, lump sum contracts may be classified according to the manner in which the builder’s offer to perform the work for the agreed price is procured. See further 5.3. Terminology, however, is not uniform and in particular the expressions ‘lump sum contract’, ‘fixed price contract’ and ‘firm price contract’ are at times used in different senses. Moreover, a lump sum contract in the sense of a contract for

doing work for a stipulated sum (as opposed to a sum which is to be ascertained either by the use of a schedule of rates or by the ultimate ascertainment of the cost of the works and the addition to that cost of a fixed fee or percentage) is to be distinguished from a lump sum contract in the sense of an entire contract meaning a contract under which the builder will be unable to recover unless the whole of the work is substantially completed. Similarly, a schedule of rates contract and a cost plus contract may or may not be an entire contract. Entire contracts are considered in 8.1–8.5. Also a contract may be partly a lump sum and partly a schedule of rates contract. [page 7]

SCHEDULE OF RATES CONTRACTS Nature of contract 1.7 A schedule of rates contract is one where the cost of the work is calculated by applying an agreed schedule of rates to the work actually done. Thus, a characteristic of such a contract is that, if variations to the work do occur, the contract sum is adjusted (whether by omission or addition) in accordance with the scheduled rates.42 A schedule of rates contract was considered in Arcos Industries Pty Ltd v Electricity Commission of NSW43 and also in In the matter of an Application by Queensland Electricity Commission.44 The schedule of rates contract is used generally where the extent of the works cannot be specified at the time when the contract is let. Often it is used for jobs involving extensive earthworks such as drainage and piling. Aside from the schedule of rates contract proper, there are also contracts which fix a lump sum for the work contracted to be done and provide that a schedule of rates shall be used for pricing variations. Ordinarily the schedule will give the contractor an estimate of the quantities of work involved. A schedule which deals with quantities as well as rates, as is usual, will be divided into a number of columns, one containing the item number, and the others setting out across the

page the description, the unit (for example, cubic metres), the quantity, the rate and the amount (obtained by applying the rate to the quantity). The contractor inserts rates and amounts, inserts prices for any general items (being work incapable of measurement and other expenses) and arrives at a total sum which will include any provisional items contained in the schedule. A schedule of rates contract is at times confused with a particular kind of lump sum contract, called the remeasurement contract, also known as the provisional lump sum contract or the provisional bill contract. A schedule of rates is a mere list of items and rates, with quantities not being given; the cost of the work is calculated by applying the schedule to the quantity of work actually done. But with a remeasurement contract, a provisional bill of quantities is prepared, based on outline drawings. This may be done where the proprietor is anxious to let a contract but the design is not advanced enough to allow anything more than a provisional bill of quantities to be prepared. The contractor prices the provisional bill and submits a provisional tender; work then proceeds and, either on completion of the design or the works, the work is remeasured and the provisional sum is adjusted by the application of the rates in the provisional bill to the quantities as determined by remeasurement. [page 8] Sometimes it can be difficult to decide whether a contract is truly a schedule of rates contract or a lump sum contract.45

Contents of schedule of rates 1.8 A schedule of rates, as well as containing various items of work which are to be measured, may contain a number of general items such as insurance, temporary buildings, lighting and fencing. In the tender the contractor will insert either an amount or ‘no charge’ in respect of such items. The schedule of rates may also contain provisional items. A provisional item will be used where it is impossible at the time of tendering to ascertain the amount of a charge but where in the course of the works such amount will be ascertained. For example, a particular sum may be specified as the amount of the

provisional item in respect of road-opening fees and road restoration charges. In the case of provisional items the contractor will be paid the actual amount of the charge. The schedule of rates in addition may also include a provisional sum to cover contingencies. A contract may be a schedule of rates contract, not a lump sum contract, notwithstanding that the tenderer, given a schedule of quantities, furnishes a tender price.46 The estimated quantities are merely for the guidance of tenderers, and the final quantities are taken from actual measurements on completion of the works.47

Essential characteristics 1.9 The essential feature of a schedule of rates contract is that the contractor is to be paid at the agreed rates for the actual measured quantity of work actually done. Although the tender will contain a price, being the total amount arrived at by applying the tendered rates to the estimated quantities given in the schedule of rates, this does not mean that the contract is not a schedule of rates contract but is instead a lump sum contract.48 The conditions of tendering may expressly provide that the totalling in the tender of the amounts for the items is not to be taken to imply that the contract is a lump sum contract. A contract containing a schedule of rates, however, nonetheless was a lump sum contract in Commissioner for Main Roads v Reed & Stuart Pty Ltd.49 [page 9]

COST PLUS CONTRACTS Nature of contract 1.10 The cost plus contract, which is not often used, takes two forms: with the first (the commission contract) the builder is entitled to be paid the cost of the work plus a commission in the sense of a percentage of the cost; with the second (the fixed fee contract) the builder is to be paid the cost plus a fixed fee. An example of the second is to be found in Wren v Emmett Contractors Pty Ltd.50 It is

not normally necessary to know the precise scope of works or to know whether particular work is a variation or not — unless, perhaps, it is a cost plus contract subject to a cap.51 The use of a cost plus contract may be justifiable where pricing is extremely difficult. But whether the contract is a commission contract or a fixed fee contract the price of the work will not be known until the work is complete. Proprietors therefore should be careful about using such contracts. A target estimate contract (to complete contract works within a target period at the estimated target price) is a variant of a cost plus contract.52

Bonus or penalty provision 1.11 A fixed fee contract may provide for a bonus increasing or a penalty reducing the builder’s fixed fee according to whether the estimated cost of the work either is not reached or is exceeded by the actual cost (excluding variations). It is then known as a target estimate contract. A contract whereby the builder is to receive the cost of the work together with a percentage of the cost to cover overhead and profit puts a premium on inefficiency; the greater the cost to the proprietor, the greater the builder’s commission. While it may be possible to contend that on the proper construction of the contract the builder is not entitled to treat as part of the cost any amounts which have been expended by reason of the builder’s own inefficiency, still such a contract puts the proprietor in an unsatisfactory position. In one sense fixed fee contracts always contain a provision for a bonus or penalty. The fee being fixed, the percentage received by the builder will vary only in consequence of variations in the actual cost. For example, a builder who negotiates a fee of $100,000 to erect a building which is likely to cost $1,000,000 is looking for a return of 10 per cent on turnover to cover overhead and profit. If able to keep the costs down to $800,000, this return is being increased to 12.5 per cent but if the costs rise to $1,500,000 the builder will receive only 6.67 per cent on turnover. _________________________ 1.

Compare Comco Constructions Pty Ltd v Leisure Holdings Australia Pty Ltd (1986) 3 BCL 259 at 265.

2.

(1975) 133 CLR 125 at 136. See also Raguz v Sullivan (2000) 50 NSWLR 236 at 251.

3.

[2001] NSWSC 1100 at [121]. See also Hescorp Italia SpA v Morrison Construction Ltd (2000) 75 Con LR 51 at 57.

4.

[2012] NSWSC 191 at [76].

5.

(2000) 171 ALR 89 at 114.

6.

(1991) 24 NSWLR 1 at 21. See further 3.1.

7.

[2005] NSWCA 32 at [66].

8.

Adicho v Dankeith Homes Pty Ltd [2012] NSWCA 316 at [16].

9.

[1994] 2 VR 32 at 81. See also Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11, 110 at 11, 117–18 per McHugh JA; Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 at 750; Ford Motor Co of Aust Ltd v Arrowcrest Group Pty Ltd [2002] FCA 1156 at [3].

10. (1996) 6 Tas R 52 at 57. Further proceedings: (1996) 6 Tas R 120. See also Marist Brothers Community Inc v Shire of Harvey (1995) 14 WAR 69 at 74–5. 11. (2003) 128 FCR 1; [2003] FCA 50 at [227(2)]. 12. [2012] VSC 634 at [26]. 13. [1994] 2 VR 106 at 178. 14. (1997) 14 BCL 201 at 206–7. 15. Ibid at 214. 16. [2001] NSWCA 61. See also Overlook Management BV v Foxtel Management Pty Ltd (2002) Aust Contract R 90-143; [2002] NSWSC 17. 17. (2000) 50 NSWLR 236 at 251. 18. [2001] FCA 1833. 19. Ermogenous v Greek Orthodox Community of SA Inc (2002) 187 ALR 92 at 100. 20. [2012] VSC 290 at [163]. 21. (2008) 70 ACSR 1; [2008] WASC 239 at [2661]. 22. (2000) 176 ALR 693 at 709. Kirby J was in the minority. 23. Nicholson v Hilldove Pty Ltd [2012] VSC 598 at [47]. 24. (2013) 298 ALR 666; [2013] WASCA 66 at [51]. 25. Ermogenous v Greek Orthodox Community of SA Inc (2002) 187 ALR 92 at 100 per Gaudron, McHugh, Hayne and Callinan JJ. See also Maroubra Pty Ltd v Murchison Queen Pty Ltd [2002] WASC 98; Alstom Ltd v Yokogawa Australia Ltd (No 7) [2012] SASC 49 at [117]. 26. See, eg, Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61. 27. Linfox Transport (Aust) Pty Ltd v Arthur Yates & Co Ltd [2004] NSWSC 943 at [261] per Brownie AJ. 28. Rural Insurance (Aust) Pty Ltd v Reinsurance Australia Corp Ltd [2002] NSWSC 156 at [34]. See also John R Keith Pty Ltd v Multiplex Constructions (NSW) Pty Ltd [2002] NSWSC 43 at [228]. 29. (2013) 298 ALR 666; [2008] WASC 239 at [2657]. 30. Ibid at [2663].

31. [2012] ACTSC 18 at [56]. 32. Factory 5 Pty Ltd (in liq) v State of Victoria (No 2) [2012] FCAFC 150 at [60] per Rares and DoddsStreeton JJ. 33. (2000) 22 WAR 101 at 110. 34. See Terrex Resources NL v Magnet Petroleum Pty Ltd (1988) 1 WAR 144 at 159. 35. Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 at 110–11; John R Keith Pty Ltd v Multiplex Constructions (NSW) Pty Ltd [2002] NSWSC 43 at [224]. 36. [2003] NSWSC 131. 37. [2011] QSC 109. 38. Mrocki v Mountview Prestige Homes Pty Ltd [2010] VSC 624 at [1] per Dixon J. 39. See A Cullen, ‘Standard Conditions of Contract in the Building and Construction Industry’ (1993) 9 Building and Construction Law 89. See also J B Dorter, ‘Construction Contracts — Past, Present and Future’ (1994) 10 Building and Construction Law 239. 40. See Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd [1979] 1 All ER 965; White Industries Ltd v Piling Contractors Pty Ltd (1986) 2 BCL 353 at 360. 41. See Alstom Ltd v Yokogawa Australia Pty Ltd (No 7) [2012] SASC 49 at [111]. 42. Thiess Contractors Pty Ltd v Placer (Granny Smith) Pty Ltd (2000) 16 BCL 255; [2000] WASCA 102 at [3]; appeal allowed (not on this point) (2003) 196 ALR 257; [2003] HCA 10. 43. [1973] 2 NSWLR 186. 44. (1991) 10 BCL 143. 45. See Cook’s Constructions Pty Ltd v Stork Food Systems Australia Pty Ltd [2008] QSC 179. 46. Young v Ballarat and Ballarat East Water Commrs (1879) 5 VLR (L) 503 at 504–16, 537. 47. Melbourne Harbour Trust Commrs v Hancock (1927) 39 CLR 570. 48. Compare Barter v Mayor etc of Melbourne (1870) 1 AJR 160. 49. (1974) 131 CLR 378. 50. (1969) 43 ALJR 213. 51. See OneSteel Manufacturing Pty Ltd v United KG Pty Ltd (2006) 94 SASR 376; [2006] SASC 119 at [4] per Debelle J. 52. See Simpson and Pritchard v Steward & Steward [2011] NSWSC 491 at [62].

[page 11]

2

CONTRACT DOCUMENTS

DOCUMENTATION Building contracts 2.1 Every building contract is constituted by agreement and it is conventional to speak of agreement in terms of consensus ad idem: see 1.1. But consensus must exist, although the paths to finding its existence may differ: it has been said that it is not a function of the court to interpret documents and dealings between parties as leading to a finding of consensus ad idem when there was obviously no consensus.1 In considering whether there is consensus, in practice the law generally ignores the subjective expectations and the unexpressed mental reservations of the parties.2 The emphasis should be on what the relevant communications would have conveyed to reasonable persons in the parties’ positions rather than on a pedantic analysis of language and preference given to form over substance.3 A building contract, like any commercial contract, should be given a ‘businesslike’ interpretation.4 But building contracts are not noted for their brevity. Seldom will the contract consist of a single page. In fact, often the contract will consist of ‘a monumental and forbidding aggregation of documents’ — to adopt what the New South Wales Court of Appeal said in F E Cleary & Sons Pty Ltd v Buckland Building Group Pty Ltd.5 Frequently it may be necessary for the court to examine the history of the negotiations and dealings between the parties only some of which may be in documentary form.6 And by law it is quite clear that an agreement may exist out of a ‘chain of correspondence’.7 [page 12]

On the other hand, it is possible for the parties to specify an ‘entire agreement clause’, such that the written document constitutes the only agreement between them, and this has or may have the effect of denuding what would otherwise constitute a collateral warranty of legal effect.8 Such a clause, however, cannot prevent the implication of a term by law.9

Kinds of contract documents 2.2 The contract documents may comprise the following: 1.

The agreement in the narrow sense, or articles or heads of agreement, as this document may be called. This document may be perhaps only a page or so in length setting out what may be no more than six clauses. It contains a promise by the contractor to execute the works and a promise by the employer to pay for them. Usually it will name the builder, architect or engineer. It identifies the drawings and specifications in accordance with which the work is to be done, and may in addition list the documents which form part of the contract. A document setting out so called ‘heads of agreement’ may itself constitute a binding agreement, without more.10 Or they may constitute a binding agreement even though there are areas in them, if not sufficiently pervasive, that amount to ‘agreements to agree’.11

2.

Conditions. Ordinarily these are the general conditions of contract, usually in the form of a printed set. At times there is also a set of special conditions. ‘General conditions of contract’ usually means a specific set of conditions so described.

3.

Drawings prepared by the architect or engineer.

4.

Specification. This describes in detail the work to be done, such description being not essentially graphic or representational (as with drawings) but verbal. If something does not conform to the specification, it is said to be ‘out of specification’ or ‘out of spec’.

5.

Bills of quantities. These show in great particularity the quantity of work to be done. They may, but usually do not, form part of the contract. Sometimes there is a combined specification and bill of quantities, called a specified bill of quantities. See generally 15.1–15.14.

6.

Schedule of rates.

7.

Miscellaneous documents. Often the articles or heads of agreement expressly state that the contract documents include such documents as the builder’s tender. At times a formidable list of documents is [page 13] assembled, comprising not only the general conditions, specifications and drawings but also several notices to tenderers, the tender itself, the letter accompanying the tender and various other letters. Even telegrams, telex messages and notes of conferences or minutes of meetings may be included. This practice of stating expressly what documents constitute the contract is often very useful and may avoid disputation about whether some particular document is or is not included. A contract may be held to exist out of correspondence (such as by email or texts), even though it is difficult, if not impossible, to analyse a transaction in terms of offer and acceptance.12 But providing the correspondence objectively manifests a present intent of the parties to be bound, it can be done.13

Documents forming part of the contract should be so endorsed and the endorsement signed by or on behalf of the parties. Where there might be dispute about whether a particular page of a document forms part of the contract, each page should be initialled. This precaution should obviously be taken in regard to additions and attachments and documents, such as specifications, that are not in a standard form. Even when it is clear what documents constitute the contract it can be difficult at times to reconcile two or more provisions contained in the contract dealing with the same matter. On some occasions, it will be found even that some matter, for example, progress payments, is dealt with in the general conditions, the special conditions and the early provisions both of the specification and of the bill of quantities. A specific provision in a contract, inconsistent with a general provision in the one composite document, was held to prevail in Ankay Pty Ltd v Erley Pty Ltd.14 At times the writer of a specification lays down what is in effect a set of general conditions without paying regard to the question whether those provisions and the general conditions proper overlap or conflict. Similarly, the authors of some

bills of quantities have an unfortunate habit of inaccurately paraphrasing the general conditions of contract and of interspersing these inaccurate paraphrases with what appear to be additional provisions. In a case where the bills of quantities are made part of the contract it may be very difficult to say what the effect of this is. In practice a provision which is really in the nature of a general or special condition but which is buried in a specification is often overlooked. However undesirable it may be to put into a specification matter which properly belongs in the general or special conditions, nonetheless, if the specification is a contract document, the parties will be bound by its provisions, even though they may deal with such matters as liquidated damages. [page 14]

Main standard forms 2.3 Standard forms of building agreement are in widespread use.15 They have been known by various short titles. The main forms which have been in use historically include the old Ed 5b JCC, AS 4000 and NPWC3. ABIC forms have replaced the JCC series of contracts in many instances. There are various ABIC forms. ABIC stands for Australian Building Industry Contracts. These are jointly published by Master Builders Australia (MBA) and the Australian Institute of Architects (AIA) and are intended for use in building projects where an architect administers the contract. ABIC MW-2008 Major Works Contract is the most comprehensive contract in the ABIC suite of contracts. It is the standard contract for non-housing work. There is then the ABIC MW-2008 Major Works Contract-Housing which is a state and territory specific contract for housing work. Thus there is ABIC MW2008 H Vic which is the Major Works Contract for Housing in Victoria. In Queensland there is ABIC MW-2011 H Qld. In Queensland also there is ABIC MW-2011 C Qld which is a Major Works Commercial Contract. ABIC SW-2008 is in general use (except in Queensland) as the standard contract (Simple Works) for non-housing work. There is then the ABIC SW2008 Simple Works Contract-Housing which, again, is a state and territory specific contract for housing work. In Queensland it is known as ABIC SW-2011

H Qld. There is for Queensland also ABIC SW-2011 C Qld which is a Simple Works Commercial Contract. Other ABIC forms include ABIC EW-1 2003 which is an Early Works Contract (suitable for early works such as demolition and/or groundworks including temporary works where an architect administers the contract) and ABIC BW-1 2002 which is a Basic Works Contract (suitable for small commercial projects or single trade activities administered by an architect). These may not be suitable for use in Queensland. There are various other standard form contracts. One, for example, is PC-1 1998 (published by the Property Council of Australia), but this is seldom, if ever, encountered. Of course, on many occasions parties are still using the well-known JCC forms of contract. In many very major works, particularly infrastructure building, there is no doubt a tendency to draft contracts specifically for the purpose. One reason is because they may involve so-called ‘public/private partnerships’, or PPP. These contracts are highly complex and lengthy and great care must be taken both in drafting and perusing them. [page 15]

Other standard forms 2.4 Various public authorities and others have their own standard forms. It is likely that some or many of these may not have been revised for many years. Other short titles encountered include: UHC1 (Uniform Housing Contract: Agreement and Conditions of Contract), DECON2-2005 (Design and Construct Contract — Lump Sum), DECON2 SC 2005 (Design and Construct Subcontract — Lump Sum, CM 2012 (Construction Management Contract) and IC 2007 (Independent Contractors Agreement). There are also state and territory local contracts which may be encountered. For example, in Victoria there has been HIA V30 (Housing Industry Association) for new house construction. There has also been HIC 5 (Home Improvement Contract) where the contract price is for more than $5,000.

INTERPRETATION OF CONTRACT DOCUMENTS General approach 2.5 The primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. This was said by Gibbs J to be ‘trite law’.16 In Investors Compensation Scheme Ltd v West Bromwich Building Society17 Lord Hoffmann said that: Interpretation is the ascertainment of the meaning which [a] document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

The subjective intentions of the parties are irrelevant.18 This has been called the ‘objectivist’ theory of contract.19 But in Hillas and Co Ltd v Arcos Ltd20 Lord Wright said that the court should construe commercial contracts ‘fairly and broadly, without being too astute or subtle in finding defects’. This should not be understood as limited to documents drawn by business people for themselves and without legal assistance.21 The Full Federal Court in Sharp v Cossack Pearls Pty Ltd22 (referring to Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW23) said that the appellants in that case had correctly contended that the courts ought to have regard to the objectively [page 16] determined commercial purpose of a contract with knowledge of the genesis of the transaction, the background, the context and the market in which the parties were operating. See further 2.16. Although a supposed building agreement may be bad for uncertainty, arguments invoking alleged uncertainty exert minimal attraction.24 There is a clear reluctance in the courts to conclude that a commercial agreement on which parties have acted is void for uncertainty.25 The courts endeavour as far as possible to treat the dealings of people as effective.26 See further 3.1–3.4.

At the same time a contract may be held not to exist even though the parties have shaken hands27 or a document has been signed.28 In Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd29 it was said by Kirby P that subject to the rule that a court should give the words of a written agreement the natural meaning that they bear, ‘in giving meaning to the words of an agreement between commercial parties, courts will endeavour to avoid a construction which makes commercial nonsense or is shown to be commercially inconvenient’. He returned to this view in Pan Foods Company Importers & Distributors Pty Ltd v Australia and New Zealand Banking Group Ltd30 when he said that ‘such documents should be construed practically, so as to give effect to their presumed commercial purposes’. How far this approach is at odds with the trite law position stated by Gibbs J is a matter of some debate.31 Certainly though in Steggles Ltd v Yarrabee Chicken Co Pty Ltd32 the Full Federal Court said that ‘in approaching the construction of [a commercial] contract, if a detailed, semantic and syntactical analysis of words … will lead to a conclusion that flouts business common sense, it must yield to business common sense’. This hardly seems like the trite law position of Gibbs J. Nevertheless, and as was quoted by Lord Bingham in Homburg Houtimport BV v Agrosin Private Ltd,33 ‘a business sense will be given to business documents’. The rule that words should be given their natural and ordinary meaning reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents.34 As Kirby P said in Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd35 ‘courts should be the upholders of bargains and not their destroyers’. [page 17]

Internal aids to construction 2.6 The agreement itself may contain provisions designed to aid construction. There may be a definitions clause setting out at length the meanings of various expressions used: see, for example, s 51 (Definitions) of ABIC MW-2008 H Vic. Another clause may state which of perhaps several contract documents is to prevail in the event of conflict. Building agreements commonly specify the law which is to govern their construction and may also specify that the written document contains the entire contract between the parties. As regards ‘entire

contract’ clauses it may be said that in general, except in the case of fraud, and subject to any statutory provision, such a clause will bind the parties in accordance with its terms, properly construed.36 It is always necessary to look carefully at contract documents to see what (if any) provision has been made to resolve interpretational issues.

Effect of printed word 2.7 Many building agreements consist of printed forms with handwritten or typewritten insertions or alterations. Generally, greater effect is given to the handwritten or typewritten words over the printed words.37 It may be necessary, in order to give effect to the handwritten or typewritten words, actually to disregard inconsistent printed words.38 When standard terms are incorporated into an agreement, the ‘proper’ approach, it has been said, going even further, is to disregard those incorporated terms that conflict with the expressly agreed terms.39

Words struck out 2.8 In MA Sassoon and Sons Ltd v International Banking Corp40 the Privy Council stated that it was now taken to be settled that the effect of deleting words from a printed form of mercantile contract was ‘the same as if the words had never formed part of the print at all’. However, the House of Lords in Mottram Consultants Ltd v Bernard Sunley & Sons Ltd41 had regard to such a deletion as did the Queensland Full Court in T J Watkins Ltd v Cairns Meat Export Co Pty Ltd.42 Reviewing the authorities in Mobil Oil Australia Ltd v Kosta43 Blackburn J concluded that the better view was that reference to words struck out was [page 18] not permissible. This was followed by Jacobs J in Harrod v Palyaris Construction Pty Ltd44 who said that in his view: … it is not … permissible to have regard to … printed or written words or phrases which have been deleted … as an aid to interpreting the words and phrases which have been substituted in their place.

To the same effect are remarks of Young J in Easyfind (NSW) Pty Ltd v Paterson.45 However, in Hughes Bros Pty Ltd v Telede Pty Ltd46 Cole J expressed the view that it ‘is permissible in case of ambiguity to have regard to deleted clauses as an aid to construction, at least in a standard form contract’. Similarly, Sheppard J in Sanko Steamship Co Ltd v Sumitomo Australia Ltd (No 2),47 a charterparty case, had regard to deleted words because of ambiguity in the words remaining. On the other hand, in Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd48 Owen J declined to consider deleted words because they were not deleted from a pre-printed form. In the interesting case of NZI Capital Corp Pty Ltd v Child49 the deliberate deletion of a clause in a loan agreement produced on a word processor expressly providing for repayment by the borrower was held to have ousted the implied obligation that the borrower repay the loan. The point is a difficult one in some respects but if ‘the starting point … still [remains] the express terms of the contract’ to use the words of Bleby J in Alstom Ltd v Yokogawa Australia Pty Ltd (No 7)50 then reference to words struck out, as a way to ascertain intention, seems inappropriate. For those words have been intentionally discarded and, thus, should not be held to have any contractual effect.

Conflicts in and between documents 2.9 In general one must construe a document as a whole so as to yield an harmonious, not an unworkable, reading which might result if clauses given their normal operation would be in conflict.51 This is in accordance with the businesslike approach to the interpretation of commercial contracts adopted by the courts.52 The courts will endeavour to avoid a construction of a document which makes commercial nonsense.53 A conflict between documents, however, may be so fundamental and farreaching as to make it obvious that there is no true consensus. Alternatively, what appears to be a conflict may be resolved by an internal aid to [page 19]

construction. Otherwise, however, the rule of construction stated long ago by Jessel MR in Re Phoenix Bessemer Steel Co54 is ‘that if contemporaneous documents can be read in two ways, in one of which they appear consistent and in the other inconsistent, the construction is to be preferred which will render them consistent’. Another principle he there stated55 is ‘that if one of two contemporaneous documents is ambiguous in its terms, but the other is clear, then force is to be given to the one whose terms are clear, so as to interpret the one containing ambiguous terms’.

Reasonableness 2.10 If the words used in the contract documents are unambiguous, orthodoxy is that the court will give effect to them notwithstanding that the result may appear capricious or unreasonable and even though it may be guessed or suspected that the parties intended something different.56 A court is not entitled to reconstruct an agreement on equitable principles, as was held in Mayfield Holdings Ltd v Meana Reef Ltd.57 In Harrod v Palyaris Construction Pty Ltd58 Jacobs J said ‘it is not the function of the court to make a new and sensible contract for the parties’. The court will not rewrite the contract for the parties.59 On the other hand, as Gibbs J said in Australian Broadcasting Commission v Australasian Performing Right Association Ltd:60 … if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, even though the construction adopted is not the most obvious, or the most grammatically accurate’.

And as he went on there also to observe,61 it is permissible ‘to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument’. But as he also observed,62 the ‘court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust’. For, as Menzies J observed in SA Railways Commissioner v Egan,63 ‘it is still true that hard cases tend to make bad law.’ Thus was it said by Batt JA in Etna v Arif64 that ‘a court must not make [page 20]

for the parties a contract that is different from or (in its view) fairer than a contract they themselves have made’. Although ‘the starting point’ still remains the express terms of a contract65 generally, in recent times, there has been a move away from the strictness of the orthodox position as may be seen from the comments of the Full Federal Court in Steggles Ltd v Yarrabee Chicken Co Pty Ltd66 in 2.5. There have also been parallel statutory developments in terms of what the courts may order in varying contracts or arrangements in such measures as the Australian Consumer Law known as the ACL (see s 243) which is Schedule 2 to the Competition and Consumer Act 2010 (Cth). It remains to note, as pointed out by Beech J in Shilkin v Jagem Pty Ltd67 that a term can be implied into a contract if it is necessary for its reasonable or effective operation in the circumstances of the case. It appears also to be the case that the power to serve a default notice upon a builder to ‘show cause’, a power present in many standard form contracts, must be exercised reasonably: see 12.12.

Unconscionability 2.11 The rule that courts will give effect to an agreement between parties even if, by doing so, unfairness is brought about in the result, is subject to a doctrine of unconscionability. As was said in Legione v Hateley68 by Mason and Deane JJ69 there is a fundamental principle according to which equity acts, ‘namely that a party having a legal right shall not be permitted to exercise it in such a way that the exercise amounts to unconscionable conduct’. Thus was it held in Commercial Bank of Australia Ltd v Amadio70 that the respondents were entitled to relief on the ground of unconscionability constituted or brought about by actual misconduct on the part of their son. Mason J expressed the doctrine in that case71 as follows: … relief on the ground of ‘unconscionable conduct’ is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage.

The doctrine prevents a party receiving a benefit under a transaction ‘which, in the eye of equity, cannot be enforced because to do so would be inconsistent with equity and good conscience’.72

[page 21] As pointed out by Blue J in Highfield Property Investments Pty Ltd v Commercial and Residential Developments (SA) Pty Ltd73 the High Court in Tanwar Enterprises Pty Ltd v Cauchi74 rejected the notion, however, that there is a single unifying principle in equity that unconscionable conduct gives rise to equitable relief or an equitable defence to a legal right. Rather, as Blue J explained,75 there are individual categories in which equity recognises conduct which it characterises as unconscionable as a basis for equitable relief or defence, each of which contains elements beyond mere unconscionability. As Croft J said in Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd,76 a retail leases case, the decisions in this area ‘confirm that the equitable jurisdiction in this respect is confined within the types of circumstances where courts of equity have given it expression’. There is also now statutory recognition of the doctrine in the ACL.77 2.12 As pointed out in Bridgewater v Leahy78 by Gaudron, Gummow and Kirby JJ, the doctrine of unconscionability is one concerned with the wider topic of equitable intervention. Thus was it also held in Garcia v National Australia Bank Ltd79 that the respondent was not entitled to enforce the guarantee against the wife of the mortgagor. Although it is clear that judges must resist the temptation to reform oppressive contracts, there remains, nonetheless, a power in the courts to intervene when conduct which is unconscionable is involved. In a case where such conduct is involved, the courts will not hesitate to relieve a party of the obligation of performance. This is an especially important doctrine where guarantees are involved. Often guarantees will be signed by a spouse or partner on the basis of trust and good faith.80 Even in the absence of actual misconduct the law will, if proper to do so, intervene to protect the innocent victim.81 The central notion, it may be said, is that equity will not allow advantage to be taken of a person labouring under a disability such as, but not limited to, sickness, age, drunkenness, illiteracy, lack of education or lack of assistance or explanation.82 Categories in which equity will intervene under the rubric of unconscionable conduct were identified by the Full Federal Court in Australian Competition and Consumer Commission v Samton Holdings Pty Ltd83 and these were set out by Croft J in Tenth Vandy Pty Ltd v Natwest Markets

[page 22] Australia Pty Ltd.84 To take advantage of a superior bargaining position, as often happens in commerce, is not per se, however, to act unconscionably for, as Gleeson CJ observed in Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd85 ‘[m]any, perhaps even most, contracts are made between parties of unequal bargaining power, and good conscience does not require parties to contractual negotiations to forfeit their advantages, or neglect their own interests’. This was quoted by Emmett J in Rose v Sakkara Properties Pty Ltd.86 ‘Unconscionability is a concept which requires a high level of moral obloquy’ said Spigelman CJ in Attorney-General of New South Wales v World Best Holdings Ltd.87 A doctrine of unconscionability is also provided for in the ACL as noted in 2.11. Also, in s 15(1)(b) of the Home Building Contracts Act 1991 (WA) it is provided that a builder must not enter into a contract that contains any provision that is ‘unconscionable, harsh or oppressive’. The word ‘unjust’ in s 7(1) of the Contracts Review Act 1980 (NSW) includes ‘unconscionable’ by virtue of s 4(1) thereof. Unwritten law unconscionability referred to in statutory provisions is generally what is unconscionable in equity.88

Oral contracts and printed conditions 2.13 Not infrequently an oral agreement is made, often by telephone, which is said later to incorporate conditions included in a printed form. Difficulty may arise when conditions included in the printed form are not expressly mentioned at the time. Sometimes it is argued that the conditions must be included by previous course of dealing between the parties. In McCutcheon v David McBrayne Ltd89 the House of Lords held that written terms were not incorporated in the oral agreement and a passage in the speech of Lord Devlin90 appeared to mean that no term can be implied into a contract from a previous course of dealing unless the party sought to be burdened with the term can be shown to have actual, and not merely constructive, knowledge of it. However, the House reached a different conclusion in Henry Kendall & Sons (a firm) v William Lillico & Sons Ltd.91 The course of dealing between the parties in

that case was held to evince an acceptance of the printed terms ‘of whose existence [the defendants] were well aware although they had not troubled to read them’.92 [page 23] Both these cases were considered by the Full Court of Victoria in D J Hill & Co Pty Ltd v Walter H Wright Pty Ltd.93 In that case the subsequent printed form was held not to be a contractual document. Winneke CJ, delivering the judgment of the court, said that although ‘the respondent had knowledge of the existence of the form … it was unaware of the content of the terms and conditions on the back of it and regarded it, being presented when it was, as nothing more than an acknowledgment by it of delivery of the goods’.94 Hogarth J in Eggleston v Marley Engineers Pty Ltd and B K and J G Mewett95 felt bound to follow this decision ‘even though not fully convinced of its correctness’; accordingly he held ‘that in spite of Mr Marley’s knowledge of the existence of conditions printed on the back of the … forms, owing to his lack of knowledge of their contents, they were not incorporated by implication in the contract for the hire of the crane on this occasion’. All authorities to that point were reviewed by the Full Court of WA in Rinaldi & Patroni Pty Ltd v Precision Mouldings Pty Ltd.96 The decision in D J Hill was followed. Cart notes sent subsequently to oral agreements were held not to be contractual documents; for that reason terms printed on the back of them could not establish a course of dealing leading to the conclusion that they were incorporated by implication into subsequent contracts. A decision to similar effect is Salcombe Investments Pty Ltd v Cement Aids (Q) Pty Ltd,97 where Connolly J held that an exemption clause on the back of an invoice could not be taken to be part of the contract between plaintiff and defendant. The invoice was not a contractual document. It only confirmed delivery and specified the price of goods and the terms of payment; when the invoice was issued the contract had already been performed. A decision also to similar effect is Liaweena (NSW) Pty Ltd v McWilliams Wines Pty Ltd98 in which it was held that the appellant’s conditions of sale did not form part of the contract for the sale of corks. The appellant’s invoices containing such

conditions ‘were sent after the contracts had been made on different terms, and performed, and were sent too late to affect the course of dealing’.99 However, in Maxitherm Boilers Pty Ltd v Pacific Dunlop Ltd100 a letter of offer, expressed to be based ‘on our standard terms and conditions as per previous quotation’, which was accepted, was held to be effective to incorporate all those terms and conditions into the contract. Although the court acknowledged that there could be cases where a particularly onerous [page 24] term might not be incorporated,101 it would be rare, said Ormiston JA,102 ‘that an apparent acceptance by the offeree should not carry with it the offeree’s assent to the whole of the terms described’. In light of the authorities it is difficult to explain the decision of Cohen J in Chattis Nominees Pty Ltd v Norman Ross Homeworks Pty Ltd (Receiver Appointed) (in liq)103 who held that a condition in a supplier’s invoices not objected to by the purchaser became a term of each of the contracts entered into between those parties. However, the number of invoices to which his Honour was referred would indicate that the dealings between the parties were frequent and regular and great in number. In Metroland Funds Management Ltd v Skyrise Consultants Pty Ltd104 Windeyer AJ held that although it is possible to have a contract which is partly written and partly oral, that cannot be so where the basic terms contradict one another and, accordingly, in that case, the written document comprised the full agreement between the parties.

Contra proferentem rule 2.14 Many clauses in building and other contracts are inserted entirely for the benefit of one party only. This arises particularly in the cases of exclusion and limitation clauses. The principle stated by the High Court in Darlington Futures Ltd v Delco Australia Ltd105 applies equally to both such clauses: either such clause is to be construed ‘according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the

clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity’.106 Being construed contra proferentem, an ambiguity is resolved against the party relying on the clause.107 But ambiguity is not shown by difficulty of construction.108 In the absence of ambiguity, there is no occasion for the use of the contra proferentem rule.109 Moreover, ‘[f]ew, if any, English words are unambiguous or not susceptible of more than one meaning or have a plain meaning’.110 The rule ‘is only to be used to resolve [page 25] ambiguities, not to create them and … it is a rule of last resort’.111 The court will not, it has been said, pervert the meaning of clear language even applying the contra proferentem rule.112 There must be a question whether the rule should be applied if the parties have negotiated their contract at arm’s length.113

Parol evidence rule 2.15 It has been said that the very purpose of a formal written contract ‘is to put an end to the disputes which would inevitably arise if the matter were left upon verbal negotiations or upon mixed communings consisting of letters and partly of conversations’.114 The ‘parol evidence rule’ was summarised by Lord Morris in Bank of Australasia v Palmer115 as follows: [P]arol testimony cannot be received to contradict, vary, add to or subtract from the terms of a written contract, or the terms in which the parties have deliberately agreed to record any part of their contract.

Characteristically, the rule applies whenever there is inconsistency between an alleged prior oral and a subsequent written agreement between the same parties.116 But the rule only applies where the written agreement contains on its face the complete contract between the parties; the rule thus can have no application in the case of an agreement which is partly in writing and partly verbal.117 Thus the rule does not prevent a party from propounding a case that documents, letters and so on, apparently concluding a self-contained contract, do not constitute the

entirety of the agreement.118 The tendency, moreover, in recent times, has been to apply the rule in a less restrictive way.119 However, where the parol evidence rule does apply it applies because prior negotiations and so on ‘are superseded by, and merged in, the contract itself’.120 But care must be taken in this regard because, for example, a pre-contractual promissory estoppel may have arisen by which equity will protect one contracting party from inequitable conduct by the other in which case, it may be said, ‘legal rights trumped by equity [page 26] include those protected by the parol evidence [and it may be added] entire contract rules’.121

Surrounding circumstances 2.16 The High Court said in Westfield Management Ltd v AMP Capital Property Nominees Ltd122 that the ‘duty of a court in construing a written contract is to endeavour to discover the intention of the parties from its words and this requires consideration of the whole of the agreement between them.’ Where a contract exists, the relationship of the parties is delineated by the agreement contained in the contract.123 For the existence of a contract is a consequence which the law imposes upon, or sees as a result of, what parties have said and done.124 However, it may be necessary on occasion to look at surrounding circumstances in order to ascertain the true intentions of the parties. The background was famously referred to by Lord Wilberforce as the ‘factual matrix’.125 One must have in mind the commercial background and aim and purpose of the agreement according to one authority.126 In Codelfa Construction Pty Ltd v State Rail Authority of NSW127 Mason J explained the position as follows: The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although … if the facts are notorious knowledge of them will be presumed.

This approach, of reference to ‘background’ information in the event of ambiguity, was reaffirmed by the High Court itself in Royal Botanic Gardens and Domain Trust v South Sydney Council,128 where it was said that: … if the language be ambiguous or susceptible of more than one meaning, it is appropriate to have regard to more than internal linguistic considerations and to consider the circumstances with reference to which the words in

[page 27] question were used and, from those circumstances, to discern the objective which the parties had in view.129

Indeed, as mentioned by Ormiston JA in Collins Hill Group Pty Ltd v Trollope Silverwood & Beck Pty Ltd,130 it is arguable in any event that where a contract is only in part constituted in writing, one should be able to look generally at the surrounding circumstances and background to the parties’ agreement in order to construe the written part. The remarks of Mason J in the Codelfa case were referred to by Hope JA in Manufacturers Mutual Insurance Ltd v Withers,131 who added that there ‘is however ample authority, both old and recent, to support the admission of evidence of the identity of the subject-matter of a written contract where the terms of the writing do not sufficiently identify that subject matter’. In Re Interwest Hotels Pty Ltd (in liq)132 Eames J held that extrinsic evidence was admissible to establish the capacity in which a party had executed a contract, whether in its own right or as trustee for another; such evidence was not concerned with the actual intentions of the parties as to the meaning of the written terms of the contract but was concerned with a matter which was in common contemplation of the parties and not otherwise embodied in the terms of the written agreement itself. Cole J in Banque Brussels Lambert SA v Australian National Industries Ltd133 made reference to the ‘backdrop of surrounding circumstances’ to establish the intentions of the parties. While this may be so, the rule remains that if there is no ambiguity in the words of the contract itself, previous conversations between the parties cannot alter the plain meaning of the contract made.134 However, in Whiteby v Hodge135 considerations outside the written contract were resorted to where there was a lack of clarity in the document over the meaning of the word ‘sale’. Nevertheless the need to consider the objective rather than subjective intention

of the parties was confirmed by the High Court in Pacific Carriers Ltd v BNP Paribas136 and in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd137 as was pointed out by the Full Federal Court in Colby Corporation Pty Ltd v Commissioner of Taxation.138 The Codelfa ruling is limited to cases where [page 28] the language in the contract is ‘ambiguous or susceptible of more than one meaning’. Accordingly the Queensland Court of Appeal in Velvet Glove Holdings Pty Ltd v Mount Isa Mines Ltd139 ruled that resort to extrinsic evidence was not permissible because ‘when the contract was looked at in its entirety, the language used … was not ambiguous or susceptible of more than one meaning’. The High Court in Western Export Services Inc v Jireh International Pty Ltd,140 refusing special leave in that case, made a point of referring to the Codelfa ruling as a binding authority and bound to be followed by all lower courts unless disapproved or revised by the High Court itself. For the purposes of the Codelfa ruling ‘only matters mutually known to the contracting parties can be taken into account.’141 But, that being said, the High Court itself has said in Westfield Management Ltd v AMP Capital Property Nominees Ltd142 that interpretation ‘of a written agreement may involve consideration of the background knowledge available to the parties at the time of the contract which may include matters of law including relevant legislation.’

Prior negotiations 2.17 In Australia and New Zealand Banking Group Ltd v Compagnie D’Assurances Maratimes Aeriennes Et Terrestres143 Hayne J, in the Victorian Supreme Court, said that it was accepted by the defendants in that case that: … prior negotiations were admissible to the extent to which they tended to establish objective background facts known to both parties and the subject matter of the contract but were not admissible in so far as they consisted of statements and actions of the parties which were reflective of their actual intentions and expectations.

There is no doubt that this is the rule and it was restated as such, in similar terms, by RD Nicholson J in BP Australia Pty Ltd v Nyran Pty Ltd.144 Thus was it

held in Skywest Aviation Pty Ltd v Commonwealth of Australia145 that discussion immediately before execution of a contract was not admissible, as evidence of surrounding circumstances, to aid in its interpretation. So also was it held in Australian Co-operative Foods Ltd v Norco Co-operative Ltd146 that the contract in that case could not be qualified by pre-contractual exchanges. [page 29] The basis for the rule, mentioned by McLelland J in Johnston Mathey Ltd v AC Rochester Overseas Corporation,147 is that allowing pre-contract dealings to affect the meaning to be given to the contract subsequently entered into would pose a serious threat to the stability of commercial relationships. Reason itself supports a view that if parties have entered into a contract, particularly one containing detailed and elaborate terms, the extent of their obligations should be found in the contract itself and not in exchanges prior to it. As Jenkins J put the matter in Hawker Pacific Pty Ltd v Casair Pty Ltd148 ‘the endeavour is not to determine what the parties themselves believed to be the meaning of the contract, but rather what a reasonable person would have understood the parties to mean’. The point, of course, can be made that a reasonable person, fully informed, could be inclined to look at pre-contract negotiations to understand what indeed the parties did mean. In any event, background evidence of a contract is always admissible to demonstrate the facts known to each party at the time of its execution.149

Subsequent conduct 2.18 The Privy Council decision in Watcham v A-G of East Africa Protectorate150 has often been cited as authority for the proposition that evidence may be given of the subsequent conduct of the parties for the purpose of resolving an ambiguity in an instrument. But the authority of this case was greatly weakened by its being distinguished and doubted in decisions of the House of Lords in James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd151 and L Schuler & Co v Wickman Machine Tool Sales Ltd.152 In Administration of the Territory of Papua and New Guinea v Daera Guba153 Gibbs J referred to the general rule laid down in these cases that ‘it is not legitimate to use as an aid in the construction of the contract anything which the parties said or did after it was made’ and said that he

left open the question whether Watcham’s case laid down a correct principle of construction. The rule was said to be ‘very clear’ by Bryson J in Sportsvision Australia Pty Ltd v Tallglen Pty Ltd:154 ‘the later conduct and statements of parties are not admissible even to resolve an ambiguity in the meaning of the contract’. [page 30] To quote the ‘homely analogy’ of Nathan J in FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd,155 ‘A meat pie does not become an apple tart merely because it is served for dessert’. The Victorian Full Court decision in that case decides that the conduct of the parties subsequent to the making of a contract is not relevant to the interpretation of the contract. As was observed by Brooking J any ‘general principle that the conduct of the parties after a contract has been made may be used as throwing light on its meaning would be uncertain in its operation and mischievous in its effect’.156 In the earlier case of Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd157 this question of law was considered by the NSW Court of Appeal but did not have to be determined. Nevertheless, Kirby P, pointing out that the ‘dangers and disadvantages of permitting reference to post-contract conduct by the parties to the contract are obvious’, did say that the ‘present authority of the High Court of Australia appears to be against the use of [such] conduct in aid of the construction of a written contract’.158 Some disquiet has recently been expressed with this as the general position. In The Bell Group Ltd (In liq) v Westpac Banking Corporation (No 9)159 Owen J said that ‘the better view is that post-contractual conduct is not admissible as an aid to the construction of the terms of a contract’. This was quoted by Jenkins J in Hawker Pacific Pty Ltd v Casair Pty Ltd160 who, however, referred to what was said by Heydon JA (as he then was) in Brambles Holdings Pty Ltd v Bathurst City Council161 (that ‘post-contractual conduct is admissible on the question whether a contract was formed’) and who then said ‘it is artificial to distinguish between the inadmissibility of post-contractual conduct to construe the terms of a contract and the admissibility of post-contractual conduct to determine whether a contract, which contained a particular term, existed’.162 It is difficult, with respect, to express disagreement with her Honour. Certainly though, as for considering postcontractual conduct to determine whether a contract was made at an earlier date,

the authorities are plainly to the effect that this is permissible. In Tomko v Palasty,163 although Basten JA was inclined to leave the wider question open,164 Einstein J (with whom Mason P agreed) said that evidence of post-contractual conduct is admissible on the question of whether a contract was formed.165 To the [page 31] same effect are the judgments in Kriketos v Livschitz166 especially in remarks of Allsop P (as he then was).167

Terms describing building to be erected 2.19 The contractor’s obligation is often expressed in imprecise terms. An agreement to erect a house ‘similar to’ a certain house was construed in Mays v Roberts168 as requiring the erection of a house having a general likeness in the principal points of materials, design and workmanship. A contract by a builder for the sale of a building allotment contained a special condition that the vendor would erect thereon a dwelling ‘in conformity with the local government and uniform building regulations’ was held to be wide enough in Dean v Gibson169 to require the vendor to procure a permit required by an interim development order made under the Town and Country Planning Acts, without which the erection of the dwelling was unlawful. A condition of a contract of sale dealing with the erection of a building on the land sold will be regarded as collateral and, despite the doctrine of merger, will not be extinguished by the conveyance or transfer of the land.170 In Hannan v Fyfe and Fyfe171 a builder agreed to sell to a purchaser an allotment of land together with a dwelling house to be erected thereon by the builder, the house to be ‘exactly the same’ as a dwelling house inspected by the purchaser. The builder in fact erected a dwelling house the same as the one inspected, but subsequently the house developed serious cracks owing to the fact that it had been built upon unconsolidated sand. The house that had been inspected by the purchaser had been built upon consolidated soil. The evidence established that a house erected on unconsolidated sand was certain to crack as the sand consolidated, unless special foundations were constructed. Ligertwood J held that

it was an implied term of the contract that the house would be erected in a workmanlike manner; and that the contract was not performed by building a house ‘exactly the same’ as the house inspected without either allowing the sand on which it was built to consolidate or constructing special foundations appropriate to the site. In another case172 a builder who was in the course of erecting certain buildings agreed to sell the land upon which the buildings were being erected to the plaintiff. The agreement contained a condition whereby the vendor agreed ‘to complete the buildings as per memorandum annexed before completion’. The annexed memorandum was in these terms: Memorandum of work required to complete buildings referred to in contract: Hand rails on stairs of billiard room; two lavatories to be erected outside;

[page 32] archway between third and fourth shop to be bricked in and cemented; the shops to be rekalsomined. The whole of the buildings to be finished in a proper and workmanlike manner.

After completing the purchase the plaintiff discovered certain defects in the building which showed that it had not been completed in a proper and workmanlike manner. He made no complaint as to the specific works mentioned in the memorandum. His action for damages succeeded on the ground that the promise to complete the buildings in a proper and workmanlike manner was not limited to the specific works mentioned in the memorandum, but related to the whole of the buildings.

Meaning of buildings 2.20 It is sometimes important to determine whether, in fact, what is in issue before the court is a ‘building’ or not under the contract. The answer to this question may appear clearer in some cases than in others.173 Usually the answer will depend on the nature and permanency of the object together with the purpose of its construction. In one particular case, Lazaway Pools & Spas Pty Ltd v Caldarera,174 the issue was whether a swimming pool was a ‘building’ within the definition of that expression in s 3 of the Domestic Building Contracts Act 1995

(Vic). That expression was defined to include a ‘structure’. It was held that a swimming pool is a structure — it is ‘a large and substantial construction, intended to be permanent, on a fixed site’175 — and was thus a ‘building’ within that definition. A similar result was reached in Darwin Fibreglass Pty Ltd v Kruhse Enterprises Pty Ltd.176 In Highfield Property Investments Pty Ltd v Commercial and Residential Developments (SA) Pty Ltd 177 Blue J discusses the notion of ‘private residences’ and the meaning of the expression ‘house’. _________________________ 1.

Comco Constructions Pty Ltd v Leisure Holdings Australia Pty Ltd (1986) 3 BCL 259 at 265.

2.

G Percy Trentham Ltd v Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25 at 27. See also Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (2000) 16 BCL 353 at 363.

3.

Weemah Park Pty Ltd v Glenlaton Investments Pty Ltd [2011] QCA 150 at [49] per Muir JA (agreeing with trial judge).

4.

International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 at 160 per Gleeson CJ.

5.

CA(NSW), 12 February 1976, unreported.

6.

See Hescorp Italia SpA v Morrison Construction Ltd (2000) 16 Const LJ 413 at 415.

7.

ANZ Bank v Ciavarella [2002] NSWSC 1186 (mediation agreement).

8.

Inntrepreneur Pub Co v East Crown Ltd [2000] 2 Lloyd’s Rep 611. See 2.6.

9.

See Alstom Ltd v Yokogawa Australia Pty Ltd (No 7) [2012] SASC 49 at [114], [1519] (nor can it prevent a written agreement being varied by subsequent oral one).

10. Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101. See also AW Ellis Engineering Pty Ltd v Malago Pty Ltd [2012] NSWSC 55 at [114]. 11. LMI Australia Pty Ltd v Baulderstone Hornibrook Pty Ltd (2001) 18 BCL 57 at 61–4. 12. Marist Brothers Community Inc v Shire of Harvey (1995) 14 WAR 69. 13. Coles Supermarkets Australia Pty Ltd v FKP Ltd [2008] FCA 1915 at [45]. 14. SC(WA), White J, 9 November 1994, unreported. 15. See generally J Sweet, ‘Standard Construction Contracts: Some Advice to Construction Lawyers’ (1991) 7 Construction Law Journal 8. 16. Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109. 17. [1998] 1 All ER 98 at 114. See also Nordic Holdings Ltd v Mott Macdonald Ltd (2001) 77 Cons LR 88 at 116–17. 18. Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (1999) 16 BCL 353 at 358. 19. Stoelwinder v Southern Health [2001] FCA 115 at [30] per Finkelstein J. 20. (1932) 147 LT 503 at 514.

21. Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109. 22. [2012] FCAFC 110 at [82]. 23. (1982) 149 CLR 337 at 350. 24. Queensland Electricity Generating Board v New Hope Collieries Pty Ltd [1989] 1 Lloyd’s Rep 205 (PC). 25. Sportsvision Australia Pty Ltd v Tallglen Pty Ltd (1998) 44 NSWLR 103. 26. Hillas and Co Ltd v Arcos Ltd (1932) 147 LT 503 at 512. 27. Graham Evans Pty Ltd v Stencraft Pty Ltd [1999] FCA 1670. 28. Le Mans Grand Prix Circuits Pty Ltd v Ilidis [1998] 4 VR 661. 29. (1990) 20 NSWLR 310 at 313–14. 30. (2000) 170 ALR 579 at 584. 31. See Hancock Prospecting Pty Ltd v BHP Minerals Pty Ltd [2002] WASC 224 at [49]. 32. [2012] FCAFC 91 at [59]. The court (Jacobson, Lander and Foster JJ) referred to Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at [43]. 33. [2003] 2 WLR 711 at 718 (quoting from Glynn v Margetsen & Co [1893] AC 351 at 359 per Lord Halsbury LC). 34. Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98 at 115 per Lord Hoffmann. 35. (1995) 7 BPR 14551 at 14570. 36. Johnson Matthey Ltd v AC Rochester Overseas Corp (1990) 23 NSWLR 190 at 196. Quoted in Alstom Ltd v Yokogawa Australia Pty Ltd (No 7) [2012] SASC 49 at [113]. 37. Addis v Burrows [1948] 1 KB 444 at 449; Gesellschaft Burgerlichen Rechts v Stockholms Rederiaktiebolag Svea [1967] 1 QB 58. 38. Building and Engineering Constructions (Aust) Ltd v Property Securities No 1 Pty Ltd [1960] VR 673 at 681. 39. Ford Motor Co of Aust Ltd v Arrowcrest Group Pty Ltd [2002] FCA 1156 at [8]. 40. [1927] AC 711 at 721. 41. [1975] 2 Lloyd’s Rep 197. 42. [1963] Qd R 21 at 27. 43. [1970] ALR 253. 44. (1973) 8 SASR 54 at 58. 45. (1987) 11 NSWLR 98 at 101. 46. (1989) 7 BCL 210 at 215. 47. (1995) 63 FCR 227 at 258. 48. (1999) 16 BCL 353 at 365. 49. (1991) 23 NSWLR 481. 50. [2012] SASC 49 at [110]. 51. See Morgan Equipment Co v UMW Corporation Sdn BhD [2002] NSWCA 193 at [10].

52. Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 550 at 559. 53. Sydney Organising Committee for the Olympic Games v Zhu [2002] NSWCA 380 at [173]. 54. (1875) 44 LJ Ch 683. 55. Ibid. 56. Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109. 57. [1973] 1 NZLR 309 at 318. 58. (1973) 8 SASR 54 at 58. 59. Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (2000) 16 BCL 353 at 359. 60. (1973) 129 CLR 99 at 109. 61. Ibid. 62. Ibid. 63. (1973) 47 ALJR 140 at 141. 64. [1999] 2 VR 353 at 372. 65. Alstom Ltd v Yokogawa Australia Pty Ltd (No 7) [2012] SASC 49 at [110]. 66. [2012] FCAFC 91 at [59]. 67. [2013] WASC 113 at [66]. 68. (1983) 152 CLR 406 at 444. 69. Citing Story, Commentaries on Equity Jurisprudence, 12th ed, 1877, Vol 2, para 1316. 70. (1983) 151 CLR 447. 71. Ibid at 461. 72. Ibid. 73. [2012] SASC 165 at [325]. 74. (2003) 217 CLR 315. 75. [2012] SASC 165 at [325]. 76. [2010] VSC 2 at [108]. 77. Competition and Consumer Act 2010 (Cth) Sch 2, s 21. 78. (1998) 194 CLR 457 at 478. See also GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Ltd (2001) 191 ALR 342 at 386–90. 79. (1998) 155 ALR 614. 80. See Yerkey v Jones (1939) 63 CLR 649. 81. Ibid at 685–6. See also Garcia v National Australia Bank Ltd (1998) 155 ALR 614. 82. Overlook Management BV v Foxtel Management Pty Ltd [2002] Aust Contract R 90-143; [2002] NSWSC 17. 83. (2002) 117 FCR 301 at 318. 84. [2010] VSC 2 at [142].

85. (2003) 197 ALR 153 at 157. See also Durkin v Pioneer Permanent Building Society Ltd [2003] FCA 419 at [46]. 86. [2009] FCA 304 at [163]. 87. (2005) 63 NSWLR 557 at 583. 88. Australian Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253; Wenzel v Australian Stock Exchange Ltd [2002] FCA 95 at [76]. 89. [1964] 1 WLR 125. 90. Ibid at 134. 91. [1969] 2 AC 31. 92. Ibid at 113. 93. [1971] VR 749. 94. Ibid at 753. 95. (1979) 21 SASR 51 at 66. 96. [1986] WAR 131. See also Pondcil Pty Ltd v Tropical Reef Shipyard Pty Ltd [1994] ATPR 53,647. 97. [1987] ASC 57 292. 98. [1991] ASC 56,616. 99. Ibid at 56,624–5. 100. [1998] 4 VR 559. 101. Ibid at 560–1, 562, 569. 102. Ibid at 561. 103. (1992) 28 NSWLR 338. 104. [2011] NSWSC 343 at [11]. 105. (1986) 161 CLR 500 at 510. 106. Compare BHP Petroleum Ltd v British Steel plc (2000) 74 Cons LR 63 (less hostile approach to be adopted to limitation clauses). 107. Re an Arbitration between Taylor Woodrow International Ltd and the Minister of Health (1978) 19 SASR 1 at 3. 108. Compare Higgins v Dawson [1902] AC 1 at 10. 109. Galaxy Homes Pty Ltd v The National Mutual Life Association of Australasia Ltd (2013) 116 SASR 41; [2013] SASCFC 34 at [52]. 110. Manufacturers Mutual Insurance Ltd v Withers (1988) 5 ANZ Ins Cases 60-853 at 75,343 per McHugh JA. 111. Re an Arbitration between Taylor Woodrow International Ltd and the Minister of Health (1978) 19 SASR 1 at 3 per Bray CJ. 112. Maxwell v Highway Hauliers Pty Ltd [2013] WASCA 115 at [106] per Pullin JA. 113. Leighton Contractors Pty Ltd v East Gippsland Catchment Management Authority (2001) 17 BCL 35 at 39. 114. Inglis v Buttery (1878) 3 App Cas 552 at 577. 115. [1897] AC 540 at 545.

116. Nicolazzo v Harb (2009) 22 VR 220; [2009] VSCA 79 at [86] per Dodds-Streeton JA. 117. L G Thorne & Co Pty Ltd v Thomas Borthwick & Sons (A/Asia) Ltd (1955) 56 SR (NSW) 81 at 88. 118. Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833 at [280]. 119. B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman and Associates Pty Ltd (1994) 35 NSWLR 227 at 235 per Kirby P. See also Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd (1999) 16 BCL 353 at 362–3. 120. Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352. 121. Saleh v Romanous (2010) 79 NSWLR 453; [2010] NSWCA 274 at [68] per Handley AJA. 122. (2012) 293 ALR 241; [2012] HCA 54 at [27]. 123. Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd (2013) 296 ALR 465; [2013] FCAFC 29 at [60]. 124. Seven Network (Operations) Ltd v Brown [2013] NSWSC 372 at [87]. 125. Reardon Smith Line Ltd v Hansen-Tangen [1976] 3 All ER 570 at 575. See Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98 at 114 per Lord Hoffmann. 126. Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833 at [418] per Allsop J. 127. (1982) 149 CLR 337 at 352. Compare Walker Civil Engineering (Qld) Pty Ltd v F A Pidgeon & Son Pty Ltd (1986) 3 BCL 345. 128. (2002) 186 ALR 289. 129. Ibid at 292–3, 316–17. Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ (at 301) indicated that courts in Australia must follow the Codelfa formulation, in preference to any possibly wider English cases, until the High Court makes a final determination in the matter. 130. [2002] VSCA 205 at [26]. 131. (1988) 5 ANZ Ins Cases 75,336 at 75,340–1. 132. (1993) 12 ACSR 78 at 89–91. 133. (1989) 21 NSWLR 502 at 521. 134. Marks v GIO Australia Holdings Ltd (1996) 63 FCR 304 at 316. See also Shakibee v Chan [2001] WASC 60. 135. [2000] NSWSC 866. 136. (2004) 218 CLR 451 at 461–2. 137. (2004) 219 CLR 165 at 179. See also Queensland Power Co Ltd v Downer Edi Mining Pty Ltd [2009] QSC 6 at [57]. 138. (2008) 100 ALD 244; [2008] FCAFC 10 at [49] per Branson and Stone JJ. See also [59]–[60] per Jessup J. 139. [2011] QCA 312 at [103] per Philippides J (with whom Fraser and White JJA agreed). 140. (2011) 282 ALR 604; [2011] HCA 45 at [2]–[3] per Gummow, Heydon and Bell JJ. 141. Westpac Banking Corporation v The Bell Group Ltd (In liq) (No 3) (2012) 89 ACSR 1; [2012] WASCA 157 at [1342] per Drummond AJA. 142. (2012) 293 ALR 241; [2012] HCA 54 at [36].

143. [1996] 1 VR 561 at 565. 144. [2003] FCA 520. 145. (1995) 126 FLR 61. See also Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61. 146. (1999) 46 NSWLR 267. See also Best & Less Pty Ltd v Divergent Technologies Pty Ltd [2002] FCA 43. 147. (1990) 23 NSWLR 190 at 195–6. 148. [2011] WASC 152 at [81]. 149. Hennessey Glass & Aluminium Pty Ltd v Watpac Australia Pty Ltd [2002] QCA 24 at [77] per Ambrose J. 150. [1919] AC 533. 151. [1970] AC 583. 152. [1974] AC 235. 153. (1973) 130 CLR 353 at 446. 154. (1998) 44 NSWLR 103 at 114. See also Magill v National Australia Bank Ltd [2001] NSWCA 221. Evidence, however, of subsequent conduct may be admitted to identify things which are dealt with by the contract. Evidence is admissible also on the question whether a contract was formed: Merewyn Pty Ltd v Simeon Wines Ltd [2002] NSWSC 207 at [16]. 155. [1993] 2 VR 343 at 353. 156. Ibid at 350. 157. (1990) 20 NSWLR 310. 158. Ibid 315–16. 159. (2008) 70 ACSR 1; [2008] WASC 239 at [2667]. Appeal dismissed: (2012) 89 ACSR 1; [2012] WASCA 157. 160. [2011] WASC 152 at [84]. 161. (2001) 53 NSWLR 153; [2001] NSWCA 61 at [26]. 162. [2011] WASC 152 at [86]. 163. [2007] NSWCA 258. 164. Ibid at [13] (‘not necessary … to consider the extent to which subsequent conduct of the parties … is admissible to determine the existence and nature of the contractual arrangements in question’. (Emphasis added) 165. Ibid at [6]. 166. (2009) 14 BPR 26,717; [2009] NSWCA 96. 167. Ibid at [5]. See also at [109] per McColl JA. 168. [1928] SASR 217. 169. [1958] VR 563. 170. Gaut v Patterson (1931) 31 SR (NSW) 612. 171. [1957] SASR 90. 172. Gaut v Patterson (1931) 31 SR (NSW) 612. 173. See Hardie v Cuthbert (1988) 4 BCL 279 (whether encroachment a ‘building’) and R v City of Hobart; Ex

parte Beck (1988) 4 BCL 286 (whether proposed top-floor dwellings were ‘houses’). In Stevenson v Stephens (1989) 7 BCL 218 land was held to be ‘affected by’ a proposal of a competent authority within the meaning of a clause in a contract because the proposal, for road widening, would directly alter its boundary. In Allpike v Lang (1993) 82 LGERA 373 it was held that a pipe laid in an excavation was not a structure or ‘building’ within s 6 of the Local Government Act 1960 (WA). In Stork Wescon Australia Pty Ltd v Morton Engineering Co Pty Ltd (1999) 15 BCL 278 it was held that fabrication work and transport of material was ‘installation’ of equipment etc so as to make it ‘building work’ within s 4 of the Building Services Authority Act 1991 (Qld). 174. (1996) 12 VAR 207. 175. Ibid at 210. 176. (1998) 124 NTR 1. 177. [2012] SASC 165 at [228]–[244].

[page 33]

3

CONTRACTUAL DOCTRINES

UNCERTAINTY Generally 3.1 It may be suggested that a building agreement as a whole, or some provision of one, is bad for uncertainty. The expression ‘uncertainty’ is itself uncertain when used of a contract or term. Many contracts contain provisions which are uncertain in the sense of being ambiguous; the mere fact of ambiguity, however, is not enough to make the provision or contract bad for uncertainty;1 the court will construe the words in order to ascertain what the parties meant by them. Uncertainty which vitiates is uncertainty in the sense of absence of meaning.2 The vice aimed at is any arrangement which is too ‘uncertain and incomplete’ to make a contract.3 The parties must have reached agreement upon all the essential contractual terms of their bargain.4 Reasonable certainty of terms and subject matter is called for.5 Indeed, as long as it is not completely devoid of meaning, an ambiguous provision may still be valid and will bear such meaning as the court attaches to it.6 Thus, as was said by Ipp J in Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd,7 not merely any omission at all will make a contract incomplete or uncertain in the sense of rendering it invalid: ‘It is only the omission of an essential term that will have that effect’. Thus it was said by Beech J in Love v Brien8 that an agreement ‘is not void for uncertainty [merely] because it leaves open to one party a latitude of choice as to the manner in which [an] agreed stipulation is to be carried into effect’. And as was said by Brooking J in Toyota Motor Corp Australia Ltd v Ken Morgan Motors Pty Ltd,9 a ‘contract is uncertain if some essential term is so vague that no definite meaning can be assigned to it’. In Hillas and Co Ltd v Arcos Ltd,10

[page 34] Lord Tomlin in the House of Lords said that the conclusion, that the words ‘of fair specification’ had no meaning which was certain or capable of being made certain, might be the proper one to reach, before it was reached it was necessary to exclude as impossible all reasonable meanings which would give certainty to the words. The court, anxious that the law may not incur the reproach of being the destroyer of bargains will, so far as possible, treat the dealings of people as effective.11 In commercial transactions ‘the court should strive to give effect to the expressed arrangements and expectations of those engaged in business, notwithstanding that there are areas of uncertainty and notwithstanding that particular terms have been omitted or not fully worked out’.12 But ‘the process of construction is not a process necessarily concluded by logical reasoning or a priori analysis’.13 And parties’ subjective intentions or actual understandings are irrelevant to the exercise.14 Arguments invoking alleged uncertainty, or alleged inadequacy in the machinery available to the courts for making contractual rights effective, exert minimal attraction.15 There is a reluctance in the courts to find commercial agreements on which parties have acted as void for uncertainty.16 Courts are ‘slow’ to declare provisions void on this basis.17 As noted in 1.1, courts and lawyers may expect the agreements of business people to be clear and complete; unfortunately, in the market place, agreements often fall short of these lawyerly desires.18 In essence the courts will endeavour to find a construction of a contract that is ‘commercial’ but the fundamental rule remains that the words of a written agreement should be given the natural meaning they bear.19 An agreement by a term of which a relevant or critical term will be the subject of future agreement between the parties is uncertain and not enforceable.20 Brooking J in Toyota Motor Corp Australia Ltd v Ken Morgan [page 35] Motors Pty Ltd21 referred to this as uncertainty in the sense of incompleteness. In seeing whether there is an implied provision for its solution, there is a difference between an arrangement which is wholly executory, and one which has been

executed on one side or the other. In the ordinary way, if there is an arrangement to supply goods at a price ‘to be agreed’ or to perform services on terms ‘to be agreed’, then if it is executed on one side without agreement as to price or terms, the law will imply a contract that, in default of agreement, a reasonable sum is to be paid.22 Specifically, the fact that a transaction is executed makes it easier to imply a term resolving any uncertainty, or, alternatively, it may make it possible to treat a matter not finalised in negotiations as inessential.23 An agreement, to be enforceable, however, does not have to be worked out in meticulous detail.24 A binding contract may be arrived at even though it leaves unresolved many matters which may arise in the future.25 It is often difficult to say in advance on which side of the line a case will fall. In May and Butcher Ltd v R26 there was an agreement to sell tentage at prices to be agreed upon, the agreement providing that all disputes with reference to or arising out of the agreement should be submitted to arbitration. The House of Lords held that there was no binding contract and took the view that the arbitration clause provided no answer. On the other hand, in Foley v Classique Coaches Ltd27 the Court of Appeal, distinguishing May and Butcher Ltd v R, upheld an agreement for the purchase of petrol ‘at a price to be agreed by the parties in writing and from time to time’ in a document which also contained an arbitration clause on the ground that a term should be implied that the petrol should be sold at a reasonable price and that any dispute arising as to what was a reasonable price could be determined under the arbitration clause. In Whitlock v Brew28 a contract for the sale of land contained a clause whereby the purchaser promised that he would immediately upon taking possession grant a lease to a third person ‘upon such reasonable terms as commonly governed such a lease’. Neither the term of the lease nor the rent was specified. Although the clause provided for arbitration the High Court held that the clause was uncertain, that it was not severable and that there was no concluded contract. On the other hand, a clause which is uncertain but clearly severable from the rest of the contract without impairing the sense or reasonableness of the contract as a whole, will be rejected.29 An agreement consisting solely of ‘heads of agreement’, as in Anaconda Nickel [page 36]

Ltd v Tarmoola Australia Pty Ltd,30 may well constitute a binding contract. So called ‘heads of agreement’ were also upheld as constituting a binding agreement in Malago Pty Ltd v AW Ellis Engineering Pty Ltd.31 On the other hand, an agreement emerging out of circumstances of ‘extreme informality’ may not constitute a binding contract on the ground that the parties could not have intended to create legal relations in such circumstances.32

Standard form contracts 3.2 Difficulties may arise because the parties mistakenly believe a certain standard form exists. A contract of sale in the form of a letter provided that the conveyance should be ‘in the model form of conveyance especially prepared’ for use in relation to the same and that the sale was subject to the restrictions appearing in the model form of conveyance. In fact no model form of conveyance had been prepared for use in relation to the land. The result was that there was no enforceable contract, since material terms were missing which the court could not supply.33 But where a contract for the sale of a farm incorporated a set of non-existent conditions ‘so far as inconsistent herewith’ the clause was construed as meaning ‘so far as consistent herewith’ and was held to be bad for uncertainty, but capable of being severed.34 The price may be agreed upon, or the contract may be to do the work for a reasonable sum, or for a sum to be fixed by a third party. Although an agreement to ‘negotiate’ a fair and reasonable contract sum is illusory35 an agreement to agree upon a price structure for the next period of supply to reflect changes in various factors such as in costs, new mining, plant and scale of operations, was upheld in Queensland Electricity Generating Board v New Hope Collieries Pty Ltd.36 Moreover, an agreement to negotiate via a mediation process would itself be enforceable depending on its wording.37 In Denton v Ryde Municipal Council38 a lump sum contract in a standard form contained a handwritten clause by which ‘the usual Rise and Fall clause’ was to apply to the contract. In fact there was no ‘usual Rise and Fall clause’, and the provision was bad for uncertainty. One member of the Full Court, Herron J, took the view that the consequence was that there was no contract.39 An instance of a misdescription of a standard form of contract which was not fatal is provided by Modern Building Wales Ltd v Limmer & Trinidad Co Ltd.40 A contract whereby the price was to be varied in the event

[page 37] of a variation in ‘supplier’s costs’ was upheld in Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd.41 In City of Box Hill v E W Tauschke Pty Ltd42 Pape J found it possible to assign a meaning to a badly drawn indemnity clause in a specification which was attacked as uncertain. The ‘ordinary meaning [of] a technical expression … used in a particular industry is not a question of construction but is a question of fact to be decided upon expert evidence’.43 Recitals in formal or other agreements may or may not be helpful even in the construction of a standard form.44

Indefinite agreements 3.3 In Walford v Miles45 the House of Lords decided that an agreement to negotiate in good faith was unenforceable. Lord Ackner observed that a duty to carry on negotiations in good faith is as unworkable in practice as it is inherently inconsistent with the position of a negotiating party.46 However, in Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd,47 although Handley JA expressed a different view, Kirby P, with whom Waddell A-JA generally agreed, said that he did not share the opinion that no promise to negotiate in good faith would ever be enforced by a court. In Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd t/as ‘Uncle Ben’s of Australia’48 Kirby P was prepared to allow for the possibility that an agreement to ‘confer’ could be enforceable. And in Hooper Bailie Associated Ltd v Natcon Group Pty Ltd49 Giles J held that an agreement to conciliate or mediate a dispute is neither to be likened to an agreement to agree nor is it an agreement to negotiate or negotiate in good faith; according to Giles J, depending upon its express terms and any terms to be implied, such an agreement may require of the parties participation in the process of conciliation or mediation by conduct of sufficient certainty for legal recognition of the agreement.50 But in Barrier Wharfs Ltd v W Scott Fell & Co Ltd51 Higgins J had said that the law ‘knows nothing of virtual agreements, or honourable understandings’. However, in Computershare Ltd v Perpetual Registrars Ltd52 Warren J upheld the validity of the dispute resolution clause there in issue as being sufficiently certain

[page 38] and in Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL53 her Honour (as Warren CJ) said that ‘there has been clear recognition of the doctrine of good faith” in contracts but some would say this is unduly optimistic. With this must be compared in any event a further but earlier decision of Giles J in Elizabeth Bay Developments Pty Ltd v Boral Building Services Pty Ltd54 in which he declined to uphold a mediation clause owing to the ‘cumulative uncertainty’ of the expressions it contained. In Aiton Australia Pty Ltd v Transfield Pty Ltd55 Einstein J held a mediation clause void as uncertain for failing to deal with the issue of the mediator’s remuneration while in Morrow v chinadotcom Corp56 Barrett J held void a clause by which the parties were obliged to ‘attempt to settle by negotiation any dispute in relation to this Agreement’. The tendency of the courts these days is to uphold an obligation to act in good faith as not being merely an agreement to agree but as a substantive obligation on its own, but then (as mentioned by Warren CJ)57 to decide a case of breach of contract on some other basis. The dispute resolution clause in WTE CoGeneration v RCR Energy Pty Ltd58 was held to be an agreement to agree on a process of dispute resolution to be employed and thus unenforceable due to ‘inherent uncertainty’.59 A clause in a contract which provides that such contract is ‘subject to finance on satisfactory terms and conditions’ is not so indefinite in meaning as to render the contract illusory.60 In exceptional circumstances a binding contract may be held to exist even though the words ‘subject to contract’ have been used.61 But use of the words ‘subject to details’ means there is no concluded agreement.62 Where parties have agreed that certain terms are to be agreed upon between them in the future then the implication that the terms are to be reasonable cannot be made. However, parties may enter into an agreement to sign a further contract and by the former contract can agree that the latter may contain further terms not inconsistent with the agreed terms and which are, by the former contract, expressly or by implication required to be reasonable.63 Equally, parties may enter into a binding contract, containing only ‘heads of agreement’, in the expectation that at a later date a further contract will be entered into containing additional terms facilitating and

[page 39] clarifying the initial contract.64 As noted in an agreement of this nature was upheld in Malago Pty Ltd v AW Ellis Engineering Pty Ltd.65 An agreement for sale at a valuation is capable of constituting a binding agreement even if the machinery established by the parties for the ascertainment of the price should for some reason fail in that respect.66

Blanks not completed 3.4 Sometimes the contract documents contain a clause requiring completion within a certain time but the parties fail to fill up the blank, whether the blank is contained within the clause itself or in a schedule referred to in that clause. In Crowshaw v Pritchard and Renwick,67 for example, a clause in the specification left blank the number of weeks in which the work was to be done. The contractor had made a mistake in preparing his tender, and was anxious to escape from the contract which had resulted from the acceptance of it. He therefore argued that the failure to complete the specification in this regard made the supposed contract bad for uncertainty This argument was rejected, it being held that the clause in the specification should be treated as struck out, leaving the contract one under which the work was by implication to be performed within a reasonable time. Another example of a failure to fill up the blanks in a provision dealing with liquidated damages for delay is Parle v Leistikow.68 In Spectra Pty Ltd v Pindal Pty Ltd,69 Wootten J said that in some cases a blank in a document may be dealt with simply by ignoring it, and reading on as if it were not there. This is a practical commonsense approach – one consistent with an approach treating words struck out as being of no effect as regards what the parties intended. In Re S C Molineaux & Co Pty Ltd and Board of Trustees of Sydney Talmudical College70 Asprey J was concerned with provisions of Ed 4 requiring payment of interest in the event of a failure by the architect to issue or the proprietor to pay a progress certificate. Clauses 20(2) and 26(i) of Ed 4 provided that in such an event interest was to be paid at the percentage rate stated in the appendix. Printed words ‘10 per cent per annum’ in the appendix referring to interest were struck out. Asprey J concluded that the effect of this was not that the parties were to be taken as having agreed that the builder was not entitled to be paid any interest at

all. The correct view was that the parties had shown an intention that the builder should be entitled to interest but had failed to specify a rate, with the result that the obligation was to pay a reasonable rate.71 [page 40] Where parties have reached a common contractual intention and one party executes an incomplete formal document for the purpose of giving effect to it, the person filling in blanks in the document may be taken to be authorised to do so to make the document conform to that intention.72 A binding contract will come into existence when parties intend to exchange signed contracts even though the counterparts exchanged in fact are not identical if their lack of correspondence is capable of being remedied by rectification.73

ILLEGALITY Contracts contrary to statute 3.5 Early on, in St John Shipping Corp v Joseph Rank Ltd74 Devlin J said ‘a court ought to be very slow to hold that a statute intends to interfere with the rights and remedies given by the ordinary law of contract’. And as was said in reference to other authority by Redlich JA in Dover Beach Pty Ltd v Geftine Pty Ltd75 to construe a statute as invalidating a contract ‘is a serious and far-reaching matter’. It is always a question of construction in the first place as made clear by Gibbs ACJ in Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd.76 Where an agreement is made for the erection of a building in contravention of statute, the contract is illegal if the statute prohibits the contract and will not be enforced. As the court said in Gaffney v Ryan: ‘Contracts to do what a statute forbids form an established category of illegal contracts which are void and unenforceable.’77 Statute, however, may render the agreement unenforceable without being illegal and void but, if void, it must, of necessity, be unenforceable.78 A contract for the erection of a block of flats is illegal where the contract provides that the flats are to be erected in accordance with plans which

show that the building is to be less than the minimum distance from the adjoining allotment permitted by regulations.79 On the other hand, a contract may be lawfully entered into but performed in a manner which is contrary to some statute. In such cases the result may be in doubt. If there is a failure to obtain a necessary permit or licence, or if work is done in excess of the amount permitted by the permit or licence which has been obtained, the contract may become a contract prohibited by statute, thus preventing recovery of any sum or (it may be) a sum in excess of [page 41] the amount specified in the permit or licence.80 A part of a contract tainted by illegality may be severable from the rest.81 Generally, though, it may be said that the ‘invalidation of contracts by statute is a serious and far-reaching matter’ to quote Redlich JA again and that a ‘statute would be construed as having that effect only if such an intention were clear from its terms’.82 Failure to obtain a permit where one is required may be held on the proper construction of the statute not to vitiate the contract.83 Thus in Doug Rea Enterprises Pty Ltd v Hymix Australia Pty Ltd84 failure to obtain local authority approval did not vitiate a contract for the construction of an overhead aggregate storage bin; having regard to the small monetary penalty imposed for such failure which applied irrespective of the cost of the structure, the legislature intended that such penalty should be the only deterrent which operated specifically with respect to non-compliance. However, in Redwood Anti-Ageing Pty Ltd v Knowles,85 White J, dealing with s 25 of the Pharmacy Act 1964 (NSW), said that the fact that only a modest criminal penalty was provided supported rather than weakened the inference that Parliament intended that a contract entered into in breach of that provision to be unenforceable. The refusal of a municipal council to grant a permit was a ground for the court holding that the building contract was impossible of performance by operation of law in Staunton and King v Wellington Education Board.86 Where the failure to obtain a permit or to comply with its conditions does have the effect of making the contract obnoxious to the statute, it may be that instalments of the price

already paid should be appropriated to the lawful part of the work.87 A contract which is unenforceable may not be ineffectual for all purposes.88 Although the question may arise whether the court should take notice of illegality which is not pleaded,89 the burden of proving illegality is upon the party alleging it.90 [page 42] By cl 511 of the Uniform Building Regulations (Vic) (since revoked) no variation from or alteration of approved plans and specifications could be made by the builder without the prior consent in writing of the municipal surveyor. During the course of construction of a house the plans for the roof were altered and a hipped roof was built instead of a gabled roof. To the plans for this alteration the consent in writing of the building surveyor was never obtained. The manner in which the contract had been performed was held to have vitiated the whole contract.91 Independently of statute, a contract of course may be void, illegal or unenforceable on grounds of public policy.92

Restitution 3.6 Restitution is a doctrine in our law covering or including formerly the area dealt with by quantum meruit to use traditional terminology. Although a contract may be unenforceable a claim on a quantum meruit (as many still call it) may still be maintainable. As made clear by the decision in Pavey & Matthews Pty Ltd v Paul,93 quantum meruit arises not out of contract but out of obligation imposed by law. A claim in quantum meruit is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution, in the sense of compensation for the benefit of unjust enrichment, to the person who has sustained the countervailing detriment.94 In Pavey & Matthews Pty Ltd v Paul95 the builder succeeded although the building contract was unenforceable because it was not in writing as required by what was s 45 of the (now repealed) Builders’ Licensing Act 1971 (NSW). The same result was reached in another case96 where the building contract being

unwritten was unenforceable under what was s 75 of the (now repealed) Builders Registration and Home-owners Protection Act 1979 (Qld). In Gaffney v Ryan97 it was held that s 58(1)(a) of that Act, making it an offence for a builder to perform general building construction when not registered, did not render void the contractual liability of a registered builder for defective workmanship in the performance of building work which, in breach of that provision, he had no authority to perform. However, it has been said in the context of s 42 of the Queensland Building Services Authority Act 1991 (Qld) that the principle in Pavey & Matthews [page 43] should not be extended to instances in which statute prohibits both the contract and the doing of the work unless licensed.98 Section 19(1) of the House Contracts Guarantee Act 1987 (Vic) is differently expressed and provides that a builder cannot recover the cost of any work performed under a variation to a domestic building work contract unless the variation is in writing. This applies whether the claim is brought in contract or on a quantum meruit.99 By s 19(3), however, it does not apply in relation to a cost plus contract. A strict view of the effect of s 25 of the Pharmacy Act 1964 (NSW) was taken by White J in Redwood Anti-Ageing Pty Ltd v Knowles100 as noted above whereby he held that the legislative purpose of that provision would be negated if the claim for marketing fees in that case were allowed either as a contractual claim or in restitution. The essential basis for a claim in restitution or quantum meruit is execution of work for which no enforceable contract exists and acceptance of the work by the party for whom it is performed.101 See further 8.8–8.9. The party thereby benefited is under a duty imposed by law to pay for the benefit (enrichment) thus bestowed. In Equuscorp Pty Ltd v Haxton102 French CJ, and Crennan and Kiefel JJ said that unjust enrichment ‘has a taxonomical function referring to categories of cases in which the law allows recovery by one person of a benefit retained by another’. As they explained103 more fully: The outcome of a restitutionary claim for benefits received under a contract which is unenforceable for illegality, will depend upon whether it would be unjust for the recipient of a benefit under the contract to retain that benefit. There is no one-size-fits-all answer to the question of recoverability. As with the question of recoverability under a contract affected by illegality the outcome of the claim will depend upon the scope and purpose of the relevant statute. The central policy consideration at

stake, as this Court said in Miller, is the coherence of the law. In that context it will be relevant that the statutory purpose is protective of a class of persons from whom the claimant seeks recovery. Also relevant will be the position of the claimant and whether it is an innocent party or involved in the illegality.

Registration of builders 3.7 Many of the cases on quantum meruit arise out of the activities of unregistered builders. In Victoria registration of builders is governed by the Building Act 1993 (Vic) ss 169–171. There are also registration requirements [page 44] in the other states and territories.104 Under s 176(1) of the Victorian Act it is an offence for a person not registered in the appropriate category or class to take or use the title ‘building practitioner’.

WAIVER Concept of waiver 3.8 The pleadings in a building dispute often contain in the reply a plea that the proprietor has waived some condition relied upon in the defence. ‘Waiver’ is a word of vague and shifting legal import.105 As was observed by Dawson J in Commonwealth v Verwayen106 ‘waiver’ is an imprecise term used to describe what is done in a variety of circumstances rather than to assert any particular legal process, and where it is not used in the sense of election between mutually exclusive alternatives, if it has any identifiable legal consequence, it is generally indistinguishable from estoppel.107 Toohey J quoted Roscoe Pound that waiver is a ‘slippery word worn smooth with overuse’.108 In the same case Brennan J observed that a right is waived only when the time for its exercise has arisen and the party for whose sole benefit it has been introduced knowingly abstains from exercising it: a mere intention not to exercise a right is not immediately effective to divest or sterilise it.109 As mentioned by Austin J in Lewis v Cook110 the doctrine of waiver, as an independent doctrine, can operate only in a very limited

field following the decision in Verwayen’s case. The primary meaning of ‘waiver’ in legal parlance is the abandonment of a right in such a way by a party that the other party is entitled to plead the abandonment by way of confession and avoidance if the [page 45] right is thereafter asserted.111 Thus an intention or an election not to pursue a claim for arrears under an agreement will constitute a waiver.112 Detriment is not an element of waiver by election.113 In order to found an estoppel there must be a representation, reliance, detriment and unconscionability114 but it is clear that the representation, when consisting of a promise to do something, need not be precisely defined.115 How far, if at all, the various doctrines and remedies in the area of estoppel fall, or will be held to fall, within ‘a single overarching doctrine’116 (perhaps a species of unconscionability) has yet to be affirmatively decided.117

Contractual provisions 3.9 Proprietors seek to protect themselves against allegations of waiver by inserting into building agreements clauses by which none of the provisions of the contract shall be varied or waived unless by the express written consent of the proprietor. Such a provision may have the desired result118 but will not always be effective. Thus in Melbourne Harbour Trust Commissioners v Hancock119 it was held by the High Court following Craine v Colonial Mutual Fire Insurance Co Ltd120 that it was open to the arbitrator to find that, notwithstanding a clause purporting to prevent informal waiver, the proprietor was precluded by its conduct from relying on the absence of a written notice directing a suspension. In Summers v Commonwealth121 the plaintiff made a contract with the Commonwealth for the supply and delivery of marble for Australia House in London. By condition 35, ‘none of the conditions of this contract shall be varied, waived, discharged or released, either at law or in equity, unless by the express consent of the Minister testified in writing under his hand’. Isaacs J (whose decision was affirmed122) held that on the proper construction of the contract the plaintiff’s obligation was to supply blocks of the specified dimensions, not blocks which might be cut so as to

produce pieces of the specified dimensions, and that the large blocks tendered by the plaintiff therefore did not comply with the requirements of the contract. The plaintiff then contended that the Department of Works [page 46] inspector at the quarry had passed and approved of the blocks. Isaacs J rejected this contention, finding as a fact that the inspector had not accepted or passed the blocks and holding that in any event he had no power to do so, since the contract required the work to be done in strict accordance with the specification and to the entire satisfaction of the works director. Finally, Isaacs J referred to condition 35, saying, ‘Then condition 35, already quoted, operates to prevent waiver except by the Minister in writing’.123

RECTIFICATION Generally 3.10 Building agreements, like other agreements, may be rectified by the court in appropriate circumstances. The object of rectification is the correction of errors.124 When rectification is ordered, what is rectified, of course, is the writing, not the agreement itself.125 In Thermoplastic Foam Industries Pty Ltd v Imthouse Pty Ltd126 rectification of a lease was ordered to exclude an option to purchase which had been inserted because of a mistake in a precedent which had been generated. Rectification applies where a written agreement does not, as a result of common mistake by the parties, express their true agreement correctly.127

Requirements for rectification 3.11 To obtain rectification there need not be a concluded antecedent contract, but there must be an intention common to both parties at the time of contract to include in their bargain a term which by mutual mistake is omitted therefrom;

the plaintiff must advance ‘convincing proof’ that the written contract does not embody the final intention of the parties and the omitted ingredient must be capable of such proof in clear and precise terms.128 The expression ‘clear and convincing’ proof was used by Jagot J in Yarrabee Chicken Co Pty Ltd v Steggles Ltd (No 4).129 It is sufficient for rectification to find an identical corresponding contractual intention on each side, manifested by some act or conduct from which one can see that [page 47] the contractual intention of each party met and satisfied that of the other.130 Evidence of the parties’ prior intentions as evidenced by negotiations is admissible.131 Rectification also may be ordered for unilateral mistake, but only upon convincing proof, where one party may be estopped from relying upon the other party’s execution of the agreement to resist the other party’s application for rectification.132 In M R Hornibrook (Pty) Ltd v Eric Newham (Wallerawang) Pty Ltd133 in an action by a subcontractor against the principal contractor for the balance of moneys claimed to be due under an agreement for the execution of works the matter in dispute was whether the subcontractor was entitled to the benefit of a rise and fall clause. The written agreement executed by the parties contained no such clause. The High Court was of opinion that the contractor and subcontractor had agreed that the adjustments made to payments under the principal contract by virtue of a rise and fall clause in that contract should be passed on by the principal contractor to the subcontractor in respect of works done under the subcontract. The subcontract contained a clause that the agreement was subject to the approval in writing of the owner. The written subcontract had been approved by the owner. It was held that the clause requiring approval of the owner did not prevent rectification of the contract and that the contract as rectified could be enforced without the approval of the owner. _________________________ 1.

Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101.

2.

Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 436–7.

3.

Ashton v Pratt (No 2) [2012] NSWSC 3 at [29] per Brereton J.

4.

Australian and New Zealand Banking Group Ltd v Frost Holdings Pty Ltd [1989]VR 695 at 703.

5.

Conway v Critchley [2012] NSWSC 1405 at [6].

6.

See Malago Pty Ltd v AW Ellis Engineering Pty Ltd [2012] NSWCA 227 at [28] (Macfarlan JA).

7.

(2000) 22 WAR 101 at 112.

8.

[2012] WASC 457 at [55].

9.

[1994] 2 VR 106 at 130.

10. (1932) 147 LT 503 at 512. 11. Ibid. See also F & G Sykes (Wessex) Ltd v Fine Fare Ltd [1967] 1 Lloyd’s Rep 53 at 57; Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd t/as ‘Uncle Ben’s of Australia’ (1992) 27 NSWLR 326 at 332; Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14551 at 14570. 12. Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 at 67 per Ormiston J. 13. OneSteel Manufacturing Pty Ltd v BlueScope Steel (AIS) Pty Ltd [2013] NSWCA 27 at [61] per Allsop P. 14. Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216 at [75] per McLure P; see also Lucke v Cleary [2011] SASFC 118 at [56]. 15. Queensland Electricity Generating Board v New Hope Collieries Pty Ltd [1989] 1 Lloyd’s Rep 205 (PC). 16. Sportsvision Australia Pty Ltd v Tallglen Pty Ltd (1998) 44 NSWLR 103 at 111. See also New South Wales v Banobelle Electrical Pty Ltd [2002] NSWSC 178 at [28]; Mainteck Services Pty Ltd v Stein Heurtey SA and Stein Heurtey Australia Pty Ltd [2013] NSWSC 266 at [70]. 17. See Downer EDI Mining Pty Ltd v Wambo Coal Pty Ltd [2012] QSC 290 at [10]. 18. Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 at 21 per Kirby P. 19. See BOS International (Australia) Ltd v Babcock and Brown International Pty Ltd [2011] NSWSC 1382 at [17]; see also Schwartz v Hadid [2013] NSWCA 89 at [32]. 20. Australian and New Zealand Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695 at 700. 21. [1994] 2 VR 106. 22. British Bank for Foreign Trade Ltd v Novinex Ltd [1949] 1 KB 623 at 629–30. 23. G Percy Trentham Ltd v Archital Luxfer Ltd [1993] 1 Lloyd’s Rep 25 at 27 per Steyn LJ. 24. Terrex Resources NL v Magnet Petroleum Pty Ltd [1988] 1 WAR 144 at 159. 25. Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 at 110. 26. [1934] 2 KB 17. 27. [1934] 2 KB 1. See also Hall v Busst (1960) 104 CLR 206 at 226–8, 234–5, 239–41. 28. (1968) 118 CLR 445. 29. White Industries Ltd v Piling Contractors Pty Ltd (1986) 2 BCL 353. 30. (2000) 22 WAR 101. 31. [2012] NSWCA 227.

32. Pirt Biotechnologies Pty Ltd v Pirtferm Ltd [2000] WASC 28. 33. Stimson v Gray [1929] 1 Ch 629. 34. Fitzgerald v Masters (1956) 95 CLR 420. 35. Courtney and Fairbairn Ltd v Tolaini Bros (Hotels) Ltd [1975] 1 WLR 297. 36. [1989] 1 Lloyd’s Rep 205 (PC). 37. See Computershare Ltd v Perpetual Registrars Ltd [2000] VSC 223. See 3.3. 38. (1953) 19 LGR (NSW) 152. 39. Ibid at 162. 40. [1975] 1 WLR 1281. 41. (1968) 118 CLR 429. 42. [1974] VR 39. 43. Max Cooper & Sons Pty Ltd v Sydney City Council (1980) 29 ALR 77 (PC) at 85. 44. Compare Schwartz v Hadid [2013] NSWCA 89 at [80]. 45. [1992] 2 AC 128. See also Hong Jing Co Ltd v Zhuhai Kwok Yuen Investment Co Ltd [2013] 1 HKLRD 441. 46. Ibid at 138. 47. (1991) 24 NSWLR 1 at 26. 48. (1992) 27 NSWLR 326 at 332. 49. (1992) 28 NSWLR 194. 50. Ibid at 209. 51. (1908) 5 CLR 647 at 650. 52. [2000] VSC 223. 53. [2005] VSCA 228 at [2]. 54. (1995) 36 NSWLR 709 at 716. 55. (1999) 16 BCL 70. 56. [2001] NSWSC 209. 57. Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228 at [2]. 58. [2013] VSC 314. 59. Ibid at [47] per Vickery J. 60. Meehan v Jones (1982) 149 CLR 571. See also Manfal Pty Ltd v Longuet (1987) 3 BCL 105. 61. See Alpenstow Ltd v Regalian Properties plc [1985] 1 WLR 721. Compare, however, Fraser Williams v Prudential Holborn Ltd (1993) 64 BLR 5. 62. See Granit SA v Benship International Inc [1994] 1 Lloyd’s Rep 526. 63. Woodside Offshore Petroleum Pty Ltd v Atwood Oceanics Inc [1986] WAR 253. 64. Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 at 110. 65. [2012] NSWCA 227.

66. Money v Ven-Lu-Ree Ltd [1989] 3 NZLR 129 (PC) at 133. 67. (1899) 16 TLR 45. 68. (1883) 4 LR (NSW) 84. 69. [1974] 2 NSWLR 617 at 620. 70. (1965) 83 WN (NSW) 458. 71. Ibid at 466. 72. Walsh v Westpac Banking Corp (1991) 104 ACTR 30. 73. Hayward v Planet Projects Pty Ltd [2000] NSWSC 1105. See 3.11. 74. [1957] 1 QB 267 at 288. 75. [2008] VSCA 248 at 134. 76. (1978) 139 CLR 410 at 413. 77. [1995] 1 Qd R 19 at 22. 78. Farrow Mortgage Services Pty Ltd (in liq) v Edgar (1993) 114 ALR 1 at 10. 79. O’Carroll v Potter (1929) 29 SR (NSW) 393; Hayes v Cable [1961] NSWR 610. 80. Jackson Stransfield and Sons v Butterworth [1948] 2 All ER 558; Bostel Bros Ltd v Hurlock [1949] 1 KB 74; Strongman (1945) Ltd v Sincock [1955] 2 QB 525; Frank W Clifford Ltd v Garth [1956] 2 All ER 323; Carey v Hastie [1968] NZLR 276. 81. Barac (t/as Exotic Studios) v Farnell (1994) 125 ALR 241 at 260. 82. Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 at 130 per Ipp J. 83. Hayes v Cable [1961] NSWR 610. 84. [1987] 2 Qd R 495. 85. [2013] NSWSC 508 at [112]. 86. (1909) 28 NZLR 449. 87. A Smith & Son (Bognor Regis) Ltd v Walker [1952] 2 QB 319; Varley v Spatt [1955] VLR 403 at 407. 88. Barac (t/as Exotic Studios) v Farnell (1994) 125 ALR 241 at 258, 263. 89. See G C Dickson & Yorston (Builders) Pty Ltd v Hattam [1935] VLR 168; Varley v Spatt [1955] VLR 403. Compare Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833. Leave may be given to raise the defence as in Redwood Anti-Ageing Pty Ltd v Knowles [2013] NSWSC 508. 90. Doug Rea Enterprises Pty Ltd v Hymix Australia Pty Ltd [1987] 2 Qd R 495 at 505. 91. Varley v Spatt [1955] VLR 403 at 406 (referring to Bond v Frederick, SC(Vic), 1952, unreported). 92. See discussion in Ashton v Pratt (No 2) [2012] NSWSC 3 at [37]–[52]. 93. (1987) 162 CLR 221. 94. Pohlmann v Harrison (1993) 12 Aust Cons LR 80 at 82. 95. (1987) 162 CLR 221. 96. Gino D’Alessandro Constructions Pty Ltd v Powis [1987] 2 Qd R 40. See also Lee Gleeson Pty Ltd v Sterling Estates Pty Ltd (1991) 23 NSWLR 571; Tea Tree Gully Builders Co Pty Ltd v Martin (1992) 59 SASR 344; Mostia Constructions Pty Ltd v Cox (1993) 12 Aust Cons LR 75.

97. [1995] 1 Qd R 19. 98. Zullo Enterprises Pty Ltd v Sutton (1998) 15 BCL 283. 99. Sevastopoulos v Spanos [1991] 2 VR 194. 100. [2013] NSWSC 508. 101. Pohlmann v Harrison (1993) 12 Aust Cons LR 80 at 82. See generally D S Jones and R T Varghese, ‘Quantum Meruit in Australia’ (1992) 8 Building and Construction Law 101. 102. [2012] HCA 7 at [30]. 103. Ibid at [34]. 104. See Construction Occupations (Licensing) Act 2004 (ACT) ss 8, 17 and 18; Building Professionals Act 2005 (NSW) ss 5, 5A and 10; Building Act (NT) ss 4, 22, 23, 24, 25; Queensland Building Services Authority Act 1991 (Qld) ss 4(1), 30, 31, 32, 33, 34; Builder’s Work Contractors Act 1995 (SA) ss 6, 7, 8 and 9; Building Act 2000 (Tas) ss 23A, 23B, 23C, 23D, 23E and 28; Building Services (Registration) Act 2011 (WA) ss 9, 10, 11, 12 and 13. 105. Morton v Hampson [1962] VR 364 at 371. See also Sargent v ASL Developments Ltd (1974) 131 CLR 634. 106. (1990) 170 CLR 394 at 451. 107. Ibid. See A Leopold, ‘The Elements of Estoppel’ (1991) 7 Building and Construction Law 248. 108. (1990) 170 CLR 394 at 467. 109. Ibid at 427. A contractor it was held did not waive the right to cancel a contract in the form (SC) NPWC Ed 3 given by cl 42 thereof in giving directions to the subcontractor to perform work under the contract while, for such period as is reasonable, a consideration was underway of the subcontractor’s response to the notice to show cause: Presmist Pty Ltd v Turner Corporation Pty Ltd (1992) 30 NSWLR 478. 110. [2000] NSWSC 191. 111. Charltons CJC Pty Ltd v Fitzgerald [2013] NSWSC 350 at [23] (quoting Banning v Wright [1972] 1 WLR 972 at 978–9 per Lord Hailsham LC). 112. Cedar Meats Pty Ltd v Five Star Lamb Pty Ltd [2013] VSC 164 at [93]. 113. Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486 at 494. On waiver generally see also Elkhoury v Farrow Mortgage Services Pty Ltd (in liq) (1993) 114 ALR 541; Australian Horizons (Vic) Pty Ltd v Ryan Land Co Pty Ltd [1994] 2 VR 463. 114. Ibid at [77]. 115. Flinn v Flinn [1999] 3 VR 712 at 734 (proprietary estoppel). 116. Commonwealth v Verwayen (1990) 170 CLR 394 at 411 per Mason CJ. 117. See Giumelli v Giumelli (1999) 196 CLR 101 at 112–13. 118. Bysouth v Shire of Blackburn and Mitcham (No 2) [1928] VLR 562 at 579; A-G v McLeod (1893) 14 LR (NSW) 246 at 252. 119. (1927) 39 CLR 570. 120. (1920) 28 CLR 305; on appeal [1922] AC 541. 121. (1918) 25 CLR 144. 122. See (1919) 26 CLR 180.

123. (1918) 25 CLR 144 at 150. 124. West’s Plumbing Services Pty Ltd v Trade Indemnity Australia Ltd (1994) 8 ANZ Ins Cases 61,214. 125. Kennedy v Collings Construction Co Pty Ltd (1989) 7 BCL 25 at 35. 126. (1990) 5 BPR 11,181. 127. Sumieski Materials Co Ltd v Wambo Coal Pty Ltd [2013] NSWSC 235 at [180] per Hammerschlag J. 128. Pukallus v Cameron (1982) 43 ALR 243 at 247 per Wilson J. See also Slee v Warke (1949) 86 CLR 271 at 280–1; Joscelyne v Nissen [1970] 2 QB 86; Hooker Town Developments Pty Ltd v Director of War Service Homes (1973) 47 ALJR 320; Bishopsgate Insurance Australia Ltd v Commonwealth Engineering (NSW) Pty Ltd [1981] 1 NSWLR 429. 129. [2013] FCA 604 at [45]. 130. Kennedy v Collings Construction Co Pty Ltd (1989) 7 BCL 25. 131. Powell General Sheet Metal Pty Ltd v Autopak Nominees Pty Ltd [2011] NSWSC 321 at [38]. 132. Leibler v Air New Zealand Ltd (No 2) [1999] 1 VR 1. 133. (1971) 45 ALJR 523.

[page 49]

4

IMPLIED TERMS

IMPLICATION OF TERMS GENERALLY General position 4.1 In order to justify the importation of an implied term it is not sufficient that it would be reasonable to imply the term.1 A court is not entitled to reconstruct an agreement on equitable principles:2 see 2.10. The court is concerned to establish what the parties agreed upon which is established normally by what they have stated in writing. It will not pervert the meaning of clear language in a contract even when applying the contra proferentem rule as was said in an insurance case.3 Nor is an implied term supplied to add what some may perceive as a desirable improvement to the bargain.4 This, however, is subject to statutory provision to the contrary. For example, under s 7(1) of the Contracts Review Act 1980 (NSW) there is power to declare void, in whole or in part, a contract found to have been unjust. Under s 53(2)(e) of the Domestic Building Contracts Act 1995 (Vic) there is power, for the Victorian Civil and Administrative Tribunal to ‘declare void any unjust term of a domestic building contract, or otherwise vary a domestic building contract to avoid injustice’. By s 15(1)(b) of the Home Building Contracts Act 1991 (WA) it is provided that a builder must not enter into a contract that contains any provision that is ‘unconscionable, harsh or oppressive’. It is necessary, always, in this area to ascertain whether a matter is governed by statute or not. In every case the question whether the implication ought to be made will depend upon the particular facts.5 There is, however, a basic distinction between two classes of implied terms; terms unique to the particular contract under consideration and terms which are to be implied in all contracts of a particular class.6 The implication of a term of the former kind (also referred

[page 50] to as implication ad hoc7) is designed to give effect to the parties’ presumed intention and is necessary to give business efficacy to the particular contract8 in respect of some matter the parties have not mentioned.9 A term of the latter kind, however, is implied by law regardless of the actual intention of the parties.10 This distinction, between terms implied in fact and terms implied by law, was explained by Gaudron and McHugh JJ in Breen v Williams11 as follows: The common law draws a distinction between terms which are implied in fact and terms which are implied by law. Leaving aside terms that are presumed to apply because of the custom of a trade or business, the courts will only imply a term in fact when it is necessary to give efficacy to the contract. A term implied in fact purports to give effect to the presumed intention of the parties to the contract in respect of a matter that they have not mentioned but on which presumably they would have agreed should be part of the contract. A term implied by law on the other hand arises from the nature, type or class of contract in question. Some terms are implied by statutes in contracts of a particular class, for example, money lending and home building contracts. Such terms give effect to social and economic policies which the legislature thinks are necessary to protect or promote the rights of one party to that class of contract. Other terms are implied by the common law because, although originally based on the intentions of parties to specific contracts of particular descriptions, they ‘became so much a part of the common understanding as to be imported into all transactions of the particular description.’ Many of these terms are implied to prevent ‘the enjoyment of the rights conferred by the contract [being] rendered nugatory, worthless, or, perhaps … seriously undermined’, the notion of necessity being central to the rationale for such an implication. The distinction between terms implied by law and terms implied in fact can tend in practice to ‘merge imperceptibly into each other’.

Business efficacy 4.2 Referring to The Moorcock12 and other authorities, a majority of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings13 said that in order for a term to be implied on the ground of business efficacy: [page 51] … the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.

For obvious reasons, however, the courts are slow to imply a term on this basis:14 ‘A degree of caution is to be exercised when entering into Moorcock country’.15 This caution is inherent in the economic freedom to which the law of contract gives effect.16 In general, in the case of a formal contract complete on its face, no implication will ever arise (except where it is a legal incident of a particular class of contract) unless it is necessary or quite obvious.17 In a Matter of the Contract between Commonwealth of Australia and Citra Constructions18 it was held that business efficacy did not require the implication of a term in the building agreement that the information contained in a site investigation report would, with reasonable accuracy, represent and describe the nature of the soil and subsurface strata at the site of bore holes. However, business efficacy in Relative Mirait Services Pty Ltd v Midcoast Under Road Boring Pty Ltd19 did require a term that, in the event of a suspension of works, the defendant was entitled to a progress payment for the work that had been undertaken to date. A different result was reached in Hydrofibre Pty Ltd v Australian Prime Fibre Pty Ltd20 where a term to the effect asserted was not implied because it was not necessary for business efficacy nor was it so obvious that it went without saying and it was far from clear in any event. In general it may be said that it is easier to imply a term for reasons of business efficacy where the contract is informal than where the parties have executed a complicated and sophisticated document.21 Care must be taken to avoid an automatic or rigid application of the ordinary cumulative criteria set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings,22 for determining whether a term should be implied in a written contract to a case where the contract is oral or partly oral or where it is apparent that [page 52] the parties have never attempted to reduce their agreement to complete written form.23 A term will not be implied for business efficacy reasons if the contract is capable of operating reasonably and effectively in the absence of such a term.24 In Vroon BV v Foster’s Brewing Group Ltd25 Ormiston J said that for the purposes of his judgment in that case he was prepared to accept that the process of implication is less rigidly confined where apparent agreement has been reached

upon an informal basis, whether conducted orally or by correspondence, or by a combination of both. As regards the need for necessity the rule would appear to be that necessity is not shown if a contract is effective without the particular term being implied.26 On the other hand, there is authority for the view that ‘necessity’ in an absolute sense is not required in that there have been cases in the past where terms have been implied on the basis of necessity where it is not possible to say that the implication was always necessary.27 Implying a term on the ground of business efficacy does not necessarily involve the court in rewriting the parties’ contract: the court simply spells out with greater precision what they obviously intended their obligations to be.28 As was said by McGrath J in Nielson v Dysart Timbers Ltd29 in doing so the court implies what is necessary to make a contract ‘workable’. Some could object, of course, that in doing this the courts in reality are supplying an omission and therefore are reconstructing the parties’ bargain on the ground that this is what the parties would have intended had they thought about it.

Trade custom or usage 4.3 Terms may be implied on the basis of trade custom or usage. As regards the implication of terms on this basis, the following propositions set out in Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd30 are established: [page 53] 1.

the existence of a custom or usage that will justify the implication of a term into a contract is a question of fact;

2.

there must be evidence that the custom or usage relied on is so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract;

3.

a term will not be implied into a contract on the basis of custom or usage where it is contrary to the express terms of the agreement;

4.

a person may be bound by a custom or usage notwithstanding the fact that such person has no knowledge of it.

As was pointed out by McHugh and Gummow JJ in Byrne v Australian Airlines Ltd,31 where it is sought to imply a term based on custom the ‘question is always whether the general notoriety of the custom makes it reasonable to assume that the parties contracted with reference to the custom so that it is therefore reasonable to import such a term into the contract’. They emphasised, however, that a term sought to be implied by custom must yield to the actual intention of the parties embodied in the express terms of the contract, whether the contract be written or oral.32 A distinction must be drawn, of course, between a term implied as a matter of trade custom or usage and one which is incorporated into a contract as a result of an inference arising from the prior conduct of the parties as a whole.33 However, care clearly must be exercised in implying terms on the latter basis. The parties, for example, may never have intended their prior conduct to have any bearing on the meaning and effect of their current bargain.

PARTICULAR IMPLIED TERMS Workmanship 4.4 In general, the contractor must do the work with proper skill and care,34 or as it is often stated, in a workmanlike manner or tradelike way.35 In a contract for the provision of services there will usually be implied a term that the services will be carried out with reasonable care and skill.36 It ‘can hardly be doubted’ that it is an implied term of an agreement to build a house that it should be built in a good and workmanlike manner and with [page 54] good and proper materials.37 Commonly, this is called an implied warranty of ‘good workmanship’.38 Under s 8(a) of the Domestic Building Contracts Act 1995 (Vic) it is an

implied warranty in every domestic building contract that ‘the builder warrants … the work will be carried out in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract’. By s 9 of the Act this warranty ‘runs with’ the building and by s 10, in effect, cannot be excluded. The same warranty arises under s 18B(a) of the Home Building Act 1989 (NSW) in respect of residential building work; such warranty also runs with the land and cannot be excluded: see ss 18D, 18G. It arises also (as a warranty to perform works in a proper manner to accepted trade standards) under s 32(2)(a) of the Building Work Contractors Act 1995 (SA) (which extends to successors: s 32(3)), and under s 7(a) (as a warranty to perform works in a proper and skilled manner) of the Housing Indemnity Act 1992 (Tas) (extended to successors by s 8(1)). See also s 42(1)(c) of the Building Act 2004 (ACT). A modified (and more expansive) version of the warranty is to be found in ss 44 and 45 of the Domestic Building Contracts Act 2000 (Qld) which by s 49(1) also runs with the land. See also ss 3 and 37 of the Building Act 2011 (WA). See also the general provision in the Building Act 2004 (NZ) s 14E(2). Many actions in respect of defective goods (as in 4.5) or services (for poor workmanship) now lie under the Australian Consumer Law (ACL) which is Schedule 2 to the Competition and Consumer Act 2010 (Cth).

Materials 4.5 The general rule is that ‘a person contracting to do work and supply materials warrants that the materials [used] will be of good quality and reasonably fit for the purpose for which [they are being used], unless the circumstances of the contract are such as to exclude any such warranty’.39 In a building contract involving subcontractors it has been said that the main contractor accepts responsibility for materials provided by nominated subcontractors.40 It has been said that there is ‘good reason’ for not construing any implied terms of quality or fitness in such circumstances.41 On subcontracts see Chapter 14. [page 55] It will be noted that there are two implied warranties — a warranty of quality and a warranty of fitness — although for most purposes there is no difference

between the two. As noted in 4.4 actions for the supply of defective materials now usually are brought under the ACL. In Young & Marten Ltd v McManus Childs Ltd42 the builder let a roofing subcontract and the subcontract specified a particular tile made by only one manufacturer. The subcontractor duly obtained the tiles in the ordinary course of trade and fixed them. Owing to faulty manufacture the particular tiles used had an undetectable defect which made them liable to break in frosty weather. The fact that the builder had specified tiles made by only one manufacturer was held by the House of Lords not to exclude the ordinary implied warranty as to materials. For the subcontractor it was argued that there was a clear distinction between a sale of goods and a contract for work and materials and that either no responsibility for the materials arose under the latter form of contract or all responsibility was excluded when materials of a particular sort, for which there was only one manufacturer, were chosen by the employer. The House pointed out that many contracts for work and materials closely resembled contracts of sale: where the employer contracted for the supply and installation of a machine or other article, the supply of the machine or other article might be the main element and the work of installation might be a comparatively small matter. The employer who bought an article and installed it would have the benefit of the implied warranty of merchantable quality under s 14 of the Sale of Goods Act 1893 (UK) (which warranty extends to latent defects), and it would be strange if the fact that the seller also agreed to install the article should make all the difference. Lord Pearce said:43 It is frequent for builders to fit baths, sanitary equipment, central heating and the like, encouraging their clients to choose from the wholesalers’ display rooms the bath or sanitary fittings which they prefer. It would, I think, surprise the average householder if it were suggested that simply by exercising a choice he had lost all right of recourse in respect of quality of the fittings against the builder who normally has a better knowledge of these matters. Of course, if a builder warned him against a particular fitting or manufacturer and he persisted in his choice, he would obviously be doing so at his own risk. And a builder can always make it clear that he is not prepared to take responsibility for a particular kind of fitting or material … If it is known to both parties that the manufacturer gives no warranty to the contractor, that fact is a strong indication that no warranty is being given by the contractor. So, too, of course, if a contractor advises against a particular material. But the circumstances of contracts are so various that it must be a question of fact

[page 56] and degree whether the circumstances of a particular case suffice to exclude a warranty which the

general rule implies.

Lord Upjohn said that: … as a matter of common sense and justice, one who contracts to do work and supply materials ought to be under at least as high, if not a higher, degree of obligation with regard to the goods he supplies and the work that he does than a seller who may be a mere middleman or wholesaler.44

In Gloucestershire County Council v Richardson (t/as W J Richardson & Son) the implied warranty as to materials was held to be excluded.45 The council employed a contractor to erect a building. The concrete columns were to be ordered from suppliers nominated by the council. The columns supplied were examined and passed by the architect and the consulting engineers but they had defects, resulting from an unsuitable mix, which were not detectable until some of them were incorporated in the building. The architect on behalf of the council had authorised the contractor to accept the supplier’s quotation, which substantially limited the supplier’s liability in the event of the columns being defective. Differing views were taken on whether the implied warranty was displaced. Lords Pearce and Wilberforce held that on the true construction of the contract it was the intention to exclude any implied warranty of quality and fitness by the contractor in respect of goods supplied by nominated suppliers.46 Lord Upjohn considered that, while the contract between the council and the contractor did not exclude the implied warranty, it was displaced in the case of the columns by the terms of the contract with the nominated supplier limiting its liability for defects, which contract was imposed on the contractor by the council.47 Lord Pearson took the view that the declaration in the clause dealing with nominated suppliers — that all nominated specialists were to be suppliers of the contractor — had the effect of imposing on the contractor responsibility for the quality of the materials supplied and that the special circumstances of the contract were not sufficient to exclude the usual obligation of a contractor to supply materials of good quality.48 These decisions were considered by the High Court of Australia in Helicopter Sales (Australia) Pty Ltd v Rotor-Work Pty Ltd.49 In that case the defendant, a wholly owned subsidiary of the plaintiff, supplied and installed in the plaintiff’s helicopter a defective replacement bolt. The bolt had been made by the manufacturer of the helicopter and certified by it to be manufactured to relevant standards and to have been found by inspection to be airworthy. The bolt was defective and caused the helicopter to crash. The plaintiff, by reason of its relationship with the defendant, knew that the

[page 57] defendant did not have or know the specifications to which the bolt should have been made, did not have the means of testing the bolt or the expertise to determine whether it was suitable for the purpose for which it was to be used. It was a term of the plaintiff’s contract with the defendant that it would obtain a certificate as to quality from the manufacturer. Both the plaintiff and the defendant were clearly relying upon the manufacturer to have made a bolt which was suitable for its purpose and of airworthy quality. The High Court held that the implied warranty of quality was excluded in the circumstances. Stephen J said that: [A] warrantor’s inability to ensure compliance with quality standards will often, of itself, provide no ground for the exclusion of an implied warranty of quality … But the case will be different where, as here, both contracting parties know all the relevant facts, have agreed upon an exclusive source of supply and are treating a third party’s certification as to quality as being critical.50

The trial judge had not found any implied warranty as to fitness for the purpose. The court agreed with that conclusion on the grounds that a requirement that the defendant should obtain replacement parts only from the manufacturer, that the parts should be made by the manufacturer of the helicopter and otherwise conform to the manufacturer’s manual, left no room for such an implied warranty. Canadian decisions have held that no warranty is to be implied where the specified material is supplied. In CCH Canadian Ltd v Mollenhauer Contracting Co Ltd51 a building contractor supplied a particular type of brick in accordance with the specifications. The brick was unsuitable for the purpose. The Supreme Court of Canada held that the builder was not liable to the owner for complying with the specification, even if the material proved to be unsuitable, unless the owner relied on the skill and judgment of the builder in respect of the suitability of the material. This decision was applied in Frontenac Air Systems Ltd v Parmac Construction Ltd52 where a supplier of specified air conditioning equipment was held not liable for the failure of that equipment on account of the inadequacy of the specification. In Martin v McNamara53 the building contract provided for a certain class of roof to be placed on a house about to be constructed. When the structure was ready for roofing, the contractor informed the owner that the roofing specified

would be unprocurable for a very long time and in reply to a question, ‘What would be the best to use?’ said ‘Concrete tiles’, concerning which the owner said he knew nothing. The contractor then suggested using Cornish Tiles, delivery of which would take only a few weeks. The owner having informed the contractor that he would rely on his skill and [page 58] experience, the latter said that he considered that Cornish Tiles were ‘quite all right’. Subsequently, the owner having told the contractor to ‘Go ahead with Cornish Tiles’, they were used, but proved faulty. In proceedings brought by the owner against the contractor the magistrate found that, as the tiles were ordered under the trade name ‘Cornish Tiles’, the owner did not rely on the skill and judgment of the contractor, and dismissed the claim. The Full Court reversed this decision, being of opinion that there was an implied condition or warranty by the contractor that the Cornish Tiles were reasonably fit for the purpose for which they were required and that the fact that the owner asked for the Cornish Tiles under their trade name did not bring the case within the sale of goods legislation as the owner had indicated that he was relying on the skill and judgment of the contractor that they were fit for the particular purpose for which they were required. The decisions make it clear that the implied warranty extends to latent defects in the materials.54 The common law warranties as to workmanship and as to the use of proper materials have together been referred to more compendiously as a warranty of ‘habitability’.55 A warranty of suitability of premises for occupation is implied by s 46 of the Domestic Building Contracts Act 2000 (Qld). In Tranquility Pools and Spas Pty Ltd v Huntsman Chemical Co Australia Pty Ltd56 Einstein J found breach of implied contractual terms of fitness for purpose and merchantability in relation to supply of swimming pools which had latent defects, such that they would later develop osmosis, but he found such terms to be implied on the basis of statute — not common law — which is now usually the case which is advanced. By s 8(b) of the Domestic Building Contracts Act 1995 (Vic), in every

domestic building contract ‘the builder warrants that all materials to be supplied … for use in the work will be good and suitable for the purpose for which they are used and that, unless otherwise stated, those materials will be new’. Further, by s 8(d) the builder warrants ‘that the work will be carried out with reasonable care and skill and will be completed by the date (or within the period) specified by the contract’. If the work consists of the erection or construction of a house, or is work intended to ‘renovate, alter, extend, improve or repair’ a home to a stage suitable for occupation, then by s 8(e), the builder warrants that ‘the home will be suitable for occupation at the time the work is completed’. These warranties run with the land57 and may not be excluded.58 [page 59] A similar warranty provision exists in s 18B(b) of the Home Building Act 1989 (NSW), in s 42(1) of the Domestic Building Contracts Act 2000 (Qld) and in s 7(b) of the Housing Indemnity Act 1992 (Tas); modified forms of the warranty appear in s 32(2)(b) of the Building Work Contractors Act 1995 (SA) and s 88(2) (c) of the Building Act 2004 (ACT).

Best endeavours 4.6 A building contract may contain a ‘best endeavours’ clause requiring a party to use its best endeavours to do certain things or to achieve certain results: see, for example, cl A1.1 of ABIC MW-1 2008. There is a statutory implied term substantially to this effect in s 9(2) of the Home Building Contracts Act 1991 (WA). But as was said in City of Camberwell v Camberwell Shopping Centre Pty Ltd,59 a best endeavours clause is the kind of clause which in any event would be implied. The observations of Lord Blackburn in Mackay v Dick60 were said to be in point: [As] a general rule … where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.

In Sydney Attractions Group Pty Ltd v Schulman61 Sackar J said that a best endeavours clause ‘prescribes a standard of endeavour which is measured by what

is reasonable in the circumstances’. It is hard to see how it could import anything more demanding than this for it must be said that the external mark of reasonableness is a feature of our system of jurisprudence generally. There is authority also for a related rule that each party to a contract has an implied duty to cooperate in the performance of acts which are necessary to the performance by them or one of them of the fundamental obligations under the contract.62 Another formulation is an implied contractual obligation of ‘reasonableness, good faith and fair dealing’.63 Non-compliance with a duty to cooperate may take away a defaulting party’s right to terminate if there is a direct causal [page 60] relationship between the non-compliance and the failure by the other party to complete the contract.64 The implication of a term that the respondent was obliged to act in good faith towards the applicant was rejected by Gummow J in Service Station Association Ltd v Berg Bennett & Associates Pty Ltd.65 In South Sydney District Rugby League Football Club Ltd v News Ltd66 Finn J said that ‘Australian law has not yet committed itself unqualifiedly to the proposition that every contract imposes on each party a duty of good faith and fair dealing in contract performance and enforcement’. To similar effect are remarks of Parker J in Central Exchange Ltd v Anaconda Nickel Ltd.67 An obligation of good faith, however, has been recognised in other cases, including Overlook v Foxtel,68 and a mutual term that each party will act in good faith was said by Blue J in the South Australian Supreme Court to be generally implied in all commercial contracts.69 Warren CJ in Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL70 said there has been ‘clear recognition’ of the doctrine of good faith71 although in the same case Buchanan JA (with whom the Chief Justice agreed) said he was ‘reluctant to conclude that commercial contracts are a class of contracts carrying an implied term of good faith as a legal incident’.72 Warren CJ’s position on this point is therefore unclear or difficult to discern. The question was referred to by the High Court in Royal Botanic Gardens and Domain Trust v South Sydney City Council73 but left open for decision. Kirby J, however, did indicate his view that the notion appeared to be in conflict with the

doctrine of caveat emptor inherent in common law conceptions of economic freedom.74 On the other hand, it may be said to be a well-established principle at common law in the words of Lord Thankerton that ‘no person can take advantage of the non-fulfilment of a condition the performance of which has been hindered by himself’75 and the implied term of good faith which is contended for, upon analysis, perhaps needs to be seen as an application of this principle. For it would be no showing of good faith for the defaulting [page 61] party to take advantage of a non-fulfilment in such circumstances. Possibly though this leads to a wider notion of unconscionability.

Efficacy of works 4.7 This area is one substantially affected by the provisions of the Australian Consumer Law (ACL) which as mentioned above is Schedule 2 to the Competition and Consumer Act 2010 (Cth). See ss 54 (acceptable quality), 60 (due care and skill) and 61 (fitness for a particular purpose). There is, otherwise, however, no doubt that common law warranties of good quality and fitness for purpose will be implied in a building contract. Hargrave J in Barton t/as Freeform Builders v Stiff76 (a case where bricks used in construction of a house failed because they were affected by salty groundwater) agreed with a formulation that at common law as well as under state statute it was an implied term of the contract in that case that the work to be performed by the builders, including the design obligation, would be ‘competently done’. By this he agreed with the notion that they were under an obligation to carry out the services to be provided by them under that contract in a proper and workmanlike manner or, in other words, with reasonable skill and care.77 He held that the warranties of fitness for purpose in the case required the builders to provide materials, and a completed house, which would be proof against any groundwater conditions likely to be encountered on the land.78 The common law warranty that the works when completed will be fit for the

purpose for which they are required does not stand in the same position as the warranty of good workmanship in that it cannot be regarded as a warranty which is prima facie to be implied from the fact that a contractor has been employed. As was said in McKone v Johnson:79 Unlike a warranty of good workmanship, a warranty that the work will answer the purpose for which it is intended is not implied in every contract for work. The essential element for the implication of such a term is that the employer should be relying, to the knowledge of the contractor, upon the contractor’s skill and judgment and not upon his own or those of his agent.

Whether this formulation is in terms too absolute is not clear. In Greaves and Co (Contractors) Ltd v Baynham Meikle and Partners80 Lord Denning MR spoke of contractors having a duty to see that the finished product is reasonably fit for the purpose for which they know it is required. This case was referred to in Doug Rea Enterprises Pty Ltd v Hymix Australia Pty Ltd,81 where it was held that it was an implied term that the contractor would use [page 62] reasonable care and skill in and about the design of an overhead bin and supporting steel work and that the bin and the steel work as designed would be reasonably fit for its intended purpose which was clearly known to that company. In the important case of Cable (1956) Ltd v Hutcherson Bros Pty Ltd82 Barwick CJ, in delivering the leading judgment, said: No doubt at times the question whether the promise of a builder is to produce a result or merely to do specific work is difficult to answer. In reaching a conclusion, the fact that it can be seen that reliance is placed upon the skill and judgment of the builder may on occasions be an important if not a decisive consideration.

There the contractor was employed to do work which included the supply and installation at Bunbury Harbour of large bins for the storage of minerals. The contract drawings provided for ring-beam foundations, but this was an error in design, in that, since the site consisted of reclaimed land, in order to prevent subsidence, piled foundations were necessary. The contractor installed the bins with ring-beam foundations as required by the drawings and the High Court decided that that was all that the contractor was required by the contract to do: the contractor had not warranted the efficacy of the works. It will, it seems, be a matter of examining in every case the contract and the

surrounding circumstances in order to decide whether the implication of the warranty is appropriate.83 There is a marked difference between the situation where a contractor is asked to deal with a leaking roof, and the situation where a contract is let on drawings and specifications prepared by the proprietor’s architect. Where the contractor is employed to execute works in accordance with a detailed design prepared by the proprietor’s architect, prima facie the only obligation of the contractor is properly to perform the work specified.84 On the other hand, where a contractor is employed on the basis not only to execute but also to design the works, prima facie it will be incumbent upon the contractor to produce a satisfactory result.85 In some cases a builder who prepares plans and specifications and who builds in accordance with them may not necessarily be under the same responsibility as an architect in relation to the design.86 An express warranty may be regarded as not extending to the performance of plant or machinery the capacity of which is specified in the contract. So in Hosie v Robison87 the defendant contracted to execute certain work and to provide certain materials and fittings for a bathing establishment, and the [page 63] contract concluded ‘We guarantee the same to be in every way suitable for the requirements and efficiency of your establishment’. Among the fittings was a large copper boiler which proved insufficient in capacity, although of the specified dimensions. The defendant builder succeeded on the ground that under the warranty he was liable only to provide labour and materials which should be good and suitable and under no liability as to the capacity of the boiler except that it should be of the specified size. In an ordinary building contract the builder is only responsible for bringing the works to completion according to their design; the builder is entitled to build the structure strictly in accordance with the plan, even should it be defective, and be paid the full contract price; where, however, the builder is responsible also for the design, the builder impliedly accepts responsibility for it and impliedly warrants suitability for the required purpose and is, therefore, under a duty to provide the owner with a building that is structurally sound.88 However, in Barton t/as Freeform Builders v Stiff89 Hargrave J in the Victorian Supreme Court specifically rejected the notion that, by the contract in that case, the builders in their works

became, in effect, the insurers of the houses they had built. With respect, this is an entirely correct position. A builder simply is not an insurer of the house built and it would be absurd to contend otherwise. A warranty of soundness and suitability of premises for carrying on a business has been held to be implied in the terms of a contractual licence in England in Western Electric Ltd v Welsh Development Agency.90 In McQuade v Solchek Pty Ltd91 it was held that the contractor was not in breach of an implied term (to the extent to which it existed) that a driveway would be fit for use as a driveway. After its construction, the owners and others had experienced difficulties using the driveway owing to the steepness of the site. But its construction was controlled by its location, design and slope and these were matters which were the responsibility of other contractors who had been engaged before the defendant. By s 8(f) of the Domestic Building Contracts Act 1995 (Vic), should a domestic building contract state the particular purpose for which the work is required or the result which the building owner wishes the work to achieve ‘so as to show that the building owner relies on the builder’s skill and judgement’ then the builder is taken to warrant ‘that the work and any material used in carrying out the work will be reasonably fit for that purpose or will be of such a nature and quality that they might reasonably be expected to achieve that result’. This warranty runs with the land92 and cannot be excluded.93 To similar effect are warranties provided for in s 18B(f) [page 64] of the Home Building Act 1989 (NSW), s 32(2)(f) of the Building Work Contractors Act 1995 (SA), s 7(e) of the Housing Indemnity Act 1992 (Tas) and s 88(2)(e) of the Building Act 2004 (ACT). This warranty, as such, is not to be found in the Domestic Building Contracts Act 2000 (Qld) but other warranties implied by the Act (see s 44) produce the same result. See also s 54B(1)(b) and (c) of the Building Act (NT). Note also Building Regulations 2012 (WA) Pt 4.

Compliance with regulations

4.8 Possibly a term will be implied to the effect that the work will be done in accordance with the requirements of the positive law. It has been held that a contract for the erection of scaffolding contains an implied term that the work will be done in a proper and workmanlike manner and in compliance with the demands of the positive law, such as the requirements of scaffolding regulations.94 Under s 8(c) of the Domestic Building Contracts Act 1995 (Vic) there is an implied warranty in every domestic building contract by the builder that the work under the contract will be carried out in accordance with, and will comply with, all laws and legal requirements, including those under the Building Act 1993 (Vic). This warranty runs with the land95 and cannot be excluded.96 The warranty in s 18B(c) of the Home Building Act 1989 (NSW) is to similar effect, as are s 54B(1)(d) of the Building Act (NT), s 32(2)(c) of the Building Work Contractors Act 1995 (SA), s 7(c) of the Housing Indemnity Act 1992 (Tas) and s 43 of the Domestic Building Contracts Act 2000 (Qld). A more restricted version of the warranty is in s 88(2)(a) of the Building Act 2004 (ACT). Note also the general provision in the Building Act 2004 (NZ) s 14E(2)

Sale of house to be erected 4.9 Where a contract is made for the sale of land on which the vendor is to erect a house, or to complete the erection of a house, there will ordinarily be implied a warranty on the part of the vendor to do the work in a good and workmanlike manner and to supply good and proper materials and that the house will be reasonably fit for human habitation.97 There is no such implied warranty if the erection of the house has been completed by the time of the sale.98 This is so even if the vendor has created the defects or is aware of their existence because, as to such matters, the maxim caveat emptor [page 65] is applicable; however, in the case of a sale of a ‘spec’ house by a builder it has been held that it might well be appropriate to imply a term as to the quality of the product because the vendor has produced the building and has special knowledge of it.99 A warranty of fitness for human habitation was not implied

where compliance with the specification (nine-inch solid brick external wall) meant that rain penetration was inevitable.100

Time for completion 4.10 If no time for completion is agreed upon it will be implied that the work is to be executed within a reasonable time.101 Where the contract documents contained a clause providing that the work was to be done within a certain number of weeks and the number was left blank, the argument that the contract was bad for uncertainty was rejected, it being held that the clause was to be treated as if struck out, leaving the contract one for work which was by implication to be performed within a reasonable time.102 A party under the implied duty to perform its obligations under the contract within a reasonable time which, because of prevailing economic conditions, determines to perform those obligations only at a time and in a manner suitable to such party will almost inevitably be found to have repudiated such contract.103

Permits 4.11 A term may be implied that the contractor will procure all permits that are necessary to carry out the building operations contracted for, at all events where the consequence of the erection of the building without a permit may be the demolition of the building by a public authority.104 However, in Davie v Kemp and Denning Home Improvements Centre Pty Ltd,105 where works were constructed without planning permission, it was held that, as there was no evidence that the owner and the contractor had expressly agreed that the contractor would obtain planning permission for the proposed use, and as the need for an application for planning permission was not mentioned by either until after the agreement to build had been made, the owner was nevertheless liable to the contractor for the contract price. The obtaining of [page 66] a permit where one is required by law would be an aspect of an obligation to comply with all laws and regulations.

Possession of site 4.12 Written building agreements usually make express provision for the proprietor to give the contractor possession of the site. See, for example, cl A4.1c of ABIC MW-1 2008. Such a term will be implied in any event even in the absence of express provision. As was said by Collins LJ in Freeman & Son v Hensler:106 There is an implied undertaking on the part of the building owner, who has contracted for the buildings to be placed by the plaintiff on his land, that he will hand over the land for the purpose of allowing the plaintiff to do that which he has bound himself to do.

In Marburg Management Pty Ltd v Helkit Pty Ltd107 Kelly J held that it was an implied term of a contract that once a contractor has been given possession of a site ‘it should be allowed to retain that possession and to continue work on the contract until it [is] completed or otherwise lawfully determined’. This plainly accords with common sense. Under s 19(1) of the Domestic Building Contracts Act 1995 (Vic) it is made an offence, however, for the builder to fail to permit the building owner to have reasonable access to the building site and to view any part of the building works. But by s 19(2) a person exercising a right of access under s 19(1) must not interfere with the carrying out of the building works. In Commissioner for Main Roads v Reed & Stuart Pty Ltd108 Stephen J referred to Southern Foundries (1926) Ltd v Shirlaw109 where Lord Atkin said that it is ‘a positive rule of the law of contract that conduct of either promiser or promisee which can be said to amount to himself “of his own motion” bringing about the impossibility of performance is in itself a breach’. Whether it is proper to imply a covenant binding the proprietor not to revoke the contractor’s licence in breach of contract is considered in 4.14.

Sufficient working space 4.13 It has been held to be an implied term of every building contract that the owner will provide sufficient space around the site of the proposed building to enable the builder to carry out the work.110 [page 67]

Revocation of contractor’s licence 4.14 In Hounslow London Borough Council v Twickenham Garden Developments Ltd111 Megarry J held that there was an implied obligation on the proprietor not to revoke, in breach of contract, the licence of the contractor to remain on the site. The Hounslow decision was followed in Graham H Roberts Pty Ltd v Maurbeth Investments Pty Ltd112 in which Helsham J took the view that common sense demanded the implication of such an obligation because ‘it is obviously necessary to give business efficacy to the contract’. However, he rejected an argument that equity would grant specific performance of the building contract and that therefore there should be an injunction restraining the building owner from interfering with the work. He went on to find, on the ordinary principles applicable to applications for injunctive relief, that the facts of the case did not justify the grant of an injunction to restrain the breach of a negative covenant in a contract. This case should be contrasted with Mayfield Holdings Ltd v Moana Reef Ltd,113 not cited in argument in the Maurbeth case. In the Mayfield Holdings case Mahon J refused to follow the Hounslow case and held that there was no implied obligation not to revoke the licence. He concluded that business efficacy did not demand such an implication and, since specific performance was not available, that an injunction having the same effect should not be granted. The ruling in the Maurbeth case was distinguished by Judd J in Humphries v Southern Cross Ski Club.114 A member of a club was expelled in that case and that is an issue tending to raise different contractual considerations. The analysis of Mahon J in Mayfield Holdings was referred to with approval by Hunt J in Hughes Bros Pty Ltd v Telede Pty Ltd115 who said: The practical exigencies of the performance of a building contract must be kept in mind. Where the proprietor seeks to dismiss the builder for what he sees as departures from the contract’s specifications, he should not be compelled to stand by whilst his action for breach (or an arbitration, which can take just as long if not longer) is fought and watch the building being completed in a manner which may ultimately be decided to have been in breach of the contract.

Subsequently, in Chermar Productions Pty Ltd v Prestest Pty Ltd,116 Southwell J (preferring the decision of Lush J in Porter v Hannah Builders Pty Ltd117 to that of Megarry J in the Hounslow case) held that once a builder’s licence has been revoked, whether rightly or wrongly, the builder becomes a trespasser. In light of

this it could be submitted that the view of Megarry J does not represent good law on this point in Australia, but Batt JA has [page 68] expressed a view in Sigma Constructions (Vic) Pty Ltd v Maryvell Investments Pty Ltd118 that ‘[c]ases can be found where an injunction was granted in favour of a licensee to prevent the licensor from revoking, or acting upon the revocation of, the licence at least where it was not a fleeting one’. The basis for this, said Batt JA, ‘is that in every contractual licence there is an implied negative stipulation by the licensor not wrongfully to revoke the licence, not to treat the licensee as a trespasser until the licence has been validly terminated’.119 His Honour distinguished Porter v Hannah Builders Pty Ltd but did not specifically overrule it although appearing to express misgivings about it.120 The other members of the court (Vincent and Nettle JJA) expressed agreement with his judgment. There may be a proper basis for saying, therefore, that Megarry J’s view should now be held to prevail, but the matter is far from concluded. None of this is to say that in appropriate cases the remedy of injunction should not be available to a builder to restrain a proprietor from terminating a building contract when there is a dispute as to the entitlement to or the validity of the termination.121 Nor is it to say, as mentioned by Campbell J in McKeand v Thomas122 that ‘[s]ometimes the outcome of a proprietary estoppel can be that a licence, which at law is revocable, comes to be irrevocable in equity’.

To employ contractor 4.15 Where a contractor undertakes to do work it may be difficult to know whether there is a reciprocal promise on the part of the proprietor to employ the contractor. Where the plaintiff agreed with the defendant to do all the mechanical repairs required to the latter’s electrical plant for 12 months, a promise by the defendant to employ the plaintiff to do those repairs to the exclusion of others was implied.123

Progress payments

4.16 Progress payments are and have long been regarded as the lifeblood of the building industry. As was said in Appleby v Myers124 in ‘the absence of something to shew a contrary intention, [a] bricklayer … is to be paid for the work and materials he has done and provided, although the whole work is not complete’. And as was said by Phillimore J in The Tergeste:125 [page 69] A man who contracts to do a long costly piece of work does not contract, unless he expressly says so, that he will do all the work, standing out of pocket until he is paid at the end. He is entitled to say, ‘That is not my contract; it is quite true that I had contracted to do the work and I am bound to do it; but there is an understanding all along that you are to give me from time to time, at reasonable times, payments for work done, and if the contract here was to do certain work, it always included that term, to do it if we are paid reasonable sums in part payment as we go along, not an advance, but in part payment for work already done before we proceed to the next thing’; and if that payment is not made, then the shipwright, or any other artificer, is entitled to review his work, and say, ‘I have done work worth so much; true I have contracted to do other work, but it is not reasonable I should do it as I have not been paid and in respect of work I have done I claim payment’.

These passages were relied upon by Herdman J in Lockhart v Collingwood Cooperative Dairy Co Ltd,126 where a term that the contractor should receive progress payments was implied in an oral ‘cost plus’ contract. The progress payments in Ownit Homes Pty Ltd v Batchelor127 were regarded as more closely resembling a right to payment on account than an accrued right to final payment. The mere fact that a contract allows the builder to make claims for progress payments in respect of materials delivered to site is not sufficient to justify a finding that property in such materials has passed to the owner where they have not been integrated into the building.128 Under s 40 of the Domestic Building Contracts Act 1995 (Vic) there are limits placed on the amounts that may be claimed by way of progress payments. The area of claims for progress payments is now largely governed by statute. See: Building and Construction Industry (Security of Payment) Act 2009 (ACT); Building and Construction Industry Security of Payment Act 1999 (NSW); Construction Contracts (Security of Payments) Act (NT); Building and Construction Industry Payments Act 2004 (Qld); Building and Construction Industry Security of Payment Act 2009 (SA); Building and Construction Industry Security of Payment Act 2009 (Tas); Building and Construction Industry Security

of Payment Act 2002 (Vic); and Construction Contracts Act 2004 (WA). See further 9.20.

Ancillary work by public authority 4.17 A contractor who had incurred additional expense in consequence of delay on the part of a sewerage authority in relocating a sewer line sought to recover that expense from the proprietor on grounds which began with [page 70] the assertion of an implied obligation on the part of the proprietor to ensure that the work of relocation would be executed by the authority at such a time as would enable the contract to be performed by the contractor according to its terms. This contention was ultimately abandoned, but the High Court indicated that it would in any event have been unsuccessful.129

Builder’s entitlement to indemnity 4.18 It is a general principle of law laid down in Lord Mayor etc of Sheffield v Barclay130 that when an act is done by one person at the request of another, which act is not in itself manifestly tortious to the knowledge of the person doing it, and such act turns out to be injurious to the rights of a third party, the person doing it is entitled to an indemnity from the person who requested that it should be done. A contract of indemnity is to be implied from the circumstances. Accordingly, where contractors were employed to construct a sewer in a public street and in the course of their operations, conducted without negligence, damage was caused to buildings, the owner of which recovered judgment against them, they were entitled to be indemnified by their employer, and that was so notwithstanding a general condition whereby the contractors were to be liable for any accident, damage or injury whatsoever to the public or to any individual which might be caused by their operations.131 The Privy Council in Stanley Young Kai Yung v Hong Kong Shanghai Banking Corporation132 said that the principle established by the Sheffield case is a broad principle now firmly

embedded in the law. There may possibly be an argument, however, that the principle only applies where a party was obliged to do the act requested of it.133

Architect’s availability 4.19 The person appointed architect by the building agreement may be unwilling or unable to act. The building agreement may expressly empower the proprietor to appoint another person in substitution. In the absence of express provision, it would seem that a condition will be implied that the contract is to have effect only in the event that the named person is able and willing to act as architect. If not, and the employer orally appoints another person in substitution and that person acts as architect with the knowledge and acquiescence of the contractor, then this substitution is no departure from the original contract, but a new agreement rendered necessary by the failure of the original contract.134 [page 71] Clause A6.6 of ABIC MW-1 2008 specifies that if the architect resigns or becomes incapable of acting as architect or if the owner terminates the engagement of the architect, the owner must immediately nominate another architect and give written notice of the name and address of that architect to the contractor. Such newly appointed architect is, by cl A6.8, bound by the written decisions of any previous architect. _________________________ 1.

Heimann v Commonwealth of Australia (1938) 38 SR (NSW) 691 at 695; Dikstein v Kanevsky [1947] VLR 216 at 220; John Holland Construction & Engineering Pty Ltd v World Services and Construction Pty Ltd (1993) 12 Aust Cons LR 116 at 120, 122. See generally Hon Mr Justice Byrne, ‘Implied Terms in Building Contracts: Inference or Imputation?’ (1995) 11 Building and Construction Law 6.

2.

Mayfield Holdings Ltd v Moana Reef Ltd [1973] 1 NZLR 309 at 318.

3.

Maxwell v Highway Hauliers Pty Ltd [2013] WASCA 115 at [105] per Pullen JA (quoting Cheshire and Fifoot, Law of Contract, 10th Aust ed, 2012, [10.73]).

4.

Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 at 44; further proceedings (1994) 68 ALJR 313.

5.

Dikstein v Kanevsky [1947] VLR 216 at 221.

6.

Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 at 487. See also Esso Australia Resources Ltd v Plowman [1994] 1 VR 1 at 8 per Brooking J; Breen v Williams (1996) 70 ALJR 772 at 800; South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 at 695.

7.

Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 256.

8.

Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 345–6.

9.

Vita Pacific Ltd v Heather [2001] TASSC 137.

10. Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 at 486. 11. (1996) 186 CLR 71 at 102–3. 12. (1889) 14 PD 64 at 68. 13. (1977) 16 ALR 363 at 376. 14. Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 346. See also Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 117 ALR 393; Trade Practices Commn v CC (NSW) Pty Ltd (1994) 125 ALR 94 at 103; Palermo Nominees Pty Ltd v Broad Construction Services Pty Ltd (1998) 15 BCL 20. 15. Seton Contracting Co Ltd v A-G [1982] 2 NZLR 368 at 375 per Prichard J. See also Chadmax Plastics Pty Ltd v Hansen and Yuncken (SA) Pty Ltd (1985) 1 BCL 52. 16. Roxborough v Rothmans of Pall Mall Australia Pty Ltd (2001) 185 ALR 335 at 381 per Kirby J. 17. Breen v Williams (1996) 186 CLR 71 at 90. 18. (1985) 2 BCL 235. 19. [2013] NSWSC 107 at [63] per Latham J. 20. [2013] QSC 163 at [78] per Philip McMurdo J. 21. See Robt Jones (363 Adelaide Street) Pty Ltd v First Abbott Corporation Pty Ltd (1997) 14 BCL 282 at 326 (no terms implied). 22. (1977) 16 ALR 363. 23. Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 121; Hawkins v Clayton (1988) 164 CLR 539 at 571. See also Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 374; Hughes Bros Pty Ltd v Telede Pty Ltd (1989) 7 BCL 204 at 207; Byrne v Australian Airlines Ltd (1995) 69 ALJR 797 at 813. 24. Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 423. 25. [1994] 2 VR 32 at 70. 26. John Holland Construction & Engineering Pty Ltd v World Services and Construction Pty Ltd (1993) 12 Aust Cons LR 116 at 120. 27. Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 261 per Priestley J. 28. Mainteck Services Pty Ltd v Stein Heurtey SA and Stein Heurtey Australia Pty Ltd [2013] NSWSC 266 at [123] per Sackar J. 29. [2009] NZSC 43 at [64]. 30. (1986) 160 CLR 226 at 236–7. See also Riseda Nominees Pty Ltd v St Vincent’s Hospital (Melbourne) Ltd [1998] 2 VR 70 at 77.

31. (1995) 185 CLR 410 at 440. 32. Ibid. 33. La Rosa v Nudrill Pty Ltd [2013] WASCA18 at [43] per McLure P. 34. Young & Marten Ltd v McManus Childs Ltd [1969] 1 AC 454 at 469. 35. Pearce v Tucker (1862) 3 F & F 136; 176 ER 61; Riverside Motors Pty Ltd v Abrahams [1945] VLR 45; Foster v A T Brine & Sons Pty Ltd [1972] WAR 157; Miller Construction Ltd v Olsen [1973] 1 NZLR 265 at 271; Greaves and Co (Contractors) Ltd v Baynham Meikle and Partners [1975] 1 WLR 1095 at 1098. 36. Costa Vraca Pty Ltd v Berrigan Weed and Pest Control Pty Ltd (1998) 155 ALR 714 at 720. See De Pasquale Bros Pty Ltd v Cavanagh Biggs & Partners Pty Ltd (1998) 16 BCL 116. 37. O’Neale v Barra Rosa Pty Ltd (1989) 96 FLR 436 at 443 per Miles CJ. 38. Maxstra Constructions Pty Ltd v Gilbert (t/as A J Gilbert Concrete) [2013] VSC 243 at [60]. 39. G H Myers and Co v Brent Cross Service Co [1934] 1 KB 46 at 55 per du Parcq J. 40. Independent Broadcasting Authority v EMI Electronics Ltd and BICC Construction Ltd (1980) 14 BLR 9 at 44. 41. Robt Jones (363 Adelaide Street) Pty Ltd v First Abbott Corporation Pty Ltd (1997) 14 BCL 282 at 326 per White J. 42. [1969] 1 AC 454. 43. Ibid at 470–1. 44. Ibid at 473–4. 45. [1969] 1 AC 480. 46. Ibid at 497, 508. 47. Ibid at 503–4. 48. Ibid at 512. 49. (1974) 132 CLR 1. 50. Ibid at 12. 51. (1974) 51 DLR (3d) 638. 52. (1978) 87 DLR (3d) 277. 53. [1951] St R Qd 225. 54. See Hancock v B W Brazier (Anerley) Ltd [1966] 1 WLR 137. See also Carrington Constructions Pty Ltd v Fiore Holdings Pty Ltd (CA (NSW), 1 May 1992, unreported). 55. Palmerston (Qld) Pty Ltd v Fogl [1983] 2 Qd R 700 at 703 per McPherson J. 56. [2011] NSWSC 75. 57. Section 9. 58. Section 10. 59. [1994] 1 VR 163 at 186. 60. (1881) 6 App Cas 251 at 263. 61. [2013] NSWSC 858 at [176]. 62. John Holland Construction & Engineering Pty Ltd v World Services and Construction Pty Ltd (1993) 12 Aust

Cons LR 116 at 124 (referring to Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607). See also Finola Moorhead v Paul Brennan (t/as Primavera Press) (1991) 20 IPR 161 at 166; WMC Resources Ltd v Leighton Contractors Pty Ltd (1998) 15 BCL 49 at 63; Overlook Management BV v Foxtel Management Pty Ltd (2002) Aust Contract R 90-143; [2002] NSWSC 17; New South Wales v Banobelle Electrical Pty Ltd [2002] NSWSC 178 at [67]. 63. Compare Merrill Lynch International (Australia) Ltd v Commr of Taxation (2001) 191 ALR 420 at 447. 64. Expectation Pty Ltd v Pinnacle VRB Ltd [2002] WASCA 160 at [90]. 65. (1993) 117 ALR 393 at 401–7. 66. (2000) 177 ALR 611 at 695. See also Anglo Group plc v Winther Browne & Co (2000) 72 Con LR 118 at 142 per Judge Toulmin QC. 67. [2001]WASC 128. See also Goldtaper Pty Ltd v Berda Ltd [2001] QSC 104.See R Niemann, ‘Recent Aspects of Good Faith’ (2002) 18 Building and Construction Law 103. 68. [2002] NSWSC 17 (citing Burger King Corp v Hungry Jack’s Pty Ltd [2001] NSWCA 187). 69. Telstel Australia Pty Ltd v KRG Electrics Pty Ltd [2013] SASC 91 at [121]. 70. [2005] VSCA 228. 71. Ibid at [2]. 72. Ibid at [25]. 73. (2002) 186 ALR 289 at 301. 74. Ibid at 312. 75. Panamena Europea Navigacion (Compania Limitada) v Frederick Leyland & Co Ltd [1947] AC 428 at 436. See also Covecorp Constructions Pty Ltd v Indigo Projects Pty Ltd [2002] QSC 322. 76. [2006] VSC 307 at [15]. 77. Ibid. 78. Ibid at [39]. 79. [1966] 2 NSWR 471 at 472. 80. [1975] 1 WLR 1095 at 1098. 81. [1987] 2 Qd R 495. 82. (1969) 123 CLR 143 at 150. 83. See, for example, Brunswick Construction Ltd v Nowlan (1974) 49 DLR (3d) 93. 84. Note, however, that the contractor’s obligation to third parties at common law may not be so limited: Bowen v Paramount Builders (Hamilton) Ltd [1977] 1 NZLR 394 at 419. 85. Compare Independent Broadcasting Authority v EMI Electronics Ltd and BICC Construction Ltd (1980) 14 BLR 9. 86. See Stein v Anderson [1937] NZLR 491. 87. (1874) 5 AJR 176. 88. Ownit Homes Pty Ltd v Batchelor [1983] 2 Qd R 124 at 131, 133. 89. [2006] VSC 307 at [39] 90. [1983] 1 QB 796.

91. (1988) 5 BCL 131. 92. Section 9. 93. Section 10. 94. Foster v A T Brine & Sons Pty Ltd [1972] WAR 157 at 162. 95. Section 9. 96. Section 10. 97. Jennings v Tavener [1955] 1 WLR 932; Streeter v McLennan [1959] Qd R 136; Hannan v Fyfe and Fyfe [1957] SASR 90; Hancock v B W Brazier (Anerley) Ltd [1966] 1 WLR 1317; McKey v Rorison [1953] NZLR 498; Greaves and Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 at 1098; Lowden v Lewis [1989] Tas R 254. 98. Hoskins v Woodham [1938] 1 All ER 692. 99. Wickham v City of Gosnells (1984) 55 LGRA 102 at 113–14. 100. See Lynch v Thorne [1956] 1 WLR 303. Under the Defective Premises Act 1972 (UK) a house without some essential attribute (for example, a roof or a damp course) may well be unfit for human habitation even though the problems resulting from lack of that attribute are not yet apparent: Andrews v Schooling [1991] 1 WLR 783 at 790. 101. Dunedin Water Works Co v Bassett (1868) 1 NZCA 141; Gold Coast Oil Co Pty Ltd v Lee Properties Pty Ltd (1984) 1 BCL 63 at 66. 102. Crowshaw v Pritchard and Renwick (1899) 16 TLR 45. 103. Gold Coast Oil Co Pty Ltd v Lee Properties Pty Ltd (1984) 1 BCL 63. 104. Staunton and King v Wellington Education Board (1909) 28 NZLR 449; Dean v Gibson [1958] VR 563 at 571. 105. (1987) 64 LGRA 400. 106. (1900) 64 JP 260. See also Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605 at 621; Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 at 348. 107. (1990) 100 FLR 458 at 469. 108. (1974) 131 CLR 378 at 384–5. 109. [1940] AC 701 at 717. 110. R v Walter Cabott Construction Ltd (1975) 69 DLR (3d) 542. 111. [1971] Ch 233. 112. [1974] 1 NSWLR 93 at 103. 113. [1973] 1 NZLR 309. 114. [2012] VSC 232. 115. (1989) 7 BCL 204 at 206. 116. (1989) 7 BCL 46. 117. [1969] VR 673. 118. (2005) ATPR 42-048; [2004] VSCA 242 at [31]. 119. Ibid.

120. Ibid at [32]. 121. Robert Salzer Constructions Pty Ltd v Elmbee Pty Ltd (1990) 10 Aust Cons LR 64 at 68. See also Doran Constructions Pty Ltd v University of Newcastle (SC(NSW), Giles J, 16 December 1994, unreported). 122. (2006) 12 BPR 23; [2006] NSWSC 1028 at [123]. 123. Milne v Municipal Council of Sydney (1912) 14 CLR 54. See also Commissioner for Main Roads v Reed & Stuart Pty Ltd (1974) 131 CLR 378 at 383. 124. (1867) LR 2 CP 651 at 660. 125. [1903] P 26 at 34. 126. [1920] GLR 521 at 523. 127. [1983] 2 Qd R 124 at 135. 128. R J Grills Pty Ltd v Dellios [1988] VR 136. See also Otis Elevator Co Pty Ltd v Girvan (Qld) Pty Ltd (1990) 9 Aust Cons LR 107. 129. See Tuta Products Pty Ltd v Hutcherson Bros Pty Ltd (recs appd) (1972) 127 CLR 253. 130. R v Henrickson & Knutson (1911) 13 CLR 473. 131. [1981] AC 787 at 797. 132. [1905] AC 392 at 397. 133. Gale v Council of the Shire of Douglas [2000] QSC 44. 134. Moore v Ferguson (1892) 18 VLR 266 at 272.

[page 73]

5

TENDERS

TENDERS GENERALLY Meaning of ‘tender’ 5.1 In Comalco Fabricators Ltd v Dillingham Constructions Pty Ltd1 Mitchell J said that when used commercially the word ‘tender’ had the Shorter Oxford English Dictionary definition of ‘an offer made in writing by one party to another to execute, at an inclusive price or uniform rate, an order for the supply or purchase of goods, or for the execution of work, the details of which have been submitted by the second party’. This meaning would accord with industry practice.2 The definition adopted in the New Zealand case of GHP Piling Ltd v Leighton Contractors Pty Ltd3 was ‘an offer esp. an offer in writing to execute work or supply goods at a fixed price’. An invitation to tender (see 5.3) is by its nature not normally an offer: it solicits offers.4

Tender documents 5.2 Tender documents usually comprise the following: 1.

one or more notices to tenderers;

2.

conditions of tendering;

3.

form of tender;

4.

general conditions of contract;

5.

specification;

6.

drawings; and

7.

bill of quantities (if any).

It was decided in Davis Contractors Ltd v Fareham Urban District Council5 that a letter accompanying a tender was not incorporated in the contract and was not a contract document but merely formed part of the negotiations between the parties. It may be clear from the documentation that a tender [page 74] is not an offer capable of acceptance because, for instance, vital statements leading to certainty are lacking.6

TENDERING Invitation to tender 5.3 With substantial construction projects it is usual for contractors to be invited to tender for the works. But even with some domestic construction this is rapidly becoming the case; certainly it is so in apartment construction. A party calling for tenders may do no more than issue an invitation to treat but equally the steps taken by it may result in the invoking of contractual commitments in relation to the whole or parts of the tendering process.7 Thus has it been held in England that, in the public sector where competitive tenders are sought and responded to, a contract comes into existence whereby the prospective employer agrees to consider all tenderers fairly.8 A claim that the respondent in Ipex ITG Pty Ltd (in liq) (recs apptd) v State of Victoria9 would act fairly and in good faith in assessing tenders was rejected as not having been established but was not ruled out by the Court of Appeal. The existence of an implied duty to treat all bidders in the tendering process fairly and equally was accepted as the law in New Zealand in Roading & Asphalt Ltd v South Waikato District Council10 in which Canadian authority11 was quoted to the effect that implying such an obligation is consistent with the goal of protecting and promoting the integrity of the bidding process and benefits all participants involved. It is all very well to insist on competition in

the market place but sometimes this valid pursuit may need legal protection from unscrupulous bidders and such a duty has strong appeal. The invitation to tender may take one of several forms. The contract may be put out to ‘open’ tender where any interested contractor may bid. On the other hand, there may be a ‘negotiated’ tender with a single contractor. Between these two extremes, tenders might be ‘invited’ from a number of known contractors. Or a register of approved contractors might be maintained from amongst whom ‘select’ tenders might be invited. The register might be established following a public invitation to contractors who desire to be invited to tender. A Code of Tendering AS 4120-1994 has been prepared, setting out in detail the ethics and obligations of principals and contractors in tendering in the construction industry. [page 75] The Code requires tendering at all levels in the industry to be conducted honestly and in a manner that is fair to all parties involved: cl 4(a). The Code provides that principals may only call for tenders after they have made a firm commitment to proceed with a project but that a principal may reject a tender if acting honestly and with probity in doing so: cll 4(e), 6.5. As regards tenderers the Code provides that they may bid only when they intend to carry out the work if successful and that they may only submit tenders if they genuinely believe they have the competence and capacity to undertake the work being offered: cll 4(d), 7.1. The Code specifies that generally only the tender most advantageous to the principal should be considered for acceptance and at the same time specifies that any tender which does not comply with the tender documents is liable to be rejected: cl 6.5.

Conforming and non-conforming tenders 5.4 A conforming tender is one which conforms with the requirements of the tender documents.12 A non-conforming or alternative tender is one which is not an offer to perform the works precisely as specified but is instead an offer to execute the works which departs in some way or ways from the contract

documents. This is sometimes called a ‘tagged’ tender.13 The departure or departures may be very extensive: the tenderer may suggest, for example, an alternative method of construction which is radically different from that proposed. A tenderer may be required or permitted to submit one tender which is subject to ‘rise and fall’ and an alternative tender which is for a firm price contract.

Cost of tendering 5.5 Ordinarily the cost of tendering must be borne by the unsuccessful tenderer. The reason for this as the general rule was explained by Barry J in William Lacey (Hounslow) Ltd v Davis14 in the following terms: … if a builder is invited to tender for certain work, either in competition or otherwise, there is no implication that he will be paid for the work … involved in arriving at his price: he undertakes this work as a gamble, and its cost is part of the overhead expense of his business which he hopes will be met out of the profits of such contracts as are made as a result of tenders which prove to be successful.

This general rule that the unsuccessful tenderer cannot recover wasted costs is not inflexible. In William Lacey (Hounslow) Ltd v Davis itself the tenderer’s claim succeeded. Barry J held that the work for which the tenderer was entitled to be paid fell outside that which a builder normally [page 76] performs gratuitously when invited to tender. In the later Scottish case of Sinclair v Logan15 a joiner agreed to prepare plans for alterations to licensed premises, to negotiate with the police, to obtain estimates and to apply for the approval of the licensing court, all on the basis that he would make no charge if he obtained the contract for the alteration works. He carried out the preliminary work but after a period of months it became apparent that he would not be employed to carry out the work of alteration. He succeeded in a claim in the Sheriff’s Court for payment on a quantum meruit. The principle of recovery in such circumstances was stated by Sheppard J in Sabemo Pty Ltd v North Sydney Municipal Council16 as follows: … where two parties proceed upon the joint assumption that a contract will be entered into between

them, and one does work beneficial for the project, and thus in the interests of the two parties, which work he would not be expected, in other circumstances, to do gratuitously, he will be entitled to compensation or restitution, if the other party unilaterally decides to abandon the project, not for any reason associated with bona fide disagreement concerning the terms of the contract to be entered into, but for reasons which, however valid, pertain only to his own position and do not relate at all to that of the other party.

In this case, in late 1969, the defendant council invited tenders for developing a civic centre to be financed by the developer and then leased by the council. In August 1970 the plaintiff was the successful tenderer but it was agreed between the plaintiff and the council that the acceptance of the tender did no more than bring the parties together so that they could plan the project until they reached the point where they could enter a contractual relationship, the building lease. Thereafter the plaintiff, to its considerable cost, prepared various plans to meet the council’s requirements. At last, in May 1973, a plan satisfactory to all parties and authorities was achieved, but in December 1973 the defendant resolved to drop the proposed plan and to confer with the plaintiff for a further altered scheme. In January 1974 the plaintiff rendered to the council an account for $426,000 for work done by the plaintiff for the council in connection with the proposed development. The claim was rejected and the plaintiff sued on a claim said to arise quasi ex contractu. No contract was relied upon. In a careful review of Australian and English authorities Sheppard J pointed out17 that a significant change had come about since the decision in Craven Ellis v Canons Ltd18 whereby: … it is now recognized that there are cases where an obligation to pay will be imposed (a promise to pay implied) notwithstanding that the parties to a transaction, actual or proposed, did not intend, expressly or impliedly, that such an obligation should arise. The obligation is imposed by the law in the light of all the circumstances of the case.

[page 77] Subsequently, referring to the facts of the case before him, Robert Goff J in British Steel Corp v Cleveland Bridge and Engineering Co Ltd19 expressed the principle in these terms: In my judgment the true analysis of the situation is simply this. Both parties confidently expected a formal contract to eventuate. In these circumstances, to expedite performance under that anticipated contract, one requested the other to commence the contract work, and the other complied with that request. If thereafter, as anticipated, a contract was entered into, the work done as requested will be treated as having been performed under that contract; if, contrary to their expectation, no contract

was entered into, then the performance of the work is not referable to any contract the terms of which can be ascertained, and the law simply imposes an obligation on the party who made the request to pay a reasonable sum for such work as has been done pursuant to that request, such an obligation sounding in quasi contract or, as we now say, in restitution.

The principle stated by Sheppard J in Sabemo Pty Ltd v North Sydney Municipal Council was referred to by Rogers A-JA in Austotel Pty Ltd v Franklins Selfserve Pty Ltd20 and by Byrne J in Brenner v First Artists’ Management Pty Ltd.21 However, it was not referred to by the High Court in Pavey & Matthews Pty Ltd v Paul.22 Nevertheless, remarks of Deane J in that case show the relation of the principle to the more general doctrine of unjust enrichment (apparent also from the reference to ‘restitution’ by Robert Goff J) even though Sheppard J in Sabemo was at pains to say his decision was not based on any doctrine of unjust enrichment.23 Speaking of the importance of the doctrine of unjust enrichment in the law of this country, Deane J said24 that such doctrine ‘constitutes a unifying legal concept which explains why the law recognises, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit, derived at the expense of a plaintiff’. This is not to say, however, that there are not cases which may be found which would deny that that doctrine as such is part of the law in Australia.25 But those cases must now be regarded as no longer tenable: it is well accepted now that the doctrine of unjust enrichment is part of Australian law today. The Sabemo principle was applied in Independent Grocers Co-operative Ltd v Noble Lowndes Superannuation Consultants Ltd26 where the defendant was held liable on a quantum meruit for the costs of the work done by the plaintiff [page 78] in establishing a superannuation scheme which ultimately did not proceed. However, in Regalian Properties PLC v London Docklands Development Corporation27 Rattee J declined to hold that the principle enunciated by Sheppard J was established by any English authority or should be held to apply in English law. Lindgren J said nothing on that point in Vivian Fraser & Associates Pty Ltd v Shipton28 where he distinguished Sabemo’s case on the ground that the failure of the parties to reach agreement in the case before him was neither party’s ‘fault’. The Sabemo principle seems to be confined to that category of case where no

contract results from a negotiation while benefits are conferred in contemplation of such a contract.29 It was applied by Southwood J in Mattila v Gardner (No 2).30 However, as pointed out by Bergin J in Leading Edge Events Australia Pty Ltd v Kiri Te Kanawa,31 Wilcox J in Pos Media Online Ltd v Queensland Investment Corporation32 declined to apply it. Bergin J in the case before her went on to find no occasion to distinguish Sabemo and applied it accordingly. It seems clear though that Sabemo will not be applied outside a narrow band of cases whose facts are closely analogous to those in the case itself. This is the effect of observations of Bryson J in Fensom v Cootamundra Racecourse Reserve Trust.33 A claim based on Sabemo failed in BBB Constructions v Aldi Foods34 on the ground that the facts in that case were different to those considered by Sheppard J — McDougall J saying that ‘even if Sabemo should be followed’, it did not govern the particular aspect of the case in question.35 This last observation, however, does tend still to raise doubts about the continuing applicability of the Sabemo principle.

Letters of intent 5.6 The proprietor may wish to secure the services of the tenderer without yet entering a formal contract. In such circumstances it may issue the tenderer with a letter of intent, or letter of comfort as it is called by some, expressing an intention to enter into a contract with the tenderer. While the legal value of a letter of intent must depend on the facts of the case, normally such [page 79] a letter will give rise to no binding obligations on the proprietor.36 However, in Turriff Construction Ltd and Turriff Ltd v Regalia Knitting Mills Ltd37 the plaintiff’s claim to be paid for preparatory work, done on the strength of a letter of intent, was allowed. In Australian European Finance Corporation Ltd v Sheahan38 Matheson J concluded that the letter of comfort in that case was at most a non-promissory statement of intention. In a commercial context, however, it has been said that there is a presumption of fact, prima facie, that promissory statements are intended to create legal obligations.39

WITHDRAWAL OF TENDER By tenderer 5.7 A tender, like any other offer, except in the unlikely event of its being under seal, may be withdrawn at any time prior to acceptance notwithstanding that it is expressed to remain open for a certain period of time; that is, unless the proprietor has given consideration for the tenderer’s promise to keep the offer open40 or unless an estoppel should arise. Otherwise, though, the general rule is clear, and was quoted by Palmer J in Macquarie Generation v CNA Resources Ltd,41 that a party is ‘free to withdraw its offers at any time before acceptance …’. A tenderer may wish to withdraw the tender having realised that it is affected by a mistake. In Belle River Community Arena Inc v W J C Kaufmann Co Ltd42 the bid submitted by the defendant for a construction project was, by reason of error, substantially lower than intended. The instructions to tenderers stated that tenders were to remain open for 60 days. When tenders were opened the defendant’s bid was the lowest submitted. On the day after tenders were opened the defendants sent a telegram withdrawing the quotation and explaining that it contained a serious error. About one month later the solicitors for the plaintiff wrote to the defendant accepting the tender. It was found at first instance that this was the first communication of any acceptance. The plaintiff then made a formal contract with the second lowest tenderer and sued the defendant for the difference in price. It was held by the Ontario Court of Appeal that the plaintiff should fail. It could not accept an offer which it knew had [page 80] been made as a result of a mistake which affected a fundamental term of the contract. However, this case was distinguished by the Supreme Court of Canada in R v Ron Engineering & Construction Eastern Ltd43 on the basis that in the Belle River case, but not in that case, the contractor purported to withdraw the tender before any action to accept was taken by the owner. It is possible for a tenderer to bind itself not to withdraw its bid but even in the

absence of an express obligation of this kind it may be possible to imply a promise on the part of the proprietor to consider the tender in return and as consideration for the promise of the contractor not to withdraw it. In the important case of Stafford v Mayor, Councillors and Citizens of South Melbourne44 the general conditions of contract included a clause providing that the contractor should send in the tender according to the form given with the specification. The plaintiff submitted a tender in the prescribed form. It was found as a fact that the plaintiff knew that it was necessary to tender in that form in order to have the offer considered by the council. By the tender, the plaintiff agreed that the preliminary deposit which accompanied the tender should be forfeited to the council as liquidated damages in the event of withdrawal of the tender or failing to enter into a properly executed contract for the performance of the work within 48 hours after being called upon to do so. A few days after the tender was submitted the plaintiff informed the council of an error made in pricing the work, and then sought to withdraw the tender. The council forfeited the plaintiff’s deposit. An action to recover the deposit failed, the Full Court being of opinion that a promise on the part of the council to consider tenders in the prescribed form was good consideration. In Fripp v Upton45 conditions of tendering provided that the deposit should be forfeited by the successful tenderer if such tenderer should fail to sign a contract within 24 hours of being notified in writing of the acceptance of the tender. A contractor, having discovered a mistake in the amount of his tender, purported to withdraw it before being given written notice of its acceptance. Such notice was subsequently given. The contractor stopped payment of the cheque representing the deposit. The report of the case does not refer to any condition of tendering requiring a tenderer not to withdraw a tender. Counsel for the proprietor argued that consideration was given for the cheque, such consideration being the right to tender. Counsel evidently did not rely upon that alleged consideration as supporting some promise not to withdraw the tender. In an action on the dishonoured cheque, judgment was given for the defendant, on the basis that the contractor was entitled to retract his offer at any time before acceptance. [page 81] Brisbane Board of Waterworks v Hudd46 is a difficult case. The conditions of

tendering did not expressly prohibit the withdrawal of any tender; the express provision was limited to a condition that if the successful tenderer should withdraw the deposit would be forfeited. Another condition prohibited the amendment of a tender after it had been opened. Neither the tender nor the conditions of tendering expressed any consideration to support a preliminary contract in the sense of a contract whereby the tenderer became bound by the conditions of tendering in consideration of the proprietor’s promising to consider the tender. The plaintiff purported to withdraw his tender before it was opened. He was nevertheless declared to be the successful tenderer. The Full Court of Queensland held that he was entitled to recover his deposit. Counsel for the tenderer argued that there was no preliminary contract and no consideration and that his client was entitled to withdraw the offer before its acceptance. He relied on Fripp v Upton and on Bristol, Cardiff and Swansea Aerated Bread Co v Maggs.47 Counsel for the board argued that there was a completed preliminary contract, the consideration for which he described as ‘advertising for tenders and paying for the advertisement, preparing the tender forms and conditions for tendering for the intending tenderers, the receiving and considering of the tenders’. The Full Court did not in terms address the question whether there was a preliminary contract or any consideration, but treated the conditions of tendering as operative; it held accordingly that on their proper construction those conditions entitled the plaintiff to the return of his deposit. It appears to be implicit in this decision, however, that a binding preliminary contract, supported by consideration, had been made. In Dunton v Warrnambool Waterworks Trust48 effect was given to a condition of tendering whereby the tenderer was to forfeit his deposit if he failed to sign the formal contract; the question whether the tenderer might withdraw his tender was discussed during the argument. Whether effect can be given to conditions of tendering where the tender of the contractor concerned is not accepted depends upon the question whether a preliminary contract, supported by consideration, has been made. Once the tender is accepted, there is no difficulty in treating the conditions of tendering as having contractual force, even though the conditions of tendering provide (as is usual) for the execution of a formal contract. The acceptance of the tender gives rise to a contract, whether or not it is possible to contend that merely by submitting a tender the tenderer was entering into a preliminary contract. A proprietor may endeavour to rely on conditions of tendering as binding a tenderer at a stage when the tenderer’s bid has not been accepted in order to

establish, for example, that the tenderer has undertaken not to withdraw or has undertaken to forfeit a preliminary deposit in the event of withdrawing. [page 82] Conditions of tendering may be relied upon after acceptance of a particular tender. An example is Porter v Board of Land and Works,49 where after the acceptance of a tender the proprietor successfully invoked a condition of tendering which provided for forfeiture of the initial deposit if a further deposit was not paid within 10 days of the contractor being called upon to do so. The essential fact, though, as mentioned by Kenneth Martin J in BGC Construction Pty Ltd v Ministet for Works,50 is ‘there is no contractual relationship with the person who submits a tender until their tender is accepted’. Until that time, a tender may clearly be withdrawn in the absence of some special consideration to the contrary effect.

By subcontractor 5.8 A tenderer seeking to withdraw perhaps because of a mistake in calculations may be not a prospective head contractor but a prospective subcontractor or supplier. If the circumstances are such that the tenderer is at liberty to withdraw, whether because the tender has not been accepted or because no contractual obligation has arisen to keep the offer open for a period which has not expired, the head contractor may be severely embarrassed in such circumstances in that the head contractor’s own tender may have been significantly affected by the price received from the subcontractor or supplier. However, the doctrine of promissory estoppel cannot be invoked by the head contractor.51 Nor, in such circumstances, may the doctrine of Hedley Byrne & Co Ltd v Heller & Partners Ltd52 be invoked. This last point was decided in Holman Construction Ltd v Delta Timber Ltd.53 In that case the plaintiff was a building contractor and the defendant was a timber merchant. The plaintiff, being interested in tendering for a contract for the erection of a building for a municipal council, called tenders for the supply of the necessary timber. Three tenders were received. The first was for $12,522, the second was for $10,173 and the third (from the defendant) was for $6,859. The

defendant’s tender was by letter dated 15 September 1970. The plaintiff formed the intention of accepting the defendant’s quotation and, relying on that quotation, on 17 September 1970 entered into a building agreement with the municipal council to erect the building for a lump sum. On 23 September 1970 the defendant, having discovered that a mistake of $3,000 had been made when extending the cost of one of the items, revoked its offer to supply the timber. It was common ground that no concluded contract for the supply of the timber had been made. In the result the plaintiff accepted the next best of the two tenders, which meant that it paid over $3,000 more for the timber. The plaintiff relied on Hedley [page 83] Byrne & Co Ltd v Heller & Partners Ltd, but Henry J held that there was no duty of care, saying:54 Even if one treats the offer in a manner most favourable to the plaintiff it is only advice to the plaintiff that the defendant is prepared, if the plaintiff accepts the offer, to supply timber on the terms stated. It is not a representation that a careful or even an honest assessment of the price asked has been made. It is not advice that the offer will remain open for any specified time. It is no more than the expression of an intention to become bound by contract if the offer be accepted. The offeror can be under no duty to make vis-a-vis the offeree a careful estimate of the price he seeks. It is for the offeree to judge the worth of the offer and to accept it while it is still capable of acceptance if he wishes to create any duty on the offeror. It is then no more than a contractual duty in terms of the contract … Whatever may ultimately be the metes and bounds of Hedley Byrne I can see nothing in the cases nor on principle to extend a duty of care to those who express a mere willingness to become bound by contract. If the person, to whom such an offer is made, desires to act in reliance on such an offer, he should either accept it or obtain a binding period for acceptance. An offer is an offer and is not advice or information except in the sense that it expresses willingness to become contractually bound by its terms if the offer is duly accepted. The law on offer and acceptance is not to be qualified by some new duty of care, the breach of which will give damages, merely because the offeror was negligent in assessing its terms. In essence the present claim is based on the defendant’s exercise of his legal right to revoke his offer. Further, the sole cause of loss, if any, is the plaintiff’s failure to exercise his legal right to accept his offer while it was still possible for him to do so. Recourse to Hedley Byrne will not solve these difficulties which lie firmly in the path of the plaintiff.

Despite developments which have taken place in recent times in the law governing negligent misstatements,55 and despite the wide range of circumstances in which a duty of care will now arise when giving advice, this ruling of Henry J still seems correct in principle: ‘The mere fact that injury results from a careless misstatement or a non-disclosure does not, ipso facto, create a liability’.56 One

might say it does not create a liability, ipso jure, either. There is this point also, as the New Zealand Court of Appeal mentioned: ‘The courts have been very reluctant to confer rights to sue in negligence which are inconsistent with (perhaps just in the sense of going beyond) the rights for which plaintiffs have bargained.’57 Moreover, in a case where a duty of care is alleged, it must not be unreasonable to posit the duty [page 84] in the first place.58 The existence or non-existence of a duty will always be ‘fact dependent’ as Henry and Keith JJ observed in R M Turton & Co Ltd (in liq) v Kerslake & Partners.59 It seems that the defendant must be shown on the facts to have actively and personally assumed responsibility — a point made clear in the judgment of Williams J in Newton v Stewart.60 Many of the issues in the area of negligent misstatement are discussed in an interesting review of authorities by Jackson J in Tarangau Game Fishing Charters Pty Ltd v Eagle Yachts Pty Ltd.61 A proprietor may be able to succeed in a claim for negligence against a contractor who makes a representation to the proprietor concerning the probable time a job will take which induces the proprietor to employ the contractor at an hourly rate.62 An estimate supplied by the proprietor to a tenderer concerning the value of a subcontract in relation to which the tenderer is required to make an allowance for overheads, supervision and profit may be intended to be relied upon by the tenderer so as to give the latter rights.63 In addition to, or despite the above, an action for careless misstatement may be maintainable as one for misleading or deceptive conduct under s 18 of the Australian Consumer Law (ACL) in Schedule 2 of the Competition and Consumer Act 2010 (Cth) even on the basis of a representation that the information conveyed by a particular statement has been verified when in reality it has not. With regard to loss suffered as a result of negligent statements made in precontract negotiations see 8.15.

RECALL AND ACCEPTANCE OF TENDERS

Recalling tenders 5.9 The lowest tender may come as a disagreeable surprise to the proprietor. The design may then be modified so as to reduce costs and the architect may then recall tenders on the amended drawings and specification. After the closing of retenders, if the lowest tender is still unacceptable to the proprietor, additional modifications may be made to the design with a view to obtaining a further cost reduction by calling tenders for the third time. By this time the seeds of a building case may have been sown: standards may have been reduced in redesigning the work and the proprietor may live [page 85] to regret the economies which have been effected. Or the contractor may do so. It depends upon the terms of the contract and particularly upon the terms of any performance guarantees.

Acceptance of tender 5.10 Ordinarily, when a contractor or supplier furnishes something in the nature of a quotation or estimate, no difficulty arises in deciding whether what has been furnished is an offer capable of acceptance so as to give rise to a concluded contract. In the case of a unilateral contract, the offer is accepted by doing the very thing or things asked.64 It may be contended, however, that what has been supplied is no more than an invitation to make offers, for example, a price circular. The architects who had designed Bonython Hall at the University of Adelaide arranged for a quarrymaster to send to each of the builders who were tendering a statement of terms and prices for the supply of stone. The High Court in Jarvis v Pitt Ltd65 had no hesitation in holding that the statement was a quotation amounting to an offer to supply the stone for the building upon which the successful tenderer was entitled to rely; in other words, an offer which, when the main contract was made, would be incapable of withdrawal or modification without the tenderer’s consent.66 Having held that the quotation amounted to a proposal for a binding agreement, the court went on67 to consider the matter of acceptance of the offer:

Although the proposal was made to all tenderers, it was upon its terms to operate only in the case of him whose tender was accepted. The University procured the proposal and, through the architects, caused it to be communicated as a necessary incident of the transaction it invited. The specification of stone from the respondent’s quarry and the respondent’s statement of the terms of supply depended one upon the other. All parties were alive to the position that the man with whom the University contracted was meant without more to be entitled to a supply of the necessary stone from the respondent in terms of the statement. In these circumstances the tender of the builder may be taken to imply a willingness to assent to both proposals and the acceptance of the tender by the University involves two things. Not only is it an acceptance of the tender, but it performs one or other of two functions in respect of the respondent’s proposal. If the builder’s tender is treated as an offer to agree to that proposal, it is an acceptance of that offer for and on behalf of the respondent. If, on the other hand, each builder’s tender is treated as an acceptance of the respondent’s conditional or contingent proposal to him, conditional or contingent upon the acceptance of his tender by the University, the University’s acceptance of the tender is the fulfilment of the condition, the happening of the contingency. The respondent’s proposal, as has already appeared, was for the supply of all the stone, and that implies a

[page 86] promise on the part of the contractor to take it all. It is an offer to supply stone as ordered at the stated price, if all the stone needed is taken from the respondent. Accordingly, to assent to the proposal is to promise to take the entire quantity of stone required to fulfil the specifications. In this way a contract was formed between the respondent and the appellant binding the one to supply and the other to take all the stone specified.

An acceptance of a tender by telegram stating ‘Your tender accepted — letter posted’ may not be an acceptance giving rise to a concluded contract as was held in E J Armstrong v Wellington-Manawatu Railway Co (Ltd).68 This decision cannot be regarded as sound unless it depends upon some local commercial practice. It was not followed by the High Court of Australia in Lamont v Heron.69 In the latter case an option to purchase land was held to have been exercised by a telegram notifying that the option was to be taken up and stating: ‘Letter following’. The court held that the fact that the exercise would be confirmed by some more formal writing than a telegram did not detract from its effectiveness. This would also be so in the case of an email or SMS text indicating it is to be followed by a formal letter. Often a long period elapses after the acceptance of a tender before the contract is signed. Sometimes the contract is not signed until the work is well under way; on occasions it is never signed. The effect of delay in signing the contract was considered by Pape J in City of Box Hill v E W Tauschke Pty Ltd.70 In that case the conditions of tendering provided that the formal contract should be executed

within four days of the acceptance of the tender, but in fact months went by before the formal contract was signed. Pape J held71 that if no concluded contract came into existence between the parties until the formal contract was executed such formal contract should be construed as covering all work done prior to the date of its execution and after acceptance of the tender. In some ways, however, it is difficult to justify this ruling; especially if one has regard to the view that a contract is not binding until it comes into effect, that is, when it is executed. Thus was it said in Eccles v Bryant & Pollock72 that ‘parties became bound by contract when, and in the manner which, they intend and contemplate becoming bound’ — and not otherwise, it may be added. The place of making a formal contract, sealed by the contractor in Victoria and by the proprietor in Queensland, was considered in Deer Park Engineering Pty Ltd v Townsville Harbour Board.73 Gillard J in that case held74 that Queensland was the state where the contract was made. Tenders in the case had been called in Townsville and all correspondence was addressed [page 87] to the proprietor in Townsville. The submission that by affixing a company seal in Victoria the contractor was entering into a contract in Victoria was rejected. It was held in Streamline Travel Service Pty Ltd v Sydney City Council75 that there was no implied contractual promise by the council in that case (which had invited tenders) to consider and deal with all tenders strictly in accordance with the written terms and conditions of tender. Kearney J said that: … [the] terms and conditions of tender do no more than specify the condition which the council requires a tenderer to fulfil in order to have [such person’s] tender considered. The purpose of such a tender document is to test the market and to obtain offers. It is designed entirely for the benefit of the council, and is not intended to commit the council to any obligation.76

These remarks were cited with approval by Derrington J in Maxwell Contracting Pty Ltd v Gold Coast City Council.77 As made clear by Asher J in GHP Piling Ltd v Leighton Contractors Pty Ltd,78 a court will not assume that the submission of a tender even in conformity with a tender process is an acceptance of an offer that has created a preliminary contract: ‘In all cases it comes down to a question of fact, and orthodox contract law

principles must be applied to the preliminary exchange to discern whether a contract was created at that point.’ But the parties undoubtedly may have in mind that a contract will be formed if a tender is accepted. In the case before the learned judge, however, in the language of offer and acceptance, the two did not conform: the request for tenders by the defendant had specified a 90 day period of validity, whereas the plaintiff’s quote differed in a material way in providing that it remained valid only for one month from the date of submission.

ESTIMATES AND STANDING OFFERS Estimates 5.11 The description of a tender as an estimate will not prevent it from being an offer capable of acceptance so as to give rise to a contract if the circumstances otherwise are such as to show that the tender was to fulfil its normal role. In the case of a unilateral contract it is not the law that an offeror cannot revoke an offer even though performance has commenced.79 Where architects invited a number of contractors to tender on certain drawings and a specification, one contractor replied by letter, headed ‘Estimate’, in the following terms: ‘Our estimate to carry out the sundry alterations to [page 88] the above premises, according to the drawings and specification prepared by Messrs Barnes, Williams, Ford and Griffin, amounts to the sum of £1,230.’ The proprietor wrote to the contractor purporting to accept his ‘offer to execute, for the sum of £1,230’ the work in question. Later the contractor wrote that he had made a mistake in his figures, and stating that in the circumstances he must withdraw his estimate. Counsel for the contractor contended that the contractor’s first letter was not an offer and that the word ‘estimate’ was advisedly used. Bingham J in Crowshaw v Pritchard and Renwick80 held that a concluded contract had been made and that the proprietor was entitled to damages reflecting the increased price paid by him to another contractor to do the work. However, it may not be easy to decide whether conversations between the

proprietor and the builder concerning the probable cost of the works or the amount which the proprietor is willing or able to pay have resulted in the conclusion of an agreement. Many of the smaller building cases are in large part concerned with this issue of whether work is to be done for a certain price. An interesting decision in this regard is Daniell Ltd v Kebbell.81 There the builder gave an estimate orally. Chapman J referred briefly to Crowshaw v Pritchard and Renwick and held82 that the proprietor ‘had something which he was entitled to regard as equivalent to a tender resulting at least in an implied contract to do the work at the price named which I find to be £450, the highest price mentioned in the evidence after the site had been viewed’. There appears, with respect, to be some confusion in the reasons for judgment in this case: Chapman J held that there was an implied contract to do the work for a certain price, but before reaching that conclusion and after referring to Crowshaw v Pritchard and Renwick he spoke of the duty of the builder, upon whom the owner relied, to make a correct representation as to the cost of the work, and cited Nocton v Lord Ashburton.83 His Honour spoke of the duty to give a correct estimate or ‘say it could not be done’. The question of liability for representations concerning the cost of the works must not be confused with the question whether the builder has given a firm price to the proprietor in the sense of a promise to do the work for that price; it may be, however, that Chapman J is to be regarded as having referred to the relationship between the parties merely for the purpose of his conclusion that in all the circumstances the implication should be made that the work was to be done for a certain price. A contractor professing special expertise may be liable in negligence for loss suffered by a proprietor when, in pre-contractual negotiations, the contractor makes a negligent statement inducing the proprietor to enter a contract with the contractor and thereby suffer a loss: see further 5.8 and 8.15. [page 89] In J & J C Abrams Ltd v Ancliffe84 a builder was held liable for economic loss suffered by a developer as a result of the builder’s failure to confirm an estimate of building cost when the builder knew that the confirmed price would greatly exceed the original estimate. In the meantime, relying on the estimate, the developer had become committed to substantial irrecoverable outlay. Economic

loss cases however, especially in the area of negligence, tend to raise special considerations.

Standing offers 5.12 A contractor or supplier may tender for the execution of work or the supply of materials over a period. The consequences of the acceptance of such a tender are at times not easily ascertained. The resulting contract may be of several kinds. There may be a firm contract for the execution of a certain amount of work or for the supply of a certain quantity of materials over a period. At the other extreme there is the arrangement where the employer is not bound to give the contractor any order at all: the contractor offers to do work or supply materials at a price and, if the employer chooses to give an order for work or materials during a stipulated time, the contractor is under an obligation to do the work or supply the materials in accordance with the order; but apart from that nobody is bound. There is also an intermediate contract that can be made where, although the parties are not bound to any specified quantity of work or materials, yet the employer is bound to employ and pay the contractor for all the work or goods in fact needed.85 In Milne v Municipal Council of Sydney86 where the plaintiff agreed with the defendant to do all the mechanical repairs required to the defendant’s electrical plant for 12 months, a promise on the part of the defendant to employ the plaintiff to do those repairs to the exclusion of other persons was implied. In The Queen v Demers87 a contract made between a printer and the Crown whereby the former undertook to print certain public documents at specified rates, there being no express obligation imposed on the Crown, was held not to impose any implied obligation on the Crown requiring the Crown to give the printer all or any of the work referred to in the contract or to prevent the Crown from giving the whole or any part of the work to any other printer. The tender is described as a ‘standing offer’ in cases where the contractor offers to do work or supply materials at certain prices upon the footing that, although the employer is not bound to place any order, a binding contract arises upon the placing of each order for the doing or supply of [page 90]

the work or goods ordered.88 A standing offer may be revoked in respect of future orders.89 In Jarvis v Pitt Ltd,90 referred to in 5.10, a quarrymaster at the request of the architect furnished all tenderers with a statement of his terms and prices for the supply of the stone required for the erection of a University Hall. It was held by the High Court that the statement was an offer to supply stone as ordered at the stated prices, provided that all the stone needed was taken from the offeror. The argument that the quarrymaster had done no more than make a standing offer susceptible of a series of acceptances effected by, and binding to the extent of, each order given was rejected. The court further held91 that there was not sufficient ground for limiting the agreement to such stone as should in the event be actually required by the university from the quarry concerned: the transaction between the contractor and the quarrymaster was based on the actual specifications and did not contemplate their variation by the mutual consent of the university and the contractor. In Montefiore v Parkin92 another stone case, the plaintiff contracted to deliver ‘as much boulder stone as the [defendants] will require to carry out and complete their existing contract with’ a municipal shire. The defendants lost their contract with the shire and, in consequence, did not order any stone from the plaintiff. In an action by the plaintiff for damages for breach of contract it was held that the meaning of the contract was that the plaintiff should supply as much stone as the defendants would necessarily have required to fulfil their contract had they carried it out. An argument on behalf of the defendants that no obligation arose until an order for a specific quantity of stone was placed was rejected. On the other hand, in Pitcaithly & Co v John McLean & Son93 the plaintiff failed in an action for breach of a contract where the plaintiff was to supply ‘all the assorted gravel and sand required by and in accordance with’ specifications of another contract made by the defendants ‘which shall from time to time be ordered or required by’ the defendants. It was held that the defendants were bound only to order the quantity they actually required from time to time and that their other contract having been abandoned, they were not bound to take the quantity of material necessary to complete the dock according to the specifications. [page 91]

COLLUSIVE TENDERING Practice of collusive tendering 5.13 Collusive tendering may take several forms. Several contractors may agree that only one of them will tender. Or they may agree that they will all put in the same tender price. In another situation, even though there are in fact several tenders at different prices, these may be the result of an agreement made between the tenderers as to the prices at which they were to tender. The practice of collusive tendering has been of particular concern to public authorities. As to ‘loaded’ tenders see 15.13 and the remarks of Brooking J in Sist Constructions Pty Ltd v State Electricity Commission of Victoria.94 There is authority in Wagdy Hanna and Associates Pty Ltd v National Library of Australia95 that, depending on the intentions of the parties, a term is to be implied into a ‘tender process contract’ that the tender material of each tenderer will be kept confidential. Refshauge ACJ went on in that case, however, to find there had been no breach of such a term. But such a term, it may be said, is one which makes good sense in the context of ensuring the integrity of the tender process is maintained.

Common law cases 5.14 An agreement made between two contractors whereby one of them was not to tender was enforced in Metcalf v Bouck,96 the question of illegality not being raised. In Jones v North97 four quarrymasters, A, B, C and D, agreed that A should tender for the supply of stone, that B should not tender, that C and D should tender above A’s price, that A should purchase certain quantities of stone from B, C and D at a fixed price and that B, C and D should not supply the municipal corporation which had invited tenders with stone for a certain period. In breach of the agreement B sent in a tender, which was accepted. It was held that the agreement was not illegal, and that A was entitled to restrain B from supplying the corporation with stone. For a more recent example of collusive

tendering see Re Electrical Installations at Exeter Hospital Agreement98 decided under the Restrictive Trade Practices Act 1956 (UK). It is of interest that at common law agreements between two or more persons not to bid against each other at an auction and to share the property [page 92] purchased between them (known as a ‘knock-out’), were held to be not against public policy and were enforceable.99

Statutory position 5.15 The Competition and Consumer Act 2010 (Cth) does not make collusive tendering and bidding the subject of any specific provision. However, central to the operation of Pt IV of that Act, which deals with restrictive trade practices, is a prohibition on collusion and anti-competitive agreements.100 While this is to be seen especially in ss 45–45E of that Act, reference may be made in particular to the provisions of s 45(2) which, inter alia, provides: (2) A corporation shall not: (a)

make a contract or arrangement, or arrive at an understanding, if: (i)

…

(ii) a provision of the proposed contract or arrangement or understanding has the purpose, or would have or be likely to have the effect of, substantially lessening competition; or (b) give effect to a provision of a contract, arrangement or understanding … if that provision: (i)

…

(ii) has the purpose, or has or is likely to have the effect of substantially lessening competition.

The words ‘contract, arrangement or understanding’ are not defined in the Act but it is well established that they include both formal and informal agreements.101 The following statement of French CJ and Kiefel J in Australian Competition and Consumer Commission v Channel Seven Brisbane Pty Ltd102 was quoted by Logan J in Australian Competition and Consumer Commission v TF Woollam & Son Pty Ltd:103 ‘An arrangement or understanding ordinarily involves an element of reciprocal commitment even though it may not be legally

enforceable. It involves [however] more than a mere hope or expectation that each party will act in accordance with its terms.’ The ACL s 56 also deals with the subject of ‘bait’ advertising. This may have special importance in the area of tendering, where the practice of underquoting — which may thus be the ‘bait’ — has historically enjoyed some prominence. _________________________ 1.

(1977) 17 SASR 82 at 86.

2.

See H J Milton (ed), Glossary of Building Terms, National Committee on Rationalised Building, Sydney, 1994, p 145.

3.

[2012] NZHC 1695 at [52].

4.

Harmon CFEM Facades (UK) Ltd v Corporate Officer of the House of Commons (1999) 67 Cons LR 1 at 168.

5.

[1956] AC 696.

6.

See GHP Piling Ltd v Leighton Contractors Pty Ltd [2012] NZHC 1695.

7.

Hughes Aircraft Systems International v Airservices Australia (1997) 146 ALR 1 at 25. See also MJB Enterprises Ltd v Defence Constructions (1951) Ltd (1999) 15 Const LJ 455 (SC of Can).

8.

Harmon CFEM Facades (UK) Ltd v Corporate Officer of the House of Commons (1999) 67 Cons LR 1.

9.

[2012] VSCA 201 at [52]–[57].

10. [2012] NZHC 1284 at [29]. 11. Martel Building Ltd v Canada [2002] 2 SCR 860 at [88]. 12. See Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 3 All ER 25 at 31. 13. GHP Piling Pty Ltd v Leighton Contractors Pty Ltd [2012] NZHC 1695 at [64]. 14. [1957] 1 WLR 932 at 934. 15. [1961] SLT 10. 16. [1977] 2 NSWLR 880 at 902–3. 17. Ibid at 898. 18. [1936] 2 KB 403. 19. [1984] 1 All ER 504 at 511. 20. (1989) 16 NSWLR 582 at 621. See also Re Byrne Australia Pty Ltd and the Companies Act (No 2) [1981] 2 NSWLR 364. 21. [1993] 2 VR 221 at 258–9. 22. (1989) 162 CLR 221. 23. [1977] 2 NSWLR 880 at 897. 24. Ibid at 256–7.

25. See Re Gasbourne Pty Ltd [1984]VR 801 at 849; Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 111 ALR 649 at 669; Christiani & Nielsen Pty Ltd v Goliath Portland Cement Co Ltd (1993) 2 Tas R 122 at 131, 171. 26. (1993) 60 SASR 525. 27. [1995] 1 WLR 212 at 227, 230–1. 28. [1999] FCA 60. 29. Shaft Drillers International LLC v Australian Shaft Drilling Pty Ltd [2013] QSC 79 at [2] per Jackson J. 30. [2013] NTSC 32 at [136]. 31. (2007) Aust Contract R 90-250; [2007] NSWSC 228 at [242]. 32. [2001] FCA 809. 33. [2000] NSWSC 1072 at [88]. 34. [2010] NSWSC 1352. 35. Ibid at [386]. 36. Kleinwort Benson Ltd v Malaysia Mining Corp Bhd [1989] 1 All ER 785. See also comments of Tadgell J in Commonwealth Bank of Australia v TLI Management Pty Ltd [1990] VR 510 at 514–15. 37. (1971) 9 BLR 20. 38. (1993) 60 SASR 187 at 206. Compare Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502. 39. McGellin v Mount King Mining NL (1998) 144 FLR 288 at 294 per Murray J. For a recent case involving a letter of comfort see Letizia Building Co Pty Ltd v Redglow Asset Pty Ltd [2013] WASC 171. 40. Bristol, Cardiff and Swansea Aerated Bread Co v Maggs (1890) 44 Ch D 616 at 625. 41. [2001] NSWSC 1040 at [53]. 42. (1978) 87 DLR (3d) 761. 43. (1981) 119 DLR (3d) 267 at 271. See also Markholm Construction Co Ltd v Wellington City Council [1985] 2 NZLR 520. 44. [1908] VLR 584. 45. (1884) NZLR 3 (SC) 237. 46. [1910] QWN 11. 47. (1890) 44 Ch D 616. 48. (1893) 19 VLR 84. 49. (1870) 1 VR (L) 207. 50. [2009] WASC 398 at [44]. 51. Cook Islands Shipping Co Ltd v Colson Builders Ltd [1975] 1 NZLR 422 at 437. 52. [1964] AC 465. 53. [1972] NZLR 1081. 54. [1972] NZLR 1081 at 1082–3. 55. See for example: Esanda Finance Corp Ltd v Peat Marwick Hungerfords (Reg) (1997) 142 ALR 750; Tepco

Pty Ltd v Water Board (2001) 178 ALR 634. 56. Allied Finance and Investments Ltd v Haddow & Co [1980] 2 NZLR 428 at 435 per Prichard J. 57. Body Corporate 202254 v Taylor (2008) 12 TCLR 245; [2008] NZCA 317 at [16] per William Young P and Arnold J. 58. Tepco Pty Ltd v Water Board (2001) 178 ALR 634 at 646 per Gleeson CJ, Gummow and Hayne JJ. 59. [2000] NZCA 115 at [7]. 60. [2013] NZHC 970 at [195]. 61. [2013] QSC 16. 62. K M Young v Cosgrove [1963] NZLR 967. See also J & J C Abrams v Ancliffe [1978] 2 NZLR 420 where a builder allowed the proprietor to rely upon a negligently given estimate without correcting the estimate which the builder knew to be unreliable. 63. Cana Construction Co Ltd v The Queen (1973) 37 DLR (3d) 418. 64. See Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd (1998) 153 ALR 198 at 229. 65. (1935) 54 CLR 506. 66. Ibid at 514–15. 67. Ibid at 515–16. 68. (1885) NZLR 3 (SC) 441. 69. (1970) 126 CLR 239 at 242–3. 70. [1974] VR 39. 71. Ibid at 48. 72. [1948] Ch 93 at 104. 73. [1975] VR 338. 74. Ibid at 342. See also McFee Engineering Pty Ltd (in liq) v CBS Constructions Pty Ltd (1979) 44 FLR 340. 75. (1981) 46 LGRA 168. 76. Ibid at 176. 77. [1983] 2 Qd R 533 at 540–1. 78. [2012] NZHC 1695 at [36]. 79. Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd (1998) 153 ALR 198 at 224. 80. (1899) 16 TLR 45. 81. [1919] GLR 156. 82. Ibid at 160. 83. [1914] AC 932 at 955. 84. [1978] 2 NZLR 420. 85. See generally Percival Ltd v London County Council Asylums and Mental Deficiency Committee (1918) 87 LJKB 677. 86. (1912) 14 CLR 54.

87. [1900] AC 103. 88. See Great Northern Railway Co v Witham (1873) LR 9 CP 16; Kelly v Caledonian Coal Co (1898) 19 LR (NSW) 1; Colonial Ammunition Co v Reid (1900) 21 LR (NSW) 338; Munday and Shreeve v State of Western Australia and Western Australian Transport Board [1962] WAR 65; Cook Islands Shipping Co Ltd v Colson Builders Ltd [1975] 1 NZLR 422. 89. Offord v Davies (1862) 12 CBNS 748; 142 ER 1336. 90. (1935) 54 CLR 506. 91. Ibid at 516–17. 92. (1907) 26 NZLR 1317. 93. (1911) 31 NZLR 648. 94. [1982] VR 597 at 606. 95. (2012)7 ACTLR 70; [2012] ACTSC 126 at [233]. 96. (1871) 25 LT 539. 97. (1875) LR 19 Eq 426. 98. [1970] 1 WLR 1391. 99. Rawlings v General Trading Co [1921] 1 KB 635; Cohen v Roche [1927] 1 KB 169; Gomm v England (1899) 5 ALR (CN) 78; Harrop v Thompson [1975] 1 WLR 545. 100. Refrigerated Express Lines (A’asia) Pty Ltd v Australian Meat and Livestock Corp (No 2) (1980) 29 ALR 333. For a case see Queensland v Pioneer Concrete (Qld) Pty Ltd [1999] FCA 499. 101. See Re British Basic Slag Ltd Agreements [1963] 1 WLR 727 at 746; Top Performance Motors Ltd v Ira Berk (Qld) Pty Ltd [1975] ATPR 40-004 at 17,116. On price-fixing arrangements see further Radio 2 UE Sydney Pty Ltd v Stereo FM Pty Ltd (1983) 48 ALR 361. 102. (2009) 239 CLR 305 at [48]. 103. (2011) 285 ALR 236; [2011] FCA 973 at [52].

[page 93]

6

TIME FOR COMPLETION

GENERALLY Time requirement 6.1 If no time for completion is agreed upon, a term will ordinarily be implied that the work be done within a reasonable time having due and equal regard to the interests and convenience of both parties.1 The court will determine what is fair to both parties and as was said by Mullighan J in the Full Court of South Australia in Woolcock Engineering Pty Ltd v SWF Hoists & Industrial Equipment Pty Ltd,2 a case about a failure to install cranes on time, what ‘is fair to the parties will be what they could reasonably have expected to agree upon by reference to the facts as then known by both of them, not by reference to the facts known by only one party which [have] not been disclosed to the other’. Written building agreements almost invariably make express provision in relation to time for completion. Where the contract documents contained a clause providing that the work was to be done within a certain number of weeks and that number was left blank, a submission that the contract was bad for uncertainty failed, it being held that the clause should be treated as struck out, leaving the contract one for work which was by implication to be performed within a reasonable time.3 An agreement may expressly provide for completion within a reasonable period. One standard form contains a promise by the contractor to complete ‘within a reasonable time under prevailing conditions’ but it would seem that this provision is the same as what would otherwise be implied: the reference to ‘prevailing conditions’ adds nothing because what is a reasonable time must always depend upon all the circumstances. In some circumstances, time may be made of the essence of the contract by the unilateral act of a party. Where the

other party has been guilty of unnecessary delay, a party may serve a notice limiting a time at which the contract will be treated as at an end. That time must be a reasonable time. But whether delay is, of itself, [page 94] sufficient to raise an inference of lack of due diligence, such as to entitle a notice to be served, must depend on the circumstances.4 In determining the reasonableness of the time so limited, the court will consider not only what remains to be done, but all the circumstances of the case including previous delay and the attitude of the party giving the notice.5 In Gold Coast Oil Co Pty Ltd v Lee Properties Pty Ltd6 it was held that, as a general rule, where time is not of the essence, a party desiring to rescind a contract for failure to perform on the due date can only do so after giving a notice to complete and after non-compliance with that notice. However, it was also there held that the general rule does not apply where the other party has evinced an intention not to be bound by the contract. Imposing conditions of a kind not warranted by the contract, such as to time, can itself amount to repudiatory conduct.7

Bonus or damages 6.2 Building agreements commonly provide liquidated damages to be paid by the contractor in the event of delay in completion. See 6.3. A provision for a bonus for early completion is much less common.8 Nevertheless, there are many circumstances where it may make great sense to insert a bonus provision as an incentive to the builder to achieve completion on time. Some employers go so far as to offer the builder cash sums to achieve this objective, entirely unprovided for by the contract and regardless of the legality of doing so.

LIQUIDATED DAMAGES PROVISIONS Liquidated damages or penalty 6.3 Building agreements very commonly provide for payment by the contractor

of a sum described as ‘liquidated damages’ or ‘liquidated and ascertained damages’, usually for delay in completion. When a provision of this nature is invoked the contractor may argue that the sum stipulated for is not a genuine pre-estimate of loss or damage but a penalty. A liquidated damages provision is a genuine preestimate of loss or damage but a penalty is not.9 A penalty, on the other hand, is often included in order to induce or compel compliance with the principal obligation under the contract and is in a sense collateral.10 If the provision is held to be penal, it has no legal [page 95] effect11 and is unenforceable12 but the contractor may not entirely escape liability and will be liable to pay such damages as the employer is able to prove, although the better view appears to be that the penal provision sets a limit beyond which damages may not be recovered.13 But on a quantum meruit it is no objection that the figure arrived at exceeds the figure payable had the contract been performed.14 On quantum meruit see 8.8–8.9. The doctrine of penalties and its foundations was considered by the High Court in Andrews v Australia and New Zealand Banking Group Ltd.15

Doctrine of penalties 6.4 It may be said that the doctrine of penalties has pursued such a tortuous path in the course of its long development that it is a risky enterprise to construct an argument on the basis of the old decisions.16 Davies JA in Bartercard Ltd v Myallhurst Pty Ltd17 referred to the ‘arbitrary nature’ of the doctrine. Nevertheless, in determining whether a sum stipulated is a penalty or not, reference is usually made to the tests laid down by Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd18 as follows: 1.

The use by the parties of the expression ‘penalty’ or ‘liquidated damages’ is by no means conclusive.

2.

The essence of a penalty is a payment of money stipulated as in terrorem of the offending parties; the essence of liquidated damages is a genuine covenanted pre-estimate of damage.

3.

The question whether a sum stipulated is a penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged as at the time of the making of the contract, not as at the time of the breach.

4.

To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive: (a)

it will be held to be a penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach; [page 96]

(b) it will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum, which ought to have been paid; (c) there is a presumption (but no more than that) that it is a penalty when a single lump sum is made payable by way of compensation, and the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage; (d) it is no obstacle to the sum stipulated being a genuine pre-estimate of damage that the consequences of the breach are such as to make precise pre-estimation almost an impossibility. On the contrary, that is just the situation when it is probable that pre-estimated damage was the true bargain between the parties. In Cedar Meats Pty Ltd v Five Star Lamb Pty Ltd19 Sifris J summarised the law this way: The question whether a provision is a penalty is one of characterisation, to be determined as a matter of substance, taking into account all the circumstances. The critical question is whether the burden imposed by the clause is ‘extravagant and unconscionable’. The factors to consider include the circumstances of the parties at the date of the contract, their perceptions at that time regarding their respective positions should breach of contract occur at a later and perhaps distant time, and their understanding of the likely imposition generated by the clause.

In that case his Honour found cl 8(a) of the agreement there under

consideration to be a penalty and unenforceable on the ground that the stipulation was for an extravagant amount far exceeding the greatest loss suffered by the plaintiff. It was not, however, strictly necessary for him to deal with this issue, as he pointed out. Following a review of the authorities, Mason and Wilson JJ in AMEV-UDC Finance Ltd v Austin20 referred to the supervisory jurisdiction of the courts, not to rewrite contracts imprudently made, but to relieve against provisions which are so unconscionable or oppressive that their nature is penal rather than compensatory. They then said:21 The test to be applied in drawing that distinction is one of degree and will depend on a number of circumstances, including (1) the degree of disproportion between the stipulated sum and the loss likely to be suffered by the plaintiff, a factor relevant to the oppressiveness of the term to the defendant, and (2) the nature of the relationship between the contracting parties, a factor relevant to the unconscionability of the plaintiff’s conduct in seeking to enforce the term.

[page 97] And as they then said,22 ‘the courts should not be too ready to find the requisite degree of disproportion lest they impinge on the parties’ freedom to settle for themselves the rights and liabilities following a breach of contract’. This same sentiment was also expressed by the Privy Council in Philips Hong Kong Ltd v A-G of Hong Kong23 where emphasis was given to the extravagance of the sum payable as the test to be applied. To similar effect is the High Court decision in Esanda Finance Corporation Ltd v Plessnig.24 But there is authority in Multiplex Constructions Pty Ltd v Abgarus Pty Ltd25 that a provision which is not open to empirical attack based on quantum may still be objectionable on the ground of unconscionability — the court looking at such matters as ‘the circumstances of the parties at the date of the contract, their perceptions at that time regarding their respective positions should breach of contract occur at a later and perhaps distant time, the equality or inequality of bargaining position at the date of contract, and the willingness or unwillingness of a party to accept an imprecise or in some respects ill defined obligation to pay damages as the price of obtaining what presumably was regarded as a profitable contract’.26 There is also authority in Wollondilly Shire Council v Picton Power Lines Ltd27 that the doctrine of penalties in principle applies to provisions which provide not for the payment of

money but for the transfer of money’s worth. But a doctrine of proportionality as such is not the law as made clear by the High Court in Ringrow Pty Ltd v BP Australia Pty Ltd:28 ‘The principles of law relating to penalties require only that the money stipulated to be paid on breach or the property stipulated to be transferred on breach will produce for the payee or transferee advantages significantly greater than the advantages which would flow from a genuine preestimate of damage.’ Although Mason and Wilson JJ in AMEV-VDC Finance Ltd did use the expression a ‘degree of disproportion’ they were not to be taken as asserting any doctrine of proportionality of the kind relied on by the appellant, said the High Court.29 Where the contract provides for the payment to or deduction by the proprietor of liquidated damages for delay in completion at a stated rate per day, week or other period, the provision will not be regarded as penal unless the sum stipulated is quite unreasonable. Provisions for the payment or deduction of a daily sum were upheld in Williamson v Murdoch30 and Bysouth v Shire of Blackburn and Mitcham (No 2).31 If the clause fixes a daily sum it will [page 98] ordinarily be construed as requiring payment in respect of every day during the period of delay, and if the parties wish to limit the builder’s liability to working days they should do so expressly.32 While provision for the payment of damages for delay at a specified rate is normally unexceptionable, a provision superadded for payment of a lump sum will usually be obnoxious as a penalty. So where a contract provided for payment of damages for delay at the rate of £10 per week and went on to provide that in case the contract should not be in all things duly performed by the contractors, they should pay to the employer £1,000 as and for liquidated damages, the £1,000 was regarded as in the nature of a penalty.33 But the mere possibility of unfairness lurking in a formula contained in a provision is not sufficient to characterise the provision as a penalty.34 Nor is the possibility of a windfall brought about by the operation of a provision enough necessarily to make it a penalty.35

FORFEITURE CLAUSES

Forfeiture of deposit 6.5 Conditions of tendering usually provide for the forfeiture of the deposit should the tenderer be unwilling to proceed. Provided that the amount of the deposit is not plainly unreasonable or if there is no argument available based on unconscionability, sums of this kind will not be regarded as penalties. For example, in Dunton v Warrnambool Waterworks Trust36 a provision in the conditions of tendering for forfeiture of the deposit of five per cent if the tenderer failed to sign the formal contract was held by the trial judge not to impose a penalty; on appeal, the point was abandoned by the tenderer. In Pitt v Curotta37 there was ‘no doubt’ that the defendant was entitled to retain the deposit which was a guarantee of the plaintiff’s obligations under the contract. The nature of a deposit was discussed by Kaye J in Fiorelli Properties Pty Ltd v Professional Fencemakers Pty Ltd.38 His Honour said that in ‘any contract, a deposit constitutes an earnest, to bind the bargain, and a guarantee of due performance, of the contract, by the payee’.39 He rejected the notion that legal principles relating to the forfeiture of deposits are confined to contracts for the sale of real property and held that they are applicable to any contract whatever.40 He held that the magistrate in the case did not err in law in holding that the first respondent, carrying on the business of manufacturing [page 99] and installing steel fencing and gates, was entitled to retain the whole of the deposit of $17,300 paid to it by the appellant.

Other forfeitures 6.6 Clauses may provide for the forfeiture of moneys other than the deposit or of materials and plant. In Ranger v Great Western Railway Co41 the contract provided, first, that upon the contractor’s default, after seven days’ notice, the proprietor might proceed and complete the works itself, paying for the same out of the money then remaining due to the contractor; secondly, that the payments then already made to the contractor were to be taken as full satisfaction for all works then already done; thirdly, that all money being due, or which would thereafter

have become due, to the contractor under the contract, and all the tools and materials in and about the works, were to become the absolute property of the proprietor; and fourthly, that if the moneys, tools and materials to become the property of the proprietor were insufficient to cover all charges occasioned by completing the works, then the contractor was to make good the deficiency. Lord Cranworth LC referred to the fact that the right of the proprietor to invoke the forfeiture clause might arise at any period of the contract including a stage at which almost the whole of the work had been done and that on one view of the provisions the proprietor might make a very large profit by forfeiting that which was worth a sum far in excess of the value of the work remaining to be done.42 Similarly, in Commissioner of Public Works v Hills43 the contract provided that in the event of non-completion by the due date the contractor should forfeit the retention moneys and also certain security money, and it was held that the provision could not be treated as a genuine pre-estimate of loss. On the other hand, in Bysouth v Shire of Blackburn and Mitcham (No 2)44 it was a condition of a contract for the construction of a road that the municipal council might by writing determine the contract if in the opinion of the engineer the contractor used bad materials or committed other breaches of the contract, and that in that event the moneys previously paid to the contractor should stand in full satisfaction of all claims under the contract and the contractor’s deposit and all retention money and all materials and plant upon the works should remain the absolute property of the council. The Full Court was of opinion that, as to moneys already payable to the contractor at the time of the termination, and all property belonging to the contractor at that time, and not vested in the council by the terms of the contract, the clause was a penalty clause. [page 100] Bysouth’s case was distinguished by the majority in Forestry Commission of NSW v Stefanetto.45 In that case the contract provided that, upon the default of the contractor, the principal might take over the work. In that event the principal had the right to take possession of, and use for the purpose of the contract, any materials and construction plant on the site and owned by the contractor without payment or any responsibility to make allowances for fair wear and tear and to retain their possession until any money ultimately due by the contractor had been

paid. Barwick CJ and Jacobs J held that these contractual provisions were designed to secure and achieve early completion of the contract work and were not in the nature of a penalty.46 Bysouth’s case was distinguished on the ground that it gave to the principal right of property and not merely possession.47 Barwick CJ left as an open question whether, if the relevant provisions were held to be penal, the reach of the doctrines of equity against forfeitures and penalties would have provided jurisdiction to grant relief.48 On the other hand, Jacobs J expressed the view that if the work should be completed for a sum less than the contract price, equity might treat as penal the provision depriving the contractor of compensation or allowance for the use of the plant and require, on a final account, that compensation or allowance be made by the principal.49 Forfeiture clauses, such as the one in Ranger v Great Western Railway Co or the one in Bysouth’s case, these days may be analysed in terms of unconscionability: indeed, the decision of Davies J in Federal Airports Corporation v Makucha Developments Pty Ltd50 is plainly to this effect. There his Honour said that the parties to an agreement cannot oust the jurisdiction of a court of equity to relieve against forfeiture ‘for a court of equity will relieve against forfeiture if there is an equity which justifies it in doing so’.51 As he made clear in that case the ‘principles of equity with respect to unconscionable conduct are not limited to contracts for the purchase of land or leases’.52 However, it has been said to be still ‘open to doubt’ to what extent those very principles do indeed apply to the grant of such relief.53 [page 101]

LOSS OF RIGHT TO LIQUIDATED DAMAGES Generally 6.7 A contractor faced with a claim to recover or to retain liquidated damages for delay will often contend that the sum sought to be recovered is in truth a penalty and not liquidated damages: see 6.4. There are, however, various other grounds on which the contractor may rely when a proprietor seeks to invoke a clause providing for liquidated damages for delay. Unconscionability, not merely as an

aspect of the doctrine of penalties, may itself be a ground for saying a clause may not be invoked:54 see 2.11. But for other grounds see 6.5 and 6.6.

Prevention by proprietor 6.8 It is a fundamental principle that one party may not rely upon the failure of the other party to perform the contract where it is the former who has prevented the performance. Or, as it was put in Panamena Europea Navigacion (Compania Limitada) v Frederick Leyland & Co Ltd,55 ‘at common law … no person can take advantage of the non-fulfilment of a condition the performance of which has been hindered by himself’. It was expressed in similar terms by Blue J in Built Environs Pty Ltd v Tali Engineering Pty Ltd:56 ‘A party generally cannot rely upon non-fulfilment of a condition the performance of which has been prevented by that party’s own breach of contract.’ As such it is commonly known as the ‘prevention principle’. One application of this principle, which is to some extent covered by a ‘best endeavours’ or ‘co-operation’ clause, is a general rule that a proprietor may not recover or retain damages for delay in completion where timely completion of the work has been prevented by the proprietor’s own act. The proprietor may, for example, have failed to give possession of the site or deliver machinery to be erected by the contractor or may have ordered extras, and in either case thereby increased the time required to execute the works. In these circumstances the proprietor will (unless the position is affected by a clause providing for an extension of time) usually be unable to claim damages for delay.57 This is consistent with the application of the principle [page 102] that no person shall be allowed to prevent an act being performed and then take advantage of that non-performance for such person’s own benefit.58 Where the contract entitles the proprietor to order extra work the question arises whether upon its true construction the builder has taken on a burden of completing the works within the time originally specified notwithstanding the ordering of extras; a court, however, may be reluctant to adopt this

construction.59 In SMK Cabinets v Hili Modern Electrics Pty Ltd60 it was held by Brooking J that the ordering of variations after the due date for completion which substantially delays completion will, unless the contract provides otherwise, and in the absence of an applicable extension of time clause, disable the proprietor from recovering or retaining liquidated damages which might otherwise have accrued after the giving of the order, although the proprietor’s rights in respect of amounts already accrued by way of liquidated damages will not be affected. The general rule was examined by Menhennitt J in Aurel Forras Pty Ltd v Graham Karp Developments Pty Ltd,61 who pointed out that it has not been of universal application. He concluded that: … the question whether a liquidated damages provision is rendered inapplicable by acts of an employer which impede or prevent a builder from commencing contract works on time or which significantly add to the work to be done so as to render completion on time difficult or impossible, turns on the proper construction of the contract and that, where the liquidated damages provision is rendered inapplicable, it is because there has been implied into the contract a term producing this result or the agreement between the parties has been varied by mutual agreement to produce this result.62

His Honour said63 that the House of Lords in Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board64 could not have accepted the earlier authority of Dodd v Churton65 as establishing, as an invariable rule of law, that ‘when there is a stipulation for work to be done in a limited time, if one party by his conduct … renders it impossible or impracticable for the other to do his work within the stipulated time, then the one whose conduct caused the trouble can no longer insist upon strict adherence to the time stated’. Insofar as Lord Pearson (and the three other Law Lords who concurred with him) accepted that Dodd v Churton did establish that proposition, Menhennitt J took them to mean that it must have been accepted only as a principle to be applied where the court concludes that a term is to be implied. Despite the [page 103] logic of Menhennitt J’s reasoning and conclusion, it does not sit easily with terminology used concerning a general rule in such cases.66 The judgment in Aurel Forras’ case illustrates the difficulty in reconciling the decisions on this subject and shows the need for caution by contractors in relying

upon the comfort of ‘a general rule’. Formal building agreements usually make elaborate provision with regard to the ordering of extras and the extension of time for completion, and the contract will usually make it clear that if an extension of time is granted on the ground that extra work has been ordered, or on any other ground, the contractor will be liable for liquidated damages should there be a failure to complete by the extended date.67 But, unless the contract provides otherwise, liquidated damages for delay in completion cannot be recovered by the proprietor where the ordering of extras or other variations causes or contributes to the delay in completion, notwithstanding that the contractor may in fact have been disabled from completing by the due date by the contractor’s own delays.68 The paradoxical situation at times consists of the proprietor contending and the contractor denying that an extension of time has been granted. An example is MacMahon Construction Co v Crestwood Estates.69 Burt J pointed out that in the absence of an extended time for completion there was no date from which liquidated damages could run and the right to liquidated damages would have gone.70 His Honour was concerned with a clause which provided as follows: If the Contractor be delayed in the execution of the Works by a cause which he considers to be such as to justify an extension of the time fixed by the Contract for the completion of the Works and if he desire to claim such an extension, he shall give to the Engineer, in writing, the earliest possible notice of his claim for an extension of time for the completion of the Works, together with a statement of the facts on which he bases his claim. If the Engineer be of the opinion that the cause of the delay is such as to justify an extension of the time for completion of the Works and that all reasonable action has been or will be taken by the Contractor to prevent such delay from extending the time for completion of the Works, the Engineer shall grant such extension of time as he shall think fit.

Burt J held that this provision dealt with a cause which in some way held up the doing of the work, for example, bad weather or a strike. A contractor was not ‘delayed in the execution of the Works’ by the acts of the principal in ordering additional or different work. Burt J then went on to consider another clause which provided: [page 104] If, in the opinion of the Contractor, any variation under Clause 40.1 prevents him from fulfilling any of his obligations or guarantees under the Contract, he shall notify the Engineer in writing as soon as

possible in what manner his obligations or guarantees may be affected. The Engineer shall notify the Contractor forthwith whether he confirms or withdraws the order for variation. If the Engineer confirms the order for variation, the Contractor’s obligations and guarantees shall be varied in so far as the variation under Clause 40 shall in the opinion of the Engineer require.

Burt J held that a variation prevented the contractor from fulfilling the contractor’s obligations under the contract within the meaning of this clause if the impact of a variation order upon the contractor’s time schedule was such that the contractor was unable to complete the works (including the variations) within the specified time. Although the prevention principle is established in authority, it has been said that it is not entirely clear what its juridicial basis is: it could be a term generally implied into contracts requiring co-operation between parties or it may be part of the principle of avoiding circuity of action (otherwise due to damages to which the principal would otherwise have been entitled for breach of the contract being recoverable back by the contractor as damages arising from the principal’s own breach of contract) or it may be a principle in its own right derived from notions of fairness and justice.71

Waiver 6.9 A right to recover or deduct damages for delay may be ‘waived’, and the ‘waiver’ may be either express or implied. Or, the waiver might be analysed in terms of an estoppel: see 3.8. Strictly, this could equally also be analysed as an election.72 Where the proprietor is entitled to deduct liquidated damages from progress payments the failure to exercise this right (depending on the terms of the contract) may prevent the deduction of the amount in question when a subsequent certificate is issued. Building agreements have previously given the proprietor the option to deduct from amounts due to the builder, or recover from the builder, liquidated damages for delay. If the contract gives only the right to deduct liquidated damages, the proprietor may be left without remedy against the builder if a final certificate is given for the full amount without any deduction on account of liquidated damages. The proprietor in such circumstances may be entitled to recover from the architect if the certificate was given in breach of duty, or negligently. The right to make a deduction of this nature from a progress

payment is now, however, seriously curtailed by security of payments legislation which has generally been well received. See 4.16. [page 105] In cases where the proprietor is given the usual option of retaining or recovering, the issue of a final certificate without deduction of any amount by way of damages for delay may be regarded as the grant of an extension of time by the architect.73 If by the contract the proprietor is entitled to deduct liquidated damages for delay from any moneys due to the contractor, but there is no agreement by the contractor to pay those damages, the proprietor will lose the right to liquidated damages by making a payment without deducting damages.74 In White v Ensor75 the right to liquidated damages for delay was held not to have been waived by the issue of a final certificate.

Determination of contract 6.10 Where the contractor fails to proceed with the work with reasonable diligence the proprietor may determine the contract either in the exercise of a power in that behalf conferred by the contract or (where the circumstances warrant it) by accepting a repudiation of the contract by the contractor.76 The contractor may have already become liable to pay liquidated damages for delay, and the question may arise whether the contractor incurs further liability in respect of the period between the date of determination of the contract and the date of completion of the works. Where the proprietor has exercised an express power conferred by the contract, it will be a matter of ascertaining the rights of the parties from the terms of the contract. The contract may provide, not for determination by the proprietor, but for taking the works out of the hands of the contractor, and it may on its proper construction make the contractor liable to pay liquidated damages in respect of the period after the works are removed.77 Where the contract is determined by the acceptance of a repudiation, liquidated damages which have become payable up to the time of the determination may be recovered, but thereafter the liability of the contractor for liquidated damages will cease, although the contractor will be liable for unliquidated damages. This is the consequence of the rule that the effect of the

acceptance of the repudiation of a contract is to put an end to the contract so far as its future performance is concerned, leaving the repudiating party liable to an action for damages.78 Election to commence proceedings for specific performance does not prevent a subsequent claim for damages for breach of contract, as has been indicated in a New South Wales case. That election does not amount to a waiver of rights existing up to that time to terminate for repudiation, such [page 106] that it is necessary for there to be further repudiatory conduct to bring about a right to terminate.79

STANDARD FORM PROVISIONS Suspension of works 6.11 The architect or superintendent may be empowered to instruct the contractor to suspend the whole or any portion of the works. Usually there is provision for the payment of compensation to the contractor in circumstances where this is appropriate. Where the contract provided that the contractor should on receiving written notice from the engineer suspend the whole or any portion of the works and should have no claim for loss or damage on that account until 30 days from the date of the suspension, it was held that the clause gave rise to a liability to compensate once the 30 days expired.80 Almost invariably, the clause providing for a suspension of work requires a written order, but the proprietor may be precluded by conduct from relying on the absence of a written order, as by standing by and allowing work to be done, and this is so even if the contract contains a clause purporting to prevent the informal waiver of any of the provisions of the contract.81 The question may arise whether a clause providing for payment of compensation to the contractor if the suspension continues for more than a stated period is cut down by a provision empowering the engineer to give orders respecting the time of execution of

portions of the works.82 A contractor who fails to establish a claim for compensation under the suspension clause may endeavour to maintain an action for damages for interference by the engineer as the alleged servant or agent of the employer.83 Clause G11.1 of ABIC MW 2008 provides that the architect at the owner’s request must instruct the contractor in writing to suspend the works. The contractor must promptly comply with the instruction. If the suspension continues for more than 20 days the contractor, by cl G11.2, may terminate its engagement (as set out in cl Q13) as if it has already given notice of termination under cl Q12. Under cl G12.1, the contractor may be instructed to recommence works.

Time extension for delay 6.12 The ABIC form of contract (cl L1.1 of ABIC MW 2008) makes provision for adjusting the date for practical completion on account of [page 107] delay.84 In particular it provides that a claim for adjustment to that date in respect of a delay may be made in the case of delay caused by: (a)

loss of or damage to the works, or materials or equipment on the site that are intended to be incorporated in the works, or plant or equipment used on the site, provided that loss or damage was not caused by an act or omission of the contractor

(b) the owner failing to give possession of the site in accordance with clause F1 (c) an architect’s instruction (d) relevant authorities, including a private building surveyor, failing to promptly give approval for the works (except when the delay is caused by an act or omission of the contractor) (e) a dispute with a nearby owner or occupier (except one caused by an act or omission of the contractor) (f)

the owner’s consultants failing to promptly provide necessary information which is properly due to the contractor or which the contractor has specifically requested in writing

(g) widespread industrial unrest not limited to the site or to any other sites on which only the contractor or any of its subcontractors is working (h) a suspension of the necessary work under clause Q12

(i)

a breach of this contract by the owner

(j)

an act of prevention by the owner not otherwise covered by this clause

(k) any act or omission of a separate contractor which causes interference to the contractor beyond that which a competent contractor might have anticipated, having regard to the contract documents and the requirements of clause G14 (l)

where clause F8 applies, a delay in relation to dangerous or contaminated material, including any reasonable suspension of necessary work

(m) any delay shown in item 24 of schedule 1.

By cl L1.2, the contractor must take all reasonable steps to minimise the impact of any delay on the progress of the works. As well, by cl L2.1.a the contractor may make a claim for an adjustment to the date for practical completion (but not for adjustment of time costs) caused by disruptive weather conditions exceeding the conditions allowable set out in item 25 of sch 1. [page 108]

Recovery by builder of damages or costs and expenses due to delay 6.13 By cl L1.1 of ABIC MW 2008 the contractor is permitted to make a claim for adjustment of time costs in respect of a delay affecting worked days caused by any of 13 specified causes set out in 6.12 above. The requirement for making a claim to adjust the contract and the procedures to be followed are set out in Section H of the form. _________________________ 1.

Dunedin Waterworks Co v Bassett (1868) 1 NZCA 141 at 151.

2.

[2000] SASC 120.

3.

Crowshaw v Pritchard and Renwick (1899) 16 TLR 45.

4.

Hometeam Constructions Pty Ltd v McCauley [2005] NSWCA 303 at [169] per McColl JA.

5.

See Ajit v Sammy [1967] 1 AC 255 (PC); Bow v McGrath Builders Ltd [1974] 2 NZLR 442.

6.

(1984) 1 BCL 63 at 66. See also Ryan v McLachlan (1987) 4 BCL 155 at 159; Bartos v Scott (1993) 26 IPR 27 at 34.

7.

Botros v Freedom Homes Pty Ltd (1999) 15 BCL 351.

8.

For an example see Ware v Lyttelton Harbour Board (1882) NZLR 1 SC 191.

9.

Forestry Commn of NSW v Stefanetto (1976) 133 CLR 507 at 519; Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551 at 555.

10. Cameron v UBS AG [2000] VSCA 222. 11. Citicorp Australia Ltd v Hendry (1985) 4 NSWLR 1 at 23. Compare, however, Jobson v Johnson [1989] 1 WLR 1026 at 1040. 12. Cedar Meats Pty Ltd v Five Star Lamb Pty Ltd [2013] VSC 164 at [110]. 13. Fraser v Evans [1946] VLR 382 at 385. See A H Hudson, Note (1974) 90 Law Quarterly Review 31 and 296 and Note (1975) 91 Law Quarterly Review 25. However, compare remarks in AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 174, 192. 14. Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234. 15. (2012) 290 ALR 595; [2012] HCA 30. 16. AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 186. The same observation is made by Clarke JA in AMEV Finance Ltd v Artes Studios Thoroughbreds Pty Ltd (1989) 15 NSWLR 564 at 570. See generally F Cahill, ‘The Use and Operation of the Liquidated Damages Clause’ (1990) 9 Australian Construction Law Reporter 88. 17. [2000] QCA 445. 18. [1915] AC 79 at 86–8. 19. [2013] VSC 164 at [102]. 20. (1986) 162 CLR 170 at 193. See RT Varghese, ‘Penalties and Agreed Damages’ (1992) 8 Building and Construction Law 270. 21. (1986) 162 CLR 170 at 193. 22. Ibid at 193–4. 23. (1993) 12 Aust Cons LR 20 at 25. 24. (1980) 166 CLR 131. 25. (1992) 33 NSWLR 504 at 509–10. 26. Ibid per Cole J. 27. (1994) 33 NSWLR 551 at 555. 28. (2005) 224 CLR 656; [2005] HCA 71 at [27]. 29. Ibid. 30. (1912) 14 WALR 54 (where the clause was in the specification). 31. [1928] VLR 562. See further Latham v Foster’s Australian Fibres Ltd [1926] VLR 427; Reynolds v Strelitz (1901) 3 WALR 143; Lax v Glenmore Pty Ltd (1969) 90 WN (Pt 1) (NSW) 703. 32. Brown v Johnson (1842) 10 M & W 331; 152 ER 497. See also J Matheson and Co Ltd v Invercargill City Corp [1975] 2 NZLR 226. 33. Re Newman (1876) 4 Ch D 724. 34. Esanda Finance Corp Ltd v Plessnig (1989) 166 CLR 131 at 142.

35. Bartercard Ltd v Myallhurst Pty Ltd [2000] QCA 445. 36. (1893) 19 VLR 81. 37. (1931) 31 SR (NSW) 477 at 481. 38. (2011) 34 VR 257; [2011] VSC 661. 39. Ibid at [31]. 40. Ibid at [27]–[31]. 41. (1854) 5 HLC 72; 10 ER 824. 42. Ibid at 109–10; 839–40. 43. [1906] AC 368. See also Richardson v Motuhora Stone Quarries Co Ltd (1918) 20 GLR 518. 44. [1928] VLR 562. 45. (1976) 133 CLR 507. 46. Ibid at 515, 523–4. 47. Ibid at 515. 48. Ibid. But compare Shiloh Spinners Ltd v Harding [1973] AC 691 at 722 cited in Jobson v Johnson [1989] 1 WLR 1026 at 1043–4. 49. Ibid at 524. 50. (1993) 115 ALR 679. 51. Ibid at 700. 52. Ibid. 53. Fiorelli Properties Pty Ltd v Professional Fencemakers Pty Ltd (2011) 34 VR 257; [2011] VSC 661 at [62] per Kaye J. 54. Compare remarks of Cole J in Multiplex Constructions Pty Ltd v Abgarus Pty Ltd (1992) 33 NSWLR 504 at 508–13. 55. [1947] AC 428 at 436. See also Covecorp Constructions Pty Ltd v Indigo Projects Pty Ltd [2002] QSC 322. 56. [2013] SASC 84 at [152]. 57. Dodd v Churton [1897] 1 QB 562; Findlay v Cameron (1878) 4 VLR (L) 191; Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601; Baskett v Gibbs Beach Gold Dredging Co (Ltd) (1902) 21 NZLR 201; Dillon v Jack (1903) 23 NZLR 547; Cameron Bunning Bros v Manea (1911) 13 WALR 148. 58. Bruce v R (1866) 2 WW & a’B (L) 193. Compare Commissioner for Main Roads v Reed & Stuart Pty Ltd (1974) 131 CLR 378 at 385. 59. Dodd v Churton [1897] 1 QB 562. 60. [1984] VR 391 at 397–8. 61. [1975] VR 202 at 209–16. 62. Ibid at 209. 63. Ibid at 213–15. 64. [1973] 1 WLR 601.

65. [1897] 1 QB 562. 66. See also Findlay v Cameron (1878) 4 VLR (L) 191. Note the comment in SMK Cabinets v Hili Modern Electrics Pty Ltd [1984] VR 391 at 395. 67. Reynolds v Strelitz (1901) 3 WALR 143. 68. SMK Cabinets v Hili Modern Electrics Pty Ltd [1984] VR 391. 69. [1971] WAR 162. 70. Ibid at 167. 71. Built Environs Pty Ltd v Tali Engineering Pty Ltd [2013] SASC 84 at [152] per Blue J. 72. See discussion in Yogesh Enterprises Pty Ltd v Jury [2011] NSWSC 131 at [32]–[38]. 73. British Thomson Houston Co Ltd v West Brothers (1903) 19 TLR 493. 74. Baskett v Bendigo Gold-Dredging Co (Ltd) (1902) 21 NZLR 166. 75. (1892) 11 NZLR 586. 76. For an example see Batrouney v Elliott [2000] VCAT 22. 77. Baylis v City etc of Wellington (1886) 4 NZLR 84. 78. YP Barley Producers Ltd v E C Robertson Pty Ltd [1927] VLR 194. 79. Kelly v Galafassi [2013] NSWSC 680 at [13] per Windeyer AJ (discussing the decision in Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444). 80. Young v Ballarat and Ballarat East Water Commissioners (1878) 4 VLR (L) 502. 81. See Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570. 82. See Young v Ballarat and Ballarat East Water Commissioners (1879) 5 VLR (L) 503 at 557–9. 83. Ibid at 559–61. 84. See A Fletcher, ‘Key Issues in Time Extension Claims’ (1988) 4 Building and Construction Law 193. On the justiciability of disputes between parties as to various forms of certification including certifications for extensions of time see KBH Constructions Pty Ltd v PSD Development Corp Pty Ltd (1990) 21 NSWLR 348. There may be liability in negligence for wrongfully granting an extension of time: see Royal Brompton Hospital NHS Trust v Hammond (No 7) (2001) 76 Con LR 148.

[page 109]

7

RISE AND FALL CLAUSES

GENERALLY Principle of rise and fall 7.1 The most common type of building agreement dealing expressly with the subject of price is the lump sum contract. Under a lump sum contract, the builder is to complete the works for a lump sum price. The lump sum price may be for a fixed or firm amount, without provision for variation of the price as a result of fluctuations in costs. Alternatively, the lump sum price may be subject to ‘rise and fall’.1 Rise and fall refers to an agreed method of adjustment (up or down) to the price of the contract to allow for fluctuations in the costs of labour and/or materials or other costs during construction. Inclusion of a rise and fall provision may also apply as some protection against costs increases.2 Subject to various state or territory laws,3 requiring all domestic building contracts (with limited exceptions) to be for a fixed price, there is no principle of law prohibiting the inclusion of rise and fall provisions in other kinds of building contracts. It is very unlikely a rise and fall provision would ever be implied or held to apply out of custom or usage. However, the method for calculating any cost adjustment must be stated clearly and with certainty in the contract to prevent the provision being held void for uncertainty. In Stanwell Park Hotel Co Ltd v Leslie,4 the High Court held that there is no principle of law which prevents parties to a contract from accepting a fixed figure as a primary monetary expression of a liability and then proceeding to effect a substantive variation of the liability by providing that more

[page 110] or less money must be actually paid according to whether, for example, index numbers evidence a variation of price levels; that is only a method of measuring the actual liability contracted for and nothing more.

Rise and fall clauses 7.2 As a fixed price lump sum contract is an agreement to execute specified work for a fixed price, there should be no need to explicitly state that the price is or is not to be adjusted for fluctuations in costs. If it is a fixed price lump sum contract, the contract will not be subject to rise and fall. The price is fixed for the work defined. In practice, however, out of an abundance of caution, the drafting of a lump sum building contract, often results in the inclusion of a provision expressly negating any adjustment, such as: ‘The contract is for a “firm” or fixed price not subject to adjustments for fluctuations in the costs of labour and/or materials’ or ‘The contract is a lump sum contract not subject to variation owing to rise or fall in the costs of labour or materials’ or ‘Unless stated otherwise, the contract amount shall not be subject to adjustment for rise and fall in costs for any cause whatsoever, including changes in the cost of labour, plant, equipment, materials, taxation (other than GST), excise, duty, fees or charges’.5

A rise and fall clause may be found not only in a lump sum contract but also in a schedule of rates contract. In the case of a lump sum contract, the adjustment to be made is to the lump sum. In the case of a schedule of rates contract, the adjustment is made by varying the rates in the schedule. The rise and fall provision usually states that it shall not apply to any prime cost or provisional amounts, the reason being that such amounts are inherently subject to adjustment. In Cook’s Construction Pty Ltd v Stork Food Systems Australia Pty Ltd,6 a schedule of rates contract was described as where: … the contractor agrees to execute the works for a price to be calculated according to the quantity of material actually used at an agreed rate. Rather than submitting a total price for the works, the contractor indicates rates per square metre, cubic metre or some other form of quantity and is paid for the actual amount performed.

[page 111] … This form of contract has the advantage that the principal is to pay for the amounts required (no more and no less) whereas under a lump sum contract both the principal and the contractor take the risk that their preliminary estimates were accurate.

In Re an Arbitration between Taylor Woodrow International Limited and the Minister of Health7 Bray CJ considered the inter-relation of cll 1(e) and 24(i) of the old Ed 5b with a rise and fall clause. Clause 1(e) provided a right to recover loss, expense or damage incurred because of an architect’s instructions, or the lack of them. Bray CJ pointed out that since the clause provided only for loss expense or damage ‘beyond that otherwise provided for in or reasonably contemplated by this Contract’, the builder could get nothing under cl 1(e) in respect of matters governed by the rise and fall clause which that clause did not give.8 He held, however, that provided there was a cause of delay under cl 24(i) and that all the other conditions of the clause were satisfied, that clause gave the builder a right to recover loss and expense. A similar decision was reached in Max Cooper and Sons Pty Ltd v University of NSW.9

Origins and purposes 7.3 The device of the rise and fall clause appears to be a modern phenomenon and to be part of the afterbirth of inflation. Clauses providing for the adjustment of the price in consequence of alterations in costs, called rise and fall clauses in Australia and ‘fluctuations’ clauses in England, but also known as cost adjustment or escalator clauses, have been in use for about the last three or four decades in particular. While, as the name rise and fall clause implies, these clauses provide not only for a rise in the contract price where costs rise but also for a fall where costs fall, the adjustment is almost invariably in an upward direction, the raison d’etre of the clause being the need to protect contractors against spiralling costs during the period between tender and completion of the work. In CC (Victoria) Pty Ltd and Concrete Constructions Group Pty Ltd v State Electricity Commission of Victoria,10 Teague J was required to decide whether six award variations made in 1989, 1990 and 1991 increasing the wages

[page 112] payable to workers were or were not, in the words of the clause, ‘awarded in recognition of, or in exchange for, efficiency or productivity improvements’. A portion of the relevant clause provided: ‘an award variation in any factor used in determining the Total Award Rate Per Week for any particular classification of employee nominated in Schedule 3.3 shall only be taken into account if such variation has not been awarded in recognition of, or in exchange for, efficiency or productivity improvements …’. His Honour said of the rise and fall clause in that case that its purpose was ‘to provide a degree of protection to the contractor by giving the contractor a limited right to recover certain increases in his costs which occur between the time or the reference date, and the time of completion’. His Honour decided that the variations were not so awarded. His decision was upheld on appeal.11

Interpretation 7.4 In Codelfa Construction Pty Ltd v State Rail Authority of NSW,12 Aickin J (with whom Stephen and Mason JJ agreed on this point) said of the rise and fall clause under consideration there, and perhaps in obiter, that if ‘the construction were doubtful the provision should be construed contra proferentum’ [sic].13 However, in CC (Victoria) Pty Ltd and Concrete Constructions Group Pty Ltd v State Electricity Commission of Victoria14 Teague J said of the clause there that it had been framed in such a way as to make it clear that only some, and not all, increases were to be covered. Accordingly, he said, ‘there is no justification for starting from the premise of construing the clause benignly to the contractor, or from the premise that the result should be what seems fair in all the circumstances’. Further, if, upon proper construction, the contract is for a fixed price, it may only be adjusted in accordance with the contractual provisions or by further agreement between the parties, regardless of industry habits, practice or expectations: Pan Orient Shipping Services Pty Ltd v Basell Australia Pty Ltd.15 Mason J’s ‘true rule’ from Codelfa16 remains the guiding principle, requiring that ambiguity or uncertainty must be shown before evidence of surrounding

circumstances may be admitted to assist in the interpretation of the terms of a contract.17 [page 113]

Advantages 7.5 In 1990, a report was prepared on rise and fall clauses by members of the Department of Economics, University of Newcastle.18 The report notes a number of advantages of rise and fall clauses over fixed price contracts.19 But flexibility must be the main obvious advantage of a rise and fall clause. By virtue of rise and fall, such flexibility should mean in principle the pricing of a construction project at its true market level is achieved.

KIND OF CLAUSES Two kinds of clause 7.6 While rise and fall clauses vary greatly in length and complexity, there are basically two kinds: cost-based20 clauses and formula-based clauses. Cost-based clauses provide for the adjustment of the contract price by reference to actual variations in costs occurring during the contract. Formulabased clauses provide for rise and fall based on formulae, which may be short or elaborate. It must be stressed, however, that this division between the two is plainly arbitrary. A clause may have features of both. Arguably, a provision in a lease providing for rent reviews ‘tied to cost of living from [the] CPI index’,21 has features of both cost-based and formula based clauses.

Cost-based clauses 7.7 An example of a cost-based clause is the ‘Cost Variation Clause’ used by the British Government during the Second World War in its standard form of

contract, which provided that in the event of any variations occurring in wage rates and materials prices after the contract was signed the net amount of such variation would be reimbursed to the contractor as an addition or deduction, as the case might be, from the contract sum. Subject to legal requirements, parties are free to devise their own cost-based clause. A clause might provide for the adjustment of the contract price according to the net increase or decrease in costs as determined by the engineer; or, it might provide that any difference in the price of materials occurring during the period of the contract shall be added to or deducted from the contract price as the case may require. [page 114] Also a British creation, escalation has been applied in construction contracts using data from the BCIS22 Price Adjustment Formulae Indices, previously named the BERR Price Adjustment Formulae Indices.23 These are used in conjunction with the Formula Methods of adjusting building, specialist engineering, and civil engineering contracts to allow for fluctuations in labour, plant and materials. The authors of ‘When is an Escalation Clause Necessary? Dealing with Price Fluctuations in Dredging Contracts’24 describe the two situations where ‘escalation clauses’ may arise, albeit related to fuel, wages, steel costs and others involved in dredging, namely through reimbursing actual costs with the use of actual evidence of expenditure (eg, payslips, receipts) or use of price indexes. The authors note several considerable problems with the administration of cost reimbursement in the absence of specific contractual provisions, and continue at length to describe formula based methods for inclusion. In Australia, however, clauses providing for rise and fall by actual cost are relatively rare and usually found only in contracts that permit a contractor to adjust the price of the contract where there has been a fluctuation in award wages or allowances or by statute.25

Formula-based clauses

7.8 Formula-based rise and fall clauses entitle the contractor to adjustment of price based upon the application of a formula, disregarding any actual cost fluctuations. They are more commonly used than cost-based clauses. Rise and fall clauses in general, and formulae contained within them in particular, have proved a fertile source of dispute.26 The prevailing note regarding the use of formula-based clauses is one of caution.27 As Connolly J observed in Matter of a Building Contract between Blandhurst Pty Ltd and Graham-Hall (Contractors) Pty Ltd,28 although ‘formulae are adopted to avoid the necessity for a precise calculation of the multifarious consequences which may flow from such events as an increase in the price of materials or the cost of labour’, the ‘application of the formulae will frequently be found not to reflect accurately the consequence of the event in the circumstances which have in fact occurred’. [page 115] Formula-based clauses generally have regard to index movements which become reflected as movements in the contract price. The parties may construct their own index or they may be able to make use of an existing one. For example, the Queensland Master Builders Association recommended that if a domestic building contract is to include a price change mechanism, a cost escalation clause for increased costs of labour or materials be inserted into the contract as a special condition. The Association29 also provided a formula for such a cost escalation clause or price change for the supply of labour or materials which is based on price indexes published quarterly by the Australian Bureau of Statistics (ABS). The ABS provides summary measures of the movements in various categories of prices over time including the Labour Price Index (labour index) and the Construction Industry Producer Price Indexes (materials index). There are difficulties in producing a formula that can be applied generally. This was considered by Dr F J Bromilow in a 1977 study called ‘Cost Escalation of Building Contracts’ for the CSIRO Division of Building Research. It may be said that there are two main types of formula. In one, a distinction is drawn between labour and materials and separate adjustments are made to the components of the contract price representing each. In the other, instead of employing both a labour

index and a materials index, a single index is used which makes adjustments to the contract price as a whole. The single index may be a labour index and an example of this second type of formula would be one which provides that the contract price is to be varied by addition or deduction of an amount representing a stated proportion of the percentage variation in the average on-site weekly wage. The clause will then go on to define ‘average on-site weekly wage’, and in further sub-clauses may define the word ‘wage’ (specifying what are to be considered as wages and what are not) and/or may set out how the ‘average’ is to be calculated. The Formula and Conditions for Cost Adjustment of Building Contracts is a formula in use in the building industry, designed to calculate the amount of adjustment applicable to a building contract resulting from fluctuations in the cost of labour and/or materials during the currency of the contract. Another formula (among some others) which has been in use in the building area is the very complicated National Cost Adjustment Provision (NCAP). NCAP2 has replaced NCAP1. The meaning of the expression ‘Base Index Number’ in cl 4.19 2 2.2 of NCAP1 was considered by Kelly J in Parliament House Construction Authority v CLD Meares and Lumo Constructions Pty Limited.30 [page 116] Recent developments in enterprise bargaining may have affected the operation of some of the formulae used.31 Whichever approach is adopted, where a rise and fall provision is included, two things must be specified: the labour and materials ratio that will be applied, and the precise formula that will be used in making any adjustment. The provision must be drafted carefully to prevent being held void for uncertainty.

UNCERTAINTY Doctrine of uncertainty 7.9 The doctrine of uncertainty is considered in 3.1–3.4. It is not easy to

invalidate a provision of a contract on the ground of uncertainty. Mere ambiguity is not sufficient. Uncertainty which vitiates is uncertainty in the sense of absence of meaning.32 Before it can be concluded that words are uncertain, it is necessary to exclude as impossible all reasonable meanings that could give certainty to the words or clause.33 A contract is affected by uncertainty only if its essential terms are uncertain or lacking.34 The function of a court in the case of a dispute over a commercial document is to make it operate, and operate sensibly, if that is possible within the reasonable confines of its language.35 As Brooking J observed in Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd,36 courts ‘are reluctant to strike down an agreement on the ground of uncertainty or incompleteness’. In Seven Network (Operations) Ltd v Warburton (No 2),37 Pembroke J said this of legal uncertainty: … the legal doctrine of uncertainty does not depend on mere complexity. Nor is opacity, obscurity or vagueness sufficient by themselves. There must

[page 117] be such a lack of clarity that the clause is unworkable; that it cannot be given effect in a meaningful way.

General considerations such as these, however, will not save a rise and fall clause that is uncertain.38 More specifically, to avoid being vitiated for uncertainty, the rise and fall clause must specify at least the labour and materials ratio to be adopted, as well as the precise formula by which adjustments will be made.

Effect of uncertainty 7.10 Under the general law of contract, uncertainty may undermine the existence of an enforceable agreement either at creation or when construing its terms.39 If a rise and fall clause is bad for uncertainty, there are at least three possible consequences. The most limited consequence is the invalidation of the rise and fall clause only, leaving the remainder of the contract, including the other provisions as to

price, operative. In that event, a lump sum contract containing a rise and fall clause becomes simply a lump sum contract with no provision for cost adjustment, despite the fact that both parties had contemplated that there should be a cost adjustment. The second position, which might be called the intermediate one, is where the invalidity of the rise and fall clause causes all the provisions fixing the price to fail for uncertainty, but with the rest of the contract remaining on foot. In this situation, there is a contract to do certain work, containing numerous detailed provisions, but not fixing any price. The legal result will be that a reasonable price must be paid. The third position is that the whole contract is bad for uncertainty, in which case, ordinarily, the contractor will be entitled to recover on a quantum meruit. In Bevelon Investments Pty Ltd v Kingsley Air Conditioning Pty Ltd,40 it was common ground that if the rise and fall provisions of the clause in question were bad for uncertainty, not only the rest of that clause but also all the other provisions of the agreement were unable to be severed and fell with them. Newton J did not in terms express any opinion on the correctness of that view, although after referring to such common ground, he cited Whitlock v Brew.41 This might be thought to suggest that he was endorsing the view. [page 118] In the case, it was also common ground that if the rise and fall provisions of the clause were void for uncertainty, the contractor was entitled to recover on a quantum meruit, subject only to giving credit for progress payments already made. In Denton v Ryde Municipal Council,42 the parties entered into a lump sum standard form contract for the erection of a number of cottages. Litigation arose because of a handwritten clause in the following terms: ‘The usual rise and fall clause will apply to this contract in respect of variations in cost of labour and/or material subsequent to 20 November 1946’. In fact, there was no ‘usual rise and fall clause’, and all members of the New South Wales Full Court held the clause to be bad for uncertainty. At the trial before Kinsella J, the plaintiff conceded that there was no ‘usual rise and fall clause’ and claimed on a quantum meruit, relying on an implied promise arising from the performance of the work and its

acceptance by the defendant. The plaintiff argued that the form of contract was not a binding contract, in that an essential condition was too uncertain. This meant, therefore, that the parties were in the same position as if they had proceeded with the work without any formal contract, and the work had been done by the plaintiff at the defendant’s request and accepted by the defendant. Kinsella J held that the claim on a quantum meruit must fail, since the only claim made in the declaration was a claim on the formal contract. He said that he was willing to assume for the purposes of the argument that the formal contract was not a binding contract.43 Kinsella J held that there could be no implied contract for payment and went on to hold that, in any event, a claim on an implied promise to pay would have been defeated by an ordinance requiring a contract made by a municipal council to be in writing.44 In reaching that conclusion, his Honour relied upon the following dictum in Re Allison, Johnson & Foster Ltd; Ex parte Birkenshaw:45 There can be no implied contract for payment arising out of acceptance of the work done where the work was done upon an express request which turns out to be no request at all, but which down to the time when the whole of the work had been done was supposed by both parties to be valid and operative.

That statement, however, had been questioned by the Court of Appeal in Craven-Ellis v Canons Ltd.46 An appeal by Denton to the Full Court was dismissed. On appeal, the plaintiff conceded that the effect of the ordinance was that the claim on a quantum meruit would not succeed unless there was writing evidencing [page 119] the contract. Having made this concession, the plaintiff sought to rely upon either the formal contract or two letters, which were the original tender and its acceptance. As to the formal contract, the plaintiff contended that evidence might be adduced to show what the parties themselves understood the words ‘usual rise and fall clause’ to mean by reference to their own course of conduct while the cottages were being constructed. Street CJ, with whom Owen and Herron JJ agreed, held that such evidence would not be admissible, as extrinsic evidence was admissible only where a clause was ambiguous, not where it was meaningless. The words in question were not ambiguous but meaningless.47 The letters did

not amount to any contractual agreement as to a rise or fall in prices. The letters had been superseded by the formal contract and, in any event, did not give rise to an agreement to pay some additional amount. Severance, which was not dealt with by Kinsella J, was referred to by Street CJ who expressed no decided opinion, saying48 that the plaintiff could get no comfort from the formal contract in that the claim that was made depended upon the contention that the rise and fall clause formed part of the contract, and it made no difference whether the presence of the meaningless clause destroyed the whole contract or whether the clause was severable. The plaintiff could not get assistance from either. Owen J did not refer to severance. Herron J expressed a clear view on the point, saying: There is no “usual rise and fall clause”, or there was none at the time this contract was entered into, and as it was something that was necessary for the parties to agree upon before this contract could be given full efficacy, it follows that there was no consensus ad idem between the parties, and consequently no contract at all.49

More recently, in the New South Wales Court of Appeal case Tonkin v CoomaMonaro Shire Council,50 Ipp JA observed that the basis of Kinsella J’s decision in Denton was an ordinance made under the Local Government Act 1919 (NSW) requiring contracts entered into by a council to be in writing and executed by or on behalf of the council, which requirements were mandatory, not directory, ‘and consequently the defendant council could not validly make a contract to pay the plaintiff for the work and labour done and material supplied for the building of the houses in question’. His Honour also considered51 that Denton52 was inconsistent with Pavey & Matthews Pty Ltd v Paul53 in which the High Court held that a licensed builder who was precluded by the Builders Licensing Act 1971 (NSW) from suing for work he had done under an oral contract, had a right to restitution based on unjust enrichment. Further, in light of the approach laid down by the [page 120] High Court in Project Blue Sky Inc v Australian Broadcasting Authority54 for determining the issue of validity by asking whether it was a purpose of the legislation that an act done in breach of the provision should be invalid, which he described as the preferred approach of courts in this country in recent years, Ipp

JA considered55 that the reasoning underlying Haynes and Denton can no longer be regarded as good law. The ability of the contractor to claim on a quantum meruit means that, unless the proprietor persuades the court to adopt the first of the three possible views, the consequences of the invalidation of the rise and fall clause are by no means as drastic as might be thought. If either the second or the third view is adopted, the effect on the position of the parties of the taking of the point will depend upon how good a bargain the rise and fall formula represents from the contractor’s point of view. A claim on a quantum meruit must, of course, be dealt with in the light of actual costs prevailing, so that rises or falls will be taken into account. On quantum meruit, see 8.8–8.9. If a rise and fall clause is attacked for uncertainty, then the assailant may seek to isolate the clause with a view to expunging it alone, leaving the contractor saddled with a lump sum contract containing no provision for cost adjustment. Should this fail, the choice will lie between the view that all provisions fixing price fail for uncertainty, the rest of the contract remaining on foot, and the view that the whole contract is bad for uncertainty. Important practical consequences may well flow from the adoption of one of these views over the other. If the contract remains on foot with the exception of the provisions fixing the price, conditions dealing with progress payments may still apply, although it might be argued that they too must fall, on the basis that all provisions dealing with the price were expunged from the contract. If, however, the whole contract is avoided, the question of payment by instalments is a difficult one, especially if the contract is not declared to be bad for uncertainty until a large part of it has been performed and a number of progress payments have been made. A provision dealing with the effect of an increase in costs may confer no legal rights, not because it is bad for uncertainty, but because it amounts, at most, to an agreement to enter into negotiations. In Carr v Brisbane City Council,56 a contractor entered into a written contract with a municipal council for the removal and disposal of nightsoil. The clauses in the contract for payment included a clause dealing with variation in cost. The first two paragraphs of the clause dealt with variation in cost by reason of certain specified matters. In each of them, the obligation — to pay in one event and to allow in the converse event — was clearly imposed. In addition, machinery for

ascertaining the amount of the payment or allowance was set out, and the resultant obligation and corresponding [page 121] rights of the parties were definite. The amounts were precisely ascertainable. The fourth paragraph provided that: If for any reason other than the foregoing the cost to [the contractor] of carrying out his contract at the time of the commencement thereof or at any time thereafter is increased the Council will be prepared to negotiate with such contractor with a view to making good to him any such increased cost which for such reason as aforesaid he has actually and necessarily incurred.

The contractor sought to recover an amount under this paragraph. Mansfield SPJ held that the word ‘negotiate’ was inconsistent with the idea of a concluded contract (in its ordinary sense he said it means ‘to discuss, confer with, or treat’) and that the council had deliberately reserved to itself the right to consider whether it would assume liability for all or some or none of the increased cost.57 The conduct of the council in assigning one of its officers to check the contractor’s claim did not amount to an assumption of liability, but only, at best, to the establishment of a common basis for negotiation. Further, even if the paragraph did amount to an agreement to enter into negotiations, such promise was illusory and conferred no legal rights.58 Moreover, since the contract had been concluded and, as far as its main object was concerned, had been performed by the contractor, it could not be contended that the whole contract was void for uncertainty.59 In Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd,60 Kirby P, with whom Waddell A-JA agreed generally, said he did not share the opinion of the English Court of Appeal that a promise to negotiate in good faith would not ever be enforced by a court, and he declined to follow the approach in Carr v Brisbane City Council and cases to similar effect. However, Kirby P went on to say that he agreed with Lord Wright’s Speech in Hillas that where there was consideration for the promise, in some circumstances, a promise to negotiate in good faith will be enforceable depending on its terms.61 This matter is discussed more generally elsewhere. It is worth noting here however that Coal Cliff Collieries was referred to by the

New Zealand Court of Appeal in Wellington City Council v Body Corporate 5170262 where Tipping J summarised the New Zealand position as follows: good faith, being a subjective concept, cannot give objective certainty to a purported obligation to negotiate in good faith; Walford v Miles63 was correct; [page 122] but that there will be some ‘process contracts’ (such as tenders) where a specific procedure is in issue that the Court can objectively determine; and that is how Kirby P’s views were to be accommodated with the English position, with which Tipping J essentially agreed. In Computershare Ltd v Perpetual Registrars Ltd (No 2)64 Warren J took the view that agreements to negotiate were capable of being enforced ‘as a matter of concept’; but her Honour did not explain what she meant by this unclear observation, saying only that she was ‘[a]pplying the approach taken by the NSW Courts’ — although a single approach of those courts in this matter has hardly been discernible. In The Heart Research Institute Ltd v Psiron Ltd65 the New South Wales Supreme Court itself, however, did hold that an agreement to negotiate was enforceable ‘provided the conduct required of the parties for participation in the process is sufficiently certain’. This was a decision of Einstein J, who had earlier delivered a lengthy decision on the subject in Aiton Australia Pty Ltd v Transfield Pty Ltd.66 This, somewhat surprisingly, was not referred to by Warren J in the Computershare case, but perhaps it was not cited to her in submissions. In United Group Rail Services v Rail Corp (NSW),67 the New South Wales Court of Appeal declined to follow Walford v Miles and held that an agreement to negotiate in good faith was not uncertain, and that it was valid and enforceable. Despite the decision in Coal Cliff Collieries, the Court of Appeal considered that the position in Australia was not settled. Allsop P set out the ‘essential propositions’ that led to his position, which are: an agreement to agree is incomplete and lacking essential terms;

a provision to negotiate in good faith or, effectively, an agreement about moderating conduct in the result of a dispute, is to be distinguished from a mere agreement to agree; and the role of the court is to give effect to business contracts where there is a meaning capable of being ascribed to a word or phrase or term of a contract. A court, it seems, is more likely to hold unenforceable a simple agreement to negotiate in good faith than a similar agreement which incorporates some form of readily ascertainable standard against which to assess whether the parties have acted in good faith. But this is not due to any ‘matter of concept’. [page 123]

Drafting rise and fall clauses 7.11 A rise and fall clause may be only a few lines long or it may run into thousands of words and contain elaborate provisions only understood after careful study. As with any contractual provision, a rise and fall clause is best drafted succinctly and clearly. Brevity, however, must be tempered with the need to provide sufficient detail in the event the method of calculation (eg, indices or other formula) changes or becomes redundant. Avoiding uncertainties in the drafting is essential: see 7.9. If a formula is to be used, great care must be taken to ensure it is arithmetically accurate. In practice, however, it is very difficult if not impossible to foresee all eventualities that may arise at the time of drafting. This was adverted to by Connolly J in Matter of a Building Contract between Blandhurst Pty Ltd and GrahamHall (Contractors) Pty Ltd.68 A formula approach may be mathematically simple and make calculations easier, provided the contract terms clearly document which particular items in, or elements of, the price will be subject to rise and fall, and that application of the formula produces an amount by which those items are to be adjusted. In Australia, where trade-related and other employment contracts may have previously raised issues for careful consideration in drafting rise and fall or other fluctuation provisions,69 the effects of the Fair Work Act 2009 (Cth) and the

various associated obligations, specifications and enterprise agreement requirements provide firm guidance. Any deductions from an employee’s pay by the employer must comply with that Act, which also provides for wage limits, allowances, base rates of pay, the applicable modern award, classifications, enterprise agreements, penalty rates, and rates of pay. These requirements of the Act may have an impact on the drafting of any rise and fall clause, in so far as it may concern, for instance, labour rates. In drafting a rise and fall clause, the time factor also must be considered. Sometimes, it is agreed that the rise and fall clause shall operate throughout the period of the contract. At other times, the parties agree that the price shall remain firm until a certain date, after which the rise and fall clause shall operate. Such a clause was considered by the New South Wales Court of Appeal in Hodgson and Lee Ltd v A P Little Pty Ltd.70 Again, it may be agreed that the price shall be firm until, say, 30 September, after which date the rise and fall clause shall take effect, with a further provision that if the outstanding portion of the contract as at 30 September is less than a certain percentage of the contract sum, the rise and fall clause will be waived until [page 124] 30 November. In drafting a provision of this kind it is desirable to indicate clearly how the value of the ‘outstanding portion’ is to be ascertained. The architect may contend that it is necessary to look to the actual value of work done in determining what remains outstanding, while the builder may argue that it is permissible to regard as completed only work in respect of which certificates have been given. Further, a dispute may arise on the question whether materials stored form part of the work completed. There is often a provision in the rise and fall clause preventing the builder from passing on increases in costs which have occurred during a period of delay in completion. A contractor, when tendering, may stipulate for a rise and fall adjustment but go on to indicate preparedness to delete the price variation provision if, say, seven and a half per cent is added to the tender price after first deducting from the tender price the prime cost and contingency sums. A price quoted subject to rise and fall, which is increased in order to convert it to a fixed price, is said to be ‘firmed up’.

Ultimately, when drafting a rise and fall clause, it is wise to carefully consider at the least the following: establishment of base payment, selling price or purchase price, subject to indexation; selection an appropriate index, clear identification of the selected index and citation of an appropriate source; supply of an alternative to be used in the event the price index becomes redundant or varied;71 frequency of price adjustments; not locking the index/indexes used for indexation clauses into the particular reference base period; definition of the formula for the price adjustment calculations; and allowance for negative price movements.

Cases on rise and fall 7.12 In TC Whittle Pty Ltd v T & G Mutual Life Society Ltd,72 the High Court considered a formula frequently used in the building industry referring to alterations in the ‘average award weekly wage … or the equivalent monetary alteration due to a change in standard working hours or any other conditions of employment arising from any statute, statutory regulations or award or order of an industrial tribunal’. The High Court held to be included within the term a 17.5 per cent annual holiday loading, an additional [page 125] week’s annual holiday, an increased excess fare allowance, entitlement to pay during sick leave, entitlement to long service leave regardless of continuous employment and increased height money or multi-storey allowance. It was held that increased workers’ compensation entitlements were not a change in ‘conditions of employment’ within the provision.

In Max Cooper & Sons Pty Ltd v Sydney City Council,73 the Privy Council had occasion to consider a very similar clause to that in Whittle. It was different, in a material respect, in giving an explanation of what was meant by the term ‘conditions of employment’. The difference resulted in the Privy Council holding that ‘increases in the cost of effecting workers compensation’ were required to be taken into consideration in applying the rise and fall clause. In Lewis Construction (Engineering) Pty Ltd v Southern Electric Authority of Queensland74 the High Court considered, as a matter of construction, whether a rise and fall clause required a calculation based on the difference between the current index and that applicable immediately preceding the change or that in force at the date of the tender. In Commonwealth v T J Watkins Ltd,75 the High Court was concerned with the question whether amendments to the Building Industry (Northern Territory) Award 1968 in respect of travelling allowance and district allowance were to be taken into account on the proper construction of a rise and fall clause which operated by way of prescribing the manner in which the adjusted average on-site loaded weekly wage was to be calculated. One kind of formula which has been frequently used in rise and fall clauses provides for an adjustment to the price of a certain percentage for each increase or decrease of a certain amount in wages. Two examples may be given of such a formula, one of which withstood attack, on the ground of uncertainty, and the other which succumbed. In Re Sanders Constructions Pty Ltd,76 where the formula withstood attack, cl 8 of a subcontract for the construction of works provided that the price payable ‘is subject to increase for increases in the cost of labour and is to be increased by 0.15 per cent on the balance of the work for each 10 cents increase in the State basic wage or equivalent extra cost arising from increases in the margins or changes in the conditions of employment’. During the currency of the contract there were certain state basic wage increases and certain site allowances were awarded by the Industrial Commission to most classes of employees of the subcontractor. There was no disagreement between the parties concerning the operation of that part of the clause which related to the state basic wage increases, but disagreements arose in relation to the [page 126]

proper increase in the subcontractor’s price following the granting of the site allowances. When appearing before Lucas J, the head contractor did not seem to argue that the clause was bad for uncertainty, and submitted only that the subcontractor was only entitled to the actual amount by which the latter’s labour costs were increased by reason of the site allowances. It was argued that the parties would be hardly likely to agree to a formula which gave the subcontractor payment of more than its actual increase in costs. Counsel for the head contractor recognised that this construction of the clause required the words ‘or equivalent extra cost arising from …’ to be expanded to read ‘or by an amount equivalent to the extra cost arising from …’. Lucas J rejected this construction of the clause, holding that the price was to be increased by 0.15 per cent on the balance of the work not only for each 10 cents increase in the basic wage but also for each equivalent extra cost arising from the increases in margins or changes in conditions.77 The word ‘equivalent’ meant equivalent to the extra cost to the subcontractor arising from an increase of 10 cents in the basic wage.78 The fact that the final amount of increased payment would not be exactly equal to the amount of extra cost incurred was not decisive on the question of construction. The parties had agreed on a formula to deal with increases in the basic wage, the use of which was unlikely to provide a figure equal to the extra amount paid out by the subcontractor in increased basic wages. It was quite natural that a subcontractor who by reason of wage increases, site allowances and the like was required to undertake a greater outlay than was at first expected should seek to obtain an additional profit on the extra money so expended. Merely to recoup the additional amount so spent was to reduce the percentage of profit included in the agreed price. The parties, having agreed to the use of a formula to deal with increases in the basic wage, had agreed to the use of the same formula to deal with the other types of increased cost.79 On appeal, the main contractor argued in the alternative that the relevant portion of cl 8 was too uncertain to be enforced or that the clause on its proper construction entitled the subcontractor only to the actual extra expenditure incurred by it. The appeal failed, the Full Court taking the view that Lucas J had construed the clause correctly. On the question of uncertainty, Hoare J, who delivered the leading judgment, was influenced by the fact that if the latter part of the clause was held to be uncertain then there would be no provision contained in the contract to reimburse the subcontractor for cost increases, whereas it was clear that the parties had so intended. On the question of construction, he said:

It is true that an increase in the basic wage is almost certain to cause other cost increases beyond the actual increase in wages cost paid by a sub-contractor. It would be impossible to quantify, in advance, all such increases. Accordingly,

[page 127] it is not surprising that the parties should arrive at a formula which could hardly be expected to reflect accurately the sub-contractor’s cost increases but which, in a general way, may be expected to compensate the sub-contractor for this increase. Again, it is true that some wage increases such as a site allowance would not be expected to have as wide effects as would a basic wage increase. But the parties, when seeking to compensate a sub-contractor for wage cost increases, may well expect that all wage increases are likely to have some unascertainable side effects. Accordingly, it would not be altogether surprising if business men decided to endeavour to create some kind of formula to take into account all wage increases.80

The application of the clause in question in this case to increases in the basic wage which had been granted was not in dispute. The first part of the clause operated by reference to increases in the basic wage, and the question of choosing a class of employee whose wage was to be the yardstick did not arise. The head contractor appears at no stage except on appeal to have suggested that cl 8 was bad for uncertainty. The work in question was that of quarrying, loading, carting and tipping rock. The subcontractor’s employees fell into several classes, and according to the report of the case the site allowances which gave rise to the dispute were awarded to certain classes of the employees. Whether the same allowance was granted to each class of employee does not appear. So far as one can tell, it was not argued that increases of unequal amounts which had been or might be granted to different classes of employees made the clause bad for uncertainty. Nor did Hoare J discuss the question whether in estimating ‘equivalent extra cost’ it is necessary to ignore the fact that only certain classes of employee have been given the increase or, on the other hand, to make some adjustment, for example, by using a proportion of the site allowance equal to the proportion borne by the number of employees who received it to the total number of employees. More attention was paid to difficulties of this kind in Bevelon Investments Pty Ltd v Kingsley Air Conditioning Pty Ltd.81 The clause there held to be bad for uncertainty was as follows: The Contractor’s price accepted by the Owner/Builder for the performance of the work is ONE HUNDRED AND EIGHTY EIGHT THOUSAND DOLLARS ($188,000.00) subject to rise and fall and subject further to variation of such price in accordance with the provisions of Clauses 1-8 and

1-9 of this Section. The price computed by the Contractor and agreed to by the Owner/Builder was quoted on the basis of the cost of labour and materials at the date of signing the Contract and is subject to increase or decrease of 0.2% for each 10 cent increase or decrease caused by alterations to the wage and/or allowances of employees, shortening of hours and conditions of employment, whether made by the Government Authorities or by Agreements binding the Industry and is applicable to the uncompleted portion of the Contract.

[page 128] The ‘uncompleted portion of the Contract’ shall mean the aforesaid Contract price less the total of progress payments approved by the Architect.

Given that the intention was to have a rise and fall clause which would operate by furnishing a formula whereby an increase in the contract price might be arrived at which would reflect rising costs in a general way, it would be difficult to find an attempt to compress the formula into a smaller number of words. The vice of the clause was its exceptional brevity and consequent failure, as Newton J held, to lay down an intelligible formula. The great problem in the case was that the clause provided for the variation of the contract price by 0.2 per cent for each 10 cents increase or decrease but did not in express terms provide an answer to the question ‘increase or decrease in what?’ Newton J held that it was not possible to extract from the clause any answer to this question and rejected the submission that the words ‘increase or decrease’ should be taken to refer in substance to increases or decreases in the contractor’s average labour costs in respect of its on-site work force for a 40-hour week. He held that there were two difficulties which at all events in combination were insuperable. The first difficulty was in being reasonably satisfied that the words ‘each 10 cent increase or decrease’ were intended to refer to labour costs of some description; and the second was in being reasonably satisfied what those labour costs were. Even assuming that the drafter of the provision intended it to operate in some such fashion as that submitted by the contractor, it was quite impossible to reach any conclusion on several important matters. For example, one could not say whether the words ‘each 10 cent’ referred to 10 cents per day or per 40-hour week or some other period, or whether the employees in question were the whole of the contractor’s employees, or only its employees directly engaged in carrying out the contract, or only its plumbers or its sheet metal workers, or whether on the other hand regard was to be had to employees of a particular class employed in the building industry generally. From the learned

judge’s reasons, it would seem that the addition of only a few words to the clause could have saved it; for example, had the words ‘in the contractor’s average onsite labour costs for 40 hour week’ been used in the clause after ‘increase or decrease’, the clause might well have been upheld. It is important to appreciate that Bevelon Investments does not lay down any novel proposition of law. The court was there concerned with one particular rise and fall clause and moreover a clause which was unusually compressed. The decision does not lay down principles concerning rise and fall clauses generally. His Honour’s decision is one which reflects simply the law’s requirement of certainty in order for such clauses to be upheld.82 In Leighton Contractors Pty Ltd v Public Transport Authority of Western Australia (No 6),83 Le Miere J was required to interpret rise and fall provisions in a [page 129] deed where the index used under the deed had been discontinued. His Honour had to consider which replacement index should be substituted for the discontinued index by determining which of those under consideration was the ‘nearest’ index consistent with the deed so as to give effect to it. The court recited the much-quoted dictum of Gibbs J, in Australian Broadcasting Commission v Australasian Performing Right Association Ltd,84 that ‘if the language [of a contract] is open to two constructions, that will be preferred which will avoid consequences which appear capricious, unreasonable, inconvenient or unjust’. Reference was also made to Lewis Construction (Engineering) Pty Ltd v Southern Electric Authority of Queensland,85 where a rise and fall clause which, if literally applied, yielded more than was required by way of compensation for the cost of inflation. There the High Court held that the clause should be interpreted in conformity with its evident rationale: ‘[T]he clause … being open to two constructions, it is proper to construe it so as to avoid consequences which appear unreasonable’. His Honour identified the task for the court ‘to assess which index is the nearest index to the discontinued index consistent with the rise and fall provisions of the Project Deed so as to give effect to them’.86 After examining a number of different indexes and receiving extensive expert evidence in respect of them, the court decided upon an index described as ‘an accepted building and

construction industry index and is well established and recognised by those in the construction industry’.87

Arbitration clauses 7.13 Another consequence of the view that the contract remains on foot, with the exception of the provisions fixing (or, it may be, dealing with) the price, is that any arbitration clause will continue to operate. If, however, the whole contract falls for uncertainty, it might be thought that the arbitration clause would disappear with it. This was, in fact, conceded before Newton J in Bevelon Investments Pty Ltd v Kingsley Air Conditioning Pty Ltd,88 but the judgment does not expressly state that the concession was properly made. There are cases now which have decided that arbitration clauses are severable.89 Reference may be made to the remarks of Foster J in QH Tours Ltd v Ship Design & Management (Aust) Pty Ltd90 and to the decision of the New South Wales Court of Appeal in Ferris v Plaister.91 Also, [page 130] in Trade Practices Commission v Collings Construction Co Pty Ltd,92 Wilcox J considered an arbitration clause as constituting a separate contract.

UNCONSCIONABILITY 7.14 Parties are free to enter into their own bargains except as otherwise provided by law. Yet it cannot be doubted that there may be cases where a proprietor enters into a building contract containing a rise and fall clause which operates quite harshly or unfairly; or in some other way, perhaps because of a tactic adopted by the contractor, the contract containing the clause may be unjust. The Australian Consumer Law (ACL), contained in Sch 2 of the Competition and Consumer Act 2010 (Cth), applies nationally and in all states and territories, and to all Australian businesses. Sections 51AA–51AC of the former Trade Practices Act 1974 (Cth) (TPA) prohibited unconscionable conduct. In its place,

Pt 2-2 of the ACL provides nationally consistent prohibitions on unconscionable conduct.93 It reflects and extends the equitable doctrine of unconscionable conduct, as well as the range of available remedies. Section 20 of the ACL prohibits a corporation from engaging in unconscionability ‘within the meaning of the unwritten law’. The provision is much the same as its predecessor in s 51AA of the TPA. Section 21 prohibits unconscionable conduct in connection with the supply or acquisition of goods or services by or from a person. It is not intended to be ‘limited by the unwritten law relating to unconscionable conduct’, and relevant factors extend ‘beyond consideration of the circumstances relating to the formation of a contract’ and to the terms of the contract itself. See ss 21(4)(a) and (c). Section 22 sets out a range of factors a court may consider when determining whether conduct is unconscionable. They accord with and reflect the myriad of decisions concerning unconscionability under the TPA, including: the relative bargaining strength of the parties; whether any conditions were imposed on the weaker party that were not reasonably necessary to protect the legitimate interests of the stronger party; whether the weaker party could understand the documentation used; whether undue influence, pressure or unfair tactics were adopted by the stronger party; whether any industry codes apply, these obligations and how they were applied; [page 131] the willingness of the stronger party to negotiate; the extent to which the parties acted in good faith; and where a party seeking to enforce a transaction has taken unfair advantage of a superior bargaining position or of a position of disadvantage of the other party.

Alternatively to the relief provided by or under the ACL, there may be cases where a rise and fall clause in a building contract should not be enforced and should be set aside for unconscionability having regard to the common law principles laid down by the High Court in Commercial Bank of Australia Ltd v Amadio.94 In summary, such principles may be said to relate to unconscientious bargains where a party seeking to enforce a transaction has taken unfair advantage of a superior bargaining position or of a position of disadvantage of the other party.95 But as under statute, an unconscientious bargain does not arise out of the fact merely that a rise and fall clause exists. Unconscionability will be determined by examining the circumstances of the parties when the contract was made, including age, mental capacity, whether there was any lack of choice, superior knowledge of one over the other or other obligations or circumstances surrounding the bargaining process. As pointed out by Hill J in Zoneff v Elcom Credit Union Ltd,96 in general terms, it may be said that conduct will be unconscionable where the conduct can be seen in accordance with the ordinary concepts of humankind to be so much against conscience that a court should intervene. At the least, the conduct must be unfair. In Australian Competition and Consumer Commission v Radio Rentals Ltd,97 Finn J described the purpose of the doctrine as being: … to provide relief in situations where one party to a transaction has actively taken advantage of the weakness of the other. In this way, equity seeks to look beyond the fiction of equality of bargaining power that the common law takes for granted. Pursuant to the doctrine of unconscionability, equitable relief is given where there has been “an abuse of power possessed by one party over the other by virtue of the other’s position of special disadvantage”.

[page 132] More recently, in Kakavas v Crown Melbourne Ltd,98 the High Court observed: The invocation of the conscience of equity requires ‘a scrutiny of the exact relations established between the parties’ to determine ‘the real justice of the case’. Where an appeal is made by a plaintiff to the standards of equity embodied in the Amadio99 principle, the task of the courts is to determine whether the whole course of dealings between the parties has been such that, as between the parties, responsibility for the plaintiff’s loss should be ascribed to unconscientious conduct on the part of the defendant. In Louth v Diprose,100 Deane J explained the basis on which the conscience of equity is engaged to apply the Amadio principle.101

The court further held that the equitable intervention does not relieve a

plaintiff from the consequences of improvident transactions conducted in the ordinary and undistinguished course of lawful business.102

Statutory regulation 7.15 Various states have sought to regulate the use and operation of rise and fall clauses, particularly in the context of domestic or home building contracts. In Victoria, a cost escalation or ‘rise and fall’ clause is prohibited and will be void unless the contract price exceeds $500,000 or the clause is in an approved form under the regulations,103 and (before entering the contract) the builder gave the owner a notice in approved form explaining the effect of the clause and the owner signed or initialled the clause.104 The prohibition does not apply to unforeseeable cost increases resulting from changes to government taxes or charges, or prime cost items or provisional sums. In New South Wales,105 the contract price should be included. If it may be varied under the contract, the contract must contain a warning to that effect and an explanation about how it may vary. The warning and explanation must be placed next to the contract price. Variations to the contract, including the contract price, are countenanced under the Home Building Act 1989 (NSW). The variation must be in writing and include the signature of both parties. Ideally, the price variation authorisation should include a description of the variation and the implications, the impact on the overall contract price, and the method for calculating the price change, rather than a dollar amount alone. [page 133] In South Australia, statutory provisions regulate when and in what circumstances a contractor may have the benefit of a rise and fall clause.106 Domestic building contracts must be written and set out all terms and conditions, including a fixed price, a rise and fall clause if appropriate, and payment terms.107 A rise and fall clause is described in the statute108 as a contractual provision under which a price stipulated for performance of domestic building work may change to reflect changes in the costs of labour (including related overhead expenses) and materials to be incurred by the building work contractor. Such contracts must

also contain a form providing information about pricing including rise and fall clauses. In Western Australia, rise and fall clauses in home building contracts (such a clause being defined as ‘a provision under which a price stipulated for the performance of home building work may change to reflect changes in the costs of labour (including related overhead expenses) or materials, or both, to be incurred by the builder’) are prima facie void.109 However, that prohibition does not apply to contracts over a certain value, or to provisions which allow a builder to increase the price to reflect further costs actually imposed on or incurred by the builder: (a)

as a direct consequence of a written law of the state or the Commonwealth; or

(b) on account of an increase in any tax, duty or other charge imposed under any such law after the date of the contract; or (c) by reason of a delay in the commencement of home building work beyond 45 working days after the date of the contract being a delay — (i)

that is caused solely by the failure of the owner to comply with a condition imposed on the owner by the contract, including a condition to the effect that the owner produce satisfactory evidence of the owner’s ability to pay the contract price or of the owner’s title to the land on which the work is to be performed; or

(ii) that occurs without any failure on the part of either the owner or the builder to comply with his or her obligations under the contract.110

In Martin v Worthmore Homes Pty Ltd,111 a clause that permitted rises in the costs of materials and labour due to GST was held to be a rise and fall clause, and therefore void. The decision was reversed on appeal.112 In Antonelli Investments Pty Ltd v Campbell,113 Martino DCJ agreed that provisions for price increases due to GST were not void under s 13 of the Home Building Contracts Act 1991 (WA). [page 134] In Queensland, under the Domestic Building Contracts Act 2000, rise and fall (or ‘cost escalation’ as they are referred to in the Act) clauses are prohibited from being included in domestic building contracts under a ‘set price’ or unless the contract is to be administered by an architect engaged by or for the owner.114 However, they may be permitted in the event of increases in price as a result of certain delays.

_________________________ 1.

Danidale Pty Ltd v Abigroup Contractors Pty Ltd [2007] VSC 391 at [32]; Michael Davies Associates Pty Ltd v Auburn Council [2007] NSWSC 877 at [196]–[202]; Pan Orient Shipping Services Pty Ltd v Basell Australia Pty Ltd [2007] VSC 215 at [14]–[32]; SDR Australia Pty Ltd v Leighton Contractors Pty Ltd [2012] WASC 434 at [295].

2.

Leighton Contractors Pty Ltd v Public Transport Authority of Western Australia (No 6) [2008] WASC 193 at [71]–[72].

3.

See 7.14.

4.

(1952) 85 CLR 189 at 201, cited in Cusack v Commissioner of Taxation (2002) 120 FCR 520; [2002] FCA 1012 at [14].

5.

SDR Australia Pty Ltd v Leighton Contractors Pty Ltd [2012] WASC 434 at [295].

6.

[2008] QSC 179; affirmed on appeal [2009] QCA 75.

7.

(1978) 19 SASR 1. Cited in Co-ordinated Construction Co Pty Limited v Climatech (Canberra) Pty Ltd [2005] NSWSC 312 at [22]–[27].

8.

Ibid at 30.

9.

NSWSC,13 December 1977, unreported. Appeal to the Privy Council was dismissed: see [1979] 2 NSWLR 257; and see Co-ordinated Construction Co Pty Limited v Climatech (Canberra) Pty Ltd [2005] NSWSC 312 at [25]–[27].

10. [1993] Vic SC 523; (1993) 12 Aust Cons LR 158 at 161; cited with approval in Leighton Contractors Pty Ltd v Public Transport Authority of Western Australia (No 6) [2008] WASC 193 at [71]. 11. State Electricity Commission of Victoria v CC (Victoria) Pty Ltd [1994] VSC 2. 12. (1982) 149 CLR 337 at 389. 13. Compare Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at [32]–[36], [38]; and McCourt v Cranston [2012] WASCA 60 at [25]–[26]. 14. [1993] Vic S C 523; (1993) 12 Aust Cons L R 158 at 161. 15. [2007] VSC 215 at [16]. 16. Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 352. 17. Western Export Services Inc v Jireh International Pty Ltd (2011) 282 ALR 604. 18. R Green, D MacDonald, B Mitchell and C Mitchell, Report on Rise and Fall and Cost Reimbursement Clauses, Department of Economics, University of Newcastle, August 1990. 19. Ibid, paras 3.1–3.3. 20. Also known as ‘open book’. 21. The validity of which was upheld in Trifid Pty Ltd v Ratto [1985] WAR 19. See also Hely v Sterling [1982] VR 246 at 248 and Alcatel Australia Limited v Scarcella [2001] NSWCA 401. 22. Building Cost Information Service. 23. Also known as the NEDO or Baxter Indices. 24. D Kinlan and D Roukema, Terra et Aqua, Number 125, December 2011 at 5.

25. As in TC Whittle Pty Ltd v T & G Mutual Life Society Ltd (1977) 18 ALR 431. 26. Re Building Contract between Blandhurst Pty Ltd and Graham-Hall (Contractors) Pty Ltd (1984) 1 BCL 48. 27. See the following for examples of litigation related to terms in rise and fall formulae clauses: TC Whittle Pty Ltd v T & G Mutual Life Society Ltd (1977) 18 ALR 431; Max Cooper & Sons Pty Ltd v Sydney City Council (1980) 29 ALR 77; Re Sanders Constructions Pty Ltd [1969] Qd R 29. 28. (1984) 1 BCL 48 at 50. 29. As did the Master Builders’ Federation of Australia and the Australian Institute of Architects. 30. (1987) 3 BCL 367; also [1987] ACTSC 35. 31. See generally J Tyrril, ‘Cost Adjustment — Problems and Developments — Enterprise Agreements’ (1993) 9 BCL 245. 32. Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 436–7. See also Trifid Pty Ltd v Ratto [1985] WAR 19 at 28. 33. Hillas and Co Ltd v Arcos Ltd (1932) 147 LT 503 at 512; and at 514 where Lord Wright stated that commercial contracts should be construed ‘fairly and broadly, without being too astute or subtle in finding defects’; referred to in Goodwin v La Macchia [1999] NSWSC 1184. 34. Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27, referred to in Austman Pty Ltd v Mount Gibson Mining Ltd [2012] WASC 202, and Lahodiuk v Pace [2013] NSWSC 512. 35. Hely v Sterling [1982] VR 246 at 249, cited in Pacific Hydro Group Two Pty Ltd v Argyle Diamond Mines Pty Ltd [2003] VSC 443. 36. [1994] 2 VR 106 at 130 referred to in Challenge Charter Pty Ltd v Curtain Bros (Qld) Pty Ltd [2004] VSC 1 at [193]. 37. (2011) 206 IR 450 at [24]; referred to in Westpac Banking Corporation v Newey [2013] NSWSC 847 at [12]. See also Vickery J in WTE Co-Generation v RCR Energy Pty Ltd [2013] VSC 314 in relation to alleged uncertainty surrounding a dispute resolution clause. 38. Compare, for example, Bevelon Investments Pty Ltd v Kingsley Air Conditioning Pty Ltd [1971] VSC 220: see 7.10. The validity of a rise and fall clause in an agreement granting a licence to perform musical works in public was upheld in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; referred to in Fermentation Industries (Aust) Pty Ltd v Burns Philp & Co Ltd [2000] NSWCA 71. 39. Pirone v Craig J Roberts (Solicitor) Pty Ltd (2006) 244 LSJS 284; [2006] SASC 134. 40. [1971] VSC 220. 41. (1968) 118 CLR 445. 42. (1953) 19 LGR (NSW) 152 at 157. 43. Ibid at 157. 44. Ibid at 158. 45. [1904] 2 KB 327 at 330. 46. [1936] 2 KB 403; referred to in Vivian Fraser & Associates Pty Ltd v Shipton [1999] FCA 60, and applied in Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd (2002) 18 BCL 15 and Christiani & Nielsen Pty Ltd v Goliath Portland Cement Co (1993) 2 Tas R 122. 47. (1953) 19 LGR (NSW) 152 at 159.

48. Ibid. 49. Ibid at 162. 50. (2006) 145 LGERA 48; [2006] NSWCA 50 at [95]. 51. Ibid at [102]. 52. And also Haynes v Sutherland Shire Council (1966) 83 WN (Pt 1) NSW 428. 53. (1987) 162 CLR 221. 54. (1998) 194 CLR 355 at 390–1. 55. [2006] NSWCA 50 at [97]. 56. [1956] St R Qd 402. 57. Ibid at 410. 58. Ibid at 411. 59. Ibid. 60. (1991) 24 NSWLR 1 at 26. 61. Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 at 26. Referring to Hillas and Co v Arcos Ltd (1932) 147 LT 503. 62. [2002] NZCA 191 at [28]. See at [30]–[34]. 63. [1992] 2 AC 128. 64. [2000] VSC 233 at [13], [14]. 65. [2002] NSWSC 646. 66. (1999) 16 BCL 70 at [78]. 67. (2009) 74 NSWLR 618, applied in Zurich Australian Insurance Limited v The Workers Compensation Nominal Insurer [2013] NSWSC 915 and cited in William McCausland v Surfing Hardware International Holdings Pty Ltd [2013] NSWSC 902. 68. (1984) 1 BCL 48. 69. Matter of a Building Contract between Blandhurst Pty Ltd and Graham-Hall (Contractors) Pty Ltd (1984) 1 BCL 48; William Sindall Ltd v North West Thames Regional Health Authority [1977] ICR 294 (HL); London County Council v Henry Boot & Sons Ltd [1959] 1 WLR 1069. 70. NSWCA, 10 March 1977, unreported. 71. Leighton Contractors Pty Ltd v Public Transport Authority of Western Australia (No 6) [2008] WASC 193. 72. (1977) 18 ALR 431; applied in National Union of Workers v Graincorp Operations Ltd (2002) 117 IR 136, and referred to in Public Service Association (SA) Inc v State of South Australia (2012) 113 SASR 49. See also Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 389, 420. 73. (1980) 29 ALR 77. 74. (1976) 11 ALR 305. 75. (1975) 49 ALJR 213. 76. [1969] Qd R 29, applied in Jones and Commissioner of Taxation (2011) 84 ATR 876; [2011] AATA 26 at [38].

77. Re Sanders Constructions Pty Ltd [1969] Qd R 29 at 32. 78. Ibid. 79. Ibid. 80. Ibid at 38–9. 81. [1971] VSC 220. 82. Applied in Cape Crusaders Pty Ltd v Stuart Saw Constructions & Cooktown Property Developments Pty Ltd [2008] QCCTB 226 at [18]. 83. [2008] WASC 193. 84. (1973) 129 CLR 99 at 110. 85. (1976) 11 ALR 305. 86. Ibid at [235]. 87. Ibid at [147]. 88. [1971] VSC 220. 89. For example United Group Rail Services v Rail Corp (NSW) (2009) 74 NSWLR 618. 90. (1991) 105 ALR 371 at 384, applied in WesTrac Pty Ltd v Eastcoast OTR Tyres Pty Ltd (2008) 219 FLR 461 and Curtin University of Technology v Woods Bagot Pty Ltd [2012] WASC 449. 91. (1994) 34 NSWLR 474 applied in Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd (2012) 287 ALR 315 and Telesto Investments Limited v UBS AG (2013) 94 ACSR 29. Compare Behmer & Wright Pty Ltd v Tom Tsiros Constructions Pty Ltd [1996] VSC 523. 92. (1994) 53 FCR 137. See also NSW Racing Pty Ltd v TAB Ltd (2003) 19 BCL 386. 93. Which have been adopted by the states and territories: see, for example, Fair Trading Act 1987 (NSW); Fair Trading Act 1989 (Qld); Fair Trading Act 1999 (Vic). 94. (1983) 151 CLR 447. 95. Ibid at 459 per Gibbs CJ, 467 per Mason J, 474 per Deane J. See also Multiplex Constructions Pty Ltd v Abgarus Pty Ltd (1992) 33 NSWLR 504 at 509–10 on unconscionability and penalties. See also B Horrigan, ‘Unconscionability Breaks New Ground — Avoiding and Litigating Unfair Client Conduct after the ACCC Test Cases and Financial Services Reforms’ (2002) 7 Deakin Law Review 73 and ‘Confused in Words: Unconscionability and the Doctrine of Penalties’ by P Baron (2008) 34(2) Monash University Law Review 285. 96. (1990) 94 ALR 445 at 463; affirmed [1990] ATPR 51, 742; applied in Re Planet Securities Unit Trust v Dalrymple [1997] QSC 204; National Australia Bank Limited v Anderson [2004] VSC 193 and Body Corporate 396711 v Sentinel Management Limited [2012] NZHC 1957. 97. (2005) 146 FCR 292 at 297. 98. [2013] HCA 25. 99. Commercial Bank of Australia v Amadio (1983) 151 CLR 447. 100. Louth v Diprose (1992) 175 CLR 621. 101. Kakavas v Crown Melbourne Ltd [2013] HCA 25 at [18]. 102. Ibid at [20]. 103. Domestic Building Contracts Regulations 2007 (Vic).

104. Domestic Building Contracts Act 1995 (Vic) s 15. 105. Home Building Act 1989 (NSW) s 7(5). 106. Building Work Contractors Act 1995 (SA) ss 29(3) and (4). 107. Ibid, s 29. 108. Ibid, s 29(10). 109. Home Building Contracts Act 1991 (WA) s 13. 110. Ibid, s 13(4). 111. (2002) 29 SR (WA) 250. 112. Worthmore Homes Pty Ltd v Martin (2002) 29 SR (WA) 250. 113. (2004) 35 SR (WA) 281. 114. Section 56 provides the restriction and exemptions. Section 11 provides the definition of ‘cost escalation clause’.

[page 135]

8

PAYMENT

ENTIRE CONTRACTS Doctrine of entire contracts 8.1 A builder who has contracted to do an entire job for a specific sum can recover nothing unless the work be done or unless it can be shown that it was the other party’s fault that the work is incomplete, or that there is something to justify the conclusion that the parties have entered into a fresh contract.1 It often becomes necessary to decide whether a contract is caught by this rule. Contracts falling within the rule are described as ‘entire’ or ‘entire and indivisible’, as opposed to ‘divisible’ or ‘separable’ contracts. An entire contract is one in which the contractor’s promise to complete the work is an essential term, there being no entitlement to payment should the builder fail to complete the work. ‘An entire contract or, perhaps more accurately, an entire obligation is one in which the consideration for the payment of money or for the rendering of some other counter-performance is entire and indivisible.’2 Whether a contract is an entire one depends upon its proper construction, the question being whether completion is a condition precedent to the right of the contractor to be paid the price. While building contracts have commonly been regarded, prima facie, as entire or ‘lump sum’ contracts, they also commonly provide to the contrary by, for example, apportioning the consideration, that is, payment of instalments or progress payments.3 See 8.5. A contractor may undertake to execute drainage works or erect fencing, and then proceed to carry out part only of the work. Is the contractor entitled to recover something for the work that has been done? This sort

[page 136] of question has arisen in innumerable cases.4 If the contract is held to be divisible, the contractor may recover accordingly. If, on the other hand, the contract is entire, there are only certain situations in which the contractor may recover for something less than full performance. In the first place, if there has been substantially complete performance, the contractor may, in some circumstances, recover a sum ascertained by deducting from the agreed price the cost of rectifying and making good all defects and omissions.5 However, contracts for the performance of specified work and for the payment of a specified sum on completion thereof are usually construed as requiring entire and exact performance as a condition precedent to payment.6

Substantial performance 8.2 The question whether there has been substantial performance of an entire contract often arises. What substantial performance is depends upon the nature of the contract and all the circumstances.7 The question is one of fact. If, after the completion of the work left incomplete by the contractor, the structure will be of an entirely different character from that which the contractor contracted to erect, the contractor cannot be said to have substantially performed the contract.8 Nor is there substantial performance if the contractor abandons performance or does work entirely different in kind from that agreed upon.9 [page 137] In Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd,10 Bathurst CJ adopted Lord Denning’s summary in Hoenig v Isaacs:11 … When a contract provides for a specific sum to be paid on completion of specified work, the courts lean against a construction of the contract which would deprive the contractor of any payment at all simply because there are some defects or omissions. The promise to complete the work is, therefore, construed as a term of the contract, but not as a condition. It is not every breach of that term which absolves the employer from his promise to pay the price, but only a breach which goes to the root of the contract, such as an abandonment of the work when it is only half done. Unless the breach does go to the root of the matter, the employer cannot resist payment of the price. He must

pay it and bring a cross-claim for the defects and omissions, or, alternatively, set them up in diminution of the price. … It is, of course, always open to the parties by express words to make entire performance a condition precedent.

A contractor who has not substantially performed an entire contract will be able to recover if it is the proprietor’s fault that the work is incomplete.12

Repudiation 8.3 Where there is an express contract, and the proprietor’s fault amounts to repudiation of the contract, the builder may accept the repudiation and either sue on a quantum meruit or claim damages for breach of contract.13 In Sopov v Kane Constructions Pty Ltd (No 2),14 the proprietor, having been held to have repudiated, sought to challenge the builder’s common law right to elect between a claim for damages under the contract or on a quantum meruit. After examining the long line of relevant authority, the Court of Appeal noted that ‘[s]ince 1994, there has been a growing chorus of criticism — judicial as well as academic — of the availability of quantum meruit as an alternative to contract damages where a repudiation is accepted’. The criticisms included, and the Court accepted, that the decisions in Lodder v Slowey and in Brooks Robinson had been founded on the ‘rescission fallacy’, that is, the notion that the acceptance of a repudiation had the effect of rescinding the contract ab initio. Notwithstanding, the court held: [page 138] In our respectful view, these criticisms are very powerful. Unconstrained by authority, we might well have upheld the Principal’s argument that Kane’s only remedy in these circumstances was to sue on the contract. But we are heavily constrained by authority, as explained earlier. What was said in 1994 to be ‘too well settled by authority to be shaken’ is all the more so 15 years later. We regard the High Court’s refusal of special leave to appeal from the decision in Renard as of particular significance, notwithstanding that the point at issue there was whether the contract price placed a ceiling on the quantum meruit claim, not whether such a claim was available in the first place. As we have seen, the New South Wales Court of Appeal in Renard had affirmed the availability of quantum meruit in a repudiation case, despite acknowledging expressly that the rescission theory of repudiation had long since been viewed as ‘heretical’.

The right of a builder to sue on a quantum meruit following a repudiation of the contract has been part of the common law of Australia for more than a century. It

is supported by decisions of intermediate courts of appeal in three states, all of which postdate McDonald and two of which postdate Pavey & Matthews.15 If that remedy is now to be declared to be unavailable as a matter of law, that is a step which the High Court alone can take. As in Renard, Sopov’s application to the High Court for special leave to appeal was refused.16 If the contractor chooses to sue upon a quantum meruit for work done and materials supplied, it is no answer to the claim that full performance would not have been profitable. However, if the contract was a loss-making one, the innocent party’s recovery will be limited to the extent (if at all) to which expenditure would have been recouped through continued performance.17 On quantum meruit, see 8.8–8.9.

Taking benefit of work 8.4 Although there has been no wrongful act on the part of the proprietor, a builder who does some work by way of carrying out an entire contract but cannot be said to have substantially performed it may recover if it can be proven that a fresh contract has been made, either expressly or by implication. It is often said that the builder may succeed on a quantum meruit if the proprietor accepts the work and takes the benefit of it.18 Statements to [page 139] this effect must not be permitted to obscure the true basis of decisions of this kind, which is that the contractor is entitled to recover if able to establish a fresh contract. To establish, by way of proving the making of a fresh contract, that the proprietor has ‘taken the benefit of the work’, it is not enough that the work was in fact beneficial to the proprietor. It must be shown that the proprietor has taken the benefit of the work in the exercise of some choice that was actually open.19 That will usually be evident by a request from the proprietor. In some cases, a request may be implied. Absent a request, ‘the law does not generally compel a

person to pay for a benefit another has provided merely because that other has taken it into his or her mind to provide the benefit’.20 Where a proprietor has no option whether to take the benefit of the work or not, then ‘one must look to other facts than the mere taking the benefit of the work in order to ground the inference of a new contract’.21 It ought be noted though, as Gleeson CJ mentioned in Lumbers v W Cook Builders Pty Ltd (in liq), that ‘[t]he reference to an “inference of a new contract” may reflect an approach since overtaken by Pavey & Matthews Pty Ltd v Paul, but the problem involved in identifying a conferring or accepting of a benefit remains’.22 In Morrison v Grovenor,23 Martin CJ said: Where a person enters into a contract in general terms to do certain work, and does it wholly or partly, though not in accordance with the contract, then if the work so done is of any value, and if it is adopted by the person with whom he has contracted, the person doing it is entitled to be paid the value of the work which he has performed.

Provided that references to adoption of the work by the proprietor, like references to taking the benefit of the work, are to be understood as meaning that the proprietor has exercised some choice, this passage is unexceptionable. The Full Court in that case refused to disturb a verdict where there was [page 140] evidence that the defendant had gone into possession of the cottage and some evidence that the defendant had expressed satisfaction with the work. A ‘benefit’ for these purposes would need to be incontrovertible but would not seem limited to economic benefits.24 The circumstance that the proprietor had made progress payments was held on the facts in Hunter v Council of Municipality of West Maitland25 not to amount to an admission that the work had been done, the proprietor having made the payments on the faith of representations made by the contractor. If the contractor abandons a lump sum contract at a time when a right has already arisen to a payment on account of the price, the cause of action survives.26

In cases where a contractor who has failed to complete an entire contract succeeds in establishing a new contract, the contractor may, in the alternative to setting up a fresh agreement whereby a reasonable price is to be paid, contend that the new agreement is one by which the condition precedent of the original contract is to be waived.27 In appropriate circumstances, a contractor who has failed to complete an entire contract because it has become impossible of performance or is otherwise frustrated, may be entitled to payment pursuant to the Frustrated Contracts Act 1959 (Vic) or the Fair Trading Act 1999 (Vic) Pt 2C.28 This area, it should be noted, is substantially affected by the security of payments legislation in force in the states and territories. See 8.7.

Progress payments 8.5 Where an informal agreement is made for the doing of work which will extend over a considerable period, it may be proper to imply a term that progress payments are to be made on account of the price.29 In Lockhart [page 141] v Collingwood Co-Op Dairy Co Ltd,30 a term for progress payments was implied into an oral ‘cost plus’ contract. Standard form building contracts commonly provide for progress payments to be made upon progress certificates issued by the project architect or Superintendent: see, for example, the old Ed 5b cl 28; NPWC 3 cl 42; JCC cl 10.07; AS 2124-1992 cl 42.1; SBW2-1996 cl 10; PC-1 (1998) cl 12.7; ABIC MW-1 2003 section N.8; ABIC MW 2008 section N.8. The object of the system of progress payments and certificates is to enable the contractor to have money in hand to enable subcontractors to be paid and to get on with the work. As White J said in Construction Services Civil Pty Ltd v J & N Allen Enterprises Pty Ltd, progress payments are the ‘life-blood’ of contractors in the building industry.31 ‘The basic principle at common law upon which progress certificates are issued is that they represent interim vouchers for the payment of money on account of the final contract price.’32 Formerly it was held that a progress certificate is to be regarded

as virtually cash: it must be honoured, and payment must not be withheld on account of cross-claims.33 However, this is now a question of construction. It is necessary in each case to examine and construe the terms of the contract in order to determine34 whether the proprietor is bound to pay the amount of the certificate without deduction. Thus, in LU Simon Builders Pty Ltd v Fowles,35 it was held by Smith J upon the proper construction of the contract in that case that the proprietor was not able to raise any cross-claim under such contract by way of defence in answer to a claim by the builder for payment on progress certificates. A similar result obtained in Main Roads Construction Pty Ltd v Samary Enterprises Pty Ltd,36 where Habersberger J held that the AS 4000–1997 contract required the principal to pay certified progress claims in full during the course of the project, without reduction or set-off, such that if the [page 142] superintendent had not deducted from the progress claim any claims for set-off made by the principal, the contract deferred any appropriate adjustments to a later date. Often, the person authorised under the contract to issue progress certificates, usually the administering architect or superintendent, will be empowered to deduct amounts owed by the builder to the proprietor as provided by the contract. However, the recurring theme in recent decisions is that the proprietor must then pay the amount shown on the certificate, without further deduction or set-off. In Novawest Contracting Pty Ltd v Taras Nominees Pty Ltd 37 Gillard J, dealing with progress certificates issued under an AS 2124 contract, held: The law is clear with respect to parties interfering with common law rights by contract. It has long been established that to exclude common law rights the intention must be clearly and unequivocally spelt out … In my opinion, the provisions of clause 42.1 which I have summarised and referred to make it clear that once the certificate is issued it must be paid without deduction.

Vickery J reached the same conclusion in Skilled Group Ltd v CSR Viridian Pty Ltd.38

Before a certificate can conclusively establish the accuracy and validity of a claim for a progress payment, the terms of the contract must unequivocally lead to that conclusion.39 Payments made against progress certificates are provisional and subject to adjustment at the end of the contract.40 A contract is not prevented from being an entire contract because progress payments are to be made.41 Some building contracts42 contain payment regimes whereby the superintendent is required to issue a progress certificate within a stipulated [page 143] period of receipt and in assessment of a progress claim, failing which, the progress claim is deemed to be the progress certificate. The principal is then required to pay, on account, the amount of the progress claim. It has been held, though, that the obligation on a superintendent to issue a payment certificate under the common standard contracts is subject to a condition precedent that the contractor supports the progress claim with evidence of the amount claimed due and with such information as the superintendent may reasonably require.43 However, as noted above, because all progress payments are on account or provisional only, any benefit a contractor might enjoy by reason of a deemed certificate (often through the aid of a prompt summary judgment application) may be reversed in a subsequent certificate wherein the superintendent effectively ‘corrects’ the ‘account’ by assessing the actual value of the works completed to that latter date.44 Similar provisions also bestow upon a superintendent a discretion to issue a progress certificate even where the contractor fails to submit a progress claim in a given payment period.45

Payments and acceptance 8.6 The mere fact that the builder has been paid will not prevent the proprietor from setting up a claim for defective work. Such a claim may be set up by separate action even after the builder has recovered judgment for the contract

price.46 Often the builder contends that the proprietor has ‘accepted’ or ‘adopted’ the work and is thereby prevented from complaining about defects. There can be no ‘acceptance’ or ‘adoption’ for this purpose where the proprietor has been imposed upon by a fraud concealing the real character of the work.47 In AS 2124, cl 42.8 provided that, subject to any notice of dispute, ‘the final certificate shall be evidence that the works have been completed in accordance with the terms of the contract except in the [page 144] case of fraud, dishonesty or fraudulent concealment; any defect (including omission) in the works which was not apparent at the end of the defects liability period, or which would not have been disclosed upon reasonable inspection at the time of the issue of the final certificate; or any accidental or erroneous inclusion or exclusion of any work, plant, materials or figures in any computation or any arithmetical error in any computation’. The fact that progress certificates are given and honoured will not prevent the proprietor from setting up the defect claim.48 Generally speaking, a builder who relies upon ‘acceptance’, or payment, or some such thing, must prove that the proprietor has waived performance in accordance with the contract.49 Waiver, if it has any identifiable legal consequence, is generally indistinguishable from estoppel;50 for it to arise, a party must knowingly abstain from exercising a right.51 See further 3.8–3.9. Where in a contract for diamond-drilling the diameter of the bore was to be reduced where the continuation of the original size became impracticable for certain reasons, and progress payments were made to the contractor by the company for which the drilling was being done after the company knew that the diameter was reduced, it was held that it would be unreasonable for the company, knowing that work had begun and encouraging this work by payments, to set up that the work was not properly performed; it was further held that the payments were evidence of approval and acceptance of the work as performance of the contract and raised an equitable estoppel against the setting up of breach of contract.52

Security of payment

8.7 Since 1999, every state and territory throughout Australia has enacted legislation aimed at providing contractors with security of payment for progress claims during the course of a project. Major features of the legislative scheme are set out elsewhere in this work; see 9.20. The legislation has given rise to numerous of judicial decisions, mostly in New South Wales, Victoria and Queensland, all chiefly concerning such [page 145] matters as challenges to the validity of payment claims;53 attempts to avoid or subvert the consequences of failing to issue a payment schedule in the prescribed time;54 and reviews of adjudication determinations.55

QUANTUM MERUIT Generally 8.8 As pointed out by Byrne J in Brenner v First Artists’ Management Pty Ltd,56 there are two broad categories of claim which are commonly described as quantum meruit. The first is where services are performed under an existing and enforceable contract which contains an express or implied term to pay a fair and reasonable sum. The second is where it is said that the law imposes on a person an obligation independent of contract to pay a fair and reasonable sum for the services. In this second category the obligation arises by the application of the law of restitution or unjust enrichment and not out of contract express or implied. Payment becomes due ‘to avoid unjust enrichment’.57 In the leading decision in this area, Pavey & Matthews Pty Ltd [page 146] v Paul,58 the builder was statutorily precluded from seeking to enforce the

contract because it was not in writing. Deane J said that: … there is no apparent reason in justice why a builder who is precluded from enforcing an agreement should also be deprived of the ordinary common law right to bring proceedings on a common indebitatus count to recover fair and reasonable remuneration for work which he has actually done and which has been accepted by the building owner.

Restitution, he said, involves ‘the payment of an amount which constitutes, in all the relevant circumstances, fair and just compensation for the benefit or “enrichment” actually or constructively accepted’. It is not possible in this second category to claim on a quantum meruit and under a contract at the same time.59 In reaffirming that principle, in Lumbers v W Cook Builders Pty Ltd (in liq),60 the High Court noted Lord Goff of Chieveley’s warning in Pan Ocean Shipping Co Ltd v Creditcorp Ltd:61 Serious difficulties arise if the law seeks to expand the law of restitution to redistribute risks for which provision has been made under an applicable contract.

In order to establish the value of the work done and the consequent reward in this second category of claim, the plaintiff must prove the exact nature of the work that has been done and must prove that the work was done with proper skill.62 Sometimes a ‘fair’ or ‘reasonable’ or ‘fair and reasonable’ price is mentioned, but the meaning is the same. What is a fair and reasonable price is a question of fact.63 This question frequently competes with the question of defects.64 In order to prove what was reasonable the contractor may give evidence of the actual cost of labour, materials and (where appropriate) plant and claim in addition a percentage to cover profit and overheads or may rely upon evidence as to what is a reasonable price for the work viewed as a whole. As part of the assessment, the contract price is relevant on a quantum meruit, but not because of any ‘continuing influence’ of the contract. The price is [page 147] merely an item of evidence, showing the value the parties attributed — at a particular time — to the work which the builder was agreeing to perform.65 It is not a ‘ceiling’ on the amount recoverable.66 Expert witnesses called to give evidence on value may include contractors,

architects and quantity surveyors. While each case must be considered on its own facts to determine what evidence is available or should be procured, the general statement may be made that if the claim is a substantial one, the engagement of a quantity surveyor, as the person especially concerned with the measurement and valuation of work, should be considered.

When quantum meruit arises 8.9 Quantum meruit arises not out of contract but out of obligation imposed by law.67 A claim in quantum meruit is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution, in the sense of compensation for the benefit of unjust enrichment, to the person who has sustained the countervailing detriment.68 It is a claim which straddles the boundaries between contract and restitution.69 The essential basis for a claim in quantum meruit is execution of work for which no enforceable contract exists and acceptance of the work by the party for whom it is performed.70 It is implicit that the work is of benefit: hence the obligation to pay for it, which arises most clearly if the benefit is indisputable or incontrovertible. Derived from the analysis of Jordan CJ in Horton v Jones (No 2),71 a claim in quantum meruit may be said to lie in particular in the following cases: 1.

Where a contractor has done work under an agreement and the proprietor has expressly or by implication promised to pay for it but the agreement does not fix the price. Here the law implies a term that [page 148] a reasonable price shall be paid.72 The plumber who is summonsed to unblock the drain or repair the leaking roof perhaps late into the night usually does work upon an implied promise by the householder to pay a reasonable price for the work. A promise to pay for work done at the request of another will not always be implied.73 The implied promise to pay a reasonable price for work requested in circumstances showing that it was intended that the work be paid for is the most common basis of a claim on a quantum meruit. Often it is said that the contractor may recover on a quantum

meruit if the proprietor ‘accepts’ or ‘adopts’ or ‘takes the benefit of’ the work. But in reality, where the contractor succeeds in cases of this kind it is because the making of a fresh contract is proven. See further 8.4. 2.

Where additional work is carried out by a contractor at the request of the proprietor and the work does not fall within the scope of the power to order variations contained in the contract, the contractor is entitled to be paid for the extra work on a quantum meruit.74 This situation is sometimes treated as if it represented a separate category75 of the cases in which a contractor may recover on a quantum meruit, but in truth, it is merely an example of work done at the request of the proprietor without any express agreement concerning remuneration and in circumstances in which a promise to pay must be implied. Recovery in such cases is perhaps better referred to ideas of restitution rather than implied contract.76

3.

Where it is expressly agreed that a reasonable price shall be paid.

4.

Where there is an express contract for the doing of work which is repudiated by the proprietor. Here the builder has the option of treating the contract as at an end and either suing on a quantum meruit for the value of the work and labour done or suing for damages for breach of contract.77 Whether the availability of the ‘election’ was still good law in light of the ‘rescission fallacy’ — the notion that the acceptance of [page 149] a repudiation had the effect of rescinding the contract ab initio — was considered in Sopov v Kane Constructions Pty Ltd (No 2).78 The Court of Appeal considered that if it had been ‘unconstrained by authority’, it may well have accepted the principal’s argument that the only remedy for the builder was to sue on the contract. However, the court held that it was ‘heavily constrained by authority’ and that the notion of election was ‘too well settled by authority to be shaken’.79 Accordingly, it remains open for an innocent builder to sue either for damages on the contract or for a sum by way of quantum meruit. The fact that judgment on the claim in quantum meruit exceeds the amount which would have been payable under the

contract is irrelevant: the contract does not provide a ‘ceiling’ on the amount recoverable.80 5.

Where work has been done under a void contract or an unenforceable contract.81 Accordingly, where a rise and fall clause was held to be void for uncertainty and this had the consequence that the whole building agreement was bad for uncertainty, the contractor was entitled to recover on a quantum meruit.82 In Denton v Ryde Municipal Council,83 Kinsella J expressed the opinion that there could be no implied contract for payment arising out of acceptance of work done where the work was done upon an express request which turned out to be no request at all, but which, down to the time when the whole of the work had been done, was supposed by both parties to be valid and operative. In so doing his Honour relied upon a passage in Re Allison, Johnson & Foster Ltd; Ex parte Birkenshaw,84 but as noted in 7.10 the passage in question had been doubted by the Court of Appeal in Craven-Ellis v Canons Ltd.85 In any event Denton v Ryde was not followed in Tonkin v Cooma-Monaro Shire Council.86

6.

Where a contract is frustrated, the contractor may by statute in effect recover on a quantum meruit. See the Frustrated Contracts Act 1959 (Vic).87 [page 150]

Entire contract 8.10 A contractor who has failed to perform a contract which is an entire contract is unable to recover either the contract price or on a quantum meruit unless it can be shown that it was the proprietor’s fault that the work was incomplete or that there is something to justify the conclusion that the parties have entered into a fresh contract:88 see 8.1. This rule, however, has been relaxed by the development of the doctrine of substantial performance, by which a contractor who has substantially performed the contract may recover a sum equal to the agreed price less the cost of making good defects and omissions. See further 8.2.

Onus of proof

8.11 In an action for work and labour done, where the plaintiff is suing upon a quantum meruit and the defence is that the work was done so negligently as to be valueless, the plaintiff has the onus of proving, first, that the work was done skilfully and without such negligence as to have rendered it worthless, and, second, an entitlement arising to receive the amount claimed or some lesser amount.89 Where some evidence is given that the work was completed with due skill, the burden of adducing evidence may shift, but the burden of proof as to value remains on the plaintiff.90 The onus is upon an unsuccessful defendant to show a failure by the plaintiff to mitigate loss.91

INACCURATE INFORMATION SUPPLIED TO CONTRACTOR Contractual liability 8.12 Contractors who have encountered unforeseen difficulties in the course of executing the works have often sought to recover additional sums from the proprietor, but have usually been unsuccessful.92 The attitude of the common law is that the proprietor gives no implied warranty that the work can be done in accordance with the design prepared by or on behalf [page 151] of the proprietor, nor that the proprietor must do everything necessary to complete the works. Conversely, a builder who builds a structure strictly in accordance with a proprietor’s defective plan is entitled to be paid the full contract price.93 In Thorn v Mayor and Commonalty of London,94 the House of Lords held that there was no implied warranty on the part of the building owner in that case that the work could be successfully executed in the mode prescribed by the plans and specifications prepared by the owner’s engineer.

However, in Codelfa Construction Pty Ltd v State Rail Authority (NSW),95 Mason J declined to apply the principle in Thorn’s case, noting that the contractor’s case — there based on an implied warranty — failed, there being some indications in the contract inconsistent with the existence of such a warranty. As Lord Cairns LC in Thorn acknowledged,96 a contractor could have a claim on a quantum meruit for the additional work performed and might refuse to go on with the contract on the ground that the new work was ‘additional or varied work, so peculiar, so unexpected, and so different from what any person reckoned or calculated upon’.97 Thus, in McDonald v Mayor etc of Workington,98 a case concerning an unfortunate sewerage contractor, part of the work involving tunnelling through a bank proved to be impracticable because of water in the soil and the plaintiff threw up the contract. The statement of claim alleged that before the contract was entered into the defendant represented and guaranteed that the tunnelling should be through dry ground. The action failed. Lord Esher MR said: [The] contractor found he could not do [the work] without additional precautions. The truth is the contractor ought to have taken steps to protect himself. The plan shows him the ground, and before he contracts he ought to go to the ground and see if he can do the work upon the terms mentioned in the specification. He takes the risk. He [had] no right to throw up the contract.99

[page 152] So, also, it was held in Walker v Council of the Municipality of Randwick100 that the contract there was an entire contract to build a retaining wall for a fixed price, and as the specification was, but the plan was not, expressly incorporated in the contract, the plaintiff’s obligation to complete the works for the agreed price was not affected by an alleged understatement in the plan and, therefore, he was not entitled to recover payment for extra work occasioned. In Thiess Services Pty Ltd v Mirvac Queensland Pty Ltd, de Jersey CJ observed: The problem confronting the appellant Thiess does not seem to me to differ in substance from that confronting many contractors who in unqualified terms undertake to perform work that, because of unforeseen and perhaps unforeseeable physical conditions, turns out to be much more difficult and expensive than originally expected or supposed. A well known example is Re Carr and the Shire of Wodonga [1925] VicLawRp 33; [1925] VLR 238. The contractor there undertook to build a bridge for the Council, which involved sinking piers into the river bed, which was believed to consist of sandy clay or clay and gravel. In fact, in sinking the cylinders for the piers, it was discovered that there were unforeseen obstacles in the form of large logs buried in the alluvium of the river, as well as

water, which increased the total cost of the work by 50%. The Full Court of Victoria held that there was no warranty, express or implied, on the part of the Council as to the absence of obstructions in the area having to be excavated for the piers, and that the additional cost of doing so occasioned by those obstructions could not be recovered from the Council.

Of course, everything depends on the provisions of the contract …101 Contractors have regularly failed in cases where there are contractual provisions requiring them to make their own inquiries about site conditions and dimensions.102

Other liability 8.13 It is no answer to a claim by a builder for the full contract price that the plan supplied by the proprietor and followed strictly by the builder is defective.103 The contractor may contend, not that there is some implied warranty of the practicability of the design, but that inaccurate information has been supplied by or on behalf of the proprietor. Causes of action for damages resulting from inaccurate information or defective design are listed below: [page 153] 1.

Breach of contract — although, as seen above, actions founded on an alleged implied warranty contained in the drawings or specification (eg, a warranty that the sub-surface conditions are as shown on a geological section) have usually failed. The drawings and specifications may simply be held to contain no warranty, or what might perhaps otherwise be treated as a warranty is prevented from being so regarded by some express provision in the contract documents. In construction-only contracts, where the principal supplies the design, the question will be one of allocation of risk. In negotiating terms, principals will often endeavour to include provisions104 by which they expressly do not warrant the accuracy of the information in the supplied design, casting instead an obligation on the builder to check all information prior to entering into the contract and to be satisfied about accuracy or even a provision whereby the builder is to be deemed to have done such checking. Where the contract is one for design and construction, the builder will almost always assume full responsibility for the accuracy and

‘buildability’ of the design. See further 8.14. 2.

Negligent misrepresentation — since Hedley Byrne & Co Ltd v Heller & Partners Ltd,105 as seen in the light of later authorities,106 a claim of negligent misrepresentation may be made. See 8.15.

3.

Fraud — if an inaccurate statement has been made without any honest belief in its truth.107

4.

Misleading and deceptive conduct or false or misleading representations — under Sch 2 s 18 of the Competition and Consumer Act 2010 (Cth), the Australian Consumer Law (ACL) (formerly, as noted elsewhere, the Trade Practices Act 1974 (Cth)).108 The ACL has been adopted and [page 154] incorporated into the relevant fair trading legislation of the each of the states and territories.109

Contractual provisions 8.14 The position of a contractor may be alleviated by a clause governing latent conditions, giving protection against, for example, subsurface conditions. Limited protection was afforded by the old Ed 5b cl 7 and by the later AS 2124-1992 cl 12. Subject to the remaining provisions of the clause, Ed 5b cl 7(a) provided that it is a condition of the contract that the proprietor warrants that the site of the works will satisfactorily support the works. The matter is dealt with somewhat differently in the more elaborate JCC form of contract. In cl 3.01 it provides that the proprietor’s responsibilities include the accuracy of all information specifically relating to the site contained in the agreement and the supply to the builder of any survey or other information necessary to enable the builder to locate and define the site. Pursuant to its cl 3.02, should any of the physical conditions, including sub-surface conditions, encountered in the execution of the work differ from the conditions described in the agreement, or reasonably cause the builder to consider that the work should be varied, the builder must promptly notify the architect who is required to issue

instructions to the builder before the performance of that part of the work affected by the different conditions. Clause 10.29 provides for the valuation of cost variations as a result of any differences between physical conditions and site characteristics encountered and those described in the agreement or any such architect’s instruction. Apart from conditions which the contract specifies to be latent conditions, cl 12 in the AS 2124 suite defines latent conditions as physical conditions on the site or its surroundings, including artificial things but excluding weather conditions, which differ materially from the physical conditions which should reasonably have been anticipated by the contractor at the time of tendering. In order to anticipate these conditions the contractor would need to inspect the site and its surroundings, and also examine all information relevant to the risks, contingencies and other circumstances having an effect on the tender, whether provided by the principal for the purpose of tendering or obtainable by the making of reasonable enquiries. Upon becoming aware of a latent condition, the contractor must give written notice and specified details of it to the superintendent. Delay caused by a latent condition may justify an extension of time. If a latent condition causes the contractor to carry out additional work, use additional [page 155] constructional plant or incur extra cost (including but not limited to the cost of delay or disruption), which the contractor could not reasonably have anticipated at the time of tendering, a valuation will be made under cl 40.5. See also ABIC MW-1 (2003) section F, PC-1 (1998) cl 7.3, and ABIC MW 2008 section F5. For a discussion on latent condition claims, see BMD Major Projects Pty Ltd v Victorian Urban Development Authority.110

Negligent misrepresentation 8.15 A contractor suffering loss, usually in the form of increased costs, due to

inaccurate design or site information provided by a principal (including other professionals engaged by the principal such as engineers and architects), may seek to recover damages for negligent misrepresentation (also referred to as negligent misstatement). In Morrison-Knudsen International Co Inc v Commonwealth,111 contractors for certain works in the construction of the airport at Tullamarine in Victoria alleged that site information given to tenderers was misleading, in that the clay contained large quantities of cobbles. They sued in negligence. The High Court determined that the fact that the documents contained various protective statements, for example, that the principal would not be responsible for any conclusion drawn by the tender in regard to site conditions from the information supplied, would not necessarily be fatal to the contractors’ claims. In 1990, Marks J in Norris v Sibberas,112 as set out elsewhere in this work, said: If a person, who has or professes to have special knowledge or skill, makes a representation by virtue thereof to another — whether it be advice, information or opinion — with the intention of inducing [that other] to enter into a contract, [such person] is under a duty to use reasonable care to see that the representation is correct and that the advice, information, or opinion is reliable.

And as Marks J also there said, the duty is not limited to persons whose business or profession includes giving the sort of advice or information sought but extends to persons who on a serious occasion give considered advice or information concerning a business or professional transaction.113 [page 156] However, liability is confined to cases where the statement or advice has been given to a known recipient for a specific purpose of which the maker was aware and upon which the recipient has relied and acted to their detriment.114 Negligent misstatement is but a sub-species of the general law of negligence, normally involving claims for pure economic loss. That branch of the law has undergone substantial development in recent times. Its operation in building cases, in particular, has unfolded through a line of High Court authority including Bryan v Maloney,115 Esanda Finance Corporation Ltd v Peat Marwick Hungerfords116 Pyrenees Shire Council v Day,117 Perre v Apand Pty Ltd,118 Woolcock Street Investments Pty Ltd v CDG Pty Ltd.119 The principles laid down in these decisions have to a

degree harmonised the law on the subject and brought it to a stage of relative certainty which is reflected in decisions such as Moorabool Shire Council v Taitapanui,120 Caltex Refineries (Qld) Pty Limited v Stavar,121 Apache Energy Ltd v Alcoa of Australia Ltd (No 2)122 and Owners — Strata Plan No 61288 v Brookfield Australia Investments Ltd.123 State and territory laws deal with liability for negligence, which usually includes economic harm. Although it was once at the forefront of considerations relevant to the imposition of a relevant duty of care, the High Court has pronounced that ‘the demise of proximity as a useful informing principle in this area is now complete’.124 Instead, the High Court has identified the following approach. If the circumstances fall within an accepted category of duty, little or no difficulty arises. If, however, the posited duty is a novel one, the proper approach is to undertake a close analysis of the facts bearing on the relationship between the plaintiff and the putative tortfeasor by references to the ‘salient features’ or factors that, when combined, constitute or reflect a sufficiently close relationship to give rise to a duty of care.125 The plurality in Caltex Refineries (Qld) Pty Ltd v Stavar126 provided a comprehensive collection127 of the salient features, namely: [page 157] the foreseeability of harm; the nature of the harm alleged; the degree and nature of control able to be exercised by the defendant to avoid harm; the degree of vulnerability of the plaintiff to harm from the defendant’s conduct, including the capacity and reasonable expectation of a plaintiff to take steps to protect itself; the degree of reliance by the plaintiff upon the defendant; any assumption of responsibility by the defendant; the proximity or nearness in a physical, temporal or relational sense of the plaintiff to the defendant;

the existence or otherwise of a category of relationship between the defendant and the plaintiff or a person closely connected with the plaintiff; the nature of the activity undertaken by the defendant; the nature or the degree of the hazard or danger liable to be caused by the defendant’s conduct or the activity or substance controlled by the defendant; knowledge (either actual or constructive) by the defendant that the conduct will cause harm to the plaintiff; any potential indeterminacy of liability; the nature and consequences of any action that can be taken to avoid the harm to the plaintiff; the extent of imposition on the autonomy or freedom of individuals, including the right to pursue one’s own interests; the existence of conflicting duties arising from other principles of law or statute; consistency with the terms, scope and purpose of any statute relevant to the existence of a duty; and the desirability of, and in some circumstances, need for conformance and coherence in the structure and fabric of the common law. Discharge of the duty may require information to be researched or investigations to be made.128 Any question of whether the High Court’s ‘incremental approach’ to broadening the categories or classes of claims for economic loss should apply to pre-contract negotiations may now be answered by the above approach.129 [page 158] In Esso Petroleum Co Ltd v Mardon,130 the plaintiff was held liable for damages for negligent misrepresentation in respect of an incorrect through-put estimate made for the purpose of inducing the defendant to enter into a contract. However, in TRFCK Pty Ltd v O’Brien Holdings (Townsville) Pty Ltd,131 referring to Esso v Mardon (amongst others), Jackson J cast some doubt on the subject when he said: Following the landmark decision of the House of Lords in Hedley Byrne & Co Ltd v Heller & Partners

Ltd, there was at least some suggestion or indication that the law of negligence might develop to encompass damages for negligently made pre-contractual representations, but it is unnecessary to say more about that fascinating subject matter or whether it could stand with more recent developments of principle of the common law of Australia as to the existence of a duty of care against economic loss in the High Court of Australia.

On the subject of negligence generally, and for further discussion of cases in the area, see Chapter 16.

WASTED PRE-CONTRACT EXPENDITURE Principle of restitution 8.16 A principle of restitution may apply in circumstances where a joint project upon which a party has worked is abandoned by the other party. The principle is set out in full in the judgment of Sheppard J in Sabemo Pty Ltd v North Sydney Municipal Council.132 See 5.5.

Relation to doctrine of unjust enrichment 8.17 The principle stated by Sheppard J in Sabemo Pty Ltd v North Sydney Municipal Council133 has relation to the more general doctrine of unjust enrichment.134 See 5.5. _________________________ 1.

Phillips v Ellinson Bros Pty Ltd (1941) 65 CLR 221 at 233–4 per Starke J; Phillips Fox (a Firm) v Westgold Resources NL [2000] WASCA 85 at [7]; GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited (2003) 128 FCR 1; [2003] FCA 50 at [471], [654], [702]–[703]; Phillips v Tobias Partners Pty Ltd [2013] NSWSC 496 at [21].

2.

Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 350; see Turner v Californian Cars & Sports Trucks Pty Limited [2002] NSWSC 666; Nguyen v Luxury Design Homes Pty Ltd (2005) 21 BCL 46; [2004] NSWCA 178 at [20]–[29]; Alexiadis v Zirpiadis (2013) 302 ALR 148; [2013] SASCFC 64 at [181].

3.

Nguyen v Luxury Design Homes Pty Ltd (2005) 21 BCL 46; [2004] NSWCA 178 at [24]; cf W & F Lechner Pty Ltd v Drummond and Rosen Pty Ltd (2001) 38 ACSR 42; [2001] NSWSC 275 at [36].

4.

See Lucas v Borough of Drummoyne (1895) 16 LR (NSW) 55; Hunter v Council of Municipality of West Maitland (1923) 23 SR (NSW) 420; Smith v Jones (1924) 24 SR (NSW) 444; Parkinson v Lord [1925] VLR 22; Hoenig v Isaacs [1952] 2 All ER 176; Zamperoni Decorators Pty Ltd v Lo Presti [1983] 1 VR 338; Bunting Cabinets Pty Ltd v Halperin (1986) 4 SR (WA) 75; ACN 002 804 702 (formerly Brooks Building) v

McDonald [2009] NSWSC 610 at [110]; Sharp v Cossack Pearls Pty Ltd [2011] FCA 1477 at [120]; Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd (2013) 29 BCL 329; [2012] NSWCA 184 at [77]–[79]. 5.

H Dakin & Co Ltd v Lee [1916] 1 KB 566; Hoenig v Isaacs [1952] 2 All ER 176; S & S Constructions Pty Ltd v Fulop [1966] VR 401; Morgan v S & S Constructions Pty Ltd [1967] VR 149; Bolton v Mahadeva [1972] 2 All ER 1322; Chalet Homes Pty Ltd v Kelly [1978] Qd R 389; Zamperoni Decorators Pty Ltd v Lo Presti [1983] 1 VR 338; Nguyen v Luxury Design Homes Pty Ltd (2005) 21 BCL 46; [2004] NSWCA 178 at [33].

6.

Corio Guarantee Corp Ltd v McCallum [1956] VLR 755 at 760; Gardner v Smith [2001] WASCA 116; Nguyen v Luxury Design Homes Pty Ltd (2005) 21 BCL 46; [2004] NSWCA 178 at [68]–[69].

7.

James Birrell Mack and Partners v Evans (1984) 1 BCL 344 at 349; Bell v Greenland Design Pty Ltd [1994] QSC 9; Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 at [77]–[79], [93]– [95].

8.

Connor v Stainton (1924) 27 WALR 72; Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd (2013) 29 BCL 329; [2012] NSWCA 184 at [94].

9.

James Birrell Mack and Partners v Evans (1984) 1 BCL 344 at 349; Nguyen v Luxury Design Homes Pty Ltd (2005) 21 BCL 46; [2004] NSWCA 178 at [70]; Eminent Forms Pty Ltd v Formosa [2004] SASC 192 at [49]–[55].

10. (2013) 29 BCL 329; [2012] NSWCA 184 at [99]. See Hoenig v Isaacs [1952] 3 All ER 176. 11. Hoenig v Isaacs [1952] 2 All ER 716 at 181. 12. Phillips v Ellinson Bros Pty Ltd (1941) 65 CLR 221 at 233–4; Nguyen v Luxury Design Homes Pty Ltd (2005) 21 BCL 46; [2004] NSWCA 178; Phillips v Tobias Partners Pty Ltd [2013] NSWSC 496 at [21]. 13. Lodder v Slowey [1904] AC 442; Brooks Robinson Pty Ltd v Rothfield [1951] VLR 405 at 409 Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234; compare McDonald v Dennys Lascelles Limited (1993) 48 CLR 457,476–7; Iezzi Constructions Pty Ltd v Watkins Pacific (Qld) Pty Ltd [1995] 2 Qd R 350 at 361; Austman Pty Ltd v Mount Gibson Mining Ltd (2013) 29 BCL 154; [2012] WASC 202 at [554]–[556]; Kronenberg v Bridge [2013] TASSC 57 at [91]–[93]. 14. (2009) 24 VR 510; [2009] VSCA 141 at [9]–[12]. 15. Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221. 16. Sopov v Kane Constructions Pty Ltd [2009] HCATrans 338. The principle involved has since been applied in a number of cases. See Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd (2013) 29 BCL 329; [2012] NSWCA 184 at [94]; Austman Pty Ltd v Mount Gibson Mining Ltd (2013) 29 BCL 154; [2012] WASC 202 at [556] and Kronenberg v Bridge [2013] TASSC 57 at [91]. 17. GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1; [2003] FCA 50 at [936]. 18. R v Lloyd (1870) 1 AJR 78; Lucas v Borough of Drummoyne (1895) 16 LR (NSW) 55; Cooper v Australian Electric Co (1922) Ltd (1922) 25 WALR 66; Zorba Structural Steel Company Pty Ltd v Watco Pty Ltd (1993) 115 FLR 206 at 209; Nguyen v Luxury Design Homes Pty Ltd (2005) 21 BCL 46; [2004] NSWCA 178, at [18], [26] and [67]; Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd (2013) 29 BCL 329; [2012] NSWCA 184; Eagle Sea Pty Ltd v Radford [2012] TASSC 41 at [61]–[62]. 19. Steele v Tardiani (1946) 72 CLR 386 at 503; Bulic v Melbourne City Nominees Pty Ltd [1998] VSC 11; Trimis v Mina [1999] NSWCA 140 at [56]; Oliver v Lakeside Property Trust Pty Ltd [2005] NSWSC 1040 at [85]; Page v Home Team Constructions Pty Ltd [2008] NSWSC 613 at [21], [23]; Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635; [2008] HCA 27 at [51]; compare Austman Pty Ltd v Mount

Gibson Mining Ltd (2013) 29 BCL 154; [2012] WASC 202 at [578]. 20. Progressive Pod Properties Pty Ltd v A & M Green Investments Pty Ltd [2012] NSWCA 225 at [62] citing Sumpter v Hedges [1898] 1 QB 673 at 676; and Steele v Tardiani (1946) 72 CLR 386 at 403. See also Henderson’s Automotive Technologies Pty Ltd (in liq) v Flaton Management Pty Ltd (2011) 32 VR 539; [2011] VSCA 167 at [55]. 21. Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635; [2008] HCA 27 at [51]. 22. Ibid at [52]. 23. (1884) 5 LR (NSW) 195 at 197; distinguished in Hunter v West Maitland Municipal Council (1923) 23 SR (NSW) 420; W & F Lechner Pty Ltd v Drummond and Rosen Pty Ltd [2001] NSWSC 275; Mulley v Jim Wilson Builder Pty Ltd [2007] QCCTB 79 at [18]. 24. Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221 at 257–9; Vivian Fraser & Associates Pty Ltd v Shipton [1999] FCA 60 at [325]; compare Sandtara Pty Ltd v Longreach Group Ltd [2008] NSWSC 373 at [58]; Peet Limited v Richmond (2011) 33 VR 465; [2011] VSCA 343. 25. (1923) 23 SR (NSW) 420, cited in Mulley v Jim Wilson Builder Pty Ltd [2007] QCCTB 79 at [18]. 26. McLachlan v Nourse [1928] SASR 230 (where the contract provided for monthly progress payments not exceeding 75 per cent of the value of the work done); applied in Alucraft Pty Ltd (in liq) v Grocon Ltd [1994] VSC 246; GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1; [2003] FCA 50 at [705]; and Danthanarayana v GR8 Constructions Pty Ltd (2012) 201 FCR 347; [2012] FCA 231 at [51]. 27. Compare Steele & Tardiani (1946) 72 CLR 386 at 403 and authorities there cited. Referred to in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1; [2003] FCA 50. See also John Nelson Developments Pty Ltd v Focus National Developments Pty Ltd [2010] NSWSC 150 at [331]–[332]. 28. See Appleby v Myers (1867) LR2CP 651 at 660. See also State of Victoria v Tymbrook (Palais Theatre) [2006] VCAT 2298. For legislation elsewhere see: Frustrated Contracts Act 1978 (NSW); Frustrated Contracts Act 1988 (SA). 29. The Tergeste [1903] P 26 at 34; Besser Industries (NT) Pty Ltd v Steelcon Constructions Pty Ltd (1995) 129 ALR 308 at [11]; W & F Lechner Pty Ltd v Drummond & Rosen Pty Ltd (2001) 38 ACSR 42; [2001] NSWSC 275 at [36]. 30. [1920] NZLR 412. 31. (1985) 1 BCL 363 at 365, referring to Lord Denning MR in Modern Engineering (Bristol) Ltd v GilbertAsh (Northern) Ltd (1973) 71 LGR 162 at 167; Main Roads Construction Pty Ltd v Samary Enterprises Pty Ltd [2005] VSC 388 at [45]. See also Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 at [26]. 32. Construction Services Civil Pty Ltd v J & N Allen Enterprises Pty Ltd (1985) 1 BCL 363; 620 Collins Street Pty Ltd v Abigroup Contractors Pty Ltd (No 2) [2006] VSC 491 at [80]; Candetti Constructions Pty Ltd v M & I Samaras (No 1) Pty Ltd [2011] SASC 165 at [41]. 33. Dawnays Ltd v F C Minter Ltd [1971] 1 WLR 1205 at 1209; overruled by the House of Lords in GilbertAsh (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689; cited in Engineering Construction Pte Ltd v Sanchoon Builders Pte Ltd [2010] SGHC 293. 34. Triden Contractors Pty Ltd v Belvista Pty Ltd (1986) 3 BCL 203 at 215; Construction Services Civil Pty Ltd v J & N Allen Enterprises Pty Ltd (1985) 1 BCL 363 at 367–9; Grahame Allen Earth-moving Pty Ltd v Woodwark Bay Development Corp Ltd (1988) 13 Aust Cons LR 14; Sabemo Pty Ltd v de Groot (1991) 8

BCL 132 at 143–4; Aquatec-Maxcon Pty Ltd v Minson Nacap Pty Ltd (2004) 8 VR 16; [2004] VSCA 18; Main Roads Construction Pty Ltd v Samary Enterprises Pty Ltd [2005] VSC 388. 35. [1992] 2 VR 189. 36. [2005] VSC 388. 37. [1998] VSC 205; referring to Re Concrete Constructions Group Pty Ltd [1997] 1 Qd R 6 and also Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd (1997) 14 BCL 215. See also Dura (Aust) Constructions Pty Ltd v Vilacon Corporation Pty Ltd [1999] VCAT 44; Queensland University of Technology v Project Constructions (Aust) Pty Ltd [2002] QCA 224; 1–5 Grantham Street Pty Ltd v Glenrich Builders Pty Ltd [2008] VSCA 228. 38. [2012] VSC 290. 39. R J Grills Pty Ltd v Dellios [1988] VR 136 at 138. 40. Lamprell v Guardians of the Poor of the Billericay Union (1849) 18 LJ Ex 282; Tharsis Sulphur and Copper Co v M Elroy (1878) 3 App Cas 1040; A-G v McLeod (1893) 14 LR (NSW) 246; Re Sanders Constructions Pty Ltd and Eric Newham (Wallerawang) Pty Ltd [1969] Qd R 29 at 39; considered in Besser Industries (NT) Pty Ltd v Steelcon Constructions Pty Ltd (1995) 129 ALR 308; Dial D Pty Ltd (as trustee for Smith Street Unit Trust) v Kingston Building (Australia) Pty Ltd [2013] NSWCA 277. 41. Chalet Homes Pty Ltd v Kelly [1978] Qd R 369; Ownit Homes Pty Ltd v Batchelor [1983] 2 Qd R 124 at 135; Besser Industries (NT) Pty Ltd v Steelcon Constructions Pty Ltd (1995) 129 ALR 308; Nguyen v Luxury Design Homes Pty Ltd (2005) 21 BCL 46; [2004] NSWCA 178 at [38]. 42. For example: AS 2124, cl 42.1; AS 4000, cl 37.2; as discussed in Aquatec-Maxcon Pty Ltd v Minson Nacap Pty Ltd (2004) 8 VR 16; [2004] VSCA 18; Dial D Pty Ltd (as trustee for Smith Street Unit Trust) v Kingston Building (Australia) Pty Ltd [2013] NSWCA 277. 43. Brewarrina Shire Council v Beckhaus Civil Pty Ltd (2003) 56 NSWLR 576; [2003] NSWCA 4; AquatecMaxcon Pty Ltd v Minson Nacap Pty Ltd (2004) 8 VR 16; Lysaght Building Solutions Pty Ltd (t/as Highline Commercial Construction) v Blanalko Pty Ltd (No 3) [2013] VSC 435 at [35]–[42]. 44. Zauner Construction Pty Ltd v No 2 Pitt Street Pty Ltd (2001) 17 BCL 357; [2001] VSC 154; Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211; Sopov v Kane Constructions Pty Ltd [2007] VSCA 257 at [39]; Dial D Pty Ltd (as trustee for Smith Street Unit Trust) v Kingston Building (Australia) Pty Ltd [2012] NSWCA 277 at [54]. 45. Daysea Pty Ltd v Watpac Australia Pty Ltd (2001) 17 BCL 434; Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2003] NSWCA 4; Lysaght Building Solutions Pty Ltd (t/as Highline Commercial Construction) v Blanalko Pty Ltd (No 3) [2013] VSC 435; Dial D Pty Ltd (as trustee for Smith Street Unit Trust) v Kingston Building (Australia) Pty Ltd [2013] NSWCA 277. 46. Davis v Hedges (1871) LR 6 QB 687; referred to in Hoppe v Titman [1996] 1 WLR 841. 47. A-G v McLeod (1893) 14 LR (NSW) 246 (where a contractor who erected a fort at the entrance to Botany Bay concealed the fact that he had passed off, as concrete, works constructed of rubbish and clay covered over with a thin skin of concrete — a circumstance which made it safer for a defender to be outside the fort than in it). 48. Triden Contractors Pty Ltd v Belvista Pty Ltd (1986) 3 BCL 203 at 215. See also Construction Services Civil Pty Ltd v J & N Allen Enterprises Pty Ltd (1985) 1 BCL 363 at 367–9; Sabemo Pty Ltd v de Groot (1991) 8 BCL 132 at 143–4; Melbourne Class Pty Ltd v Coby Constructions Pty Ltd (1998) 14 (5) BCLC 409; and Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd (1997) 14 BCL 215. 49. Mayor Councillors and Burgesses of Borough of Stratford v J H Ashman (NP) Ltd [1960] NZLR 503 at 516–

17. Compare Hawke v Lagal (1913) 16 WALR 6. See also National Coal Board v William Neill & Co (St Helens) Ltd [1985] 1 QB 300 at 313–14. 50. Commonwealth v Verwayen (1990) 170 CLR 394 at 451; discussed in, for example: The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 70 ACSR 1; Agricultural and Rural Finance Pty Limited v Gardiner (2008) 238 CLR 570; Krulow v Glamorgan Spring Bay Council [2013] TASFC 11. 51. Commonwealth v Verwayen (1990) 170 CLR 394 at 427. 52. Adelaide Oil Exploration Co Ltd v Goldfields Diamonds Drilling Co (Pty) Ltd [1932] SASR 390. See also Alstom Ltd v Yokogawa Australia Pty Ltd (No 7) [2012] SASC 49. 53. For example, see Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (in liq) (2005) 64 NSWLR 462; Abigroup Contractors Pty Ltd v River Street Developments Pty Ltd [2006] VSC 425; Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248; Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd (2009) 26 VR 112; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106; 470 St Kilda Road Pty Ltd v Reed Constructions Australia Pty Ltd [2012] VSC 235; Built Environs Pty Ltd v Tali Engineering Pty Ltd [2013] SASC 84. 54. For example, see Lucas Stuart Pty Ltd v Council of the City of Sydney [2005] NSWSC 840; Cant Contracting Pty Ltd v Casella [2006] QCA 538; Abigroup Contractors Pty Ltd v River Street Developments Pty Ltd [2006] VSC 425; T & M Buckley Pty Ltd v 57 Moss Rd Pty Ltd (2010) 27 BCL 280; State Asphalt Services Pty Ltd v Leighton Contractors Pty Ltd [2013] NSWSC 528; Dial D Pty Ltd (as trustee for Smith Street Unit Trust) v Kingston Building (Australia) Pty Ltd [2013] NSWCA 277; Pearl Hill Pty Ltd v Concorp Construction Group (Vic) Pty Ltd (2011) 32 VR 247. 55. For example, see Brookhollow Pty Ltd v R & R Consultants Pty Ltd [2006] NSWSC 1; Grocon Constructors v Planit Cocciardi Joint Venture (No 2) (2009) 26 VR 172; Phoenix International Group Pty Ltd v Resources Combined No 2 Pty Ltd [2009] VSCA 309; Spankie v James Trowse Constructions Pty Ltd [2010] QCA 355; Watpac Construction (NSW) Pty Ltd v Austin Corp Pty Ltd [2010] NSWSC 168; Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393; Metacorp Australia Pty Ltd v Andeco Construction Group Pty Ltd (No 2) (2010) 30 VR 141; Pines Living Pty Ltd v O’Brien [2013] ACTSC 156; Jotham Property Holdings Pty Ltd v Cooperative Builders Pty Ltd [2013] VSC 552. 56. [1993] 2 VR 221 at 256; applied in Vivian Fraser & Associates Pty Ltd v Shipton [1999] FCA 60 and Andrew Shelton & Co Pty Ltd v Alpha Healthcare Ltd [2002] VSC 248; considered in Torpey Vander Have Pty Ltd v Mass Constructions Pty Ltd [2002] NSWCA 263; Kane Constructions Pty Ltd v Sopov (No 2) (2006) 22 BCL 92 [2005] VSC 237 at [862]. 57. Tea Tree Gully Builders Co Pty Ltd v Martin (1992) 59 SASR 344 at 353 per Bollen J; applied in Nunkuwarrin Yunti of SA Inc v A L Seeley Constructions Pty Ltd (1998) 72 SASR 21, in relation to s 39 of the former Builders Licensing Act 1986 (SA) and the prohibition therein against unlicensed builders being able to enforce building contracts. Not followed in Mostia Constructions Pty Ltd v Cox and Labivolo Pty Ltd [994] 2 Qd R 55. 58. (1987) 162 CLR 221 at [23], [24]. 59. Ansett Transport Industries (Operations) Pty Ltd v Alenia Aeritalia & Selenia SPA (1991) 105 FLR 169 at 174. 60. [2008] HCA 27 at [79]. See also Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498; [2012] HCA 7 at [26]. 61. [1994] 1 WLR 161. 62. Riverside Motors Pty Ltd v Abrahams [1945] VLR 45; considered in Leighton Contractors Pty Ltd v East Gippsland Catchment Management Authority [2000] VSC 26, and in relation to a proprietor’s right to abate

the contract price in respect of defective work. Compare Andrew Shelton & Co Pty Ltd v Alpha Healthcare Ltd [2002] VSC 248, where the assessment of the quantum meruit claim involved consideration of the value of the benefit conferred on and accepted by the defendant; discussed in Skilled Group Ltd v CSR Viridian Pty Ltd [2012] VSC 290 at [178]. 63. See Torpey Vander Have Pty Ltd v Mass Constructions Pty Ltd [2002] NSWCA 263. 64. See Candetti Constructions Pty Ltd v M & I Samaras (No 1) Pty Ltd [2011] SASC 165 at [85] referring to Kane Constructions Pty Ltd v Sopov (No 2) (2006) 22 BCL 202; [2005] VSC 492 at [37]–[43]. 65. Sopov v Kane Constructions Pty Ltd (No 2) (2009) 24 VR 510; [2009] VSCA 141 at [21]; applied in Austman Pty Ltd v Mount Gibson Mining Ltd (2013) 29 BCL 154; Eagle Sea Pty Ltd v Radford [2012] TASSC 41. 66. See Sopov v Kane Constructions Pty Ltd (No 2) (2009) 24 VR 510; [2009] VSCA 141 at [24] following Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 278; Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221; Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; Iezzi Constructions Pty Ltd v Currumbin Crest Development Pty Ltd (1994) 13 ACLR 29. 67. Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221. 68. Pohlmann v Harrison (1993) 12 Aust Cons LR 80 at 82; see also [1995] 2 Qd R 59. Followed in Kev Leahman Earthmovers Pty Ltd v Hammond Villagers Pty Ltd (1998) 19 Qld Lawyer Reps 10. 69. British Steel Corp v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504 at 509 per Robert Goff J. See generally D S Jones and R T Varghese, ‘Quantum Meruit in Australia’ (1992) 8 Building and Construction Law 101. ‘Formerly a quantum meruit claim was categorised as a quasi contractual claim’: Howtrac Rentals Pty Ltd v Thiess Contractors (NZ) Ltd [2000] VSC 415; ‘… now generally classed as restitutionary claims’: Wentworth v Rogers [2002] NSWSC 709. 70. Pohlmann v Harrison (1993) 12 Aust Cons LR 80 at 82. 71. (1939) 39 SR (NSW) 305 at 319–20. See also Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498. 72. Horton v Jones (No 2) (1939) 39 SR (NSW) 305 at 319. See also Spencer v Harris (1890) 11 LR (NSW) 21; Riverside Motors Pty Ltd v Abrahams [1945] VLR 45 at 47, 51; considered in Leighton Contractors Pty Ltd v East Gippsland Catchment Management Authority [2000] VSC 26. 73. Sinclair v Rankin (No 2) (1908) 10 WALR 126. 74. Thorn v Mayor and Commonalty of London (1876) 1 App Cas 120 at 127; Parkinson (Sir Lindsay) & Co Ltd v Commissioners of His Majesty’s Works and Public Buildings [1949] 2 KB 632. See also Update Constructions Pty Ltd v Rozelle Child Care Centre Pty Ltd (1990) 20 NSWLR 251. 75. Particularly in the United States, where such cases fall within what is known as the ‘cardinal change’ theory. See M Whitten, ‘Cardinal Change’, Construction Law Section Seminar Workbook, The Commercial Bar Association, pp 1–14, 22 April 2004, . 76. Compare Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251 at 272 per Priestley JA. 77. Lodder v Slowey [1904] AC 442. See also Gabriel v Sea & Retaining Wall Construction Pty Ltd (1987) 3 BCL 162 at 167. 78. (2009) 24 VR 510; [2009] VSCA 141 at [5]–[14]. 79. Special leave to appeal to the High Court on this point was refused: Sopov v Kane Constructions Pty Ltd [2008] HCATrans 209.

80. Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 276–7. See also Sopov v Kane Constructions Pty Ltd (No 2) (2009) 24 VR 510; [2009] VSCA 141 at [24]–[25]. 81. Craven-Ellis v Canons Ltd [1936] 2 KB 403; Semple v City of Geelong [1937] VLR 28; Phillips v Ellinson Bros Pty Ltd (1941) 65 CLR 221 at 235; Matthews v Carter (1955) 55 SR (NSW) 347; Keeley v State of Vic [1964] VR 344 at 368–70. 82. Bevelon Investments Pty Ltd v Kingsley Air Conditioning Pty Ltd [1971] Vic SC 220. See also British Steel Corp v Cleveland Bridge and Engineering Co Ltd [1984] 1 All ER 504 (‘if’ contract never concluded; hence, quantum meruit maintainable). 83. (1953) 19 LGR (NSW) 152 at 157. 84. [1904] 2 KB 329 at 330. 85. [1936] 2 KB 403. 86. (2006) 145 LGERA 48. 87. For legislation elsewhere see: Frustrated Contracts Act 1978 (NSW); Frustrated Contracts Act 1988 (SA). 88. Phillips v Ellinson Bros Pty Ltd (1941) 65 CLR 221 at 233–4; referred to in Wentworth v Rogers [2005] NSWSC 143; Haxton v Equuscorp Pty Ltd (2010) 28 VR 499. See also McCulloch v Mackie (1868) 5 WW & a’B (L) 1; Lucas v Borough of Drummoyne (1895) 16 LR (NSW) 55; Nicholson v Burnett (1922) 25 WALR 101; Connor v Stainton (1924) 27 WALR 72; Parkinson v Lord [1925] VLR 22. 89. Riverside Motors Pty Ltd v Abrahams [1945] VLR 45; considered in Leighton Contractors Pty Ltd v East Gippsland Catchment Management Authority [2000] VSC 26. 90. Eagle Sea Pty Ltd v Radford [2012] TASSC 41 at [66]. 91. Gabriel v Sea & Retaining Wall Constructions Pty Ltd (1987) 3 BCL 162 at 168. See also Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2010] NSWSC 1073. 92. For a rare example of a successful claim, see Amuri County (Chairman, Councillors and Inhabitants) v Thomas (1891) 10 NZLR 430. 93. Ownit Homes Pty Ltd v Batchelor [1983] 2 Qd R 124 at 131. 94. (1876) 1 App Cas 120. See also M Dalling and A Baron, ‘Thorn’s Case and Notions of Buildability: Change in Direction by Canadian Courts’ (1999) 15 Building and Construction Law 178; and cf ‘Thorn’s Case in Australia? No Change in Direction by Canadian Courts’ (1999) 15 Building and Construction Law 220, where the author argues that recent Canadian decisions reinforce the principles in Thorn’s case. 95. (1982) 149 CLR 337 at [33]. For another example where the principle in Thorn’s case was distinguished and not applied, see Verve Constructions Pty Ltd v Visser [2012] VCAT 284 at [366]. 96. (1876) 1 App Cas 120 at 127. 97. See also Wegan Constructions Pty Ltd v Wodonga Sewerage Authority [1978] VR 67 (the point is better illustrated in the whole of the judgment of Lush J part only of which has been reported); Taylor v Chapman [2003] NSWSC 992 at [20]. 98. (1893) 9 TLR 230. 99. Ibid. 100. (1929) 30 SR (NSW) 84. 101. (2006) 22 BCL 437; [2006] QCA 50 at [34]–[35].

102. See Packham v Board of Land and Works (1874) 5 AJR 37 at 38; Gee v Sumner Borough Council (1893) 12 NZLR 63; George Wimpey and Co Ltd v Territory Enterprises Pty Ltd (1970) 45 ALJR 398; and J Dorter, ‘Construction Contracts — Past, Present and Future’ (1994) 10 Building and Construction Law 239. 103. Ownit Homes Pty Ltd v Batchelor [1983] 2 Qd R 124 at 131. 104. As seen in Peninsula Balmain Pty Limited v Abigroup Contractors Pty Ltd (2002) 18 BCL 322; [2002] NSWCA 211 at [14]. 105. [1964] AC 465. 106. See particularly Norris v Sibberas [1990] VR 161; Caparo Industries plc v Dickman [1990] 2 AC 605; considered in GNB Battery Technologies Ltd v Nichicon (Singapore) Pte Ltd [1994] Vic SC 353. For an illustration of recognition of liability in tort for negligent provision of information to an intending contractor by a principal, see Commonwealth v Citra Constructions Ltd (1986) 2 BCL 235, referred to in Eden Constructions NSW Pty Ltd v Haines (NSWSC, Giles J, 21 July 1989, unreported). 107. See Forrest v Australian Securities and Investments Commission (2012) 247 CLR 486; [2012] HCA 39 at [22]. 108. For examples under s 82 of the former TPA, see: Truss v Brazier (1990) 96 ALR 767; Stork Electrical Pty Ltd v Leighton Contractors Pty Ltd [2000] QCA 517; RACV Insurance Pty Ltd v Unisys Australia Ltd [2001] VSC 300, and on appeal Unisys Australia Ltd v RACV Insurance Pty Ltd [2004] VSCA 81; Leighton Contractors Pty Ltd v Page Kirkland Management Pty Ltd [2006] FCA 288. See also Rennie Golledge Pty Ltd v Ballard (2012) 82 NSWLR 231; Londsdale Investments Pty Ltd v OM (Manganese) Ltd (No 3) [2012] WASC 185; Industrial Conveying (Aust) Pty Ltd v SKM Recycling Pty Ltd [2012] VSC 278. For examples in relation to the ACL, see: SMEC Australia Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd (No 3) [2012] VSC 557; Rennie Golledge Pty Ltd v Ballard (2012) 82 NSWLR 231. 109. Fair Trading (Australian Consumer Law) Act 1992 (ACT) Pt 2; Fair Trading Act 1987 (NSW) Pt 3; Consumer Affairs and Fair Trading Act (NT) Pt 4; Fair Trading Act 1989 (Qld) Pt 3; Fair Trading Act 1987 (SA) Pt 3; Australian Consumer Law (Tasmania) Act 2010 (Tas) Pt 2; Fair Trading Act 2010 (WA) Pt 3. 110. [2009] VSCA 221. 111. (1972) 46 ALJR 265. See also J Dorter, ‘Contracting and Tendering — A Legal Perspective’ (1996) 12 Building and Construction Law 234. 112. [1990] VR 161 at 171–2; considered in Amadio Pty Ltd v Henderson (1998) 81 FCR 149. See also Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2003) Aust Torts Reports 81-692, where Gillard J said of the proximity doctrine that it had ‘not proved a useful guide for inclusion or exclusion’ in the analysis of circumstances in which a duty of care is to be found in respect of pure economic loss claims. 113. [1990] VR 161 at 172. 114. See Caparo Industries plc v Dickman [1990] 2 AC 605. See also Bride v KMG Hungerfords (1991) 109 FLR 256 at 276; Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520; and Bryan v Maloney (1995) 182 CLR 609. 115. (1995) 182 CLR 609. 116. (1997) 188 CLR 241. 117. (1998) 192 CLR 330. 118. (1999) 198 CLR 180. 119. (2004) 216 CLR 515; referred to more recently, albeit in other applications, in Miller v Miller (2011)

242 CLR 446 and Barclay v Penberthy (2012) 246 CLR 258. 120. (2006) 14 VR 55. 121. (2009) 75 NSWLR 649. 122. [2013] WASCA 213. 123. [2013] NSWCA 317. 124. Miller v Miller (2011) 242 CLR 446 at [59]. 125. MM Constructions (Aust) Pty Ltd v Port Stephens Council (No 7) (2012) 191 LGERA 292; [2012] NSWCA 417 at [92]. 126. (2009) 75 NSWLR 649. 127. Described at [14] as a ‘a non-exhaustive universe of considerations of the kind relevant to the evaluative task of imputation of the duty and the identification of its scope and content’. 128. Dancorp Developers Ltd v Auckland City Council [1991] 3 NZLR 337 at 352. 129. Compare earlier decisions such as AGC (Advances) Ltd v R Lowe Lippmann Figdor & Franck (1990) 4 ACSR 337 at 340–2, reversed on appeal in (1992) 8 ACSR 380; Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 71 ALJR 448, where McHugh J said that the law in Australia was correctly stated by the Victorian Court of Appeal in R Lowe Lippmann. See also Perre v Apand (1999) 198 CLR 180. 130. [1976] QB 801; applied in Purton-Smith v Telstra Corp Ltd [2006] VSC 197 at [112]. 131. [2012] QSC 356 at [41]. 132. [1977] 2 NSWLR 880 at 902–3; followed in Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221; applied in White Property Developments Ltd v Richmond Growth Pty Ltd [1998] FCA 26 and Leading Edge Events Australia Pty Ltd v Kiri Te Kanawa [2007] NSWSC 228; not followed in POS Media Online Ltd v Queensland Investment Corp [2001] FCA 809; but cited with apparent approval in Gibson Motorsport Merchandise Pty Ltd v Forbes [2006] FCAFC 44 at [7]; Mattila v Gardner (No 2) [2013] NTSC 32 at [136]; Shaft Drillers International LLC v Australian Shaft Drilling PtyLtd [2013] QSC 079 at [2]. 133. [1977] 2 NSWLR 880 at 902–3. 134. See POS Media Online Ltd v Queensland Investment Corp [2001] FCA 809 at [200].

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9

APPROVAL AND CERTIFICATES

APPROVAL Overriding requirement 9.1 Commonly, building contracts require that the work be done not merely in accordance with a specification but also to the approval or satisfaction of the architect or engineer or project supervisor/manager (whoever is named in the contract) or proprietor. When this is so and approval given, usually by a certificate, the issue arises: what subsequent complaint can be made about the quality of the work? If a certificate is issued entitling a builder to payment, what (if any) challenge can a proprietor make to resist paying the amount certified? Alternatively, if no approval is given, what challenge can a builder make for the failure to approve or certify? The role of approval and certificates is entirely contractual. In the absence of express terms to the contrary there will be an implied term that the works will be built in a good and trade-like manner using good and proper materials.1 It was observed by Cleary J in Mayor, Councillors and Burgesses of Borough of Stratford v J H Ashman (NP) Ltd2 that it must in every case depend on the interpretation of the contract as a whole whether, on the one hand, the satisfaction of the architect is to be the overriding requirement as to the sufficiency of the work, even if it does not conform with the specification or, whether, on the other hand, conformity with the specification and the satisfaction of the architect are cumulative requirements. In Billyack v Leyland Construction Co Ltd3 a provision that work should be carried out to the satisfaction of the local authority was held to be added protection for the purchaser and not to override the clause whereby the work was to be done in a workmanlike manner.

[page 160] In National Coal Board v William Neill & Son (St Helens) Ltd4 the court rejected the proposition that there was a rule of law or principle of construction to the effect that where a building contract contains a term that a structure is to be erected in a prescribed manner and to the satisfaction of the employer’s architect or engineer the contractor fulfils that obligation if on erection the architect or engineer is in fact satisfied even though the structure has not been erected in the prescribed manner. In Hopper v Meyer5 the building contract provided for the work to be done to the satisfaction of such architect as should be appointed by the owner and that no payment should be made except on the certificate of the architect. It also provided that the work was to be completed to the satisfaction of the owner. No architect was ever appointed. The building was completed and the price paid and, subsequently, an action was brought against the contractor for breach of contract with regard to materials used. The Full Court held that the parties had mutually consented to the striking out of the provision that the work was to be done to the satisfaction of the architect appointed by the owner and expressed the view that the clause, being put in for the protection of the owner in the first instance, could be waived by him alone.6 It held further that payment of the whole amount due was not conclusive proof that the work had been done to the satisfaction of the owner. Modern building contracts contain provisions for the issue of progress certificates and final certificates. Unless a building contract provides in clear and unequivocal terms that the approval of the project supervisor/manager or proprietor is conclusive proof of compliance, a certificate or approval will not have this effect. It will have what has been called ‘the customary dual obligation’.7

As condition precedent 9.2 Building contracts frequently provide that the work is to be done to the satisfaction of the proprietor or the architect, or that the contractor is to obtain a certificate from the architect, prior to moneys being due. If the contractor, not having obtained that approval or certificate, seeks to be paid, the defence usually

will be that the obtaining of the approval or certificate is a condition precedent to payment. In every case it is a matter of construing the contract to determine whether upon its proper construction the proprietor’s promise is merely to pay upon approval or certification. While the matter is one of construction, and depends upon the terms of the particular contract together with any surrounding circumstances to which recourse may legitimately be had, the general observation may be made that [page 161] ordinarily a provision requiring approval or certification will be regarded as creating a condition precedent.8 Similarly, whether a particular document can be construed as a certificate under the contract or not is a matter of construction. A document described as a report of the engineer and his assistant but not signed by him was held not to qualify as a certificate of the engineer in Brown & Doherty Ltd v Whangarei County Council.9 These propositions are all subject to the operation of security of payments legislation, as to which see 9.20. It might be suggested that a provision making a certificate a condition precedent to the right to payment has been ‘waived’. ‘Waiver’ is a somewhat vague and shifting legal concept10 which is generally indistinguishable from estoppel:11 see 3.8 and 3.9. In Young v Ballarat and Ballarat East Water Commissioners12 the court rejected as bad a plea of waiver of a requirement for a certificate for extras (before payment was due) which alleged merely that the certificate was not given solely by default of the engineer of which the proprietor had notice. Waiver requires that there be words or conduct by a person, who has knowledge of their rights, which is unequivocal and which is communicated in some way.13 If an allegation of waiver by election fails because of the absence of the requisite knowledge of the legal rights, a party may still be able to make out a claim of estoppel in reliance on the words or conduct.14 Estoppel is a substantive principle of law. It operates to preclude a party departing from representations as to certain facts which have been relied upon by the other party as the basis for a

course of conduct to its detriment where such departure would be unconscionable.15 In this way it functions arguably as an aspect of a broader doctrine of unconscionability. Other possible ways of circumventing a condition precedent than a certificate issued prior to a proprietor being obliged to pay are set out below In particular see 9.10, 9.14, 9.15 and 9.20. [page 162]

Dishonest disapproval 9.3 Just as the withholding of a certificate by an architect or engineer may be attacked on the ground of fraud or collusion (see 9.9), where a contract requires that the work be done to the approval or satisfaction of the employer, the employer will not be able to rely on the absence of an expression of approval or satisfaction when not having acted honestly. Thus, in Stawn Ltd v Keene,16 where the contract required a certificate of satisfactory completion from the proprietor and where the proprietor, notwithstanding that the work had in fact been completed to his satisfaction, dishonestly withheld a certificate, the contractor was able to recover. Cases like this may be regarded as examples of the rule that a person may not rely upon the failure of the other side to perform a condition where such person has prevented performance: see 6.8. In Smith v Sadler17 the subcontract provided that the work should be done in a substantial manner to the satisfaction of the main contractor. The Full Court was of opinion that the subcontractor was entitled to recover upon proving that the work had been duly executed in conformity with the subcontract and that the defendant, as a reasonable person, ought to have been satisfied with that execution.

CERTIFICATION Actual certification

9.4 Certification may be actual or it may arise by implication. On the latter, see 9.5. The building contract may provide for certificates of various kinds. But progress certificates (see 9.18), certificates of practical completion (see 9.22) and final certificates (see 9.25) are those most commonly encountered. The construction of processing facilities commonly includes certificates of mechanical completion and/or handover. In every case the terms of the contract define the purpose and effect of a certificate. There is no doubting the significance of certificates in the operation of building contracts. One learned judge has referred, for instance, to ‘the sanctity of payment certificates’.18

Certifying by implication 9.5 It is well established that where a building contract requires a certificate from the architect to a certain effect, for example, that the work has been completed to the satisfaction of the architect, the certificate need not make the necessary statement in express terms: it is sufficient if the architect [page 163] can be regarded as certifying by implication to the necessary effect. So in Harman v Scott,19 where the contract required payment of the balance of the price upon the architect’s certificate that the works were completed to his satisfaction, a certificate reading ‘I hereby certify that Messrs S Bros are entitled to the sum of £135.13.5 being balance of amount due to them on account of contract and extras for your house at S’, was held to be sufficient. This decision was cited with approval in Kirsch v H P Brady Pty Ltd.20 Similarly, in Mayor, Councillors and Burgesses of Borough of Stratford v J H Ashman (NP) Ltd21 it was held that a certificate may by implication certify the necessary fact. For example, if an architect has power to issue a certificate for payment of moneys only if the work has been completed to the architect’s satisfaction, and issues a certificate for payment, the architect by implication has certified the work has been completed to the required level of satisfaction. There is a clear distinction between the process of formally certifying an

opinion to the principal and the quite different function of advising or recommending to the principal what action it should take in its own best interests. A document performing the latter function only is not a certificate.22 A certificate headed ‘Final Certificate’ and stating that the full amount was allowed, was accepted as a certificate that the work had been satisfactorily completed in Wilson v Fitzgerald.23 In Clarke v Murray24 a contract provided for progress payments and for payment of the balance when the whole work was completed to the satisfaction of the architect and the architect’s certificate had been given to that effect. The architect certified that the contractor was entitled to receive the sum of £64.19.9, ‘this being the final certificate in full of all demands’. The certificate was accepted as valid in point of form. Instances of documents held not to be final certificates are to be found in Walker v Black25 and Loxton v Ryan.26 However, in Knox v Patutahi Road Board,27 a memorandum from the engineer to the secretary of a road board stating he had passed the contract was not regarded as a certificate that the work had been done to his satisfaction. The contract in Meyer v Gilmer28 required the grant of a certificate that the work had been satisfactorily completed. The architect signed the contractor’s account, adding the words ‘I certify this account is correct’. The court was of the opinion that this document was [page 164] probably not a certificate that the work had been satisfactorily completed but that the certificate did not have to be in writing, and that there was evidence to support the finding that an oral certificate had been given. A certificate of an inspector which refers to cracking and goes on to say that the contractor has assured the inspector that the cracking is capable of ready rectification is plainly not a certificate of satisfaction as was held in Official Assignee of Hutson v New Zealand Antimony Co Ltd.29 Ordinarily to have a contractual effect a certificate must answer the contractual terms pertaining to its issue. For example, in Ian Delbridge Pty Ltd v Warrandyte High School Council30 a document headed ‘Final Certificate’ was held not to be a final certificate in the terms of Ed 5b in circumstances where it was delivered under cover of a letter that suggested

further adjustments to the final balance would be made and that rectification work was still outstanding. The certificate could therefore not stand as conclusive evidence that the builder was bound to pay the amount stated in it.31

Certification or reasons for refusal 9.6 Generally there is no need for a certifier to give reasons for the grant or refusal of a certificate unless there is a contractual obligation to do so. In Bruce v R32 the contract provided that the engineer should either give a progress certificate upon being required by the contractor to do so or state in writing his reasons for not doing so. He refused a certificate on the ground ‘that there is nothing due to you’. The court accepted the contractor’s contention that this refusal was not a statement of reasons for not certifying: it was the mere statement of a conclusion. The court went on to hold that the reasons given by the engineer must be sufficient in law, supported on facts that are true.

Progress certificates 9.7 This area is affected by security of payments legislation, as to which see 9.20. In common building contracts, the architect (or other certifying person) is required to assess the contractual value of the work executed from time to time, including any variations, and issue progress certificates. Alternatively, the architect may be called upon to certify when particular stages are reached. The issue of the progress certificate by the architect crystallises the contractor’s entitlement to payment. A progress certificate will have the effect provided for in the contract. Progress certificates give rise to progress payments. They thus enable the contractor to have money on hand to be able to pay subcontractors and [page 165] to proceed with the works. The traditional view is that in the absence of a term of the building contract providing for progress payments, the whole of the contract has to be performed prior to payment (the entire contract doctrine). However, in substantial contracts, even without a specific term, it may be that it

can be implied that the contractor is entitled to be paid progressively.33 Further, legislation introduced into some Australian states gives rise to entitlements to progress payments: see 9.20. Progress certificates are discussed in 9.18.

Final certificates 9.8 In common building contracts there is normally provision for a final certificate to be issued at the end of the works, usually after the expiry of the defects liability period. Subject to the terms of the contract this certificate is intended to conclude the building contract and the role of the architect in administering it. The effect of a final certificate will depend upon the contractual terms. Generally the modern trend is for the issue of a final certificate to be evidence of compliance with the contract. Final certificates arise at the end stage of the work. They are discussed in 9.26.

Fraud or collusion 9.9 A dissatisfied party may challenge the decision of a certifier where the certificate was given or withheld as a result of fraud or collusion with the other party.34 The builder can recover despite the absence of a certificate if the certifier has been guilty of fraud or misconduct or has refused to proceed with the required duties.35 Where the certificate is to be given not by an architect or engineer but by the proprietor directly and the certificate is refused in bad faith, the proprietor in fact being satisfied with the work that has been done, the contractor may recover in the absence of the certificate.36 Occasionally contracts seek to limit or prevent a challenge to an architect’s certificate even where given fraudulently. The better view is that a stipulation in a contract that an architect’s certificate cannot be objected to on the ground of fraud or collusion is void as contrary to public policy.37 The decision in Tullis v Jacson,38 doubted in Czarnikow v Roth, Schmidt and [page 166]

Co,39 should be regarded as wrongly decided. Were it otherwise the court would be powerless in the face of misconduct or even fraud.40 ‘Fraud or collusion unravels everything.’41 Indeed, it is doubtful that an award obtained by fraud or collusion is truly one obtained in accordance with the terms of the contract — a term that an award must be made honestly being readily able to be implied.42 Even if the certifier is the employee of the principal and in that capacity must maintain a vigilant supervision over the builder, in the role of certifier the obligation to act fairly and equitably towards both parties respecting any matters entrusted for opinion or decision arises.43 See also 9.11. Having said that, though, as held by Vickery J in 500 Burwood Highway Pty Ltd v Australian Unity Ltd,44 a ‘certifying expert is not under an obligation to provide procedural fairness or natural justice [when certifying] in the absence of an express contractual provision’. If a final certificate is refused by a certifying engineer in collusion with the principal and by the latter’s procurement, the contractor may recover damages from the employer,45 the measure of damages being the value of the certificate which the engineer ought to have given.46 If the engineer does not direct rectification of defective work and thereby does not give the contractor the means of obtaining the final payment, that might be evidence of collusion between the employer and the contractor.47 It is not necessary to prove a deliberate intention on the part of the principal and the engineer.48 An action for damages will lie against an engineer who fraudulently certifies or fraudulently withholds a certificate.49 An action may be, in an appropriate case, brought for negligence.50

Other disqualifying circumstances 9.10 Facts falling short of fraud or collusion may serve to disqualify the architect, engineer, superintendent, project supervisor/manager or other relevant person and thus enable the party dissatisfied with the terms or the giving or withholding of a certificate to reopen the matter. Whether an engineer has become disqualified from acting as a certifier is something [page 167]

about which opinions will often differ, as is well shown by Dixon v SA Railways Commissioner,51 where the High Court was divided on the question whether the Chief Engineer for Railways had been guilty of improper conduct which disqualified him. The High Court held by majority that there had been no such improper conduct and went on to hold by a differently constituted majority that, if there had been such improper conduct, it would not have been necessary for the contractor to prove that the employer had been a party to the misconduct or that the employer had improperly interfered with the performance by the engineer of the duty with respect to certificates. However, this decision must now be considered in the light of Sutclffe v Thackrah52 and Arenson v Arenson,53 because the High Court judgments depend upon treating the certifier as a quasiarbitrator having a judicial capacity. This proposition is now rejected by the House of Lords54 and by the New Zealand Court of Appeal, which in Canterbury Pipe Lines Ltd v Christchurch Drainage Board55 said ‘the engineer, though not bound to act judicially in the ordinary sense [is] bound to act fairly and impartially’. As noted in 9.9, this is the position in Australia, also: in the absence of an express contractual provision, a certifying expert is not under any obligation to provide procedural fairness or natural justice,56 but must act honestly. Even in the absence of fraud or collusion a certificate may be attacked or dispensed with if it is not the honest and unfettered expression of the architect’s opinion.57 Dishonest approval does not in all cases require fraud. As stated by Finkelstein J in Baulderstone Hornibrook Pty Ltd v Qantas Airways Ltd:58 The cases establish that a person in the position of Cliftons [the certifying project manager] exercising a power under a contract to decide extensions of time and determine compensation claims must act honestly and fairly and if he does not, his certificate can be ignored. Hickman & Co v Roberts [1913] AC 229 is a leading example of this type of case. The circumstances in which a certificate will be vitiated cannot be exhaustively stated. The most recent edition of Hudson’s Building and Engineering Contracts, 11th edition 1997 by I N Duncan Wallace, suggests the following broad categories: (1) where the decision maker has a special interest in the result; (2) fraud or collusive conduct; (3) improper pressure, influence or interference by the owner; (4) conduct which falls short of the proper standard of fairness,

[page 168] independence and impartiality; (5) breach of contract or other act or omission of the owner having the effect of preventing the builder obtaining a decision; (6) unreasonable refusal by the decision maker to consider the matter; and (7) taking improper considerations into account.59

The fact that the certifier may be an employee of one of the parties will not, of itself, be sufficient basis to attack a certificate.60 Even if the superintendent’s engagement by a principal is not disclosed, as long as the superintendent acts honestly and impartially a certificate may withstand attack.61

Secret agreement 9.11 The architect or other certifier ordinarily has a dual role as agent of the proprietor on the one hand and certifier on the other hand.62 See further 17.4. This makes it essential to the proper administration of the building contract that the architect should not enter into any secret engagement tending to inhibit the proper discharge of duties in the second role. An architect is disqualified from acting as certifier if, unknown to the contractor, the architect has entered into a binding obligation that the cost of the works shall not exceed a particular sum.63 However, the mere fact of a secret agreement will not be sufficient to vitiate a certificate. In Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd,64 a developer entered into an agreement for the provision of project management services with a related company. The agreement contained a confidentiality clause and provided for the kinds of services which might be expected of an architect. Peninsula Balmain as principal and Abigroup Contractors as contractor had entered a building contract under which Abigroup was to construct the development for a guaranteed maximum price of $26.1m. The superintendent named was the project manager. The parties fell into dispute and Peninsula terminated Abigroup’s employment and engaged another contractor. A courtappointed referee found that Peninsula’s failure to disclose the agency agreement amounted to misleading conduct under the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)), and the primary judge awarded Abigroup damages on this basis. The New South Wales Court of Appeal took the view the project management agreement authorised the project manager to act as [page 169] the agent for the proprietor, but did not require it to act as its agent in a strict legal sense. It required the project manager to act in a professional manner and to the extent that this requirement was inconsistent with it acting as the agent of the

principal, it prohibited the project manager from doing so. It was clear from the building contract itself that the project manager was to be engaged by the principal on some basis as the superintendent. There were doubts expressed about aspects of the reasoning in this decision in Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd (No 2).65

Subservience and independence 9.12 The general rule is clear: ‘[w]hen exercising a certifying function a superintendent must act honestly and impartially’.66 This obligation arises notwithstanding the fact that the architect or other certifier is generally engaged by the principal, paid by it and usually has distinct contractual obligations to it in respect of preparation of the design and quality control of building works. Nevertheless, it is not uncommon that an architect (or a certifier generally) fails to understand the obligation of independence. In a somewhat extreme example, Hickman & Co v Roberts,67 the architect wrote to the builder: ‘Had you not better call and see my clients, because in the face of their instructions to me I cannot issue a certificate, whatever my own private opinion in the matter’. The House of Lords had no difficulty in concluding that the adjudication of the architect was not binding upon the contractor, the architect having failed altogether to preserve that attitude of independence which was required of him in the discharge of his duties as certifier. He had sacrificed his impartiality. Although required to act as an independent certifier, a superintendent is, of course, not an arbitrator.68 Architects may be pressured by proprietors not to issue promptly a progress certificate to which the contractor is entitled. Ordinarily the building contract will provide the process by which a progress certificate is to be distributed and ultimately paid. This may be affected by security of payments legislation: see 9.20. Time limits from submission of the builder’s claim to ultimate payment by the proprietor will ordinarily be set. Older building agreements provided the architect was to supply the certificate to the builder, who was then required to present it to the principal to be paid. The more common arrangement is for a certificate to be issued to both the principal and the contractor within a prescribed number of days of receipt [page 170]

of a claim made by the contractor.69 Typically a failure to provide a progress certificate within the time specified in a building agreement may set off a default provision deeming the claim to be the relevant progress certificate as in cl 37.2 of AS 4000. Although an architect (or other certifier) will commonly be engaged by the principal and have obligations to it under the terms of engagement, the obligation to act independently and impartially in administering the building contract and in the certification role overrides those obligations.70 Standard form contracts typically contain provisions prescribing how the certifier is to act. For example, cl 23 of AS 4300-1995 imposes an obligation on the principal to ensure the superintendent: (a)

acts honestly and fairly;

(b) acts within the time prescribed under the contract or where no time is prescribed, within a reasonable time; and (c) arrives at a reasonable measure or value of work quantities or time.

It could well be argued that it is an implied term in any event for the superintendent to fulfil its functions reasonably and in good faith.71 In John Holland Construction & Engineering Pty Ltd v Majorca Projects Pty Ltd,72 the contractor sued the proprietor after a certificate was issued by the architect and the proprietor failed to pay due to insolvency. Thereafter the contractor could not assert that the architect’s conduct was so lacking in independence that the certificate was of no effect. Nevertheless, it brought a claim in negligence against the architect alleging a failure to act fairly, and alternatively, that by making a provisional assessment of liquidated damages, the architect had procured a breach of the building contract by the proprietor. Both attacks failed in the circumstances of that case. Byrne J made it clear, however, that a certifier is required to make decisions ‘which are professional, careful and even-handed [and] not in the interests of any one party’.73 Depending upon the role the architect is required to perform and the terms of the building contract under consideration, the involvement of a [page 171]

principal and an architect (and their advisors) in drafting letters for each other in response to a builder’s correspondence may not be sufficient evidence of a departure from the obligation to act independently.74 Where the building contract provides that a discretionary valuation is to be made, that certificate will stand unless it was invalidly made (or is able to be opened up by arbitration, statutory adjudication or by the courts: see 9.14, 9.15 and 9.20). It has been held the fact such a determination is made by one of the parties itself makes no difference to whether the assessment is conclusive and binding.75 In such circumstances, a collateral attack on a certificate on the basis of subservience and interdependence could be impossible to sustain. In Baulderstone Hornibrook Pty Ltd v Qantas Airways Ltd,76 the applicant sought damages and other relief which the project manager should have awarded in its certificate if it had properly granted it. One basis of its claim against the respondent was that it breached two implied terms — that it would not interfere with the authority of the project manager to award extensions of time or damages and costs, etc, and that it would ensure that the project manager acted independently in the exercise of its powers. The respondent admitted the existence of the first implied term but not the second. Finkelstein J accepted the existence of the second term but only in so far as it was ‘confined in its operation to require Qantas to see to it that [the project manager] acted independently and in accordance with its obligations, if it noticed that [such project manager] was acting, or was about to act, outside its duty.’77

Right to be heard 9.13 Whether a party can complain of a failure on the part of the certifier to provide an opportunity to be heard before giving a certificate depends to some extent on the proper construction of the contract.78 In this regard it has been said that the principles of natural justice must be confined within proper limits and not be allowed to run wild.79 A similar cautionary note was sounded by Brinsden J in Gardner v McKenzie Winter Homes.80 In Sutcliffe [page 172]

v Thackrah,81 the House of Lords held that in giving a certificate an architect is not performing the function of an arbitrator or quasi-arbitrator. This is in accord with the decision of the New Zealand Court of Appeal in Canterbury Pipe Lines Ltd v Christchurch Drainage Board,82 which held that the certifier is not bound to act judicially in the ordinary sense but is bound to act only fairly and impartially and that, while in relation to persons bound to act judicially, fairness requires compliance with the rules of natural justice, in other cases this is not necessarily so. In Brown & Doherty Ltd v Whangarei County Council83 Smellie J said that ‘the position has evolved to a requirement of fairness involving impartiality and independence’. As noted in 9.9, a clear view in the matter has been expressed by Vickery J in the Victorian case of 500 Burwood Highway Pty Ltd v Australian Unity Ltd.84 He said a ‘certifying expert is not under an obligation to provide procedural fairness or natural justice [when certifying] in the absence of an express contractual provision …’. His Honour referred to Megarry J’s decision in the well-known case of Hounslow London Borough Council v Twickenham Garden Developments.85

Arbitration clause 9.14 The validity of a certificate may be questioned and eventually dispensed with if the building contract contains an arbitration clause wide enough to enable the certificate, or its withholding, to be reopened.86 The question of whether or not an arbitration clause is wide enough to reopen a certificate is one of construction of the building contract itself. In Johns and Son v Webster and Tonks87 the decision of the architect was held to be made subject to the decision of the arbitrator by an arbitration clause which empowered the arbitrator to open, review or revise any certificate, opinion, decision, requisition or notice. The arbitration clause commonly has to be read together with the clause under which the certificate has been issued. If the clause relating to the certificate provides that it is conclusive and binding it may not be able to be reopened. In WMC Resources Ltd v Leighton Contractors Pty Ltd,88 the clause under consideration provided that in the event of a disagreement between the principal and the contractor, the valuation of variations was to be carried out by the principal and its decision was binding and conclusive. Anderson J in the Supreme Court of Western Australia determined that the clause was

[page 173] sufficiently wide to permit it to substitute his own valuation. The Court of Appeal89 held that the valuation could not be set aside unless it departed from the terms of the contract, Ipp J saying: ‘Ordinarily, in cases of this kind, where a certified valuation is to be made by reference to fixed, objective criteria (such that there is no discretionary element in the valuation) there will only be one uniquely correct value. If the certifying valuer, in these circumstances, arrives at the incorrect value, the valuation will be in breach of the contract. It is for that reason that an incorrect certificate will also be set aside. The court will then have the jurisdiction to determine the correct amount owing in terms of the contract. Where there is an arbitration clause that gives the arbitrator jurisdiction to hear the merits of the claim, the arbitrator will have the same powers as the court’.90 Where a certificate relates to a progress amount to be paid, a contractor may have resort to the statutory adjudication process as an interim means of challenging a certificate: see 9.20. Where a progress certificate is issued entitling a contractor to payment of a sum certified, ordinarily an application for summary judgment can be obtained.91 The commencement of arbitration proceedings, it was said, would not support a stay application under the Commercial Arbitration Act 1984 (Vic) to delay payment.92 See now the Commercial Arbitration Act 2011 (Vic). In Re an Arbitration between Mitchell and Brassey93 the builder applied to the architect for a certificate of practical completion, but this was refused on the ground that the work had not yet been practically completed. Thereupon the builder gave notice of dispute in respect of the withholding of the certificate. Before the arbitrators it was contended on behalf of the proprietor that the arbitrators were not empowered to determine whether the builder was entitled to a certificate of practical completion and for that purpose to determine whether the works had been practically completed, but were empowered to determine only whether the opinion of the architect that the works had not been practically completed was formed honestly. The arbitration clause referred to disputes or differences inter alia ‘as to the withholding by the architect of any certificate to which the builder may claim to be entitled’. On the case stated by the arbitrators, Mann CJ rejected the proprietor’s contention and held that the arbitrators were entitled to determine the question of entitlement to the certificate and could thus determine whether the stage of practical completion had been reached.

[page 174] Generally, if the certificate is not conclusive and binding and the arbitration clause is broad enough, the arbitrator will be able to review and revise any certificate given under the contract.

Court’s power to reopen 9.15 Courts have tended to focus on whether a decision or certificate of a certifier is final and binding on a proper construction of the agreement in assessing whether it can be reopened by a court instead of looking at the arbitration clause to assess whether it gives some special power to open up a certificate given. This perspective, however, has not always been current. In the case of Northern Regional Health Authority v Derek Crouch Construction Co Limited,94 the English Court of Appeal had found that the broad provisions of an arbitration clause had conferred a special power on arbitrators not exercisable by a court. The arbitrator had broad powers to open up, review and revise the architect’s certificates and Dunn LJ said95 that where ‘parties have agreed on machinery of that kind for the resolution of disputes, it is not for the courts to intervene and replace its own process for the contractual machinery agreed by the parties’. Brown-Wilkinson LJ said96 that as the court’s jurisdiction ‘did not include a right to modify contractual rights’, the court would not have power to open up, review and revise certificates or opinions as it thought fit since ‘to do so would modify the contractual rights of the parties’. While the decision was followed in some later cases,97 it was distinguished in others. It was overruled in England98 and is generally not followed in Australia.99 Hence in Walton v Illawarra100 McDougall J felt able to conclude, upon an analysis of the decision in Derek Crouch, ‘that it is open to the court to look at the challenged assessment (for extensions of time and valuation of variations and the like), to determine whether or not they equate to the contractual standard of reasonableness [in that case], and to substitute its own determination of what should reasonably have been allowed if they do not.’ The arbitration clause, in this context, is only one of the indicators of what the

parties’ intention was. For example, in WMC Resources Ltd v Leighton Contractors Pty Ltd101 the Western Australian Court of Appeal focused on [page 175] the discretionary element in the valuation of variations to be performed by the principal under a clause, providing that that was how they were to be valued; it concluded that even though the contract did not provide in explicit terms that the determination was ‘final and binding’, that was its effect. That the discretionary assessment had been performed by one of the parties to the agreement, and not by a third party, was not relevant.102 The trial judge, Anderson J, on the other hand, had found the arbitrator was entitled to review the assessment.103 His decision was thus overturned on appeal. However, in the course of his judgment he provided the following useful overview:104 There are many cases which show that if the parties to a contract have agreed that some matter arising under the contract is to be conclusively determined by a designated person (even if the designated person is one of the parties) that agreement is to be enforced by the tribunal called upon to determine the rights of the parties, whether the tribunal be arbitral or judicial. Some of these cases are P & M Kaye Ltd v Hosier & Dickinson Ltd [1972] 1 WLR 146; Beaufort Developments (NI) Ltd v Gilbert-Ash (NI) Ltd [1998] 2 All ER (HL) 778, especially per Lord Hoffmann at 783, 788; East Ham BC v Bernard Sunley & Sons Ltd [1966] AC 406, especially per Viscount Dilhorne at 424; Dixon v South Australian Railways Commissioner [1923] HCA 45; (1923) 34 CLR 71; Perini Corporation v The Commonwealth [1969] 1 NSWR 530; Greenberg v Meffert (1985) 18 DLR (4th) 768. In such cases, that is, where the contract provides that the determination, decision, opinion or certificate of a designated person is binding and conclusive, neither an arbitrator nor the Court can intervene, at any rate as long as the determination has been made honestly and within power in the sense of in accordance with the contract. Sometimes the contract will provide that the certificate or opinion of the designated person is conclusive and binding, but will go on to provide in the arbitration clause that the arbitrator may, nevertheless, ‘open up, review and revise’ the determination. Examples of cases where the contract explicitly empowers the arbitrator to ‘open up, review and revise’ certificates and determinations expressed to be conclusive and binding are cases such as Kirsch v HP Brady Pty Ltd [1937] HCA 20; (1937) 58 CLR 36; Windsor Rural District Council v Otterway & Try Ltd [1954] 1 WLR 1494 and In re Mitchell and Brassey [1939] VLR 371. In this kind of case, it has been held that the arbitration clause operates as a proviso to the provision by which the certificate or determination is made conclusive and binding. But leaving that kind of case to one side, the cases to which I have referred establish that arbitrators and Courts cannot review certificates or determinations made by a person who the parties have appointed in their contract to conclusively determine some matter arising under the contract.

[page 176]

He continued: The cases rest on the simple proposition that, generally speaking, the tribunal called upon to determine contractual rights and obligations is bound to enforce the contract, including those provisions in it providing for final and binding determinations by a named person: Beaufort Developments (NI) Ltd v Gilbert-Ash (NI) Ltd (supra) per Lord Hoffmann at 783; Atlantic Civil Pty Ltd v Water Administerial Corporation (1992) 39 NSWLR 468, especially at 476. This is not to say that the arbitral or judicial tribunal is altogether shut out. As often as not, perhaps invariably, a term will be implied into this form of contract, that is, a contract in which the decision of a named person is expressed to be binding and conclusive, to the effect that the named person must act at least honestly and within power in making his determination or issuing his certificate: Campbell v Edwards [1976] 1 WLR 403 per Lord Denning MR at 407; Stratford v J H Ashman (NP) Ltd [1960] NZLR 503, especially at 517; Baber v Kenwood [1978] 1 Lloyd’s Rep 175 per Sir David Cairns at 181; Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234. There is a number of cases which hold that he must also act ‘reasonably’: Renard Constructions (ME) Pty Ltd v Minister for Public Works (supra) per Priestley JA and Handley JA; (contra Meagher JA.)

As to such implied terms, he then said: These implied terms that the designated person authorised to conclusively determine contractual rights is bound to act honestly, reasonably and within power are, of course, terms that will be enforced by the tribunal before which rulings by the designated person are challenged, so that if he is found to have been dishonest or to have acted beyond power, his certificate or determination or opinion will not be enforced. This is simply because it will not be a certificate or determination or opinion which is in accordance with the contract: Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 per McHugh JA at 335–336.

Although the appeal from his Honour’s decision was allowed, it is apparent, upon a reading of the Appeal Court’s reasons, that this was not because his Honour’s general statement of legal principle was in error. The difference is to be explained in the way the Appeal Court treated the clause in question. It should be noted too that Anderson J’s reading of the authorities is consistent with the remarks of McDougall J in Walton v Illawarra set out above. Those drafting clauses with the intent that the courts should have no power to revise or open up should bear the remarks of McDougall J in mind. It is usual for parties to be at liberty to agree upon whatever terms and conditions they may want. The appeal decision in WMC Resources notwithstanding, it could still be difficult to draft a clause in such a way that the courts are excluded. There are very good reasons why this should be so, not the least of which is the possibility of some impropriety showing up once a review is undertaken. [page 177]

Certificate attacked as erroneous 9.16 Whether or not a certificate can be attacked merely on the basis of it being erroneous (as distinct from it being obtained by fraud or some other invalidity: see 9.9–9.13) depends in the first analysis on whether the contract, on its proper construction, provides that the certificate is final and binding. The parties, in truth, having regard to the whole of the factual matrix, may never have intended for this to be so. One important indicator of whether this was the parties’ true intention is to examine the terms of the arbitration clause. However, the view expressed in Derek Crouch,105 that an arbitration clause may give special power to an arbitrator to open up a certificate that a court does not have, has now been overruled in England106 and was not always followed in Australia in any event: see 9.15. Determining whether a certificate is intended to be final and binding depends on the construction of the contract as a whole. Typically standard form contracts provide that final certificates are final and conclusive, but the effect of other certificates is often more vague. In Smith v Brown107 it was laid down that, where an architect’s certificate is to be final and conclusive, evidence to show that it was erroneously given is inadmissible. This seems an inconvenient precedent for those maintaining that the Derek Crouch principle is wrong. Typically, terms of standard forms of building contracts provide that progress claims and payments are intended to be provisional only. Where a contract is found on its proper construction to require payment of a certificate without deduction for amounts claimed by way of set-off or cross-claim, summary judgment can be obtained on the certificate notwithstanding that an arguable case can be presented on the matters raised in the cross-claim.108 Where the contract provides that a contractor’s claim is to stand as a certificate in the absence of a payment certificate being issued the claim will have that same interim effect.

Withdrawal or amendment of certificate 9.17 Whether a certificate can or cannot be amended by the issue of a later certificate generally depends upon the terms of the building contract. Typically, progress certificates are provisional only and subject to adjustment; however, final certificates typically are not. But it could be that an estoppel may arise.

By AS 2124-1992 cl 42.2 the superintendent is able ‘by a further certificate [to] correct any error which has been discovered in any previous certificate [page 178] other than a Certificate of Practical Completion or Final Certificate’. AS 40001997 does not include this explicit power and it would appear the superintendent must await the time the next certificate is due to correct any error. ABIC MW2008 appears to contain no such power directly. In FFE Minerals Australia Pty Ltd v Vanadium Australia Pty Ltd109 a builder sought and obtained an injunction preventing a proprietor from calling up a bank guarantee on the basis it was owed liquidated damages for late completion. The superintendent had issued a certificate of practical completion which did not entitle the proprietor to liquidated damages, but which he later swore he had given by mistake. He swore he would not have issued the certificate had he been aware of deficiencies in the work. Nevertheless, the court held the certificate had to stand until it was set aside by an arbitrator or a court, and it would not be doing so on the injunction application. Heenan J said: ‘The contract provides for that [i.e. whether practical completion had been achieved or not] to be determined by the issue of a certificate by the superintendent, a determination which prevails until it has been set aside by an arbitrator or a court. In my opinion, it is not part of the court’s function in dealing with this application to take such a step.’110 Unless there is a contractual term entitling an amendment to the certificate, it may not be revoked or amended by the person who issued it.111 In respect of that particular certificate the certifier may be regarded as functus officio and the proper course is to refer the matter to the court or arbitrator for review.

PROGRESS CERTIFICATES Progress payments 9.18 Progress certificates give rise to progress payments. As stated by White J in

Construction Services Civil Pty Ltd v J & N Allen Enterprises Pty Ltd112 the ‘basic principle at common law upon which progress certificates are issued is that they represent interim vouchers for the payment of money on account of the final contract price’. It was held in Dawnays Ltd v FC Minter Ltd113 that a progress certificate was to be regarded as virtually cash — ‘It must be honoured. Payment must not be withheld on account of cross-claims, whether good or bad’.114 This [page 179] overarching view, however, was rejected by the House of Lords in Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd.115 It is necessary to examine and construe the terms of the contract in order to determine whether the proprietor is bound to pay the amount of the progress certificate without deduction.116 For example, in LU Simon Builders Pty Ltd v Fowles117 Smith J held that the proper construction of the JCC-B 1995 form of contract prevented a proprietor from raising a cross-claim by way of defence in answer to a claim by a builder on a progress certificate. Similarly, the terms of AS 2545-1993 were held to prevent a set-off or counter-claim from defeating a summary judgment application on a certificate issued.118 AS 2124-1992 was interpreted to similar effect.119 Payments made against progress certificates are provisional and subject to adjustment at the end of the contract.120 Care must be taken in construing the contract, and a late final certificate may still have effect.121 A right to suspend work, as distinct from rescission, for failure to make a progress payment may arise only as a contractual right.122 Common standard form building contracts make provisions in this regard. A statutory right to suspend may arise.

Interest 9.19 Typically, standard form building contracts provide that interest accrues on a progress certificate where it is not paid. For example, AS 4300-1995 cl 42.7

provides that the rate should be 18 per cent per annum unless otherwise stated, compounding at six-month intervals. [page 180] ABIC MW 2008 cl N-16.1 provides that each party must pay interest on any money that it owes the other party but fails to pay on time. By cl N-16.3 the interest is calculated daily from the date when the money should have been paid.

Security of payment legislation 9.20 Legislation in force in the states and territories introduced a statutory overlay for payments under construction contracts. For such legislation see 4.16. The scheme of the legislation is relatively uniform throughout but individual differences have emerged over time in court interpretations of the provisions. The object of the legislation, taken from s 3(1) of the Building and Construction Industry Security of Payment Act 2002 (Vic), is: to ensure that any person who undertakes to carry out construction work or who undertakes to supply related goods and services under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services.

The means by which the Act ensures a person is entitled to receive a progress payment is by s 3(2) ‘granting a statutory entitlement to that progress payment in accordance with [the] Act.’ The means by which the Act ensures that a person is able to recover a progress payment is by establishing a procedure in s 3(3) that involves: (a)

the making of a payment claim by the person claiming payment; and

(b) the provision of a payment schedule by the person by whom the payment is payable; and (c) the referral of any disputed claim to an adjudicator for determination; and (d) the payment of the amount of the progress payment determined by the adjudicator; and (e) the recovery of the progress payment in the event of a failure to pay.

The Act specifies in s 3(4) that it is not intended to limit any other entitlement

a claimant may have under a construction contract or any other remedy that claimant may have for recovering that other entitlement. By s 7(1), subject to the remainder of s 7, the Act applies to any construction contract, whether written or oral, or partly written and partly oral. By s 7(2)(b), however, the Act does not apply to a domestic building contract under the Domestic Building Contracts Act 1995 (Vic). A ‘construction contract’ is defined in s 4 of the Building and Construction Industry Security of Payment Act 2002 (Vic) as ‘a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another [page 181] party’. The expression ‘construction work’ is widely defined in s 5 of that Act as including: (a)

the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings or structures forming, or to form, part of land (whether permanent or not);

(b) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of any works forming, or to form, part of land, including walls, roadworks, powerlines, telecommunication apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for the purposes of land drainage or coast protection; (c) the installation in any building, structure or works of fittings forming, or to form, part of land, including heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply, fire protection, security and communications systems; (d) the external or internal cleaning of buildings, structures or works, so far as it is carried out in the course of their construction, alteration, repair, restoration, maintenance or extension; (e) any operation which forms an integral part of, or is preparatory to or is for rendering complete, work of the kind referred to in paragraph (a), (b) or (c), including — (i)

site clearance, earth-moving, excavation, tunnelling and boring; and

(ii) the laying of foundations; and (iii) the erection, maintenance or dismantling of scaffolding; and (iv) the prefabrication of components to form part of any building, structure or works, whether carried out on-site or off-site; and (v) site restoration, landscaping and the provision of roadways and other access works; (f)

the painting or decorating of the internal or external surfaces of any building, structure or works;

(g) any other work of a kind prescribed for the purposes of this subsection.

By s 9(1) of the Act, on and from the reference date under a construction contract: a person — (a)

who has undertaken to carry out construction work under the contract; or

(b) who has undertaken to supply related goods and services under the contract — is entitled to a progress payment under this Act, calculated by reference to that date.

The ‘reference date’ referred to in s 9(1) is defined in s 9(2). It includes, by s 9(2)(a)(i), the date under the contract on which a claim for a progress payment may be made. A ‘progress payment’ is defined in s 4 as: a payment to which a person is entitled under section 9, and includes (without affecting that entitlement) —

[page 182] (a)

the final payment for — (i)

construction work carried out under a construction contract; or

(ii) related goods and services supplied under the contract; or (b) a single or one-off payment for — (i)

construction work carried out under a construction contract; or

(ii) related goods and services supplied under the contract; or (c) a payment that is based on an event or date (known in the building and construction industry as a ‘milestone payment’).

Under s 10(1)(a) the amount of a progress payment to which a person is entitled is the amount which is calculated in accordance with the terms of the contract. However, by s 10(2), and despite anything contained in the contract, a ‘claimable variation’ may be taken into account in calculating such amount and, by s 10(3), an ‘excluded amount’ must not be taken into account in calculating such amount. Claimable variations are set out in s 10A and excluded amounts are set out in s 10B. Provision is made in s 12A(1) for a lien over certain unfixed plant or materials to the extent of any unpaid progress payment which has fallen due and payable. By s 14(1) of the Act a person referred to in s 9(1), who is called the claimant, may serve a payment claim on the person who under the construction contract is

or may be liable to make the payment. A payment claim must comply with s 14(2) and must be in the relevant prescribed form. The respondent to the claim on whom a payment claim is served may by s 15(1) reply to the claim by providing a payment schedule to the claimant. A payment schedule must comply with s 15(2) and must indicate the scheduled amount (that is, the amount the respondent proposes to pay) and any amount which is alleged to be an excluded amount. From this point under s 18(1) of the Act a claimant may make an ‘adjudication application’ — that is to say, apply for adjudication of a payment claim. The circumstances in which such an application may be made are as follows: if— (a)

the respondent provides a payment schedule under Division 1 but — (i)

the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim; or

(ii) the respondent fails to pay the whole or any part of the scheduled amount to the claimant by the due date for payment of the amount; or (b) the respondent fails to provide a payment schedule to the claimant under Division 1 and fails to pay the whole or any part of the claimed amount by the due date for payment of the amount.

The application must comply with s 18(3) and must be in writing. An adjudication application, however, cannot be made unless as provided by s 18(2): [page 183] (a)

the claimant has notified the respondent, within the period of 10 business days immediately following the due date for payment, of the claimant’s intention to apply for adjudication of the payment claim; and

(b) the respondent has been given an opportunity to provide a payment schedule to the claimant within 2 business days after receiving the claimant’s notice.

The adjudication is carried out by an adjudicator to whom the application is referred by the authorised nominating authority. An adjudication response may be lodged by the respondent as provided by s 21 of the Act. The adjudicator’s powers are set out in s 22, and under s 23(3) the adjudicator’s determination must be in writing and include the reasons for the determination and the basis on which any amount or date has been decided. Essentially it is the function of the adjudication to determine the amount of the progress payment (if any) which is to be paid by the respondent to the claimant (s 23(1)(a)) and the date on which

that amount became or becomes payable (s 23(1)(b)) as well as the rate of interest payable thereon (s 23(1)(c)). Provision is made in s 28B for a respondent to apply for review of an adjudication if the threshold for review (set by s 28A) is met. An adjudicator review application must comply with s 28D. In the event that a respondent fails to pay the whole or part of an adjudicated amount, under s 28O the claimant may request an adjudication certificate and serve notice of intention to suspend works. An adjudication certificate issues under s 28Q. By s 28R(1), upon issue of the same the claimant may recover by a court proceeding the unpaid portion of the amount payable as a debt due to that person; and judgment in favour of that person may be entered accordingly. The Victorian Act follows the New South Wales Act. In introducing that Act as a Bill, Mr Iemma (then Minister for Public Works and Services) said as follows: The main thrust of this bill is to reform payment behaviour in the construction industry. The bill creates fair and balanced payment standards for construction contracts. The standards include use of progress payments, quick adjudication of disputes over progress payment amounts and provision of security for disputed payments while a dispute is being resolved. The bill will speed up payments by removing incentives to delay. Reforms include the power for an unpaid contractor or subcontractor to suspend work and a ban on pay-when-paid and pay-if-paid clauses.

The legislation in all states and territories has been generally well received but has given rise to many decisions on the meanings of various key terms. Accordingly, for each particular state or territory the legislation for that state or territory must be consulted, as individual differences do exist. There is further discussion of issues arising under security of payments legislation in 14.5. [page 184]

Progress claims: standard ABIC clauses 9.21 Building contracts commonly provide a detailed regime by which the contractor submits a claim and it is assessed. The procedure for progress claims in ABIC MW-2008 is set out in cll N3 and N5. Clause N3 deals with contractors:

1

The contractor may submit to the architect one claim for a progress payment in each month, on or after the date in each month shown in item 32 of schedule 1, unless a different date is agreed in writing between the contractor and the owner. The claim is not a ‘tax invoice’.

2

The claim must set out the contractor’s valuation of: a

the work completed

b

materials and equipment delivered to the site for incorporation in the works provided title has passed to the contractor

c

subject to clause C10, the value of off-site plant or material

all in relation to the cost of building work, as adjusted, up to and including the day of the claim. 3

The claim must identify any amount of GST that has been included in the claim. The claim must be supported by any information shown in item 33 of schedule 1 and a declaration made by the contractor that: a

all wages and other entitlements including building industry superannuation and long service leave levies due at the date of the declaration have been paid to or on behalf of all employees of the contractor

b

all monies due to subcontractors at the date of the declaration have been paid

c

all insurance required to be maintained by the contractor are in force.

Clause N5 deals with architects:. 1

The architect must assess a claim for a progress payment and issue to the contractor and to the owner a certificate setting out any payment due to either the owner or the contractor, within 10 business days after receiving a claim for a progress payment.

2

When assessing a claim for a progress payment the architect must take account of each of the following: a

any adjustments to the cost of building work since any previous assessment

b

the proportion of the cost of building work claimed, representing the value of the work completed up to and including the day of the claim, making allowance for the cost of rectifying deficits, if any

c

the proportion of the cost of building work claimed, representing the value of materials and equipment delivered to the site for incorporation in the works up to and including the day of the claim, provided title has passed to the contractor

d

the proportion of the cost of building work claimed, representing the value of off-site plant or material

[page 185] e

an allowance for cash retention where clause C2 applies

f

any claim by the owner for a set off of monies due under this contract

g

the owner’s entitlement to liquidated damages, in accordance with clause M12, since any

previous certificate, calculated up to the date of the certificate h

any other matter to be taken into account in accordance with this contract

i

GST

3

The certificate must identify the amount of GST that has been included and the architect must give written reasons for any difference between the cost of building work amount certified and the (GST exclusive) amount claimed.

4

If the architect reasonably needs additional information to assess the claim, the architect must promptly ask the contractor for it. If that information is needed to assess only part of the claim, the architect must assess the rest of the claim.

In the operation of cl N5 the provisions of cl N8 should be noted: 1

Before the owner is obliged to make the first progress payment, the contractor must: a

have in place the security by unconditional guarantee in accordance with clause C1

b

have in place the insurances in accordance with section E unless the owner has taken out the insurance in accordance with clause E6 and

c

have given the architect the program in accordance with clause G5.

Clause N7 sets out the obligation to pay in these terms: 1

The amount stated as owing in any certificate must be paid within the period shown in item 11 of schedule 1 after delivery of the certificate and the tax invoice (if applicable).

2

The architect may issue a certificate for payment at any time up until the final certificate is issued.

CERTIFICATE OF PRACTICAL COMPLETION Meaning of ‘practical completion’ 9.22 Typically building contracts contemplate two stages of completion. The first stage commonly marks the point in time when possession of the works is handed back to the owner, liquidated damages cease to run and the defects liability period commences to run. It is commonly referred to in building contracts as ‘practical completion’, although other terms may be used. Ordinarily, practical completion occurs at some (defined) point when the works are generally able to be used for the purpose contemplated by the agreement. The precise contractual definition of practical completion contained in a building contract prescribes the test to be applied by the architect or other certifier in determining whether it has been achieved or

[page 186] not. The second typical point in time contained in a building contract is final completion. This is discussed below. In engineering contracts terms such as ‘handover’ or ‘mechanical completion’ are sometimes used. They may mark a point in time when the plant commences to be commissioned, or when performance damages, as opposed to damages for late completion, begin to operate. Typically, a building contract will speak of a date for practical completion being the date the project was intended to reach the stage defined by the contract as practical completion. That date may be extended by extensions of time. The date on which practical completion is achieved is referred to as the date of practical completion. Normally a building contract will require the builder to notify the architect, or other certifying person, when it believes the works are practically complete. Ordinarily, the architect will then inspect the works and assess whether the definition of practical completion contained in the building contract has been achieved by the works or not. Common definitions of practical completion provide that the works need to be complete save for minor items which do not interfere with the use of the building. Some building contracts provide a mechanism whereby the works may be deemed to be practically completed. Usually it is provided that there is deemed to be practical completion when a proprietor takes occupation of the works prior to the issue of a notice of practical completion, or where no response is given by a proprietor or architect, as the contract requires, in response to a builder’s application for practical completion within a stipulated time limit. Requiring a greater level of completion, or that the works be defect-free, before a certificate of practical completion is issued in disregard of contractual requirements, may amount to a repudiation of the construction agreement.123 The building agreement may speak of a ‘certificate’ of practical completion, as in Kirsch v HP Brady Pty Ltd,124 or it may refer to a ‘notice’ of practical completion. Usually, though, the parties themselves will speak of a ‘certificate’. AS 4000-1997 defines practical completion as a stage in the works where a number of requirements had been satisfied; perhaps most notably that the works

were complete except for minor defects not preventing them from being reasonably capable of being used for their stated purpose and in respect of which the superintendent had determined the contractor had reasonable grounds for not promptly rectifying.125 ABIC MW 2008 defines practical completion as follows: 1

The contractor must bring the works to practical completion by the date for practical completion shown in item 27 of schedule 1 as adjusted

[page 187] in accordance with this contract. The works are of practical completion when, in the reasonable opinion of the architect: a

they are substantially complete and any incomplete works or defects remaining in the works are of a minor nature and number, the completion or rectifying of which is not practicable at that time and will not unreasonably affect occupation and use

b

all commissioning tests in relation to the plant and equipment shown in item 28 of schedule 1 have been carried out successfully and

c

any approvals required for occupation have been obtained from the relevant authorities and copies of official documents evidencing the approvals have been provided to the architect.

2

Subject to clause M14, the owner takes possession of the works at 4.00pm on the date the architect issues the notice of practical completion.

3

This clause applies to each separate part shown in item 29 of schedule 1.

Practical completion was defined in cl 25(a) of Ed 5b as the stage at which the works are reasonably fit for use and/or occupation by the proprietor. The term is defined more precisely in cl 1.02.09 of JCC-C 1994 and JCC-D 1994, with modifications to suit staged practical completion in cl 1.02.10 of JCC-E 1994 and JCC-F 1994. A related issue may be the commencement of works: sometimes it is necessary to determine, not whether building work has been completed, but whether it has been substantially commenced. There are a number of cases concerned with commencement. Waddell J in Lidcombe Developments Pty Ltd v Warringal Shire Council126 said that the test to be applied is ‘whether the work or development [that is] the subject of the approval or consent has been begun by the performance of some substantial part of that work or development’. The following principles were stated by Connolly J in Ex parte Dackfield Pty Ltd:127

First, whether building work has or has not been substantially commenced does not depend on the motive or intention of the building owner in performing the work. The test of substantial commencement is an objective not a subjective one … Second, it is not correct to say that commencement involves an activity which is a continuing activity, so that if there is no continuance there is no commencement … Third, what is probably a corollary of the second, an alleged commencement does not cease to be a commencement if the party commencing the work does not … intend to continue and finish the work … Fourth, where a provision calls for substantial commencement of the work within a specified time, the work commenced is that to which the approval itself refers and work is not commenced when nothing more has been done than acts preparatory to the work which is the subject of the approval.

[page 188]

Importance of practical completion date 9.23 As described, building contracts usually fix a date as the date for practical completion and will provide a means by which that date may be extended (by extensions of time) and provide for payment of liquidated damages in the event that the builder fails to achieve practical completion by that (extended) date: see further 6.3 and 6.4. Practical completion is usually achieved only when the certificate to that effect is issued (the date of practical completion). Once practical completion is achieved, the builder is ordinarily entitled to a release of part of the retention fund (or bank guarantee), this being a fund standing as security to ensure that the obligations of the builder under the contract are performed. See 9.25. The date of practical completion will also usually be the commencement of the ‘defects liability period’, that being a period (sometimes 12 months) during which defects which are notified by the architect to the builder are to be made good by the latter. Once the defects liability period has expired the builder will ordinarily be entitled to receive a final certificate if the obligation to make good defects has been complied with and any other requirements of the contract have been satisfied.128 See 9.26. It is not until this stage that the balance of the retention fund (sometimes one-half of it) is returned to the builder. However, ordinarily a builder’s obligation in respect of defective work continues beyond the expiry of the liability period. If it is the intention of a building contract to limit the builder’s liability for defects just to the defects liability period clear words will be

required. And this will be subject to the operation of the Australian Consumer Law (ACL). The issue of a certificate of practical completion may have other contractual effects. For example, in ABIC MW 2008 cl J1.1 the power of the architect to order variations does not extend beyond practical completion. In Kirsch v HP Brady Pty Ltd,129 the suggestion that the provision for a certificate of practical completion was solely for the benefit of the builder and therefore could be waived by the builder was rejected. In Murphy v Acumen Design & Development130 it was held that in accepting the project and opening it to the public the owner was found to have waived any right it had to take the point that the superintendent had not in fact issued a certificate of practical completion. In Kenneth McMahon & Partners Pty Ltd v Domain Investments Pty Ltd131 the question was raised but not decided whether a notice is an unqualified notice of practical completion where it is expressed to be subject to the performance of additional work said to be of a minor nature. In the absence of express contractual provisions to this effect, conditional certificates or notice of practical completion ought not to be issued. A certificate of [page 189] practical completion is intended to have a clear contractual operation. The contractual effect of a conditional certificate, where the building contract does not provide for the issue of such a creature, cannot be certain.

Occupancy before practical completion: standard provisions 9.24 Some modern contracts provide that, in the absence of a written agreement between the owner and the builder, if the owner retakes possession practical completion is deemed to have occurred. However, in all cases it depends on the construction of the contract. For example, clause M11 of ABIC MW 2008 retains the concept that if the owner takes possession of the works (or a separable part of it) then that part is to be treated as having reached practical completion:

1

If the owner takes possession of the whole of the works or a separable part of the works before the architect issues the notice of practical completion, the whole of the works or that separable part, as the case may be, are to be treated as having reached practical completion. The architect must issue to the contractor and to the owner a notice of practical completion for the works or that separable part, as the case may be, within 5 working days after being notified in writing that the owner has taken possession, unless clause M4 applies.

2

Possession of the whole of the works or a separable part of the works, as the case may be, before the architect issues the notice of practical completion, is to be treated as an instruction to amend the program under clause G9 and the contractor may make a claim to adjust the contract.

3

The requirements for making a claim to adjust the contract and the procedures to be followed are stated in section 11.

Clause 25(f) of Ed 5b provided that, in the absence of written agreement between the proprietor and the builder, if the proprietor occupied or used the works prior to the issue of the notice of practical completion, the works would be deemed to have been practically completed on the commencement of such occupancy and/or use. Clause 9.10.04 of JCC-C 1994 and JCC-D 1994 contain similar provisions. Apart from contractual provisions, however, the use and occupation by an owner of a building constructed upon such owner’s land does not imply acceptance of the work or a waiver of any defects, nor does it preclude the owner from contending that the work has not been performed in accordance with the contract.132 However, taking possession of a building may be taken as a waiver of a requirement to take the point that the superintendent had not issued a certificate of practical completion.133 [page 190]

Performance or guarantee bonds 9.25 As noted in 9.23, often a building contract will provide for a retention fund or bank guarantee to stand as security pending ascertaining all the obligations of the builder under the contract have been met. In ABIC MW 2008 this is dealt with in cl C1, which states: 1

If the contractor is required by item 7a of schedule 1 to provide security for performance of its obligations under this contract, the contractor must: a

allow the owner to withhold a cash retention sum or

b

provide the owner with the unconditional guarantees

according to the alternative required by item 7b of schedule 1.

In the event that security to the owner is by unconditional bank guarantee, then the provisions of cl C3 apply: 1

If the security provided by the contractor is unconditional guarantees, the contractor must within 10 working days after this contract is executed give to the owner two unconditional guarantees each equal in value to the percentage shown in item 10a of schedule 1 of the contract price.

2

An unconditional guarantee is an unconditional undertaking or a performance undertaking from a recognised financial institution approved by the owner. The guarantees must be of an approved type. The type shown in schedule 5a is approved.

3

Where the works are to be completed as separable parts, shown in item 29 of schedule 1, separate security by the same type of unconditional guarantees must be provided for each part.

4

If the owner is registered for GST and able to claim an input tax credit, the value of the unconditional guarantees which must be provided to the owner is exclusive of the GST component of the contract price.

Release of security is dealt with in cll C7, C8 and C9. Not all building contracts will be in this form, but they may stipulate for guarantees or bonds nonetheless. In Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd134 in the Victorian Court of Appeal, Callaway JA spoke of the reasons for such a stipulation: There are broadly two reasons why the beneficiary may have stipulated for a guarantee. One is to provide security. If it has a valid claim and there are difficulties about recovering from the party in default, it has recourse against the bank. The second reason, which is additional to the first, is to allocate the risk as to who shall be out of pocket pending resolution of a dispute. The beneficiary is then able to call upon the guarantee even if it turns out, in the end, that the other party was not in default … It is a question of construction of the underlying contract whether the guarantee is provided solely by way of security or also as a risk allocation device. Remembering that we are

[page 191] speaking of guarantees in the sense of standby letters of credit, performance bonds, guarantees in lieu of retention moneys and the like, the latter purpose is often present and commercial practice plays a large part in construing the contract. No implication may be made that is inconsistent with an agreed allocation of risk as to who shall be out of pocket pending resolution of a dispute and clauses in the contract that do not expressly inhibit the beneficiary from calling upon the security should not be too readily construed to have that effect. As I have already indicated, they may simply refer to the kind of default which, if it is alleged in good faith, enables the beneficiary to have recourse to the security or its proceeds.135

In that case the builder (Fletcher Constructions) sought to restrain the owner (Varnsdorf) from drawing on standby letters of credit. According to Charles JA the critical question the court had to decide was this: … whether the relevant commercial purpose of the agreement was to provide security to Varnsdorf, so that a valid claim to damages (whether or not Time Damages) would be secured or whether clauses such as 3.13 made provision for an allocation of the risk between Fletcher and Varnsdorf — showing which party was to be out of pocket pending resolution of any dispute. If the contractual intention of the parties was the first of these alternatives, cl 3.13 would give Varnsdorf no authority to call on the letters of credit pending resolution of any dispute. On the other hand, if the second alternative were to be preferred, a question would remain whether there was any relevant qualification or prohibition affecting Varnsdorf’s ability now to call on the security.136

He formed the view, as did Callaway and Batt JJA, that the case fell within the second of these alternatives. Accordingly he held that: In my view the terms of the agreement show that the commercial purpose of this agreement was to provide an allocation of risk and that Varnsdorf is entitled, under cl 3.13, to call on the security provided by Fletcher notwithstanding that there is a genuine dispute and a serious issue to be tried as to whether Handover has been reached.137

Callaway JA said in his judgment that ‘[i]n the absence of fraud or illegality, Varnsdorf cannot be restrained from acting in conformity with the contract’.138 The decision in Fletcher Constructions was referred to by the Queensland Court of Appeal in Lucas Drilling Pty Ltd v Armour Energy Ltd139 and earlier by the Full Federal Court in Clough Engineering Ltd v Oil and Natural Gas Corporation Ltd.140 In that case, in a joint judgment (French, Jacobson and [page 192] Graham JJ), the court said that ‘clear words will be required to support a construction which inhibits a beneficiary from calling on a performance guarantee where a breach is alleged in good faith i.e. non-fraudulently’.141 For, as was pointed out by Stephen J in the High Court in Wood Hall Ltd v Pipeline Authority,142 to introduce a qualification on the entitlement of an owner to call upon performance guarantees ‘would be to deprive them of the quality which gives them commercial currency’.

FINAL CERTIFICATES

9.26 Typically, building contracts provide for a final certificate to be issued at the end of the defects liability period. The effect of such a certificate depends upon the terms of the contract. Ordinarily the final certificate is the concluding point of the building contract and therefore how it deals with defects which are claimed by a proprietor after a final certificate has been issued is often an area of contention between parties. To understand the role of the certificate often requires examining the terms of the contract that relate to the standard of work to be performed, the procedure for defects to be addressed during the defects liability period and the arbitration clause, in addition to the clause dealing with the final certificate. Ordinarily a defects liability provision provides a right to the builder to be given an opportunity to rectify defective work within a certain period of time after practical completion has been achieved. Unless the terms of the clause are clear it does not replace a proprietor’s ordinary entitlement to claim damages for breach of contract for defects. A proprietor’s damage for defects as a breach of contract claim would ordinarily be assessed by reference to the cost of engaging other contractors to rectify the defective work. This would typically be more expensive than having the builder itself rectify the defective work, perhaps by requiring subcontractors to rectify their defective work. During the defects liability period (and depending upon the actual terms of the contract) if a proprietor engages others to rectify works its damages may be limited to those which it would have cost the builder to carry out the works itself, under ordinary rules of mitigation. Alternatively, if a proprietor does not give a builder an opportunity to rectify the defective work itself under the defects liability provision, the builder may have a claim in damages by way of set-off for breach of contract for the difference between the expense it would have incurred in rectifying the defective work itself and the proprietor’s claim for the cost of engaging others to rectify. The final certificate ordinarily brings to an end the defects liability period but does not by that fact alone bring to an end a proprietor’s entitlement to claim damages for defective work. A final certificate may not, on the proper construction of the contract as a whole, prevent a proprietor claiming for [page 193]

bad work.143 That is unless, for instance, an estoppel arises or it would be unconscionable. What is a defect, however, must be assessed by having regard to the terms of the contract itself. Contracts which require work to be performed to the satisfaction of an architect (or other certifying person) may be interpreted as requiring a cumulative standard to that contained in the specification and drawings.144 Unless the terms of the contract specifically provide for the effect of a final certificate as being to prevent the proprietor from claiming for a defect, that right will continue.145 For a final certificate to have the effect of limiting the proprietor’s claim for defective work, the terms of the contract must be so expressed that it is intended to have that effect. Ed 5b, JCC, NPWC3 and AS 2124 (1992 revision and 1981 revision but not 1986 revision) have or had this effect. In these contracts, defects arising after the issue of the final certificate constitute an exception to the general provision to be recovered: for example, if the defect is not discoverable during the course of execution of the works or at the time of issue of the final certificate (Ed 5b), or is not apparent at the time of issue of the final certificate (NBWC3, JCC, AS 2124-1992), or is a result of fraud. Fraud can include circumstances where a contractor knowingly or recklessly progresses work to cover up a defect.146 AS 4000-1997 provides a similar regime of constituting the final certificate conclusive evidence of discharge of the builder’s obligations, save for a number of exceptions set out in cl 37.40. In this respect it is similar to its predecessor AS 4000-1995. Clause N15 of ABIC MW-2008 provides for the effect of a final certificate as follows: The final certificate must state the architect’s assessment of all outstanding entitlements under this contract. The final certificate is evidence of the parties’ entitlements under this contract and that the contractor has performed its obligations under this contract, subject to any matter already in dispute under section P.

The importance of the final certificate under AS 2124-1992 was considered by Byrne J in Southern Region Pty Ltd v Minister for Police & Emergency Services (No 3).147 His Honour observed that in that building contract the superintendent had no power to correct any error in it by any further certificate and that the final certificate gave finality not only to the parties but to the role of the superintendent. He said that ‘[t]he significance

[page 194] of the Final Certificate in bringing this contract to completion cannot be overemphasised.’148 Having regard to the significance of the final certificate, Byrne J concluded the requirement that it issue within a stipulated time period was directory only and that a final certificate issued outside the time provided for still had the contractual effect the parties had agreed. Where a contract specifies that the quality of materials or standard of workmanship is to be to the reasonable satisfaction of the architect, a final certificate is not conclusive evidence of the general satisfaction of the standard of workmanship and quality of materials but only of the architect’s reasonable satisfaction.149 Depending upon the terms of the building contract, final certificates may typically be challenged by arbitration. Both the terms of the building contract referring to the final certificate and the arbitration clause need to be examined closely. Commonly, a challenge to a final certificate must be made within a certain period of time. In order to take advantage of a final certificate being conclusive evidence the terms of the certificate must be unequivocal.150 By cl 31(i) of the old Ed 5b a final certificate was conclusive evidence ‘that the Works have been completed in accordance with the terms of this contract to the reasonable satisfaction of the Architect and that any necessary effect has been given to all the terms of this Contract which require an adjustment to be made to the Contract Sum’. The corresponding words in cl 25(f) of Ed 4 were ‘that the Works have been properly carried out and completed and properly and accurately measured and valued in accordance with the terms of this contract’. The question of the meaning of the corresponding words in the British standard form (‘that the works have been properly carried out and completed’) was raised but not decided in P & M Kaye Ltd v Hosier & Dickinson Ltd.151 In Ian Delbridge Pty Ltd v Warrandyte High School Council152 the architect issued an alleged final certificate (under Ed 5b standard form) stating an amount payable by the builder to the proprietor. This certificate was accompanied by a letter from the architect stating that adjustments to the final balance would be made when the builder had submitted the information requested. That letter referred also to completion of rectification works which had not yet occurred. A contract summary accompanying the certificate contained various statements indicating

that the architect contemplated a further review of the builder’s claim. It was held that the certificate was not a ‘final’ certificate as contemplated by the contract. Murphy J held that the document which was issued, although on its face purporting to be a final certificate, was clearly not intended by the architect to have the effect of a final certificate under the contract: [page 195] The parties to the contract including the architect were each aware that at all relevant times there were on foot continuing discussions concerning the cost of various items of variation, and the architect sought further information concerning the appellant’s claims upon receipt of which, he said in the contract summary, the contractor’s claims would be reviewed.153

Paragraph (ii) of cl 31(i) of Ed 5b dealt with such defects which ‘reasonable inspection during the carrying out of the Works or before the issue of the [final] certificate would not have disclosed’. By expressly dealing with the matter of the time of the inspection, this provision avoids the difficulty which arose in East Ham Corp v Bernard Sunley & Sons Ltd,154 where the clause spoke merely of ‘a reasonable examination’ without expressly stating at what time or times the examination was to be taken as having been made. In the Southern Region case, Byrne J indicated that generally a strict approach should not be taken to the construction of certificates (whether progress or final).155 _________________________ 1.

Young & Marten v McManus Childs [1969] 1 AC 454.

2.

[1960] NZLR 503 at 517.

3.

[1968] 1 WLR 471.

4.

[1985] 1 QB 300 at 319.

5.

[1906] VLR 235.

6.

Ibid at 237.

7.

Oxford University Fixed Assets Ltd v Architects Design Partnership (a firm) [1999] All ER (D) 22 at [13].

8.

There are many authorities on this point. Among them see Kennard v I E Featherston Superintendent of Wellington (1877) 1 NZ CA 15; Walsh v Johnston (1869) 6 WW & a’B (L) 77; Young v Ballarat and Ballarat East Water Commissioners (1878) 4 VLR (L) 306; Metropolitan Brick Co v Hayward [1938] SASR 462.

9.

[1988] 1 NZLR 33.

10. Morton v Hampson [1962] VR 364 at 371. 11. Commonwealth v Verwayen (1990) 170 CLR 394 at 451 per Dawson J. 12. (1878) 4 VLR (L) 306. 13. See E Olsson, ‘Waiver and Estoppel’ (2001) 80 Australian Construction Law Newsletter 17–21. 14. Coastal Estates Pty Ltd v Melevende [1965] VR 433. 15. Update Constructions Pty Ltd v Rozelle Child Care Centre (1990) 20 NSWLR 251. 16. (1913) 30 WN (NSW) 173. 17. (1880) 6 VLR (L) 5. 18. See JM Kelly (Project Builders) Pty Ltd v Toga Development No 31 Pty Ltd [2006] QSC 365 (Robin AJ). 19. (1874) 2 NZCA 407. 20. (1937) 58 CLR 36. 21. [1960] NZLR 503. 22. Brown & Doherty Ltd v Whangarei County Council [1988] 1 NZLR 33 at 40. 23. (1902) 5 GLR 64. 24. (1885) 11 VLR 817. 25. (1879) 5 VLR (L) 77. 26. [1921] St R Qd 79. 27. (1892) 11 NZLR 496. 28. (1899) 18 NZLR 129. 29. (1891) 10 NZLR 143. 30. [1991] 2 VR 545. 31. See also Southern Region Pty Ltd v Minister for Police and Emergency Services (No 2) (2002) 18 BCL 211. See also the discussion in relation to final certificates in 9.26. 32. (1866) 2 WW & a’B (L) 193. 33. See J Dorter, ‘Performance’ (1999) 15 Building and Construction Law 361 at 408–9. 34. Shaw v Baker (1885) 19 SALR 69; Kennard v I E Featherston Superintendent of Wellington (1877) 1 NZCA 15; Johns and Son v Webster & Tonks [1916] NZLR 1020; Panamena Europa Navigacion (Compania Limitada) v Frederick Leyland & Co Ltd (J Russell & Co) [1947] AC 428; Mayor Councillors and Burgesses of Borough of Stratford v J H Ashman (NP) Ltd [1960] NZLR 503 at 518. See also Grahame Allen Earthmoving Pty Ltd v Woodwark Bay Development Corp Ltd (1988) 13 Aust Cons LR 14 at 16. 35. Mahoney v Le Rennetel (1892) 13 LR (NSW) Eq 7 at 10. 36. Stawn Ltd v Keene (1913) 30 WN (NSW) 173. 37. Redmond v Wynne (1892) 13 LR (NSW) 39. 38. [1892] 3 Ch 441. 39. [1922] 2 KB 478 at 488. 40. Mutual Shipping Corp v Bayshore Shipping Co Ltd [1985] 1 WLR 625 at 631.

41. Campbell v Edwards [1976] 1 WLR 403 at 407 per Lord Denning MR. 42. Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 at 335. 43. Young v Ballarat and Ballarat East Water Commissioners (1879) 5 VLR (L) 503 at 504. 44. [2012] VSC 596 at [168]. 45. Ibid at 545. 46. Ibid at 546. 47. Ibid at 508. 48. Ibid at 526. 49. Young v Ohlfsen-Bagge (1878) 4 VLR 516; Dixon v South Australian Railways Commissioner (1923) 34 CLR 71 at 104. 50. John Holland Construction & Engineeering Pty Ltd v Majorca Projects Pty Ltd (19967) 13 BCL 235 at 260. 51. (1923) 34 CLR 71. 52. [1974] AC 727. 53. [1977] AC 405. 54. See also South Australian Railways Commissioner v Egan (1973) 130 CLR 506; F H Compton and Sons Operations Pty Ltd v Umpty Pty Ltd (1988) 5 BCL 134 at 138. 55. [1979] 2 NZLR 347 at 357. See also Brown & Doherty Ltd v Whangarei County Council [1988] 1 NZLR 33 at 45; Pacific Associates Inc v Baxter [1990] 1 QB 993. 56. 500 Burwood Highway Pty Ltd v Australian Unity Ltd [2012] VSC 596 at [168]. 57. Mayor, Councillors and Burgesses of Borough of Stratford v J H Ashman (NP) Ltd [1960] NZLR 503 at 518. 58. [2003] FCA 174 at [89]. 59. In this case his Honour went on to find none of these possible challenges were made out and declined to reopen the certificate. See 9.15. 60. South Australian Railways Commissioner v Egan (1993) 130 CLR 506; Re an arbitration between Modern Road Construction and Melbourne Harbour Trust Commissioners [1931] VLR 214; John Holland Construction & Engineering Pty Ltd v Majorca Projects Pty Ltd (1996) 13 BCL 235 at 248. 61. Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd (2002) 18 BCL 322. 62. John Holland Construction & Engineering Pty Ltd v Majorca Projects Pty Ltd (1996) 13 BCL 235 at 248. 63. Kemp v Rose (1858) 1 Giff 258; 65 ER 910; Kimberley v Dick (1871) LR 13 Eq 1; Fraser v Mayor etc of Hamilton (1912) 32 NZLR 205. 64. (2002) 18 BCL 322. 65. [2012] WASCA 53 at [57] per McLure P and at [143] per Murphy JA. Warren CJ referred to the decision (with approval but without extensive analysis) in Kane Constructions Pty Ltd v Sopov (2006) 22 BCL 92; [2005] VSC 237 at [660]: for further proceedings in that case see Sopov v Kane Constructions Pty Ltd (2007) 20 VR 127. 66. John Holland Pty Ltd v Schneider Electric Buildings Australia Pty Ltd [2010] QSC 159 at [50] per Applegarth J. 67. [1913] AC 229.

68. Perini Corporation v Commonwealth [1969] 2 NSWLR 530. See also 17.4 and 17.5. 69. See, for example, cl N5 of ABIC- MW- 2008. 70. Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd (2002) 18 BCL 322 at [51]. 71. Perini Corporation v Commonwealth [1969] 2 NSWLR 530, but see Lubhman Fidelities and Investments v South Pembrook Shire District Council (1986) 33 BLR 39 at 58. Non-observation of this obligation: ‘may in certain circumstances relieve the builder from the contractual pre-condition that there is an architect’s certificate before an entitlement to payment arises’: John Holland Construction & Engineering Pty Ltd v Majorca Projects Pty Ltd (1996) 13 BCL 235 at 245 citing with approval Dixon v South Australian Railways Commissioner (1923) 34 CLR 71. 72. (1996) 13 BCL 235. In an appropriate case a proprietor may be liable for the negligence of a superintendent acting in his or her capacity as a certifier, but there is significant doubt on what facts might be necessary; Multiplex Constructions Pty Ltd v SOR Pty Ltd (2001) 17 BCL 174 at 179. 73. (1996) 13 BCL 235 at 247. This is quoted in JM Kelly (Project Builders) Pty Ltd v Toga Development No 31 Pty Ltd [2008] QSC 311 at [61]. 74. John Holland Construction & Engineering Pty Ltd v Majorca Projects Pty Ltd (1996) 13 BCL 235 at 259. 75. WMC Resources Ltd v Leighton Contractors Pty Ltd (2000) 16 BCL 53 at [34]. 76. [2003] FCA 174. 77. Ibid at [93]. 78. Shaw v Melbourne and Metropolitan Board of Works (1898) 24 VLR 70 at 83; Forrest v Chairman Councillors and Inhabitants of Ohinemuri County (1909) 29 NZLR 401; Bysouth v Shire of Blackburn and Mitcham (No 2) [1928] VLR 562; Nelson Carlton Construction Co Ltd (in liq) v A C Hatrick (NZ) Ltd [1964] NZLR 72; [1965] NZLR 144; Hounslow London Borough Council v Twickenham Garden Developments Ltd [1971] Ch 233. 79. Hounslow London Borough Council v Twickenham Garden Developments Ltd [1971] Ch 233 at 259. 80. (1985) 3 BCL 278 at 281. 81. [1974] AC 727. 82. [1979] 2 NZLR 347 at 357. 83. [1988] 1 NZLR 33 at 45. See also Savory Holdings Ltd v Royal Oak Mall Ltd [1992] 1 NZLR 12 at 18. 84. [2012] VSC 596 at [168]. 85. [1971] Ch 233 at 258–60. 86. Mayor Councillors and Burgesses of Borough of Stratford v JH Ashman (NP) Ltd [1960] NZLR 503 at 518. 87. [1916] NZLR 1020. 88. (2000) 16 BCL 53. 89. (2000) 16 BCL 53. 90. [1999] WASC 10 at [18]. 91. Southern Region Pty Ltd v Minister for Police and Emergency Services (No 2) (2002) 18 BCL 211; Novawest Contracting Pty Ltd v Taras Nominees Pty Ltd [1998] VSC 205 (regarding AS 2124-1992); Wulduru Heights Pty Ltd v Merritt Cairns Constructions Pty Ltd (1999) 13 BCL 37 (regarding AS 2124-1986). 92. Thiess Constructions Pty Ltd v Pavements and Excavations Pty Ltd (2000) 16 BCL 42.

93. [1939] VLR 371. 94. [1984] QB 644. 95. Ibid at 664. 96. Ibid at 667. 97. Bond Corp Pty Ltd v Thiess Contractors Pty Ltd (1988) 17 FCR 487. 98. Beaufort Developments (NI) Ltd v Gilbert-Ash NI Ltd [1999] AC 266. 99. Hawker Noyes Pty Ltd v NSW Egg Corp (SC (NSW), Brownie J, 11 November 1988, unreported); KBH Constructions Pty Ltd v PSD Development Corp (1990) 21 NSWLR 348; WMC Resources Ltd v Leighton Contractors Pty Ltd (2000) 16 BCL 53; Baulderstone Hornibrook Pty Ltd v Qantas Airways Ltd [2003] FCA 174 at [99]; see also I N Duncan Wallace, ‘RIP Crouch: An Unmourned Demise’ (1998) 14 Building and Construction Law 441. 100. (2012) 28 BCL 202; [2011] NSWSC 1188 at [57]. 101. (2000) 16 BCL 53; [1999] WASCA 10. 102. Ibid at [34]. 103. (1999) 15 BCL 49; [1998] WASC 280. 104. (1999) 15 BCL 49 at 56; [1998] WASC 280. 105. Northern Regional Health Authority v Derek Crouch Construction Co Ltd [1984] QB 644. 106. Beaufort Developments (NI) Ltd v Gilbert-Ash NI Ltd [1999] 1 AC 266. 107. (1887) 4 WN (NSW) 44. 108. Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd (1998) 14 BCL 215 (regarding AS 2545-1993); Re Concrete Constructions Group Pty Ltd [1997] 1 Qd R 6; Novawest Contracting Pty Ltd v Taras Nominees Pty Ltd [1998] VSC 205. 109. (2000) 16 BCL 305. 110. Ibid at [11]. 111. F and E Davey v Mayor, Aldermen and Burgesses of the Borough of Gravesend (1903) 67 JP 127 at 128. 112. (1985) 1 BCL 363 at 367. 113. [1971] 1 WLR 1205. 114. Ibid at 1209 per Lord Denning MR. 115. [1974] AC 689. As Lord Diplock said at 718: ‘So when one is concerned with the building contract, one starts with the presumption that each party is to be entitled to all those remedies for its breach as would arise by operation of law, including the remedy of setting up a breach of warranty in diminution or extinction of the price of material supplied or work executed under the contract. To rebut that presumption one must be able to find in the contract clear unequivocal words in which the parties have expressed their agreement that this remedy shall not be available in respect of breaches of that particular contract’. 116. Triden Contractors Pty Ltd v Belvista Pty Ltd (1986) 3 BCL 203 at 215. See also Construction Services Civil Pty Ltd v J & N Allen Enterprises Pty Ltd (1985) 1 BCL 363 at 367–9; Grahame Allen Earthmoving Pty Ltd v Woodwark Bay Development Corp Ltd (1988) 13 Aust Cons LR 14; Sabemo Pty Ltd v de Groot (1991) 8 BCL 132 at 143–4; Savory Holdings Ltd v Royal Oak Mall Ltd [1992] 1 NZLR 12. 117. [1992] 2 VR 188.

118. Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd (1998) 14 BCL 215. 119. Novawest Contracting Pty Ltd v Taras Nominees Pty Ltd [1998] VSC 205; see also Re Concrete Constructions Group Pty Ltd [1997] 1 Qd R 6. 120. Lamprell & Guardians of the Poor of the Billericay Union (1849) 18 LJ Ex 282; Tharsis Sulphur and Copper Co v M’Elroy (1878) 3 App Cas 1040; A-G v McLeod (1893) 14 LR (NSW) 246; Re Sanders Constructions Pty Ltd and Eric Newham (Wallerawang) Pty Ltd [1969] Qd R 29 at 39; Ownit Homes Pty Ltd v Batchelor [1983] 2 Qd R 124 at 134. 121. Southern Region Pty Ltd v Minister for Police and Emergency Services (No 3) (2002) 18 BCL 211; [2001] VSC 436 at [49] (AS 2124-1992 final certificate). 122. Canterbury Pipe Lines Ltd v Christchurch Drainage Board [1979] 2 NZLR 347 at 352–3. 123. Walter Construction Group Ltd v Walker Corporation Ltd (2001) 47 ATR 48. 124. (1937) 58 CLR 36. 125. Clause 1. 126. (1980) 41 LGRA 420 at 427–8. See Drummoyne Municipal Council v Page (1974) 30 LGRA 237. 127. [1983] Qd R 10 at 12–13. 128. But see Qantas Airways Ltd v Joseland & Gilling (1986) 6 NSWLR 327. 129. (1937) 58 CLR 36 at 51, 52, 57, 58. 130. (1995) 11 BCL 274. 131. (1973) 47 ALJR 240. 132. Morgan v Allen [1971] Tas SR 285 at 290. 133. Murphy Corporation v Acumen Design & Development (1995) 11 BCL 274. 134. [1998] 3 VR 812. 135. Ibid at 826–7. 136. Ibid at 821. 137. Ibid. 138. Ibid at 830. 139. [2013] QCA 111. 140. (2008) 249 ALR 458; [2008] FCAFC 136. 141. Ibid at [83]. 142. (1979) 141 CLR 443 at 457. 143. Municipal Council of Sydney v Evers & Kennedy (1881) 2 LR (NSW) 151. 144. National Coal Board v William Neill & Son (St Helens) Ltd [1985] QB 300. Older cases suggest where there is no arbitration clause an expression of satisfaction by the third party may be conclusive even where the contract requires work to be performed according to drawings and specifications and to the satisfaction of the architect: Harvey v Lawrence (1867) 15 L T 571. 145. Compare Hewitt v Municipality of Broken Hill (1893) 10 WN (NSW) 85. 146. Bearman v ARTC Ltd [1949] 1 KB 540.

147. (2002) 18 BCL 211; [2001] VSC 436. 148. Ibid at [46]. 149. Belcher Food Products Ltd v Miller & Black [1999] SLT 142. 150. Ian Delbridge Pty Ltd v Warrandyte High School Council [1991] 2 VR 545. 151. [1972] 1 WLR 146. 152. [1991] 2 VR 545. 153. Ibid at 553. 154. [1966] AC 406. 155. (2002) 18 BCL 211; [2001] VSC 436 at [13].

[page 197]

10 VARIATIONS GENERALLY Terminology 10.1 Many expressions are used in building agreements in dealing with the subject of additions or alterations to works. These include extras, enlargements, alterations, additions, deviations, changes, omissions, deductions, substitutions, variations and modifications. Another expression is adjustments. A convenient expression, wide enough to cover extras, omissions and substitutions, is ‘variation’.1 But ‘extras’ as such are separately considered in 10.13. With substantial contracts, it is usual for the contractor to give the architect a written quotation for variations (‘Variation Quotation’ or ‘Variation Price’, usually numbered) and for the architect to issue a numbered variation order (VO). Commonly the building agreement provides that written variation orders are necessary. The effect of such a provision is considered in 10.3–10.12. The purpose of such a provision is to avoid disputes2 and this is a fertile area for disputation. Disputes in this area are often protracted and heated, as many will testify.

Contractual provisions 10.2 Clause J1 of ABIC MW 2008 enables the architect to give to the contractor a written instruction for a variation at any time before the date of practical completion: see cl J1.1. A variation includes, for this purpose, an urgent instruction given under cl J9. Alternatively, by cl J1.3 the contractor may request an instruction from the architect if it considers that a variation may be required. The request must be in writing. A variation under cl J1 includes a change to the

scope of the works, a dimension or level of the works or a detail of the works: see cl J1.4. It is provided by cl J2.1 that the contractor must review any written instruction issued by the architect under cl J1. By cl J4.1 the contractor must promptly proceed with a variation if instructed to do so by the architect and must maintain detailed records of the cost of carrying it out. Prior to this, however, there is a procedure for a contractor to give a notification in writing to the architect under cl J2.3. [page 198] Clause 6.10 of JCC-C 1994 and JCC-D 1994 authorises the architect to order variations but provided that all variations should be of a character and extent contemplated by, and capable of being executed under, the applicable conditions of the agreement. All variations must be authorised in writing by the architect unless urgent, in which case the written authorisation must be provided by the architect as soon as practicable thereafter. Clause 10.16 makes provision for the valuation of the variations and cll 9.07 and 9.08 provides for the adjustment of the time for performance of the contract. If the time is to be reduced, cl 9.08 provided a detailed procedure to be followed.

ORDERING VARIATIONS Power to order variations 10.3 While there is always a power to order variations in the sense that the proprietor and the contractor may agree that variations are to be executed, there is no right to order variations unless the contract expressly or by implication so provides, and insistence by a proprietor who has no such right upon a variation may amount to a repudiation of the contract.3 Almost invariably, however, written building agreements expressly empower the proprietor or architect to order variations: see the discussion in 10.2.

Power not unlimited

10.4 A power given to order ‘variations’, and providing that ‘such variations whether involving addition to, omission from or alteration of the works shall not vitiate this contract’, is not unlimited. For example, as may be seen in Wren v Emmet Contractors Pty Ltd,4 it may not cover work which was expressly excluded from the building agreement which was to be carried out under a separate contract to be let by the proprietor. In that case Barwick CJ referred in fact to four possible situations where substantial additional works were carried out.5 In the first place, the additional works might be done under the variation clause in the building agreement; secondly, the additional works might be done under a contract which was limited to those works and was separate and distinct from the building agreement; thirdly, the building agreement might be varied tacitly or expressly so as to bring the additional works within the scope of the builder’s obligation under it; and fourthly, the building agreement might be abandoned altogether, and be replaced by a new contract, having its subject [page 199] matter partly in the subject matter of the original building agreement and partly in the additional works. Generally, works will be a permissible variation under a contract if they are of a character and extent contemplated by the contract.6 However, additional or varied work may be so peculiar, so unexpected and so different from what any person reckoned or calculated upon, that it is not within the contract at all. If such work is ordered, two courses are open to the contractor. The contractor may refuse to perform the additional work, or alternatively may perform it and claim on a quantum meruit or unjust enrichment basis in respect of it.7 On quantum meruit see 8.8 and 8.9. This situation is sometimes treated as if it represented a separate category of the cases in which a contractor may recover on a quantum meruit, but in truth it is merely an example of work done at the request of the proprietor without any express agreement concerning remuneration and in circumstances in which a promise to pay must be implied. In Swanson Bros Pty Ltd v Stardawn Investments Pty Ltd,8 the court was concerned with the ambit of the power to order variations under old Ed 4. By cl 1(a)(ii) the architect had power to issue instructions in regard to ‘the variation or modification of the design, quality or quantity of the Works or the addition or

omission or substitution of any work’. Clause 3 dealt with the special case of variations made necessary by the requirements of public authorities. Clause 9 provided that no variation should vitiate the contract and that unless a price therefor had previously been agreed all variations authorised or sanctioned by the architect should be valued and the sum involved should be added to or deducted from the contract sum as the case might be. With the authority of the architect, the builder executed a large number of variations. Newton J held that none of the items involved such a departure from the work originally contemplated by the contract as not to be fairly within the description of a ‘variation’. In another case, Wegan Constructions Pty Ltd v Wodonga Sewerage Authority,9 Lush J considered whether altered and increased works which the defendant required the plaintiff contractor to carry out were merely variations of the original contract or something substantially different. The plaintiff made a contract with the defendant to construct sewers. Altered conditions resulted in new plans and quantities for construction being prepared by the defendant. In the new plan excavation was increased by 60 per cent, sewer length by 40 per cent, manholes required 90 per cent more concrete and the number of house connection branches was increased from 47 to 91. These, and other changes, caused the original contract price to be increased from $30,867 to $43,200. The contract was in the CA 24.1 1973 form and the question to [page 200] be determined arose from the interpretation of the general condition 40.1: was the amended plan a variation which increased the moneys payable by more than a reasonable amount? Lush J held that the proper test was one of objective assessment by an independent bystander — ‘Is the amount of the increase or decrease such that it would be judged by the bystander reasonable for the principal to require the contractor to submit to the increase or reduction of the total sum and so to the increase or reduction of the work involved, and to the performance of the extra or reduced work on the contract terms?’10 Without attempting an exhaustive definition of matters to be taken into consideration in assessing reasonableness, he said that, in the case of an increase, the extent of the additional work could be looked at, the past history of the contract, the time at which the variation is ordered and any changes in circumstances between the date

of the contract and the date of the variation.11 His Honour decided, having regard to the time at which the alterations were made, that it was not reasonable to require the contractor to remain on site to perform the additional work upon the terms of the existing contract. Clause 6.10 of the JCC form of contract previously made the architect’s power to order variations subject to a requirement that all variations ‘shall be within the general scope of this Agreement so as to be of a character and extent contemplated by and capable of being executed under the applicable conditions of this Agreement’. The provision introduced various elements of an unspecific kind and could create difficulty for either party to determine what effect it had upon the architect’s rights in any particular case. Clause 40.1 of AS 4000-1997 was more specific in this regard. But it too provided that the contractor was bound only to execute a variation which was within the general scope of the contract. On the other hand, cl J1.4 of ABIC MW 2008 now gives a wider operation to the concept of variation, so that it includes not only a change to the scope of the works (as contemplated by the contract documents and capable of being executed under the contract) but also a change to a dimension or level of the works or to a detail of the works or to the materials, workmanship or quality of any part of the works. In extending the concept beyond that which is within the general scope of the contract, this clause, in theory, opens up possibilities for abuse — especially where the concept includes a change to ‘a detail of the works’.

Valuation of variations; contract adjustments 10.5 Usually written building agreements make fairly elaborate provision for the valuation of variations. If a bill of quantities is supplied, the contract will normally provide that the rates in the bill are to be used as the basis for pricing variations. This was the case, for example, with cl 9 of the old [page 201] Ed 4 which was considered by Asprey J in Re SC Molineaux & Co Pty Ltd and Board of Trustees of Sydney Talmudical College.12 Clause 9 was also considered by

the High Court in Tuta Products Pty Ltd v Hutcherson Bros Pty Ltd (recs appd).13 In that case, it may be observed, Stephen J drew a very clear distinction between a variation proper and doing the very thing called for by the contract which could not be a variation.14 Doing what one must do by contract can hardly be a variation of it and indeed is not one. In ABIC MW 2008 valuation of variations is dealt with in terms of claims to adjust the contract. Clause J4 sets out the requirements for the submission of a claim if the claim results from an instruction to proceed with a variation. By cl J4.2 the contractor must maintain detailed records of the cost of carrying out the variation (except for any part of the variation for which a quotation has been accepted) and the effect if any on the date for practical completion. The contractor must submit the detailed claim to adjust the contract within 20 days after the completion of the work under the instruction to proceed. A claim to adjust the contract must comply with cl H2.1 and must contain the required details including a breakdown, on a trade-by-trade basis, of any extra costs including the cost of preliminaries and a reasonable allowance for contractor’s overheads and profit (not greater than the specified rate). A clause whereby in the event of any alteration or addition being deemed necessary during the progress of the works it was to be done by the builder and the cost of it was to be valued by the architect and added to or deducted from the contract price was held not to contain an undertaking by the proprietor that the architect should value; accordingly an action for damages for breach of the supposed undertaking failed in Duncan v Shrigley15 where the court described such supposed undertaking as an ‘impossible’ construction of the clause.

Orders in writing 10.6 Usually the building agreement will provide that the power to order variations must be exercised in a certain manner, for example, by order in writing or by written instructions given by the architect: see 10.2. The contract usually will make it plain that the order in writing is a condition precedent to payment. See, for example, cl J4 of ABIC MW 2008. Occasionally, however, doubt exists and it is or may be necessary to construe the contract to determine whether the contractor is entitled to payment for extras only if a written order has been obtained. A provision of the contract which, on its proper construction, makes

obtaining a written order a condition precedent to payment, is effective and the contractor is not [page 202] entitled to recover the price of extras unless the case falls within one of the exceptions mentioned below; it is, of course, no answer to a provision requiring a written order that the contractor is subjected to hardship.16 Under a contract which requires the contractor to obtain a written order for variations the situation may arise where the architect instructs the contractor to perform work which the architect contends is not a variation but which the contractor does regard as a variation. For example, the architect may require the contractor to re-do work which the architect claims was improperly done, which claim is disputed by the contractor; or the architect may require the contractor to carry out some procedure, such as screening material used in concrete, which the latter says must be regarded as a variation. In these circumstances a contractor wishing to be certain of the right to be remunerated should decline to carry out the work unless an order in writing is given; otherwise the contractor may be unable to recover.17 The contractor must consider whether a failure to comply with an oral direction, or a written direction which does not purport to be a variation order, subjects the contractor to the danger that the proprietor may determine the contract under some provision in that behalf or purport to accept a repudiation of the contract by the contractor should the contractor be wrong in the contention that the work does amount to a variation. In Sweet & Maxwell Ltd v Universal News Services Ltd,18 however, it was held that a bona fide misconstruction of the terms of a contract does not amount to a repudiation. See also cl A8.1 of ABIC MW 2008. A contractor who has carried out extra work without obtaining an order in writing as required by the contract cannot evade the condition requiring written orders by suing under the common count for work and labour done or goods sold and delivered19 unless the case falls within the principle mentioned below which permits recovery where there has been an implied promise to pay for the extra work.

Clause 5.04 of the JCC form of contract requires all instructions by the architect to be given promptly and in writing. On the other hand, provisions such as cl 1(b) of Ed 5b (the successor to Ed 4), allow oral instructions given to the builder by the architect to have the force of architect’s instructions. Clause 5.03 of JCC-C 1994 provides that, whenever appropriate or requested by the builder, any instruction given by the architect to the builder must identify the particular provisions of the agreement pursuant to which the instruction is given. [page 203] By cl J1.1 of ABIC MW 2008 the architect’s instruction to carry out a variation also must be in writing. It may be given at any time before the date of practical completion. Under cl A7.3, however, an oral instruction may be given if the circumstances are urgent and it is not reasonably possible to give the instruction in writing. The oral instruction though must be confirmed in writing within 24 hours. The kinds of documents which will satisfy the requirements of the contract dealing with variation orders or written instructions depends upon the language used in the contract. But if the proprietor takes this defence the result may be that the contractor sedulously assembles every scrap of paper which might be thought to constitute an instruction from the architect: not only formal variation orders but also numerous letters, emails, texts, memoranda, drawings and minutes of site meetings. If the contract provides that the contractor may confirm in writing an oral instruction given by the architect so as to create a ‘deemed’ instruction in writing from the architect, the categories of potentially useful documents are broadened still further: for example, the contractor may rely on a memorandum or letter sent by the architect or on minutes of a site meeting prepared by him or her and sent to the architect. An example of a case where the contractor, met by a defence of ‘no written variation order’, performed the task of assembling a mass of assorted documents is Swanson Bros Pty Ltd v Stardawn Investments Pty Ltd.20 Whether an actual drawing will satisfy the need for written authority must depend on the terms of the provision and on what the drawing contains or depicts. In Myers v Sarl21 the contract required a direction from the architect by writing under the hand of the architect. There were certain sketches indicating the manner in which the extra work was to be done, but not specifying the

materials to be used, or containing any absolute order or direction for the execution of the work. The sketches were all prepared in the architect’s office by the architect’s clerks and under the architect’s directions, and were by order of the architect furnished to the builder, but were not signed by the architect or by the architect’s clerks. The court, while stigmatising the defence as very shabby, held that it was too plain for argument that the sketches did not amount to directions as required by the contract.22 Having regard to the nature of progress certificates, the inclusion of an extra in such a certificate cannot be regarded as the giving of a written order.23 In Bedford v Borough of Cudgegong,24 where the contract provided that no extra work should be done unless upon the authority of the architect shown by [page 204] an order in writing, it was held that a letter from the architect authorising the builder to do the work was sufficient and that it was unnecessary for the letter to state that the work was an extra. A condition provided that no extras should be paid for unless ordered in writing by the engineer and unless the quantities and rates had been previously ascertained and certified by the engineer; the contractor argued that ‘previously’ meant before demand for payment, but the proprietor’s contention that it meant before the execution of the extras was upheld in Young v Ballarat and Ballarat East Water Commissioners.25 The power to order variations was considered, as noted above, in Swanson Bros Pty Ltd v Stardawn Investments Pty Ltd. While the action took the form of a claim by the builder against the surety (the builder having obtained an unsatisfied judgment against the proprietor), it was necessary to consider whether the variations had been ordered or sanctioned in a manner or in circumstances rendering the proprietor liable to pay for them. The contract in question was Ed 4 for the conversion of four buildings into an entertainment centre. The terms of cl 1(a)(ii) are noted in 10.4.The variations were numerous, and as noted the builder assembled for the purposes of the trial a large collection of documents of various kinds bearing on the variations. Newton J found that each of the variations had been carried out pursuant to instructions given by the architect and that most of such instructions were wholly, or at all events in part, in writing, including letters and drawings. There were some few items in respect of which

the builder was unable to produce any written direction. As to these, the builder relied upon cl 9, whereby ‘all variations authorised or sanctioned by the Architect’ were to be valued and the sum concerned added to or deducted from the contract price, as the case might be. Clause 3 dealt with the special case of variations made necessary by the requirements of some public authority. Newton J was of the opinion that the items in respect of which there were no written directions fell within cl 9, saying: My present view is that Clause 9 covers not only variations falling within Clause 1 or Clause 3, but also any other variations ‘authorised or sanctioned’ by the Architects: compare Hudson’s Building and Engineering Contracts, 9th ed, p 402 and the discussion of Clause 9 of the English RIBA form of contract (1957 Revision) in Keating’s Law and Practice of Building Contracts, 2nd Ed, p 280. As I have already said, I find upon the evidence that all the items in question were authorised by the Architects. And most of them were subsequently sanctioned by the Architects in that all or part of the value or cost thereof was included in claims by Swanson Bros in respect of which progress certificates were given by the Architects.

Some of the items of work in the Swanson Bros case had been carried out by subcontractors. With regard to these the builder also placed reliance [page 205] upon the provisions of Ed 4 dealing with nominated subcontractors and nominated suppliers. Clause 21(i) was as follows: … if any nominated Sub-Contractors are nominated or selected by the Architect to supply and fix materials or goods for which no provisional sum is included in the Specification or otherwise disclosed at the time of tendering for the Work, the subject of this Contract, the provisions of section (a) of this clause shall apply, save that the Builder shall be entitled to a remuneration of two and a half per cent on the final cost of the work executed.

By cl 22(2): If any specialists merchants tradesmen or others are nominated or selected by the Architect to supply materials or goods to be fixed by the Builder for which no provisional sum is included in the Specification or otherwise disclosed at the time of tendering for the work the subject of this contract such specialists merchants tradesmen or others shall be deemed to be nominated suppliers and the provisions of Section (1) of this clause shall apply save that the Builder shall be entitled to a remuneration of 10% on the final cost of the materials or goods supplied and to such payment for fixing as the Architect and Builder shall agree upon or in default of such agreement as shall be determined by arbitration in accordance with clause 26 of these Conditions.

Newton J would if necessary have upheld the alternative contention of the

builder based on these provisions, for his Honour said: So far as concerns those of the items referred to in Exhibit ‘Y’ which represented work done by subcontractors I think that even if not ordered by the Architects in writing, so as to fall within Clause 1(a)(ii), they would have fallen within Clause 21(i) or Clause 22(2) in so far as they involved the supply and fixing of materials and goods or the supply of materials and goods to be fixed by Swanson Bros. But whether or not these views be right, I think that these items would still have fallen within Clause 9. It must be conceded that Clause 21(i) gives rise to some difficulties of interpretation.

An early case is District Road Board and Ratepayers of the Road District of Broadmeadows v Mitchell.26 By cl 7 of a contract for the construction of a bridge, no variations were to be paid for unless previously authorised in writing by the surveyor; by cl 14, no money should be payable on account of the works until a written certificate to that effect was obtained from the surveyor. The alleged extra was the construction of the embankment to an altered slope; according to the plaintiff contractor, this resulted in additional work. The surveyor had put up a ‘profile’ or board to which the embankment was to be constructed, bearing the following words written by the surveyor: ‘Height of bank allowing two feet for pitching and metalling’. The County Court judge held this to be a sufficient written authority, and the appeal which was taken evidently did not extend to this part of the decision. The County Court judge further held that cl 14 on its proper construction did [page 206] not apply to extras. The Full Court took the view that cl 14 did apply to extras and that this defence was fatal to the claim. Referring to its earlier decision, Bruce v R,27 the Full Court said: We there held that all the works — not merely the work specified, but all the items — were subject to the condition of being finally certified by the engineer. Indeed, extras would seem on general principles to demand such a safeguard more than any other works. There must be an order in writing, and a certificate of completion before any payment. We think there is no getting over this objection.28

Depending on the facts, this may still be the approach adopted by a court in similar circumstances.

Absence of written order and recovery

10.7 A clause which, on its proper construction, makes a written order a condition precedent to payment for variations generally will be effective to bar a claim for payment. A variation under s 19(1) of the House Contracts Guarantee Act 1987 (Vic) must be in writing,29 as must be any variation under s 79 of the Domestic Building Contracts Act 2000 (Qld). There are several exceptions to the abovementioned rule, however: see further 10.8–10.11. The principle underlying particular decisions is not always entirely clear or easy to discern, and the situations in which the contractor may succeed notwithstanding the apparent bar still await authoritative classification. In particular, it is not clear whether references in some cases to it being a fraud on the part of the proprietor to set up the clause requiring written variation orders are to be regarded as recognising a distinct ground for enabling the contractor to recover notwithstanding the absence of such an order but the answer may well lie in arguments addressing some broad equitable principle. Quite apart from that doubt, the true principle and scope of other exceptions is not entirely clear, and it may be said generally that it is often impossible to answer with confidence the question whether a contractor who has failed to obtain a written order will be able to recover the cost of variations.30 But the doctrine of waiver, or estoppel, may be effective in this regard as may be the doctrine of unjust enrichment or unconscionability: see 2.11 and 10.12.

Implied promise to pay 10.8 One exception to the general rule is regarded as well established. If the contractor is able to establish the making of a contract with the [page 207] proprietor by which the contractor is to be paid for doing the extra work, the contractor’s claim will succeed. The leading case is Liebe v Molloy.31 Molloy was the building owner and employed Liebe to erect a theatre and hotel in Perth. The contract provided that no works beyond those it included should be allowed or paid for without an order in writing from the proprietor and architect; and the specification provided

that any extra works ordered by the architect or the proprietor should not be recognised or paid for unless an order in writing, stating the nature of the works and the amount fixed, was signed by the architect and endorsed by the proprietor. An umpire found that the works in question were extras; that no order in writing signed by both architect and proprietor was given for the works; but that orders in writing were given by the architect for some of them, and verbal orders for the rest, and that the proprietor had such knowledge of these extras as might fairly be inferred from the fact that he was constantly on site and taking an active interest in the work. The High Court was of opinion that on the facts found by the umpire the view was open that there was an implied contract to pay for the extras, and the matter was remitted to the umpire to enable him to determine the question of fact whether any such implied contract had been made. Griffith CJ, delivering the judgment of the court, said that the stipulation requiring an order in writing:32 … does not exclude altogether the implied doctrine of law that, when one man does work for another at his request, an implied obligation arises to pay the fair value of it. The question therefore is whether, notwithstanding the absence of written orders, the contractor is entitled to recover these sums, or in other words, whether under the circumstances of the case an implied contract to pay for them is to be inferred … Now, the only fact found is that the employer had such knowledge as to these works as may be fairly inferred from the fact that he was constantly on the work, and taking an active interest therein. But a further inference must be drawn before a liability to pay arises, namely, that there was an implied contract to pay … An implied contract may be proved in various ways. When a man does work for another without any express contract relating to the matter, an implied contract arises to pay for it at its fair value. Such an implication of course arises from an express request to do work made under such circumstances as to exclude the idea that the work was covered by a written contract. So it would arise from the owner standing by and seeing the work done by the other party, knowing that the other party, in this case the contractor, was doing the work in the belief that he would be paid for it as extra work. If the umpire was of opinion that any of this work was done under such circumstances that the owner knew or understood that the contractor was doing the work in the belief that he would be paid for it as extra work, then the umpire might, and probably would, infer that there was an implied promise to pay for it. That is

[page 208] one instance. Again, the architect might have been expressly authorised by the owner to order extra work. Under such circumstances it would not be understood by either party that it was included in the lump sum specified in the contract. As, in the view which we take of the case, the matter must go back to the umpire, it is not desirable to state in further detail what would be sufficient evidence of an implied contract.

When the matter came before the umpire again further findings were made

which divided the extras into three classes. In respect of one class he found that the contractor was not entitled to recover. In respect of the second he found that the architect had been expressly authorised by the owner to order the work, and he made an award in favour of the contractor in respect of this work. This part of his award was not subsequently challenged. In respect of the third class the umpire found that execution of the extra works was insisted upon by Molloy, who had asserted that those works were a portion of the contract, and he found also that Molloy was told at the time by Liebe that those works were extras and would be charged as such. Molloy applied to set aside that part of the supplementary award and the Full Supreme Court of WA dismissed the motion. Molloy appealed to the Judicial Committee, but the appeal was dismissed: see Molloy v Liebe.33 Lord Macnaghten said that Griffith CJ had in the earlier proceedings ‘pointed out that the question was whether under the circumstances of the case an implied contract was proved to the satisfaction of … the umpire. He explained that an implied contract might be proved in various ways, and he gave instances’.34 After referring to the supplementary award, Lord Macnaghten continued:35 As Molloy insisted on the works being done, in spite of what the contractor told him, the umpire naturally inferred (and it was for him to draw the inference) that the employer impliedly promised that the works would be paid for either as included in the contract price or, if he were wrong in his view, by extra payment to be assessed by the architect. It is difficult to see how the umpire could have drawn any other inference from the facts as found by him, without attributing dishonesty to Molloy.

In Thackwray v Winter36 a building contract under seal provided that no extras would be paid for unless ordered in writing by the architect. The proprietor himself orally ordered extras and promised the builder that he would pay for them. The Victorian Full Court refused to interfere with a verdict for the builder, saying:37 The object of these conditions was evidently to protect the employer from having to pay for extra work ordered by the architect, unless that order was in writing. That is a matter between the architect and the contractors. But there is nothing to prevent the employer himself giving directions as to additional

[page 209] works to be executed, or giving orders not opposed to the contract. The employer might orally make

any additional contract he pleased, though he could not, without writing, so vary the contract previously made in writing.

The correctness of this observation may be doubted to the extent to which it suggests that a written contract — the contract was in fact under seal — cannot be varied orally. The contract does not appear to have been one required by law to be in writing, and the rule that a parol variation of a written contract is ineffective is limited to contracts which not only are in fact but are in addition required by law to be in writing.38 The High Court decision in Liebe v Molloy was referred to by Lowe J in Bysouth v Shire of Blackburn and Mitcham (No 2).39 The decision of the Judicial Committee in Molloy v Liebe was distinguished by Humphreys J in S C Taverner and Co Ltd v Glamorgan County Council.40 There the contract provided that the contractor should not be entitled to recover the price of extras unless they were in writing. Humphreys J referred to Molloy v Liebe and distinguished it on the ground that in the case before him there was no plea that the absence of orders was due to the defendant’s refusal to give them and that the defendant nonetheless insisted on the doing of the work. Humphreys J held that the lack of an order in writing was, on the limited facts upon which he was required to decide the case, fatal to the claim. This decision does no more than recognise that with a clause in what might be regarded as one of the usual forms the lack of a written order will be fatal if nothing more appears than that extra work was done and no written order was given. The decision does not question the proposition that the contractor may in appropriate circumstances recover on an implied promise to pay.41 This principle was recognised in the Queensland case of Michael v Andrews,42 where the contract provided that there should be no payment for extras unless there was a written order from the building owner. Douglas J referred to Liebe v Molloy and found that the building owner, who had requested the doing of the extra work, had impliedly promised to pay a reasonable price for it and was therefore liable.43 A further exception to the general rule denying recovery in the absence of a written order, is sometimes suggested where the extra work is of such a kind as not to fall within the power to order extras and is regarded as outside the contract. If work which is in this sense outside the contract is ordered by the proprietor or with the proprietor’s authority, the proprietor will be liable to pay for it upon an implied promise to pay a reasonable price. Such cases are really

only examples of the exception which has already been discussed. They do differ, however, in this respect; that where work which is outside [page 210] the contract is ordered, there will ordinarily be no difficulty whatever in implying a promise to pay, while in the case of work which falls within the scope of a power to order extras, the circumstances may or may not be such as to raise the necessary implication. In Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd,44 the decision of the High Court in Liebe v Molloy was distinguished. In that case it was held that the work claimed for was work within the contract and that the proprietor was estopped from relying upon the requirement for written notice in defence to the builder’s claim for payment. But in Liebe v Molloy the extra work was truly ‘outside the contract’, not having to be done to complete the contract work but additional to what was necessary to be done to carry out the contract work for the contract price.45 It was pointed out also by Priestley JA that these days the builder’s right of recovery in respect of work done outside the contract which the builder was not required to do by the contract would be referred to ideas of restitution rather than implied contract.46 Analysis in terms of restitution arguably is one supported as well in remarks of Byrne J in John Holland Construction & Engineering Pty Ltd v World Services and Construction Pty Ltd.47 Sackville AJA in Xu v Jinhong Design & Constructions Pty Ltd48 summarised this aspect of Priestley JA’s reasoning in Update Constructions49 as follows: Priestley JA’s reasoning … demonstrates that if an owner and a builder orally agree to variations to a contract, but the contract requires all variations to be in writing, any additional work performed by the builder is not work ‘under the contract’ for the purposes of the Liebe v Molloy principle. If the requirements stated in Liebe v Molloy are satisfied, the builder may have a contractual claim against the owner. However, that claim would not be under the original contract unless perhaps the owner was estopped from denying that the work was performed under that contract.

In the case before the Court of Appeal his Honour said that ‘it was not suggested that the Second Building Contract required the Builder to carry out the work the subject of the oral variations.’50 That work, he said, ‘unlike the work in Update Constructions, was additional to the work the Builder was obliged to perform by the terms of the Second Building Contract’. Thus, said his Honour,

‘[s]ince the Second Building Contract provided that any variations had to be in writing, the additional work was “outside the contract”.’51 Basten JA agreed with this analysis of Update Constructions by Sackville AJA.52 [page 211] Macfarlan JA, with whom Basten JA and Sackville AJA agreed, did not find it necessary to discuss Update Constructions at length. The decision in Liebe v Molloy was discussed by Rolfe J in Gigliotti Constructions Pty Ltd v Jalili.53 It was held in that case that the arbitrator had been entitled to find in favour of the contractor on a quantum meruit basis despite cl 5(a) of the contract between the parties providing that it was not to be allowed to claim payment for any variation not authorised in writing. His Honour said in the course of so ruling that ‘once it is accepted that a variation is work “outside the contract” there is no obligation … to comply with at least certain of the contractual requirements relating to that work in order to obtain payment’. The result was that cl 5(a) was, in the circumstances, left with little, if any, operation. A different result was reached in Trimis v Mina.54 The contractor lost in that case because the variations were not authorised in writing and the principles stemming from Liebe v Molloy as explained by Priestley JA in the Update Constructions case were not satisfied.55 The decision in Liebe v Molloy was also discussed by Bleby J in Alstom Pty Ltd v Yokogawa Australia Pty Ltd (No 7)56 who found as regards the observations of Griffith CJ in Liebe, that in respect of most of the so-called B1 variations in that case there was no mere ‘standing by’ but, instead, there was as to each a specific request or instruction to perform the work in question.

Certification 10.9 The cost of extras may usually be recovered by the contractor, notwithstanding that a written order has not been obtained as required by the contract, if the architect is empowered to give a certificate which is to constitute a binding determination of the question of what is the amount to be allowed for extras. The reason for this is that the parties have agreed to be bound by the

architect’s decision on the question of what amount is to be paid for extras, and (in the absence of fraud) they are accordingly bound by the architect’s decision even though it may be erroneous.57

Drafting guarantees 10.10 When drafting a guarantee of the performance of the proprietor’s obligations under a building agreement (if a standard form is not followed) care should be taken to ensure that, however extensive the variations may be, and whatever the nature of the arrangements under which the variations [page 212] are executed, the guarantee will extend to payment of the price of the variations. A guarantee in what might be called an ordinary, simple form will probably extend to the price of variations ordered under a power in that behalf contained in the building agreement. The difficulty is that on occasions a surety (who may be the alter ego of the proprietor and may have been the instigator of the variations) will contend that the variations were ordered, not under the original building agreement, but under some new arrangement. A guarantee should be cast in terms wide enough to cover all work done by the builder for the proprietor. Where the defendant guaranteed payment of the cost of the contract works the High Court in Wren v Emmet Contractors Pty Ltd58 held that the trial judge had not properly addressed the question whether substantial additional works had been executed as ‘variations’ within the meaning of the contract. The court in that case also dealt briefly with the question whether, assuming that the contract itself had been varied, the defendant had as surety agreed to that variation. In Swanson Bros Pty Ltd v Stardawn Investments Pty Ltd59 the builder, having obtained an unsatisfied judgment against the proprietor for the amount of a progress certificate, brought an action against the surety on an instrument cl 1 of which was as follows: ‘If the Proprietor shall commit any breach of its obligations under the Building Agreement the Guarantor will indemnify the Builder against all losses damages costs expenses or otherwise which may be incurred by it by reason of any default on the part of the Proprietor in performing and observing

the agreements and provisions on its part contained in the Building Agreement’. The defence taken by the surety was that the progress certificate was not duly presented and payable pursuant to the building agreement, because it included amounts in respect of works not falling within the terms of the building agreement. Newton J rejected this defence, holding that none of the items involved such a departure from the work originally contemplated by the contract as not fairly to be within the description of a ‘variation’ and that the variations had all been authorised or sanctioned in a manner or in circumstances which entitled the contractor to be paid for them. His Honour went on to hold that if, contrary to his view, some of the items fell outside the provisions of the agreement dealing with variations, the true view was that the building agreement had itself been varied so as to include those items. The guarantee, Newton J further held in that case, extended not only to variations falling within the terms of the agreement but also to extra work which was included in the building agreement by reason of variations of that agreement itself consequent upon subsequent agreements between the builder and the proprietor. Here he relied upon cl 3 of the guarantee, which was as follows: ‘The Guarantor shall not be discharged or released from its Guarantee by any arrangement made between the Builder and the Proprietor with or without the consent of the Guarantor or by any [page 213] alteration in the obligations undertaken by the Builder or the Proprietor or by any forbearance [sic] on the part of the Builder whether as to payment time performance or otherwise’. Newton J indicated that, quite apart from this clause, the instrument covered the obligations of the proprietor to the builder under the building agreement as varied so as to include the items in question (whether such variations fell within the provisions of the building agreement dealing with variations or were the result of subsequent consensual variations of the building agreement itself), because the evidence established that the surety consented to, and indeed instigated, the carrying out of all the items in question. In this regard he relied on Woodcock v Oxford and Worcester Railway Co.60

Arbitration clause 10.11 The terms of an arbitration clause may be wide enough to enable the contractor to succeed on a claim for extras not ordered in writing. A decision of importance to contractors in this respect is Brodie v Corp of Cardiff.61 The contract in that case empowered the engineer to order variations and provided that the corporation was not to be liable for the cost of variations unless instructions for them were given in writing by the engineer. The arbitration clause provided that in case any dispute should arise, either during the progress of the works or after the determination of the contract, as to the construction of the contract, or as to any matter or thing arising thereunder, or as to any objection by the contractor to any certificate, finding, decision, requisition or opinion of the engineer, such dispute was to be referred to arbitration, and either party might demand an immediate determination of the dispute. Disputes arose during the progress of the works as to requirements by the engineer for executing certain portions of the work in a particular manner and with certain materials. The contractor contended that these requirements were extras, for which he was entitled to be paid in addition to the contract price. The engineer refused to give written orders for these items on the ground that they were in accordance with the contract. The contractor carried out the work as ordered. On the completion of the contract the matter was referred to arbitration. The arbitrator made an award in favour of the contractor and the House of Lords refused to interfere with this award. Lord Finlay LC drew attention to the fact that the arbitration clause provided that there might be either an immediate determination of the dispute or a determination after the completion of the work.62 He went on to say that the dispute which had arisen was on the question whether the items were extras and therefore ought to have been ordered in writing; if the arbitration was held immediately, an award by the arbitrator in favour [page 214] of the contractor would take the place of the order in writing and the contractor might then go on with the work, relying on the award as putting him in the same position as if the engineer had given an order in writing.63 The contract

contemplated that an order in writing should be given before any extra work was done; and if instead of an immediate arbitration there was an arbitration undertaken after the completion of the works the effect of the arbitration clause was that the award then to be made, if in favour of the contractor, should have the same effect as if an order in writing had been given.64 The effect of the findings of the arbitrator was that by arrangement between the engineer and the contractor the arbitration was stood over until the works were completed. The dispute was whether the items were extras for which an order in writing should be given, and when the parties agreed that the work should be done and that the question should stand over for arbitration, the effect of the contract was that the finding of the arbitrator should take the place of the order in writing which ought to have been given. Otherwise the postponed arbitration would be entirely useless.65 The question which arises is whether the view taken in Brodie’s case of the effect of the arbitration clause depended upon the provision whereby there might be either an immediate or a deferred arbitration and the finding that the parties agreed that the arbitration should be deferred. Lord Atkinson does not appear to have founded himself upon this: he held that the dispute which the arbitrator was empowered to determine finally was whether the contractor should be paid for the work he in fact executed, though no written order had been given for it.66 Lord Shaw, on the other hand, did refer to the agreement of the parties to allow the determination of the dispute to stand over, but does not appear to have relied upon this agreement or upon the provision in the arbitration clause whereby an immediate determination might have been made; he based his decision on the view that the contention of the corporation reduced the arbitration clause to futility.67 Lord Wrenbury held that the arbitration clause extended to the question whether the engineer ought to have given a written order and extended to the right to payment under the contract. If the arbitrator could review the action of the engineer in refusing an order in writing, he was empowered so to do, not idly and without result, but effectively, by finding that the money was due.68 If a similar question were to arise under a contract containing an arbitration clause which did not provide that there might be either an immediate or a deferred arbitration, an attempt might be made to distinguish Brodie’s case. It is thought, however, that the better view is that the basis of the decision is that, on its proper construction, the arbitration clause empowered the

[page 215] arbitrator to determine whether an order in writing should have been given and to give effect to that determination by ordering payment and that it was not critical to the formation of this view of the clause that it contemplated that there might have been an immediate hearing. Faced with a possible defence based on the absence of written variation orders a contractor may be in a better position before an arbitrator than before a court. For the arbitration clause may be wide enough to enable it to be said, applying Brodie’s case, that the arbitrator is empowered effectively to review the failure of the architect to give a written order, and this power given to the arbitrator may not devolve on the court should there be litigation.69 It is doubtful to suggest, however, that in the absence of an arbitration the courts would have the same power of review as the arbitrator. Contractors should proceed upon the basis that the powers of an arbitrator in this respect may be wider than those of the court. Generally, though, the rule is, as mentioned in a different context by Ipp J in WMC Resources Ltd v Leighton Contractors Pty Ltd,70 that ‘unless the contract confers additional powers on the arbitrator, the arbitrator only has those powers that could be exercised by the court’. The decision in Brodie’s case was followed by Cole J in State Rail Authority of NSW v Baulderstone Hornibrook Pty Ltd71 In that case material for embankment fill was required for road works but not permitted by the superintendent to be taken from within the road alignment. The contractor claimed that importation of fill was a variation. The superintendent maintained that importation was not a variation and continued to require the contractor to import the fill. The contractor imported the fill and sought the cost of the same. This claim was disputed on the ground that the absence of a direction from the superintendent prevented the claim being one for a variation. Cole J regarded this submission as offensive both to authority and common sense.72 Having quoted at length from the speech of Lord Shaw in Brodie’s case, he said that it: … would be a nonsense for an arbitrator to be asked to determine whether, on the proper construction of the contract, importation of fill was extra work such as to constitute a variation, and upon … holding that it was, for there then to be upheld a contention that, notwithstanding that finding, as no superintendent’s direction had issued (as it ought to have issued) the extra work was not a variation within the meaning of the contract.73

[page 216] The decision in Brodie’s case was also referred to by the English Court of Appeal in Henry Boot Construction Ltd v Alstom Combined Cycles Ltd,74 but not discussed at length

Waiver 10.12 It is sometimes said that a provision requiring a written variation order may be waived by the proprietor. Waiver, if it has any identifiable legal consequence, is generally indistinguishable from estoppel.75 Where the proprietor was present on a number of occasions when the architect gave oral orders for extras it was held that it was open to the jury to find that the requirement of an order in writing had been waived.76 In Bysouth v Shire of Blackburn and Mitcham (No 2),77 a contract for the execution of road-making works provided that no extra works would be paid for unless there was an order in writing and a certificate of the engineer in respect of them. The contractor alleged that the engineer orally requested him to do certain extra works, that the municipality paid for certain extras done without written authority, that the municipality stood by and saw the contractor doing the extras without written order and took the benefit thereof and that the contractor was induced by these acts and conduct to believe that the municipality would not require written orders and acted to his detriment upon that belief so induced. The Full Court was asked to determine whether those facts were capable of affording an answer to the defence based on the absence of a written variation order. The court held that they were not. Irvine CJ held that the facts established neither waiver nor estoppel.78 The facts alleged were not sufficient to warrant an implied agreement to waive the condition. Mann J concurred in the reasons of the Chief Justice. Lowe J said that the plaintiff’s case was really one of estoppel, and it was not made out.79 If ‘waiver’ did denote something other than estoppel, however, it might be a sufficient answer that the contract expressly provided that there should be no waiver unless by the express consent of the council under their seal. Lowe J further observed80 that the pleadings did not raise the question whether the plaintiff might make a case based on a new agreement, as was done in Liebe v Molloy.81

In A-G v McLeod82 the Full Court of NSW expressed the opinion that a clause whereby none of the conditions should be varied or waived except by express consent in writing put an end to the contention that the condition requiring orders in writing could be waived or got over. It [page 217] may be, however, despite these statements, that a proprietor could engage in conduct precluding reliance on the absence of a written variation order notwithstanding the presence of a clause to the effect that none of the provisions of the contract should be varied or waived unless by express consent in writing. In Melbourne Harbour Trust Commissioners v Hancock83 the High Court held that notwithstanding such a clause the proprietor might be precluded by its conduct from relying on the absence of a written notice directing a suspension. In Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd84 Priestley JA (with whom Kirby P and Samuels JA agreed) said that ‘Rozelle thus having led Update to act to its detriment by representing (even if indirectly) that the requirement of writing was not being insisted on, should not by the rules of estoppel, later be allowed to rely upon the requirement for written notice as an answer to Update’s claim under the contract’. Accordingly it is submitted that waiver, in truth estoppel, may be a viable reply to a defence based on an absence of writing. It is to be noted that in Xu v Jinhong Design and Constructions Pty Ltd,85 Sackville AJA analysed Priestley JA’s judgment and made a point of saying that ‘Update Constructions itself was decided on the basis of estoppel’.86

EXTRAS AND OMISSIONS Extras 10.13 Many building disputes arise over the issue of ‘extras’. Building owners are, or claim to be, astonished when a job for which a firm price was given ends up by costing half as much again. It may be the homely case of the interfering partner, who every day visits the house being built and continually changes the design by moving this or adding that. At a different level, the proprietor who has

signed a lump sum contract for the erection of a multi-storey office building at a cost of $20 million may be surprised to receive a final account for $35 million and will have to be reminded of the fact that three storeys were added and numerous other costly changes made, many at a stage when considerable expenses already incurred had to be thrown away by reason of the alteration. While proprietors often have only themselves to blame, the danger of ultimate dissatisfaction and dispute is at times increased by failure on the part of the architect to indicate sufficiently clearly to the proprietor the way matters are proceeding. The tendency of some proprietors to intermeddle by visiting the site and personally directing that this or that be changed or added is another contributing cause of the dispute which often develops later. [page 218] In S C Taverner and Co Ltd v Glamorgan County Council87 ‘extra’ work was referred to as ‘work quite outside the contract’. An extra, or extra work, is work which is neither expressly nor by implication described in the contract documents. As was pointed out by Egbert J in Re Chittick and Taylor,88 if an item is specifically provided for in a contract it is not an extra. In order to determine the soundness of a claim for additional remuneration on the ground that extra work has been done it is necessary first to determine what work the contractor agreed to do for the contract price. Although a fixed price contract may put a ‘limit’ on the work described in the contract this cannot prevent payment for additional or varied work.89 Where a contractor employed to build a bridge gave an unconditional undertaking to sink the caissons and there was no countervailing promise or warranty on the part of the employer as to what the contractor would encounter in sinking the caissons, the contractor was unable to recover the cost of contending with unforeseen obstacles in the form of buried logs and groundwater under the provisions dealing with extras, deviations and alterations in Re an Arbitration between Carr and Shire of Wodonga.90 There are innumerable kinds of extras, and Young v Ballarat and Ballarat East Water Commissioners91 affords interesting illustrations. Extra work may consist of the re-execution of work which the engineer has wrongly condemned;92 the treating of material by some process not required by the specification, for example, screening the material used in making concrete;93 the placing of cement

under pitchers, when the specification requires cement only to be placed around them;94 the extension of a drain beyond the limits contracted for.95 As that case also shows, the dispute is often on the question whether the supposed extra is in fact part of the contract work. Difficulties may arise because of doubt whether the contract includes some particular work which is not expressly indicated in the drawings or specification. There can also be terminological difficulties with ‘extras’ being sometimes treated or regarded as ‘variations’. For example, in Limin James Chen and Mei Fang Xu v Kevin McNamara and Son Pty Ltd96 Hargrave J said that ‘[t]aking the evidence as a whole, I find that the extra landscaping works proceeded as a variation to the tennis court contract and were thus subject to the arbitration clause contained in that contract.’ It could have been found that they were in reality not variations but extras. Problems may also arise in consequence of inaccuracies contained in information supplied [page 219] to the contractor. The contractor, finding for example that the work actually required is greater than that shown on some drawing, will contend that the drawing delimited the contract works; the proprietor, on the other hand, will contend that the contractor has undertaken to achieve a particular result and that this must be achieved whether or not the work involved exceeds that shown in the document in question. The decision in Walker v Council of the Municipality of Randwick97 illustrates the sort of problem that can arise in this area. In that case the builder contracted to construct a retaining wall for a lump sum, and the drawings indicated a quantity of work (the removal of a sand bank of a certain width) which was in fact less than the quantity necessary to be done. It was a matter of construing the contract to determine whether the work contracted to be done was limited to that set out on the drawings. If it was so limited, the additional work was an extra and the builder was entitled to additional remuneration accordingly. If it was not so limited, the builder could not recover additional remuneration; but if the measurement in the drawing was warranted, or if there was a fraud, the builder might be able to recover damages for breach of warranty or deceit. It was held (Stephen J dissenting) that the contract was an entire contract and no claim for

extras by the builder could be substantiated. Where a contract with a public authority provided that all claims and demands of the contractor should be settled by the Inspector-General but that if either party should be dissatisfied with the Inspector-General’s decision regarding any extras that party might require that the claim respecting such extras should be submitted to arbitration, it was held that the contractor was entitled to have submitted to arbitration not only claims where the work was admittedly an extra and the dispute related to the price but also claims in respect of alleged extras where the authority contended that the work was contract work.98 The early case of Barter v Mayor etc of Melbourne99 is a difficult one. The contract was for street construction works at what the report describes as a bulked sum of £1,092.8.2. The contract provided that no claim would be allowed for extras unless ordered in writing. The contractor did what was in some sense additional work, the report suggesting that the quantity of work in fact found necessary to be done in order to construct the street in question exceeded the quantity stated in the contract documents. The Full Court held that the additional work was contemplated by the parties and therefore could not be regarded as an extra. In delivering the judgment of the court Stawell CJ said:100 It is evident from a consideration of the cases that great difficulty has been experienced in defining what are and what are not extras. One case especially uses the expression extras within and extras without the contract. It is very

[page 220] hard to say that that which both parties contemplated by the contract, anticipated, and made full provision for, are extras, ie, works which are not contemplated by the parties at the time of the execution of the contract, and are not provided for. The strange expression, ‘extras within the contract’, which has been had recourse to, explains the position. In one sense the works are extra, as they are beyond the sum named in the contract. I may parenthetically observe that it is generally in cases of bulk sum contracts that the difficulty arises. Extras are works not contemplated by the parties; power is given for their being ordered if necessity arises, and for their being paid for. About these there can be no doubt; they require to be ordered in writing; they are extras without the contract. But this case affords a very good illustration of the expression extras within as contradistinguished from extras without the contract. In contracts of this kind it may be impossible to ascertain the precise amount of work to be done, and it may be unavoidable to exceed the quantity of work in the specification. If 500 yards of pitching, for instance, are provided for, and it is obviously necessary that there should be 600 yards to be done at the same place; and in the same way, what necessity is there for a special order? In point of fact, how is the contractor to know that the order would be necessary? It may be practically in excess of the quantity, or it may be not, for there may be a reduction to the

same amount of the pitching in another part of the contract, which reduction would prevent the full amount being exceeded, and it was surely never intended to put the parties in such a position. We think that in a contract of this kind, framed in the terms and containing the provisions this does, and where obviously the additions are of the same kind of work, although it may cause the whole sum to be exceeded, yet it is not an extra outside the contract.

The explanation of this decision is probably that the contract was in truth not a lump sum contract but a schedule of rates contract, the tenderer having merely arrived at a bulk sum in preparing the tender by grossing up the amounts which had been inserted in the schedule. If the contract had been a true lump sum contract, it is difficult to see how the work in question could not have been regarded as extra work. The ordering of extra work may occasion the contractor additional expense which is not compensated for by payment at the same rate as that which applies to the contract work. The lengthening of the drain so as to extend it beyond its original limits, sub-surface conditions remaining the same, may give rise to an expense which can be compensated for by merely paying the contractor at the same rate for the additional distance; but if the contractor is required to excavate at greater depths, the contractor may claim not only for the greater quantity but also an additional price to meet the expense caused by working at, and raising material from, a greater depth101 and if on going deeper should an underground river be struck, the cost, and price payable, may be enormously increased. [page 221] In WI Bishop Ltd v James Maclaren Co102 the Judicial Committee in an appeal from Canada held that, in an action on a contract for dam construction the contractor could not claim extra for ‘hardpan’ (boulder clay) excavation, such material being earth within the meaning of the contract and not outside the contemplation of the parties at the time the work was commenced.

Omissions 10.14 The meaning of ‘omissions’ is discussed in Arcos Industries Pty Ltd v Electricity Commission of NSW.103 A clause empowering the engineer to require from time to time the omission of any particular portion or portions of the work

does not authorise the engineer to require an omission which fundamentally alters the contract.104 Nor may such a power be exercised in order, not to omit part of the work altogether, but to take away that part from the contract in order to have it done by another contractor.105 But, on the proper construction of the contract, a power to omit work may permit the proprietor to omit work from the contract for the purpose of having it done by others. This construction may be more readily accepted in the case of a schedule of rates contract than in the case of a lump sum contract.106 _________________________ 1.

See generally J Dorter, ‘Variations’ (1990) 6 Building and Construction Law 156.

2.

Sevastopoulos v Spanos [1991] 2 VR 194 at 202.

3.

Ettridge v Vermin Board of the District of Murat Bay [1928] SASR 124; [1930] SASR 210. See also Vidovich v Scalzi & Scalzi (1986) 3 BCL 85 at 87.

4.

(1969) 43 ALJR 213.

5.

Ibid at 216.

6.

Sabemo Pty Ltd v De Groot (1991) 10 Aust Cons LR 116 at 120.

7.

Thorn v Mayor and Commonalty of London (1876) 1 App Cas 120 at 127; Parkinson (Sir Lindsay) & Co Ltd v Commissioners of His Majesty’s Works and Public Buildings [1949] 2 KB 632.

8.

[1967] VSC 71.

9.

[1978] VR 67.

10. Ibid at 69. 11. Ibid. 12. (1965) 83 WN (Pt 1) (NSW) 458. 13. (1972) 127 CLR 253. 14. Ibid at 285. 15. (1870) 1 VR (L) 139 at 140. 16. A-G v McLeod (1893) 14 LR (NSW) 246 at 251; Smyth v The Queen (1884) 1 NZLR 80; S C Taverner and Co Ltd v Glamorgan County Council (1940) 57 TLR 243. 17. See, for example, Young v Ballarat and Ballarat East Water Commissioners (1879) 5 VLR (L) 503 at 548– 51. 18. [1964] 2 QB 699. 19. Young v Ballarat and Ballarat East Water Commissioners (1879) 5 VLR (L) 503 at 546–7. 20. [1967] VSC 71. 21. (1860) 30 LJQB 9. 22. See also District Road Board and Ratepayers of the Road District of Broadmeadows v Mitchell (1867) 4 WW &

a’B (L) 101. 23. A-G v McLeod (1893) 14 LR (NSW) 246 at 251–2; compare, however, Smyth v The Queen (1884) 1 NZLR 80. 24. (1900) 16 WN (NSW) 142. 25. (1878) 4 VLR (L) 503. 26. (1867) 4 WW & a’B (L) 101. 27. (1866) 2 WW & a’B (L) 193. 28. (1867) 4 WW & a’B (L) 101 at 104. 29. Sevastopoulos v Spanos [1991] 2 VR 194 at 205. 30. Compare Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570. 31. (1906) 4 CLR 347. 32. Ibid at 353–5. 33. (1910) 102 LT 616. 34. Ibid at 617. 35. Ibid. 36. (1880) 6 VLR (L) 128. 37. Ibid at 133. 38. Goss v Lord Nugent (1833) 5 B & Ad 58; 110 ER 713. 39. [1928] VLR 562 at 579. 40. (1940) 57 TLR 243 at 245. 41. See Re Chittick and Taylor (1954) 12 WWR (NS) 653 at 655. 42. (1925) 21 QJPR 30. 43. Ibid at 32–3. 44. (1990) 20 NSWLR 251. 45. Ibid at 274. 46. Ibid at 272. 47. (1993) 12 Aust Cons LR 116 at 122. 48. [2011] NSWCA 277. 49. Ibid at [127]. 50. Ibid. See Al-Atabi v Zaidi [2009] NSWCA 433 at [66]. 51. Ibid. 52. Ibid at [26]. 53. [1998] NSWSC 182. 54. (1999) 16 BCL 288. 55. Ibid at 297 per Mason P.

56. [2012] SASC 49 at [1502]–[1505]. 57. Goodyear v Mayor, Aldermen & Burgesses of the Borough of Weymouth and Melcombe Regis (1865) 35 LJCP 12; Young v Ballarat and Ballarat East Water Commissioners (1879) 5 VLR (L) 503 at 546–7; compare, however, Smyth v The Queen (1884) 1 NZLR 80. 58. (1969) 43 ALJR 213. 59. SC(Vic), 8 May 1967, Newton J, unreported. 60. (1853) 1 Drew 521; 61 ER 551. 61. [1919] AC 337. 62. Ibid at 345. 63. Ibid at 350. 64. Ibid. 65. Ibid at 350–1. 66. Ibid at 358. 67. Ibid at 361–2. 68. Ibid at 365–6. 69. East Ham Corp v Bernard Sunley & Sons Ltd [1966] AC 406 at 424, 434. 70. (1999) 16 BCL 53 at 63. 71. (1988) 5 BCL 117. 72. Ibid at 122. 73. Ibid at 123. 74. [2005] EWCA Civ 814. 75. Commonwealth v Verwayen (1990) 170 CLR 394 at 451. 76. Meyer v Gilmer (1899) 18 NZLR 129. 77. [1928] VLR 562. 78. Ibid at 567–8. 79. Ibid at 579. 80. Ibid. 81. (1906) 4 CLR 347. 82. (1893) 14 LR (NSW) 246 at 252. 83. (1927) 39 CLR 570. 84. (1990) 20 NSWLR 251 at 276. 85. [2011] NSWCA 277. 86. Ibid at [127]. 87. (1940) 51 TLR 243 at 245 per Humphreys J. 88. (1954) 12 WWR (NS) 653 at 654. 89. New Zealand Structures & Investments Ltd v McKenzie [1979] 1 NZLR 515 at 522.

90. [1925] VLR 238. 91. (1879) 5 VLR (L) 503. 92. Ibid at 548. 93. Ibid at 551. 94. Ibid at 553. 95. Ibid at 541. 96. [2009] VSC 294 at [17]. 97. (1929) 30 SR (NSW) 84. 98. Higgins v Board of Land and Works (1895) 16 ALT 158. 99. (1870) 1 AJR 160. 100. Ibid at 160–1. 101. Young v Ballarat and Ballarat East Water Commissioners (1879) 5 VLR (L) 503 at 549. 102. [1937] 2 DLR 625 at 630. 103. [1973] 2 NSWLR 186 (where it was held that the word ‘omissions’ appearing in General Conditions did not extend to a difference between estimated and actual quantities arising from a difference between the dimensions and levels of the work shown on the drawings accompanying the tender and those shown on the actual drawings subsequently supplied, that is, a shortfall between estimated and actual quantity of any item). 104. Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570. 105. Carr v J A Berriman Pty Ltd (1953) 89 CLR 327; Commissioner for Main Roads v Reed & Stuart Pty Ltd (1974) 131 CLR 378. 106. On the meaning of a ‘schedule of rates’ contract see Arcos Industries Pty Ltd v Electricity Commission of NSW [1973] 2 NSWLR 186 at 193–4. This is referred to by Dowsett J in In the matter of an Application by Queensland Electricity Commission (1991) 10 BCL 143 at 144.

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11 DEFECTS AND DAMAGES GENERALLY Defects and defects liability periods 11.1 Building work which is not in conformity with the contract is defective. Defective work is a breach of the contract and, in the absence of contractual provisions to the contrary, gives rise to an entitlement in the proprietor to rectify the defective work and claim damages against the builder. Where defects are discovered during the progress of the works, standard form contracts typically provide a process by which the builder can be directed to rectify the work. In Kaye v Hosier1 Lord Diplock suggested defects prior to practical completion were a ‘temporary disconformity’; however, that view has not been generally adopted,2 and Lord Diplock’s speech was dissenting in any event. In William Thomkins & Sons v Parochial Church Council of Saint Michael,3 his Honour Judge Stannard QC concluded that a proprietor could claim for defects before practical completion subject to such costs not exceeding those that the contractor would have had to incur if it had remedied the defect itself. That view is also not without its critics. The learned author of the 11th ed of Hudson’s Building Contracts4 suggests at [5.027]: It is submitted that, on grounds of both principle and practicality, a contractor will be in immediate breach of contract whenever his work fails to comply with the contract descriptions or requirements, although no doubt, as envisaged by Lord Diplock, the damages will be at best nominal in a case where he can show that he intends to rectify at some more convenient time before completion without affecting the quality of the remaining work.

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A further alternative view is that by the terms of the contract the common law entitlement to damages is limited until notice has been given to the contractor to rectify its work and there has been a failure to comply.5 Standard contracts commonly provide for defects liability periods. A defects liability period normally commences on the date for practical completion and continues for a stated time. The effect of defect liability clauses is commonly misunderstood by builders and proprietors as creating a limited warranty that the builder gives for its work. Depending on the precise terms of the contract under consideration, that is not usually their effect. If the clauses relating to the defects liability period are intended to limit the contractor’s obligations, clear words need to be used. Ordinarily, contractual provisions relating to a defects liability period are inserted primarily for the benefit of the builder. The usual contractual arrangement is that the builder not only has the obligation to rectify defective work during the defects liability period, but in most instances has the right to make good at its own cost those defects which appear during that period. If the principal does not give the contractor the opportunity to make good its defective work, then its claim for damages may be limited to what it would have cost the contractor to carry out the rectification works.6 Typically, the cost to a builder to rectify defective work is substantially less than the cost to a proprietor of engaging an outside contractor to rectify. However, as always, the terms of the contract must be carefully examined. Clause 35 of AS 4000-1997 apparently gives a right to a principal to carry out rectification work only during the defect liability period upon default of the contractor to rectify a defect it has been directed to attend to. ABIC MW 2008 cll M14 and M15 oblige the contractor to attend to defects before or after the date of practical completion upon instruction by the architect within 10 working days (or an agreed time stated in the instruction) and on the default of the contractor it effectively becomes a show cause situation which may result in the owner being entitled to engage another person to correct the defect. Further, by cl M17 the contractor, upon becoming aware by instruction from the architect or from its own observations of any defect or incomplete work during the defects liability period undertakes to promptly return to site and correct the defect or finalise the incomplete work. This obligation does not come to an end when the defects liability period is over.

The operation of the defects liability period may be limited to particular types of defects by the terms of the contract. For example, cl 26 of the old Ed 5b provides that any ‘defects, shrinkages, or other faults’ in the works which may [page 225] be evident and are notified in writing by the architect to the builder within the defects liability period must be made good by the builder upon the issue of architect’s instructions within a reasonable time. The failure to construct a window in a wall in this context would be a fault or defect in the works but not the failure to erect the room itself.7

Builder relieved of liability by instructions 11.2 A builder or subcontractor who has executed work which is admittedly defective may seek to escape responsibility by establishing that on the instructions of the proprietor the work in question was done in circumstances which created a danger that the work would be unsatisfactory. For example, in Elanora Country Club Ltd v VJ Summersby & Pearce & Sons (Excavations) Pty Ltd,8 the engineer directed the construction of a dam which failed because the topsoil had not been stripped before that construction. The court would not impose an obligation on the general earthworks contractor to have particular knowledge that all the topsoil needed to be removed before construction.9 In order to escape liability for a defect in circumstances where the contractor can perceive that an instruction or direction might result in a defect arising, a warning sufficient to establish waiver or estoppel must be shown. As to waiver see 3.8 and 3.9. The facts were not strong enough in Apex Realty Pty Ltd v Walker Bros & Preece Pty Ltd.10 The subcontractor there was obliged to pour concrete foundations according to certain specifications. The work was done during a week of wet weather and the actual pouring took place on a Friday in a very heavy downpour of rain, as a result of which the concrete was defective and did not strictly comply with the specifications. The main contractor refused to pay for the work. The subcontractor sued and gave evidence that the pouring had been carried out on

the particular day because of the pressing request of the main contractor that the work should be finished that week. The subcontractor thereby sought to establish that the main contractor had relieved him from the risks involved in pouring the concrete in the heavy rain; further, that the main contractor had also relieved him of the obligations so far as to absolve him from the risk of injury to the work and to agree to accept the work, whatever the outcome might be, provided that the subcontractor poured the concrete before the end of the week. The subcontractor failed, the Full Court being of opinion that there was no evidence from which it could be inferred that the request to complete the work that week was made with intent to enter into a legally operative contractual engagement. Street CJ observed that: [page 226] Mere pressure by a contractor on his sub-contractor to proceed rapidly with the work, or a mere statement that the contractor desired to commence laying bricks on the following Monday, would not in itself … even if the sub-contractor said that he would have the work ready, amount to a concluded and binding agreement between the parties absolving the sub-contractor from any liability if such a thing happened as [actually] happened … and he had poured the concrete at a time when it became subjected to a severe risk of injury and that risk actually matured and the concrete was seriously affected.11

Where a contract provides for a specific item to be supplied, then in the absence of an express term requiring a particular quality, the ordinarily implied warranty at common law that the material be of good quality and be reasonably fit for its intended purpose might not arise;12 but this could well be different under the Competition and Consumer Act 2010 (Cth). Some contracts may be construed as requiring specific work to be performed without giving rise to any warranty of a particular result. In such a case an action in negligence might still be brought but will turn on the degree of skill and judgment required and applied.13

DAMAGES Purpose of damages

11.3 In the early case of Robinson v Harman14 Parke B said that ‘where a party sustains a loss by reason of a breach of contract he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed’. In its judgment in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd,15 the High Court unanimously confirmed this as the ‘ruling principle’ with respect to damages at common law for breach of contract. Earlier, in Burns v MAN Automotive (Aust) Pty Ltd16 Wilson, Deane and Dawson JJ said that this rule of the common law forms the starting point of a consideration of the assessment of damages. However, as their Honours there pointed out, this general rule is limited by the other [page 227] rule laid down by the Court of Exchequer in Hadley v Baxendale17 to prevent recovery of damages considered too remote in the following terms: Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, ie, according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.

Allanson J has stated that this ‘rule is concerned with the question of remoteness and marks out the limits of the heads of damage for which [a] plaintiff is entitled to receive compensation.’18 In order to recover a particular head of damage asserted to have arisen by reason of a breach of contract it must fit within one of these two limbs of the rule. The first limb enables recovery of any loss which might fairly and reasonably be considered to arise in the usual course of the breach of contract judged at the time the contract was formed. It is the type of loss that needs to be considered, not the specific loss, and it is assessed as a reasonable person in the position of the party in breach would have considered the question of what loss was liable to result from a breach.19 Something which a contract regards as a possibility of a loss, by reason of its inclusion of a provision in that regard, will bring that loss within the contemplation of the parties for the purposes of the first limb of the rule.20

The second limb requires some additional knowledge on the part of the party in breach at the time the contract was formed. If there are special circumstances brought to the attention of that party at the time the contract was formed then a loss suffered which does not fall within the first limb may be recovered under the second. An application of the second limb of the rule, in the context of a lawyer’s liability, may be found in Provident Capital Ltd v Papa (No 2).21 On an action in negligence a plaintiff is entitled to damages to put it into the position which it enjoyed prior to the commissioning of the negligent act. Thus stated, damages for breach of contract may be more extensive than in negligence and include aspects of loss not recoverable otherwise; for example, loss of profit. [page 228]

Measure of damages 11.4 The measure of the damages recoverable by the building owner for breach of a building contract is prima facie the difference between the contract price of the work and the cost of making the work conform to the contract. However, this general rule is subject to the qualification that the undertaking of the work necessary to produce conformity must be a reasonable course to adopt;22 and where a future failure is being considered, the degree of probability of that failure.23 In Alucraft Pty Ltd (in liq) v Grocon Ltd24 Grocon was held not to be entitled to recover damages for defective work performed by a subcontractor in circumstances where it had been paid its full contractual sum under the head contract and neither Grocon nor the proprietor displayed any intention of carrying out rectification works. Reasonableness, it seems, was related to the probability of loss and Smith J referred to Commonwealth v Amann Aviation Pty Ltd25 in this regard. Accordingly, his Honour awarded an amount to Grocon in respect of the defective work, but discounted it on the basis of the low risk Grocon faced of it being called on to rectify its work. Somewhat different considerations apply to the assessment of damages in building cases in the English jurisdiction.26 If the work cannot be carried out, the principle in question (that undertaking

the work must be a reasonable course to adopt) is inapplicable: the reason being, of course, that the work cannot be carried out. If, however, there is no intention to carry out the work, what is relevant is not just that intention but the reason why it has been formed, e.g. because the building has been sold and the vendor thereafter has no intention to carry out the works because it cannot now carry out those works.27 The requirement that remedial works be reasonable does not require a remedial strategy to be less than the difference in valuation between the building with or without defects.28 In determining reasonableness, intangible benefits may be taken into account, such as the time, trouble and inconvenience of carrying out the works.29 [page 229] As a general rule, however, a successful plaintiff is not entitled to any more than the costs of the cheapest remedy for the damage caused.30 Nevertheless, what may appear as a small defect may result in significant damage being incurred. And if by the contract the parties contemplated that the building works should be done to the highest possible standard, or ‘first class’, there is no justification for saying the wronged party should have to put up with ‘some bandaid solution, producing a less than first class result.’31 A party may be entitled to receive ‘new for old’ where it is not possible to provide a substitute for a damaged article. In Day v O’Leary32 the householders recovered the cost of replacing an entire floor even though only a portion of it was damaged due to faulty workmanship. This principle, however, ‘cannot be pressed too far’.33 A proprietor who seeks to recover the cost of properly completing the works must give credit for any unpaid balance of the contract price.34 In addition to the cost of completing the work so as to produce conformity with the plans and specifications, any appropriate consequential damages may be recovered. Subject to the normal rules governing damages for breach of contract, damages for loss of use or loss of earnings may be recovered. Thus in Chas Drew Pty Ltd v JF & P Consulting Engineers Pty Ltd,35 damages for loss of profits based on inordinate

delays were assessed in the case of a supervising engineer found liable for negligence by inadequate supervision. A recoverable loss for a builder may include detriment suffered by operating on overdraft while moneys remain unpaid36 or, in an appropriate case, the loss associated with the loss of use of money that should have been paid.37 Where the actual loss has been reduced by some later event, the assessment will take this into account.38 On the other hand, where a claimant has incurred costs in carrying out works which were ultimately unsuccessful in rectifying a defect, provided that such work was reasonably undertaken (for example, if it was carried out upon expert advice) then that work may be claimed as part of the reasonable rectification costs. Generally, the onus of proof falls on the party alleging a failure to mitigate loss.39 ‘A plaintiff cannot claim damages which could have been avoided or reduced by the taking of reasonable steps’ said Tipping J in Marlborough District Council v Altimarloch [page 230] Joint Venture Ltd.40 In Auburn Municipal Council v ARC Engineering Pty Ltd,41 the costs of attempting to repair a pavement were allowed in addition to the cost of its complete replacement. Where negligent advice has been given in a building inspection report and has been acted upon in the purchase of premises, the purchaser ordinarily is entitled to the difference between the price paid for the premises and their true value.42

Demolition or repair costs 11.5 As noted by Taylor LJ in Dominion Mosaics and Co Ltd v Trafalgar Trucking Co Ltd,43 the problem is often ‘whether restitution is to be achieved by assessing the diminution in the value of the damaged premises or the cost of reinstatement or possibly on some other basis’. In the leading case of Bellgrove v Eldridge,44 the trial judge concluded that the defects were such that the only satisfactory method of assuring stability was to demolish the house and rebuild it, and assessed damages at a sum representing the

cost of demolishing and re-erecting the house in accordance with the plans and specifications, together with certain consequential losses, less the demolition value of the house and moneys unpaid under the contract. This decision was upheld by the High Court. The court reaffirmed that the general rule was that the measure of damages was the difference between the contract price of the work contracted for and the cost of making the work conform to the contract, with the addition of any appropriate consequential damages. It further held that the general rule was subject to the qualification that the undertaking of the work necessary to produce conformity must be a reasonable course to adopt and this particular aspect of the ruling has been the deciding factor in numerous subsequent cases. In their joint judgment, Dixon CJ, Webb and Taylor JJ made the following observations:45 In the result his Honour gave judgment for the respondent in the action for £4950 which represented the cost of demolishing and re-erecting the building in accordance with the plans and specifications, together with certain consequential losses less the demolition value of the house and moneys unpaid under the contract. The first objection to this finding was a submission of law advanced by the appellant. This submission assumes the validity of all of his Honour’s findings but asserts that there was evidence upon which a finding was not only justifiable but inevitable that the building was of some value, over and

[page 231] above demolition value, at the time of the breach. In particular, it was said, the building as it stood was saleable, at least, to some builders who were prepared to attempt the rectification of the existing defects by methods less drastic than demolition and rebuilding. This being so, it was contended, the proper measure of damages was the difference between the value of the house — and presumably the land upon which it stands — ascertained by reference to the amount which could be obtained for it on such a sale and the value which it would have borne if erected in accordance with the plans and specifications. To support this contention counsel for the respondent referred to the general proposition that damages when awarded should be of such an amount as will put an injured party in the same position as he would have been if he had not sustained the injury for which damages are claimed. Accordingly, it was said, damages should have been assessed by reference to the value of the building as it stands and the value it would have borne if erected in accordance with the plans and specifications since this was the true measure of the respondent’s financial loss. Whilst we readily agree with the general proposition submitted to us and with remarks of Lord Blackburn … which were cited to us, we emphatically disagree with the submission that the application of that proposition or the general principle expounded by his Lordship produced the result contended for in this case. It is true that a difference in the values indicated may, in one sense, represent the respondent’s financial loss. But it is not in any real sense so represented …

They continued (in a passage cited with approval in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd):46

In the present case, the respondent was entitled to have a building erected upon her land in accordance with the contract and the plans and specifications which formed part of it, and her damage is the loss which she has sustained by the failure of the appellant to perform his obligation to her. This loss cannot be measured by comparing the value of the building which has been erected with the value it would have borne if erected in accordance with the contract; her loss can, prima facie, be measured only by ascertaining the amount required to rectify the defects complained of and so give to her the equivalent of a building on her land which is substantially in accordance with the contract.

Then they said: One or two illustrations are sufficient to show that the prima facie rule for assessing damages for a breach of warranty upon the sale of goods has no application to the present case. Departures from the plans and specifications forming part of a contract for the erection of a building may result in the completion of a building which, whilst differing in some particulars from that contracted for, is no less valuable. For instance, particular rooms in such a building may be finished in one colour instead of quite a different colour as specified. Is the owner in these circumstances without a remedy?

[page 232] In our opinion he is not; he is entitled to the reasonable cost of rectifying the departure or defect so far as that is possible. Subject to a qualification to which we shall refer presently the rule is, we think, correctly stated in Hudson Building Contracts, 7th ed (1946), p 343. ‘The measure of the damages recoverable by the building owner for the breach of a building contract is, it is submitted, the difference between the contract price of the work or building contracted for and the cost of making the work or building conform to the contract, with the addition, in most cases, of the amount of profits or earnings lost by the breach’. Ample support for this proposition is to be found … But the work necessary to remedy defects in a building and so produce conformity with the plans and specifications may, and frequently will, require the removal or demolition of some part of the structure. And it is obvious that the necessary remedial work may call for the removal or demolition of a more or less substantial part of the building. Indeed — and such was held to be the position in the present case — there may well be cases where the only practicable method of producing conformity with plans and specifications is by demolishing the whole of the building and erecting another in its place. In none of these cases is anything more done than that work which is required to achieve conformity and the cost of the work, whether it be necessary to replace only a small part, or a substantial part, or, indeed, the whole of the building is, subject to the qualification which we have already mentioned and to which we shall refer, together with any appropriate consequential damages, the extent of the building owners’ loss.

Their Honours turned then to discuss the ‘qualification’ they had mentioned:47 The qualification, however, to which this rule is subject is that not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt. No one would doubt that where pursuant to a building contract calling for the erection of a house with cement rendered external walls of second-hand bricks, the builder has constructed the walls of new bricks of first quality the owner would not be entitled to the cost of demolishing the walls and re-erecting them in second-hand bricks. In such circumstances the work of demolition and re-

erection would be quite unreasonable or it would, to use a term current in the United States, constitute ‘economic waste’ … We prefer, however, to think that the building owner’s right to undertake remedial works at the expense of a builder is not subject to any limit other than is to be found in the expressions ‘necessary’ and ‘reasonable’, for the expression ‘economic waste’ appears to us to go too far … Many examples may, of course, be given of remedial work, which though necessary to produce conformity would not constitute a reasonable method of dealing with the situation and in such cases the true measure of the building owner’s loss will be the diminution in value, if any, produced by the departure from the plans and specifications or by the defective workmanship or materials.

[page 233] As to what remedial work is both ‘necessary’ and ‘reasonable’ in any particular case is a question of fact. But the question whether demolition and re-erection is a reasonable method of remedying defects does not arise when defective foundations seriously threaten the stability of a house and when the threat can be removed only by such a course. That work, in such circumstances, is obviously reasonable and in our opinion, may be undertaken at the expense of the builder. As we have already said … the question which arises in this case is … whether demolition and rebuilding is the only practicable method of dealing with the situation that has arisen. The learned trial judge thought it was and after hearing and considering the arguments on this appeal we agree with him.

The fact that Australian courts look at the reasonableness of rectification in assessing whether diminution in value or rectification is warranted will not always have the effect it had in Bellgrove v Eldridge. In Jandon Constructions v Lyons,48 footings defects were considered such that anything short of demolition and rebuilding would be a ‘doubtful remedy’. It appears the court agreed that the question before it was whether the demolition and re-erection of the dwelling house was a reasonable and appropriate remedy for the defects in question,49 but split on applying this test to the facts, with the majority holding demolition and re-erection were reasonable. Betterment is often an issue in cases in this area: ‘betterment’ has been defined in insurance cases as ‘improving [a] building from its old state to its “as new” state’,50 and this is a good working definition in building law. The joint judgment of Dixon CJ and Webb and Taylor JJ in Bellgrove v Eldridge was quoted at length by Mohr J in Carosella and Carosella v Ginos & Gilbert Pty Ltd.51 Mohr J said that in that case, the choice before him on the question of damages lay between demolishing and rebuilding and cosmetic rectification; in his judgment ‘the only proper and reasonable measure of damages on the evidence [was] the cost of demolition and rebuilding’.52 On appeal, the High Court found no proper ground for any interference with this aspect of Mohr J’s decision.53

Similar results were reached in Lyons v Jandon Constructions (a firm),54 Hyder Consulting v Wilh Wilhelsen55 and Brown Falconer Group Pty Ltd v South Parklands Hockey and Tennis Centre Inc.56 Even though it is ultimately found that demolition is necessary, it may be appropriate to allow in addition the cost of the lesser works carried [page 234] out in an attempt to remedy the defect.57 Some delay in contracting the remedial work may also be reasonable with due allowance being made on that account. In D Galambos & Son Pty Ltd v McIntyre,58 Woodward J stated the position as follows: Where it would be reasonable to perform remedial work in order to mend defects or otherwise to produce conformity with the plans and specifications which were part of the contract, the measure of damages is the fair cost of that remedial work. Where the defect is such that repair work would not be a reasonable method of dealing with the situation (usually because the cost of such work would be out of proportion to the nature of the defect), then the measure of damages is any diminution in value of the structure produced by the departure from plans and specifications or by defective workmanship.

His Honour also gave damages to compensate for a diminution in the enjoyment of the house because of work done not in accordance with the plans, which did not result in any loss in the value of the building but which prevented the building owner from using part of it as he had intended.

Design engineers 11.6 The application of the rule in Bellgrove v Eldridge59 to a case where a design engineer had breached a contract to exercise proper professional skill was considered by the New South Wales Court of Appeal in Auburn Municipal Council v ARC Engineering Pty Ltd60 and by the New Zealand Court of Appeal in Bevan Investments Ltd v Blackhall and Struthers (No 2).61 Different approaches were taken. In the Auburn case, as a result of the defective work of the design engineers in the preparation of plans and specifications, buildings constructed for the plaintiff had to be demolished and rebuilt. It was not contended on the hearing of the

appeal that the measure of damages in Bellgrove v Eldridge was other than the correct measure to be applied, but Hutley JA doubted whether that decision was applicable.62 In this it seems that he had the concurrence of Hardie JA. Hutley JA expressed doubts about whether a breach of contract by a builder to erect a building in accordance with plans and specifications, as in Bellgrove v Eldridge, produced the same effect with regard to damages as the breach of a contract merely to exercise professional skill. Hutley JA saw the former as a contract to produce a result whereas the latter was not. He took the view that this produces a difference in a case where demolition [page 235] and reconstruction of a building is necessary because the engineer does not contract to design a structure which will produce a desired result but only to exercise skill for that purpose.63 Therefore, he said, an engineer whose negligence causes a useless structure to be built cannot be held liable for the cost of erecting a proper one.64 The liability of the negligent engineer is exhausted by paying for what was thrown away on the cost of the useless construction caused by negligence and for whatever was necessary to restore the land to its pristine state, free of the useless structure.65 The owner would then be returned to the position before being induced by the negligence of the engineer to go on with a useless enterprise. He pointed out that in the great majority of cases concerning professional negligence by engineers, the measure of damages is, in fact, the cost of making good the defective work, but that, in a case where the total destruction of the building is necessary, different considerations applied.66 In Bevan Investments Ltd v Blackhall and Struthers (No 2), the negligence of the design engineer had resulted in the original design being useless, although a modified design could be implemented to complete the building. The trial judge had allowed damages based on the principle expressed in Bellgrove v Eldridge. The amount allowed was the balance after deducting the original contract price from the total of two amounts: the cost of construction work until the point had been reached where the failure of the design became apparent and the estimated cost of completing the building according to the modified design scheme. On behalf of the engineer it was argued that the reasoning of Hutley JA was correct and applicable in any situation where there had been a complete failure of the

essential design features of a building. It was submitted that the award should be disallowed and that compensation should be given to the plaintiff only for the amount payable to the contractor for the work already done, less the salvage value of the part constructed building. The court rejected these submissions. Richmond P closely examined the views expressed in the Auburn case. He did not apply them because he took the view that to do so would not fulfil the rule that in contract the plaintiff is entitled to be placed, so far as money can do it, in the same position the plaintiff would have been in had the contract been performed. The plaintiff must establish what the position would have been if the engineer had in fact exercised proper care and skill.67 There could be a case in which the plaintiff would have proceeded with the contract on the basis of a proper design, although the design might have meant that the contract price would have been higher than that based on the faulty design.68 That higher cost would be taken into account when determining the amount necessary to put the [page 236] plaintiff in the same position the plaintiff would have been in if the contract had been fulfilled. This situation arose in the Auburn case and was conceded by the plaintiff on appeal. On the other hand, Richmond P held that in a case where the plaintiff would have abandoned the idea of proceeding at all had the plaintiff been properly advised, the approach taken by Hutley JA would be the correct one.69 Whether or not the design engineer is engaged to produce a result or merely to exercise due care, skill and diligence in the preparation of the design is a matter of construction of the contract. In Beregold v Mitsopoulos,70 Cole J saw the measure of damages for negligent engineering (and in breach of an implied term of the contract) falling into at least three categories: First, simple repairs which may be required not involving any work which initially should have been specified had there been proper design. Second, work may involve performance of structural work which should have been included in the initial design, and would have involved additional original construction costs, had there been proper design. Third, work may involve both the above categories.

In the facts of that case, his Honour found that the obligation was to exercise due care, skill and diligence; and, having regard to that, his Honour considered that he should have regard to the additional costs which the proprietor would have paid by way of contract price had proper engineering been performed; otherwise the proprietor would receive a ‘monetary windfall’.71 In Roman Catholic Trust v Van Driel,72 the liability of an architect, an engineer and the builder was considered in respect of defective pavement. Hansen J concluded that both the engineer and architect were obliged to exercise professional skill and judgment to achieve the desired result but the builder was only engaged to construct the design. The builder was found to be at fault in the performance of the works but the method of rectification was significantly beyond the contractual scope of its works. Therefore, his Honour concluded73 that the sum awarded against the builder should be reduced to take account of betterment but a similar reduction was not made in respect of the engineer or the architect. In Greaves & Co (Contractors) Ltd v Baynham Meikle and Partners,74 it was held that, on the facts of the case, a design engineer did contract to produce a result — that the building in question would be reasonably fit for loaded [page 237] stacker (or forklift) trucks. In Morton v Douglas Homes Ltd,75 where premises suffered damage due to subsidence of the foundations, a supervising engineer as regards defective piling together with other defendants were held liable for the cost of repairs and for the difference between the value of the premises after the proposed remedial work was completed and the value of the premises had the piling not been defective. Liability for damages was apportioned amongst the defendants. In Chas Drew Pty Ltd v JF & P Consulting Engineers Pty Ltd,76 the supervising engineer was held liable for loss of profits where there were inordinate delays in the development of a multi-stage residential housing project. Many of the issues in this area were discussed by Duggan J (with whom Besanko and White JJ agreed) in the Full Court of SA decision in Brown Falconer Group Pty Ltd v South Parklands Hockey and Tennis Centre Inc.77 The respondents claimed damages against the appellants for negligent advice given in relation to

the construction of recreational facilities in the South Parklands of Adelaide. The appellants admitted liability and damages were assessed by the trial judge in the sum of $622,766.95 on the basis of a reconstruction of a playing surface deformed by heave due to soil movement. On appeal, however, the appellants were ordered to pay damages at the reduced figure of $452,608. This was, instead, for wasted expenditure on the basis that the respondents would not have gone ahead with the project on the site if the correct advice had been given, in that the appellants had caused them to build a pitch in an entirely unsuitable location. Duggan J, referring to the decision in Bevan Investments Ltd v Blackhall and Struthers (No 2), and noting the trial judge’s observation that the decision in Auburn was not followed in that case, said as follows: The authorities demonstrate that, in applying the compensatory principle referred to in Robinson v Harman and Haines v Bendall in the context of advice cases, the focus is on placing the plaintiff in the position he or she would have been in if the correct advice had been given. That issue cannot be resolved without reference to the likely consequences of that advice, in other words what the plaintiff would have done in response to the advice. If the project would not have gone ahead, the wasted expenditure in pursuing it on incorrect advice is the appropriate measure of damages. To assess damages on a rectification basis in those cases where the project would not have gone ahead ignores the principle that the plaintiff is to be placed in the position he or she would have been in if the correct advice had been given. I respectfully agree with the view expressed by the New Zealand Court of Appeal in holding that the approach to the assessment of damages applied in Bellgrove v Eldridge can be applied not only to a builder who contracts to erect a building in accordance with a contact [sic], but also to an architect or engineer who is under a duty to exercise reasonable care and skill in

[page 238] designing or advising on the project. However, the court made it clear that the appropriateness in these circumstances of an assessment of damages based on total replacement would be subject to proof that the owner would have gone ahead with the project if properly advised.78

He then said: In my view, it follows from the application of the authorities to which I have referred to the evidence in the case that it was inappropriate to assess damages on the basis of the reconstruction of the pitch. If they had been given the correct advice the respondents would not have gone ahead with this particular project. The most that can be said is that they might have investigated going to some other site and making a fresh start. The appropriate measure of damages in these circumstances is the wasted expenditure on a project which they would not have embarked upon if they had received correct advice.79

Hence the damages of the respondents were reduced.

Date when damages should be assessed 11.7 The question of the course to take to remedy defects in building cases is not always an easy one. In many cases there is a dispute about whether there is any defect at all. Frequently, the repairs, or any of the alternatives to repairs, involve substantial cost and, commonly, the question of liability for that cost is in dispute. Once a decision is made about how to remedy the defect, it may take considerable time to put it into effect. These factors and their effect on time and cost affect the appropriate award of damages. Oliver J pointed out in Radford v de Froberville:80 The older authorities in this area of the law were decided in times of relative financial stability in which the date of assessment made relatively little, if any, difference, and the passage of time could be adequately compensated for by an award of interest. But this is not the position today and if the law is to bear any relation to reality it must keep pace with the era in which we live.

A similar point was made by Mason CJ in Johnson v Perez:81 The practice of awarding fixed sums of money worked well when money values and prices were stable. However, in recent times inflation and changing economic values have created complications.

The central issue is the date the assessment of the damages should relate to. That date could be the date of the breach or when the cause of action arose. It could be when a defect was, or with reasonable diligence could have been, discovered. Or it could be the date of the hearing. Each of these dates is or may be different. [page 239] The general rule in Australia is that damages, whether for tort or for breach of contract, should be assessed as at the date when the cause of action arose. In Johnson v Perez, this rule is referred to as the ‘general rule’82 or ‘the prima facie general rule’.83 This was quoted by Allanson J in Swick Nominees Pty Ltd t/as Swick Drilling Australia v Norncott Pty Ltd (No 3).84 This preference for an early date is motivated by concerns about mitigation which in turn can be explained in

part by notions of fairness to the party at fault.85 Personal injury cases are a separate situation.86 However, there are as many exceptions to this general rule as there are cases within it.87 Mason CJ in Johnson v Perez said that the rule ‘must give way in particular cases to solutions best adapted to giving an injured plaintiff that amount in damages which will most fairly compensate him for the wrong he has suffered’.88 Wilson, Toohey and Gaudron JJ said that the rule must yield if ‘some other date is necessary to provide adequate compensation’.89 Brennan J (dissenting) said that the rule is subject to the principle governing the measure of damages, which is (in negligence) the restoration of the plaintiff’s former position so far as money can do it.90 Deane J (also dissenting) referred to various factors which might displace or modify the rule, such as the nature of the breach, the nature of the injury and the possibility of mitigation.91 Dawson J said that fairness may require departure from the rule; for example, ‘where a plaintiff does not move immediately to carry out repairs or to mitigate his loss, but it is not unreasonable for him to delay doing so’ in which case damages might be assessed at an appropriate later date.92 In Clark v Woor,93 for instance, damages were assessed at the date of discovery of the defect. The date when damage first came into existence was held to be the relevant date in Burgchard v Holroyd Municipal Council.94 However, in Radford v de Froberville Oliver J considered the proper approach was to assess damages at the date of the hearing and then look at the question of mitigation to see whether assessment at an earlier date was justified. The High Court in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd95 referred to his Lordship’s judgment in Radford with approval as clarifying the statement of Parke B in Robinson v Harman. Parke B had said, as noted in 11.3, that [page 240] the rule of the common law is that ‘where a party sustains a loss by reason of a breach of contract he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed’.96 But Oliver J said that the words ‘the same situation, with respect to damages, as if the contract was performed’ mean just that and do not mean ‘as good a financial position as if the contract had been performed’.97 There is discussion of this point

in the judgment of Hargrave J in Fenridge Pty Ltd v Retirement Care Australia (Preston) Pty Ltd.98 Although assessment of damages at the date of the hearing was refused in Philips v Ward,99 the New Zealand Court of Appeal in Bowen v Paramount Builders (Hamilton) Ltd100 held that it was reasonable for repair work to be postponed until a date roughly corresponding with the trial of the action in order to make sure that the unstable ground causing the defects had stabilised sufficiently to make renovations worthwhile; damages, accordingly, were assessed on that basis. A similar ruling was made by that court in Bevan Investments Ltd v Blackhall and Struthers (No 2).101 Richmond P in that case102 did not consider the House of Lords decision in East Ham Corp v Bernard Sunley & Sons Ltd103 to be authority to the contrary. Yet that decision of the House of Lords is sometimes cited as authority for the proposition that costs must be assessed at the time when a defect is discovered.104 However the qualifications upon the rule may be expressed, it remains true that the underlying principle upon which damages are awarded at common law, whether for breach of contract or for tort, is that of compensation.105 As already noted, the High Court in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd said that, in the case of contract, Parke B’s statement in Robinson v Harman is the ‘ruling principle’.106 This explains why on occasion it is necessary for the rule to yield, in order to afford a plaintiff adequate compensation. Equally, it also explains why at other times it is necessary to maintain the rule so that the dilatory plaintiff does not secure a substantial advantage.107 The date of the hearing was considered the material date in Dodd Properties (Kent) Ltd v Canterbury City Council.108 Judgment at first instance in that case was based on the 1970 cost of repairs. The Court of Appeal, however, held [page 241] that where there was serious structural damage to a building, it was wrong that a plaintiff, in a time of inflation, should be limited to recovery on the basis of costs of repair at the time of the wrongdoing: the plaintiffs had delayed repairs for good commercial reasons and 1978 figures should be used in calculating the cost of repairs. This ruling was followed (especially by Glass JA) in Wollongong City

Council v Fregnan.109 The facts of the case involved a house which began to collapse due to slippage after being built on the site required by the Council. The Council knew the land was prone to slippage, but it did not inform the plaintiffs of this fact. As to the time a cause of action arises in the case of defective premises, see 11.8.

DAMAGES RELATED ISSUES Time a cause of action arises 11.8 The time at which an action arises is different in tort (negligence) and in contract. A cause of action for breach of contract arises upon the breach and if no damages are suffered at that time, then normally only nominal damages are recoverable. Damage is an essential element for liability in negligence to arise and therefore no cause of action can arise until damage has actually occurred. Therefore a cause of action in negligence may arise long after the building work has been completed unless limited by legislation: see 16.9. In Sparham-Souter v Town and Country Developments (Essex) Ltd,110 the English Court of Appeal held that a cause of action accrued, and time began to run, only when the owner had discovered or with reasonable diligence ought to have discovered the defective state of the premises. This decision, however, was overruled by the House of Lords in Pirelli General Cable Works Ltd v Oscar Faber & Partners (a firm).111 The leading speech in that case was delivered by Lord Fraser, who said:112 The plaintiff’s cause of action will not accrue until damage occurs, which will commonly consist of cracks coming into existence as a result of the defect even though the cracks or the defect may be undiscovered and undiscoverable. There may perhaps be cases where the defect is so gross that the building is doomed from the start, and where the owner’s cause of action will accrue as soon as it is built, but it seems unlikely that such a defect would not be discovered within the limitation period. Such cases, if they exist, would be exceptional.

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In Hawkins v Clayton,113 Deane J considered the Sparham-Souter and Pirelli decisions. In circumstances where the building never existed and was never owned without the defect (such as a latent defect in the foundations), he concluded that ‘the only loss which could have been sustained by the owner was the economic loss which would be involved if and when the defect was actually discovered or became manifest, in the sense of being discoverable by reasonable diligence, with the consequence that the damage was then sustained by the then owner’.114 He then went on to suggest:115 … the position is different in cases where all or some of the damage, be it in the form of physical injury to person or property or present economic loss, is directly sustained in the sense that it does not merely reflect diminution in value or other consequential damage which occurs or is sustained only when the latent defect which has existed at all relevant times becomes manifest. In those cases damage is sustained when it is inflicted or first suffered and the cause of action accrues at that time.

That High Court decision was considered by the Court of Appeal in Victoria in Pullen v Gutteridge Haskins & Davey Pty Ltd.116 The court considered that the proper course was: To take the law as laid down in the reasons for judgment of Deane J. It should be noted that McHugh JA (as His Honour then was) in Hawkins v Clayton (1986) 5 NSWLR 109 at pp143–4, appears to have subscribed to the view of Deane J in Sutherland Shire Council v Heyman that any loss involved in the adequacy of the foundations was sustained only when the inadequacy was first known or manifest; His Honour observed that ‘it was by no means probable that the approach in Pirelli’s case would prevail in Australia’.117

In Hawkins v Clayton,118 both Deane J and Gaudron J appear to confine the general rule (that the cause of action only arises when damage actually occurs) to cases of purely physical damage.119 This would derive support also from the decision of Gobbo J in Page v City of Castlemaine.120 In Pullen v Gutteridge Haskins & Davey Pty Ltd,121 the latent defect in the building was the inadequacy or unsuitability of the footings and it was held by the Appeal Division of the Supreme Court of Victoria that time began to run when [page 243] such defect first became known or manifest. In cases of pure economic loss in Australia, when the defect becomes known or manifest is the relevant date.

In Invercargill City Council v Hamlin,122 the New Zealand Court of Appeal (McKay J dissenting) held that the cause of action in that case arose when the material facts on which it was based were discovered or could with reasonable diligence have been discovered and that in cases of latent building defects the loss, which was economic loss, was sustained when it became manifest. As pointed out by Daubrey J in Springfield Land Development Corporation (As Trustee) v Melisavon Pty Ltd,123 the New South Wales Court of Appeal in Cyril Smith & Associates Pty Ltd v The Owners — Strata Plan No 64970124 followed the decision in Pullen v Gutteridge Haskins & Davey Pty Ltd. Basten JA (for the court) said that ‘Pullen is authority for the proposition that even where actual damage caused by the latent defect in [a] building has been suffered more than six years before the commencement of the litigation, the cause of action does not accrue until the link between the physical manifestation and the underlying defect is known or ought to be known.’125 He said that ‘[s]uch a principle would constitute an exception to the rule that a cause of action in negligence accrues when material damage is first suffered.’126 He expressed some disquiet about this, as follows: The potential consequences of the exception require consideration. For example, it is quite possible that damage to the fabric of a building might be repaired by the builder, at its cost, because the cause (inadequate design) was not then identified, and was not then reasonably capable of identification. In such circumstances, the builder would not have joined the architect or engineer responsible for the design. When, more than six years later, the real problem becomes manifest and the architect or engineer is sued by the owner, would the builder be allowed in to recover from the architect the cost of the earlier repairs, even though that cost did not constitute damage for which the owner later sued?127

He said, however, that despite these considerations it was necessary for the Court to follow Pullen unless satisfied it was clearly wrong. In that regard he said: ‘Not only is it not clearly wrong, but it is not necessarily wrong in any sense: all that can be said is that it appears to involve a development of the general law which may not find unequivocal support in the authorities upon which it relied.’128 [page 244] The joint judgment of Mason CJ, Deane and Gaudron JJ in Bryan v Maloney129 refers to the plaintiff in that case having suffered damage of a foreseeable and

recoverable kind when a latent defect in her house (inadequate footings) ‘first’ became manifest in consequent damage to the fabric of the house. See further 16.10. The reference by Lord Fraser in the Pirelli case to a building ‘doomed from the start’ has given rise to some uncertainty. In Ketteman v Hansel Properties Ltd,130 Lord Keith said that ‘whatever Lord Fraser may have had in mind … it cannot … have been a building with a latent defect which must inevitably result in damage at some stage’. In that case it was held, accordingly, that a latent defect in a building did not give rise to a cause of action until damage occurred. In Hawkins v Clayton, Gaudron J expressed the view that the reference to a building doomed from the start ‘seems to have been intended to enable a plaintiff to bring action before physical damage actually occurred’.131 In London Congregational Union Inc v Harriss & Harriss (a firm)132 Judge Newey QC said that a building doomed from the start was ‘one in which there was never any hope for the building or the part of it the subject of the action; nothing practicable could be done to save it’. In Jones v Stroud District Council,133 Neill LJ said that a building doomed from the start was limited to extreme cases where defects were likely to be disclosed almost immediately — ‘[for] example, through some oversight a house might be built without any drainage pipes at all below ground level’. A ‘doomed from the start’ argument was rejected by Gobbo J in Page v City of Castlemaine.134 Once a cause of action arises on the occasion of actionable damage, subsequent or further damage later occurring will be regarded as part of the same cause of action.135

Extinguishment of cause of action 11.9 As provided by s 5(1)(a) of the Limitation of Actions Act 1958 (Vic) an action whether in contract or in tort unless otherwise allowed must be brought within six years of its accrual.136 But by s 134 of the Building Act 1993 (Vic),137 despite anything to the contrary in any other law, a [page 245] building action cannot be brought more than 10 years after the date of issue of

the occupancy permit in respect of the building work (whether or not the occupancy permit is subsequently cancelled or varied) or, if an occupancy permit is not issued, the date of issue under Pt 4 of such Act of the certificate of final inspection of the building work. See further 16.9.

Mitigation 11.10 A plaintiff is bound to take all reasonable steps to mitigate loss. The general rule that damages are assessed as at the date of breach or when the cause of action arose is motivated by concerns about mitigation.138 This in turn can be explained in part by notions of fairness to the party at fault. The onus of proof in respect of a plea of failure to mitigate, however, rests with the defendant.139 The rule, however, is clear. Giles JA (with whom Handley and Stein JJA agreed) stated it thus in Karacominakis v Big Country Developments Pty Ltd:140 ‘A plaintiff who acts unreasonably in failing to minimise his loss from the defendant’s breach of contract will have his damages reduced to the extent to which, had he acted reasonably, his loss would have been less.’ The plaintiff’s duty to mitigate damage however does not require the plaintiff to do what is unreasonable.141 The plaintiff is bound only to take ‘reasonable steps’.142 It was not unreasonable for the plaintiffs to delay repairs in Dodd Properties (Kent) Ltd v Canterbury City Council.143 This was referred to by Dawson J in Johnson v Perez.144 And it would seem that a defendant cannot rely on the plaintiff’s failure to mitigate the consequences of the defendant’s wrongful act if that wrongful act itself has made it impossible for the plaintiff to take the necessary steps in mitigation.145 This is certainly so in the case of a deliberate wrongful act of a defendant.146 As a general proposition, plaintiffs cannot be called on to spend money to enable them to mitigate or minimise the damages payable by the defendant.147 In London Congregational Union Inc v Harriss & Harriss (a firm),148 although the plaintiff was held to have acted reasonably in deciding not to have repairs carried out during the years from 1977 to 1982 because of internal financial difficulties and because the defendants were denying liability, the plaintiff [page 246]

also was held to be responsible for an 18-month delay in bringing the case to trial: accordingly, in late 1983 damages were assessed as at mid-1982. In McKay v Hudson,149 the Western Australian Court of Appeal considered the case where rectification work had been delayed for five years, escalating some $50,000 over that time. There was no explanation why the work had not been done, nor was it suggested that financially the plaintiff was not in a position to carry out that work. In those circumstances, the court accepted the loss should be the valuation that was performed in 1995, and not as performed in 2000.150 There is authority in Re Trent and Humber Co; Ex parte Cambrian Steam Packet Co151 for the proposition that a proprietor who does not discover defects at the time when they ought reasonably to have been discovered cannot have damages assessed as at the date of actual discovery.

Different work undertaken 11.11 A proprietor may not under the guise of recovering as damages the cost of completing the work recover the cost of executing work significantly different from the contract work: Smail (as trustee of the assigned estates of LM Wilson and GR Wilson) v DL Starbuck Pty Ltd.152 In that case, Menhennitt J concluded that because the sewerage drain constructed by the plaintiff was significantly different from the one the defendant was required to construct, the plaintiff could not recover from the defendant the cost of the construction of the substituted drain or any part thereof.153 As Cooper J said in Metro Plating v NQEA Australia Pty Ltd:154 It is not a function of damages for breach of contract to place a party in a position it would have been in only if it had entered into a different contract from that which it in fact entered into. Nor is it a function of damages to require the party in default to pay the cost of different or additional work which the party not in default would have had to pay for in any event to receive the benefit of the difference or additional work.

Profit on sale 11.12 The fact that the building owner has managed to sell the building at a profit will not displace the ordinary rule concerning the measure of damages. That rule, as laid down in Bellgrove v Eldridge,155 applies whether or not the

proprietor has sold the building. The fact that the proprietor has made a profit or a loss on the sale of the building may be irrelevant in [page 247] assessing damages. An important decision here is Director of War Service Homes v Harris.156 The leading judgment was given by Gibbs J, who said:157 It is true that Bellgrove v Eldridge was not a case in which the building owner had sold the building before bringing the action but I am unable to see any reason why there should be a different measure of damages in such a case and nothing is said in Bellgrove v Eldridge to support any such distinction. When the builder, in breach of his contract, delivered to the building owner a building that did not conform to the specifications, the owner became entitled to recover damages according to the measure approved in Bellgrove v Eldridge. If the owner subsequently sold the building, or gave it away, to a third person, that would not affect his accrued right against the builder to damages according to the same measure. The fact that the building had been sold might be one of the circumstances that would have to be considered in relation to the question whether it would be reasonable to effect the remedial work, but assuming that it would be reasonable to do the work the owner would still be entitled to recover as damages the cost of remedying the defects or deviations from the contract (assuming of course that the contract price had been paid). In assessing those damages it would not be relevant whether the owner was under a legal liability to remedy the defects, or whether he had made a profit or a loss on the sale of the building, for the builder has no concern with the details of any contract that the owner might make with a third party … The owner of a defective building may decide to remedy the defects before he sells it so that he may obtain the highest possible price on the sale; he may sell subject to a condition that he will remedy the defects; or he may resolve to put the building in order after it has been sold because he feels morally, although he is not legally, bound to do so. These matters are nothing to do with the builder, whose liability to pay damages has already accrued.

Consistently with this, the fact that the proprietor had sold the building advantageously was held to be irrelevant in the New Zealand case of Samson & Samson Ltd v Proctor.158 However, the damages awarded represented the difference in cost to the builder of the work actually done and the work specified. The judge’s reasons for adopting this are not clear. He did not refer to Director of War Service Homes v Harris or other decided authority. In Chase v de Groot,159 another New Zealand case, the plaintiffs, who had sold their house and were thus unable to reinstate it, were held to be entitled to ‘notional’ reinstatement without betterment, that is, the difference between what they ultimately had to sell and what they would have had to sell if reinstatement had taken place.

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Plaintiff’s use of damages award 11.13 Once a plaintiff establishes a loss upon the defendant’s breach and an entitlement to damages it is irrelevant whether the plaintiff intends to apply the damages to repairs or not. Indeed specific reference to this was made in Bellgrove v Eldridge160 where the High Court said as follows: It was suggested during the course of argument that if the respondent retains her present judgment and it is satisfied, she may or may not demolish the existing house and re-erect another. If she does not, it is said, she will still have a house together with the cost of erecting another one. To our mind this circumstance is quite immaterial and is but one variation of a feature which so often presents itself in the assessment of damages in cases where they must be assessed once and for all.

There is nonetheless an argument to be made, it is submitted respectfully, that a party obtaining an award of damages on the basis of a cost of reconstruction, should be obliged to use the moneys for that purpose and not for anything else. For, otherwise, the whole basis for obtaining the award seems to disappear.

Repairs paid for by others 11.14 A plaintiff seeking damages must prove a loss, but if property belonging to a plaintiff has been or will be repaired, the court in awarding damages is not further concerned with the question of whether the owner has had to pay for the repairs out of the owner’s own pocket or whether the funds have come from some other source. This principle, established in Jones v Stroud District Council,161 was said to remain ‘good law’ in Burdis v Livsey162 and was not doubted in Powercor Australia Ltd v Thomas.163 In Roman Catholic Trusts Corporation v Van Driel Ltd,164 Hansen J accepted that the law in Australia is that it is not a relevant concern for a party in breach of a contract that the actual loss suffered as a result of the breach has been paid for by a third party. His Honour was aware of the decision in Alfred McAlpine Construction Ltd v Panatown Ltd,165 but there was no argument before him on that case (as he noted).166 In that case, the House of Lords considered the situation where a building contractor was engaged by an employer who was, in turn, engaged by the owner

to carry out building works. In addition to this ordinary contract chain, the building contractor and the owner had entered into a deed by which the contractor guaranteed its work; with the deed expressly extended [page 249] to successors in title. In these circumstances, after conflicting decisions of the arbitrator, then the trial judge, then the Court of Appeal, the House of Lords (32) held that the employer had suffered no financial loss and could recover only nominal damages for the breach of contract by the contractor, as the owner could recover directly against the contractor. The McAlpine decision has been referred to in several cases in Australia. However, the High Court decision in Trident General Insurance Co v McNiece Bros Pty Ltd167 suggests possibly a different view. In the older case of Alucraft Pty Ltd (in liq) v Grocon Ltd,168 however, a builder was found not to be entitled to recover for damages associated with defective work performed by a subcontractor in circumstances where there was a low probability that the builder would be required to make good that defective work to the proprietor. Smith J considered the fact that the builder would be unlikely to be called upon to rectify its work one of the factors that made the cost of rectification significantly disproportional to the value of the work under the principles of Bellgrove v Eldridge. The general rule, as set out by McLure JA in Australian Goldfields NL (in liq) v North Australian Diamonds NL,169 ‘is that in an action for breach of contract, a plaintiff is limited to recovery of its loss and not that of third persons.’ Her Honour referred to the Alfred McAlpine decision when she pointed out that there are recognised exceptions to that principle, although there is disagreement as to the basis and thus the scope of the exceptions.170 In Pourzand v Telstra Corp Ltd,171 Edelman J said that ‘a plaintiff can recover damages for a breach of contract or covenant even in the absence of financial losses such as the absence of any payment, or prospective payment, … for work done.’ In that regard he said it was ‘instructive’172 to quote the hypothetical example given by Lord Goff in the Alfred McAlpine case: Lord Goff spoke of a wealthy philanthropist who contracts for work to be done to the village hall. The work is defective. Can the philanthropist sue the builder, perhaps to obtain damages to repair the work? Lord Goff described as ‘absurd’ the suggestion the philanthropist will fail because he does not

own the hall, and because he will not incur the expense himself of employing another builder to do the remedial work: The philanthropist’s cause of action does not depend on his having actually incurred financial expense … he ‘has suffered loss because he did not receive the bargain for which he had contracted with the first builder’.

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Damages for stress 11.15 In Ellis v City of Bendigo,173 the notice which the plaintiff received requiring rectification was found to have flowed directly from the negligence of the defendants, and Murphy J awarded the plaintiff a sum for stress and anxiety suffered in consequence. In Council of the City of Campbelltown v Mackay,174 the plaintiffs had been awarded damages for nervous shock after observing cracking and displacement of parts of their home (particularly after a heavy downpour), which was due to the admitted negligence of the defendants. The judgment was upheld, not on the ground of nervous shock, but as appropriate compensation for the vexation, worry, distress and inconvenience which it was found the plaintiffs undoubtedly did suffer to a considerable degree. In Lyons v Jandon Constructions (a firm),175 Anderson J ordered $2,000 for emotional distress. The point was not argued on appeal, and the appeal was dismissed in any event.176 A claim for mental distress was rejected by Giles J in Kennedy v Collings Construction Co Pty Ltd,177 but not because he held that such a claim was not at all maintainable in law. However, in Watts v Morrow178 it was held that a plaintiff is not entitled to recover general damages for mental distress not caused by physical discomfort or inconvenience resulting from the defendant’s breach of contract.

Damages for inconvenience 11.16 In Burke v Lunn,179 damages were awarded for physical inconvenience and time spent by the building owner in rectifying, and arranging to rectify, defects. An amount as compensation for inconvenience and upset was allowed by Davies J in Denton v Dama Pty Ltd.180 Damages for physical discomfort or inconvenience

were allowed in Watts v Morrow.181 It has been held that retired persons carrying out work themselves are entitled to be paid for their time in correcting defects.182 [page 251] In Boncristiano v Lohmann183 the Victorian Court of Appeal considered an appeal against an award of $500 for inconvenience and $1,000 for mental distress. Winneke P (with whom Charles and Batt JJA agreed) said this: It now appears to be accepted, both in England and Australia, that awards of general damages of the type to which I have referred can be made to building owners who have suffered physical inconvenience, anxiety and distress as a result of the builder’s breach of contract, but only for the physical inconvenience and mental distress directly related to those inconveniences which have been caused by the contract … Although it would seem to have been accepted in England that such awards should be ‘restrained’ or ‘modest’ … this injunction has not been met with the approval of the Court of Appeal in NSW, in the Campbelltown case, where Kirby (at 504) said that he ‘Could find no logical basis for it’ and Samuels, JA (505) found it ‘extremely difficult to attribute any meaning to the phrase’.184

His Honour went on to say: Whilst in my view damages awarded under this head will rarely be large, because of the very nature of the loss being compensated, it seems to me that a trial judge, once he has satisfied himself that damages are awardable under this head, should not be constrained from awarding damages which are fair and reasonable by a concept which, in my view, is foreign to the assessment of general damages.185

The court did not disturb the damages awarded, taking the view that although they were low they did not indicate error. His Honour considered that the two claims for damages should be considered together: In truth and in law, a claim for general damages consequent upon a breach of contract is but a single claim for damages for inconvenience and distress including damage for deleterious consequences to health following from a physical inconvenience.186

In D Galambos & Sons Pty Ltd v McIntyre,187 Woodward J awarded damages for diminution in enjoyment.188 In Nouvelle Homes Pty Ltd v G & M Smargiassi,189 it was submitted to Beech J that Baltic Shipping Co v Dillon190 was authority for the proposition that the only circumstances in which damages for distress and inconvenience could be awarded were where the contract is one the subject of which is to provide enjoyment, relaxation or freedom from molestation. His Honour

[page 252] rejected that argument, citing the decision in Boncristiano. Then he said as follows: In a case such as this of breach of a building contract, the conduct of a party to an arbitration or litigation in those proceedings is not itself a wrong giving rise to any right to damages. However, it does not follow from that proposition that distress coming after the termination of the contract, in the course of litigation or an arbitration, cannot be the subject of an award of distress and inconvenience damages for breach of contract. In other words, an award of damages for distress which takes account of the distress arising after the termination of a contract and in the course of an arbitration about the contract does not of itself reveal a manifest error of law. The defendant’s breach must be a cause of distress and inconvenience the subject of the award of the distress and inconvenience damages. The question of whether a defendant’s wrongful conduct caused particular damage is a question of fact to be determined by applying common sense to the facts of the case. The but for test of causation is a useful aid although it is not the exclusive or definitive test: March v E & MH Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506, 508, 515–519, 522–524. It is not necessary, in order to establish causation, to find that the breach was the dominant, effective or real cause of the loss: March v E & MH Stramare Pty Ltd (512–514); Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310, 315, 352–358. Rather, it is enough if the breach materially contributed to the loss or damage. See also Medlin v State Government Insurance Commission [1995] HCA 5; (1995) 182 CLR 1, 6–7; Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 [61], [106]. Further, the existence of another concurrent cause does not prevent the breach from having caused the damage. It will be enough if the breach is a cause of the damage. See the cases already referred to, and Simonius Vischer v Holt [1979] 2 NSWLR 322, 346. In some cases an intervening or superseding event may be viewed as breaking the chain of causation. This may occur if the intervening event is treated in a practical sense as the sole cause of the damage: Alexander v Cambridge Credit Corporation Ltd (315, 361); Henville [106]; Bennett v Minister of Community Welfare [1992] HCA 27; (1992) 176 CLR 408, 412–413. On the face of it, all of the distress and inconvenience the subject of the award of damages would not have occurred if there had been no breach by the builder. Thus the but-for test is satisfied. However, as I have said, that is not decisive.191

Taking all these matters into account, his Honour said he was not satisfied that the arbitrator had erred in law in awarding damages for distress and inconvenience. [page 253]

OTHER REMEDIES

Specific performance 11.17 Specific performance is the term given to a court order directed towards a party to a contract ordering it to perform its contractual obligations. It is an order available to a court exercising its equitable jurisdiction. Ordinarily, a court will not order specific performance of a building contract. In Hewett v Court,192 Deane J quoted Mellish LJ in Wilkinson v Clements,193 who said: ‘Now it is settled that, as a general rule, the Court will not compel the building of houses’. In Mayor, Aldermen and Burgesses of Wolverhampton v Emmons,194 Romer LJ said that there ‘is no doubt that as a general rule the Court will not enforce specific performance of a building contract’. However, he recognised an exception to such rule in these terms:195 [In] order to bring himself within [the] exception, a plaintiff must establish three things. The first is that the building work, of which he seeks to enforce the performance, is defined by the contract; that is to say, that the particulars of the work are so far definitely ascertained that the Court can sufficiently see what is the exact nature of the work of which it is asked to order the performance. The second is that the plaintiff has a substantial interest in having the contract performed which is of such a nature that he cannot adequately be compensated for breach of the contract by damages. The third is that the defendant has by the contract obtained possession of land on which the work is contracted to be done.

These three conditions were referred to by Pennycuick VC in Jeune v Queens Cross Properties Ltd,196 who held that the court had power, which should be carefully exercised, to make an order in an appropriate case against a landlord to do some specific work under a covenant to repair. Whether or not these three conditions apply in Australia, there is power to order specific performance.197 However, damages will usually be an adequate remedy for defective work or poor construction. For this reason, if for no other, the cases in which specific performance will be granted will be rare.198 Even so, however, Refshauge J in Canberra Hire Pty Ltd v Koppers Wood Products Pty Ltd199 indicated he was minded, in certain events, to order specific performance in that case observing that the approach indicated [page 254] by the rule that a court will not order specific performance of a contract where it is required to supervise such performance ‘has more recently moderated,

especially in relation to building contracts … but not so much where other contracts are involved.’200 Specific performance is, of course, an equitable remedy subject to the discretionary considerations associated with that jurisdiction. _________________________ 1.

[1972] 1 All ER 121. For a discussion of this case (on a question of waiver) see Clemens v Flower [2006] QCA 265.

2.

Lintest Builders v Roberts (1980) 13 BLR 38; Nene Housing Society v National Westminster Bank (1980) 16 BLR 22; Surrey Heath Borough Council v Lovell Construction Ltd & Haden Young Ltd (1988) 42 BLR 25 and I N Duncan Wallace, Hudson’s Building Contracts, 11th ed, Sweet & Maxwell, London, 1995 at [5.027] and [5.028].

3.

(1990) 6 Const LJ 814.

4.

Hudson’s, fn 2 above.

5.

A Bellemore, ‘Rectification of Defects by Owner Without Notice to Contractor’ (2001) 17 Building and Construction Law 325 at 327.

6.

It is possible that a lack of notice by a head contractor to a subcontractor will prevent recovery for damages where the contract can be construed as imposing an obligation only to remedy defects that are notified; but contracts where that construction is open would seem rare. See Cassidy v Engwirda Construction Co (No 2) [1968] Qd R 159.

7.

Qantas Airways Ltd v Joseland & Gilling (1986) 6 NSWLR 327 at 334.

8.

(1988) 4 BCL 309.

9.

Ibid at 314.

10. (1958) 76 WN (NSW) 34. 11. Ibid at 35. The engineer was not in breach either of his obligation to the proprietor of the land on which the dam was constructed in directing the earthworks contractor to proceed in circumstances where he had received an assurance from the proprietor that all the material was stripped. 12. Helicopter Sales (Aust) Pty Ltd v Rotor-Works Pty Ltd (1974) 132 CLR 1. 13. Metro Plating v NQEA Australia Pty Ltd (FCA(Qld), von Doussa, Tamberlin and Kiefel JJ, Q9162 of 1995, 3 May 1996, unreported). 14. (1848) 1 Ex 850 at 855; 115 ER 363 at 365. See also Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 at 39; County Personnel (Employment Agency) Ltd v Alan R Pulver & Co (a firm) [1987] 1 WLR 916 at 925; Dominion Mosaics and Tile Co Ltd v Trafalgar Trucking Co Ltd [1990] 2 All ER 246 at 249. 15. (2009) 236 CLR 272; [2009] HCA 8 at [13]. See also Tranquility Pools and Spas Pty Ltd v Huntsman Chemical Co Aust Pty Ltd [2011] NSWSC 75 at [594]. 16. (1986) 161 CLR 653 at 667. 17. (1854) 9 Ex 341 at 354; 156 ER 145 at 151. 18. Swick Nominees Pty Ltd t/as Swick Drilling Australia v Norncott Pty Ltd (No 3) [2013] WASCA 173 (S) at [173] per Allanson J. 19. Victoria Laundry v Newman Industries [1949] 2 KB 528.

20. See Wang v Garland Lot 3 Pty Ltd [2013] NSWSC 1112 at [140]. 21. [2013] NSWCA 156. 22. Bellgrove v Eldridge (1954) 90 CLR 613; Hyder Consulting (Australia) Pty Ltd v Wilh Wihjelmsen Agency Pty Ltd (2002) 18 BCL 122. 23. Robt Jones (363 Adelaide Street) v First Abbott Corporation (1998) 14 BCL 282 at 324; Malec v J C Hutton Pty Ltd (1990) 169 CLR 638; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; RACV Insurance Pty Ltd v Unisys Australia Ltd [2001] VSC 300 at [621]–[627]. 24. [1996] 2 VR 386. 25. (1991) 174 CLR 64. 26. See D Miller, ‘Damages for Defective Works: Reasonableness and Restitution’ (1995) 11 Building and Construction Law 379. 27. See Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2010] NSWSC 1073 at [346]. 28. Carosella v Ginos & Gilbert Pty Ltd (1982) 57 ALJR 315. 29. Gimtak v Cathie [2001] VSC 88 at [41]. 30. Lester v White [1992] 2 NZLR 483 at 499. 31. Dymocks Book Arcade Pty Ltd v Capral Ltd [2013] NSWSC 343 at [320]. 32. (1992) 57 SASR 206. 33. Ibid at 210 per Debelle J. 34. Ventura v Svirac [1961] WAR 63. 35. (1989) 10 BCL 48. See also Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528. 36. Simeone v Pesatura General Contractors Pty Ltd (1993) 60 SASR 453. 37. Hungerfords v Walker (1989) 171 CLR 125. 38. Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (2000) 173 ALR 263 at [115]. 39. British Westinghouse v Underground Railways [1912] AC 673. 40. [2012] NZSC 11 at [156]. 41. [1973] 1 NSWLR 513. 42. Christopher John Denton and Mary Jane Denton v Dama Pty Ltd t/as Design and Management Associates (1984) 3 BCL 143 at 148. 43. [1990] 2 All ER 246 at 249. 44. (1954) 90 CLR 613. 45. Ibid at 616. 46. (2009) 236 CLR 272; [2009] HCA 8 at [15]. 47. Ibid at 618. 48. (1999) 16 BCL 309. 49. Ibid at [61]. 50. See Ridgecrest New Zealand Ltd v IAG New Zealand [2013] NZCA 291 at [41]. 51. (1981) 27 SASR 515 at 523.

52. Ibid at 523. 53. (1982) 47 ALR 761. 54. [1998] WASC 224. 55. (2002) 18 BCL 122. 56. (2005) 91 SASR 152. 57. Auburn Municipal Council v ARC Engineering Pty Ltd [1973] 1 NSWLR 513 at 524; see also 11.4. 58. (1974) 5 ACTR 10 at 11. 59. (1954) 90 CLR 613. 60. [1973] 1 NSWLR 513. 61. [1978] 2 NZLR 97. 62. [1973] 1 NSWLR 513 at 531. 63. Ibid at 534. 64. Ibid at 533. 65. Ibid. 66. Ibid at 534. 67. [1978] 2 NZLR 97 at 108. 68. Ibid. 69. Ibid at 109. 70. (1999) 15 BCL 290. 71. His Honour did not see his decision as inconsistent with Bellgrove v Eldridge, or Bevan Investments v Blackhall or Auburn. His decision was consistent with his earlier views expressed in W Jeffreys Holdings v Appleyard (1990) 10 BCL 298. 72. [2001] VSC 310. 73. Ibid at [376]. 74. [1975] 3 All ER 99. 75. [1984] 2 NZLR 548. 76. (1989) 10 BCL 48. 77. (2005) 91 SASR 152. 78. Ibid [47]–[48]. 79. Ibid [60]. 80. [1978] 1 All ER 33 at 56. 81. (1988) 166 CLR 351 at 355. 82. Ibid at 356, 367, 371. 83. Ibid at 380. 84. [2013] WASC 173 (S) at [177]. 85. Ibid at 357.

86. Ibid at 356. 87. Egan v State Transport Authority (1982) 31 SASR 481 at 527 per White J. 88. (1988) 166 CLR 351 at 355. 89. Ibid at 367. 90. Ibid at 371. 91. Ibid at 380. 92. Ibid at 386. 93. [1965] 2 All ER 353. 94. [1984] 2 NSWLR 164 at 174. 95. (2009) 236 CLR 272; [2009] HCA 8 at [13]. 96. (1848) 1 Exch 850 at 855. 97. [1978] 1 All ER 33 at 44. 98. [2013] VSC 464 at [352]. 99. [1956] 1 All ER 874. See also Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd (1993) 68 BLR 39 at 96. 100. [1977] 1 NZLR 394 at 411. 101. [1978] 2 NZLR 97. 102. Ibid at 114. 103. [1966] AC 406. 104. [1980] 1 All ER 928. 105. Johnson v Perez (1988) 166 CLR 351 at 386. 106. (2009) 236 CLR 272; [2009] HCA 8 at [13]. 107. Compare O’Brien v McKean (1968) 118 CLR 540 at 545. 108. [1979] 2 All ER 118. 109. [1982] 1 NSWLR 244 at 253. See also Ownit Homes Pty Ltd v Batchelor [1983] 2 Qd R 124. 110. [1976] 1 QB 858. 111. [1983] 1 All ER 65. 112. Ibid at 70. 113. (1998) 164 CLR 539. 114. Ibid at [40]. 115. Ibid. 116. [1993] 1 VR 27. 117. Ibid at 71. In that case the court held that the respondent had failed to distinguish the present case as one of physical damage and therefore time ran when the latent defect first became known or manifest. 118. (1988) 164 CLR 539 at 588. 119. Ibid at 589, 600.

120. (1988) 5 BCL 126. See also Miell v Hatjopoulos (1985) 2 BCL 258 at 261–2. 121. [1993] 1 VR 27 at 71. 122. [1994] 3 NZLR 513. 123. [2013] QSC 228 at [60]–[62]. 124. [2011] NSWCA 181. 125. Ibid at [19]. 126. Ibid. 127. Ibid at [20]. 128. Ibid at [21]. 129. (1995) 182 CLR 609 at [16]. 130. [1988] 1 All ER 38 at 51. 131. (1988) 164 CLR 539 at 600. 132. [1985] 1 All ER 335 at 343. 133. [1988] 1 All ER 5 at 13. 134. (1988) 66 LGRA 296 (5 May 1988). 135. Jobbins v Capel Court Corporation (1989) 25 FCR 226 at 228. 136. For legislation elsewhere see: Limitation Act 1985 (ACT) s 11(1); Limitation Act 1969 (NSW) ss 14(1) (a), (b); Limitation Act 1981 (NT) ss 12(1)(a), (b); Limitation of Actions Act 1974 (Qld) s 10(1)(a); Limitation of Actions Act 1936 (SA) ss 35(a), 35(c); Limitation Act 1974 (Tas) s 4(1)(a); Limitation Act 2005 (WA) s 13. 137. See also: Limitation Act 1985 (ACT) s 40(1); Building Act 1993 (NT) s 160; Building Act 2000 (Tas) s 255. Note: Home Building Act 1989 (NSW) s 18E; Building Work Contractors Act 1995 (SA) s 32(5). 138. Johnson v Perez (1988) 166 CLR 351 at 357. 139. Monroe Schneider Associates Inc v No 1 Raberem Pty Ltd (1991) 104 ALR 397 at 412. 140. (2000) 10 BPR 18,235; [2000] NSWCA 313 at [187]. 141. Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 at 659. 142. Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11 at [156] per Tipping J. 143. [1980] 1 All ER 928. 144. (1988) 166 CLR 351 at 387. 145. Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 at 660. 146. Egan v State Transport Authority (1982) 31 SASR 481 at 528. 147. Davidson v JS Gilbert Fabrications Pty Ltd [1986] 1 Qd R 1 at 7 per McPherson J. 148. [1985] 1 All ER 335. 149. [2001] WASCA 387. 150. Ibid at [95]. 151. (1868) LR 6 Eq 396.

152. [1971] VR 449. 153. Ibid at 454. 154. [1995] FCA 1541 at [47]. 155. (1954) 90 CLR 613. 156. [1968] Qd R 275. 157. Ibid at 278. 158. [1975] 1 NZLR 655. 159. [1994] 1 NZLR 613 at 627. 160. (1954) 90 CLR 613 at 620. 161. [1988] 1 All ER 5 at 14. 162. [2002] EWCA Civ 510 at [102]. 163. [2012] VSCA 87 at [43]. 164. [2001] VSC 310 at [108]. 165. [2000] 4 All ER 97; [2001] 1 AC 518. 166. [2001] VSC 310 at [109]. 167. (1988) 165 CLR 107. 168. [1996] 2 VR 386. 169. (2009) 40 WAR 191; [2009] WASCA 98 at [49]. 170. Ibid. 171. [2012] WASC 210 (S3) at [204]. 172. Ibid at [205]. 173. (1983) 56 LGRA 250. 174. (1989) 15 NSWLR 501. 175. [1998] WASC 222. 176. See Jandon Constructions (a firm) v Lyons [1999] WASCA 310. See also D Cooper, ‘Damages for Distress and Disappointment — Problem Solved’ (2002) 118 LQR 193. Note: Farley v Skinner [2001] 4 All ER 801. 177. (1989) 7 BCL 25 at 44. 178. [1991] 4 All ER 937 at 955. 179. [1976] VR 268. 180. (1984) 3 BCL 143. 181. [1991] 4 All ER 937. 182. Miell v Hatjopoulos (1987) 4 BCL 226. 183. [1998] 4 VR 82. 184. Ibid at 94. 185. Ibid at 95.

186. Ibid at 94. 187. (1974) 5 ACTR 10 at 111. 188. Similarly, see Ruxley Electronics and Construction Ltd v Forsyth [1995] 3 All ER 268 per Lord Mustill at 277 and Lord Bridge of Harwick at 271. 189. [2008] WASC 127. 190. (1993) 176 CLR 344. 191. Nouvelle Homes Pty Ltd v G & M Smargiassi [2008] WASC 127 at [85]—[89]. 192. (1983) 57 ALJR 211 at 219. 193. (1872) 8 Ch App 96 at 112. 194. [1901] 1 QB 515 at 524. 195. Ibid. 196. [1974] 1 Ch 97 at 99. 197. See also Pacifico (Timber) v Berlian Timbers (1997) 8 BPR 15,785. 198. Agius v Sage [1999] VSC 100, but see Opie v Collum [1999] SASC 376 for a case where it was ordered. 199. [2013] ACTSC 162. 200. Ibid at [440].

[page 255]

12 DETERMINATION INTRODUCTION Kinds of determination 12.1 A building contract, like any other contract, may be determined by the exercise of an express contractual power contained within its terms or by operation of the common law through the acceptance of a repudiation. The contractual power usually only arises on the occasion of a default of a prescribed type by the other party and after delivery of a show cause notice and a continuation of the default. The two means by which a contract may be determined are distinct; however, the same events which give rise to a contractual entitlement to determine a building contract may also be construed as repudiatory conduct in common law The question may arise whether the contractual provisions entitling one party to determine the contract in the event of breach by the other party have been agreed as the exclusive means of determining the contract, so that the common law entitlement to determine is excluded. In Mazelow Pty Ltd v Herberton Shire Council,1 it was held that cl 44 of AS 2124-1992 did not have that effect, with the court referring to what was said to be common ground that common law rights are not to be regarded as excluded unless, in the words of McPherson JA, ‘the contract manifests a clear intention of doing so’.2 A building contract may also be brought to an end by agreement between the parties. That agreement may be express or may be implied from all the circumstances; such as in the case of abandonment. A building contract may also be brought to an end by frustration. For the principle of frustration to operate, however, the performance called for by the contract must become radically different from that agreed in the contract, to the

point where it was not the thing promised to be done at all.3 Standard form building contracts often provide a contractual overlay to the common law of frustration. For example, cl 40 of AS 4000-1997 has set out what the contractor’s contractual entitlement will be in the event the contract is frustrated.4 [page 256] There may also be contractual terms contained within the building contract that have the effect of bringing it to an end in the event that certain factual circumstances either do or do not eventuate. PC-1 1998 also contains a mechanism by which a clause can be included by agreement between the parties giving rise to a right in the proprietor to terminate the contract at any time for its sole convenience and for any reason. Termination for convenience clauses are becoming more common, and whether or not an overarching obligation (or term) to act in good faith can be implied into the building contract may have an effect on how they may or should be exercised. However, it is unlikely a termination for convenience clause would be limited in any significant respect.5 Where work is performed in anticipation of a contract which for some reason does not come into existence, for example because the project is cancelled, the contractor may nevertheless recover the cost of that work, although the legal basis for that recovery is somewhat unclear.6

Abandonment 12.2 A building agreement may be terminated by the tacit mutual abandonment of the parties whereby they so conduct themselves in relation to each other as to mutually abandon or abrogate the contract.7 It has been held that a contract may be abandoned even though not wholly executory.8 In Australia it appears that the question of whether an agreement has been abandoned does not require an examination of whether the parties actually had the intention of abandoning the agreement, but rather an objective assessment of whether the conduct manifests that intention. The position was summarised in Mareva Building Consultants v Zevon9 by the Australian Capital Territory Court of Appeal as follows: ‘Whilst

consensus between the parties to abandon a contract must be clear, it need not necessarily be announced or otherwise communicated’. [page 257]

EXPRESS POWERS OF DETERMINATION Proprietor’s powers 12.3 Standard form building contracts typically contain express provision entitling a proprietor to determine the employment of a builder in the event of certain defaults. The principal is required to follow the procedure contained in the contractual provisions. The entitlement does not depend upon the existence of repudiatory conduct per se, but rather the occurrence of the events the contract requires. AS 4000-1997 has entitled the principal to terminate the contract upon the substantial breach of contract by the builder. Clause 39.2 defines some matters that are deemed to be substantial breaches, but does not purport to be an exclusive list. The more important matters listed include: failing to comply with the superintendent’s direction to remedy defective work; substantially departing from the construction program without reasonable cause or the superintendent’s approval; and where there is no construction program, failing to proceed with due expedition and without delay. In Mazelow Pty Ltd v Herberton Shire Council,10 the phrase ‘substantial breach of contract’ was considered where it appeared in AS 2124-1992. It was held the phrase required a substantial breach. The view expressed is consistent with a general perception that contractual rights to determine are included in contracts to expand the common law right to determine. In Khoompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd,11 Gleeson CJ, Gummow, Heydon and Crennan JJ, citing Tramways Advertising Pty Ltd v Luna

Park (NSW) Ltd12 and its context in subsequent legal developments, concluded the test to determine an essential term as follows: It is the common intention of the parties, expressed in the language of their contract, understood in the context of the relationship established by that contract and … the commercial purpose it served, that determines whether a term is ‘essential’, so that breach will justify termination.13

Upon the commission of a substantial breach (in the terms of AS 4000-1997) the principal is entitled to deliver a notice to show cause under cl 39.3. The formal requirements for the notice are that it must refer to the fact that it is a notice under cl 39, allege the substantial breach, state that the contractor is [page 258] required to show cause in writing why the principal should not exercise its rights under cl 39.4, specify a date and time (not less than seven days) by which the contractor must have shown cause, and specify the place at which cause must be shown. If the contractor fails to show reasonable cause by the stated date and time, then the principal may take out of the contractor’s hands part or all of the works remaining to be completed and suspend payment or terminate the contract.14 If the principal takes works out of the contractor’s hands, it may use the materials and equipment of the contractor without compensation.15 In addition to these rights, the contract provides that the proprietor would have the same entitlement that it would have had as a result of a repudiation and determination of the contract ‘under the law governing the contract’.16 The previous version of AS 4000 (AS 4000-1995) contained a similar regime in cl 44, as did AS 2124-1992 cl 44. ABIC MW 2008 also contains a similar regime, although referring to a breach of ‘a substantial obligation’ without any additional definition, as being the triggering event for a show cause notice.17 PC-1 1998, like AS 4000-1997, entitles a show cause notice to be given upon substantial breach by the contractor, and lists a number of specific events that entitle delivery of the written notice. Those events include failing to proceed with the contractor’s activities regularly and diligently (apparently regardless of whether there is a contract program or not) and failing to comply with any

direction of the contract administrator made in accordance with the contract.18 The notice that is delivered has formal requirements that must be met19 and requires the breach to be remedied within 21 days.20 In addition to an entitlement to take over and use the contractor’s plant and equipment, and providing relief from any requirement to pay the contractor further and providing an entitlement to recover additional costs, losses or damages incurred, PC-1 1998 also required the contractor to hand over to the proprietor immediately all copies of documents provided by the proprietor and design documentation prepared by the contractor prepared up to the date of termination (whether complete or not).21 Importantly, in Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 3),22 Dixon J considered the right to terminate following a [page 259] substantial breach by a contractor pursuant to AS 2124-1992. His Honour found that a principal is not entitled to terminate the contract or to take the works out of the contractor’s hands as of right upon a substantial breach: The right to take either cause of action does not automatically follow failure to rectify the breach after service of a notice. The contractor has the opportunity to influence the principal’s choice about its response to [the contractor’s] substantial breach by showing reasonable cause to the notice that the principal had served. The process affords to the contractor an opportunity to show cause why the principal should not exercise those rights at all.23

Further, the court in this case found that the regime provided for in cl 44 of AS 2124-1992 does not stipulate that the contractor is required to rectify the breach within the notice period: rather, the contractor must show cause as to the action it proposes to take to rectify the alleged breach. Most standard form building contracts give an immediate right to the proprietor to terminate on an insolvency event (which is defined) by the contractor. A power to determine the employment of the builder was given by cl 22 of the old Ed 5b. The clause required expiration of a period of time referred to in the warning notice. Clause 22(b) conferred a power to determine the employment of the builder forthwith in certain events, being events reflecting on the builder’s financial stability. Clause 22(c) dealt with the consequences of the determination. The specific events entitling the giving of the notice were set out

in cl 22(a) and included failing to proceed with the works with reasonable diligence or in a competent manner and refusing to or persistently neglecting to comply with a written notice from the architect in certain circumstances. Under the JCC form of contract, determination of the employment of the builder is governed by cl 12. The events that entitle the giving of the notice are generally similar to those in cl 22 of Ed 5b, but there are differences. By cl 12.03, after receiving notice of default, the builder has 10 days (not 14 days as in Ed 5b) to remedy the default. If not remedied, the proprietor may (within a further 10 days) by written notice determine the builder’s employment. Unlike Ed 5b, there is no provision that the notice must not be given unreasonably or vexatiously. Under cl 12.01, determination for the builder’s bankruptcy or the like may be effected at any time and not merely ‘forthwith’ as provided in cl 22(b) of Ed 5b. There is also provision in cl 12.04 that permits determination in the event of the builder’s deregistration under builders’ licensing legislation.

Builder’s powers 12.4 Standard form building contracts give the builder the right to determine the contract or to suspend works in certain circumstances. [page 260] Commonly, the contractual regime contemplates the builder first suspending works before becoming entitled to terminate the contract. Suspension of the works is sometimes seen as a tactical means by which the principal can be encouraged to remedy a default in making payment. The contractual power to suspend has often been used for this purpose; however, under security of payments legislation a statutory right to suspend is also available. In order to exercise the statutory entitlement to suspend, builders (or subcontractors) are required to follow strictly the procedures set out in the legislation: see 9.20. However, the statutory regime does not entitle the builder to determine the contract; to do that the contractual provisions must be followed or the common law of determination upon repudiation relied on.

AS 4000-1997 provides in cl 39.7 that if the principal commits a substantial breach of the contract the contractor may deliver a show cause notice. As discussed in 12.3, the term ‘substantial breach’ is not exclusively defined, but this clause includes a failure to make a payment due and payable pursuant to the contract or to rectify inadequate possession. Notably, a failure by the superintendent to give a certificate of practical completion is also a substantial breach committed by the principal. Clause 39.8 sets out the formal requirements of the notice. The notice must state that it is a notice under cl 39, state the alleged substantial breach and specify that the principal is required to show cause in writing why the contractor should not exercise a right under cl 39.9 within a set period (seven clear days or more) at a specified place: see 12.10. If the principal fails to show reasonable cause the contractor may, by written notice, suspend the whole or part of the works. The suspension must be lifted if the principal remedies the breach, but if the principal fails to remedy the breach within 28 days of suspension (or make other arrangements to the reasonable satisfaction of the contractor) the contractor is entitled to terminate the contract by a third written notice. ABIC MW 2008 entitles the contractor to give a proprietor a written notice requiring it to rectify the default within 10 working days if the proprietor fails to meet any substantial obligation under the contract, suspends the work for more than 20 days under cl G9 or fails to make a progress payment on time.24 There are formal requirements for this notice set out in the clause, which include that a copy of the notice must be given to the architect. If the proprietor fails to rectify the default or fails to show reasonable cause why it cannot be remedied within 10 working days after receiving the notice, the contractor may immediately suspend the works by giving the owner a further written notice. A copy of that notice must also be given to the architect and comply with formal requirements. Thereafter the contractor is entitled to terminate the contract by a third notice. [page 261] Both AS 4000-1997 and ABIC MW 2008 entitle the contractor to damages on

the same basis as if the proprietor had repudiated the contract and the builder had accepted that repudiation.25 PC-1 1998 entitles a builder to give a proprietor a notice of default in three specified circumstances. They are: insufficient access to the site; failure to pay an amount due and payable; and a failure to appoint a person to act as contract administrator.26 There are formal requirements for the notice,27 and on a failure to remedy the breach within 21 days of receipt of the notice, the contractor may suspend the whole or part of the works by written notice. The contractor may terminate the contract 21 days after the date of suspension, if the proprietor has failed to remedy the breach or, if the breach is not capable of remedy, to make arrangements satisfactory to the contractor. Unlike AS 4000 and ABIC MW 2008, PC-1 1998 purports specifically to limit the contractor’s rights to claim under a quantum merit, which it would otherwise have under common law.28 Older standard form contracts tended to be more prescriptive about the circumstances allowing the giving of a show cause notice on which a contractual right to determine might be founded. They also tended to be less clear in setting out the steps that had to be followed. Clause 23(a) of Ed 5b provides that the builder, by written notice sent by certified mail to the proprietor, may suspend operations or determine employment in any of a list of events there set out. Some of the events require a previous default notice to have been given (for example, failure to pay on a certificate or issue a certificate) while others do not. Clause 23(a) provides that the builder’s rights under such clause are without prejudice to any other rights and remedies the builder may possess. The clause also provides that the builder’s notice must not be given unreasonably or vexatiously. This type of restriction is becoming less common in modern contracts. It is discussed in 12.12. Clause 12.06 of the JCC form of contract provided that the builder, by written notice hand delivered or sent by certified mail to the proprietor, may suspend operations or determine employment in certain events. As in Ed 5b, some of the events require a previous notice to have been delivered, while others do not. As with cl 23(a) of Ed 5b, the builder’s rights under cl 12.06 are expressed to be without prejudice to any other rights or remedies. Unlike cl 23(a), however, cl

12.06 does not stipulate that the builder’s notice must not be given unreasonably or vexatiously. [page 262] Clause 44.7 of AS 2124-1992 is expressed differently to both cl 23(a) of Ed 5b and cl 12.06 of the JCC form. It follows the current style of a show cause notice being required as a first step towards termination. A ‘substantial breach’ is the trigger for the entitlement to serve the show cause notice and examples of what events are deemed to be substantial breaches are provided. It is no requirement of AS 2124-1992 that the builder’s notice not be given unreasonably or vexatiously. However, it is a requirement by cl 44.8 that the notice specify, inter alia, the alleged substantial breach. The notice must give the principal at least seven clear days to show cause why the contractor should not exercise a right referred to in cl 44.9. Thereafter a notice suspending the works can be given (on the principal’s failure to show cause) and 28 days later termination may be possible by a third notice.

REPUDIATION Meaning of ‘repudiation’ 12.5 In order for a contract to be determined at common law there must be a repudiation of the contract by one party and an acceptance of that repudiation by the other. Repudiatory conduct will often also be a significant breach of the express terms of the contract. For example, the time for performance of a particular obligation may not have arisen and yet the conduct of one party may make it clear that when the time for performance arises the contractual obligation will not be met. Such conduct is often termed an anticipatory breach.29 As discussed above, repudiatory conduct may give rise to an express contractual right to determine the contract; or there may be an express contractual entitlement to determine a contract even though the conduct complained of is not necessarily a repudiation.

The term ‘repudiation’ implies conduct or acts evincing an intention no longer to be bound by the terms of the contract. In Kennedy v Collings Construction Co Pty Ltd,30 Giles J said: The question then is whether the [builder] had repudiated the contract. By that is meant the evincing of an intention not to be bound. That may take the form of straight-out refusal to perform the contract, or may be found if the party shows that he intends to fulfil [sic] the contract only in a manner substantially inconsistent with his obligations … or only if, or as and when, it suits him.

In Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd,31 Deane and Dawson JJ had said that an issue of repudiation turns upon objective acts [page 263] and omissions and not upon uncommunicated intention; accordingly, Giles J summarised: … repudiation turns upon objective acts and omissions, not on uncommunicated intention, and it is sufficient that, viewed objectively, the conduct of the relevant party has been such as to convey to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it.32

These remarks were referred to by Ashley J in Wilson v Kirk Contractors Pty Ltd,33 who added that when deciding whether there has been a repudiation ‘all the circumstances of a matter must be considered’.34 Citing Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd, Gleeson CJ, Gummow, Heydon and Crennan JJ concluded in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd35 that repudiation was used in different senses. First, it may refer to conduct evincing an unwillingness or an inability to render substantial performance of the contract. ‘The test is whether the conduct of one party is such to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it.’36 Second, repudiation may be used at breach of contract which justifies termination by the other party: There may be cases where a failure to perform, even if not in breach of an essential term … manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements. This overlapping

between renunciation and failure of performance may appear conceptually untidy, but unwillingness or inability to perform a contract often is manifested most clearly by the conduct of a party when the time for performance arrives.37

A ‘renunciation’ of a contract is an absolute refusal to perform the contract.38 A party may terminate a building contract if the other party, through insolvency, is ‘wholly and finally’ disabled from performing under its terms.39 A contract may be repudiated by a party putting itself in a position where it [page 264] will not be able to perform its obligations. A financial inability to perform may constitute a repudiation.40

Instances of repudiation 12.6 Whether or not particular conduct is a repudiation of the contract is often a difficult question of mixed fact and law.41 In Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd,42 Deane and Dawson JJ referred to ‘Lord Wright’s oftquoted admonition that “repudiation of a contract is a serious matter, not to be lightly found or inferred”’. But if one party gives the other distinct notice that it will not be performing the contract the other is not bound to wait for an actual breach.43 In Carr v JA Berriman Pty Ltd,44 a proprietor who failed to deliver the excavated site on the due date and announced that he had engaged another contractor to carry out a large part of the work comprised in the contract was held to have shown that he was prepared to carry out his part of the contract only if and when it suited him, and to have put the original contractor in a position to rescind. The persistent maintenance of an untenable construction of a contract on a matter of essential substance may be construed as a repudiation.45 And if one party clearly evinces the intention of performing the contract upon the footing of an erroneous construction of an essential condition, the other may determine.46 But such an inference should not be drawn ‘too readily’47 and an attempt to add new terms to a contract will not necessarily amount to a repudiation.48 Obstinate

insistence on an erroneous interpretation of the contract was held not to constitute repudiation in Velik v Steingold.49 In Earth and General Contracts Ltd v Manchester Corp,50 a forfeiture clause entitled the proprietor, on the occurrence of certain events, to take possession of plant and materials on giving three days’ notice. One of the specified events having occurred, the proprietor gave notice accordingly, and on the [page 265] expiration of the three days specified in the notice took over the site. Before the expiration of the three days, the proprietor entered the site and took certain measures with regard to the plant and equipment there, including stencilling on equipment and controlling the movement of vehicles. Although the defendant admitted that such entry was premature and that the stencilling was a technical trespass, Elwes J was of the opinion that the defendant had not by conduct shown an intention to repudiate the contract. Obligations on the part of the main contractor to proceed as expeditiously as possible and to provide temporary heating were held not to be of such major importance as to go to the root of the subcontract in Pigott Construction Co Ltd v WJ Crowe Ltd.51 It is sometimes suggested that delivering an invalid notice52 of determination, purporting to exercise a contractual right to determine, is repudiatory conduct. However, where a party acts in reliance on a term of the contract without manifesting an intention to abandon it, ordinarily that conduct cannot be treated as repudiatory. In Woodard v Wimpey Constructions UK Ltd53 Lord Wilberforce said: Unless the invocation of that provision were totally abusive or lacking in good faith … the fact that it has proved to be wrong in law cannot turn it into a repudiation.

This view was affirmed by the Supreme Court of Victoria in the decision of Ashley J in Nigel Wilson v Kirk Contractors Pty Ltd.54 However, there are cases to the contrary.55 Whether a repudiation has taken place depends on all the facts.56 In Cassidy v Engwirda Construction Co (No 2),57 it was held that the contractor’s refusal to pay the full amount of the subcontractor’s progress claim was not a

repudiation where the contractor bona fide disputed the accuracy of the subcontractor’s valuation of the work. Hoare J had held that the contractor had repudiated the agreement. In a decision only noted58 the High Court allowed an appeal ‘on the ground that there was an arithmetical error in the calculation of the full court which led to the decision that there had been no breach of contract by the contractor’. The note of the proceedings in the High Court does not indicate whether the court dealt with the question of the circumstances in which the failure to pay a progress claim should be regarded as a repudiation: see further 11.17. [page 266] A refusal to recognise an agreement as subsisting may evince an intention no longer to be bound by it.59 A party committing a number of breaches of contract none in itself sufficiently serious to be regarded as amounting to a repudiation may nonetheless, as a whole, be held to have repudiated such contract.60 A delay in setting about performance of the contract depending upon the circumstances may constitute repudiation61 as may a refusal to perform obligations occurring before the time for performance.62 A determination of contract can be justified on any sufficient ground that was available at the time of determination; even if that specific ground was not relied upon at the time of determination.63 A high level of finish required by the contract beyond the capabilities of the builder might form one aspect of repudiatory conduct where the builder has a contractual entitlement to be given an opportunity to rectify defects.64

Effect of repudiation 12.7 The fact that repudiatory conduct has taken place has no effect in common law on the continuance of the contract. In order to bring the contract to an end the repudiation must be validly accepted. Notwithstanding this, the repudiatory conduct will commonly comprise a breach of the contract sounding in damages.

Upon the repudiation of one party to a contract, the other may accept the repudiation and bring the contract to an end or may continue to hold the defaulting party to the contract and pursue remedies for breach. The repudiation must be accepted in the sense of electing to treat the contract as at an end for, otherwise, the contract remains on foot.65 In Howard v Pickford Tool Co Ltd,66 Asquith LJ described an unaccepted repudiation as a ‘thing writ in water and of no value to anybody: it confers no legal rights of any sort or kind’. [page 267]

Acceptance of repudiation and damages 12.8 To have the effect of bringing a contract to an end the repudiation at common law of one party must be accepted by the other. Acceptance may be by words or conduct which make it plain that the innocent party is treating the contract as at an end.67 But the election to treat the contract as at an end must be unambiguous.68 Acceptance of a repudiation can be by words or conduct.69 On the other hand, where a contract gives an express right to bring the contract to an end in particular circumstances, the procedure set out in the contract must be strictly followed. Repudiation of a contract gives rise to a right of election in the other party to accept that repudiation or not. It must elect between two inconsistent rights, to either hold the repudiating party to its contractual obligations or release it and seek damages. A delay in accepting a repudiation may result in the right to accept it being extinguished. The delay may form one of a series of acts demonstrating an election not to terminate the contract but rather to affirm it.70 It is not necessary to elect immediately upon the repudiatory conduct taking place, but once the innocent party has conducted itself in a way justifiable only if an election had been made, the law will view the election as having been made.71 The repudiation by one party must be known of by the other before it can be said to have elected to continue with the contract.72 A classic statement of the modern law on the effect of determination of a contract was given by Dixon CJ in McDonald v Dennys Lascelles Ltd,73 as follows: When a party to a simple contract, upon a breach by the other contracting party of a condition of the

contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected. When a contract is rescinded because of matters which affect its formation, as in the case of fraud, the parties are to be rehabilitated and restored, so far as may be, to the position they occupied before the contract was made. But when a contract, which is not void or voidable at law, or liable to be set aside in equity, is dissolved at the election of one party because the other has not observed an essential condition or has committed

[page 268] a breach going to its root, the contract is determined so far as it is executory only and the party in default is liable for damages for its breach.

These remarks were cited with approval by the House of Lords in Johnson v Agnew.74 Fox LJ quoted them in Damon Compania Naviera SA v Hapag Lloyd International SA,75 as did Kerr LJ in Rover International Ltd v Carron Film Sales Ltd.76 They were quoted also by Hayne J in Commonwealth Bank of Australia v Begonia Pty Ltd77 and by the Full Federal Court in Elkhoury v Farrow Mortgage Services Pty Ltd (in liq).78 The acceptance of a repudiation puts an end to the contract for all purposes except for the purpose of bringing an action for damages.79 However, where the contract provides an arbitration clause, that procedure remains the binding procedure for resolving disputes within its ambit. Where the contractor repudiates the contract and that repudiation is accepted by the proprietor, the proprietor is entitled to damages flowing from the breach. That would include the cost of completing the works and rectifying any defects, but the outstanding contract balance will be taken into account. Where the proprietor repudiates the contract and that repudiation is accepted by the contractor, bringing the contract to an end, the contractor has an option in respect of the damages it can recover. The contractor may recover damages, or may put the contract on one side and sue on a quantum meruit. Some contracts, however, seek to modify this common law position; for example, PC-1 1998 provides that notwithstanding the owner’s repudiation a contractor will not be entitled to a quantum meruit.80 If the contractor chooses to sue upon a quantum meruit, it is no answer to the claim that full performance would not have been profitable.81 The contractor may sue in the alternative for damages and on a quantum meruit, but will have to make an election when seeking judgment. A

builder who accepts a repudiation may recover damages for loss of the contract and for any particular loss suffered through any breach of contract committed by the building owner before rescission.82 On quantum meruit see 8.8–8.9. In Robert Salzer Constructions Pty Ltd v Elmbee Pty Ltd,83 Smith J indicated that the remedy of injunction should be available, in appropriate cases, to [page 269] restrain a proprietor from terminating a building contract when there is a dispute as to the entitlement to or the validity of the termination. A determination of contract can be justified on any sufficient ground that was available at the time of determination; even if that specific ground was not relied upon at the time of determination.84

ISSUES IN DETERMINATION OF CONTRACTS Method of giving notice 12.9 Where the building contract provides an express right to determine the contract on the happening of a certain event, invariably it sets out a formal process which must be followed. That process will include the delivery of at least one formal notice, and commonly two or three such notices, which must comply with prescribed formal requirements and time limits. In respect of accepting a common law repudiation, see 12.8. AS 4000-1997 begins the process with a show cause notice,85 which must be delivered by hand or by certified post. Upon a failure to show reasonable cause in response to that notice, the innocent party may deliver a further written notice exercising its right.86 If it is the contractor who has suspended the works and thereafter elects to terminate, a further written notice must be given.87 These later notices do not require delivery by hand or registered post, but would need to comply with cl 7, the general provision dealing with the service of notices.

ABIC MW 2008 refers only to written notice being given (by the proprietor or builder to remedy the breach),88 as did cll 44.2 and 44.7 of AS 2124-1992, but ABIC MW 2008 cl Q1.3 also requires a copy of the notice to be given to the architect. The notice of termination (by the proprietor) and the notice of suspension and termination (by the builder)89 similarly do not refer to a special service provision, but the clause covering service of documents generally will apply.90 The termination provisions of PC-1 1998 do not require any special service.91 [page 270] Clauses 22(a) and 23(a) of Ed 5b require notice to be sent by certified mail. Clauses 12.02 and 12.06 of the JCC form of contract refer to notice being hand delivered or sent by certified mail. The predecessor of cl 22(a) of Ed 5b (cl 19 of Ed 4) referred to registered mail and was considered in Eriksson v Whalley.92 Collins J there held that the first of two notices was not properly served by being handed to the builder’s foreman at a site meeting. The provision requiring service by registered post was not directory: compliance with it was intended to eliminate disputes and the procedure imported a solemnity which a less formal mode of service might not convey.93 However, in Kennedy v Collings Construction Co Pty Ltd,94 Giles J distinguished Eriksson v Whalley95 on this point. He held that a provision in a building contract for notice by registered mail should be seen as facultative — as permitting but not obliging registered mail.96 To hold otherwise he said would be to ‘place an absurd premium on a particular form which could be of no benefit to anybody’.97

Contents of default/show cause notice 12.10 The question of whether a default notice (often referred to as the ‘show cause’ notice) complies with the contractual provisions specifying what it must contain, and whether a deficiency renders it incapable of giving rise to the contractual entitlement to determine, sometimes arises.

All default notices in standard form construction contracts must contain contractually specified grounds.98 It appears that in every case the overarching requirement is that the notice specifies the default or event relied upon with sufficient particularity so that the recipient can address and make good that default. Collins J in Eriksson v Whalley99 held that the requirements for the first notice required by cl 19 of Ed 4, the default notice, should not be strictly construed. The notice in question might be good as an elliptical specification of a default accompanied by possibly gratuitous suggestions on the way the default could best be remedied.100 In the later case of Brenmar Building Co Pty Ltd v University of Newcastle,101 the New South Wales Court of Appeal held that ‘both authority and commonsense [sic] … fully support the view that to inform a builder that he has not been proceeding with the general task [page 271] which he has been given — not with a particular item — in a competent manner or with reasonable diligence is a sufficient specification’. In Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 3),102 the Court found the principal is merely required to ‘name expressly, or mention definitely, the alleged substantial breach’. The principal is not required to provide detailed particulars of that breach. The AS 2124-1992 regime is a process of communication between the parties, therefore a contractor who proceeds to remedy the defects but does not communicate that rectification, or show cause, may remain in breach.103 A show cause notice ought to convey what is amiss in enough detail to allow the contractor to show cause. Complete accuracy is not a requirement to ensure validity.104 Dura argued that in order for a show cause notice to be unambiguous, it must state which remedies the principal proposes to exercise. This position was rejected by the Court: This position is misconceived. The contract permits the principal to determine its response after affording an opportunity to the contractor to show reasonable cause. That decision may be influenced by the contractor’s response. It is not a situation where the contractor is left to guess which remedy will be exercised, the contractor must show cause as to why either right should not be exercised. In any event, the contractor is fully aware of the specific consequences of not showing

reasonable cause as cl 44.4 makes it clear that the principal may elect for one or other of the rights set out in that clause.105

A stricter approach had earlier been indicated by Moffitt J in Re Stewardson Stubbs & Collett Pty Ltd and Bankstown Municipal Council,106 which was not cited in Eriksson v Whalley. Moffitt J held that the default notice was required to be in such terms that it was clear to the builder that the notice was being given under the clause.107 While it was required that the notice be unequivocal, this should be determined from a practical viewpoint by asking whether a commercial person such as a builder would understand clearly that it was a notice under the clause.108 A notice was sufficient if it specified the default and clearly indicated that unless the situation changed within 14 days (as mentioned in the clause), the architect would give advice to the proprietor which could lead the latter to take action under the clause to dismiss the builder.109 An approach of this nature is supported by the Queensland Full Court decision in Yendex Pty Ltd v Prince Constructions Pty Ltd.110 It was there held [page 272] that the relevant provision required an unequivocal notice to be given which conveyed to a commercial builder what was said to be amiss so as to identify the default in respect of which cause was to be shown.111 Were it to be held otherwise, as Byrne J commented in the subsequent case of Re White Industries (Qld) Pty Ltd,112 when discussing cl 12.01 of JCC-B 1985, ‘the giving of the notice would be an empty gesture’. Clause 12.02 of the JCC form of contract goes further than others, requiring a notice not only to ‘specify’ the default but also (except for a suspension of works default) to ‘provide details’ of such default. A notice is not effective as a cl 12.02 notice unless the detail of the default is clearly identified.113 ABIC MW 2008 is limited to ‘specifying the default’ in cl Q1.1.

Premature notice of determination 12.11 Standard building contracts typically provide that after the default or show cause notice has been delivered, a prescribed period of time must pass in which

the defaulting party has the opportunity of remedying the breach or showing cause, after which time a notice of determination can be delivered. AS 40001997, for example, states that the principal’s notice to show cause must give to the contractor not less than seven clear days after receipt of the notice to show reasonable cause.114 The contractor’s right to determine in that contract arises 28 days after suspension (which is by written notice), the right of which in turn depends on a failure to show cause within seven clear days (after the default notice was received).115 The question may arise whether a notice of determination which is given before the specified time has expired is valid. In Eriksson v Whalley,116 Collins J held that the notice of determination in that case had been given prematurely and the attempt to determine the contract failed. Clause 19 of Ed 4 required the builder’s default to continue for 14 days after being given notice of default by registered mail before the builder’s employment might be determined. However, the notice of default had been given on 30 April and the notice of determination, which was dated 13 May, was sent by registered mail on 14 May and was received on 15 May. Clause 19 did not allow the second notice to be given until after midnight on 14 May. But the posting of such notice on 14 May, before that time, was the giving of that notice so that such notice was given prematurely. A similar conclusion was reached by Moffitt J in Re Stewardson Stubbs & Corbett Pty Ltd and Bankstown Municipal Council.117 The first notice was [page 273] given on 22 May on the day it was posted. The first of the 14 days allowed by cl 19 of Ed 4 was the following day. The second notice given on 5 June, therefore, was premature as 6 June was the earliest day on which it might be given. In Wilson v Kirk Contractors Pty Ltd,118 Ashley J also held that a notice of determination failed to determine the contract between the parties. A notice of default dated 7 July was sent by post to the builder and by the terms of the agreement was deemed to have been received on 10 July. But cl 26 of the agreement allowed for a period of default to continue for 10 days after the notice

of default was given. Therefore the notice of determination sent on 20 July, the tenth day after the first notice was given, was premature and invalid. See also 12.15.

Reasonableness in assessing whether cause has been shown 12.12 Whether or not a party exercising a contractual entitlement to determine a contract is subject to a requirement of reasonableness in assessing whether cause has been shown is a matter of contractual interpretation. As standard form building contracts often provide an opportunity to the defaulting party to show cause, it might be expected that reasonableness is a requirement of assessing whether cause has or has not been shown. For example, AS 4000-1997 required a contractor (or principal) to show ‘reasonable cause’ in response to a default notice.119 On the other hand, the default notice in PC-1 1998 required the breach to be remedied (rather than show cause) and a failure entitles termination.120 A requirement of reasonableness would not appear to be an express contractual requirement. ABIC MW 2008 also requires the breach to be remedied but does provide that a defaulting party can show reasonable cause why it cannot be.121 Clause 44.1 of NPWC 3 is similar in providing for a builder to show cause (to the satisfaction of the principal) upon notice why the principal’s powers should not be exercised, but does not refer to any requirement for ‘reasonableness’ in its express terms. Nevertheless, in Renard Constructions (ME) Pty Ltd v Minister for Public Works,122 Priestley and Handley JJA, Meagher JA dissenting, held that the powers conferred on the principal under cl 44.1 of NPWC 3 must be exercised reasonably. Priestly JA said123 that to him it was relatively obvious that an objective and reasonable outsider upon reading cl 44.1 would assume without question: [page 274] … that the principal would have to give reasonable consideration to the question whether the contractor had failed to show cause and then, if the principal had reasonably concluded that the

contractor had failed, that reasonable consideration must be given to whether any power and if any which power should be exercised.

Handley JA said that the ‘very notion of showing cause seems inconsistent with the view that the principal will be entitled to act, within the limits of honesty, on his own idiosyncratic opinion’.124 Accordingly, a principal’s decision, however honest, if objectively unreasonable would be an invalid exercise of power.125 Meagher JA’s view, however, was that provided the principal comprehended the factual background sufficiently to be ‘satisfied’ as required by the clause there otherwise was ‘no reason why the principal should have regard to any interests except his own’.126 The majority decision in this case has since been applied in Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney127 by Kirby P and Priestley JA, again with Meagher JA dissenting. It was applied also in Presmist Pty Ltd v Turner Corp Pty Ltd,128 a case of a contractor giving a subcontractor a show cause notice. Cole J held that it must follow that the contractor must give a reasonable opportunity to consider whether the notice does show cause, and during the period that this was being considered directions could still be given. Dixon J, in Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 3),129 appears to agree with the above, stating: A court should be satisfied that the principal has made an honest decision in good faith about the matter enabling it to exercise the contractual rights in its favour provided by [cl 44.4 of AS 21241992]. It is not a relevant consideration for a court that the principal’s decision serves only its interests or that the court considers an alternative decision on the part of the principal to have been reasonably open.130

How far the decision may be applied to other contracts is unclear. On one view an overarching requirement of reasonableness, appropriate enough in administrative law, might be considered out of place in construction contracts.131 The courts moreover are disinclined to import doctrines of reasonableness in the interpretation of terms. The construction of each contract in this regard will, it seems, inevitably depend upon its terms. [page 275]

Reasonable diligence

12.13 Standard form building contracts commonly provide the proprietor with a contractual entitlement to deliver a default (or show cause) notice in the event the builder does not proceed with the works at an appropriate pace. PC1-1998 gave that right where the builder did ‘not proceed with the contractor’s activities regularly and diligently’.132 AS 4000-1997 provides for the right where the builder has failed ‘to proceed with due expedition and without delay’; but note that obligation only arises where there is no construction program.133 Neither does ABIC MW 2008 define what sort of a breach constitutes a breach of a substantial obligation giving rise to a notice to show cause134 — but it would seem a substantial obligation would be to carry out the works diligently.135 Under cl 22 of Ed 5b, the proprietor was entitled to serve a notice specifying default if the builder failed to proceed with the works with ‘reasonable diligence’. In cl 12.02.02 of the JCC form of contract the failure to proceed ‘regularly and diligently’ gave an entitlement to serve a notice, while in cl 44.2 of AS 21241992 it is expressed as a failure to proceed ‘with due expedition and without delay’. The meaning of the expression ‘diligence’ was considered by Blackburn J in Hooker Constructions Pty Ltd v Chris’s Engineering Contracting Co:136 ‘Diligence’ may, at one extreme, refer to the personal characteristics of the defendant (ie in this case, the person carrying on business under the business name of the defendant). If this were the proper construction of the phrase in the contract as it stands, the plaintiff would have to prove that to an unreasonable degree the defendant was, in his own person, lazy or neglectful. On this interpretation, a man who worked himself to the bone with the aim of fulfilling his contract, and yet by mismanagement and lack of organization failed to do so, would not be in breach of the contract because whatever other failings he had, he was still industrious. At the other extreme, the phrase may mean no more than ‘if the work is not in fact performed in accordance with a rate which would reasonably be expected’. On this interpretation, the defendant’s personal characteristics would be irrelevant, and only the actual discrepancy between the work done and what could reasonably be expected to be done, would be significant.

He continued: … I think [the phrase] bears a meaning which is not the same as either of the two extremes I have mentioned. I think that a sensible commercial construction of the phrase is that the actual extent of work completed is of some significance. ‘Diligence’ in this contract means … not only the

[page 276] personal industriousness of the defendant …, but his efficiency and that of all those who worked for

him … Moreover, it would be wrong to insist that ‘reasonable diligence’ refers only to the personal characteristics of individuals, and that evidence of the actual conduct or misconduct of the defendant and his servants is alone relevant, to the exclusion of evidence of the actual state of the work at a given time … [Construing] this sub-contract as a reasonable commercial document, I am entitled to accept, as evidence, that reasonable diligence had not been displayed by the defendant, evidence that the work was, at the material time, seriously incomplete, together with evidence that there were no circumstances preventing the defendant from overcoming this situation.

In Re Stewardson Stubbs & Collett Pty Ltd and Bankstown Municipal Council,137 Moffitt J described reasonable diligence as follows: The question of what precisely constitutes a failure to proceed with reasonable diligence is a matter of some difficulty. However, it is an allegation of a general failure to proceed with that degree of promptness and efficiency that one would expect of a reasonable builder who has undertaken a building project in accordance with the terms of the contract in question.

Determining what comprises reasonable diligence must have regard to the terms of the contract. If, for example, a builder agrees in the contract to a short construction period, then the progress that might reasonably be expected will be greater than if a longer contract period had been agreed.138 The building agreement in Bailey v Hart139 provided that if the architect during the progress of the work should discover that the contractor was not proceeding in a sufficiently expeditious manner the contract might be determined. It was held that the words ‘sufficiently expeditious’ must have reference to the original date for completion or the extended date for completion (if any), and accordingly that the power could not be exercised after the expiration of the time allowed for completion, without any extension having been granted.

Notice of determination given unreasonably or vexatiously 12.14 Some older standard form building contracts provided a further impediment on delivery of a notice determining the contract in that if the deliverer is itself in breach of the terms of the contract or acting unreasonably or vexatiously, there is no contractual power to deliver the notice. More modern standard form building contracts do not contain such a restraint (AS 4000, AS 2124, JCC, PC-1 and ABIC MW 2008). However, an example of such a clause can be found in Ed 5b where cl 22(a) concluded:

[page 277] … provided that such notice shall not be given unreasonably or vexatiously. If the Proprietor is at the time of such notice … in breach of this Contract, then the said notice of determination of the employment of the Builder shall be deemed to be void and of no effect.

The contractor’s rights were similarly qualified by cl 23(a) of Ed 5b. The proviso in cl 22(a) itself comes at the end of a single sentence which refers both to the notice specifying the default and to the notice determining the employment. This raises the question whether the words ‘such notice’ in the proviso refers to the first notice, the second notice or to both. The concluding sentence adds to the doubt by referring first to ‘such notice’ and then to ‘the said notice of determination’. Similar doubts existed in relation to cl 19 of Ed 4, which contained the proviso ‘provided that notice in pursuance of this clause shall not be given unreasonably or vexatiously and shall be void if the Proprietor is at the time of the notice in breach of this contract’. The better view would seem to be that the expression ‘such notice’, both in the proviso forming part of cl 22(a) and in the last sentence of cl 22(a), refers to the notice of determination of the employment of the builder. Further doubt is occasioned by the words ‘unreasonably’ and ‘vexatiously’. It is impossible to offer any confident opinion concerning the effect of these words. See also 12.12. Some light, however, is thrown on their meaning by the observations of Megarry J in Hounslow London Borough Council v Twickenham Garden Developments Ltd.140 His Lordship did not find it necessary to expound the expression, but he did say this: Mr Neill’s fourth submission on the borough’s notice was that it was given unreasonably or vexatiously, and so contravened the concluding words of condition 25(1). In support of this contention he pointed to some allegations made by the contractor to the effect that the borough wished to make arrangements with other contractors, and that the borough wanted the contractor off the site so that the other contractors would be willing to begin work there; and he urged that these allegations had not been answered. However, if one accepts that to the full, I do not see how it establishes that the borough’s notice was given unreasonably or vexatiously. A building owner may have a dozen reasons, all extraneous to the contract, for wishing to terminate it. But if he also has one good and reasonable ground for determining the contract, that suffices, and it is not invalidated by the existence of the dozen reasons. I remain wholly unconvinced that there was anything unreasonable or vexatious in the giving of the notice by the borough.

In JM Hill & Sons Ltd v London Borough of Camden,141 where the phrase qualified the contractor’s power to give notice, Lawton LJ said he was ‘far from

clear … what kind of conduct on the part of a contractor would make what he did unreasonable or vexatious’. [page 278]

Power to determine and to accept repudiation 12.15 The same facts may give the proprietor or the builder grounds both for exercising an express power to determine the contract and for accepting a general law repudiation of the contract. That both may be exercised is confirmed by Giles J in Kennedy v Collings Construction Co Pty Ltd.142 While it is possible a contractual term might limit a party’s ability to rely on a common law repudiation, clear words will be needed for a contract to have that effect.143 Many standard form building contracts provide explicitly that a contractual right to determine is not intended to prejudice the common law rights.144 However, it may be necessary to make an election if the rights after determination conferred by the express power differ from the common law rights.145 A notice purporting to terminate a contract pursuant to contractual provisions will not, usually, if found to be defective in terms of contractual procedures, stand as a determination at common law. In Summers v Commonwealth,146 cl 28 of the general conditions provided that if the contractor neglected to carry out the instructions of the works director, the minister, after giving a show cause notice, might take the works out of the contractor’s hands and complete them and deduct the cost from any money coming to the contractor. The question arose whether a ‘notice of cancellation’ (which Isaacs J held not to be a proper notice taking the works out of the hands of the contractor) might be regarded as a rescission in common law: accepting the contractor’s repudiation constituted by the contractor’s letter refusing to perform the contract. Isaacs J concluded147 that the ‘notice of cancellation’ could not be so regarded for two reasons: in the first place, the notice purported to be given under cl 28 of the contract, not in the exercise of the common law power; second, the notice asserted a right under the contract to determine, so that the notice rested, and would be understood by the recipient to rest, on the contract and not on the general common law power. However, it is possible that a deficient notice can be seen as acceptance of a repudiation at common law.148

Where a party has delivered a show cause notice which gives the other party a period of time in which to make good its default — or show cause — it will not be able to determine the contract at common law until the period specified in the notice has expired. The repudiation cannot be accepted until [page 279] the period has expired.149 The authorities are not clear on why this should be so, but it may be the delivery of the notice of dispute can be construed as an election to affirm the contract (upon the repudiation of the other party) for a limited time.150

Completion at builder’s cost 12.16 Traditionally, standard form building contracts contain provisions entitling a proprietor who has exercised the power to determine the builder’s employment to have the works completed by others and recover that cost from the builder. The proprietor’s common law rights are substantially to the same effect.151 The power to complete at the cost of the builder does not, however, enable the proprietor to carry out work significantly different from the contract work. AS 4000-1997 specifies the contractual entitlement as the same as if the contract had been repudiated at common law.152 ABIC MW 2008 contains a different regime and requires the architect to make an assessment of the cost of completing the works so that an assessment can be calculated before the works are completed.153 PC-1 1998 entitled the proprietor to recover any costs, losses or damage incurred or suffered in any way in connection with the termination154 and disentitled the contractor to any further payment.155 Older clauses entitling the proprietor to complete the work and recover from the builder can be seen in cl 22(c)(i) of Ed 5b, cl 44.6 of AS 2124-1992 and cl 12.05.01 of JCC. In Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq)156 the proprietor determined the employment of the builder pursuant to cl 22(b) of Ed 5b. The proprietor then engaged former employees of the builder and retained subcontractors who had previously been employed on the job in

order to complete the work. Some subcontractors engaged by the builder before the termination of the contract had not been paid for work or materials supplied before that date and the proprietor wished to pay them. Pursuant to cl 30(c) of the building contract, the builder had established a bank guarantee in lieu of a retention fund. The High Court, by a majority, held that the proprietor had the right to resort to the moneys provided by the guarantor for the purpose of satisfying obligations of the [page 280] builder to the proprietor and that those obligations included the obligation to reimburse the proprietor for any amounts paid to subcontractors. Therefore, the proprietor was entitled to use the moneys provided by the guarantor for payments to the subcontractors in respect of amounts due to them by the builder for work done or materials supplied before the date of the termination of the builder’s employment. In Gianfriddo v Garra Constructions Pty Ltd,157 a notice of dispute was held not to suspend the operation of a notice given by the proprietor of intention to take possession of the works.

Ousting contractor from site and use of builder’s plant 12.17 Once a builder’s licence to be in possession of the site has been revoked, whether rightly or wrongly, the builder was thought to become a trespasser,158 but this now seems open to some doubt on the basis of learning about contractual licences in particular. See 4.14. However, this is not to say in any event even if so that the law will not allow the builder a reasonable time to gather belongings together and withdraw from the site.159 The principal, having cancelled the contract, is not entitled to take possession of and permit other persons to use any materials, construction plant and other things on or about the site and left behind which are owned by the contractor in the absence of some contractual power to do so.160 Ordinarily the property in materials brought to a site by a builder vests

in the building owner only when they are integrated with the building under construction.161 However, where a principal determines a contract pursuant to a contractual entitlement, the contractual provisions may vary the common law position. For example, PC-1 1998 entitles the owner ‘to take over and use … the plant, equipment and work and all materials, equipment and other things intended for the works’.162 AS 4000-1997 provides similarly that the principal can ‘take possession of, and use such of the construction plant and other things on or in the vicinity of the site as were used by the contractor’ as are reasonably required by the principal to facilitate completion.163 In Forestry Commission of NSW v Stefanetto,164 the High Court considered a clause in a road-making contract giving the principal a right to complete [page 281] the work on the default of the contractor and, for that purpose, to take possession of and use any materials, construction plant and other things on the site which were ‘owned by the contractor’. The clause did not give the contractor a right to any compensation or allowance, even for fair wear and tear, but provided that the principal should maintain the plant in good working order. A majority held that property ‘owned by the contractor’ did not include property in which the contractor had only an interest as hirer under a hire–purchase agreement or as lessee.165 It held further that the clause giving the right to take possession of the materials and plant was designed to ensure and achieve early completion of the work under the contract and, therefore, was not in the nature of a penalty. See further 6.6. It is possible for a principal to obtain an injunction restraining a builder from removing plant and equipment, notwithstanding that the validity of the determination is in question. In order to obtain an injunction there must be a serious question to be tried and the balance of convenience must favour the granting of an interlocutory injunction. There may be other considerations which could make it unjust to grant an injunction.166 In considering the balance of convenience factor, courts will also look at whether damages are a sufficient

remedy; and in the case where a principal will suffer significant delay and disruption if plant is removed, an injunction may be obtained.167 Onerous provisions which operate upon determination may be subject to equitable modification or adjustment if considered by the court to operate as a penalty. For example, a clause that provided ‘the monies which shall have been previously paid to the contractor under this contract shall be deemed to be the full value of the works executed and shall be taken and accepted by the contractor in full payment and satisfaction of all claims and demands under this contract’ was considered to involve a forfeiture of existing rights and, as such, to be a penalty.168 Care must be taken in assessing whether a particular contract does, in the circumstances that have evolved, give a right to take possession of construction plant and materials.169 [page 282]

Measure of damages where proprietor repudiates 12.18 In Burns v MAN Automotive (Aust) Pty Ltd,170 Wilson, Deane and Dawson JJ said that the general rule of restitutio stated by Parke B in Robinson v Harman171 forms the starting point of a consideration of the assessment of damages: see 11.3. However, as they pointed out, this general rule is limited by the rule laid down by the Court of Exchequer in Hadley v Baxendale.172 Where the proprietor repudiates, the builder may have suffered several losses. Having lost the benefit of the contract, the builder may have suffered a loss of profits on the job. Perhaps the builder had expended moneys in advance on purchases made for the purposes of the contract. In having lost the benefit of the contract, the builder may have lost a commercial advantage which would have been gained had the contract been performed. Damages for loss of profits and damages for expenditure reasonably incurred were said by Mason CJ and Dawson J in Commonwealth v Amann Aviation Pty Ltd 173 to be simply two manifestations of the general rule stated by Parke B in Robinson v Harman. As the decision in the Amann Aviation case shows, the builder may recover so-called reliance damages — ‘that is to say, damages equivalent to the wasted expenditure which has been reasonably incurred in reliance upon the

assumption that the contractual promises of the [principal] would be honoured’.174 In RJ Grills Pty Ltd v Dellios,175 Murray J said that it should be taken to be in the reasonable contemplation of the parties to a building contract, particularly a contract on a fixed price basis, that the builder might order and pay for materials well in advance of the time that those materials would be required. He said: … if through default of the owner the contract goes off, the builder should be entitled to claim the losses he will suffer by reason of having purchased the materials in advance. These losses should be calculated upon the basis of the cost to the builder less the value of the materials in its hands, that is the probable price which it will be able to get for them.

It is made clear by the judgments in the Amann Aviation case that recovery of reliance damages is not dependent upon whether the contract, if not repudiated, would have resulted in a profit.176 But loss of profits is a well-established head of damages.177 Having found him discharged by breach by a total prevention of performance, Lusher J in Gabriel v Sea & Retaining Wall [page 283] Constructions Pty Ltd178 held that the plaintiff in that case was entitled to the damages resulting from the loss of the benefit of the contract — ‘ie, the contract price less the cost to him of executing or completing the work … that is to say, the value of the work performed together with profit lost on the uncompleted work, credit being given for payments … made’. In Foley Bros v McIlwee,179 the Judicial Committee affirmed the decision of the British Columbia Court of Appeal. It held that the measure of damages is the difference between the amount payable to the contractor under the terms of the contract and the amount it would have cost the contractor to carry out the work if the contract had not been cancelled. There may be cases where a broader loss, beyond merely loss of profits on the job, of a commercial advantage is sought to be claimed by the builder. There may have been the expectation of further contracts. In principle such loss should be compensable. It is no objection that there would be difficulty in assessing it.180 Referring to the Amann Aviation case, Mason CJ, Dawson, Toohey and Gaudron JJ in Poseidon Ltd v Adelaide Petroleum NL181 said that ‘there can be no

doubt that a contract to provide a commercial advantage or opportunity, if breached, enables the innocent party to bring an action for damages for the loss of that advantage or opportunity’. There is no readily apparent reason why this principle should not extend to the appropriate building case. In the assessment of damages it is for the principal to show that the builder has failed to mitigate loss.182 A contractor’s loss is reduced if in consequence of the termination of the contract the contractor was enabled thereby to perform other contracts and make a profit.183 But the loss is not reduced if the other work could have been carried out in addition to the contract work or if no profit arose from such other work.184 If the contractor would have suffered a loss if the contract had not been terminated, an action may nevertheless be brought on a quantum meruit to recover the value of work and materials already supplied:185 see 8.8–8.9. [page 284] A claim in quantum meruit, however, does not lie if the contract is still on foot between the parties, and governs the situation between them.186 The standard form contract PC-1 1998 purports to limit the builder’s entitlement to claim a quantum meruit at common law.187 _________________________ 1.

(2002) 18 BCL 272.

2.

Ibid at [7]. See also Walter Construction Group Ltd v Walker Corporation Ltd (2001) 17 BCL 364.

3.

Davis Contractors Pty Ltd v Fareham Urban District Council [1956] AC 696 at 723; Codelfa Construction Co Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 357, 380.

4.

ABIC MW 2008 provides similarly at cl Q19.

5.

Thiess Contractors Pty Ltd v Placer (Granny Smith) Pty Ltd (2000) 16 BCL 130 at 170. This case went on appeal to the High Court as Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257, but this question was not considered.

6.

In Sabemo Pty Ltd v North Sydney Municipal Council [1977] 2 NSWLR 880, Sheppard CJ permitted recovery on the basis of restitution in quasi-contract, while Byrne J, agreeing with the justice of the decision, questioned this legal analysis in ‘Restitution: For Work Done in Anticipation of Contract’ (1997) 13 Building and Construction Law 4. Compare BBB Constructions Pty Ltd v Aldi Foods [2010] NSWSC 1352.

7.

Summers v Commonwealth (1918) 25 CLR 144; Wren v Emmett Contractors Pty Ltd (1969) 43 ALJR 213 at 216. See also Lombok Pty Ltd v Supetina Pty Ltd (1987) 14 FCR 226.

8.

Sturt v Cusack (1989) 12 Qld Lawyer Reps 84 at 92.

9.

[2013] ACTCA 28 at [24].

10. (2002) 18 BCL 272. 11. (2007) 233 CLR 115. 12. (1938) 38 SR (NSW) 632. 13. Khoompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at 48. 14. AS 4000-1997 cl 39.4. 15. Ibid cl 39.5. 16. Ibid cl 39.10. 17. ABIC MW 2008 cl Q1. 18. See cl 14.2. 19. PC-1 1998 cl 14.4. 20. The absolute requirement to remedy the breach contained in PC-1 1998 can be compared with the requirement to show reasonable cause contained in the AS 4000 and AS 2124 contracts. 21. Clause 14.6. 22. (2013) 29 BCL 19. 23. Ibid at 385. 24. Clause Q11. 25. AS 4000-1997 cl 39.10; ABIC MW 2008 cl Q15. 26. PC-1 1998 cl 14.3. 27. Ibid cl 14.4. 28. Ibid cl 14.7. 29. In Bysouth v Shire of Blackburn and Mitcham (No 2) [1928] VLR 562 at 578, Mann J referred to the situation as ‘a breach of contract by anticipation’. 30. (1989) 7 BCL 25 at 39; see also Shevill v Builders Licensing Board (1981) 149 CLR 620 at 625–6 and 633. 31. (1989) 166 CLR 623 at 658. 32. (1989) 7 BCL 25 at 39. 33. (1991) 7 BCL 284 at 29. 34. See also Sopov v Kane Constructions Pty Ltd [2007] VSCA 257. 35. (2007) 233 CLR 115. 36. Ibid at [44]. 37. Ibid at [44]. 38. Mersey Steel and Iron Co v Naylor Benzon & Co (1884) 9 App Cas 434 at 439. See also Robert Joseph Ryan and Martha Maria Ryan v Maxwell George McLachlan (1987) 4 BCL 155 and Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 3) (2013) 29 BCL 19.

39. See Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 111 ALR 649 at 663–4. 40. Nibaldi v Downes [1993] VSC 668. 41. See, for example, Foster v Frassetto (NSWSC), 55057/97, Rolfe J, 17 December 1997); appeal dismissed [1998] NSWSC 793. 42. (1989) 166 CLR 623 at 657. See also Bow v McGrath Builders Ltd [1974] 2 NZLR 442. 43. Mersey Steel and Iron Co v Naylor Benzon & Co (1884) 9 App Cas 434 at 442–3. 44. (1953) 89 CLR 327. As to the difference between rescission and determination see 12.8. In Adams v Quasar Management Services Pty Ltd [2002] QSC 223 the defendant imposed new conditions. 45. Summers v Commonwealth (1918) 25 CLR 144; Botros v Freedom Homes Pty Ltd (1999) 15 BCL 351. 46. Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286. Compare Sweet and Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699. But see Woodside Offshore Petroleum Pty Ltd v Atwood Oceanics Inc [1986] WAR 253. 47. Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd t/as ‘Uncle Ben’s of Australia’ (1992) 27 NSWLR 326 at 354 per Samuels JA. 48. Lennon v Scarlett & Co (1921) 29 CLR 499. 49. [2013] NSWCA 303. 50. (1958) 108 LJ 665. 51. (1961) 27 DLR (2d) 258; (1963) 38 DLR (2d) 9. 52. For example, failing to comply with contractual requirements as to content. 53. [1980] 1 WLR 571. 54. (1991) 7 BCL 284. 55. Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 at 343. 56. Wilson v Kirk (1991) 7 BCL 284 at 291. 57. [1968] Qd R 159. 58. See (1968) 42 ALJR 168. 59. Dimond v Moore (1931) 45 CLR 159 at 166. 60. Hudson Crushed Metals Pty Ltd v Henry [1985] 1 Qd R 202. 61. Compare Gold Coast Oil Pty Ltd v Lee Properties Ltd (1984) 1 BCL 63. 62. Fercometal SARL v Mediterranean Shipping Co SA [1989] AC 788. 63. Botros v Freedom Homes Pty Ltd (1999) 15 BCL 351; Shepard v Felt & Textiles of Aust Ltd (1931) 45 CLR 359. 64. Hughes v Dormley Pty Ltd [2001] WASC 83. 65. Building and Engineering Constructions (Aust) Ltd v Property Securities No 1 Pty Ltd [1960] VR 673 at 680; R P Robson Constructions Pty Ltd v D & M Williams (1989) 6 BCL 219 at 223. See also Gino D’Alessandro Constructions Pty Ltd v Powis [1987] 2 Qd R 40; Association of Professional Engineers, Scientists and Managers Australia (APESMA) v Skilled Engineering Pty Ltd (1994) 122 ALR 471 at 479. 66. [1951] 1 KB 417 at 421. 67. Vitol SA v Norelf Ltd [1994] 4 All ER 109 at 114.

68. Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 at 351–2. 69. Vitol SA v Norelf Ltd [1994] 4 All ER 109. 70. Christiansen v Klepac (2001) 10 BPR 18,955. 71. Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 646. 72. Khoury v Government Insurance Office of NSW (1983) 165 CLR 622. 73. (1933) 48 CLR 457 at 476–7. 74. [1980] AC 367 at 396. 75. [1985] 1 WLR 435 at 450. 76. [1989] 1 WLR 912 at 930. 77. (1993) 11 ACSR 609 at 614. 78. (1993) 114 ALR 541. 79. Y P Barley Producers Ltd v E C Robertson Pty Ltd [1927] VLR 194. 80. Clause 14.7. 81. Lodder v Slowey [1904] AC 442 at 453; Brooks Robinson Pty Ltd v Rothfield [1951] VLR 405 at 409. 82. Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 at 352. 83. (1990) 10 Aust Cons LR 64 at 68. See also Hughes Bros Pty Ltd v Telede Pty Ltd (1984) 7 BCL 204. 84. Botros v Freedom Homes Pty Ltd (1999) 15 BCL 351; Shepard v Felt & Textiles of Aust Ltd (1931) 45 CLR 359. 85. AS 4000-1997 cl 39.2 when delivered by the principal, cl 39.7 when delivered by the contractor. 86. Ibid cl 39.4 or 39.9. 87. Ibid cl 39.9. 88. ABIC MW 2008 cl Q1 and Q11. 89. Ibid cl Q2, Q13 and Q14. 90. Ibid cl R6. 91. PC-1 1998 cl 14.2, 14.3, 14.5 and 14.8. 92. [1971] 1 NSWLR 397. 93. Ibid at 401. 94. (1989) 7 BCL 25 at 37. 95. [1971] 1 NSWLR 397. 96. (1989) 7 BCL 25 at 37. 97. Ibid. See also J M Hill & Sons Ltd v London Borough of Camden (1980) 18 BLR 31 at 41, 48, and J Dorter, ‘Performance’ (1999) 15 Building and Construction Law 361 at 444. 98. AS 4000-1997 cll 39.2 and 39.3, PC-1 1998 cl 14.4 and ABIC MW 2008 cll Q1 and Q11. 99. [1971] 1 NSWLR 397. 100. Ibid at 402. 101. (1999) 15 BCL 467.

102. (2013) 29 BCL 19; [2012] VSC 99. 103. Ibid at [386], [391]. 104. Ibid at [397]. 105. Ibid at [402]. 106. [1965] NSWR 1671. 107. Ibid. 108. Ibid at 1675. 109. Ibid. 110. (1988) 5 BCL 74. 111. Ibid at 75. 112. (1990) 7 BCL 200 at 202. 113. Re White Industries (Qld) Pty Ltd (1990) 7 BCL 200 at 202. But cf Hughes Bros Pty Ltd v Telede Pty Ltd (1989) 7 BCL 204 at 208–9. 114. Clauses 39.3 and 39.4. 115. Clauses 39.8 and 39.9. 116. [1971] 1 NSWLR 397. 117. [1965] NSWR 1671. 118. (1991) 7 BCL 284. 119. AS 4000-1997 cl 39.4 and 39.9. 120. PC-1 1998 cl 14.5. 121. Clause Q1, but cf Q11. 122. (1992) 26 NSWLR 234. 123. Ibid at 257. 124. Ibid at 279. 125. Ibid. 126. Ibid at 275–6. 127. (1993) 10 BCL 355. 128. (1992) 9 BCL 265 at 269. 129. (2013) 29 BCL 19; [2012] VSC 99. 130. Ibid at 566. 131. See generally Hon Mr Justice Cole, ‘The Concept of Reasonableness in Construction Contracts’ (1994) 10 Building and Construction Law 7. 132. PC 1-1998 cl 14.2. 133. AS 4000-1997 cl 39.2. 134. ABIC MW 2008 cl Q1.1. 135. Ibid cl A1.

136. [1970] ALR 821 at 822–3. 137. [1965] NSWR 1671 at 1675. 138. Nibaldi v Downes [1993] VSC 668. 139. (1883) 9 VLR (L) 66. 140. [1971] Ch 233 at 267. 141. (1980) 18 BLR 35 at 44. 142. (1989) 7 BCL 25 at 39. 143. Mazelow Pty Ltd v Herberton Shire Council (2002) 18 BCL 272. 144. AS 4000-1997 cl 39.1; PC-1 1998 cl 14.7. 145. Bysouth v Shire of Blackburn and Mitcham (No 2) [1928] VLR 562 at 572 per Irvine CJ. 146. (1918) 25 CLR 144. 147. Ibid at 151. 148. See Bysouth v Shire of Blackburn (1928) VLR 562; Architectural Installations Services Ltd v James Gibbons Windows Ltd (1989) 46 BLR 91; and Lang & Morrison-Knudson v Aegon (1997) 86 BLR 70. 149. Wilson v Kirk Contractors Pty Ltd (1991) 7 BCL 284 at 294; Cox v Franz (NSWSC), BC7700005, Carmichael J, 22 June 1997, unreported). 150. See S Furst and V Ramsey, Keating on Building Contracts, 7th ed, Sweet & Maxwell, London, 2001, 6– 83A. 151. Smail (as trustee of the assigned estates of LM Wilson and GR Wilson) v DL Starbuck Pty Ltd [1971] VR 449 at 453. 152. See AS 4000-1999 cl 39.10. But note that there is also the entitlement to take over the plant and equipment which is a right which would not exist at common law: cl 39.5. 153. ABIC MW 2008 cl Q8. 154. PC-1 1998 cl 14.7. 155. Ibid cl 14.6. 156. (1978) 22 ALR 1. 157. [1971] VR 289. 158. See Chermar Productions Pty Ltd v Prestest Pty Ltd (1989) 7 BCL 46. 159. Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605 at 632 per Dixon J. 160. P & E Phontos Pty Ltd v NSW Land and Housing Corp (1987) 4 BCL 45 at 48, considering NPWC 3 cl 44.1. 161. R J Grills Pty Ltd v Dellios [1988] VR 136 at 138. 162. PC-1 1998 cl 14.6(a). 163. AS 4000-1997 cl 39.5. 164. (1976) 8 ALR 297. 165. Compare P & E Phontos Pty Ltd v NSW Land and Housing Corp (1987) 4 BCL 45 at 49. 166. DG Whelan Rentals Pty Ltd v Australian Building Construction Employees and Builder’s Labourers Federation

(1983) 46 ALR 339. 167. TR Nominees Investments Pty Ltd v Multiplex Constructions Pty Ltd (1996) 12 BCL 219, where a third party sought possession of cranes and a hoist; Acrow Pty Ltd v Allen C Smith Pty Ltd (NSWSC), Street CJ, 22 March 1994, unreported), where the equipment hirer had an immediate right to possession; Kallis Hire Pty Ltd v Consulere Design and Consruction [1990] VSC 161. 168. Bysouth v Shire of Blackburn and Mitchum (No 2) [1928] VLR 562 at 572. 169. P & E Phontos Pty Ltd v NSW Land & Housing Corp (1988) 4 BCL 45 is a case where the contract (NPWC 3) contained the power to take over construction plant, but not if a contractual power to cancel the contract was exercised. 170. (1986) 161 CLR 653 at 667. See also Surrey County Council v Bredero Homes Ltd [1992] 3 All ER 302 at 307, and Stuart Pty Ltd v Condor Commercial Insulation Pty Ltd (2008) 24 BCL 255. 171. (1848) 1 Ex 850 at 855; 115 ER 363 at 365. 172. (1854) 9 Ex 341 at 354; 156 ER 145 at 151. 173. (1991) 174 CLR 64 at 85. 174. Ibid at 127 per Deane J. 175. [1988] VR 136 at 139. 176. See (1991) 174 CLR 64 at 81, 99, 127. 177. Compare Foley Bros v McIlwee (1918) 44 DLR 5 at 7. 178. (1987) 3 BCL 162 at 167. 179. (1918) 44 DLR 5 at 7. 180. Chaplin v Hicks [1911] 2 KB 786 at 792; Fink v Fink (1946) 74 CLR 127 at 143. 181. (1994) 68 ALJR 313 at 320. 182. Gabriel v Sea & Retaining Wall Constructions Pty Ltd (1986) 3 BCL 162 at 168. See also TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 158. 183. See Re Vic Mill Ltd [1913] 1 Ch 465; Hill & Sons v Edwin Showell & Sons Pty Ltd (1918) 87 LJKB 1106; Driver v War Service Homes Commissioner (1923) 44 ALT 130; Thompson (WL) Ltd v Robinson (Gunmakers) Ltd [1955] Ch 177; Charter v Sullivan [1957] 2 QB 117; Interoffice Telephones Ltd v Robert Freeman Co Ltd [1958] 1 QB 190. 184. Gabriel v Sea & Retaining Wall Constructions Pty Ltd (1986) 3 BCL 162 at 168. 185. Planche v Colburn (1831) 8 Bing 14; 172 ER 876; Lodder v Slowey [1904] AC 442 at 453; Chandler Bros Ltd v Boswell [1936] 3 All ER Rep 179; Gabriel v Sea & Retaining Wall Constructions Pty Ltd (1986) 3 BCL 162 at 167. 186. Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251 at 275. See also Christiani & Neilson Pty Ltd v Goliath Portland Cement Co Ltd (1993) 2 Tas R 122. 187. PC-1 1998 cl 14.7.

[page 285]

13 ASSIGNMENT ASSIGNMENT GENERALLY Nature of assignment 13.1 Assignment of choses in action takes place when the liabilities imposed or the rights acquired under a contract between A and B are transferred to C who was not a party to the original contract.1 It is the immediate transfer of an existing proprietary right, vested or contingent, from the assignor to the assignee.2 In such circumstances, it may be said that C acquires liabilities or rights by virtue of an arrangement which does not fit neatly into some pre-cast contractual formula.3 In strict legal phraseology an instrument does not operate as an assignment unless the grantor parts with the whole of such party’s interest, but in common parlance it is otherwise.4

Rights and liabilities 13.2 It is necessary to distinguish between the assignment of rights under a contract and the assignment of liabilities under it.

ASSIGNMENT OF RIGHTS Generally 13.3 Rights under a building agreement are an example of a chose in action. Choses in action may be legal or equitable, the former being such as may be recovered or enforced by action at law5 as opposed to the old suit in equity.

Contractual rights under building agreements are legal choses in action. The common law refused to recognise the assignment of a chose in action on the ground that such an assignment led to maintenance. Negotiable instruments were an exception. As Windeyer J observed in Norman v Federal [page 286] Commissioner of Taxation6 it ‘was a somewhat unsophisticated view of legal rights that led the common lawyers to classify choses in action and debts with mere possibilities, and to condemn all assignments of them as leading to maintenance’. This common law doctrine was never accepted in equity. In addition, the legal assignment of a chose in action has been made possible by statute: see below 13.6. One result of the builder’s need for working capital is that assignments by builders of their rights under building agreements are common.7 Sometimes what is assigned is the right to receive retention moneys, as in Official Assignee of Palmer v Sharpe8 and Victorian Railways Commissioners v James L Williams Pty Ltd.9 In every case, though, this must be subject to any statutory prohibition which may apply. However, as is often so, a builder under a contract may give a personal guarantee by agreement and it has been said to be unnecessary even to cite authority for the proposition that the benefit of a contract of guarantee is assignable as a legal chose in action.10

Formalities for equitable assignments 13.4 No particular form of words is necessary for an equitable assignment. It need not be addressed to anyone. While, of course, there must always be an intention to assign,11 all that is otherwise necessary is that the debtor should be given to understand that the debt has been made over by the creditor to some third person.12 It should, of course, be supported by consideration but this requirement is usually met by execution of a deed.13 A document whereby the builder authorised the Department of Public Works to pay direct to the electrical subcontractor the balance due on the subcontract was held to be a good equitable assignment in Cossill v Strangman.14 An equitable assignment may be oral:15

An equitable assignment does not always take the form of an assignment. It may be addressed to debtor, it may be couched in the language of command;

[page 287] it may be a courteous request; it may assume the form of mere permission. The language is immaterial if the meaning is plain.16

Assignments by builders of moneys payable under building agreements commonly take the form of procuration orders in favour of subcontractors or suppliers. An example is in Sandford v DV Building & Constructions Co Pty Ltd.17 Assignments by way of security for loans are also common. A rule exists prohibiting the assignment of bare rights of action but this rule does not extend to the assignment of debts.18 Notice of an equitable assignment is not necessary to complete the title of the assignee either as between assignor and assignee19 or as between persons who stand in the same position as the assignor and the assignee.20 Nonetheless an equitable assignee should at once give notice to the debtor; for if the assignee fails to do so and the debtor makes payments to the assignor without notice of the assignment, the assignee is bound by the payments.21 While a written or formal notice is not demanded, a debtor who has received no notice of an assignment may discharge the debt by payment to the original creditor, the assignor.22 Notice, it seems, is sufficient if it brings home to the debtor the identity of the person in whom the legal right to sue is vested.23 Further, there is a danger that the debtor will make a further assignment, and that by the rule in Dearle v Hall24 the subsequent assignee will gain priority over an earlier assignee who has failed to give notice of the assignment to the debtor.25 Notice given should be clear and unambiguous.26 [page 288] Contractual rights under building agreements are legal choses in action. Rights conferred by an option under a building contract are also choses in action.27 A further disadvantage of a mere equitable assignment of a legal chose in action is that the assignor is a necessary party to an action; if the assignor refuses to join as a

plaintiff, the assignee’s proper course, having tendered the assignor an indemnity for costs, is to join the assignor as a defendant.28 Legal assignments of choses in action are considered in 13.6.

Assignee takes subject to equities 13.5 The assignee of a chose in action takes subject to all ‘equities’ affecting the assignor. This rule is ‘well established’ said Elliot J in the Victorian Supreme Court in Hogan v BPW Transpec Pty Ltd (No 2).29 This means that every assignee takes subject to all defences available as between the original parties to the obligation until notice is given of the first assignment.30 The word ‘equities’ is not used in its technical sense as meaning an equitable interest or something in the nature of an equitable interest; it is a general expression calculated to comprehend defences which would have been available to the debtor in an action brought against the debtor by the assignor as well as set-off and counter-claims.31 The possibility of disputes between builder and proprietor gives this rule practical importance; the benefit of the assignment may prove to be illusory. What is to be regarded as a defence for the purposes of the rule is not clear. In Young v Kitchin32 the builder assigned to the plaintiff the balance of the cost of the works. In an action on the assignment the defendant proprietor claimed ‘by way of set-off and counter-claim’ damages for breach of the building agreement by the assignor in not completing the work within the time agreed. It was held that this cross-claim was a defence as against the assignee but, since the defendant had no claim to recover anything against the plaintiff but was entitled only to meet the plaintiff’s claim, the defendant should be required to amend by showing that he did not claim to recover damages but only to set them off against the plaintiff’s claim. Similarly, in Government of Newfoundland v Newfoundland Railway Co33 the Judicial Committee expressed the view, applying Young v Kitchin, that the proprietor might set off a claim for damages for delay against a claim by an assignee for the price of the work. In both these cases the proprietor’s claim was for unliquidated damages.34 [page 289] Certain Australian authorities, on the other hand, suggest that a claim for

unliquidated damages may not be raised as a set-off to a liquidated demand and may be pleaded only by way of counter-claim.35 In Edward Ward & Co v McDougall,36 Gowans J was of opinion that he was not bound by authority to hold that a cross-claim for unliquidated damages could never be set off against a common law claim for a liquidated amount. In whatever way the conflict is to be resolved, it would seem that there are some claims which may not be set off in an action brought by the assignee of a chose in action.37

Statutory assignments 13.6 Provision for the assignment of choses in action has been made by statute and in the case of an assignment falling within the statutory provision the assignee may sue in the assignee’s own name. By s 134 of the Property Law Act 1958 (Vic) the legal right to a chose in action is vested in the assignee provided that the following three conditions are satisfied: 1.

the assignment must be absolute and not purport to be by way of charge only;

2.

the assignment must be in writing under the hand of the assignor; and

3.

express notice in writing of the assignment must be given to the debtor. This provision is to be found in force in the other states and territories also.38

An ‘absolute’ assignment signifies one which is unconditional.39 The statutory method of assignment is not available for the assignment of part of a chose in action.40 By s 134 the assignee takes subject to equities, so that legal assignments are in the same position as equitable assignments in this regard. An assignment not falling within the statutory provisions is ineffective except in equity as an equitable assignment.41 [page 290]

Nature of rights assignable 13.7 Assignments of rights under building agreements are usually instruments whereby builders in need of working capital assign to a subcontractor or supplier

or to a lender the right to receive moneys payable under the building agreement. The case of Bruce v Tyley42 is unusual. Bruce had a contract with the military authorities to remove garbage from a military camp. He entered into a subcontract with Tyley for the performance of part of this work. Subsequently Tyley assigned to his wife his interest in the subcontract. An action by Mrs Tyley against Bruce for damages for the repudiation of the subcontract failed. The basis of the decision, however, is not clear and the reasoning in the judgments is unsatisfactory. The fact that on the proper construction of the contract the builder has no right to arrange for vicarious performance does not have the consequence that the builder is not entitled to assign money due under the contract.43 The proprietor may be entitled to assign the benefit of the contract, although such assignments are in practice rare. Whether the proprietor is so entitled depends upon the proper construction of the contract. It is necessary to consider whether the contract is a personal one. If, having regard to the terms of the particular contract, the personal element does enter into consideration, the benefit of the contract may not be assigned as in Kemp v Baerselman.44 In that case the personal element was held to make the benefit of a contract for the sale of goods incapable of assignment, while in Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd45 the benefit of a contract for the supply of chalk to a cement manufacturer was held to be assignable. The general rule that the benefit of the performance of a contract involving personal skill and confidence cannot be assigned was affirmed in Devefi Pty Ltd v Mateffy Pearl Nagy Pty Ltd.46 Some of the cases on assignments deal with contracts for the sale of goods where the contract on its proper construction obliges the seller to supply a new purchaser to whom the original purchaser has purported to assign the contract: although they make reference to the ‘assignment’ of the contract, it is not clear whether what is being considered is the assignment of the right to receive the goods, or the obligation to pay for them, or both. For example, in Cole v Wellington Dairy Farmers’ Co-operative Association47 the matter for determination was whether the vendor was obliged to supply the assignee of the purchaser. Stout CJ said that the question was whether ‘the contract’ was assignable and went on to answer this question in the [page 291]

negative on the ground that credit had to be given in a considerable amount and that it could not have been intended that the contract could be assigned to a person who might well be unworthy of credit.48 To take this approach is to assume that the question for determination is a composite one, namely, whether the right to receive goods and the obligation to pay for them have been transferred to the assignee. It is possible, however, that on the proper construction of the contract the benefit but not the burden is assignable: compare Kemp v Baerselman where Lord Alverstone CJ suggested that the question of payment might not prevent the benefit of the contract being assignable.49 It is submitted that it is always a matter of construing the contract with regard to benefit and burden and that on the proper construction it may be possible to assign one or the other, or both, or neither. It is not possible, as a matter of basic principle, to assign the benefit of a guarantee or the security for it while retaining the benefit of the guaranteed debt and thereby to convert the one debt owing by both principal debtor and guarantor to the one creditor into two debts, one owing by the principal debtor to the creditor and the other owing by the guarantor to the assignee.50 It has been held that a holding company has a legitimate interest in the enforcement of a cause of action which has been obtained by one of its subsidiaries when the cause of action arose even though the ownership of the subsidiary subsequently changes.51 Bare rights to litigate are generally not capable of assignment,52 but it is different if the assignee has a genuine or substantial commercial interest in the suit.53 There is discussion of what is meant by a ‘genuine commercial interest’ in the judgment of Gotterson JA (with which McMurdo P and Martin J expressed agreement) in WorkCover Queensland v AMACA Pty Ltd.54 From the time of the making of a costs order there is a valuable subsisting right in a litigant which is capable of assignment.55 The benefit of an estoppel arising by deed is capable of transmission by way of assignment depending on the subject matter of the estoppel.56 [page 292]

ASSIGNMENT OF LIABILITIES

Assignment of liabilities 13.8 Neither party to a building agreement may assign liabilities under it without the consent of the other.57 In general, one cannot assign a contract.58 If the other party consents to the assignment of the liability, there is a novation and a novation may be inferred from conduct.59 What is described as an assignment may be found to be a novation.60 The difference between a transfer of a debt by assignment and by novation was explained by Windeyer J in Olsson v Dyson61 as follows: ‘Novation is the making of a new contract between a creditor and his debtor in consideration of the extinguishment of the obligation of the old contract … [A]ssignment of a debt, on the other hand, is not a transaction between the creditor and the debtor. It is a transaction between the creditor and the assignee to which the assent of the debtor is not needed.’ This was quoted by Edmonds J in Fitzroy Services Pty Ltd v Commissioner of Taxation.62 Three elements for a novation were identified by the Court of Appeal of New Zealand in Hela Pharma AB v Hela Pharma Australasia Ltd63 and quoted by it in Kakara Estate Ltd v Savvy Vineyards 3552 Ltd64 as: ‘(a) the consent of all parties (that is, the original parties and the new party) is required; (b) [such] consent may be inferred from conduct and need not be express; (c) there must be consideration (mutual promises can amount to consideration).’ The contract may expressly or by implication permit one party to be rid of a liability without the consent of the other but such cases are not common. These propositions were affirmed by the House of Lords in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd.65 Lord Browne-Wilkinson, delivering the leading speech in that case, said that the ‘burden of a contract can never be assigned without the consent of the other party to the contract in which event such consent will give rise to a novation’.66 This was described by him as ‘trite’ law and was quoted by Ball J in CBD Prestige Property Holdings No 3 Pty Ltd v Metropolitan Local Aboriginal Land Council.67 [page 293]

Vicarious performance 13.9 In Nokes v Doncaster Amalgamated Collieries Ltd68 Viscount Simon LC drew

attention to the need to differentiate between the question of ‘assignability’ and the question whether the original contracting party may perform the contract by getting somebody else to do the work in satisfactory fashion. An example of a contract under which the contractor had that right is to be found in British Waggon Co and the Parkgate Waggon Co v Lea & Co.69 The decision in Lyon v Creati70 affords a Victorian example of the failure to distinguish clearly between ‘assignability’ and vicarious performance. In McElroy v Australian Forge and Engineering Co Pty Ltd,71 a contract for the painting of railway trucks was held not to require the contractor to do the work personally. Building agreements in writing usually prohibit assignment of the contract without consent.

PROHIBITION OF ASSIGNMENT Contractual provisions 13.10 Written building agreements commonly contain an express prohibition of assignment without consent. Clause 1.05 of the JCC form of contract is such a provision, adding that the consent is not to be unreasonably withheld. Clause 4.01 of the JCC form of contract permits subcontracting any part of the works but not the works as a whole; cl 4.02 preserves the liability of the builder in respect of subcontracted work. Clause R1.1 of ABIC MW 2008, substantially in keeping with the earlier JCC form, provides that neither of the parties may assign any rights under the contract without the other’s consent, which must not be unreasonably withheld. The argument that a contractual prohibition on assignment without consent was contrary to public policy and unenforceable was rejected in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd.72 Sackville J referred to this ruling in Matter of Turner Corp Ltd (in liq)73 but was able to hold, nonetheless, on the facts of the case, that moneys once paid over formed part of the payee’s assets. It was held by Ball J in Re Idoport Pty Ltd (in liq) (recs apptd)74 (and quoted with approval by Stevenson J in Ocean Marine Insurance Co Ltd v CSR [page 294]

Ltd)75 that ‘the existing authorities establish that an attempted assignment of contractual rights in breach of a contractual prohibition is ineffective to transfer such contractual rights.’

Issue of ‘final say’ 13.11 The final say, not only over payment, but over control and quality of works, may be affected by a prohibition on assignment. In Helstan Securities Ltd v Hertfordshire County Council,76 a county council entered into a contract with a contractor to carry out roadworks. The contract contained a stipulation that the contractor was not to ‘assign the contract or any part thereof or any benefit or interest therein or thereunder without the written consent’ of the council. Without the council’s consent, the contractor assigned to the plaintiff the amount alleged to be owing by the council. The council refused to pay the plaintiff and the plaintiff brought an action to recover payment. The plaintiff contended that, while the contract prohibited the assignment of the contract and certain choses in action arising under it, it did not prohibit the assignment of debts which arose under it. Croom-Johnson J held that if the parties to a contract, the subject matter of which was a chose in action, agreed that the chose in action was not to be assigned, any purported assignment was invalid. The debt from the council to the contractor was both a chose in action and a ‘benefit or interest’ under the contract, and accordingly the contractor could not validly assign it without the council’s consent and the council was entitled to refuse payment. He refused to draw the distinction between a right to payment on a certificate and the resulting debt. He pointed out that the clause, together with its following clause forbidding subletting the whole of the works, had the object of allowing the employer to retain control of who did the work. Clause 1.05 of the JCC form of contract prohibits the assignment of the contract and the agreement respectively but, unlike cl 9.1 of NPWC 3, does not add a prohibition on the assignment of any part thereof. Clause R1.1 of ABIC MW 2008 refers to the prohibition on the assignment of ‘any rights’ under the contract.

Effect of prohibition on assignment 13.12 The decision in Helstan Securities Ltd v Hertfordshire County Council77 was

cited by the House of Lords in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd,78 where it was held as established that an attempted assignment of contractual rights in breach of a contractual prohibition is ineffective to transfer such contractual rights to the assignee. This ruling was followed by [page 295] Brownie J in Berata Air Systems v FAI Insurance Ltd,79 and is good law based on the authority of Ocean Marine Insurance Co Ltd v CSR Ltd.80 In England, however, reference must now be made in issues of this kind to the Contracts (Rights of Third Parties) Act 1999 (UK). It seems clear, though, that causes of action under Pt V of the former Trade Practices Act 1974 (Cth) are not assignable at all.81 See now the ACL in the Competition and Consumer Act 2010 (Cth) Sch 2. _________________________ 1.

Halsbury’s Laws of England, 4th ed, Vol 9, para 336. See generally J G Starke QC, Assignments of Choses in Action, Butterworths, Sydney, 1972.

2.

Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 26 per Windeyer J. See Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd (2012) 294 ALR 550; [2012] WASCA 216 at [126].

3.

Compare remarks of Lord Millett in Alfred McAlpine Construction Ltd v Panatown Ltd [2000] 3 WLR 946 at 1012.

4.

Butler v Capel (1823) 2 B & C 251 at 253; 107 ER 377.

5.

See Westralian Farmers Co-Operative Ltd v Southern Meat Packers Ltd [1981] WAR 241 at 244 per Burt CJ: ‘A chose in action is a thing recoverable by action’.

6.

(1963) 109 CLR 9 at 26.

7.

See Holland-Stolte Pty Ltd v Bill Acceptance Corp Ltd (1992) 11 Aust Cons LR 181 at 184 per Brooking J.

8.

[1921] NZLR 460.

9.

(1969) 44 ALJR 32.

10. Mark Sensing (Aust) Pty Ltd v Flammea [2003] VSCA 41 at [21] per Charles JA. 11. See Noonan v Martin (1987) 10 NSWLR 402. 12. William Brandt’s Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 at 462; Liverpool & London and Globe Insurance Co Ltd v Hartley & Ford [1927] VLR 523. 13. Westgold Resources NL v St George Bank Ltd [1998] WASC 352. 14. [1963] NSWR 1695.

15. Tibbits v George (1836) 5 Ad & El 107; 111 ER 1107; Riccard v Prichard (1855) 1 K & J 277; 69 ER 462. Compare, however, PT Ltd v Maradona Pty Ltd (No 2) (1992) 27 NSWLR 241. 16. William Brandt’s Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 at 461 per Lord Macnaghten. 17. [1963] VR 137. The dutiability under the Stamps Act 1958 (Vic) (now the Duties Act 2000 (Vic)) of instruments constituting equitable assignments was considered in Liverpool & London and Globe Insurance Co Ltd v Hartley & Ford [1927] VLR 523 and Re Row Dal Constructions Pty Ltd [1966] VR 249. In both cases Camp v King (1887) 14 VLR 22 was distinguished. The question whether an authority given by a builder to the proprietor to pay money to a third person constituted a good equitable assignment was considered in Robinson v Podosky [1905] St R Qd 118; Hyne and Sons v Podosky [1905] St R Qd 147; Re H Dengate and Son (1921) 21 SR (NSW) 619; Re Buring and Chapman; Ex parte Gibson (1941) 13 ABC 72; Re Stewart (1943) 13 ABC 229; Re Cunningham [1966] ALR 26. 18. Re Daley; Ex parte National Australia Bank Ltd (1992) 37 FCR 390 at 394. An assignment of a cause of action in contract or tort is only valid if there has been an assignment of a property right and the cause of action is ancillary to it or if the assignee had a genuine commercial interest in taking the assignment and enforcing it for his or her own benefit: Monk v Australia and New Zealand Banking Group Ltd (1994) 34 NSWLR 148 at 152. 19. Gorringe v Irwell India Rubber and Gutta Percha Works (1886) 34 Ch D 128. 20. Re Wallis; Ex parte Jenks [1902] 1 KB 719. 21. Stocks v Dobson (1853) 4 De GM & G 11; 43 ER 411. 22. Squires v SA Steel and Sheet Pty Ltd (1987) 45 SASR 142 at 144. 23. Westgold Resources NL v St George Bank Ltd [1998] WASC 352. 24. (1828) 3 Russ 1; 38 ER 475. 25. Re Wallis; Ex parte Jenks [1902] 1 KB 719. 26. Squires v SA Steel and Sheet Pty Ltd (1987) 45 SASR 142 at 144. 27. Westgold Resources NL v St George Bank Ltd [1998] WASC 352. 28. Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 27. 29. [2013] VSC 372 at [47]. 30. Southern British National Trust Ltd (in liq) v Pither (1937) 57 CLR 89 at 108. 31. Clyne v Deputy Commissioner of Taxation (NSW) (1981) 35 ALR 567 at 580. See also Bank of New Zealand v Harry M Miller & Co Ltd (1992) 26 NSWLR 48 at 52. 32. (1878) 3 Ex D 137. 33. (1888) 13 App Cas 199. 34. See also Hanak v Green [1958] 2 QB 9; D Galambos & Son Pty Ltd v Mclntyre (1974) 5 ACTR 10. 35. See McDonnell & East Ltd v McGregor (1936) 56 CLR 50 at 62; Re KL Tractors Ltd [1954] VLR 505 at 508; Bayview Quarries Pty Ltd v Castley Development Pty Ltd [1963] VR 445. 36. [1972] VR 433. 37. For a discussion of the conflicting views see ICF Spry, ‘Equitable Set-offs’ (1969) 43 ALJ 265. See also Stoddart v Union Trust Ltd [1912] 1 KB 181. 38. See: Civil Law (Property) Act 2006 (ACT) s 205; Conveyancing Act 1919 (NSW) s 12; Law of Property Act (NT) s 182; Property Law Act 1974 (Qld) s 199; Law of Property Act 1936 (SA) s 15;

Conveyancing and Law of Property Act 1884 (Tas) s 86; Property Law Act 1969 (WA) s 20. 39. Compare Clyne v Deputy Commissioner of Taxation (NSW) (1981) 35 ALR 567 at 580. 40. Sandford v DV Building & Constructions Co Pty Ltd [1963] VR 137 at 139; Norman v Federal Commmissioner of Taxation (1963) 109 CLR 9 at 29. 41. Westgold Resources NL v St George Bank Ltd [1998] WASC 352. See also Primary Yield Finance Pty Ltd v Meyer [2012] VSC 595 at [22]. 42. (1916) 21 CLR 277. 43. Russell and Co Ltd v Fryers (1909) 25 TLR 414; International Fibre Syndicate v Dawson (1901) 84 LT 803 at 804. 44. [1906] 2 KB 604. 45. [1903] AC 414. 46. (1993) 113 ALR 225 at 234. The court there pointed out that ‘fruits of performance’, such as copyright, stand in a different situation and are assignable. 47. [1911] NZLR 372. 48. Ibid at 377–8. See further Holland-Stolte Pty Ltd v Bill Acceptance Corp Ltd (1992) 11 Aust Cons LR 181 at 185 per Brooking J. 49. [1906] 2 KB 604 at 609. 50. Hutchens v Deauville Investments Pty Ltd (1986) 68 ALR 367. 51. Deloitte Touche Tohmatsu v JP Morgan Portfolio Services Ltd (2007) 240 ALR 540; [2007] FCAFC 52 at [56]–[66]. See also Insight SRC IP Holdings Pty Ltd v Australian Council for Educational Research Ltd (2013) 101 IPR 484; [2013] FCAFC 62 at [28]. 52. See discussion in EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd (No 3) [2013] WASC 183 at [885]–[904]. 53. Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498; [2012] HCA 7 at [79]. See also CH2M Hill Australia Pty Ltd v State of NSW [2012] NSWSC 963 at [388]. 54. [2012] QCA 240 at [65]–[66]. 55. Lewis v Lamb [2012] NSWSC 244 at [30]. 56. See Labracon Pty Ltd v Cuturich [2013] NSWSC 97 at [110]–[113]. 57. Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 at 668; [1903] AC 414 at 424. 58. Specialised Transport Pty Ltd v Dominiak (1989) 16 NSWLR 657 at 663. 59. Re Marton Club House Buildings Co Ltd (1908) 10 GLR 582. 60. Harkness v Mayor of Maryborough (1872) 3 AJR 26. See also Yara Australia Pty Ltd v Oswal (No 2) [2013] WASCA 187 at [96]. 61. (1969) 120 CLR 365 at 388. 62. [2013] FCA 471 at [36]. 63. [2005] BCL 202 at [56]. 64. [2013] NZCA 101 at [35].

65. [1994] 1 AC 85. 66. Ibid at 103. 67. [2013] NSWSC 1005 at [77]. 68. [1940] AC 1014 at 1019. 69. (1880) 5 QBD 149. 70. (1892) 18 VLR 629. 71. (1899) 24VLR 953. See further Newell v Moulden (1911) 11 SR (NSW) 539; Bruce v Tyley (1916) 21 CLR 277. 72. [1994] 1 AC 85. See also Alfred McAlpine Construction Ltd v Panatown Ltd [2000] 3 WLR 946. 73. (1995) 17 ACSR 761. 74. [2012] NSWSC 524 at [47]. 75. [2012] NSWSC 1229 at [75]–[78]. 76. [1978] 3 All ER 262. 77. [1978] 3 All ER 262. 78. [1994] 1 AC 85 at 108–9. 79. SC(NSW), 17 February 1995, unreported. 80. [2012] NSWSC 1229 at [75]–[78]. 81. Mark Sensing (Aust) Pty Ltd v Flammea [2003] VSCA 41 at [29].

[page 297]

14 SUBCONTRACTS SUBCONTRACTS GENERALLY Subcontracts 14.1 Usually the builder will execute various parts of the works, not personally, but by the employment of specialist contractors. The contracts whereby the builder arranges for the vicarious performance of parts of the work are known as subcontracts. There is a high degree of subcontracting in the building industry.1 In building contracts, the engagement of a subcontractor is, if there is no stipulation to the contrary, considered ordinarily unobjectionable. Generally a ‘head’ contract, which is between the principal contracting parties, will expressly provide for subcontracting. In the absence of any express restraint, the right to subcontract will be limited only to work which might be regarded as personal in character,2 such as involving some type of specialist knowledge. Both the subject matter and the form of subcontracts vary greatly. The subcontract may be for the doing of work and the supply of materials, for example, general fitout work or mechanical or electrical work or painting. It may be for the doing of work only, such as excavation or drilling or demolition work. It may be for the supply of goods only, such as windows or precast concrete components, upon the basis that such goods are to be fixed by the builder. The subcontractor will often be engaged in a highly specialised business and will in fact quite often design the portion of the work to be executed; so, the structural steel, piled foundations or even air-conditioning units may be designed by the subcontractor concerned. The highly specialised character of much of the work, frequently coupled with the importunity of a proprietor anxious for an early start, may cause architects, engineers and others to place undue reliance on subcontractors in matters of design. This approach used to be commonly linked

to the use of prime cost or provisional sums, but more recently, particularly in fast-track design and construct projects, it is used to push the risk of design growth from the proprietor on to the head contractor. [page 298] Any supplier of goods is, in reality, a subcontractor. Unless regard is being had to particular legislation there is no real distinction.3 The term ‘supplier’ is commonly used to describe suppliers of goods which are specially manufactured for the works. Subcontractors or suppliers who are nominated or selected by the proprietor or architect are known as nominated subcontractors or nominated suppliers,4 and have been the subject of elaborate provisions in many standard building agreements.5 The majority of standard form contracts used in the Australian construction industry permit builders to subcontract to various degrees. JCC cl 4.01 permits builders to subcontract any part of the works but not the whole. AS 2124 allows builders to subcontract with the written approval of the principal. AS 4000 allows builders to subcontract but provides a means by which this can be specifically limited.6 NPWC 3 allows the builder to subcontract with the written approval of the principal. Formal approval processes are commonly not followed. ABIC MW 2008 deals with this in cl G14, allowing for separate contractors for separate work. The common law position of subcontractors has been significantly affected by the introduction of security of payment legislation in all states and territories. The schemes introduce procedures aimed at securing progress payments for subcontractors and suppliers:7 see 9.20.

Meaning of ‘subcontractor’ 14.2 Sometimes it will not be clear whether a party is a subcontractor or not. For example, in South Seas Drilling Co v Esso Australia Ltd8 the issue was whether an injured worker was an employee of a subcontractor of the third party. The case concerned the interpretation of a clause in a contract which provided an

indemnity for an employer in respect of a damages claim for injury suffered by an employee where the employer was a subcontract or subcontractor. The court below had held that the employer was a subcontractor of the third party ‘in the generally accepted [page 299] sense of that term’.9 However, on appeal, that judgment was set aside and a finding made that the injured worker was an employee of a contractor and not of a subcontractor of the third party substituted. As was said by O’Bryan J,10 with whom Vincent J concurred: In its ordinary meaning ‘sub-contractor’ means (1) ‘a contract, or one of several contracts, for carrying out a previous contract or part of it’ (The Oxford English Dictionary); (2) ‘one who contracts to render some performance for another which the latter requires for the performance of his own contract’ (Macquarie Dictionary). ‘Sub’ is a prefix meaning ‘under’ (Macquarie Dictionary).

And as the judge then went on to observe:11 … in order to find a sub contractor there must exist somewhere a ‘head contract’ and a further contract under the ‘head contract’ whereby a contractor has agreed to perform the whole or portion of the head contract for the principal contractor.

The employer was not a subcontractor of the third party because in no sense at all had the employer agreed to perform the whole or a portion of a head contract involving the third party. It followed that the injured worker was not an employee of a subcontractor. A party may be, of course, not a subcontractor but a sub-subcontractor.

Types and form of subcontracts 14.3 Subcontracts vary widely not only in relation to their subject matter but also in relation to their form. There are standard forms put out to be used in conjunction with standard form head contracts. Builders, in a large way of business, sometimes have their own standard forms which they modify to suit the particular case. Some builders who do not use a standard form of subcontract use a printed form of order when letting subcontracts. These printed forms of order have their own set of printed conditions, which are frequently ill-drawn.

Often a particular printed condition is difficult if not incapable of application to the subject matter of the particular contract. Subcontractors and suppliers naturally envelop their own tender or quotation in a protective covering of conditions, which are usually as ill-drawn and one-sided as the conditions forming part of the order. Frequently great difficulty is encountered in ascertaining the terms of a subcontract from a considerable body of correspondence which may, for example, include the subcontractor’s original tender with printed conditions on its reverse side, the letter accompanying the tender, which itself contains conditions [page 300] (perhaps conflicting with those on the tender itself), a letter from the builder referring to conversations which have taken place with a view to reducing the price, a revised tender and accompanying letter, a printed form of order bearing printed and additional typewritten conditions and a letter accompanying the order. It may also be necessary to consider conversations and a prior course of dealing. In major projects it has become common for prequalification submissions and meetings to take place, and post-tender, a series of tender clarification meetings might occur. What is discussed in such meetings, particularly if reduced to a set of minutes distributed to the parties, by email or otherwise, may have contractual significance. Another possible source of confusion is the act of the architect (as the owner’s agent) in obtaining a quotation which the architect then either purports to accept or directs the builder to accept. Not infrequently it is found that a subcontract for costly works or materials has been let by the mere oral acceptance by the builder of a tender or quotation which, when the work or materials are found to be unsatisfactory, is properly examined then for the first time and found to contain stringent conditions negating or limiting liability. Contractors commonly focus on the tendered price of a subcontractor and do not address other important considerations. The precise scope of supply or work to be performed and the time in which the subcontractor is to complete that

work or make that supply, and what events might entitle it to an extension of time, are matters commonly left unclear. Various examples of standard form subcontracts have existed. See, for example, SC JCC 1994. Also there have been Australian Standard subcontract conditions (AS 2545-1993) compatible with head contracts AS 2124-1992, AS 2125-1992 and AS 2127-1992. More recent standard form contracts have been the AS 4000 suite of contracts and subcontracts.12 Standard form subcontracts are often used as general conditions of contract to which special conditions apply. It is not unusual for a subcontract to refer to the general conditions of contract as being a particular standard form set of conditions, without attaching a set of the terms as found in the standard form of subcontract to it. Ordinarily, if the reference is sufficiently clear, those general conditions will be part of the terms of the subcontract. In Modern Building Wales Ltd v Limmer & Trinidad Co Ltd,13 the nominated subcontractor’s quotation was accepted by the head contractor by an order containing the words ‘in full accordance with the appropriate form for [page 301] nominated subcontractors (RIBA 1965-Edition)’. This was a misdescription, as the standard form of contract was dated ‘1963’. Nevertheless the English Court of Appeal found that the standard form of contract was incorporated into the subcontract, including the arbitration clause on which the dispute centred. This decision accords with common sense.

RELATIONSHIP BETWEEN PROPRIETOR AND SUBCONTRACTOR Payment of subcontractor 14.4 Ordinarily there is no privity of contract between a proprietor and a subcontractor, and the latter must look for payment to the builder alone.14 However, all major building contracts contemplate direct payment by the

proprietor to the subcontractor and the ability to deduct this amount from any sum due to the builder.15 Questions affecting the right of the proprietor to pay subcontractors upon determination of the employment of the builder were considered by the High Court in Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq).16 At times, usually under the spur of the builder’s insolvency, the sub-contractor seeks to address the proprietor directly. Historically the subcontractor would succeed in obtaining payment from the proprietor only if able to establish a contract made with the proprietor. This might have been either a contract to pay for the works or a contract of guarantee. In the latter case, s 126 of the Instruments Act 1958 (Vic) (and equivalent legislation in the other states and territories) requires the agreement or some memorandum or note thereof to be in writing signed by the proprietor or the proprietor’s agent. While there may still be circumstances where a subcontractor seeks to establish a contractual right directly against the proprietor, the position of subcontractors has been markedly improved by the introduction of security of payments legislation in the states and territories. See further 9.20. The circumstances of a case may be such as to enable the implication of a promise to pay on the part of the proprietor. Where the builder has become insolvent and the proprietor seeks to induce a reluctant subcontractor to continue to give credit, the question will be whether in the absence of [page 302] any express promise by the proprietor to pay, such a promise may in all the circumstances be implied. In Victorian Railways Commissioners v James L Williams Pty Ltd,17 an unsuccessful attempt was made by a nominated subcontractor for mechanical services to establish a promise by the proprietor (a separate agreement to the building contract) to pay retention moneys to it; the decision turned merely on the construction of the proprietor’s letter to the subcontractor. In an earlier case of WM Adams & Co Ltd v Symonds,18 the proprietor had plans prepared for a new building and via architects called for tenders for the steel reinforcement required for it. On 28 August 1922 the plaintiff company

tendered, and on the following day its tender was accepted. The defendant employed a contractor (Dinham) to erect the building. From December 1922 to September 1923, deliveries of steel reinforcement similar to that in respect of which the plaintiff had tendered to the defendant were made by the plaintiff at the site, with full knowledge that Dinham was the contractor, and such deliveries were made at the request and upon the order of Dinham’s foreman. These goods were debited by the plaintiff in its books against Dinham. The plaintiff invoiced Dinham. Dinham failed to pay, and the plaintiff then addressed itself to the defendant. It was held that the first question for determination was whether the goods were delivered under the contract made on 29 August 1922 to the defendant or to the defendant’s agent, or were delivered to Dinham personally as contractor for the building. Another case, Dodwell v Phillips,19 is an example of an unsuccessful attempt by a subcontractor to recover from the proprietor the cost of work done after the failure of the main contractor on the assurance of the architect that the subcontractor would be paid. In Pritchett & Gold and Electrical Power Storage Co Ltd v Currie,20 the head contract was for the supply and erection of an electrical installation. A subcontract was let for part of the work, namely, the supply and installation of a battery. The subcontractor supplied the battery, and it was installed. The head contractor went into liquidation, and, not having been paid for the battery, the subcontractor sued the proprietor, claiming that the battery was its property and that it was entitled to a lien on the money payable to the head contractor. The claim failed, it being held that upon the construction of the subcontract property in the battery had passed to the head contractor. The Court of Appeal distinguished Bellamy v Davey21 as a case where the subcontract was for the whole of the work the subject of the head contract. In Day v Ost,22 an architect who assured a subcontractor that ample funds were available to cover the balance of the price was held liable in negligence to the subcontractor. [page 303] Whether a payment by a proprietor direct to a subcontractor in the exercise of a power conferred by the head contract was voidable as a preference in the event

of the liquidation or bankruptcy of the builder was considered in Re CG Monkhouse Pty Ltd (in liq)23 and also in Re Cooper; Ex parte Smith.24 Perhaps a growing means by which a subcontractor can recover against the principal aside from statute will be under the law relating to quantum meruit: Where the law imposes an obligation independent of contract to pay a fair and reasonable price for the goods and services, such obligation arising from the law of restitution or unjust enrichment.25

In many ways of course this is arguably but an instance of a wider notion of unconscionability. Thus in ABB Power Generation Limited v Chapple26 the court permitted a subsubcontractor to recover from a contractor. Cockburn Cement had employed a contractor for the construction of some industrial equipment. The contractor employed ABB to supply the equipment. ABB contracted with CIS to clad the equipment. CIS had engaged a scaffolder to provide the scaffolding necessary to perform this work. The trial judge had awarded judgment in favour of the scaffolders against ABB and the Court of Appeal of Western Australia rejected the appeal. It seems clear that the scaffolder expected CIS to pay it and pass its claim on to ABB. The court did not perceive a contract between the scaffolder and ABB but, in a somewhat unusual decision, accepted the scaffolder’s claim in quantum meruit.

Issues in statutory schemes for payment 14.5 In recent years all states and territories have introduced legislation providing for security of payment for subcontractors. The legislation is set out in 9.20 where an overview of the Victorian provisions is given. The laws in all states and territories are closely aligned, although slight variations in form do occur. The Western Australian legislation contains some significant differences, discussed below. All Acts provide comprehensive schemes aimed at securing progress payments to contractors, subcontractors and suppliers in the building and construction industry. The legislation specifies that construction contracts must provide for progress payments, and sets default provisions in the event that a construction contract does not do so. The legislation provides for quick independent adjudication, a means by which an adjudicator’s decision is enforceable and provides a right to suspend work for non-payment.

[page 304] Division 4 of the Building and Construction Industry Security of Payment Act 2002 (Vic) provides that in certain circumstances a subcontractor may obtain a statutory right to be paid by the principal moneys owed by a head contractor. The procedure is only applicable if the subcontractor has obtained an adjudication in its favour on a claim lodged. First the subcontractor must obtain a debt certificate,27 and then it must serve a notice of claim on the principal in prescribed form.28 Thereafter the principal must pay the claimant the money which the principal owes to a respondent (head contractor).29 In order to obtain a debt certificate it must first have served a payment claim complying with s 14 of the Act, obtained a payment schedule, adjudicator’s determination or the default provision of s 15(4) of the Act must apply, and then, on application to a court, a debt certificate may be issued. In New South Wales, the Contractors Debts Act 1997 amended the similarly titled Act of 1897 by updating its provisions and terminology. It provides a means by which an attachment order can be made on moneys retained by a proprietor.30 In George Feros Memorial Hostel Committee Incorp v Hammat Constructions Pty Ltd,31 a question in issue was whether rights of subcontractors to recover moneys due extends to recovery from a security bond given by a bank to a proprietor in lieu of a retention fund by the builder. The court held that as the money was not ‘money that is payable … to the defaulting contractor’32 (ie, the builder), no valid claim on the money could be made. In Re Summit Design & Construction Pty Ltd33 it was held that the Contractors Debts Act 1997 (NSW) should not be construed so as to prevail over any provisions of the Corporations Law (now Corporations Act 2001 (Cth)), as one might expect. The Queensland Subcontractors’ Charges Act 1974 provides a means by which subcontractors can charge moneys owed by a principal/contractor in respect of moneys owing under any contract; however, contractors cannot bring a dispute under both that Act and the Building and Construction Industry Payments Act 2004 (Qld).34 The Queensland Subcontractor’s Charges Act makes provision for a preferential change in favour of a subcontractor on moneys payable by a principal to a contractor which secures all moneys payable under the subcontract. As

pointed out by Dunn J in Ex parte Pavex Constructions35 there is broadly similar legislation in South Australia in the Worker’s Liens [page 305] Act 1893.36 The South Australian Act allows for liens and charges in favour of workers and subcontractors in certain circumstances. By virtue of the Northern Territory Acceptance Act 1910 (Cth) s 7(1), the Worker’s Lien Act 1893 (SA) remains in force in the Northern Territory.37 The Western Australian Construction Contracts Act 2004 is significantly different to the legislation in other jurisdictions. A critical element is that the reasonable payment terms set out in the Act are only implied where a contract does not provide payment terms.38 This is in contrast to the other states and territories where the provisions of the Act concerned override any express contractual provisions. Further, the Act only provides for the adjudication of a ‘payment dispute’ as against a ‘payment claim’ and either party may apply for adjudication.39 Section 13(1) of the Building and Construction Industry Security of Payment Act 1999 (NSW) (NSW Act) provides that a person ‘who is or claims to be entitled to a progress payment’ may make such a claim. In Bitannia Pty Ltd v Parkline Constructions Pty Ltd,40 Basten JA, with whom Hodgson and Tobias JJA agreed, considered that terms of this section do not import a: … separate precondition to the making of a valid payment claim under s 13 of the [NSW Act], requiring, as a precondition to enforcement action under s 15, proof that the claimant has made the claim with a bona fide belief in its entitlement to the moneys paid.41

If this position is upheld, it is expected to extend to the legislation in the Australian Capital Territory, the Northern Territory, Queensland, South Australia, Tasmania and Victoria, whose Acts are similarly expressed. In Gantley Pty Ltd v Phoenix International Group Pty Ltd,42 Vickery J considered payment claims which were only partially compliant with s 14 of the Building and Construction Industry Security of Payment Act 2002 (Vic) (Victorian Act). In order for a payment claim to satisfy the statutory requirement to identify construction work to which the payment claim relates, it must contain sufficient detail in order to determine the basis for

[page 306] the claim.43 His Honour determined that in circumstances where a payment claim was only partially compliant, the non-compliant part may be severed — thereby giving efficacy to the compliant part: Severance in this case would operate to achieve the purpose and objects of the Act and would not diminish the attainment of these goals. A respondent to a payment claim and an adjudicator, if appointed, should be able to assess the valid part of this progress claim which sufficiently describes the work for which payment is claimed, and provide a rational response or adjudication determination in respect of that part of the claim, and exclude from consideration that part of the claim which does not comply.44

In Seabay Properties Pty Ltd v Galvin Construction Pty Ltd,45 Vickery J considered the excluded items provision at s 10B of the Victorian Act. Section 10B operates to exclude items from the payment claim regime, for example, certain variations and contractual damages claims. The language of the provision does not explicitly exclude those items from payment schedules, but Vickery J held that applying s 10B to amounts claimed in a payment schedule ‘advances the purposes of the Act’. The contrary construction tends to work opposite to those purposes.46 Service of a payment claim prematurely, that is prior to the time for service in the contract, does not of itself invalidate a payment claim.47 In Chase Oyster Bar v Hamo Industries Pty Ltd,48 the court held, after extensive consideration of existing authority, that an arbitrator is under no duty to act judicially under the arbitration provisions of the NSW Act.49 It also held that the decision of an arbitrator may be set aside by the Supreme Court acting in its supervisory jurisdiction where the arbitrator’s decision is affected by jurisdictional error.50 Again, it is anticipated that these findings would extend to the Australian Capital Territory, the Northern Territory, Queensland, South Australia, Tasmania and Victoria where the relevant legislation in the case of each does not exclude Supreme Court jurisdiction.51 The legislation of Western Australia and the Northern Territory, however, expressly provide that, with the exception of a decision to dismiss the application, adjudicators’ decisions cannot be reviewed or appealed. Decisions to dismiss an application for adjudication may be reviewed by the [page 307]

State Administrative Tribunal (in Western Australia) or the Local Court (in the Northern Territory).52

Warranties 14.6 Just as the subcontractor cannot ordinarily look to the proprietor for the price, since there is no contract between them, so the proprietor will not ordinarily have any claim against the subcontractor in respect of defective work or material. It may be possible, however, to construct a contract between a proprietor and subcontractor by proving the existence of a collateral warranty, so that the proprietor can sue on that contract. Such a claim succeeded in Shanklin Pier Ltd v Detel Products Ltd.53 The plaintiff was the owner of a pier and engaged a contractor to repair the pier and to repaint it with bituminous paint, the plaintiff having the right under the contract to vary the specification. The defendant was the manufacturer of a paint known as ‘DMU’. The plaintiff established that, in consideration of the plaintiff’s specifying that its contractor should use DMU paint for repainting the pier in lieu of the bituminous paint originally specified, the defendant gave a warranty to the plaintiff that its paint would be suitable for repainting the pier, give a surface impervious to dampness, prevent corrosion and the creeping of rust, and have a life of seven to 10 years. The plaintiff also established that in reliance on the warranty it required its contractor to use the defendant’s paint, and that its contractor bought quantities of the paint from the defendant and used it on the pier. The plaintiff further established breaches of the warranty, and was held to be entitled to damages, McNair J saying: I see no reason why there may not be an enforceable warranty between A and B supported by the consideration that B should cause C to enter into a contract with A or that B should do some other act for the benefit of A.54

Accordingly, if, for example, an architect specifies a particular wall cladding on the faith of a statement as to its suitability made by the manufacturer, it may be possible for the proprietor to establish a warranty given by the manufacturer to the architect as the proprietor’s agent, the consideration for the warranty being the specification of the material. The Shanklin Pier case was discussed by Jackson J in Fuji Seal Europe Ltd v Catalytic Combustion Corp,55 and was applied in the earlier case of Wells (Merstham) Ltd v Buckland Sand and Silica Ltd56 where the plaintiff succeeded on a warranty given to it by a sand merchant, notwithstanding that it had

[page 308] bought the sand from a third person, who had in turn obtained it from the defendant. Edmund Davies J said:57 As between A (a potential seller of goods) and B (a potential buyer), two ingredients, and two only, are in my judgment required in order to bring about a collateral contract containing a warranty: (1) a promise or assertion by A as to the nature, quality or quantity of the goods which B may reasonably regard as being made animo contrahendi, and (2) acquisition by B of the goods in reliance on that promise or assertion.58

However, representation and reliance alone may not be sufficient to establish a collateral contract. As Lee J held in Cassisi v CFC Holdings: Representations alone do not establish a collateral contract. There must be an intention on the part of the maker of a statement that the statement be relied upon and there must be reliance on the part of the person to whom the statement was made. Most importantly, there must be the foundation for a legal relationship enforceable as the collateral contract in the nature of a promise or a guarantee as to the truth of the statement.59

In making those comments his Honour relied upon the decision in JJ Savage & Sons Pty Ltd v Blakney.60 In that case the High Court had found that a statement by a vendor of a motor boat as to the likely speed the vessel would achieve was intended to have commercial significance, the purchaser was intended to act upon it and he did in fact act upon it but, nevertheless, those facts did not warrant the conclusion that the statement was promissory. It was only the vendor’s opinion as to what the vessel would be capable of.61 Circumstances which raise the question whether a subcontractor is liable on some warranty alleged to have been given to the proprietor or architect may also raise the question whether the fact that the proprietor or architect has specified a particular material prevents the implication of the usual terms as to quality or fitness, a matter discussed in 4.5.

Express warranties 14.7 Mention has been made of Shanklin Pier Ltd v Detel Products Ltd.62 Architects as a profession have become more conscious of the need to protect the proprietor by obtaining from the subcontractor an express warranty in the former’s favour. The Royal Australian Institute of Architects (RAIA; now the

AIA) has previously circulated advisory notes AN 14.02.100 and 400 and a form of warranty which may be given by a subcontractor or supplier [page 309] containing warranties and covenants on the part of the subcontractor or supplier to or with not only the builder but also the proprietor. Care should be taken in drafting express warranties to ensure that they are effective, that they cover an appropriate period given the work and materials, and that they do not compromise the operation of any ACL statutory warranties which cannot be excluded or modified.

Negligent misrepresentation 14.8 Where misrepresentations are negligently made by a subcontractor to the proprietor or architect and the proprietor or architect acts upon them by requiring the builder to let the subcontract to the representor, it may be possible to establish liability in tort under Hedley Bryne & Co Ltd v Heller & Partners Ltd.63 See further 8.15. So if a contractor who specialises in floor finishes and regularly in the course of business gives skilled technical advice recommends to the architect that a particular finish should be used in order to withstand unusual wear from heavy trolleys in a factory under construction, and the architect, relying upon such a recommendation, requires the builder to engage the subcontractor to apply the finish, the proprietor may be entitled to sue the subcontractor in tort for any loss suffered if the recommendation is made negligently. In the unlikely event of it being possible to establish that a representation made by the subcontractor to the proprietor or the proprietor’s agent was made fraudulently, an action in deceit will lie, provided of course that the other elements of the cause of action for deceit exist. In Esso Petroleum Co Ltd v Mardon64 it was held that tortious liability existed for a false statement made negligently in the course of pre-contract negotiations. Generally, however, there is not a sufficient closeness of relationship between the proprietor and the subcontractor to allow a claim for economic loss resulting from negligence, assuming such a claim is otherwise able to be brought in any event. Economic loss in the case of negligent misstatement is different to other

claims for economic loss, which themselves are or may now be able to be brought under the civil liability laws of the states and territories. A subcontractor may be liable to a proprietor where the proprietor relied on representations and advice and a particular skill, or specialist knowledge on the part of the subcontractor, but cases to date have been confined to specialist nominated subcontractors who provide specialist advice that is subsequently relied up on by the proprietor in making its nomination. The leading case standing for this proposition is Junior Books Ltd v Veitchi Co Ltd,65 but this case has not been followed in later English and Australian decisions.66 The decision in Frederick W Nielsen (Canberra) Pty [page 310] Ltd v PDC Constructions (ACT) Pty Ltd67 demonstrates the difficulty which can exist in establishing a sufficiently close relationship (should that now be a determining factor at all) between a subcontractor and a principal giving rise to a duty of care to avoid economic loss. It is more likely that a collateral warranty will exist if the proprietor expressly relies upon the advice of the subcontractor.

OTHER ASPECTS OF SUBCONTRACTS Pay when paid clauses 14.9 An example of a pay when paid clause was considered in Trade Indemnity Australia Ltd v Parkinson Air-conditioning Pty Ltd.68 The clause provided that ‘it is expressly agreed that the Sub-contractor’s right to receive payment is entirely dependent upon the Builder having already actually received from the Proprietor payment in respect of the work, the subject of the Sub-contractor’s claim, and that the Sub-contractor shall have no other or further right to payment’. A majority held this clause to be effective to disentitle a subcontractor to payment unless and until the builder was paid by the proprietor. The security of payments legislation introduced in the states and territories to protect the position of subcontractors renders such a clause nugatory. The Victorian legislation69 defines the term ‘pay when paid provision’ as being when

the liability of one party to pay money to another party is contingent upon payment to the first party by a further party, and then provides that such a provision has no effect.70 The legislation in all other states and territories contains provisions to similar effect. However, the Australian Capital Territory, Northern Territory, Queensland, Victorian and Western Australian Acts71 all contain express provisions providing that they only apply to construction contracts entered after their commencement.72 [page 311] The New South Wales Act73 makes similar provision to these Acts but does not contain the specific limitation that it does not apply to construction contracts entered into before its commencement.74 Some subcontracts make the amount certified in a subcontract dependent on an amount certified under a head contract.75 As the legislative prohibition focuses on the liability to pay being contingent on payment it remains open to debate whether such clauses are rendered ineffective. In the decision in Iezzi Constructions Pty Ltd v Currumbin Crest Development Pty Ltd,76 it was held a pay when paid clause does not impair the subcontractor’s right to recover the reasonable value for work done where, following the builder’s repudiation, the subcontractor has lawfully terminated the subcontract. On quantum meruit see 8.8–8.9. Generally it may be said of pay when paid clauses that ‘the contra proferentem principle [applies] to such clauses and that [the person] who seeks to rely upon such a clause to show that there was a condition precedent before liability to pay arose at all should show that the clauses relied upon contain no ambiguity’.77 Unless a clause is expressed in clear and precise terms and accepted by both parties, it should be regarded as relating to the time ‘when’ a contractor must pay the subcontractor and not to the ‘if’ of whether the subcontractor gets paid at all.78

Retention moneys 14.10 Standard form subcontracts commonly provide for retention sums to be

held by the builder out of payments received by the builder as security for the proper performance of the subcontract. The provision usually states that the interest of the builder in the money shall be of a fiduciary only with the money being held by the builder as trustee for the subcontractor without obligation to invest or to account to the subcontractor for any income or profit derived. See, for example, cl 10.24.05 of SC JCC-C 1994; cl 39(h) of SCNPWC Ed 3; and cl 6(d) of SC6. As held by Giles J in KBH Construction Pty Ltd v Lidco Aluminium Products Pty Ltd,79 the effect of such a provision may be to oblige the builder to appropriate and set aside the retention moneys in a fund to be held on trust for the subcontractor subject to the builder’s entitlement to have recourse thereto in the circumstances permitted by the [page 312] subcontract. Giles J considered that to be the effect of the relevant clause in SC JCC-A 1995 to have had. Retention moneys are not held properly by the builder as trustee when the builder pays them from an overdraft account; the general rule is that the moneys should be kept in a separate account.80 Where retention moneys are trust moneys, an injunction may be brought to ensure they are retained appropriately;81 however, where the contract specifically provides the moneys are not held on trust such an order will not be available.82 Many standard form contracts such as AS 2124-1992, JCC and SWB-2 have provided for the creation of trusts.83

Liability under subcontract to head contractor for breach of contract 14.11 Aside from the normal principles of contract law applying to subcontracts, where a subcontractor knows of the relevant terms of the head contract the damages recoverable for breach of the subcontract may include loss of profit which could have been made under the head contract and expenditure uselessly incurred by the head contractor for the purposes of the head contract.84 Thus where the subcontractor had notice of the fact that the goods to be fabricated were required by the main contractor for the purposes of a contract which

imposed liability for damages for delay, it was held in Die Elbinger ActienGesellschafft Fur Fabrication Von Eisenbahn Materiel v Armstrong85 that in assessing damages for breach of the subcontract regard might be had to the loss incurred by reason of the delay. A similar case is Wright v Langland’s Foundry Co.86 The matter simply falls to be determined by the general principles of the law of contract governing remoteness of damage and measure of damages. The subcontractor is liable only if the loss falls within the rule in Hadley v Baxendale.87 The first branch of that rule permits recovery if the loss arose in the usual course of things from the breach of the subcontract; the second branch of the rule enables the plaintiff to recover if the loss may reasonably be supposed to have been in the contemplation of both parties to the subcontract at the time they made it as a probable result of a breach of it.88 See further 11.3. The subcontract may expressly fix the subcontractor with notice of the terms of the head contract; but such a term on its own may not significantly alter those damages that are too remote to be recovered by a contractor. What is required is special circumstances ‘the foundation of what may “reasonably be supposed to have been in the contemplation of both parties” [page 313] — at the time when the contract is made’.89 Damages recoverable for breach of a subcontract may include costs incurred in defending an action brought by the proprietor in respect of defects amounting to a breach of the subcontract.90 In Alucraft Pty Ltd (in liq) v Grocon Ltd (No 2)91 a claim for damages by a head contractor relating to the defective work of the subcontractor was reduced significantly from the amount it would have cost to rectify the work because the proprietor had made no claim on the head contractor and the head contractor showed no intention of making good the defective work. The low risk of the head contractor being called upon to rectify the work reduced the damage it had suffered.

Liability of head contractors to employees of subcontractors

14.12 The head contractor may be liable for injury to an employee of a subcontractor even though the employee and the head contractor are not between themselves parties to a contract. In Andriolo v G & G Constructions Pty Ltd,92 the plaintiff was a bricklayer who was injured when he fell off a plank. He sued both his employer (the subcontractor) and the head contractor and while his claim in negligence failed, he recovered against both for breach of a statutory duty to provide suitable and safe scaffolding. In the course of his judgment, Miles CJ said: Although the plaintiff may not as a matter of contract law rely upon a breach of a term of a contract to which he was not a party, I think it may be said that a contract may give rise to a tortious duty of care owed to a stranger who might reasonably be foreseen by the parties as likely to be harmed as a consequence of a breach of the contract.93

He noted94 the effect of the decision of the High Court in Stevens v Brodribb Sawmilling Co Pty Ltd95 as being that ‘a duty of care is now … owed by an entrepreneur not only to its employees but to independent contractors who might reasonably be foreseen as likely to be harmed by a failure to take proper care, and that duty extends to employees of the subcontractor’. The application of the decision in Stevens v Brodribb Sawmilling Co Pty Ltd was [page 314] accepted without question by the defendant in Duffy v Salvation Army (Vic) Property Trust.96 See also 16.5.

Compromises 14.13 A question which arises in practice from time to time is whether a head contractor may safely compromise a claim made by the proprietor in circumstances where the head contractor alleges that a subcontractor is in turn liable to the head contractor in respect of the damage in question. A relevant decision here is Biggin & Co Ltd v Permanite Ltd,97 where a large sum of money had been paid by the plaintiff in settlement of a claim arising out of the supply by the plaintiff to the Dutch Government of an adhesive for use with roofing felt. The adhesive proved to be quite unsatisfactory and the question of the plaintiff’s liability to the government was referred to arbitration. The plaintiff settled the

dispute by agreeing to a price reduction of £43,000 and paying the costs of the government. The plaintiff then sought to recover from the defendant, which had sold it the adhesive, the amount of that sum of £43,000 together with the amount payable by it to the government for costs and its own costs of the arbitration, and the defendant made similar claims against the third party, which had manufactured the adhesive and sold it to the defendant. The trial judge rejected, as the measure of the defendant’s liability, the amount paid by the plaintiff under the settlement, but the Court of Appeal held that he had erred in so doing. The view was taken that, while the settlement was not conclusive, it should be taken as the measure of damages provided that it was reasonable. It was for the plaintiff to show that the settlement was a reasonable one and in this regard it was relevant to prove that the settlement was made under legal advice. In effect, the evidentiary onus then falls on the party asserting the settlement was unreasonable to show why that advice was wrong. The Biggin case was considered by the High Court in Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd.98 In that case, an insured brought an action both against its broker and the insurer for losses arising as a result of a fire. The insurer refused to indemnify on the basis of ‘material non-disclosure of prior claims’. The action against the insurer was settled for approximately half the full indemnity amount, based on legal advice given to the insured. The insured continued to press for recovery of the balance from the broker. The trial judge had held that the broker had breached the duty owed to the insured, and awarded the difference between the amount of the settlement with the insurer and full indemnity. In reaching its decision the High Court considered the Biggin case. McHugh J was critical of the reasoning in that case, saying: [page 315] In my opinion, Biggin should not be used as an authority in this country. Whether the claim is in tort or contract, the question whether the plaintiff can recover from the defendant monies paid in settlement of a third party action depends on ordinary principles of causation and remoteness. That proposition also applies in a case such as the present where the settlement is an element in the calculation of damages.99

While accepting the fact that a settlement made on legal advice was relevant,

his Honour was of the view that the evidence of the legal advisors was vital to show it was a reasonable settlement. Other judges expressed different views. Kirby J distinguished Biggin, while Gummow J agreed with Kirby J but found it remained for the insured to prove its loss against the broker and the settlement sum was not probative evidence sufficient to establish on the balance of probabilities that the settlement sum between the insurer and the insured was the limit of its liability. Hayne J was also critical of the reasoning in Biggin100 but agreed the amount of a settlement should be given significance. Whether a settlement was reasonable should be judged by reference to the material the parties had available to them at the time the compromise was reached and a consideration of the chances of the parties succeeding in their respective claims. The reasonableness of the settlement had to be established, and it was an objective test on the material available at the time rather than a subjective test. From this decision it appears that if Biggin can be interpreted as reversing an evidentiary onus, the High Court has not accepted that view. The reasonableness of the settlement must still be established by the party seeking to recover moneys paid under it. A consent judgment must be regarded in the same way as a compromise or settlement of the proceedings in question and not as a judgment on the merits.101 Where an insurer has full knowledge of a proceeding but elects not to take over the conduct of proceedings and instead leaves the insured in control of the defence, then it may not be necessary to establish a settlement was reasonable because such a case could be considered to satisfy the ordinary test for causation and remoteness.102 The related question of whether a subcontractor is bound by a judgment in an action against the main contractor to which the subcontractor is not a party will not often arise, for ordinarily the subcontractor will be brought into the litigation as a third party. Where this is not done, as mentioned by Singleton LJ in the Biggin decision,103 the judgment does not establish conclusively as against the subcontractor the amount of the loss and is not [page 316]

binding, but the court will not lightly disregard it in the absence of fresh evidence or new factors.

Materials on site 14.14 The question of whether a subcontractor can recover materials delivered on site in the absence of payment by the builder if it does not involve a claim in unjust enrichment, involves a consideration of when the property passes, which in turn raises the issue of what type of contract governed the supply. In Heweitt v Court,104 the High Court was concerned with constring a contract related to a transportable home that included a retention of title clause. Construction of the house was well under way, and a number of progress payments made, when the building company became insolvent. By agreement between the purchasers and a director of the builder the purchase price was adjusted to reflect the state of completion of the house, duly paid and the house transported. It was this transaction that the liquidators of the building company asserted amounted to a voidable preference. Wilson and Dawson JJ observed that ‘there is a line of authority which establishes that where a contract is not only to supply an article but to erect or install it so that it becomes a fixture or part of the land, the contract is for work done and materials supplied’. On the facts of the case the majority of the court held that the purchasers had a lien over the partly completed house and there was no voidable preference. While Wilson and Dawson JJ were in the minority, none of the other judges disagreed with the general proposition that a lien would not arise in an ordinary building contract. That being so, Ambrose J in Otis Elevator Co Pty Ltd v Girvan (Qld) Pty Ltd105 decided that the contract entered into in that case between the plaintiff subcontractor and the builder for the supply and installation of lifts in a hotel and office complex, was a contract for the provision of work and materials and not one for the sale of goods. The argument that upon delivery of equipment and material on site the property in such equipment and material passed to the builder was rejected, and it was held accordingly that the plaintiff was entitled to take possession of such equipment and material.106 As regards building owners, ordinarily the property in materials brought to a

site by a builder vests in the building owner only when those materials are integrated with the building under construction.107 If the builder becomes insolvent and the subcontractor has delivered materials under a supply and installation of materials subcontract but has [page 317] not yet received payment, a proprietor has no rights to the materials until they are installed.108 Specific retention of title clauses in subcontracts may prevent title passing to the builder and hence limit a proprietor’s rights to that equipment.109 There are circumstances in which a subcontractor may have a lien on goods belonging to the main contractor to which the subcontractor has added value (as by assemblage and processing), for which it has not been paid.110 In certain circumstances a lien arises under security of payments legislation: see 9.20. Tools or equipment used by a subcontractor might be retained by a builder for the completion of the works upon determination of the subcontract where the subcontract contains an appropriate clause, even if owned by a third party.111 However, this could seem unjust and damages will be payable if the determination was unlawful. The Personal Properties Securities Act 2009 (Cth) is based on overseas legislation. Failure to register interests in accordance with the Act has potentially grave implications for a contractor’s assets located on site because it recasts the concept of ownership to one of possession rather than ‘title’. A party who maintains an ownership interest in an item of personal property but does not have possession (eg, plant, equipment, machinery or site sheds) must register that interest on the central Personal Properties Securities (PPS) Register. In Graham v Portacom New Zealand Ltd,112 Portacom leased five portable buildings to NDG Pine Ltd (in receivership). NDG then granted a debenture to a bank, which debenture was registered on the New Zealand PPS Register. Portacom did not register its interest in the buildings. Upon the appointment of receivers and managers to NDG by the bank, the receivers claimed a right to sell the buildings. This was disputed by Portacom.

Under the New Zealand Act,113 the rights of the lessee are not confined solely to possessory rights: ‘the lessee has rights of ownership in the goods sufficient to permit a secured creditor to acquire rights in priority to those of the lessor’.114 The court in Graham v Portacom New Zealand Ltd found the debenture created a security interest in the buildings that was perfected on [page 318] registration of that interest on the central register. The receivers, therefore, had the power to sell the buildings.115 The Australian Personal Properties Securities Act 2009 (Cth) is in similar terms to the New Zealand Act, and there is a risk that contractors providing equipment on hire or like terms may lose their interest in that property if that interest is not registered in accordance with the Act.

Incorporated terms of the head contract 14.15 Knowledge on the part of the subcontractor of the terms of the head contract may be very material in determining questions of remoteness of damage for the purposes of the subcontract. The question of remoteness of damage must be distinguished from the question whether the terms of the head contract have been incorporated into the subcontract so as to become part of it. Plainly a subcontractor is not bound by the terms of the main contract without having agreed to be so bound.116 Such agreement may be either express or implied. Mere knowledge on the part of the subcontractor of the terms of the main contract will not suffice to import those terms into the subcontract. Nonetheless, express incorporation, while quite common, is not essential, in that it may be possible in some circumstances to draw the inference that the parties to the subcontract intended to include in it a term the same as or similar to some term in the head contract. For example, a head contractor may fail to ensure that subcontractors and suppliers are bound by express agreement to furnish work or materials that will comply with the detailed requirements of the head contract, but such a term might be implied, depending on the facts. Commonly, a subcontract will specifically incorporate parts of the head

contract. For example, cl 2(c) of SC3 provided that the subcontractor ‘shall observe, perform and comply with all the provisions of the Head Contract on the Part of the Builder to be observed, performed and complied with, so far as they relate and apply to the Works, and are not repugnant to or inconsistent with the express provisions of this Sub-Contract’. Provisions of this kind may create as well as solve problems. Such a clause will have a limited effect other than in specifying the quality of the works required in the subcontract. In Chandler Bros Ltd v Boswell,117 the head contract contained a clause giving the engineers, if dissatisfied with the subcontractor, power to require the subcontractor’s removal. The subcontract contained many provisions in similar terms to those in the head contract, but contained no clause permitting the removal of the subcontractor by the engineers. The English Court of Appeal held that, as the parties to the subcontract had the head contract before them when they made their own contract, they must be [page 319] taken to have had in contemplation the possibility that the engineers would give such a notice, and that a term could not be implied in the subcontract that in the event of the engineers calling upon the contractor to dismiss the subcontractor, the contractor should be entitled to put an end to the subcontract. The court went on to hold that the relevant provision of the head contract was not incorporated into the subcontract by a recital that the subcontractor had agreed to carry out the work in accordance with the terms of the head contract, Greer LJ saying: In my judgment, that does not mean in this contract, taking the whole contract together, that he agreed to a term which was expressly excluded when they came to recite the terms which were to apply in the subcontract. It only means that he was to provide work of the quality and with the despatch which was stipulated for in the head contract.118

Similarly, in Osburn v Leggett119 although the main contractor was bound by general conditions of contract, those conditions were not defined and were not in the contemplation of the parties when the subcontractor’s price was given and accepted; therefore as the subcontractor never became party to the general conditions (although they were referred to and incorporated in certain specifications according to which the subcontractor was bound to work), the

subcontractor was not bound by a term in the general conditions empowering the architect to dismiss a subcontractor. In JW Esson & Co v Murray,120 a stipulation in a subcontract required the work done thereunder to be in accordance with the specifications and general conditions of the head contract; and the head contract empowered the architect to direct the contractor to remove defective work and to replace the same and provided that the works should not be deemed completed until the architect had given the final certificate. This stipulation, it was held, did not postpone the date of completion of the subcontract work until the work to be done under the main contract had been approved by the architect. Another subcontract in which it was agreed that the work was to be executed according to the plans and specifications forming part of the head contract was considered in circumstances where the specification contained an arbitration clause. It was held in Goodwins Jardine & Co v Brand & Son121 that the clause, although incorporated in the subcontract to the extent of making the decisions of an arbitrator in questions between the proprietor and the contractor binding upon the subcontractor, was not incorporated in the subcontract as regards matters concerning only the rights inter se of the contractor and subcontractor. [page 320] In Place v Rees & Co122 there was, in a subcontract incorporating reference to the principal contract, a conflict arising from the retention in the printed form of subcontract of a clause that was inapplicable in the circumstances. The clause was rejected as meaningless. In O’Neill & Clayton Pty Ltd v Ellis & Clark Pty Ltd,123 the arbitration provisions of the head contract were held not to be incorporated in the subcontract because the subcontract contained a complete agreement relating to the submission of disputes to arbitration. The limits of a stipulation in a subcontract requiring the subcontractor to observe and perform the conditions contained in the head contract are illustrated by Dunlop & Ranken Ltd v Hendall Steel Structures Ltd Pitchers Ltd (Garnishees),124 where such a stipulation did not enable the head contractor to rely upon a provision of the head contract whereby payment in respect of the work of a nominated subcontractor was not to be due until receipt by the contractor of the architect’s certificate. Lord Goddard CJ observed:

No question arises here as to whether they have performed or observed the conditions. What the sub-contractors are saying is: ‘So far as payment is concerned, pay us’.125

The provision of the head contract, was, however, held to be incorporated by a condition in the subcontract whereby payment was to be made in accordance with the certificates and the times provided in the head contract. In FE Cleary & Sons Pty Ltd v Buckland Building Group Pty Ltd,126 the incorporation by a subcontract of the general conditions of contract of the head contract was held to be limited to the incorporation of the general conditions of contract so called in the head contract, and not to include a rise and fall clause which was included in the head contract documents but not in that part of them called ‘General Conditions of Contract’. If the head contract terms are found to be incorporated into the subcontract it is only to the extent that they are able to be applied to that subcontract and are not inconsistent with the terms of the subcontract.127 Devaugh Pty Ltd v Lamac Developments Pty Ltd128 considered the operation of the AS 2124 payment provisions. In that case, the parties had failed to fill in the annexure to the subcontract form AS 2545 nominating a main contractor’s representative. [page 321]

Nominated subcontractors 14.16 In North West Metropolitan Regional Hospital Board v TA Bickerton & Son Ltd,129 Lord Reid described the purpose of nominating subcontractors as follows: The scheme for nominated subcontractors is an ingenious method of achieving two objects which at first sight might seem incompatible. The employer wants to choose who is to do the prime cost work and to settle the terms on which it is to be done and at the same time to avoid the hazards and difficulties which might arise if he entered into a contract with the person whom he has chosen to do the work.

While historically most building agreements for the execution of extensive works empowered the proprietor to nominate or select subcontractors, some more recent contracts have moved away from the concept. The AS 4000 suite of contracts retain the nominated subcontractor concept, but refer to them as selected subcontractors.130 The PC-1 1998 contract, published by the Property Council, removed direct nomination and replaced it with a means by which a list

of approved subcontractors may be specified by the principal for particular parts of the works. The provision might have the same effect as a nominated subcontractor clause if only one subcontractor was approved. In the ABIC MW 2008 contract the nominated subcontractor concept is replaced with a provision that entitles the proprietor to remove from the builder’s works identified parts of the same and hand that work to separate contractors.131 Although there is no necessary connection between nominated or other subcontractors on the one hand and prime cost or provisional sums on the other hand, it will commonly be found that the building agreement provides a link by specifying a prime cost or provisional sum for the work to be performed by a nominated or selected subcontractor. Where the building contract provides a power of nomination, it ordinarily provides quite detailed provisions in relation to how it is to be managed. Within the limits of those provisions nominating a subcontractor does not alter the legal relationship between the builder and the subcontractor, and the builder will still be liable for the subcontractor’s performance of its portion of the works. It has sometimes been argued that the system of nomination has the consequence that privity of contract exists between the proprietor and the person nominated, but save in quite exceptional circumstances this will not be so.132 An appreciation of this fundamental point is essential to a [page 322] proper understanding of the practices obtaining in the building industry in relation to the letting and administration or management of contracts and subcontracts. In Young & Marten Ltd v McManus Childs Ltd,133 the question for determination was whether the nomination by the builder of the particular type of tiles to be supplied by a subcontractor excluded the ordinary implied warranty of quality on the part of the subcontractor. The House of Lords held that it did not. It was held that the selection by the builder of the tile negated any implied warranty from the builder’s supplier that the tile was suitable for its purpose. But, since the tiles were supplied by a person dealing in goods of the description ordered, the subcontractor assumed responsibility for delivering goods of merchantable

quality.134 While accepting the general proposition on which the case was based, the High Court held that, in the circumstances, it was not applicable in Helicopter Sales (Australia) Pty Ltd v Rotor Work Pty Ltd.135 In an ordinary contract of work and labour and materials supplied there is an implied term that the materials used are of good quality, extending to freedom from latent defects, and that they are reasonably fit for their intended purpose.136 That will be the case unless inconsistent with an express terms subject to the ACL: see further 4.4–4.5. In Independent Broadcasting Authority v EMI Electronics Ltd and BICC Construction Ltd,137 Lord Fraser said that it ‘is now well recognised that in a building contract for work and materials a term is normally implied that the main contractor will accept responsibility to his employer for materials provided by nominated subcontractors’. In that case it was held that the main contractor was liable to the employer for the faulty design of an aerial mast that had collapsed, even though the work of its design had been carried out by the nominated subcontractor. If a nominated subcontractor repudiates its contract or becomes insolvent, the builder will be liable to complete the nominated works in accordance with the express terms of the building contract. Clause 10.6 of AS 2124-1992 provides for a further nomination to complete the subcontract work, while NPWC 3 cl 10.08 and JCC cl 4.10 address the termination of the nominated subcontractor due to its bankruptcy but remain silent on the question of whether renomination should take place where the subcontract is terminated for breach. In Adelaide City Corporation v Jennings Industries Ltd,138 the builder was liable to complete the nominated subcontractor’s work and no term [page 323] was implied requiring renomination. The nominated subcontractor had gone into liquidation without attending to its defective work. Whether a term is to be implied in this area will normally depend upon the express terms of the building contract. In Junior Books Ltd v Veitchi Co Ltd139 it was held that a nominated subcontractor could be liable in negligence to the proprietor for a defective design. However, the decision has been much criticised and disapproved in England.140 It does not appear to be good law in Australia.141

Prime cost and provisional sums 14.17 Specifications and bills of quantities usually contain a number of ‘prime cost’ sums and provisional sums. The items priced in this way vary enormously. The specification for the construction of a dwelling house may contain a prime cost sum for a bath, while the bill of quantities for a multi-storey office building may contain a number of very substantial provisional sums for such parts of the works as the provision of the lifts or air-conditioning. Provisional sums are so called because they are sums that by the terms of the contract are required to be provided. Provisional sums are not to be confused with provisional items. The bill of quantities may describe a quantity as provisional. This provisional item shows that the quantity is uncertain and that the work will have to be remeasured after it has been done. The provisional item stands as a warning to the builder that the quantity is very approximate. Prime cost (PC) sums or items are so called because the intention is that the builder shall be paid for the item in question, not an agreed sum, but a price fixed on the basis of the actual cost. Almost invariably, written building agreements which employ prime cost or provisional sums expressly provide for the adjustment of the contract price by reference to the actual expenditure: if the PC or provisional sum is in fact exceeded, the contract price is to be increased, and vice versa. For examples see Ed 5b cl 18, JCC cl 10.27, NPWC 3 cl. 11, AS 2124-1992 cl 11.2, AS 4000 cl 3 and ABIC MW 2008 Section K. A building agreement that includes prime cost items or provisional sums but contains no express provision for the adjustment of the contract price will ordinarily be held to contain an implied term for adjustment. As was said by Stephen J in Tuta Products Pty Ltd v Hutcherson Bros Pty Ltd (Receivers appointed):142 It would, I think, require a most clearly expressed provision, not to be found in the present set of documents, to overcome the inference that when a

[page 324] proprietor requires a builder to accept his estimate of the cost of an item by including p.c. items as a mandatory part of the tender, those p.c. amounts, which are only estimates made for the purpose of convenience, are inherently subject to adjustment when the true cost, over which the builder has no more control than he had over estimated cost, emerges in due course.

Terminology is by no means uniform. Sometimes the term used is ‘PC items’; sometimes the expression ‘provisional sum’ is applied to all such items. Both items may be used in the same contract with slightly different contractual significance. Sometimes small items are described as PC items, while the larger items are called provisional sums. Again, ‘PC item’ may be confined to items which are to be supplied to and merely fixed by the builder, ‘provisional sum’ being used in relation to the cost of a complete installation, such as airconditioning. Another distinction found in practice uses the expression ‘PC item’ for items which have been specified up to a point but the price of which is uncertain (often because of the choice open to the proprietor perhaps between inexpensive and costly fittings), and reserves the expression ‘provisional sum’ for work which has not been specified with reasonable particularity, either because of its highly specialised nature, which causes the architect to anticipate the assistance of the subcontractor in designing the work, or because the time factor has not permitted the architect to complete the design, or for some other reason. The use and contractual significance of the terms will be defined by the contract in which they are found. On occasions contracts rely to an unreasonable extent upon the use of provisional sums as a device for putting off the time when attention to detail design will be necessary. The bill of quantities for a large office building might contain a section stating what prime cost or provisional sums are to be allowed for fire service and sprinkler system, air-conditioning, electrical services, lifts, aluminium cladding, floor tiles and a number of other things. A PC schedule may also require a sum to be allowed for contingencies. This might be two and a half per cent of the estimated total cost. In the event of the contingency sum not being required to cover some expenditure not elsewhere provided for, the proprietor is given credit for that sum in the builder’s final account. There is no necessary connection between prime cost or provisional sums on the one hand and nominated or other subcontractors on the other hand. A building agreement may contain a prime cost item or provisional sum even though it is not contemplated that a subcontractor will be employed. However, often a nominated subcontractor will perform work to which a prime cost or provisional sum applies.

_________________________ 1.

See R Green, D MacDonald, B Mitchell and C Mitchell, Report on Rise and Fall and Cost Reimbursement Clauses, Department of Economics, University of Newcastle, August 1990, para 3.2. See generally D S Jones, ‘Sub-contractors’ (1985) 1 Building and Construction Law 110.

2.

See I N Duncan Wallace, Hudson’s Building Contracts, 11th ed, Sweet & Maxwell, London, 1995, [14.004] and Southway Group Ltd v Wolff (1991) 57 BLR 33.

3.

See, for example, Subcontractors Charges Act 1974 (Qld) s 5.

4.

The AS 4000 suite of contracts refers to them as selected subcontractors: see cl 19.3.

5.

Some recent contracts do not make provision for nominated subcontractors.

6.

AS 4300 cl 9.2 is similar.

7.

Building and Construction Industry (Security of Payment) Act 2009 (ACT); Building and Construction Industry Security of Payment Act 1999 (NSW); Construction Contracts (Security of Payments) Act (NT); Building and Construction Industry Payments Act 2004 (Qld); Building and Construction Industry Security of Payment Act 2009 (SA); Building and Construction Industry Security of Payment Act 2009 (Tas); Building and Construction Industry Security of Payments Act 2002 (Vic); Construction Contracts Act 2004 (WA).

8.

(1988) 5 BCL 51.

9.

Ibid at 6.

10. Ibid at 55. 11. Ibid. 12. AS 4000-1997, general conditions of contract; AS 4901-1998, subcontract conditions. Similar contracts for design and construction (AS 4300), minor works, consultants agreements, project management, periodic supply of goods and so on have been available. See J Pilley and H Coombes, ‘Standard Conditions of Contract’ (2000) 16 Building and Construction Law 412. Other older forms of general conditions and subcontract contracts are SC NPWC 3 for use with NPWC 3, SCE3 for use with Ed 5b. 13. [1975] 2 All ER 549. 14. Hampton v Glamorgan County Council [1917] AC 13; A Vigers & Co Ltd v Swindell [1939] 3 All ER 590. 15. For example, JCC by operation of the special condition cl 4.09.02 could include such terms and AS 2124 allows a direct payment by operation of cll 10.6 and 10.5. NPWC 3 permits direct payment if proof of payment by the builder is not provided to the proprietor and AS 4000 allows direct payment under certain circumstances relating to a particular progress claim (cl 38.3). These direct payment clauses are discretionary. 16. (1978) 22 ALR 1. 17. (1969) 44 ALJR 32. 18. (1925) 25 SR (NSW) 204. 19. [1940] St R Qd 185. 20. [1916] 2 Ch 515. 21. [1891] 3 Ch 540. 22. [1973] 2 NZLR 385.

23. (1968) 88 WN (Pt 2) (NSW) 238. 24. (1965) 10 FLR 369. 25. Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; Brenner v First Artist’s Management Pty Ltd [1993] 2 VR 221. 26. (2002) 18 BCL 229. 27. Section 33. 28. Section 32. 29. Section 35. 30. See P Merity, ‘Paradise Postponed: A History of Attempts to Ensure Payment in the Building and Construction Industry of New South Wales’ (2002) 18 Building and Construction Law 169. 31. (2001) 17 BCL 66. 32. Pursuant to the Contractors Debts Act 1997 (NSW) s 5. 33. (1999) 33 ACSR 301. 34. Building and Construction Industry Payments Act 2004 (Qld) s 4. 35. [1979] Qd R 318 at 323. 36. Cases on this Act include: Metropolitan Brick Co v Hayward [1938] SASR 462; Ready Mixed Concrete (SA) Pty Ltd v Constructions (Broken Hill) Pty Ltd [1963] SASR 340; In the matter of Hollywood Homes Pty Ltd [1964] SASR 116; W Curl & Sons Regd v Buck Industries Pty Ltd and Dillingham Constructions Pty Ltd (1972) 2 SASR 335; Palyaris Constructions Pty Ltd v Kauri Timber Co Ltd (1979) 24 SASR 41, Jovista Pty Ltd v Pegasus Gold Australia Pty Ltd (1999) 149 FLR 199, Jovista Pty Ltd v Pegasus Gold Australia Pty Ltd (1999) 8 NTLR 171; ACN 068 628 268 Pty Ltd v Dubsky Timber Pty Ltd (2000) 76 SASR 571; Aberdine Pty Ltd v Vineyard Estate Management Pty Ltd [2001] SASC 442. 37. See Birchall Constructions Pty Ltd v Jape Nominees Pty Ltd (1982) 14 NTR 6; Blythe Green and Jordain (Trading) Pty Ltd v Sienna Pty Ltd (1986) 38 NTR 1. 38. Construction Contracts Act 2004 (WA) s 13. 39. Ibid s 25. 40. (2006) 67 NSWLR 9; [2006] NSWCA 238. 41. Ibid at 75. 42. [2010] VSC 106. 43. Ibid at 117. 44. Ibid at 116. 45. (2011) 27 BCL 244; [2011] VSC 183. 46. Ibid at 124. 47. Ibid at 131; see also Metacorp Pty Ltd v Andeco Construction Group Pty Ltd (2010) 30 VR 141. 48. (2010) 78 NSWLR 393; [2010] NSWCA 190. 49. Ibid at 9–16. 50. Ibid at 109. 51. See also Grocon Constructors Pty Ltd v Planit Cocciardi Joint Venture [2009] VSC 339.

52. Construction Contracts Act 2004 (WA) s 46 and Construction Contracts (Security of Payments) Act (NT) s 48. 53. [1951] 2 KB 854. 54. Ibid at 856. 55. [2005] EWHC 1659. 56. [1965] 2 QB 170. 57. Ibid at 180. See also Lambert v Lewis [1978] 1 Lloyd’s Rep 610 at 628. 58. See further Hercules Motors Pty Ltd v Schubert (1953) 53 SR (NSW) 301; Irwin v Poole (1953) 70 WN (NSW) 186; F Jones & Co Pty Ltd v CG Grais & Sons Pty Ltd (1961) 78 WN (NSW) 955; Mihaljevic v Eiffel Tower Motors Pty Ltd [1973] VR 545 at 560. 59. (1990) ASC 55-999. 60. (1970) 119 CLR 435. 61. Ibid. See also SVI Systems Pty Ltd v Best & Less Pty Ltd (2001) 187 ALR 302. 62. [1951] 2 KB 854. 63. [1964] AC 465. See also Independent Broadcasting Authority v EMI Electronics Ltd and BICC Construction Ltd (1980) 14 BLR 1 at 21–2, 32, 40–1. 64. [1976] QB 801. 65. [1983] 1 AC 520. 66. D & F Estates Limited v Church Commissioners for England [1989] AC 177; Wimmera-Mallee Rural Water Authority v FCH Consulting Pty Ltd (No 2) [2000] VSC 193. 67. (1967) 3 BCL 74. See also FW Nielsen (Canberra) Pty Ltd v PDC Constructions (ACT) Pty Ltd (1967) 3 BCL 367; RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1992) 11 BCL 74; Christani & Nielsen Pty Ltd v Goliath Portland Cement Co Ltd (1993) 2 Tas R 122; and P Mead, ‘Impact of Contract Upon Tortious Liability of Construction Professionals’ (1997) 13 Building and Construction Law 359. 68. (1994) 11 BCL 39. Another example of such a clause can be found in the standard form general conditions of contract SC 6 considered in Sabemo (WA) v O’Donnell Griffin Pty Ltd (1964) 3 ACLR 35. 69. Building and Construction Industry Security of Payment Act 2002 (Vic). 70. Ibid s 13. 71. Building and Construction Industry (Security of Payment) Act 2009 (ACT); Construction Contracts (Security of Payments) Act (NT); Building and Construction Industry Payments Act 2004 (Qld); Building and Construction Industry Security of Payment Act 2002 (Vic); Construction Contracts Act 2004 (WA). 72. See Building and Construction Industry Security of Payment Act 2002 (Vic) s 7(6). 73. Building and Construction Industry Security of Payment Act 1999 (NSW) as amended by the Building and Construction Industry Security of Payment Amendments Act 2002 (NSW). 74. Compare s 7 of the NSW Act with s 7(6) of the Victorian Act. 75. See Dunlop & Ranken Ltd v Hendall Steel Structures Ltd Pitchers Ltd (Garnishees) [1957] 3 All ER 344. 76. (1994) 13 Aust Cons LR 29. 77. Smith & Smith Glass Ltd v Winstone Architectural Cladding Systems Ltd [1992] 2 NZLR 473 at 481 per

Master Towle. 78. Ibid. See also Sabemo (WA) v O’Donnell Griffin Pty Ltd (1984) 3 ACLR 35. 79. (1991) 7 BCL 183 at 190. 80. Ibid at 191. 81. Walpole Pty Ltd v Rangeville Manor Pty Ltd [2000] VCAT 11. 82. Anaconda Operations Pty Ltd v Fluor Daniel Pty Ltd (2000) 16 BCL 230. 83. Ibid at 237. 84. Hydraulic Engineering Co Ltd v McHaffie Goslett & Co (1878) 4 QBD 670. 85. (1874) LR 9 QB 473. 86. (1874) 5 AJR 113. See also F Dawson, ‘Reflections on Certain Aspects of the Law of Damages for Breach of Contract’ (1995) 9 JCL 125. 87. (1854) 9 Ex 341; 156 ER 145. 88. See Kollman v Watts [1963] VR 396. 89. Cadoks Pty Ltd v Wallace Wesley & Vigar Pty Ltd (2000) 2 VR 569; [2000] VSC 167 at [201]. 90. Prince of Wales Dry Dock Co (Swansea) Ltd v Fownes Forge and Engineering Co Ltd (1904) 90 LT 527. 91. [1996] 2 VR 386. 92. (1988) 6 BCL 199. 93. Ibid at 200. 94. Ibid. 95. (1986) 160 CLR 16. See also M Spry, ‘An Employee … or Not?’ (1997) 32(5) Aust Lawyer 18; L de Plevitz, ‘Can Test from Stevens v Brodribb Protect Workers who are Quasi-Employees?’ (1997) 13 QUTLJ 263; J Clarke, ‘A High Point in the Life of Proximity’ (1997) 13 Building and Construction Law 301; Fatur v IC Formwork Services Pty Ltd (2000) 158 FLR 136 concerning a breach of regulations applying to building works. 96. [2013] VSCA 253. 97. [1951] 2 KB 314. 98. (1998) 192 CLR 603. 99. Ibid at [34]. 100. Ibid at [127]. 101. Hurlock v Council of the Shire of Johnstone [2002] QCA 256. 102. Ibid at [31]. 103. [1951] 2 KB 314 at 325. 104. (1983) 149 CLR 639. 105. (1990) 9 Aust Cons LR 107. 106. Ibid at 109. 107. RJ Grills Pty Ltd v Dellios [1988] VR 136 at 139. See also S Pyman, ‘Effect of Building Services Authority Act 1991 in Queensland’ (1993) 9 Building and Construction Law 235.

108. Aristoc Industries Pty Ltd v RA Wenham (Builders) Pty Ltd [1965] NSWR 581, which was followed in Crafter v Singh (1990) 2 ACSR 1. 109. North Western Shipping and Towage Company Pty Ltd v Commonwealth Bank of Australia Ltd (1993) 118 ALR 453. 110. Compare Alucraft Pty Ltd v Costain Australia Ltd (1990) 7 BCL 179. See also Groutco (Aust) Pty Ltd v Prince Constructions Pty Ltd (1986) 3 BCL 372 (claim by head contractor to retain goods). 111. Kallis Hire Pty Ltd v Consulere Design and Construction Pty Ltd (1990) 10 Aust Cons LR 73 (claim by third party for delivery up of formwork). 112. [2004] 2 NZLR 528. 113. Personal Property Securities Act 1999 (NZ). 114. [2004] 2 NZLR 528 at 537. 115. Ibid at 539. 116. Birmingham Construction Ltd v Moir Construction Co Ltd (1959) 18 DLR (2d) 505. 117. [1936] 3 All ER 179. 118. Ibid at 185. 119. [1930] SASR 346. 120. (1904) 23 NZLR 802. 121. (1905) 13 SLT 329. See also Pine Top Insurance Co Ltd v Unione Italiana Anglo Saxon Reinsurance Co Ltd [1987] 1 Lloyd’s Rep 476 at 479. 122. (1894) 13 NZLR 610. 123. (1978) 20 SASR 132. See also Conagra International Fertiliser Co v Lief Investments Pty Ltd (1997) 141 FLR 124 and Behmer & Wright Pty Ltd v Tom Tsiros Constructions Pty Ltd [1997] VSC 54 (CA). 124. [1957] 1 WLR 1102. 125. Ibid at 1106. 126. NSWCA, 12 February 1976, unreported. 127. White Industries Limited v Piling Contractors Pty Ltd (1986) 2 BCL 353. 128. (2000) 16 BCL 378. 129. [1970] 1 WLR 607 at 611. 130. See AS 4000-1997 cl 9.3. 131. ABIC MW 2008 cl G14. See cll G15 and G16 for the means by which the relationship between the separate contractor and the builder is then to be governed. 132. Hampton v Glamorgan County Council [1917] AC 13; A Vigers & Co Ltd v Swindell [1939] 3 All ER 590. 133. [1969] 1 AC 454. 134. Ibid at 479. 135. (1974) 132 CLR 1. See also Novta Wallpapers (Ireland) Ltd v John Sish & Sons (Dublin) Ltd [1978] IR 114. 136. Zorba Structural Steel Company Pty Ltd v Watco Pty Ltd (1993) 115 FLR 206. 137. (1980) 14 BLR 1 at 44.

138. (1985) 156 CLR 274; P Megens and B Ang, ‘Assignment, Novation and Sub-contracting — Who Cares What You Call It?’ (1994) 10 Building and Construction Law 319; and J M Paterson, ‘Terms Implied in Fact: The Basis for Implication’ (1998) 13 Journal of Construction Law 103. 139. [1983] 1 AC 520. 140. D & F Estates Limited v Church Commrs for England [1989] AC 177. 141. See also Wimmera-Mallee Rural Water Authority v FCH Consulting Pty Ltd (No 2) [2000] VSC 193. 142. (1972) 127 CLR 253 at 277.

[page 325]

15 BILLS OF QUANTITIES INTRODUCTION Nature of a bill 15.1 To submit a proper tender it may be necessary for the contractor to measure the work and materials shown on the drawings. The resulting quantities, ‘taken off’ the drawings and then gathered together under various headings, constitute the bill of quantities. Commonly this is called ‘taking out’ the quantities.1 These documents originated historically as non-contractual measurements to assist tenderers in quoting lump sum prices. Currently, bills of quantities are being used to assess interim payments by approximate measure under a lump sum contract.2 A bill of quantities falls into three sections. Sometimes, however, the document which is prepared is referred to not as the ‘bill’ of quantities, but as ‘bills’ of quantities, upon the basis that it in fact consists of a number of bills, one dealing with each trade. Quantities in bills of quantities are usually regarded as estimates only.3 Bills of quantities relating to engineering works tend to be shorter and more general than those concerned with building works.4 A bill for the construction of a moat to surround an elephant enclosure at a zoo might be contained in a single page; whereas a bill of quantities for a medical school at a new university might run into half a dozen volumes, each containing several hundred pages and several thousand items. It is not hard to envisage various examples in between these two. A bill of quantities may be, but is not ordinarily, combined with a specification, in which event it is known as a specified bill.

Quantity surveying

15.2 Years ago, to save costs, tenderers would band together and employ one person to prepare a bill of quantities to be used by each of them for [page 326] the purpose of tendering, thereby sharing the expense. Out of this practice arose the profession of quantity surveying, the quantity surveyor being one whose principal function is the preparation of bills of quantities.5 As stated by Stephen Brown LJ in Nye Saunders and Partners (a firm) v Alan E Bristow,6 ‘a quantity surveyor … is an expert in computing costs’. A quantity surveyor is also called a building/construction economist or construction cost consultant.7

SECTIONS OF A BILL Preliminaries 15.3 The first section of a bill has a heading such as ‘Contract and Preliminaries’ or ‘Preliminary and General Clauses’. This draws attention to and sometimes paraphrases (not always accurately) various conditions of the contract. Provisions are occasionally inserted here which are additional to those contained in the general conditions of contract or the ‘General’ section of the specification. However, provisions inserted in this way are sometimes not merely additional to but are in conflict with provisions in the general conditions or specification. This section of the bill will also indicate the status of the bill of quantities itself. The rest of this first section is taken up with items called ‘preliminaries’. These are the items of cost which cannot be referred to any particular trade; for example, temporary buildings, signboard, temporary services, hoardings, sanitary conveniences and cleaning.

Measured work 15.4 The second section of a bill consists of the measured work. This is divided into various trade bills, the order of the bills following the normal sequence of

trades: demolisher, excavator, drain layer, concretor, structural steelworker, bricklayer, carpenter and joiner, metalworker and so on. Bills are usually divided into six columns. This may be so whether in a program or in hard copy. The first column deals with the numbering or lettering of items. There are various methods of doing this. Each trade may be given a capital letter, so that, for example, the items which concern the roofer are numbered from R1 to R59 and the items which concern the carpenter are numbered C1 to C167. Another system is to letter the items on each page, so that item F on p 250 is item 250F. A variation of this is [page 327] to give each bill a number and to paginate each bill separately, lettering the items on each page. So if the plumber’s bill was bill number 9 the item lettered E on p 2 of that bill would be item 9/2E. There are, however, other methods of numbering or lettering items. The second column describes the item of work or materials. The third column gives the unit, for example, kilograms or cubic metres or lineal metres. If the item of work is incapable of measurement, the word ‘item’ is inserted in this column. The fourth column contains a number and, taken in conjunction with the third column, indicates the quantity. The fifth and sixth columns are left blank by the quantity surveyor. The tenderer will insert in the fifth column an amount of money representing the rate for or price of the item in question. In the sixth column the contractor places the amount allowed for the item, arrived at by multiplying the quantity by the rate.8 Trade bills will often contain prime cost items but sometimes will indicate that a prime cost sum which concerns the trade in question is to be found in the PC (prime cost) schedule, this schedule being a separate bill.

Provisional items 15.5 The third section of a bill of quantities usually forms the last bill, being that concerned with PC items and provisional sums. This bill will be headed ‘PC Schedule’, ‘Provisional Sums’ or ‘Schedule of Provisionals’, or in some similar

way. The distinguishing feature of this section of the bill of quantities is that the contract price will be adjusted by substituting the actual cost for the sum provided in the bill.

Total of tender 15.6 Each bill is totalled page by page, and the totals of each page are collated thus giving an amount for each bill. The total of each bill is carried to a grand summary, which will show the total amount of the tender.

Function of bill 15.7 At the very least, bills of quantities assist the builder to prepare a tender. Occasionally this is their only function, although they usually serve at least one further purpose — namely, pricing variations. Almost invariably, even in a case where the quantities do not form part of the contract, the contract expressly provides that the rates in the bill [page 328] of quantities are to be used as the basis for pricing variations. Thus, by cl 19(c)(i) of the old Ed 5b, where there was a priced bill of quantities, the unit prices contained therein were to determine the valuation of work of similar character executed under similar conditions in all respects as work so priced, and if it was unreasonable to apply those prices such prices could be used as a basis for valuation. Where the contract provides that the bill of quantities shall be used for the pricing of variations, the contract goes on to require that the successful tenderer shall, within, say, 14 days of the date of acceptance of its tender, lodge with the architect a copy of the bill, fully priced, extended and totalled, and with its total equalling the amount of the tender. In practice there is often considerable delay in lodging with the architect the priced bill. JCC-C 1994 and JCC-E 1994 (like MBW1) sought to avoid this difficulty. By cl 2.02.01 of both, the bill of quantities is referred to as one of the contract documents and cl 2.04 of both requires that priced bills be furnished by the

builder before the execution of the agreement. Compare, for example, cl 4.2 of AS 2124-1992; cl 2 of AS 4000-1997; cl 3.4 of AS 4303-1995; and section H2 of ABIC MW 2008.

PREPARING A BILL Formulating a bill 15.8 To prepare a bill of quantities, the quantity surveyor requires copies of all drawings, the specifications (including all provisional or PC sums) and all general and special conditions of contract. The quantity surveyor will draw the architect’s attention to errors, discrepancies and omissions in or from the documents which have been supplied: for example, the specification may conflict with what is shown on one of the drawings. They have been described as being best placed to provide cost reporting prior to the construction contract and cost control and valuation services during the construction project.9 The quantity surveyor comes last in the line of consultants charged with a major task during the pre-tender stage. All too often the quantity surveyor is expected to make up for time lost by others and to perform work required in an unreasonably short period, hampered (it may be) by drawings which lack dimensions or other necessary information and by design changes made while the bill is being prepared. The mere omission of a door or window frame may affect a dozen or more items in the bill. The architect in turn can often blame the proprietor for refusing to allow adequate time for the preparation of documents and possibly for changing requirements. [page 329]

Quantities not furnished 15.9 If quantities are provided, it is possible to reduce the period allowed for tenders without unfairness to the contractor. If the proprietor does not furnish quantities, the contractor will require more time in which to prepare the bill; for if quantities are not given, the contractor will have to embark upon the task of

measuring the work, at all events up to a point. In practice, however, where the proprietor fails to provide quantities the contractor manages without measuring the whole of the work; for instance, the contractor may leave it to a subcontractor to measure that part of the work for which the subcontractor is to give a quotation.

PRICING THE BILL Estimators 15.10 When the builder is preparing the tender, the bill of quantities is priced by the builder’s estimator (who may, or may not, be a quantity surveyor). The estimator inserts rates and prices throughout the bill. In fixing upon an amount, the estimator has regard to the actual total cost to the employer. In allowing for the cost of labour, the estimator will have regard to a number of matters including sick leave, annual holidays, payroll tax and so on. The estimator consults with some senior officer of the builder in order to decide what percentage is to be added as representing profit. This might be as much as 20 per cent, or as little as three per cent if the builder feels that the tender must succeed at all costs. In pricing the bill, the estimator allows for profit not only in the case of the measured work but also in the case of preliminaries, upon the basis that some profit should be made upon all expenditure, whatever its nature.

Amount of tender 15.11 The price which the builder inserts in respect of each item will include a profit component. The total of all the items, including PC items and provisional sums, will be the amount of the tender. When tendering, however, the builder usually will disclose how the tender was arrived at. This situation must be carefully distinguished from that which exists with a schedule by stating the rates at which they are willing to execute the work. The tenderers do in fact insert a price in their tenders, but this does not make the contract a lump sum contract. The successful tenderer will be paid a price arrived at by applying the rates in the schedule to the actual measured work. It is accordingly of the essence of a schedule of rates contract that the proprietor should be apprised of the rates in the

tender. Indeed, it is the rates which really constitute the tender, since the quantities are merely estimates which do not bind either party. A tender prepared with the assistance of a bill of quantities must not be confused with a tender in respect of a schedule of rates contract such as [page 330] was considered by the High Court in Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd.10 In the former case, the tender states the price for which the contractor is willing to execute the work, and although the contractor has arrived at this price by pricing a bill of quantities, a copy of the priced bill is not made available to the architect until after acceptance of the tender.

CONTRACTS AND QUANTITIES Contracts incorporating quantities 15.12 The critical question in a case may be whether the quantities have been made part of the contract. Despite the security which this gives the contractor, in the majority of cases where quantities are provided, they are still not made part of the contract.11 To illustrate, cl 2.2 of AS 4000-199712 provides two alternatives: the bill is either a part of the contract and priced in accordance with cl 2.3, or does not form part of the contract and is only priced if specifically required. Where the bills of quantities are incorporated as a contract document, they become the priority document for determining the content of the work tendered for.13 The question for determination is whether the quantities are to be regarded as defining the amount of work included in the price, so that if the work actually carried out is more or less than that in the quantities, there will be a variation and thus an addition to or deduction from the contract price.14 When this is the effect of the contract, the quantities are said to form ‘part of’ the contract.15 The general conditions may provide simply that the bill of quantities shall form part of the contract. This has the consequence that the quantities define the contract

work, so that if the work actually done differs from that in the quantities, there is a variation and an adjustment to the price. Often the provision contained in the general conditions or bill of quantities itself is more detailed, for example: This bill of quantities shall form part of the building contract and the quantity of work shall be deemed to be that set out in this bill of quantities. Any error in description or in quantity in or omission of items from this bill of quantities shall not vitiate the contract but shall be rectified and treated as a variation.

Often one may find in a bill, not only that a number of the general conditions are referred to or paraphrased, but that additional provisions, [page 331] of a kind more properly found in general conditions, are inserted. For example, the general conditions may provide that all variations authorised or sanctioned by the architect shall be valued and that the sum involved shall be added to or deducted from the contract sum as the case may be, while the bill of quantities may provide that the only items of extra work to be recognised on the completion of the contract are those ordered in writing by the architect. The importance of the bill of quantities is at times overlooked when a dispute arises, it not being appreciated that concealed in the bill of quantities is a clause which adds to or contradicts the general conditions or the clauses in the general section of the specification. When this occurs, it becomes necessary to consider the status of the provision in the bill.16 If the contract provides, in general terms, that the bill is to form part of the contract, the result would seem to be that the bill forms part of the contract not only in the sense that the bill defines the amount of work included in the price but in the sense that all the provisions of the bill are of contractual force. On the other hand, the clause dealing with the bill may be in terms suggesting that its only effect is to show what work is to be done for the contract price. The bill may contain a provision in the following terms: These bills are incorporated in this contract to the extent that if there is any variation in the measured quantity of any of the items listed in the bills, either of work performed or things supplied, from the respective quantities set out therein, it shall be treated (if an additional quantity) as an extra and (if a lesser quantity) as an omission and the difference in the ‘Lump Sum’ price due to such variation shall be calculated according to the items, units and price rates set out therein.

The effect of general contractual provisions in bills which are incorporated by a clause in these limited terms is uncertain. It would be even more difficult to argue that a provision in the bill dealing with variation orders prevailed over a provision in the general conditions if the general conditions contained the following clause: The quality and quantity of the work included in the contract sum shall be deemed that which is set out in the bills of quantities mentioned in cl 2 of these conditions, but save as aforesaid nothing contained in the said bills of quantities shall over-ride, modify or affect in any way whatsoever the application or interpretation of that which is contained in these conditions.

In Lee Kong Nelder Nominees Pty Ltd v John Holland Engineering & Construction Pty Ltd,17 the bills of quantities were described as a ‘guide only’ to evaluate progress claims and variations, and were not warranted by the proprietor as being correct. The proprietor contended that the quantities were not part of [page 332] the contract. The Court of Appeal held that progress claims and variations under the contract were to be assessed in accordance with the bills of quantities. Compare Bluechip Development Corporation (Gladstone) Pty Ltd v Sunstruct Pty Ltd18 where a ‘works budget’ used to monitor estimated cost and notify the principal of any variation was held by Burnett J in the Federal Circuit Court not to be a bill of quantities; nor did the contract involve a bill. Attempts to exclude bills of quantities from a contract may lead to ambiguity, in which case, claims in negligence or for misleading and deceptive conduct under the Australian Consumer Law (ACL) (Competition and Consumer Act 2010 (Cth) Sch 2) or under various state or territory fair trading laws may be open. Claims by contractors for additional costs due to items being omitted from a bill of quantities or schedule of rates can be a source of dispute and have led some owners to cease using bills of quantities.

Quantities when not part of contract 15.13 Where the quantities do not form part of the contract, the importance of

the priced bill arises from the fact that the parties usually by their contract agree that it shall be used to value variations.19 In DVP Engineering Pty Ltd v Concrete Constructions Group Ltd,20 an arbitrator considered that a new bill of quantities (for what was described as changes to the scope of work which resulted in the ‘whole job being one big variation or a series of variations’) had been agreed by the parties to be incorporated into their contract, but only in the sense that it might be used for the purpose of valuing variations and possibly progress claims and payments; and that it could not be a contract document for the purposes of defining the work to be performed, which had to be found from the drawings. Leave to appeal the decision of Gillard J at first instance, that there was no error on the face of the arbitrator’s decision, was refused. It is possible for contractors, in pricing a bill, to fix their prices in a way which causes extra work to be particularly profitable; in other words, the contractor may ‘load’ the prices of items expected to be the subject of variations or addition and fix lower prices for other items. While the total of the priced bill remains the same, variations will be more profitable than they should be. The same ‘loading’ can be done when pricing a schedule of rates: the contractor will price at high rates the work expected to be the subject of an increase in quantities and will price the other work at low rates. [page 333] A ‘loaded’ tender may be called an ‘unbalanced’ bid. But a tender may be ‘unbalanced’ in a different respect in that the contractor may, for the purpose of obtaining a better cash flow in the early stages (thus to reduce the amount of working capital tied up in the project) put a higher price on those items of work that will be done at an early stage. These practices were referred to by Brooking J in Sist Constructions Pty Ltd v State Electricity Commission of Vic21 as follows: The need for some contractual provision, either requiring the builder to act reasonably in pricing the bill or empowering the person administering the contract to reject the rates in the priced bill, arises from the notorious practice of those who tender for building and engineering contracts of making what has been described as an unbalanced bid, that is to say, of pricing the bill in a way which, without affecting the amount of the tender, is calculated to enure to their financial advantage. A

tenderer may put down low rates for items where he believes that the “as built” quantities are likely to be less than the billed quantities, and high rates for items where he believes the “as built” quantities will exceed the quantities in the bill. He may also increase his rates for early work and reduce his rates for later work in order to give him a substantial cash flow at an early stage.

Guarantee of quantities 15.14 If the quantities are not made part of the contract, the contractor may yet be given a measure of protection by a provision which amounts to a limited ‘guarantee’ by the proprietor.22 Clause 10 of Ed 4 provided that any bills of quantities or other statements as to quantities of work supplied to the builder should not form nor be deemed to form any part of the contract. Clause 3 of Ed 5b, on the other hand, begins by providing that no bills of quantities supplied by the proprietor to the builder prior to the signing of the contract shall form part of the contract, but goes on to provide a limited guarantee in respect of errors in the quantities. See also cl 3 of AS 2124-1992 and cl 2.4 of AS 4000-1997 which provide that ‘[q]uantities in a Bill of Quantities or Schedule of Rates are estimated quantities only’. In Tyneside Property Management Pty Ltd v Hammersmith Management Pty Ltd,23 the bill of quantities was described as ‘an estimate based on assumptions, the accuracy of which cannot always be known in advance’. Provisional sums also are estimates made by the architect, often after obtaining a rough figure from a subcontractor or supplier as to the cost of part of the work, frequently of a very specialised nature, which it is proposed to sublet. For example, there may be provisional sums for lifts, [page 334] air-conditioning, escalators, electrical services or fire service and sprinkler system. In the bill of quantities, provision usually is made for the contractor to add to each provisional sum a percentage for profit and any amount sought to be charged for ‘attendance’ which includes such things as provision of electricity and toilet and other facilities to a subcontractor. The charge made for ‘attendance’ could be five per cent and the percentage added for profit might be two and a half per cent.

QUANTITY SURVEYORS Profession of quantity surveyors 15.15 The quantity surveyor is one of a number of professional advisers in the building and construction industry. The Australian Institute of Quantity Surveyors, which was formed in 1971 but whose origins go back to 1908, is the professional body of quantity surveyors in Australia. The institute is divided into several state and territory chapters. Professional membership of the institute is restricted to those who have the required training and experience. In Victoria, a person may not take or use the title ‘quantity surveyor’ unless registered as a building practitioner under the Building Act 1993 (Vic): see s 176(1).24

Work of quantity surveyors 15.16 The principal function of the quantity surveyor is the preparation of bills of quantities. But they perform a number of other tasks too, such as certifying payment certificates,25 all generally related to building and construction economics.26 For example, quantity surveyors may be called upon to assess variations or value complex structures and buildings at planning stage. The description of their duties given by Morris J in 1870 in Taylor v Hall27 is now plainly far too restrictive — ‘taking out in detail the measurements and quantities from plans prepared by an architect, for the purpose of enabling builders to calculate the amounts for which they would execute the plans’.

Liability of quantity surveyors 15.17 In common with others, quantity surveyors are bound to carry out their contractual duties skilfully and properly. Although, in comparison with architects and engineers, there has been very little litigation concerning the

[page 335] role of quantity surveyors, as it is likely that architects or engineers will verify or cross check their work.28 In Bains Harding Construction & Roofing (Aust) Pty Ltd v McCredie Richmond & Partners Pty Ltd,29 the defendant quantity surveyor was retained by the plaintiff, which was a roof and wall cladding contractor, to prepare a schedule of quantities (to be taken from tender drawings) to enable the plaintiff to bid on a large project. The schedule was provided and the plaintiff forwarded it with its bid. The plaintiff was successful but it was discovered later that a page of items and an item called ‘subgirts’ had been omitted from the schedule thereby causing the plaintiff to have underbid. In an action for breach of contract, Smart J held the defendant to be in breach of an implied term explained by him as follows: The true term to be implied is that the defendant would exercise due care and skill in preparing and supplying a schedule of quantities from the drawings and documents supplied to it by the plaintiff in respect of the works in question. The exercise of due care and skill would require the schedule of quantities prepared and supplied to be complete. It would also involve the defendant either calling for any further documents which were obviously necessary (as in fact happened) or alerting the plaintiff to any gaps.30

Although the defendant was held to be in breach of that term it was held also that there was contributory negligence (which was allowed as a defence) on the part of the plaintiff. Quantity surveyors may also be liable for negligence. Thus in Tyrer v District Auditor for Monmouthshire31 a quantity surveyor who negligently approved excessive quantities and prices in some contracts with a builder was held liable for that negligence. The old case of Priestley v Stone32 which would deny recovery against a quantity surveyor in the absence of privity would be decided differently today. The remarks of Marks J in Norris v Sibberas,33 set out in 8.15, are as applicable to quantity surveyors as they are to others who have, or profess to have, special knowledge or skill: they too must use reasonable care when giving advice or information or expressing opinion. In Beneficial Finance Corporation Ltd v ABW Nominees Pty Ltd,34 Drummond J found a quantity surveyor negligent in relation to its duty to [page 336]

give an honest opinion on the costs of completion which had an impact upon the proprietor’s finance arrangements. Negligence of builders and others is considered in Chapter 16. There is also the possibility of an action for damages against a quantity surveyor under s 236 of the ACL, and for misleading and deceptive conduct under s 18 of the ACL in the event of an inaccurate bill of quantities causing loss.35 Corresponding provisions may be found in state and territory legislation so far as still applicable.36 _________________________ 1.

North v Bassett [1892] 1 QB 333 at 335. On bills of quantities generally see D McLagan, An Introduction to Building Contracts, Law Book Co, Sydney, 1991, Ch 7.

2.

J Uff, Construction Law, Sweet & Maxwell, London, 10th ed, 2009, Ch 9.

3.

For example, as reflected in AS 4000-1997 cl 2.4.

4.

Uff, above n 2.

5.

The practice of using a quantity surveyor is well established: compare Moon v Guardians of the Poor of the Witney Union (1837) 3 Bing NC 814; 132 ER 624. Contrast, however, Antisell v Doyle [1899] 2 IR 275.

6.

(1987) 37 BLR 92 at 107.

7.

R Wilmot-Smith, Construction Contracts: Law and Practice, Oxford University Press, 2nd ed, Oxford, 2010, Ch 5.

8.

Compare the ‘schedule of rates’ contract in Commissioner for Main Roads v Reed & Stuart Pty Ltd (1974) 131 CLR 378 (a case where the sixth column was left blank). See also Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257 concerning a schedule of rates contract.

9.

National Museums and Galleries on Merseyside (Trustees of) v AEW Architects and Designers Ltd [2013] EWHC 2403.

10. (2003) 196 ALR 257. See 15.4. 11. See I J A Sharkey, ‘Claims and the Claims Process — Advice to the Contractor’ (1985) 1 Building and Construction Law 99 at 103–4. 12. Similar to cl 4.1 of AS 2124-1992. 13. K Pickavance, Delay and Disruption in Construction Contracts, 3rd ed, LLP, London, 2005, Ch 12. 14. Ibid. 15. As in AS 4000-1997 cl 2.3–2.5. 16. RWE Npower Renewables Ltd v J N Bentley Ltd [2013] EWHC 978 at [23]. 17. [1998] WASCA 135. 18. [2013] FCCA 141.

19. For example, AS 4000–1997 cl 36.4. 20. [1997] VSC 368. 21. [1982] VR 597 at 606. See also Mitsui Construction Co Ltd v A-G of Hong Kong (1986) 33 BLR 7. 22. TE Uher and P Davenport, Fundamentals of Building Contract Management, UNSW Press, 2nd ed, Sydney, 2009, Ch 9. 23. [2013] NSWSC 635 at [254]. 24. See also Building Act (NT) ss 4, 22. 25. Dura (Aust) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2013] VSCA 179. 26. Wilmot-Smith, above n 7. 27. (1870) 4 IRCL 467 at 476. 28. Wilmot-Smith, above n 7. 29. (1985) 4 BCL 258. 30. Ibid at 269. 31. (1973) 230 EG 973. 32. (1888) 4 TLR 730. 33. [1990] VR 161 at 171–2, cited in Spiteri v Roccisano [2009]VSC 132 at [104] and referred to in Seirlis v Bengtson [2013] QSC 240 at [86]. 34. [1996] FCA 1475, discussed in Phillips Fox, ‘Professional Advisors — Duty of Care — Beneficial Finance Corporation Ltd v ABW Nominees Pty Ltd & R K Johnson, unreported, Federal Court of Australia, Drummond J, 16 May 1996’ (1998) 61 Australian Construction Law Newsletter 57. 35. Compare Brian James Coleman v Gordon M Jenkins & Associates Pty Ltd (1988) 9 BCL 292; set aside (1989) 23 FCR 38 (liability of architect for inaccurate estimate of costs). See also Nye Saunders and Partners (a firm) v Alan E Bristow (1987) 37 BLR 97 (liability of architect in negligence for failure to warn about inflation factor). See also John Holland Construction and Engineering Pty Ltd v Majorca Projects Pty Ltd [1995] VSC 26 (held: architect acting as certifier did not owe a duty of care to the builder); referred to in JM Kelly (Project Builders) Pty Ltd v Toga Development No 31 Pty Ltd [2008] QSC 311 at [61]. 36. Fair Trading (Australian Consumer Law) Act 1992 (ACT) s 6; Fair Trading Amendment (Australian Consumer Law) Act 2010 (NSW) Pt 3; Consumer Affairs and Fair Trading Act (NT) s 27; Fair Trading Act 1989 (Qld) Pt 3; Fair Trading Act 1987 (SA) Pt 3; Australian Consumer Law (Tasmania) Act 2010 (Tas) ss 18, 37; Fair Trading Act 1999 (Vic) s 159; Fair Trading Act 2000 (WA) s 19.

[page 337]

16 NEGLIGENCE: BUILDERS, LOCAL AUTHORITIES AND OTHERS INTRODUCTION Building cases generally 16.1 Building disputes are usually contractual in nature and involve allegations of breach or non-performance of the building contract itself or of some associated or subsidiary contract. Ordinarily there is no need to rely upon the doctrine of negligence. A typical building contract will provide a more powerful cause of action (for example) for defective work than the law of negligence, because work undertaken may be defective without necessarily being negligent. Also, in contract a defects liability period may apply. However, there may be limitation or other considerations that make a cause of action in negligence of significance, or there may be simply no contract at all between the parties. In addition to contractual causes of action under the contract and the common law of negligence, increasingly litigation in the building area relies on causes of action under the Australian Consumer Law (Competition and Consumer Act 2010 (Cth) Sch 2) which (with some savings) has replaced state and territory fair trading laws.

Trend towards negligence 16.2 The direction that legal precedent has taken demonstrates the doctrine of negligence is continuing to extend its reach. Comment on this was made by Lord

Diplock in Saif Ali v Sidney Mitchell & Co (a firm),1 a case which is often cited. Moreover, the existence of a contract (ordinarily) does not prevent a concurrent liability in negligence: ‘there can be a duty of care [page 338] actionable in the tort of negligence where the parties are in a contractual relationship’.2 In Dymocks Book Arcade Pty Ltd v Capral Ltd,3 McDougall J said he saw nothing in any recent decision ‘to subvert the proposition that a common law duty of care may exist alongside contractual duties.’ This may be so even if the contractual relationship exists in a regulatory regime.4 Certainly this is true for professional persons such as solicitors and architects as well as engineers,5 as well as in wider applications.6 Although a contract may, by its terms, exclude a liability in negligence, conversely the existence of a contractual relationship may provide a basis for a tortious duty of care to arise. Anyone involved in a building project must at all times keep in mind that they may have a liability to others even where there is no contractual obligation. This applies to local authorities whether granting approvals or carrying out inspections or performing works, to builders themselves, to contract administrators and to numerous others including product manufacturers, materials suppliers and subcontractors. Further it should be noted that previously negligence was governed solely by common law. It is now governed also by statute in the states and territories by the legislation referred to in 16.12. This legislation does not replace the common law as such but simply gives it statutory effect (modifying it in some areas) and operates on the basis of it so that its principles inform statute; but only the Victorian legislation (Wrongs Act 1958 (Vic) s 14F) expressly says it is not intended to affect the rules of common law applicable to negligence.

NEGLIGENCE Meaning of negligence

16.3 In a well-known passage, Alderson B in Blyth v Company of Proprietors of the Birmingham Waterworks7 said that negligence ‘is the omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do, or doing something which a prudent and reasonable man would not do’. The [page 339] foundation of the modern law of negligence is, however, the ‘neighbour’ principle of Lord Atkin in Donoghue v Stevenson:8 You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to be persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.

This passage is foundational to the law in this area. The Civil Law (Wrongs) Act 2002 (ACT) s 40 defines ‘negligence’ simply as the failure to take reasonable care and skill. See also the Civil Liability Act 1936 (SA) s 3. The problem, however, whether under statute or not, is to determine when in law reasonable care and skill should be taken. This is not the straightforward question it was in former times.

Elements of cause of action 16.4 In recent times, the law of negligence has undergone quite major change. In its essentials it has largely remained the same but in its details it has changed greatly. To establish a cause of action in negligence in a building case three elements must be present. First, it must be demonstrated that a duty of care existed; secondly, that that duty was breached; and, lastly, that damage has been suffered as a consequence. Each of these three elements is explored in 16.5–16.7. The measure of damage is explored in 16.8. An action in negligence must be brought within the time allowed by law, and this is explored in 16.9. On local authorities and builders see 16.10 and 16.11. A claim brought in negligence, of course, may encounter a defence by the

defendant based on contributory negligence or on the plaintiff’s failure to take steps to mitigate loss.

Duty of care 16.5 Negligence requires breach of a duty of care — but a duty of care must be owed in the first place. For a variety of reasons, a duty may exist in law in only limited circumstances. The mere fact that someone has suffered loss and damage by the act or omission of someone else is not in itself sufficient to say that a duty existed to prevent that loss or damage occurring. Particularly is this so where the loss or damage concerned is classified as pure economic loss. But it may be otherwise if the loss or damage concerned is of a different kind. [page 340] However, whether in a particular jurisdiction a duty of care is owed in respect of any loss at all or economic loss in particular may depend on statute. For example, in the Civil Liability Act 2003 (Qld) Sch 2 ‘harm’ means any kind of harm including economic loss. To like effect is s 43 of the Wrongs Act 1958 (Vic). Moreover, by s 9(1) of Queensland Act a person does not breach a duty to take precautions against a risk of harm unless the risk was foreseeable, was not insignificant and in the circumstances a person acting reasonably would have taken precautions. Reference should always be made to the legislation referred to in 16.12. Otherwise, however, at common law the courts have developed a distinction between cases where loss and damage is pure economic loss and other cases. In many ways, this distinction is an unsatisfactory one in principle. In Bryan v Maloney,9 Mason CJ, Deane and Gaudron JJ drew attention to this as follows: It is difficult to see why, as a matter of principle, policy or common sense, a negligent builder should be liable for ordinary physical injury caused to any person or to other property by reason of the collapse of a building by reason of the inadequacy of the foundations but be not liable to the owner of the building for the cost of remedial work necessary to remedy that inadequacy and to avert such damage.10

In that case the plaintiff owner was successful against the builder despite the

loss being termed ‘pure’ economic loss. Other cases, however, have not been uniformly to this effect, and several English authorities (including Murphy v Brentwood District Council)11 have indeed been to contrary effect. Moreover, there was authority in Australia in this area in the decision of the High Court in Caltex Oil (Australia) Pty Ltd v Dredge Willemstad12 which, if it had a ratio, denied recovery for pure economic loss. Yet another consideration is that it is quite apparent upon a reading of the majority judgment in Bryan v Maloney that the decision in that case was heavily influenced by a finding of a relationship of proximity between the plaintiff and the builder (‘the relationship between builder and subsequent owner with respect to the particular kind of economic loss is, like that between the builder and first owner, marked by the kind of assumption of responsibility and known reliance which is commonly present in the categories of case in which a relationship of proximity exists with respect to pure economic loss’);13 but the doctrine of proximity has now fallen out of favour. Pure economic loss in the context of the law of tort was described by Buss JA in Apache Energy Ltd v Alcoa of Australia Ltd (No 2)14 as ‘loss suffered [page 341] by a plaintiff that is not a consequence of injury or damage caused by the defendant to the plaintiff’s person or property.’ As noted by Dixon J in the Victorian decision in Gunnerson v Henwood15 (see 17.13), there is a marked reluctance in the courts to allow claims for such loss; this has been evident at least since the decision in the Caltex Oil case. His Honour considered that the plaintiffs in the case before him were claiming pure economic loss and, should they succeed, it would be ‘a novel cause of action’.16 In general, therefore, and subject to statute, to quote Buss JA in Apache Energy17 again, it may be taken to be ‘well-established that … a person does not owe a duty in tort to another to take care not to cause reasonably foreseeable economic loss.’ And this is confirmed by the judgment of the plurality (Gleeson CJ, Gummow, Hayne and Heydon JJ) in Woolcock Street Investments Pty Ltd v CDG Pty Ltd,18 who said ‘damages for pure economic loss are not recoverable if all that is shown is that the defendant’s negligence was a cause of the loss and the loss was reasonably foreseeable.’ Further in Barclay v Penberthy,19 in an unusual context, the plurality of the High Court (French CJ, Gummow, Hayne, Crennan

and Bell JJ) referring to the issue of ‘pure economic loss’ before the court and an alleged duty to avoid the same, cited the Woolcock Street Investments case and said the ‘relevant principles’ were considered in that case and ‘are not in dispute’. It is to be noted, however, that the plurality in the Woolcock Street Investments case20 was prepared to observe that ‘[c]laims for damages for economic loss present peculiar difficulty.’ This analysis means that decisions such as Alex Finlayson Pty Ltd v Armidale City Council21 and Opat v National Mutual Life Association of Australia Ltd22 can no longer represent sound law save so far as statute has rescued the situation. In the former case, Burchett J was prepared to find that a duty of care was owed by a local authority even though the loss suffered by the applicant could be categorised as economic. In the latter, Southwell J in the Victorian Supreme Court agreed ‘that in sufficiently “special” circumstances a plaintiff could maintain, in Australia, an action against, say, a manufacturer or builder where the claim for damages is in terms of pure economic loss.’23 [page 342] Nor would the New Zealand decision in J & JC Abrams Ltd v Ancliffe24 be good law to the same extent. In that case, a builder was held liable for loss, solely economic, suffered by a developer as a result of the builder’s failure to confirm an estimate of building cost when he knew that the confirmed price would greatly exceed his original estimate. Arguably, of course, this could be misleading and deceptive conduct under s 18 of the ACL. Underlying the restriction in the cases on recovery for pure economic loss appears to be a concern at imposing an indeterminate duty of care on an individual and thus imposing indeterminate liability considering the range of persons who might claim to have suffered economic loss of some kind. This, however, was not a consideration which influenced the outcome of the appeal in Moorabool Shire Council v Taitapanui.25 In that case, Maxwell P said that the council (and its employee, the building surveyor) had ‘quite properly’ conceded it owed the first owner of a property a duty of care to avoid pure economic loss26 and Ormiston and Ashley JJA said that ‘to impose a relevant duty upon Mellis [the surveyor] carried no risk of indeterminacy’.27 The decision in this case was referred to by Basten JA in Owners — Strata Plan No 61288 v Brookfield Australia

Investments Ltd.28 Macfarlan and Leeming JJA agreed with Basten JA who concluded his judgment in that case by saying: Accepting that the general law does not impose a general duty of care to avoid economic loss, and that the decision in Bryan v Maloney does not in terms dictate the outcome in the present case, there are significant features which militate in favour of the existence of a duty of care covering loss resulting from latent defects which (a) were structural, (b) constituted a danger to persons or property in, or in the vicinity of, the serviced apartments, or (c) made them uninhabitable. The existence of a duty expressed in those terms should be accepted.29

Turning, however, to other kinds of losses, the criterion of whether a duty of care is owed is foreseeability. A loss which is foreseeable if care is not taken to prevent it, usually will give rise to a duty to take that care. Statute may provide to like effect: s 9(1)(a) of the Civil Liability Act 2002 (Tas), for example, provides that a person does not breach a duty to take reasonable care unless there was a foreseeable risk of harm — that is a risk of harm the person knew of or ought reasonably to have known about. In the normal run of building cases, of course, it will not be hard to establish that a duty of care was owed, because normally harm will be clearly foreseeable if care is not taken. [page 343] Formerly, foreseeability was determined by a doctrine of proximity. In Gala v Preston;30 the High Court found a duty of care arose under the common law of negligence only in a case where the requirement of a relationship of proximity between the plaintiff and the defendant has been satisfied: the ‘requirement of proximity constitutes the general determinant of the categories of case in which the common law of negligence recognizes the existence ofa duty to take reasonable care to avoid a reasonably foreseeable and real risk of injury’.31 Mason CJ, Deane and Gaudron JJ expressed a similar view in Bryan v Maloney32 in finding that a duty of care arises ‘only where there exists a relationship of proximity between the parties with respect to both the relevant class of act or omission and the relevant kind of damage’. Wallace J observed in Warwicker Assessments v Zadow: ‘Notwithstanding the possibility of foreseeability of loss, proximity places a limitation on the existence of a duty of care’.33 This concept of proximity involved the notion of nearness or closeness, as explained by Deane J in Council of the Shire of Sutherland v Heyman.34 Proximity could be ‘physical’ (in the sense of space and time) or ‘circumstantial’ (such as

professional persons and their clients) or ‘causal’ (where there is a closeness of connection between an act and a loss). Commonly, the fact that an act could be reasonably foreseen as likely to cause loss was adequate to show that the requirement had been met.35 In many situations it was said foreseeability ‘is the influential, if not decisive, determinant of the existence of a relationship of proximity’.36 Essentially, therefore, proximity was determined by foreseeability. The doctrine of ‘proximity’ ended with the High Court decision in Sullivan v Moody.37 The High Court said as follows as to the reasoning of Lord Atkin in Donoghue v Stevenson: [I]n Le Lievre v Gould AL Smith LJ described [Brett MR’s statement in Heaven v Pender] as a statement of principle ‘that a duty to take due care [arose] when the person or property of one was in such proximity to the person or property of another that, if due care was not taken, damage might be done by the one to the other’. That statement appears to refer to a limited form of proximity: proximity of person or property. But Lord Atkin said that it was not to be understood as limited to physical proximity. It was intended ‘to extend to such close and direct relations that the act complained of directly affects a person whom the person alleged to be

[page 344] bound to take care would know would be directly affected by his careless act’. Even so, his Lordship was speaking of ‘close and direct relations’. He went on to acknowledge that there will no doubt be ‘cases where it will be difficult to determine whether the contemplated relationship is so close that the duty arises’. The references to ‘relations’, and to the problem of deciding which relations are sufficiently proximate to give rise to a duty of care, in part reflects the previous history of the law of negligence, the focus of attention often being particular categories of relationship. The search was for a unifying principle which informed the decisions in respect to those categories. The actual conclusion in Donoghue v Stevenson was that, at least in certain circumstances, the manufacturer of a product intended for human consumption stood in a sufficiently proximate relation to an ultimate consumer of the product to attract a duty of care. But Lord Atkin, in his formulation of principle, was seeking to find ‘a valuable practical guide’, and warned against ‘the danger of stating propositions of law in wider terms than is necessary’. Consistently with his reasoning, he might also have warned against the danger of stating such propositions in more categorical terms than is appropriate.38

The court then went on to deal with the doctrine of proximity in this way: As Professor Fleming said, ‘no one has ever succeeded in capturing in any precise formula’ a comprehensive test for determining whether there exists, between two parties, a relationship sufficiently proximate to give rise to a duty of care of the kind necessary for actionable negligence. The formula is not ‘proximity’. Notwithstanding the centrality of that concept, for more than a century, in this area of discourse, and despite some later decisions in this Court which emphasised that centrality, it gives little practical guidance in determining whether a duty of care exists in cases

that are not analogous to cases in which a duty has been established. It expresses the nature of what is in issue, and in that respect gives focus to the inquiry, but as an explanation of a process of reasoning leading to a conclusion its utility is limited. The present appeals provide an illustration of the problem. To ask whether there was a relationship of proximity between the medical practitioner who examined the children, and the fathers who were suspected of abusing the children, might be a convenient short-hand method of formulating the ultimate question in the case, but it provides no assistance in deciding how to answer the question. That is so, whether it is expressed as the ultimate test of a duty of care, or as one of a number of stages in an approach towards a conclusion on that issue.39

The concern of the law in this area is now the notion of ‘vulnerability’. Often this will be seen in proof of reliance. This was addressed by the [page 345] High Court in Perre v Apand Pty Ltd.40 It was also addressed in the Woolcock Street Investments decision as follows: Since Caltex Oil, and most notably in Perre v Apand Pty Ltd, the vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed. ‘Vulnerability’, in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, ‘vulnerability’ is to be understood as a reference to the plaintiff’s inability to protect itself from the consequences of a defendant’s want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant. So, in Perre, the plaintiffs could do nothing to protect themselves from the economic consequences to them of the defendant’s negligence in sowing a crop which caused the quarantining of the plaintiffs’ land. In Hill v Van Erp, the intended beneficiary depended entirely upon the solicitor performing the client’s retainer properly and the beneficiary could do nothing to ensure that this was done. But in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords, the financier could itself have made inquiries about the financial position of the company to which it was to lend money, rather than depend upon the auditor’s certification of the accounts of the company.41

In the usual building case there will normally be no difficulty in establishing that the employer was ‘vulnerable’ in the relevant way in dealing with the various professionals on the project. If so, as stated above, there will normally be no difficulty in holding that it was reasonably foreseeable that loss would result if care was not taken and, thus, that a duty of care applies. A note of caution, however, must be sounded. Observations of the Victorian Court of Appeal in Ibrahim v Davis42 remind practitioners and others alike that the inquiry whether a duty of care is owed takes place at a ‘relatively general level of abstraction’. On occasions it can be difficult to say, therefore, whether a duty was

owed or not. There is an argument also that a person may be in a vulnerable position because of their proximity to the defendant. So, it seems, proximity cannot be entirely excluded as a consideration, for it may be proximity that gives rise to reliance which leads to a finding of vulnerability. In this way proximity may still be a determinant of foreseeability to a limited extent: because of proximity a person may be unable to protect themselves from harm in that they are relying on the defendant, who is in a close relationship to them, to observe due care so as not to cause them harm. [page 346]

Breach of duty 16.6 The standard of care exacted by the duty of care in a building case (or in any other case) is that which is reasonable in the circumstances. On occasion, statute deals with this matter. For example, s 31(1) of the Civil Liability Act 1936 (SA) provides that the standard of care required of a defendant is that of a reasonable person in the defendant’s position who was in possession of all the information the defendant had or ought reasonably to have had at the time of the incident. As noted in 17.12, the High Court said in Rogers v Whitaker43 that ‘[i]n Australia it has been accepted that the standard of care to be observed by a person with some special skill or competence is that of the ordinary skilled person exercising and professing to have that special skill.’ Whether the degree of care called for by that standard has been taken will determine whether the duty has been breached. The High Court discussed these matters (in a non-building context) in Burnie Port Authority v General Jones Pty Ltd.44 It was there said that the degree of care under the standard: … necessarily varies with the risk involved and that the risk involved includes both the magnitude of the risk of an accident happening and the seriousness of the potential damage if an accident should occur. So great may be the magnitude of danger that ‘the standard of “reasonable care” may involve “a degree of diligence so stringent as to amount practically to a guarantee of safety”’.45

The standard that is reasonable in the circumstances might have regard to industry practice. In Brumby v Pearton,46 for example, Crawford J took into account the standard of the majority of builders in the Launceston area in 1977–

78 when considering the depth of footings. In Fisher v Howe,47 Adamson J said: ‘Evidence of acceptable practice amongst professionals is a useful guide’. But, he added, ‘it is for the Courts to adjudicate on what is the appropriate standard of care.’ In that regard, as far as giving advice is concerned, ‘the tenor and the content of the advice can often legitimately be pitched at a level which is consonant with the type of client with whom the professional is dealing’.48 Because the standard is that which is reasonable, not every error will necessarily be evidence of negligence. In Sutcliffe v Thackrah,49 Lord Salmon said that: [page 347] [It] by no means follows that a professional valuation or opinion was negligently given because it turns out to have been wholly wrong. Nor does the fact that an architect’s certificate was given for the wrong amount of itself prove negligence against the architect.

As Malcolm CJ said in Warwicker Assessments v Zadow: ‘There is no duty to be right. Where a duty exists it is only a duty to be careful’.50 This was a point made clearly by Akenhead J in Igloo Regeneration (General Partner) Ltd v Powell Williams Partnership: ‘It is … obvious and well established that merely because a professional person including a surveyor gets something wrong does not mean that he or she is negligent, albeit to found a case in professional negligence it will almost invariably be necessary to prove that there was a causative error or omission.’51 The distinction between contractual obligations and the obligation not to be negligent can impose quite different standards of performance. For example, a contractual term that requires a product to satisfy a particular purpose will be breached if the product, once produced, is incapable of satisfying that purpose. It is the end result that is measured against the contractual term. On the other hand, in tort, while the end result may be a defective structure, it is the departure from the required standard of skill and care in the performance of a particular task which constitutes the breach of the duty of care. Australian Standards and building codes occupy an important place in determining whether the requisite standard of care has been observed in building cases. A departure from a recognised code or standard will ordinarily be regarded as negligent unless the design can be supported on other rational principles. The standard departed from may be no higher than the standard of the majority of

builders in the area even if this is more than some municipal requirements.52 Conversely, compliance with a particular building code where it is known in the industry to be in error will not excuse a design which is otherwise negligent. A clear distinction must be maintained between duty and breach for whether a duty is owed is a question of law but whether a duty has been breached is a question of fact.53

Loss caused by the negligent act 16.7 It is essential to the tort of negligence that there is a loss suffered by the plaintiff and that it is caused by the defendant’s breach of duty.54 Statute may apply here: for example, s 5D(1) of the Civil Liability Act 2002 (NSW) [page 348] provides that the determination that negligence caused particular harm comprises an element that the negligence was a necessary condition of the occurrence of the harm and the element that it is appropriate for the scope of the negligent person’s liability to extend to the harm so caused. Loss usually must be reasonably foreseeable but even if a loss is reasonably foreseeable it may nevertheless be regarded as too remote a consequence or as not a consequence at all, in which event a damages claim will fail.55 It is entirely possible for a party in a building case to succeed on the question of causation but fail on showing a breach of duty.56 There must be a causal link between the plaintiff’s loss and the defendant’s negligent act. The authorities on causation were reviewed by the High Court in March v E & MH Stramare Pty Ltd.57 Quoting from the judgment of Windeyer J in National Insurance Co of New Zealand Ltd v Espagne58 that ‘questions of cause and consequences are not the same for law as for philosophy and science’, Mason CJ (with whom Toohey and Gaudron JJ agreed) said that ‘the common law tradition is that what was the cause of a particular occurrence is a question of fact which “must be determined by applying common sense to the facts of each particular case”’.59 Deane J said that ‘the question whether conduct is a “cause”

of injury remains to be determined by a value judgment involving ordinary notions of language and common sense’.60 This notion of causation as a matter of ‘common sense’ was referred to by Jackson J in Cross v Moreton Bay Regional Council,61 a case in which a worker, who slipped off the step of a tray on a truck, failed in his action against his employer because there was no evidence that a non-slip surface on the step would have prevented the slip occurring. Although the ‘but for’ test can be useful in many instances in determining whether a loss suffered by the plaintiff was caused by the negligence of the defendant, it cannot be regarded as the sole or exclusive criterion for making that determination.62 It is to be used ‘only as a guide’: ‘the ultimate question is whether, as a matter of commonsense, [sic] the relevant act or omission was a cause’.63 In Bailey v Redebi Ltd64 Santow J followed Bennett v Minister for Community Welfare65 and applied the ‘but for’ test as a two-stage test. After considering [page 349] whether the action of the architect (in failing to supervise an engineering team) was sufficient to cause the loss by itself, his Honour went on to assess factors which he considered may make a difference to his determination. It may be open in a building case, as noted in 16.4, to allege contributory negligence on the part of the plaintiff. Contributory negligence (which may also be dealt with in state or territory legislation) requires in effect failure on the part of the plaintiff to look after its own affairs. For example, an owner, in failing to make proper inquiries or to verify information, may have contributed to their own loss notwithstanding the builder has departed from the standard of care owed to them. Brownie J in Multiplex Constructions Pty Ltd v Amdel Ltd66 explained the law as requiring that a plaintiff should act as a reasonable person, but not ‘as an ultra-cautious pessimist, inclined to see danger at every possible point’. Of course, where, as a matter of ordinary common sense, the sole real cause of a plaintiff’s loss is the plaintiff’s own negligence, the element of causation which is required in the tort of negligence will be lacking.67 It should be noted that the actions of a plaintiff (including contributory

negligence) might reduce the assessment of damages in claims other than those made in negligence. Although the High Court in Astley v Austrust Ltd68 held that contributory negligence only applied to damages recoverable in tort and did not apply to claims made for breach of contract, the effect of that case has now been reversed by legislation. See below 16.12.

Measure of damages 16.8 In Kaze Constructions Pty Ltd v Housing Indemnity Australia Pty Ltd,69 von Doussa J confirmed that the ‘object of an award of damages in tort is to restore the plaintiff to the position in which it would have been placed if the wrongful act had not been committed’. This extends to building cases. Damages may include the cost of rectification and the diminished value of a plaintiff’s property after rectification.70 In some special circumstances, damages also may include a psychological component.71 It may also be appropriate, as in Lowden v Lewis,72 to award damages for interest on money borrowed to pay for the cost of rebuilding on the principle of Hungerfords v Walker.73 [page 350]

Limitation period 16.9 An action in tort for negligence must be brought within the time allowed by law.74 In general this is six years from the date of accrual of the cause of action which is ordinarily when the damage first becomes manifest.75 However, Victoria has enacted legislation to provide for an absolute limit. The Building Act 1993 (Vic) s 134 limits the period in which a cause of action can be brought to the period within 10 years of an occupancy permit or first occupation of the building. Other states and territories have provided similarly. This does not extend the usual six-year period of liability but provides an absolute cap so that even if the damage could not be detected by reasonable means the cap will still apply. See further 11.9.

BUILDERS, LOCAL AUTHORITIES AND

OTHERS Builders 16.10 There is clear authority in the High Court decision in Bryan v Maloney76 (Brennan J dissenting) that a builder may be liable in tort to the first owner for whom a house has been built or, as in that case, to a subsequent owner, for negligent construction work. The negligence in that case was the inadequacy of the footings and the loss involved was the decrease in the value of the house resulting from that inadequacy and its consequences. The relationship between the builder and the subsequent owner was held to have the required degree of proximity to give rise to a duty of care on the part of the builder to avoid that kind of loss.77 Mason CJ, Deane and Gaudron JJ, who with Toohey J were the majority, observed as follows:78 It is likely that the only connection between such a builder and such a subsequent owner will be the house itself. Nonetheless, the relationship between them is marked by proximity in a number of important respects. The connecting link of the house is itself a substantial one. It is a permanent structure to be used indefinitely and, in this country, is likely to represent one of the most significant, and possibly the most significant, investments which the subsequent owner will make during his or her lifetime. It is obviously foreseeable by such a builder that the negligent construction of the house with inadequate footings is likely to cause economic loss … to the owner of the house at the time when the inadequacy of the footings first becomes

[page 351] manifest. When such economic loss is eventually sustained and there is no intervening negligence or other causative event, the causal proximity between the loss and the builder’s lack of reasonable care is unextinguished by either lapse of time or change of ownership.

Brennan J dissented on the basis that the loss claimed in the case was not damage in respect of which an action lies in negligence; a duty to take reasonable care to avoid a physical defect in a house which did not pose a danger to health or safety was not cast upon the builder in his view. There was therefore no duty to use reasonable care to prevent or avoid that kind of damage even though such defects were hard to classify as pure economic loss from his perspective.79 In applying the principle of liability in Bryan v Maloney it was held in Opat v National Mutual Life Association of Australasia Ltd80 that it cannot matter if the

subsequent owner is not known by name to the builder. Nor does it matter if the builder is also the owner.81 The loss in Bryan v Maloney was brought about by a latent defect that first became manifest when cracks appeared in the walls of the house. Defects which are not latent have been said to stand in a different category by Connolly J in National Mutual Life Association of Australasia v Coffey & Partners Pty Ltd:82 [If] the view be accepted that it is, at base, reliance by the injured party which gives rise to the duty of care, it can scarcely be said that a party who purchases with knowledge that the work as performed is defective can set up his belief that the building is firmly founded and his reason for that belief as being his reliance on the skill and judgment of those who designed the foundations and supervised the work.

As discussed above in 16.5, however, the exact status of Bryan v Maloney is unclear. The decision stands as authority, at least on its facts, and has not been overruled. In Owners — Strata Plan No 61288 v Brookfield Australia Investments Ltd,83 Basten JA was inclined to question whether Bryan v Maloney is authority for any proposition extending beyond its facts. How the High Court would decide on the same facts again is an open matter. The holding in the decision is based on the doctrine of proximity and that doctrine (as discussed above) has fallen into disfavour as the criterion to be applied in deciding when a duty of care exists. On the other hand, adopting a doctrine of vulnerability, it may plausibly be argued that someone in the owner’s position in that case, although a subsequent owner at that, is in a vulnerable position nonetheless and is clearly within the range of those who are foreseeable as suffering loss, [page 352] should care not be taken. Then again, even if it does not matter that the plaintiff owner is a subsequent owner, it may very well make a significant difference that the loss claimed is pure economic loss. The reluctance of the courts to allow recovery for economic loss, still evident despite Bryan v Maloney, has already been discussed. But once more it must be noted that this is subject to state and territory legislation.

Local authorities

16.11 In the exercise of their functions with regard to building supervision the English Court of Appeal decision in Dutton v Bognor Regis Urban District Council84 was of major significance in extending liability in the law of tort to cover negligence on the part of local authorities. To the same effect is the later decision of the House of Lords in Anns v Merton London Borough Council,85 where it was held that the authority was not absolved from liability merely because it was not under a duty to inspect. Lord Wilberforce, who delivered the leading speech in that case, referred approvingly86 to Bowen v Paramount Builders (Hamilton) Ltd.87 In that case the New Zealand Court of Appeal held that local authorities have a duty to use reasonable care to prevent damage to persons whom they should reasonably expect to be affected by their work.88 In a remarkable reversal, the House of Lords in Murphy v Brentwood District Council89 overruled the Dutton case and departed from the Anns decision ‘in so far as it affirmed a private law duty of care to avoid damage to property which caused present or imminent danger to the health and safety of owners, or occupiers, resting upon local authorities in relation to their function of supervising compliance with building by-laws or regulations’.90 It reaffirmed its departure from the Anns decision in Department of the Environment v Thomas Bates and Son Ltd.91 English law has not since returned to the position in Dutton v Bognor Regis Urban District Council. The law remains that established in Murphy v Brentwood District Council. In Bellefield Computer Services Ltd v E Turner and Sons Ltd,92 Schiemann LJ said that the trial judge ‘was right not to depart from the guidance given in Murphy and the cases cited in it to the effect that where the damage is to the very building itself there should be no liability’. This [page 353] was quoted by Akenhead J in Linklaters Business Services (formerly Hackwood Services Company) v Sir Robert McAlpine Ltd.93 In Council of the Shire of Sutherland v Heyman,94 the majority (Mason, Brennan and Deane JJ) also declined to follow the Anns decision. In that case the plaintiffs sued the local council for damages for negligence after the house they purchased developed distortions and cracking. They alleged the council was negligent in

carrying out inspections or in failing to carry out inspections which should have been made. Although they eventually lost in the High Court, it was not because the council enjoyed any overall immunity from suit for negligence in these matters. However, beyond this, the precise ratio of the case is unclear. Gibbs CJ and Wilson J held that the council was not guilty of any breach of duty: it was under no duty to inspect the house and it was not established that the inspection it made was negligently carried out; nor was it proven that it was negligent in failing to consider the exercise of a discretionary power of inspection.95 Mason J held that the plaintiffs had failed to establish that the council owed them a duty of care: they had not specifically relied on the exercise of its power of inspection.96 Brennan J held that the plaintiffs had no cause of action against the council: it was under no duty to act to prevent the occurrence of damage of the kind complained of and its omission to exercise its powers of inspection more rigorously did not make it liable for the consequences of the builder’s negligence.97 Deane J held that the council owed the plaintiffs no duty of care because the element of proximity was lacking: the council’s active connection with the construction of the house was limited to the exercise of some of its statutory powers and functions.98 The acute division of opinion in the case makes it difficult to state the exact ratio of the decision. McHugh JA referred to this conflict in Parramatta City Council v Lutz.99 If, however, the case did or does stand for the proposition that a plaintiff must prove reliance in order to establish proximity,100 then it may be said that such a requirement is or would be one in keeping with some other areas of the law such as estoppel. McHugh JA said he would regard reliance as a necessary development in the law of negligence as it applies to public authorities — one ‘justified by the failure of the traditional categories to give protection to individual members of the community from harm in situations where it is impracticable for them to protect themselves’.101 [page 354] Proximity as the basis for a duty of care, however, is no longer the law, as discussed above. The basis for a duty of care is now expressed in terms of vulnerability, but that is not to say there is no argument for saying that a person

may be in a position of vulnerability because they are in a position of proximity.102 In Armidale City Council v Alec Finlayson Pty Ltd,103 the Full Federal Court held that a duty of care was owed to the subsequent purchaser of land purchased as residential land where, at the time the council had rezoned the land from commercial to residential, it had been aware of contamination on the site. The duty of care was owed because of the foreseeability of loss to a purchaser such as the plaintiff. The existence of a statutory function did not preclude an action in negligence. The Court said: ‘the Council was well aware of a serious problem’104 and made findings accordingly. A council may have a discretionary power without doubt but may be negligent nonetheless if it does not exercise that power. In Pyrenees Shire Council v Day,105 the local authority had power to direct an owner to rectify a chimney which was known to be defective and a risk to the building, but it did not do so. A subsequent purchaser of the building used the fireplace which resulted in the building, and an adjacent building owned by an unrelated party, being damaged. The majority (of the High Court) found the council had not only breached its duty of care to the adjacent owner, but also to the subsequent purchaser who had had an opportunity to inspect the premises prior to purchase.106 Brennan CJ in the case found that the Council was under a public duty to exercise a statutory power under the Local Government Act 1958 (Vic) — ‘the existence of a discretion to exercise a power is not necessarily inconsistent with a duty to exercise it.’107 Toohey, McHugh, Gummow and Kirby JJ, although differing on the liability of the Council to the current tenant, held that the Council was in breach of a duty of care to the owner. However, they did so for varying reasons largely affected by the doctrine of reliance. A council will also be under its duty to take reasonable care in relation to an inquiry made on whether a particular development may be approved by it.108 Whether or not reasonable care has been taken in answering an inquiry will depend on the particular facts of the case. It may be that an ‘off the cuff’ opinion may contravene the existence and scope of a duty to take care, depending upon the impression which is conveyed by the answer to a reasonable person in the position of the inquirer. [page 355]

Subsequent cases in the High Court in this area include Brodie v Singleton Shire Council,109 Vairy v Wyong Shire Council110 and Mulligan v Coffs Harbour City Council.111 In Brodie, a case of a collapsing bridge, Gaudron, McHugh and Gummow JJ referring to a number of previous decisions (including Sutherland Shire Council and Pyrenees Shire Council) said: … that, on occasions, the powers vested by statute in a public authority may give it such a significant and special measure of control over the safety of the person or property of citizens as to impose upon the authority a duty of care. This may oblige the particular authority to exercise those powers to avert a danger to safety or to bring the danger to the knowledge of citizens otherwise at hazard from the danger. In this regard, the factor of control is of fundamental importance.112

In Mulligan,113 a personal injuries case, McHugh J said that the ‘standard of care required of [a public] authority is predicated upon reasonable foresight and the adjective “reasonable” must be given full weight’ meaning the ‘authority cannot be required to exercise a standard of care that will protect every person that human imagination may foresee…’. It remains the case, plainly on the basis of all the authorities, although for varying reasons, that a local government body may well be liable in a building case either for what it has done or for what it has failed to do. This was made clear by Allsop P in Precision Products (NSW) Pty Ltd v Hawkesbury City Council:114 ‘When a Council exercises a power to build a structure, approve a plan, give permission for an act or otherwise engage in activity, it may well be required (on pain of liability in damages) to exercise care in relation to someone who may be affected by the power’s exercise.’ His Honour re-emphasised this in MM Constructions (Aust) Pty Ltd v Port Stephens Council,115 where Basten JA said that ‘[p]ublic authorities may act in various ways which engage responsibilities and obligations under the general law’116 and added that a council ‘may … be liable for the negligent carrying out of a building inspection and the negligent provision of information it is under a legal duty to supply.’117 Bergin CJ in Equity agreed with both Allsop P and Basten JA. A breach of a statutory duty may also create a private right of action on the proper construction of the legislation imposing that duty.118 The existence of a statutory power may be a factor in concluding a duty of care arises in a particular case. Thus was it said in Caledonian Collieries Ltd [page 356]

v Spiers119 by Dixon CJ, McTiernan, Kitto and Taylor JJ that ‘when statutory powers are conferred they must be exercised with reasonable care, so that if those who exercise them could by reasonable precaution have prevented an injury which has been occasioned, and was likely to be occasioned, by their exercise, damages for negligence may be recovered.’ McHugh J in Crimmins v Stevedoring Industry Finance Committee120 referred to this as a well-known or settled category of duty of care which (as Allsop P in MM Constructions pointed out)121 was cited by Mason J in Sutherland Shire Council.122 Statute in the states or territories may affect this position in any event.

Statutory provisions 16.12 As noted in 16.2, legislation brought into force in the states and territories deals with the law relating to negligence, and in some instances modifies it. The cases discussed in this chapter, however, are still relevant to the legislation as informing the application of the provisions. Reference should be made to the legislation as follows: Civil Law (Wrongs) Act 2002 (ACT) Ch 4; Civil Liability Act 2002 (NSW) Pt 1A; Civil Liability Act 2003 (Qld) Ch 2 Pt 1; Civil Liability Act 1936 (SA) Pt 6; Civil Liability Act 2002 (Tas) Pt 6;Wrongs Act 1958 (Vic) Pt X; Civil Liability Act 2002 (WA) Pt 1A. In the case of the Northern Territory see Law Reform (Miscellaneous Provisions) Act (NT) and Personal Injuries (Liabilities and Damages) Act (NT). These laws generally provide definitions of relevant expressions, but differences in provisions occur between jurisdictions. For example, under the NSW Act (s 5), as under the ACT Act (s 40), negligence means ‘failure to exercise reasonable care and skill’; but the Victorian Act does not define the expression at all. By s 5B of the NSW Act a person is not negligent in failing to take precautions against a risk of harm unless the risk was foreseeable, it was not insignificant and a reasonable person in the circumstances would have taken those precautions. Harm, by s 5, includes damage to property and economic loss. Section 5D(1), as noted above, deals with causation by providing a determination that negligence caused particular harm that comprises two elements: the negligence was a necessary condition of the occurrence of the harm and it is appropriate for the scope of the negligent person’s liability to extend to the harm so caused. Laws also have affected the question of who or which party may be liable in the event of a finding of negligence. That is to say, they provide for so-called

proportionate liability by establishing apportionable claims. This enables courts in legal proceedings to apportion blame and thus liability to an appropriate degree having regard to a defendant’s responsibility for damage or loss. See: Civil Law (Wrongs) Act 2002 (ACT) Ch 7A; Civil Liability Act 2002 (NSW) Pt 4; Proportionate Liability Act (NT); Civil Liability Act 2003 [page 357] (Qld) Ch 2 Pt 2; Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) Pt 3; Civil Liability Act 2002 (Tas) Pt 9A; Wrongs Act 1958 (Vic) Pt IVAA; Civil Liability Act 2002 (WA) Pt 1F. In Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd,123 French CJ, Hayne and Kiefel JJ described the effect of Part 4 of the NSW Act as follows: Part 4 of the Civil Liability Act represents a departure from the regime of liability for negligence at common law (solidary liability), where liability may be joint or several but each wrongdoer can be treated as the effective cause and therefore bear the whole loss. Under that regime, a plaintiff can sue and recover his or her loss from one wrongdoer, leaving that wrongdoer to seek contribution from other wrongdoers. The risk that any of the other wrongdoers will be insolvent or otherwise unable to meet a claim for contribution lies with the defendant sued. By comparison, under a regime of proportionate liability, liability is apportioned to each wrongdoer according to the court’s assessment of the extent of their responsibility. It is therefore necessary that the plaintiff sue all of the wrongdoers in order to recover the total loss and, of course, the risk that one of them may be insolvent shifts to the plaintiff.124

In the actual working of proportionate liability the general approach to be adopted is that set out by Campbell J in Sydney Water Corporation v Asset Geotechnical Engineering Pty Ltd:125 The approach then is the familiar approach in relation to contribution among tortfeasors — or for contributory negligence — of apportionment by reference to the degree of the departure from the standard of the reasonable person, and the causal potency of the relevant negligence bringing about the harm.126

As found in that case, though, a party which is not negligent cannot be a concurrent wrongdoer under the legislation. _________________________ 1.

[1980] AC 198 at 218. See generally DS Jones, ‘The Increasing Trend Towards Negligence Claims in the Construction Industry’ (1989) 5 Building and Construction Law 175.

2.

Lancashire and Cheshire Association of Baptist Churches Inc v Howard & Seddon Partnership (a firm) [1993] 3 All ER 467 at 474 per Judge Kershaw QC; Astley v Austrust Ltd (1999) 197 CLR 1.

3.

[2013] NSWSC 343 at [213].

4.

Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 212.

5.

See Morton v Douglas Homes Ltd [1984] 2 NZLR 548 at 587–8; Brickhill v Young [1984] 3 NSWLR 396 at 400–1; Frederick W Nielsen (Canberra) Pty Ltd v PDC Constructions (ACT) Pty Ltd (1987) 71 ACTR 1; Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1VR 27.

6.

See, for example, Dutton & Stone v Jalapen Pty Ltd (1991) 10 BCL 338 at 343.

7.

(1856) 11 Exch 781 at 784; 156 ER 1047 at 1049.

8.

[1932] AC 562 at 580.

9.

(1995) 182 CLR 609 at 20.

10. Ibid at 11. 11. [1991] 1 AC 398. 12. (1976) 136 CLR 529. 13. (1995) 182 CLR at 18. 14. [2013] WASCA 213 at [108]. 15. [2011] VSC 440. 16. Ibid at [220]. 17. [2013] WASCA 213 at [109]. Note the comment of Judge Kershaw QC in Lancashire and Cheshire Association of Baptist Churches Inc v Howard & Seddon Partnership (a firm) [1993] 3 All ER 467 at 478: ‘We must not say that economic loss is not a recoverable head of damages; we say that there is no duty of care to prevent economic loss’. 18. [2004] HCA 16 at [21]. 19. [2012] HCA 40 at [42]. 20. [2004] HCA 16 at [21]. 21. (1994) 123 ALR 155 at 185. Compare Frederick W Nielsen (Canberra) Pty Ltd v PDC Constructions (ACT) Pty Ltd (1987) 3 BCL 74; Minchillo v Lanes Ford Trucks Pty Ltd [1992] ASC 56–156; CBD Investments Pty Ltd v Ace Ceramics Pty Ltd (1992) 10 BCL 437. 22. [1992] 1 VR 283. 23. Ibid at 292. 24. [1978] 2 NZLR 420. See also Invercargill City Council v Hamlin [1994] 3 NZLR 513. 25. [2006] VSCA 30. 26. Ibid at [23]. 27. Ibid at [175]. 28. [2013] NSWCA 317. 29. Ibid at [129]. 30. (1991) 172 CLR 243 at 252. Compare Pacific Associates Inc v Baxter [1990] 1 QB 993.

31. Ibid at 253. 32. (1995) 182 CLR 609. 33. (1989) 1 WAR 307 at 318. 34. (1985) 157 CLR 424 at 497–8. 35. Jaensch v Coffey (1984) 155 CLR 549 at 579. See also Harris v Briggs (1994) Aust Torts Rep 81301. 36. Nagle v Rottnest Island Authority (1993) 177 CLR 423 at 430; Bryan v Maloney (1995) 182 CLR 609. 37. [2001] HCA 59. 38. Ibid at 46–7. 39. Ibid at 48. 40. (1999) 198 CLR 180. 41. Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16 at 23. 42. [2013] VSCA 238 at [31]. 43. (1992) 175 CLR 479 at 487. 44. (1994) 68 ALJR 331 at 347. 45. Ibid at 348. 46. (1991) 10 BCL 291 at 294. See also Rowlands v Collow [1992] 1 NZLR 178 at 187. 47. [2013] NSWSC 462 at [84]. 48. Igloo Regeneration (General Partner) Ltd v Powell Williams Partnership [2013] EWHC 1718 at [81] per Akenhead J: ‘Thus, to a highly experienced commercial client, a professional may not need to spell out everything which might need to be spelt out to a clearly inexperienced client.’ 49. [1974] AC 727 at 760. 50. (1989) 1 WAR 307 at 311. 51. [2013] EWHC 1718 at [82]. 52. Brumby v Pearton (1991) 10 BCL 291 at 294. See also Toomey v Scolaro’s Concrete Constructions Pty Ltd (in liq) [2001] VSC 279. 53. Ibrahim v Davis [2013] VSCA 238 at [30]. 54. March v E & M H Stramare Pty Ltd (1991) 171 CLR 506 at 524. 55. Mulvenna v Royal Bank of Scotland [2003] EWCA Civ 1112 at [33]; West v Ian Finlay & Assoc (A firm) [2013] EWHC 868 at [249]. 56. Lucantonio v Kleinert [2011] NSWSC 753 at [147]. 57. (1991) 171 CLR 506. 58. (1961) 105 CLR 569 at 591. 59. (1991) 171 CLR 506 at 515. 60. Ibid at 524. 61. [2013] QSC 215. 62. March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 at 515–17, 522–3.

63. Alexander v Cambridge Credit Corp Ltd (1987) 9 NSWLR 310 at 358 per McHugh JA. 64. [1999] NSWSC 918. 65. (1992) 176 CLR 408. 66. (1991) 10 BCL 115 at 139. 67. March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 at 524 per Deane J. 68. (1999) 197 CLR 1. 69. (1990) 10 BCL 63 at 77. See also the discussion in Dutton & Stone v Jalapen Pty Ltd (1991) 10 BCL 338 at 344. 70. Brumby v Pearton (1991) 10 BCL 291. 71. See Campbelltown City Council v Mackay (1989) 15 NSWLR 501. For a case on damages for loss of profits see Chas Drew Pty Ltd v JF & P Consulting Engineers Pty Ltd (1989) 10 BCL 48. 72. [1989] Tas R 254. 73. (1989) 171 CLR 125. For this principle to operate the loss must be established by evidence: Brumby v Pearton (1991) 10 BCL 291 at 297. See also Simeone v Pesatura General Contractors Pty Ltd (1993) 60 SASR 453. 74. Limitation Act 1985 (ACT) s 11(1); Limitation Act 1969 (NSW) s 14(1); Limitation Act (NT) s 12(1); Limitation of Actions Act 1974 (Qld) s 10(1)(a); Limitation of Actions Act 1936 (SA) s 35(b); Limitation Act 1974 (Tas) s 4(1)(a); Limitation of Actions Act 1958 (Vic) s 5(1)(a); Limitation Act 2005 (WA) s 13. 75. Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1 VR 27. 76. (1995) 182 CLR 609. 77. See also Miell v Hatjopoulos (1985) 2 BCL 258; further proceedings (1987) 4 BCL 226; Brumby v Pearton (1991) 10 BCL 291 at 295; Chase v de Groot [1994] 1 NZLR 613 at 619. 78. (1995) 182 CLR 609 at 625. 79. Ibid at 643. 80. [1992] 1 VR 283 at 294. 81. Chase v de Groot [1994] 1 NZLR 613 at 619. 82. [1991] 2 Qd R 401 at 406. See also Council of the Shire of Sutherland v Heyman (1985) 157 CLR 424 at 504; Miell v Hatjopoulos (1987) 4 BCL 226 at 231. See also Zumpano v Montagnese [1997] 2 VR 525. 83. [2013] NSWCA 317 at [106]. 84. [1972] 1 QB 373. 85. [1978] AC 728. 86. Ibid at 759–60. 87. [1975] 2 NZLR 546. 88. See also Lester v White [1992] 2 NZLR 483; Invercargill City Council v Hamlin [1994] 3 NZLR 513. 89. [1991] 1 AC 398. 90. Ibid at 457 per Lord Mackay LC. 91. [1991] 1 AC 499.

92. [2000] All ER 84. 93. [2010] EWHC 1145 at [21]. 94. (1985) 157 CLR 424. 95. Ibid at 447–8, 471. 96. Ibid at 470–1. 97. Ibid at 489, 493–4. 98. Ibid at 510–12. 99. (1988) 12 NSWLR 293 at 330. 100. See Opat v National Mutual Life Association of Australasia Ltd [1992] 1VR 283 at 295; Hicks v Lake Macquarie City Council (No 2) (1992) 77 LGRA 269 at 273. Compare, however, Northern Territory of Australia v Deutscher Klub (Darwin) Inc (1994) Aust Torts Rep 81,275. 101. Parramatta City Council v Lutz (1988) 12 NSWLR 293 at 330. 102. Perre v Apand Pty Ltd (1999) 198 CLR 180. 103. [1999] FCA 330. 104. Ibid at [28]. 105. [1998] HCA 3. See also Romeo v Conservation Commission of the Northern Territory [1998] HCA 5. 106. See also Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54. 107. [1998] HCA 3 at [23]. 108. City of Botany Bay Council v Jazabas Pty Ltd [2001] NSWCA 94. 109. [2001] HCA 29. See also Tepko Pty Ltd v Water Board [2001] HCA 19 (negligent misstatement alleged). 110. [2005] HCA 62. 111. [2005] HCA 63. 112. Brodie v Singleton Shire Council [2001] HCA 29 at 102. 113. [2005] HCA 63 at [21]. 114. [2008] NSWCA 278 at [120]. 115. [2012] NSWCA 417 at [100] (where a duty of care on the Council was not imposed). 116. Ibid at [206]. 117. Ibid. 118. O’Connor v SP Bray Ltd (1937) 56 CLR 464 at 477–9. 119. (1957) 97 CLR 202 at 220. 120. [1999] HCA 59 at 62. 121. [2012] NSWCA 417 at [89]. 122. (1985) 157 CLR 424 at 458–9. 123. [2013] HCA 10. 124. Ibid at [10]. 125. [2013] NSWSC 1274.

126. Ibid at [208].

[page 359]

17 ARCHITECTS AND ENGINEERS GENERALLY Architects 17.1 Over the course of a construction project an architect typically performs a number of different functions. Primarily those functions are performed pursuant to the terms of his or her engagement by the owner. For example, the Australian Institute of Architects (AIA) Client and Architect Agreement1 describes the architect’s role in a series of phases called concept design, design development, town planning/development application, construction documentation, contractor selection and contract administration. The work to be performed by the architect in each of these stages is described by the agreement. The last stage, contract administration, includes the three sub-phases of pre-construction, construction and post-construction. The sub-stage of pre-construction includes preparing the contract documents and arranging for their signing and execution. Administration includes administering the building contract, a topic further described below. Post-construction work involves making a final assessment of works and advice regarding defects. Payment for each of these phases may be on the basis of a percentage of the total project value, a lump sum or an hourly rate. In small domestic projects it is not unusual for an architect to be involved in all stages up to contract administration, but then have the owner administer the building contract without the architect’s involvement. However, more significant building contracts typically provide a role to be performed by architects, engineers or superintendents in administering them. While not a party to the building contract the architect (or superintendent or engineer) plays an important part in administering its terms. The architect is usually given power to issue

instructions, extend the time for completion and vary the scope of the works as well as certify payment. Project management is now also a separate occupation in itself and so many of these functions may be performed by a project administrator who is neither an architect nor an engineer. [page 360] The role that the architect performs in the building contract is determined by the terms of the building contract. The obligation to perform this role is set by the terms of the agreement between the architect and the owner. Often the building contract will also oblige the owner to ensure that the architect acts within certain standards of performance. It is the breach of this provision (or its equivalent) which is most often relied upon by builders when they have a complaint with the role the architect has performed in administering the building contract. In the absence of express terms, terms to a similar effect may be implied.2 There is no contractual relationship between the builder and the architect, and relying on a tortious cause of action is ordinarily difficult.3 While usually engaged directly by an owner, an architect may be engaged by other consultants. The architect’s function in such circumstances is defined by the contract the architect has with that other consultant. For example, in Palermo Nominees Pty Ltd & Mirco Bros Pty Ltd v Broad Construction Services Pty Ltd4 the architect was engaged by the project manager. The architect’s obligation in respect of defective sound insulation was no more than to advise the project manager of the need to secure an appropriate expert to advise. The architect itself was not obliged to provide that advice. The AIA Client and Architect Agreement specifies (cl Ia) that the client must appoint the architect to act as its agent for the project as necessary for the architect to carry out services. It also specifies (cl Ka) that the architect is not responsible for ensuring the constructed project complies with the building contract documents but, when engaged for contract administration, must instruct the building contractor regarding the requirements in those documents according to the terms of the contract.

Engineers and superintendents

17.2 In engineering contracts to construct highly engineered facilities, which are really only a subdivision of building contracts, the standard form contracts typically refer to an engineer, superintending engineer or a superintendent. The role that each such a nominated professional plays is defined by the terms of the building contract which it administers. [page 361]

ARCHITECTS Registration 17.3 Registration of architects is governed by provisions of the Architects Act 1991 (Vic). This may shortly be subject to some change. Similar legislation is in force in the other states and territories.5 By s 4(1) of the Act it is an offence for a person, other than an architect, to hold himself or herself out as being an architect. The Act imposes a regime for ensuring the good conduct of architects.6 The AIA was established in 1929 and was formerly the Royal Australian Institute of Architects (RAIA). It maintains state and territory chapters, is the professional body for architects and has developed and maintains a code of conduct for architects.

Duality of role 17.4 In administering a building contract the architect usually has a dual role. On the one hand, the architect is the agent of the proprietor and under a contractual obligation to the proprietor. However, as a certifier, or ‘preventer of disputes’, as a person in such a position was termed in Dixon v SA Railways Commissioner,7 the architect will be required to act in an independent and impartial manner. Ralph Gibson LJ in Pacific Associates Ltd v Baxter Co8 referred to this duty as one ‘to act fairly and impartially’. The architect must act impartially and without bias. Thus the architect must be independent and form opinions objectively; although not at law bound by the rules of natural justice, the architect would be well advised to apply them wherever possible. While the architect may also be the agent of the

proprietor, the duality of the role is well recognised and the architect will not be acting as the proprietor’s agent when exercising certifying functions in respect of which there is the duty to act honestly and impartially.9 Some cases support the proposition that an architect/superintendent may owe a duty of care to the builder in the administration of a contract. Whether the architect is in breach of that duty of care is determined by having regard to the standards which the law expects of ordinary skilled persons exercising or possessing the skill of an architect administering a [page 362] building contract. It remains unclear what circumstances could arise for this duty to be breached.10 More generally it may be said, as McDougall J in Dymocks Book Arcade Pty Ltd v Capral Ltd11 quoted from the judgment of Windeyer J in Voli v Inglewood Shire Council,12 an ‘architect undertaking work in the way of his profession accepts the ordinary liabilities of any man who follows a skilled calling.’ Not only may an owner be in breach of the building contract in circumstances where that owner has failed to discharge a contractual obligation to ensure that the architect/superintendent properly discharges functions, the owner may also be held liable for negligence of the architect/superintendent.13 In the additional functions the architect has under the contract with the owner only the owner’s interests will be sought to be advanced.14

Duty in certification 17.5 Where a contract commits the determination of some question to a third person it is a matter of the construction of the contract whether that person is to act as an arbitrator.15 Ordinarily the powers committed to the architect by a clause empowering the proprietor to administer the contract are exercisable in the performance of a merely administrative function, and the contractor has no right to be heard.16 The contractor may have the right to be heard when the architect is determining the amount which a contractor is entitled to be paid, although it is doubtful the duty to act fairly and impartially ordinarily extends that far.17 It is a

question of what the role of the certifier is on the proper construction of the contract and it may be held that on the proper construction of the contract the rights of the contractor have not been infringed by a refusal to give a hearing in relation to a certificate.18 In 500 Burwood Highway Pty Ltd v Australian Unity Ltd19 Vickery J has held that a certifying expert (in that case, a quantity surveyor) [page 363] is not under any obligation to provide procedural fairness or natural justice in the absence of an express contractual provision, and this would seem in principle applicable to architects also when certifying. The introduction of security of payments legislation providing for adjudication can be seen as recognition that relying on the certifier employed by one party to act independently has not been entirely successful. The legislation recognises that it is the principal who or which must respond to payment claims lodged by the contractor, and while building contracts might provide for this role to be performed by a certifier, it is implicit that performance is on behalf of the proprietor.20 For the legislation see 4.16. After a payment claim and payment certificate have been exchanged the adjudication process is performed by an independent adjudicator. Arguably this legislative regime might be regarded as reducing the extent to which the common law will impose obligations of independence on certifiers. Ordinarily an architect, exercising the powers of a certifier, continues to owe both contractual and tortious duties to the employer. In Dymocks Book Arcade Pty Ltd v Capral Ltd,21 McDougall J said he saw nothing in recent decisions ‘to subvert the proposition that a common law duty of care may exist alongside contractual duties’. If a certification is performed negligently by an architect resulting in loss to the employer the architect may be liable. However, if the building contract provides that the role the architect performs as a certifier is essentially that of an arbitrator then it seems arguable no duty of care will be owed. Lord Morris in Sutcliffe v Thackrah22 stated the rule in the following way: [In] general, any architect or surveyor or valuer will be liable to the person who employs him if he causes loss by reason of his negligence. There will be an exception to this and judicial immunity will be accorded if the architect or surveyor or valuer has by agreement been appointed to act as an

arbitrator. There may be circumstances in which what is in effect an arbitration is not one that is within the provisions of the Arbitration Act. The expression ‘quasi-arbitrator’ should only be used in that connection. A person will only be an arbitrator or quasi-arbitrator if there is a submission to him either of a specific dispute or of present points of difference or of defined differences that may in the future arise and if there is agreement that his decision will be binding. The circumstance that an architect in valuing work must act fairly and impartially does not constitute him either an arbitrator or a quasi-arbitrator. The circumstance that a building owner and contractor agree between themselves that a certificate of an architect showing a balance due is to be conclusive evidence of the works having been duly completed and that the contractor is entitled to receive payment

[page 364] does not of itself involve that the architect is an arbitrator or quasi-arbitrator in giving his certificate. Chambers v Goldthorpe was wrongly decided. The fact that in the present case the architect had (in an interim certificate as to the amount due) to record the total value of work properly executed and of materials and goods delivered did not constitute him an arbitrator.

Other requirements for an architect exercising the role as a certifier may also need to be present before liability in negligence can be escaped. It is likely that there must be a formulated dispute between the parties23 but it may be that no obligation to accord natural justice will need to be present following Vickery J’s observations in the 500 Burwood Highway case. It is possible that an architect performing the role of certifier also owes a duty of care to the contractor who may be adversely affected by a negligent certificate.24 This is consistent with general principles of negligence and also with authorities such as Dymocks Book Arcade Pty Ltd v Capral Ltd.25

Remuneration 17.6 If no fee has been agreed upon, the architect is entitled to a reasonable fee. While in determining what is ‘reasonable’ regard may be had to what the evidence establishes to be the practice of or in the profession, and while a scale of fees prevailing may be adopted as reasonable, the question is not what is the usual or scale fee but what is a reasonable fee. If, on the other hand, it is established that there was a usual or customary fee sufficiently notorious for the class of work concerned and that the client was aware of that fee, it may be proper to imply a term, not for payment of a reasonable fee, but for payment of the usual or customary fee.26 Where the architect is to design and supervise construction and

the client repudiates the agreement while the work is in progress, the architect may recover on a quantum meruit.27

Estimates 17.7 An owner may contend that the architect undertook to design a building that could be erected for a certain sum. It is often a matter of determining, having regard to the evidence of conversations and the documentary evidence, whether it was a term of the engagement or a clear instruction (or neither) that the design was to be built within a set cost. There is a distinction between an obligation to supply plans and specifications of a building the cost of which shall not exceed a specified amount, and an undertaking to supply plans and specifications of a building coupled with an estimate of probable cost. If the obligation is of the former kind the law [page 365] is as expressed by Sangster J in Nemer v Whitford28 and approved by the Full Court.29 In that case it was held: … in order to recover … fees or to retain them … the architect must have produced a design which, in [the architect’s] opinion, genuinely arrived at by the exercise of proper care and skill, was capable of being constructed within or approximating, as the case may be, the named cost.

A different view, one put by Fellows J during argument in Flannagan v Mate,30 which would deny the architect any fees if the named sum is exceeded, is hard to defend and not likely to be followed. If, however, the undertaking is of the latter kind, one where an estimate is involved, it is necessary to consider whether the erroneous estimate was nevertheless produced in compliance with the contract or whether it arose from negligence or want of skill. An architect is under a duty to take reasonable care to ensure that any estimate of the cost of a building being designed is reasonably accurate.31 The estimate must not only be an honest and carefully considered one but it must also be given after due consideration of the facts involved in the particular case: the architect is bound to take into account any increases in costs which the time taken in the

construction might involve.32 A breach of this obligation will entitle the owner to damages so as to be put into the same position as would have existed had the wrong not been sustained. That does not ordinarily give rise to an entitlement to the cost increase in the project from budget to actual but where the project has to be abandoned and would not have been progressed had an accurate estimation of fees been provided, the amount spent up to the abandonment can be recovered. Further, if the estimate is so erroneous that the work performed by the architect is completely valueless the architect will not be entitled to his or her fees. Depending on the circumstances an estimate which is wrong could also support a claim of misleading or deceptive conduct in breach of s 18 of the Australian Consumer Law (ACL).

Appointment of substitute 17.8 It may be that the person appointed architect by the contract is unwilling or unable to act. Alternatively, the architect’s engagement may be terminated by the owner or the architect. This will be subject to the terms of the architect and client agreement. The building contract may [page 366] expressly empower the proprietor to appoint an architect and may require the proprietor to make a substitute appointment promptly.

Copyright 17.9 Copyright, which can subsist both in a building and in plans, is governed by the Copyright Act 1968 (Cth). Copyright in an original work is the bundle of rights referred to in s 31 of that Act.33 Those rights include the right to publish the work, to reproduce the work in a material form and to make an adaptation of the work: s 31(1)(a)(i), (a)(ii) and (a)(vi). Under s 10(1) of the Act a ‘work’ means a literary, dramatic, musical or artistic work: a ‘literary’ work includes a table or compilation expressed in words, figures or symbols and a computer program or compilation of computer programs; an ‘artistic’ work includes a drawing and a

building or model of a building. As pointed out by Brownie J in Erica Vale Pty Ltd v Thompson & Morgan (Ipswich) Ltd34 there is, however, no copyright in an idea or in information as such. Where an architect prepares plans for a client, the drawings, in the sense of the sheets on which the plans are drawn, become the property of the client but copyright in those plans remains in the architect.35 This is subject to any express term of the contract. For example, cl G.1 of the Client and Architect Agreement of the AIA provides that the architect retains copyright in the design and that means the design concepts, drawings and documents provided under the Agreement. This contemplates physical ownership of the documents being retained by the architect notwithstanding the owner (and others) are given possession of some copies. Again by cl G.1, the client has an express but revocable licence to use the design for the project on the site for which it was intended, subject to the conditions therein set out. Subject to the Act, the copyright in a work is infringed by a person who, not being the copyright owner and not having the copyright owner’s licence, does or authorises any act comprised in the copyright: s 36(1). Where the infringement alleged is based on reproduction of a work the reproduction must be of a ‘substantial part’ of the work: s 14(1)(b). As Lord Evershed said in Ladbroke (Football) Ltd v William Hill (Football) Ltd,36 what amounts to a ‘substantial’ reproduction cannot be defined in precise terms but must be a matter of fact and degree. A vital or material part, though only small in quantity, may nevertheless be sufficient for infringement.37 White J in Redwood Anti-Ageing Pty Ltd v Knowles38 summarised the law this way: [page 367] ‘Whether a part is substantial depends more on the quality than on the quantity of that which is taken. This directs attention to the importance of the part in question to the work as a whole and whether it is an essential or material part of the work.’ To similar effect, Collier J in Tamawood Ltd v Habitare Developments Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed (No 3)39 made it clear that what ‘amounts in any case to substantial reproduction cannot be defined in precise terms but must be a matter of fact and degree.’ Thus, as her Honour explained (referring to Weinberg J in Inform Design and Construction Pty Ltd v

Boutique Homes Melbourne Pty Ltd)40 reproduction of a ‘substantial’ part can be constituted by the arrangement of rooms in a design as well as by matters such as traffic flow throughout a house.41 Her Honour added that in these matters ‘it is permissible and of assistance to have regard to expert opinion to resolve [the] questions [concerned].’42 By s 21(3)(a) of the Act an artistic work in a two-dimensional form is deemed to have been reproduced if a version of the work is produced in a threedimensional form and such version is deemed to be a reproduction of the work. This covers, for example, the construction of a house by the use of plans which are subject to copyright, such as might be handed out at a display home. Subject to the Act, only the owner of a copyright as provided in s 115(1) may bring an action for an infringement of the copyright.43 Such action may not be brought after the expiration of six years from the time when the infringement took place: s 134. Subject to the Act, the relief that a court may grant includes an injunction (subject to any terms the court thinks fit) and either damages or an account of profits: s 115(2). Injunctions and an inquiry as to damages were ordered in Beazley Homes Ltd v Arrowsmith44 where plans for low cost houses were copied and houses built from them in breach of the Copyright Act 1962 (NZ). See now the Copyright Act 1994 (NZ). Damages in this area of the law are difficult to assess and often may not provide an adequate remedy.45 It is open to a copyright owner to grant an exclusive right (or ‘licence’) to another to do an act comprised in the copyright: see ss 13 and 15. The concept of ‘licence’ in this field is not limited to contractual licences and a permission or consent to the user in question may be implied by law [page 368] from the conduct of the copyright owner.46 The circumstances in which and the extent to which an architect is to be regarded as granting a licence to a client to use plans which have been prepared were considered in Blair v Osborn & Tomkins47 and Stovin-Bradford v Volpoint Properties Ltd48 where the authorities considered included Beck v Montana Constructions Pty Ltd.49 Beck’s case, in which an implied permission or consent was held to exist, and other cases, were considered in Devefi Pty Ltd v Mateffy Pearl Nagy Pty Ltd.50 In

that case51 the Full Federal Court quoted from the judgment of McLelland J in Gruzman Pty Ltd v Percy Marks Pty Ltd52 that when ‘an architect contracts with a building owner to produce plans for the purpose of their being used to carry out construction work at a particular site, there arises, subject to any contractual provision to the contrary, an implied licence from the architect for the use of the plans for that purpose’. In Beck’s case Jacobs J had said that the degree of protection of an architectural plan under the law of copyright must of its nature be more limited because, in contrast to other forms of literary or artistic reproduction, there is a greater element which is common to all plans.53 Many of the authorities in this area (including Beck’s case) were reviewed in the joint judgment of Kirby and Crennan JJ in Concrete Pty Ltd v Parramatta Design and Developments Pty Ltd.54 Their Honours there said55 that a ‘non-exclusive licence to use architectural plans and drawings may be oral or implied by conduct, or may be implied, by law, to a particular class of contracts, reflecting a concern that otherwise rights conferred under such contracts may be undermined, or may be implied more narrowly, as necessary to give business efficacy to a specific agreement between the parties.’ In that particular case, on the facts, the principle their Honours applied, they said, was this: ‘in the absence of an agreement to the contrary, an express contract or an express reservation of copyright, an owner (or a co-owner) of land who is an architect, who himself prepares plans or drawings, free of charge, for himself (or for himself and other co-owners) impliedly consents to himself as owner (or co-owner) using the plans and drawings for the purposes for which they have been prepared.’56 The increasing importance of the project builder, who usually constructs houses in accordance with a range of plans at the choice of each customer, [page 369] has led to litigation founded upon the alleged infringement of copyright subsisting in plans and in buildings by the defendant’s acts in plans and the erection of houses. Such litigation may take the form of an action by one project builder against another, alleging widespread infringement, or an action by one project builder against a building owner and another builder, alleging that the defendants have copied one of its plans. Understandably, the project builder is resentful if a possible customer, having obtained a floor plan and other printed matter, takes

the plan to a competitor and has it copied, perhaps with minor alterations to escape copyright law, for the purpose of erecting a house. It will often not be easy to say whether the defendant has infringed the copyright in a building or drawing. Street J dealt with the matter in Ancher, Mortlock Murray & Woolley Pty Ltd v Hooker Homes Pty Ltd57 as follows: The copyright law will prevent the building of another house which reproduces a substantial part of the original house where such reproduction comes about as a result of a copying of the physical object itself. But the law does not restrict the application and development of architectural concepts and styles: original concepts and styles may, without risk of infringement, be applied and developed by other architects in subsequent buildings. The law does not prevent one architect from following in the footsteps of a colleague; it does prevent him from copying the plans of his colleague so as to enable him to follow those footsteps; and it does prevent him from physically reproducing those footsteps and thereby following them. I make these general observations to underline the importance that will attach in this and in any other copyright suit to the question of how the alleged infringing work came into existence. An architect may legitimately inspect an original plan or house and then, having absorbed the architectural concept and appreciated the architectural style represented therein, return to his own drawing board and apply that concept and style to an original plan prepared by him and in due course to a house built to such plan. There is a dividing line separating such a legitimate process from an inspection followed by a later copying of a substantial part of the physical object inspected, even though the copying be from memory; the latter exercise does infringe. In many instances it will be difficult to state categorically whether the dividing line has been crossed. Cases will not always be black or white where the alleged copying is from memory. The borderline area is clouded by a band of grey within which opinions and conclusions may differ. Within this grey band conflicting answers could without error be given to the questions — is that plan or house only a copy of the concept or style of the original and hence legitimate?, or is it a copy of the author’s manifestation of that concept or style and hence an infringement? In this grey band, in answering such questions as these, it can be of critical importance to know how the architect who is said to have infringed went

[page 370] about the preparation and drawing of his plan. It is only after making a finding, either on direct evidence or by inference, of copying, that is to say, of unfair or unconscientious use of the author’s plan or building, that significance will attach to the degree of similarity. In a practical sense, of course, the degree of similarity is frequently a most telling element on the question of copying. To some extent the two aspects overlap, but they are distinct in point of principle and they must be considered with this distinction in mind.

These observations have been referred to in many subsequent cases and were quoted at length by Dunn J in Half Court Tennis Pty Ltd v Seymour.58

In Ownit Homes Pty Ltd v D & F Mancuso Investments Pty Ltd,59 Kelly SPJ had regard to the basic similarities and dissimilarities between two houses and held that he could not be satisfied that there was any infringement by the defendants of the plaintiffs’ copyright. He admitted, however, that the matter which he had to determine was ‘one on which opinions may well differ’. On the other hand, in Dronpool Pty Ltd v Hunter60 Powell J decided that there was a sufficient degree of objective similarity between plans for houses to constitute a substantial reproduction and thus an infringement of copyright. But adoption of no more than the concept and idea behind the copyright work is not a breach of copyright.61 The difficulty of making decisions in this area is well recognised. Wilcox and Lindgren JJ in Tamawood Ltd v Henley Arch Pty Ltd62 commented on this, saying: ‘The application of the law of copyright to project home plans gives rise to special difficulty.’ For, as they there observed, ‘[a]ll modern homes have certain features in common. In the case of project homes competing for the same number of dollars, there are pressures towards sameness.’63 They said the ‘ideaform distinction’ (drawn by Street J, for example, in Ancher, Mortlock) which is ‘often elusive, is particularly so in the case of project homes.’64 Reproduction for the purposes of copyright law involves a significant degree of objective similarity between the two works and some causal connection between each party’s work. The simpler the plan the more closely the alleged infringer must adhere to it in order for liability to exist.65 As was said by Gibbs CJ (with whom Mason and Brennan JJ agreed) in SW Hart and Co Pty Ltd v Edwards Hot Water Systems66 (quoted by the Full Federal Court in Ron Englehart Pty Ltd v Enterprise Constructions (Aust) Pty [page 371] Ltd),67 this notion of reproduction involves two elements: ‘resemblance to, and actual use of, the copyright work, or … “a sufficient degree of objective similarity between the two works” and “some causal connection between the plaintiffs’ and the defendants’ work”.’ By s 73(2) of the Copyright Act 1968 (Cth) where a building has been constructed in accordance with architectural drawings or plans in which

copyright subsists and has been so constructed by, or with the licence of, the owner of that copyright, that copyright is not infringed by a later reconstruction of the building by reference to those drawings or plans. By s 66 the copyright in a building is not infringed by making a drawing or photograph of it.

Duty to client 17.10 In Voli v Inglewood Shire Council68 Windeyer J expressed the duty of an architect to clients as follows: An architect undertaking any work in the way of his profession accepts the ordinary liabilities of any man who follows a skilled calling. He is bound to exercise due care, skill and diligence. He is not bound to have an extraordinary degree of skill or the highest professional attainments. But he must bring to the task he undertakes the competence and skill that is usual among architects practising their profession. And he must use due care. If he fails in these matters and the person who employed him thereby suffers damage, he is liable to that person.

As pointed out by Williams J in Chas Drew Pty Ltd v J F & P Consulting Engineers Pty Ltd69 this formulation of an architect’s duty is of equal relevance to the position of any person accepting work in the course of a profession. McDougall J in Dymocks Book Arcade Pty Ltd v Capral Ltd70 regarded this statement of principle by Windeyer J as ‘the appropriate starting point’ and it has been generally accepted as such. Although the relationship between the parties is one governed by a contract, the question whether there is a tortious duty of care also may be important. It may be relevant, for example, if there is an exclusion clause which would purport to exclude liability in contract. Although historically there has been some debate about whether a concurrent liability exists in tort as well as in contract by professionals to their clients, it now appears the law in Australia is settled. A concurrent liability does exist.71 This is [page 372] confirmed also by the decision in Dymocks Book Arcade72 and by remarks of Refshauge J in Stojkoski v Belconnen Concrete Pty Ltd.73 The specific duties which the architect owes to the client depend on the nature of the work being performed. During the design phase the architect will have a

variety of duties including to advise on planning and other restrictions, to examine the site and prepare sketch plans.74 In respect of the design obligation there may be an obligation to ensure the design is fit for the purpose75 and this may arise under s 61 of the ACL. Where a novel or risky design is used added care must be taken. Once construction work commences an architect will have a duty to administer the contract (if appointed to do so) and to supervise the works. In an appropriate case an employee architect may owe a duty of care personally to a client notwithstanding the client had contracted with the company which employed the architect.76 Even where engineering matters are concerned, the architect may have a duty of care which extends in scope into matters which more commonly would be regarded as the province of an engineer. In Bailey v Redebi Pty Ltd,77 even though a structural engineer had prepared the design, the court nevertheless found that as the architect had held itself out as being a design and building consultant its duty embraced the additional responsibility to supervise the engineering team. The court found the collapse of the wall came about by the architect’s failure to supervise the engineering team. Employee architects, like employee engineers, in circumstances where they have a close working relationship with the principal, may in some cases carry a personal liability in addition to the liability of the architectural firm or company for which they work.78 Usually, though, as merely employees, they will be able to claim protection from personal liability. [page 373]

Duty of supervision 17.11 In determining whether an architect has breached the duty of care owed to a client in supervising the works, it should be borne in mind that, generally speaking, it is the function of the builder to carry out building operations; it is the builder who is on site continuously whereas the architect usually is not.79 It may be negligence on the part of the architect to fail to be present during some important phase of the works: so in Florida Hotels Pty Ltd v Mayo80 an architect who permitted the concrete for the apron of a swimming pool to be poured without making an inspection so as to be satisfied about the correct placing of the reinforcement was found to be liable. In that case the architect’s terms of

employment included the following clause, contained in the conditions of engagement of the (then called) RAIA: The Architect shall give such periodical supervision and inspection as may be necessary to ensure that the works are being executed in general accordance with the contract; constant supervision does not form part of the duties undertaken by him.

In the leading judgment Barwick CJ said:81 Evidence was led at the trial of the practice of architects where an obligation for periodic inspection or supervision is accepted. Useful and persuasive as this evidence may be, it is not of course decisive of the legal obligations which such a retainer as an architect imports. But … that professional evidence lends no support whatever to the respondents’ submission that they were entitled to rely on the appellant’s foreman to tell them when concrete was to be poured and to assume that none would be poured, without such notice, between the days of their routine inspections. I am clearly of opinion that in law the respondents were not so entitled. They were bound to supervise the work, inspecting it with due skill and care. There can be no doubt that due skill and care in this case required them to supervise the work done in preparation for the pouring of concrete to form these slabs. The facts of this case bring out starkly the importance of the performance of this obligation. In my opinion, the respondents were bound to take reasonable steps to ensure that they inspected the formwork and the placed reinforcement before concrete was poured and the work covered up. They do not satisfy this by relying on the workmen whose work they were employed to supervise: in particular, they were not entitled to assume from past satisfactory performances of the foreman, that they would be notified of the readiness of the work for inspection and of the time for the pouring of the concrete. They were not engaged to supervise only such work as could be seen on the particular days of their routine inspections, or to attend to supervise only when advised that an occasion for supervision had arisen or

[page 374] was about to arise. They owed a duty to keep themselves informed of the progress of the work. They were bound, in my opinion, at least to have made reasonable arrangements of a reliable nature to be kept informed of the general progress of the work and, in particular, to be notified of the readiness of formwork and the placement of reinforcement for the pouring of concrete; these arrangements ought to have included clear and express instructions to the foreman that work of the kind in question must not be covered up till the respondents had inspected it or, at the very least, had an adequate opportunity for its inspection.

In Sheldon v McBeath82 the architect’s contractual obligation was supervision of the construction ‘from commencement to completion and handover’. The New South Wales Court of Appeal (Handley JA dissenting) held in that case that the architect’s duty to supervise construction entailed a duty to inspect and was a continuing one not to be construed as limited to the period ending with the covering up of footings and foundations.83

Clause A6 of the ‘Client and Architect Agreement’ of the AIA provides that, where core architectural services provided by the architect include contract administration the architect shall ‘visit the site periodically to observe the general conformance of the construction works with the building construction documents and instruct the building contractor regarding design, quality control, materials selections and performance in regard to the building contract documents.’ The term suggests a reduction in the responsibility of the architect from cl 3.5 of the previous version of the agreement, which provided that the architect shall ‘undertake periodic site inspections, check work in progress regarding design quality control, materials selection and performance as described in the contract documents’ and further still from an even earlier cl 2.06 which provided that the architect ‘shall make such inspections as may reasonably be necessary in order reasonably to be satisfied that the Works executed are in general accordance with the Contract which the Architect is administering’.

Practice of other architects 17.12 The question whether an architect has exercised the requisite skill and care generally depends on whether other architects, with ordinary experience and skill, would have acted in the same way.84 Evidence of the practice of architects may be useful and persuasive but is not decisive.85 Failure to follow the general practice of the profession may be evidence of negligence; on the other hand, the fact an architect has followed the general practice of the [page 375] profession is not necessarily an answer to a claim for negligence.86 In Rogers v Whitaker87 (a non-building case) the High Court said: In Australia, it has been accepted that the standard of care to be observed by a person with some special skill or competence is that of the ordinary skilled person exercising and professing to have that special skill. But, that standard is not determined solely or even primarily by reference to the practice followed or supported by a responsible body of opinion in the relevant profession or trade.

It may thus be said in reference to this principle, in the words of Adamson J in Fisher v Howe,88 that: ‘Evidence of acceptable practice amongst professionals is a

useful guide but it is for the Courts to adjudicate on what is the appropriate standard of care.’ In a court proceeding, the description of the practice of other architects must be given by an architect presenting expert evidence and it must be given in an unbiased way. If called upon to give expert evidence an opinion cannot be expressed on whether the particular acts or omissions amount to negligence because this is an ultimate issue but the limits of expert evidence at this point are perhaps verbal rather than logical.89 The evidence of architects should be directed to the current general practice of experienced and skilful architects rather than to what the witnesses themselves would have done.90 In ULV Pty Ltd v Scott91 the New South Wales Court of Appeal held that assuming, though doubting, that expert opinion evidence of a town planner was admissible, the trial judge was only entitled to use that evidence to assist her or him to form an independent opinion and not to adopt it without doing so.

Duty to third parties 17.13 Circumstances may arise which place an architect under a duty of care to persons who are not clients or a party to a contract the architect is administering. In Clay v AJ Crump & Sons Ltd,92 for example, a builder’s labourer, who was injured on site when an obviously dangerous wall fell down, succeeded in an action for damages for negligence against the architect engaged to plan and supervise the redevelopment of the site. For the reasonably foreseeable consequences of careless and unskilful conduct in the design or construction of a building an architect may be liable in negligence to a person who, after a building has been finished and has been taken over by the building owner, lawfully enters in and comes to harm. [page 376] Thus in Voli v Inglewood Shire Council93 an architect who under-designed the floor joists of the stage of a shire hall was liable to compensate a person lawfully using the hall who was injured when the stage collapsed. An architect may be liable to a third party who is injured in consequence of a

risk created by the builder in departing from the drawings where such departure is one the architect has failed to detect and correct. This question was left open by Windeyer J in Florida Hotels Pty Ltd v Mayo94 but Barwick CJ95 and the remaining members of the court in that case were of the view that in such circumstances the architect is liable. The observations of Windeyer J in Voli v Inglewood Shire Council were endorsed by Eames J in Toomey v Scolaro’s Concrete Constructions Pty Ltd (in liq).96 In this case the architect had drawn a plan which it contended was ambiguous as to the height of a balustrade. There was argument concerning whether or not this was the case; Eames J concluded that the small scale of the drawing was undeniably misleading97 and whether this was a mistake or due to a lack of attention to detail, he concluded the architect was negligent in the circumstances where a person fell over the balustrade and that it was not as high as it ought to have been. Although the architect was contractually obliged to inspect the works his Honour concluded that he was not required, by the terms of his contract, to conduct compliance inspections to ensure the works complied with the building code; nor did he consider that any common law duty would extend so far.98 Windeyer J’s observations were also applied in the New South Wales Court of Appeal by Hoeben JA (with whom Beazley and Macfarlan JJA agreed) in Indigo Mist Pty Ltd v Palmer.99 In that case the plaintiff fell after slipping on liquid on the stairs of hotel premises. One of the defendants was a firm of architects which had designed certain parts of the hotel, including the stairs, for a refurbishment of the premises which had taken place. Judgment was given for the plaintiff and the architect’s appeal was dismissed. Hoeben JA said as follows: ‘In accordance with the obligations of an architect set out in Voli and Florida Hotels, Ms Williams [the architect] should have taken [the specified] matters into account and if she had done so, she would have realised that there was a need to test the glass bricks which she was recommending for use in the stairs, and if found to be unsuitable, to have recommended a different product.’100 Had the architect ‘not recommended [page 377] the use of a step which became highly slippery when wet, Ms Palmer would not have fallen.’101

Whether or not an architect may be liable to a contractor for pure economic loss resulting from negligent certification has occasionally been considered by the courts. In an appropriate case an architect (or other certifier) may be found liable to a contractor, even if there is an arbitration clause by which the decision of the architect can be reviewed.102 The difficulty is establishing the factual circumstances in which a liability arises and the necessary causal connection. Economic loss may be due to a number of factors not all of which may result from the negligent certification — indeed negligent certification may not have been a cause at all. There is, in any event, a marked reluctance in the courts to allow claims for pure economic loss which has been evident at least since the decision in Caltex Oil (Australia) Pty Ltd v Dredge Willemstad103 and even much earlier than that. Dixon J referred to this in Gunnersen v Henwood,104 a land slippage case, when his Honour said that the ‘High Court has traditionally treated liability for pure economic loss differently from the development of the general law of negligence.’105 He said the plaintiffs in that case had not suffered either property damage or loss consequent upon property damage and yet that being so the ‘weight of authority … is [to the effect] that all … damage to a structure and cost of remediation is pure economic loss.’106 Their ‘claim in negligence [was one] either wholly for losses comprising expense incurred to minimise or restore a perceived diminution in value or wholly expenditure to mitigate a risk of future damage.’107 As such this was ‘a novel cause of action.’108 The plaintiffs failed in their action — but for a number of reasons, it must be said.. Reference should be made to the discussion in 16.5 and also to the decision in Owners–Strata Plan No 61288 v Brookfield Australia Investments Ltd109 where the New South Wales Court of Appeal considers further relevant authorities including the Victorian decision of Moorabool Shire Council v Taitapanui.110 [page 378]

ENGINEERS Role of engineer

17.14 The role of an engineer commonly includes both design and supervision work. In respect of the duty of care owed by engineers see generally Chapter 16. In administering engineering contracts the engineer carries out functions similar to those of an architect. The position of an engineer or superintendent (or project manager) exercising functions under a contract between an owner and builder is generally the same as that of an architect performing a similar role. The Institution of Engineers, Australia, which represents all disciplines and branches of engineering, was formed in 1919. The Institution is concerned with the science and practice of engineering. It is often shortened to IE Aust trading as Engineers Australia (EA). Other bodies such as the Association of Consulting Engineers Australia (ACEA) also deal with matters of professional practice. In Victoria a person may not take or use the title ‘engineer’ if the use of such title relates to the building industry unless registered as a building practitioner under the Building Act 1993 (Vic).111 Members of ACEA cannot use the term engineer to describe themselves unless they are at least a graduate member of the Institution of Engineers, Australia. It is the Building Act 1993 (Vic) in the case of Victoria which imposes a regime for ensuring good conduct,112 although the professional organisations also have ethical rules.

Duty to client 17.15 The description that Windeyer J gave of the duty of an architect to clients described in 17.10 is equally applicable to the formulation of a duty of an engineer.113 In Brickhill v Cooke114 Glass JA said the defendant’s duty in that case ‘was to exercise such care as would be shown by a reasonably competent qualified engineer retained for the purpose in hand’. To similar effect, McMurdo J said in BHP Coal Pty Ltd v O and K Orenstein & Koppel AG115 (a case concerning a bucket wheel excavator weighing 2,500 tonnes and about 40 metres tall which collapsed) it is a question of what ‘a reasonably careful and competent engineer’ would do in the defendant’s position. [page 379] An engineer may be sued in tort as well as contract.116 An engineer owes a

duty to the client to recommend the engagement of suitable sub-consultants and properly supervise them when they are engaged.117 An engineer will owe the client a duty to exercise reasonable skill and care notwithstanding the existence of a contract of engagement. However, the existence and terms of the contract of engagement are ‘not an irrelevant circumstance’ to the determination of the content of the duty. This was said by Windeyer J in Voli’s case118 and it was quoted by the plurality (Gleeson CJ, Gummow, Hayne and Heydon JJ) in Woolcock Street Investments Pty Ltd v CDG Pty Ltd119 who added that ‘[a]t the least, that contract defines the task which the builder or engineer [undertakes].’120 Thus, that contract may, by its terms, have the effect of either raising or lowering the requisite standard of care which the engineer may, in tort, be obliged to demonstrate. Ordinarily, even in the absence of an express term, there will be implied into a contract for the performance of a professional service a term that reasonable care will be exercised in the performance of that service. In addition, an engineer will clearly be liable to those who suffer physical injury as a result of a defective design. Where pure economic loss is suffered whether a duty of care is owed becomes a more complex determination. In Tod Group Holdings v Fangrove Pty Ltd121 Riley J had held that an engineer owed a duty of care to subsequent owners, essentially on the basis of an assumption of responsibility, for professional design and (in that case) supervision. Reliance by the owner was also a factor. However, the Queensland Court of Appeal overturned the decision, concluding that if the principles in Bryan v Maloney were to be extended, it should be by the High Court itself. The owner’s argument that the defects in the house were potentially dangerous was not accepted as distinguishing them from having a character as having caused pure economic loss. In De Pasquale Bros Pty Ltd v Cavanagh Biggs & Partners Pty Ltd122 Chesterman J considered whether an engineer could be liable in negligence for failing to procure geotechnical advice in relation to the foundation work of a commercial building. While he ultimately decided the case on contractual grounds (the failure constituted a breach of the term to take reasonable care) the reasoning in the decision indicates that in his view at any rate an engineer can be held liable in principle for such a failure — not just to the owner of the building thereafter

constructed with deficient foundations, but also to adjoining owners of buildings subsequently damaged. [page 380] An engineer may also be liable in a personal capacity for economic loss caused to the company that employed him or her. In Carosella v Ginos & Gilbert Pty Ltd123 the employee engineer, who was a director of the engineering company, was found liable by the Full Supreme Court of South Australia for pure economic loss associated with cracking caused by inadequate footings. This area, however, must be seen in light of the High Court decision in Woolcock Street Investments in which it was held that the respondents (a consulting engineer business and its employee) owed no duty of care to prevent the economic loss of which the appellant complained. Referring to this decision in Gunnersen v Henwood124 Dixon J, as noted above in 17.13, said that the ‘weight of authority … is [to the effect] that all … damage to a structure and cost of remediation is pure economic loss’ and that the plaintiffs should not succeed in that case on this basis but for other reasons also. Of course, it may be a question of deciding whether some loss or other is properly to be described as ‘pure economic loss’. It was on this basis that Kirby J dissented in the Woolcock Street Investments case. He held that, considering the state of the authorities, it was not the case that the appellant was bound to fail: no ‘insuperable barrier of legal authority’ stood in its way125 but ‘the allegation of actual damage to the appellant’s building arguably [made] its claim one that [escaped] the common law’s resistance to recovery of pure economic loss.’126 In any event, this subject must now be seen in the light of civil liability laws in the states and territories which do allow for recovery for economic loss in cases of negligence. See 16.5.

Copyright 17.16 Copyright law is the same for engineers as it is for architects. See generally 17.9.

Negligent certification 17.17 Where engineers perform the role of certifier their obligations are similar to the role of an architect. However, as the skill and training and ordinary practice of an engineer are different to those of an architect, what an engineer must do to satisfy adequately the duties which the law imposes upon him or her are different.

Departure from design standard 17.18 In an action for professional negligence it may be alleged that the engineer has in a design failed to comply with an applicable Australian [page 381] design standard. The significance of departures from a design code was considered in Bevan Investments Ltd v Blackhall and Struthers (No 2),127 where Beattie J, at first instance, found that a design which departs substantially from a code is prima facie a faulty design, unless it can be demonstrated by rational analysis that it conforms to accepted engineering practice. The issue did not arise on appeal. In Rowlands v Collow128 Thomas J spoke of an engineer’s duty as one to render services in a professional manner which meets ‘the recognised standards of good engineering practice’. It is clear, as seen above in 17.15, that an engineer has a duty to do what a reasonably careful and competent engineer would do; this would include following generally accepted design standards. In Toomey v Scolaro’s Concrete Constructions Pty Ltd (in liq),129 as noted in 17.13, a plaintiff fell over a balustrade that was less than one metre in height at a landing and became a quadriplegic. The Building Code provided that the balustrade was deemed to comply if it was one metre in height, but the primary obligation was to build a balustrade to resist an accidental fall. In the context of a claim for personal injury Eames J concluded that the Building Act 1993 (Vic), the Building Regulations 1994 (Vic) and the Building Code (which he treated as part of the Regulations) gave rise to a private cause of action that could be taken against the builder and the developer for failing to comply with the provisions of the code, but not the building surveyor, building inspector, engineer or architect. His

Honour was concerned with the question of whether or not the construction of the balustrade at less than one metre in height was negligent. He recognised that the Building Code only provided for a balustrade to be deemed to comply if it was one metre in height, and that therefore it was possible that a balustrade of a lesser height was not in breach of the Code. However, he concluded that ‘it was appropriate that those under statutory or contractual obligations to ensure that the rail complied with the code, should have reasonably interpreted that task as to ensure that it was of a height of 1000mm, because only then could it be conclusively proven that it did comply’.130 This ‘fine textual analysis of the precise manner in which the obligation imposed by the Code might be described’ was said to be of little moment by his Honour because he concluded that the rail as built did not restrict an accidental fall.131 The difference in height of the rail — a mere 66.5mm — was found to be a critical distance on the basis of the expert evidence presented to him.132 [page 382]

Duty to third parties 17.19 An engineer will be liable for physical injury caused by negligence. As with architects, circumstances may arise which place an engineer under a duty of care to persons who are not his or her clients for economic loss. A common case where an engineer may have a duty of care to a third party is where a building is damaged by negligent design work. Examples of the duty arising in such circumstances are Bevan Investments Ltd v Blackhall and Struthers (No 2)133 and Greaves & Co (Contractors) Ltd v Baynham Meikle and Partners.134 In the latter case an expert structural engineer designed the structure of a warehouse. He had been warned of vibration caused by heavily laden trucks driving on floors of the building. He negligently failed to take into consideration the vibration factor with the result that the structure of the warehouse cracked. On the other hand, in King v Stolberg, Gower et al,135 an engineer who designed a pre-fabricated building which was not capable of supporting erection loads, but which was to be erected by an experienced erector, was held not liable to the widow of a man killed by the collapse of the building in the course of

construction, it not being reasonable to expect the engineer would foresee that the erector would fail to provide proper support during construction. If an architect employed to design a building engages an engineer to design the structure and the engineer does the work negligently, the architect is liable to the proprietor for breach of a duty to design the building with reasonable care and skill. The engineer is, in turn, liable to the architect.136 In De Pasquale Bros Pty Ltd v Cavanagh Biggs & Partners137 Chesterman J concluded that an engineer who negligently designed a structure and as part of the process, endeavoured to protect the integrity of an existing building, owed a duty of care to that building’s owner.138 In Woolcock Street Investments v CDG Pty Ltd139 the Queensland Court of Appeal found that an engineer who had designed defective foundations in a warehouse and office complex was not liable to a subsequent purchaser of the building for the economic loss incurred by reason of their deficiencies. The court examined the authorities that have been decided since Bryan v Maloney140 in which a builder was found liable to a subsequent owner for economic loss associated with defective foundations in the case of a domestic [page 383] house. The court considered the cases of Hill v Van Erp141 and Perre v Apand Pty Ltd142 and took the view that an extension of the law for recovery for pure economic loss such as decided in Bryan v Maloney in respect of a domestic dwelling should lie with the High Court. Subsequently in the High Court the action failed on the ground that, considering the nature of the loss (pure economic loss) the engineer was under no duty of care in the circumstances.143 Reference should be made to the discussion in 11.6 where it is noted that several of the authorities in this area are considered in Brown Falconer Group Pty Ltd v South Parklands Hockey and Tennis Centre Inc.144 Reference also should be made to 16.5 for discussion of the question of economic loss and also to the decision in Owners — Strata Plan No 61288 v Brookfield Australia Investments Ltd145 in which other authorities on that question are considered and to 16.12 where state and territory civil liability laws are considered.

It nonetheless remains true, however, as was said by McLure JA in the Western Australian Court of Appeal in Drexel London (a firm) v Gove (Blackman),146 that otherwise an ‘engineer owes a duty to exercise reasonable care and skill in the provision of professional services’ and that this ‘duty is owed not only to the client but to other classes of persons who might foreseeably suffer injury as a result of the failure to exercise [such] care.’ In that case the engineering firm and the architect were both held liable in equal proportions for personal injuries suffered by several persons when a balcony collapsed at a New Year’s Eve party The principle applicable thus remains clear as regards engineers and architects, at least where pure economic loss is not involved. And although according to the authorities economic loss is not recoverable, this now is subject to the provisions of civil liability laws in force in the states and territories. See further 16.5. _________________________ 1.

AIA, Client and Architect Agreement, September 2010.

2.

Minster Trust Ltd v Traps Tractors Ltd [1954] 3 All ER 136; Perini Corporation v Commonwealth [1969] 2 NSWLR 530.

3.

John Holland Construction & Engineering Pty Ltd v Majorca Projects Pty Ltd (1997) 13 BCL 235. See also Pacific Associates Inc v Baxter [1990] 1 QB 993 and Multiplex Constructions Pty Ltd v SOR Pty Ltd (2001) 17 BCL 174.

4.

(1999) 15 BCL 20.

5.

See Architects Act 2004 (ACT); Architects Act 2003 (NSW); Architects Act (NT); Architects Act 2002 (Qld); Architectural Practice Act 2009 (SA); Architects Act 1929 (Tas); Architects Act 2004 (WA).

6.

See ss 9, 10.

7.

(1923) 34 CLR 71 at 112.

8.

[1990] 1 QB 993 at 1029.

9.

Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd (2002) 18 BCL 15 at 28–9; on appeal 18 BCL 322 at 338.

10. John Holland Construction & Engineering Pty Ltd v Majorca Projects Pty Ltd (1997) 13 BCL 235. 11. [2013] NSWSC 343 at [212]. 12. (1963) 110 CLR 74 at 84. 13. Multiplex Constructions Pty Ltd v SOR Pty Ltd (2001) 17 BCL 174. 14. John Holland Construction & Engineering Pty Ltd v Majorca Projects Pty Ltd (1997) 13 BCL 235 at 248. 15. See Forsayth NL v Australasian Gold Mines NL (1992) 7 WAR 549 at 554 per Ipp J. See also Briscoe and Co Ltd v Victorian Railways Commissioners [1907] VLR 523; Ajzner v Cartonlux Pty Ltd [1972] VR 919; Thomas Cook Pty Ltd v Commonwealth Banking Corp (1986) 4 BPR 9185. 16. Bysouth v Shire of Blackburn and Mitcham (No 2) [1928] VLR 562; Nelson Carlton Construction Co Ltd (in

liq) v A C Hatrick (NZ) Ltd [1964] NZLR 72; affirmed [1965] NZLR 144; Hounslow London Borough Council v Twickenham Garden Developments Ltd [1971] Ch 233. See also Gardner v McKenzie Winter Homes (1985) 3 BCL 278 at 281. 17. Nelson Carlton Construction Co v AC Hatrick (NZ) Ltd [1965] NZLR 144 at 151; John Holland Construction & Engineering Pty Ltd v Majorca Projects Pty Ltd (1997) 13 BCL 235 at 248. 18. See also Isca Construction Co Pty Ltd v Grafton City Council (1962) 8 LGRA 87. 19. [2012] VSC 596 at [168]. 20. Compare Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd (2002) 18 BCL 322 at 338 where it was held that where a superintendent ‘is obliged to act honestly and impartially’ he is not acting as the owner’s agent, in the strict legal sense. 21. [2013] NSWSC 343 at [213]. 22. [1997] AC 727 at 752–3. 23. Arenson v Casson Beckman Rutley & Co [1997] AC 405. 24. John Holland Construction & Engineering Pty Ltd v Majorca Projects Pty Ltd (1997) 13 BCL 235. See also Pacific Associates Ltd v Baxter Co [1990] 1 QB 993 and Multiplex Constructions Pty Ltd v SOR Pty Ltd (2001) 17 BCL 174. 25. [2013] NSWSC 343. 26. Porter v Montrose Ltd [1958] NZLR 261. 27. Bolot v Capper (1957) 75 WN (NSW) 316. 28. (1982) 31 SASR 475 at 476. 29. (1983) 33 SASR 208 at 209, 211. 30. (1876) 2 VLR (L) 157 at 158. 31. Brian James Coleman v Gordon M Jenkins & Associates Pty Ltd (1988) 9 BCL 292 at 304; reversed (on other grounds) (1989) 87 ALR 477. 32. Ibid. See also Nye Saunders and Partners (a firm) v Alan E Bristow (1987) 37 BLR 97. 33. Taypar Pty Ltd v Santic (1989) 17 IPR 146 at 150 per Spender J. See generally S Bridge, E Candi and M Wyburn, ‘Copyright and Architecture’ (1987) 3 Building and Construction Law 94. 34. [1994] AIPC 38315 at 38319. 35. Gibbon v Pease [1905] 1 KB 810; Inala Enterprises Pty Ltd v Associated Enterprises Pty Ltd [1960] Qd R 562. 36. [1964] 1 WLR 273 at 283. 37. Collier Constructions Pty Ltd v Foskett Pty Ltd (1990) 97 ALR 460 at 466. 38. (2013) 101 IPR 358; [2013] NSWSC 508 at [146]. 39. (2013) 101 IPR 225; [2013] FCA 410 at [165]. 40. (2008) 77 IPR 523; [2008] FCA 912 at [72]. 41. (2013) 101 IPR 225; [2013] FCA 410 at [164]. 42. Ibid. 43. See on this Taypar Pty Ltd v Santic (1989) 17 IPR 146.

44. [1978] 1 NZLR 394. 45. Dronpool Pty Ltd v Hunter (1984) 3 IPR 310 at 328. Where damages are assessed the primary object is to compensate the copyright owner for loss consequential upon the defendant’s infringement: Manfal Pty Ltd v Longuet (1986) 8 IPR 410 at 421. But this is not always so: see Bailey v Namol Ltd (1994) 125 ALR 228. 46. See Devefi Pty Ltd v Mateffy Pearl Nagy Pty Ltd (1993) 113 ALR 225 at 234. See also De Garis v Neville Jeffress Pidler Pty Ltd (1990) 95 ALR 625. 47. [1971] 2 QB 78. 48. [1971] Ch 1007. 49. (1963) 80 WN (NSW) 1578. 50. (1993) 113 ALR 225. 51. Ibid at 240–1. 52. (1989) 99 FLR 116 at 118. 53. (1963) 80 WN (NSW) 1578 at 1580. 54. (2006) 229 CLR 577. 55. Ibid at [59]. 56. Ibid at [84]. 57. [1971] 2 NSWLR 278 at 284. 58. (1980) 53 FLR 240 at 250–1. 59. (1987) 4 BCL 50 at 55; affirmed (1988) 5 BCL 64. 60. (1984) 3 IPR 310 at 326. 61. Ownit Homes Pty Ltd v D & F Mancuso Investments Pty Ltd (1988) 5 BCL 64 at 73. 62. (2004) 61 IPR 378; [2004] FCAFC 78. 63. Ibid at [38]. 64. Ibid at [39]. 65. LED Builders Pty Ltd v Eagle Homes Pty Ltd (1996) 13 BCL 320. 66. (1985) 159 CLR 466 at 472. 67. (2012) 95 IPR 64; [2012] FCAFC 4 at [46]. See Tamawood Ltd v Habitare Developments Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (No 3) (2013) 101 IPR 225; [2013] FCA 410 at [160]. 68. (1963) 110 CLR 74 at 84. 69. (1989) 10 BCL 48 at 50. See also P Mead, ‘Impact of Contract Upon Tortious Liability of Construction Professionals’ (1998) 6 TLJ 145. 70. [2013] NSWSC 343 at [212]. 71. Lister v Romford Ice & Cold Storage Co Ltd [1957] 1 All ER 125 at 131; MacPherson & Kelley v Kevin J Prunty & Associates [1983] VR 573. Applied Brickhill v Cooke [1984] 3 NSWLR 396 at 401; Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1 VR 27 at 39; Bryan v Maloney (1995) 128 ALR 163; Molinari v Westralian Finance Corporation Ltd (SC(WA), CIV2151/93, 23 October 1998, unreported); Un

v Schroter [2002] NTSC 2. See also John Holland Construction & Engineering Pty Ltd v Kvaerner R J Brow n Pty Ltd & C M P S & F Pty Ltd (1996) 13 BCL 262. 72. See Dymocks Book Arcade Pty Ltd v Capral Ltd [2013] NSWSC 343 at [213]. 73. [2013] ACTSC 13 at [83]. 74. For an extensive description of the architect’s duties see Hudson’s Building and Engineering Contracts, 12th ed, Sweet & Maxwell, London, 2012, ch 2 s 6. 75. See Greaves & Co (Contractors) Ltd v Baynham Miekle & Partners [1975] 3 All ER 99. 76. Carosella v Ginos & Gilbert (1981) 27 SASR 515. 77. [1999] NSWSC 918. 78. Coleman v Gordon M Jenkins & Associates Pty Ltd (1989) 11 ATPR 40-960; but compare Robt Jones (363 Adelaide Street) Pty Ltd v First Abbott Corporation Pty Ltd (1997) 14 BCL 282, where the individual architect did not assume personal responsibility and there was no evidence of reliance on his personal involvement in the architectural work. 79. Miller Construction Ltd v Olsen [1973] 1 NZLR 265 at 273–4. 80. (1965) 113 CLR 588. 81. Ibid at 593–4. 82. (1993) Aust Torts Rep 81–209. 83. Ibid at 62,073. 84. Sulco Ltd v E S Redit and Co Ltd [1959] NZLR 45. 85. Florida Hotels Pty Ltd v Mayo (1965) 113 CLR 588 at 593. 86. McLaren Maycroft & Co v Fletcher Development Co Ltd [1973] 2 NZLR 100. 87. (1992) 175 CLR 479 at 487. 88. [2013] NSWSC 462 at [84]. 89. Florida Hotels Pty Ltd v Mayo (1965) 113 CLR 588 at 601. 90. Sulco Ltd v E S Redit and Co Ltd [1959] NZLR 45. 91. (1990) 19 NSWLR 190 at 206. See also Thannhauser v Westpac Banking Corp (1991) 31 FCR 572. 92. [1964] 1 QB 533. 93. (1963) 110 CLR 74. Considered in Toomey v Scolaro’s Constructions Pty Ltd (in liq) [2001] VSC 279. Applied in Council of the Shire of Noosa v JE Farr Pty Ltd [2001] QSC 060; and see Lines MacFarlene & Marshall v Fletcher Construction Australia Ltd [2000] VSC 358. 94. (1965) 113 CLR 588 at 603. 95. Ibid at 599. 96. [2001] VSC 279 at [221]. 97. Ibid at [226]. 98. Ibid at [244]. 99. [2012] NSWCA 239. 100. Ibid at [131].

101. Ibid at [143]. 102. John Holland Construction & Engineering Pty Ltd v Majorca Projects Pty Ltd (1997) 13 BCL 235 at 246. See also Pacific Associates Inc v Baxter [1990] 1 QB 1993 and Multiplex Constructions Pty Ltd v SOR Pty Ltd (2000) 17 BCL 174. 103. (1976) 136 CLR 529. 104. [2011] VSC 440. 105. Ibid at [213]. 106. Ibid at [219]. 107. Ibid at [220]. 108. Ibid. 109. [2013] NSWCA 317. 110. (2006) 14 VR 55; [2006] VSCA 30. 111. See s 176(1). 112. See s 177. 113. Chas Drew Pty Ltd v J F & P Consulting Engineers Pty Ltd (1989) 10 BCL 48 at 50. See Rogers v Whitaker (1992) 175 CLR 479 at 487. 114. (1984) 3 NSWLR 396 at 399. 115. [2008] QSC 141 at [104]. 116. Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1 VR 27 at 39. 117. Pasquale Bros Pty Ltd v Cavanagh Biggs & Partners (2000) 16 BCL 116. 118. (1963) 110 CLR 74 at 85. 119. (2004) 216 CLR 515 at [28]. 120. Ibid. 121. [1998] QCA 404. 122. [1999] QSC 171. 123. [1981] 27 SASR 515. 124. [2011] VSC 440 at [219]. 125. See (2004) 216 CLR 515 at [175]. 126. Ibid at [156]. 127. [1973] 2 NZLR 45. 128. [1992] 1 NZLR 178 at 187. 129. [2001] VSC 279 at [221]. 130. Ibid at [160]. 131. Ibid at [161]. 132. Ultimately his Honour concluded that 30% of the damage was caused by the contributory negligence of the intoxicated plaintiff, 50% was attributed to the two persons who had pushed him and 20% to the engineer, architect and others who were negligent in not ensuring that the balustrade was built at the

correct height. 133. [1978] 2 NZLR 97. 134. [1975] 3 All ER 99. 135. (1969) 8 DLR (3d) 362. 136. De Pasquale Bros Pty Ltd v Cavanagh Biggs & Partners (2002) 16 BCL 116. 137. Ibid. 138. Ibid at 127. Alternatively, his Honour considered that the engineer created a nuisance which led to the loss of support. 139. [2002] QCA 88. 140. (1995) 182 CLR 609. 141. (1997) 188 CLR 159. 142. (1999) 198 CLR 180. 143. See (2004) 216 CLR 515. 144. (2005) 91 SASR 152; [2005] SASC 75. 145. [2013] NSWCA 317. 146. [2009] WASCA 181 at [121]. See also Lonsdale Investments Pty Ltd v OM (Manganese) Ltd (No 3) [2012] WASC 185.

[page 385]

18 BUILDING DISPUTES INTRODUCTION Disputation 18.1 ‘Building contracts are pregnant with disputes’ said Lord Browne-Wilkinson in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd.1 And as he went on there to observe: ‘The disputes frequently arise in the context of the contractor suing for the price and being met by a claim for abatement of the price or crossclaims founded on an allegation that the performance of the contract has been defective’.2 Defects and delay are ‘classical’ areas of dispute.3 Some of these ‘disputes can become so complex that many issues arising under [such] contracts are almost untriable in the courts’.4 In Tickell v Trifleska Pty Ltd5 Rogers CJ Comm D expressed the view that it ‘is only in the last resort that a dispute should proceed to trial and to determination’.

Avenues for resolution 18.2 Building disputes may range from large commercial construction disputes to small house building disputes. Depending on the nature of the dispute, and the circumstances of the parties, several alternatives may be open for its resolution ranging from litigation to some form of alternative (or appropriate, as some have called it) dispute resolution (ADR).6 Rogers CJ [page 386] Comm D in Beveridge v Dontan Pty Ltd7 said that in ‘the more enlightened climate

of legal thinking today it should be accepted that there is not one exclusive method of dispute resolution that will lead to a just result’. Or, as Mahoney JA observed in Ferris v Plaister; Stap v Grey: The courts now increasingly recognise that the procedures available for the resolution of disputes extend over a wide spectrum. [They] are … increasingly recognising that no single means of resolving disputes is appropriate in all cases: there is ‘no magic wand’ for the settlement of disputes.8

LITIGATION Jurisdiction of courts 18.3 Generally, a matter may only be brought in the court which has jurisdiction to hear and determine it. But this is subject to the operation of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth),9 the Jurisdiction of Courts (CrossVesting) Act 1987 (Vic) and the Courts (Case Transfer) Act 1991 (Vic) and equivalent legislation in other States and Territories. The Federal Court has only such jurisdiction as is vested in it under Commonwealth laws.10 A building case however may involve a matter arising under Commonwealth law.11 Often, such cases will include claims for misleading and deceptive conduct or unconscionable conduct, as provided for under the former Trade Practices Act 1974 (Cth), which has since been replaced by the Australian Consumer Law which, as noted elsewhere in this work, is Sch 2 to the Australian Competition and Consumer Act 2010 (Cth).12 [page 387] The Federal Magistrates Court was created by the Federal Magistrates Act 1999 and is now known as the Federal Circuit Court of Australia.13 That court’s jurisdiction is that vested in it under Commonwealth laws as well as certain associated or ancillary jurisdiction.14 The Supreme Court in each State and Territory is governed by its version of a Supreme Court Act.15 Each has general jurisdiction in civil cases unlimited as to quantum.

The intermediate courts, in those States and Territories which have them, are named District Courts but inVictoria, the County Court, and are creatures of and subject to, the jurisdictional limits set by their respective establishing Acts.16 For instance, the Victorian County Court has no monetary limit on claims it can hear within its civil jurisdiction. In Queensland, the District Court has a limit of $750,000. Similarly, the jurisdiction of the lower courts, Magistrates or Local, is limited by their enabling Acts. The Victorian Magistrates’ Court is limited to claims not exceeding $100,000 in all civil cases whether a claim is for equitable relief or not.17 Where permitted, a monetary jurisdictional limit may be extended by consent of the parties.18 Jurisdiction in a court to hear a matter usually extends to jurisdiction to hear a counter-claim or cross-action. But in some cases, for example in Victoria under the Domestic Building Contracts Act 1995 (Vic) s 57, the courts’ jurisdiction is excluded and jurisdiction is conferred on a specialist tribunal (VCAT).

Procedure 18.4 Rules of court govern the progress of an action from its inception to final disposition. They govern such matters as: 1.

commencement of proceedings;

2.

service of documents; [page 388]

3.

appearance;

4.

joinder of claims and parties;

5.

third party proceedings;

6.

cross-actions;

7.

mediation and other ADR processes;

8.

offers of compromise;

9.

discovery and inspection;

10. discontinuance; 11. expert evidence; and 12. judgment. Federal Court procedure is governed by the Federal Court Rules 2011 (Cth),19 and for the Federal Circuit Court, by the Federal Circuit Court Rules 2001(Cth). In Victoria, Supreme Court procedure is governed by the Supreme Court (General Civil Procedure) Rules 2005 (Vic), comprising several chapters.20 County Court procedure is governed by the County Court Civil Procedure Rules 2008 (Vic), also comprising several chapters.21 Procedure in the Magistrates’ Court is governed by the Magistrates Court General Civil Procedure Rules 2010 (Vic).22 In Victoria, the introduction of the Civil Procedure Act 2010 (Vic) further regulates the ways in which civil litigation is conducted in that State. The Act’s main purposes (s 1) include: to reform and modernise the laws, practice, procedure and processes relating to civil proceedings in the courts and provide for uniformity; to simplify the language relating to civil procedure; and to provide for an overarching purpose of facilitating the just, efficient, timely and cost-effective resolution of the real issues in dispute. Courts are given very wide powers to give effect to the overarching purpose.23

Specialist building cases lists 18.5 The particular demands and challenges presented by building cases in modern times have given rise to increased judicial attention in the form [page 389] of specialist building cases lists. In those States which have adopted them, building cases may be entered into the relevant list and case managed from start to finish, usually by the same judicial officer.

In Victoria, the Supreme Court Building Cases List was established in 1972. In 2009, it was succeeded by the Technology, Engineering and Construction (TEC) List.24 The focus of the project (modelled on the UK TCC List), which gave birth to the TEC List, was ‘to produce a state-of-the-art approach to Technical, Engineering and Construction dispute resolution and case management for the first decades of this century which will achieve both practical and efficient working outcomes within a tolerable budget.’25 The List’s working objective is ‘to provide for the just and efficient determination of TEC cases, by the early identification of the substantial questions in controversy and the flexible adoption of appropriate and timely procedures for the future conduct of the proceeding which are best suited to the particular case.’26 A similar list (Building Cases Division of the Commercial List) operates in the County Court of Victoria,27 but not in the Magistrates’ Court. New South Wales has similar specialist building cases lists.28 To be within the Building Cases List in the Supreme or County Courts, the case must be a ‘building case’ as defined in the respective rules, which are virtually identical. Once entered in the list, the judge in charge of the list may give directions for the further conduct of the proceeding. Entry into the list in either court may be upon application, although in the Supreme Court it is possible for a case to be commenced in the list while in the County Court, a case will be entered into the list by the Registrar upon commencement.

Separate or preliminary questions 18.6 The advantages of the specialist list were explained by Menhennitt J in C W Norris & Co Pty Ltd v World Services and Construction Pty Ltd: Its essence is in the provision for the judge to give directions at the outset of the proceedings. This power enables the judge to endeavour to sort out and identify at the earliest possible stage the issues in the proceedings and then decide how those issues should best be determined. This process may reveal a main issue or issues — one which may determine the case or, when

[page 390] decided, may result in the case being determined. It may identify an issue or issues which, unless determined, will stand in the way of the orderly and expeditious determination of the whole case.29

These remarks were referred to by Byrne J (the learned judge in charge of the former Building Cases List) in Pizzey Noble Pty Ltd v H D Fowles,30 who spoke of his duty ‘to identify at the earliest stage the real issues between the parties and to focus … attention upon their resolution’ putting aside other matters not in serious contention or lacking substance. In Victoria, r 47.04 of both the Supreme and County Court Rules provides for early determination of a separate question or preliminary point which might dispose of the proceedings in their entirety or at least reduce the issues left to be determined. Although there are obvious advantages in endeavouring to isolate a preliminary issue for determination (as pointed out in Evans Deakin Industries Ltd v Commonwealth),31 it is a power that has traditionally been exercised with ‘great caution’.32 Kirby and Callinan JJ in Tepco Pty Ltd v Water Board33 described the ‘attractions of trials of issues rather than of cases in their totality’, as being ‘often more chimerical than real’ and that ‘common experience demonstrates that savings in time and expense are often illusory.’ They expressed the view that single-issue trials ‘should only be embarked upon when the utility, economy and fairness to the parties are beyond question.’ However, as Forrest J observed in Birti v SPI Electricity Pty Ltd,34 the cases expressing those reservations pre-dated the Civil Procedure Act 2010. After referring to the breadth of ss 8 and 49 of that Act, his Honour approached the question of whether to embark on determining a separate question by asking what was ‘the most efficient and just way to deal with’ the plaintiff’s claim. From a practical perspective, separate questions or preliminary points tend to prove most efficacious on relatively one dimensional issues such as the construction of a contractual provision which will effectively provide a ‘win or lose’ answer to the underlying dispute; or where all relevant factual issues are agreed such that the remaining controversy may be a succinctly stated question of law to be applied to those agreed facts. On the other hand, where for example, a court is asked, prior to a full hearing on all issues, to examine and determine conflicting factual evidence, or (worse) make credit findings about witnesses, who, if the matter is not entirely resolved, may have [page 391]

to give further evidence later in the proceeding, the procedure can be very problematic. It is in those difficult cases that the cautions expressed above have greatest foundation, and often, the only safe course is to proceed to a full hearing.

Offer of compromise 18.7 The importance of making an offer of compromise in many building cases cannot be over-estimated. But, as a practical matter, it is often difficult to persuade someone to make a realistic assessment of their position for this purpose whether with a view to making or accepting an offer. Offer of compromise generally has replaced the procedure for payment into court in Victoria. The offer, which must be in writing, may be served at any time before judgment on the claim. It is then open to be accepted within the time stipulated, usually not less than 14 days. There are significant cost implications for a party who does not accept an offer but does not recover more than was offered. See Supreme Court (General Civil Procedure) Rules 2005 (Vic) O 26; County Court Civil Procedure Rules 2008 (Vic) O 26; Magistrates’ Court General Civil Procedure Rules 2010 (Vic) O 15.35

Expert evidence 18.8 A party in a building case intending to rely upon expert evidence must, before the hearing, provide the other parties with a statement that identifies the expert witness, describes the qualifications of the witness and gives the substance of the proposed evidence. See Supreme Court (General Civil Procedure) Rules 2005 (Vic) O 44; County Court Civil Procedure Rules 2008 (Vic) O 44; Magistrates’ Court General Civil Procedure Rules 2010 (Vic) O 19.36 [page 392] Expert evidence is or contains opinion. Ordinarily, opinion evidence is inadmissible. However, s 79 of the Evidence Act 1995 (Vic)37 provides for the admissibility of opinion evidence derived from specialised knowledge based on a person’s training, study or experience. In Dasreef Pty Ltd v Hawchar,38 the High

Court affirmed the ‘rules’ for admissibility of expert evidence discussed in Makita (Australia) Pty Ltd v Sprowles.39 Admissibility of opinion evidence is to be determined by application of the requirements of the Evidence Act. A failure to demonstrate that an opinion expressed by a witness is based on the witness’ specialised knowledge based on training, study or experience is a matter that goes to the admissibility of the evidence, not to its weight. The expert must either prove by admissible means the facts on which the opinion is based, or state explicitly the assumptions as to fact on which the opinion is based. The expert must provide a statement of reasoning showing how the ‘facts’ and ‘assumptions’ related to the opinion stated to reveal whether that opinion was based on the expert’s claimed expertise.

References out of court 18.9 One form of reference out is to a special referee: see 18.10. Other forms of ADR include reference to a mediator and reference to arbitration. On this point, see Supreme Court (General Civil Procedure) Rules 2005 (Vic) O 50.07, 50.08; County Court Act 1958 (Vic) s 47A; County Court Civil Procedure Rules 2008 (Vic) rr 50.07, 50.08; Magistrates’ Court General Civil Procedure Rules 2010 (Vic) rr 50.01, 50.04.40 In both the Supreme and County Courts in Victoria, a reference out of a proceeding or any part thereof may be made at any stage of the proceeding whether with or without the consent of any party. In the Supreme Court, it may be made with the consent of any party and by an Associate Justice with the consent of all the parties. A reference of a proceeding to arbitration also may be made at any stage of the proceeding in either the Supreme or the County Court but in the former may only be made with the consent of all the parties. Thereafter, the arbitration is conducted in accordance with the Commercial Arbitration Act 2011 (Vic). [page 393]

Special referee

18.10 In a complex building case, there are obvious advantages in a court being able to refer matters of detail to an expert.41 In the Federal Court, there is power to appoint a court expert: see Federal Court Rules 2011 (Cth) Pt 23.42 In the Supreme Court and in the County Court, but not in the Magistrates’ Court of Victoria, there is power to refer any question of fact in any proceeding to a special referee for a decision or an opinion on such question: see Supreme Court (General Civil Procedure) Rules 2005 (Vic) O 50.01; County Court Civil Procedure Rules 2008 (Vic) O 50.01.43 There is Victorian authority in A T & N R Taylor & Sons Pty Ltd v Brival Pty Ltd44 that a matter will not be referred to a special referee where a party objects, unless the case is of an exceptional nature.45 It has been pointed out,46 however, that this decision was given before the Commercial Arbitration Act 1984 (Vic) was enacted.47 Certainly, a court will be ‘understandably cautious’ about appointing a referee against the wishes of both parties.48 By the rules, as the interests of justice require, there is power to adopt the special referee’s report or to decline to do so in whole or in part. For example, r 50.04 provides the court with a discretion, as the interests of justice require, to adopt the report of a special referee or decline to adopt the report in whole or in part, and make such order or give such judgment as it thinks fit. The discretion whether to adopt a report or not was said to be ‘a wide one’ by Brooking J in Nicholls v Stamer.49 [page 394] Cole J in Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd50 said that if a report shows ‘a thorough, analytical, and scientific approach’ the court will be disposed to accept it. This was approved in Super Pty Ltd (formerly known as Leda Constructions Pty Ltd) v SJP Formwork (Aust) Pty Ltd.51 Cole J in State Authorities Superannuation Board v Property Estates (Qld) Pty Ltd52 regarded the report in that case as satisfying the requirements he referred to in the Chloride Batteries case. But it will be different if the referee has ‘missed the point, failed to answer questions asked, failed to give adequate reasons or provided inconsistent reasons’; or dealt with matters not referred to the referee.53. The reasons given by the referee should lead ‘logically and cohesively’ to the referee’s opinion.54 The court should have a ‘comfortable feeling of satisfaction’ about a report.55 The fact

that the court would have reached a different conclusion does not mean the referee’s opinion must be rejected.56 In Oddy v Fry57 the court rejected part of a referee’s report which was inconsistent with a finding of fact the court had made. The court then made the relevant finding itself. Consistent with statements above, the approach to be taken in considering whether to adopt the report of a referee was recently summarised in Wenco Industrial Pty Ltd v W W Industries Pty Ltd: ‘The Court has a wide power which is to be exercised “as the interests of justice require”.’58 The purpose of rr 50.01 and 50.04 is to provide, where the interests of justice so require, [page 395] a form of partial resolution of disputes alternative to traditional litigation. Further, that purpose would be frustrated if the reference were to be treated as ‘some kind of warm-up for the real contest’. Insofar as the subject matter of dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh. Where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the court will have a disposition towards accepting the report, for to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for inquiry and report. If the referee’s report reveals some error of principle, absence or excess of jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that will ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from giving particular aspects of it different weights; and perversity or manifest unreasonableness means a conclusion that no reasonable tribunal of fact could have reached. The test denoted by these phrases is more stringent than ‘unsafe and unsatisfactory’. Generally, the referee’s findings of fact should not be re-agitated in the court where there is factual material sufficient to entitle the referee to reach the conclusions reached, particularly where the disputed questions are in a

technical area in which the referee enjoys an appropriate expertise. The court is entitled to consider the futility and cost of re-litigating an issue determined by the referee where the parties have had ample opportunity to place before the referee such evidence and submissions as they desire. Even if it were shown that the court might have reached a different conclusion in some respect from that of the referee, it would not ordinarily be a proper exercise of the discretion conferred by r 50.04 to allow matters already agitated to be re-explored so as to lead to qualification or rejection of the report.

View 18.11 In many building cases, a view may be crucial. It will ordinarily involve inspection of the works the subject matter of the proceeding by the court, with the parties, their legal representatives and any experts to be called. In Unsted v Unsted59 Davidson J said that ‘the rule is that a view is for the purpose of enabling the tribunal to understand the questions that are being raised, to follow the evidence and to apply it, but not to put the result of the view in place of evidence’. Treyvaud J said in Marriage of Fust60 that as [page 396] the parties had not agreed that he could use the results of a view as evidence in the proceedings, he would use the view solely for the purpose of giving him a better understanding of the issues to be determined by the evidence to be given.

ALTERNATIVE DISPUTE RESOLUTION Growth in ADR 18.12 There has been strong growth in ADR in recent years. In no small way has this been due to a change in the attitude of the courts to the value of arbitrations and other dispute resolution processes.61 Gleeson CJ’s prediction that the modern trend is towards ‘encouragement’ of ADR has proved accurate.62

Some of the possible reasons for this change were examined by Kirby P in IBM Australia Ltd v National Distribution Services Ltd.63 It is difficult to say how far this change represents the response of the courts to criticisms about court processes. Complaints have tended to focus on the delay, cost and formality of litigation and it is unfortunately true, so far as building cases are concerned, that many of the complaints have not been without justification. As Menhennitt J observed in C W Norris & Co Pty Ltd v World Services and Construction Pty Ltd: It is notorious that in many building cases proceedings have been bedevilled by complexity and detail, interlocutory proceedings have been tortuous and slow, trials have been long and expensive, the real issues have often emerged only during the course of the trial and parties, often both of them, have been disillusioned.64

As Einstein J observed in The Heart Research Institute Ltd v Psiron Ltd,65 cases such as IBM Australia Ltd v National Distribution Services Ltd ‘indicate an acknowledgement of the commercial utility of alternate dispute resolution processes and a willingness on the part of courts to construe dispute resolution clauses in an expansive manner.’

Types of ADR 18.13 A most important development in ADR has been the passage of uniform commercial arbitration legislation in the States and Territories: see further 18.20. The arguments usually put in favour of arbitration as against [page 397] litigation are that it tends to be quicker and cheaper (although the fees payable to the arbitrator must be borne in mind), that the parties have the benefit of the specialised knowledge and experience of the expert who may be appointed arbitrator and that the proceedings are private.66 But not every arbitration runs smoothly. Kirby P made observations about this in Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd67 as did Brooking J in the earlier case of SMK Cabinets v Hili Modern Electrics Pty Ltd.68 These days, the choice is not only between litigation and arbitration.

Arbitration is the main but not the only form of ADR. As Mahoney JA observed in Ferris v Plaister; Stap v Grey,69 the ‘courts now increasingly recognise that the procedures available for the resolution of disputes extend over a wide spectrum’. Other kinds of ADR include mediation and conciliation.

Executive meetings 18.14 In many modern standard form building contracts,70 the first measure of dispute resolution prescribed will often require the respective parties’ relevant executives or specified management personnel to meet, sometimes more than once, to attempt to resolve their dispute. That requirement will usually be stated to act as a condition precedent to any subsequent action such as mediation, expert determination, arbitration or litigation.71

Mediation 18.15 Mediation relies upon agreement and is directed at enabling the parties to resolve their dispute by agreement. A neutral third party, if engaged, will endeavour ‘to encourage an expeditious settlement forged by the parties themselves’.72 Mediation is often described as ‘structured negotiation’. Ordinarily, mediations are conducted on a without prejudice basis, to encourage full and frank discussion. Mediation procedure frequently has the following elements. Initially, in a joint session, the mediator introduces herself or himself to the parties and explains the nature of mediation, the procedure which will be [page 398] followed and the ground rules. Generally, a period of information gathering follows in which the parties outline to the mediator and each other the nature of the dispute and its context, including all the issues they consider important or relevant. They agree which issues will be dealt with in the mediation. Following initial joint discussions, the mediator may direct the parties to be located in separate rooms during the ‘negotiation’ period and will move between the rooms,

exploring the issues and options for resolving them with each party. Finally, through a process of offer and counteroffer being relayed through the mediator, an agreement on some or all of the issues may be reached. This is, of course, only one mediation model. Methods of implementing the agreement are considered.73 The mediator may insist beforehand that the parties sign an agreement inter alia excluding the rules of natural justice from the mediation. On natural justice see 18.37. There is power in both the Supreme Court and the County Court to refer matters to mediation: see 18.9. In more recent times, mediation has become an integral part of the interlocutory steps in any court or tribunal proceeding, and is often ordered as early as practicable in the proceeding.

Conciliation 18.16 As mentioned by Giles J in Hooper Bailie Associated Ltd v Natcon Group Pty Ltd74 sometimes the terms ‘conciliation’ and ‘mediation’ are used interchangeably, sometimes to connote distinct but cognate processes. In conciliation, an impartial third party acts to bring the principals together for the purpose of dispute settlement. The ‘role of the conciliator is to seek to get the parties to agree on a process by which they will attempt to resolve their dispute’.75 The Institute of Arbitrators & Mediators Australia has promulgated Rules for the Conduct of Commercial Conciliations 2006.

Other forms of ADR 18.17 Less familiar kinds of ADR include the use of mini-trials and independent expert appraisal. In a ‘mini-trial’, the parties present their arguments to a panel made up of representatives from both sides, but chaired by a neutral person, and seek the panel’s ruling.76 With independent expert appraisal, the parties agree to ask an independent person for opinion but do not agree beforehand to accept that opinion.77 Other kinds of ADR include [page 399]

determination by a certifier (referred to by Mahoney JA in Ferris v Plaister; Stap v Grey)78 and negotiated settlement between parties. In Heart Research Institute Limited v Psiron Limited, Einstein J described expert determination as: … a process where an independent expert decides an issue or issues between the parties. The disputants agree beforehand whether or not they will be bound by the decisions of the expert. Expert determination provides an informal, speedy and effective way of resolving disputes, particularly disputes which are of a specific technical character or specialised kind. Unlike arbitration, expert determination is not governed by legislation, the adoption of expert determination is a consensual process by which the parties agree to take defined steps in resolving disputes. Expert determination clauses have become commonplace, particularly in the construction industry, and frequently incorporate terms by reference to standards such as the rules laid down by the Institute of Arbitrators and Mediators of Australia, the Institute of Engineers Australia or model agreements such as that proposed by Sir Laurence Street in 1992.79

In Australia, a relatively recent addition to the suite of alternative dispute resolution procedures is the dispute resolution board (‘DRB’). A DRB is designed to be a flexible process to meet the needs of the parties to a construction or infrastructure contract. The DRB is a panel of three experienced, respected and impartial reviewers. The Board is organised before construction begins and meets at the site periodically. The Board is usually formed by the owner or principal selecting a member for approval by the contractor, the contractor selecting a member for approval by the owner/principal, with the two chosen selecting the third member to be approved by both parties. The three DRB members then select one as chair with the approval of the owner/principal and contractor. DRB members are provided with the contract documents, become familiar with the project procedures and the participants, and are kept abreast ofjob progress and developments. The DRB meets with owner/principal and contractor representatives during regular site visits and encourages the resolution of disputes at the job level. The DRB process helps the parties head off problems before they escalate into major disputes. When a dispute flowing from the contract or the work cannot be resolved by the parties, it can be referred to the DRB. The Board review includes a hearing at which each party explains its position and answers questions. In arriving at a recommendation, the DRB considers the relevant contract documents, correspondence, other documentation, and the particular circumstances of the dispute. The DRB provides usually a written, non-binding recommendation for resolution of the dispute. The report includes an explanation of the DTB’s evaluation of the facts, contract

[page 400] provisions and the reasoning which led to its conclusion. Acceptance by the parties is facilitated by their confidence in the DRB, in its members’ technical expertise, first-hand understanding of the project conditions, and practical judgment and informality; as well as by the parties’ opportunity to be heard. While the DRB recommendation for resolution of a dispute is non-binding, the DRB process is most effective if the contract language includes a provision for the admissibility of a DRB recommendation into any subsequent arbitration or legal proceeding. 80 Parties to an arbitration agreement, whether before or after proceeding to arbitration, are entitled under statute to seek settlement of a dispute between them by mediation, conciliation or similar means: see 18.34.

Arranging mediators/conciliators 18.18 Expert mediators and conciliators and expert arbitrators are able to be arranged through such bodies as the Institute of Arbitrators & Mediators Australia, Australian Commercial Dispute Management & Resolutions, LEADR and in Victoria, the Victorian Bar Mediation Centre.

ARBITRATION Nature of arbitration 18.19 In Northern Regional Health Authority v Derek Crouch Construction Co Ltd,81 arbitration was described as ‘usually no more and no less than litigation in the private sector’. Lord Goddard CJ referred to an arbitrator as a ‘private judge’.82 In Sutclffe v Thackrah83 Lord Morris said that one ‘of the features of an arbitration is that there is a dispute between two or more persons who agree that they will refer their dispute to the adjudication of some selected person whose decision upon the matter they agree to accept’. In Road Regenerating & Repair Services v Mitchell Water Board84 Nathan J said that the function of arbitrators ‘is to stand between the parties, hearing submissions and adjudicating if required’.

Governing legislation 18.20 International arbitral proceedings in Australia are governed by Commonwealth law in the form of the International Arbitration Act [page 401] 1974 (Cth),85 which adopts (with amendments) the 1985 version of the UNCITRAL Model Law on International Commercial Arbitration (‘the Model Law’) and the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Since 1984, domestic arbitration legislation in Australia has been governed by a set of substantially uniform state and territory laws known as the Uniform Commercial Arbitration Regime. As Smith J explained in Woolworths Ltd v Herschell Constructions Pty Ltd (in liq)86 the 1984 Commercial Arbitration Act ‘was the result of protracted review and discussion over some 10 years involving Federal and State governments, legal practitioners and law reform bodies’. The provisions of the Acts ‘have recognized the very important position of arbitrations in dispute resolutions in Australia today’.87 The legislation changed little in 25 years in a time when other jurisdictions elsewhere made significant reforms and improvements. The need for change was widely recognised. As Spigelman CJ said: The focus on commercial arbitration as a form of commercial dispute resolution has always offered, but rarely delivered, a more cost effective mode of resolution of disputes. Our uniform legislative scheme for domestic arbitration is now hopelessly out of date and requires a complete rewrite. The national scheme implemented in 1984 has not been adjusted in accordance with changes in international best practice.88

In November 2009, the Standing Committee of Attorneys-General released an Issues Paper and Draft Consultation Commercial Arbitration Bill based upon the 2006 UNCITRAL Model Law, following which, since 2010, the majority of Australian domestic jurisdictions have enacted new commercial arbitration legislation. In Victoria, the Commercial Arbitration Act 1984 (Vic) was repealed and

replaced by the Commercial Arbitration Act 2011 (Vic).89 References below to the ‘Act’, unless otherwise indicated, are to the current Victorian Act. [page 402] The Act came into operation on 17 November 2011. The 1984 Act continues to apply in respect of an arbitration which was commenced before the commencement of the 2011 Act. Otherwise, the 2011 Act applies to all arbitration agreements and to any arbitration under such agreements. Any reference in an arbitration agreement to the 1984 Act is to be construed as a reference to the 2011 Act.90 The main features of the Act include: uniform domestic arbitration legislation based on the Model Law; a domestic regime ensuring Australia is ‘arbitration friendly’ and aligned with the IAA;91 party autonomy is made subject to the Act and achievement of its paramount object to ‘facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense’; courts are required to refer arbitral disputes to arbitration; arbitral tribunals are empowered to issue enforceable interim measures, as are courts, in aid of the arbitration and its efficacy; court assistance to the arbitration process is enhanced; confidentiality is made an essential feature of arbitration; judicial review is kept strictly limited; and simplified and efficient mechanisms exist for the enforcement of arbitral awards and limited Model Law grounds for nonenforcement and recognition.92

Arbitration agreement 18.21 Arbitration is consensual jurisdiction, dependent upon the agreement of the parties.93 Section 7 of the Act defines an ‘arbitration agreement’ as ‘an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.’ An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. The arbitration agreement must be in writing. In most cases it will be clear whether there is an arbitration agreement as

defined; but see 18.29 on the ‘option’ to arbitrate. Moreover, not all agreements which commit the determination of some question to a third person are necessarily arbitration agreements. The intention may be, for example, that the third person is to act not as an arbitrator but as a valuer or certifier.94 Foster J in Thomas Cook Pty Ltd v Commonwealth Banking [page 403] Corp95 said of the distinction between valuers and arbitrators that the label attached by the parties in their agreement is not conclusive: in his view the most significant feature of that distinction is ‘that an arbitrator receives for decision a formulated dispute, whereas a valuer does not’.96 As was observed by Neville J in Taylor v Yielding,97 ‘the cases are quite clear that you cannot make a valuer an arbitrator by calling him so, or vice versa.’ The parties, therefore, must have intended to achieve an arbitration agreement. Ipp J in Forsayth NL v Australasian Gold Mines NL98 said that whether the parties have so intended ‘is a matter of construction of the agreement’. An arbitration clause under one agreement may apply to a second agreement where the second agreement is in truth merely an extension of the first.99 The review of a supplementary agreement was held to be within the terms of reference to the arbitrators in Rolls and Son (Produce) Ltd v J Alastair McGregor & Co Pty Ltd.100 The requirement in s 7 of the Act that an arbitration agreement be in writing is satisfied if its content is recorded in any form, even if the arbitration agreement or contract has been concluded orally, by conduct, or by other means. The requirement is also met by an electronic communication if the information contained in it is accessible so as to be useable for subsequent reference. Further, an arbitration agreement is in writing if it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other.101 While the Act does not expressly provide, the breadth of s 7 suggests it is unlikely that an arbitration agreement must be signed, as so held in Baker v Yorkshire Fire and Life Assurance Co;102 or that the agreement must be contained within the one document.103

[page 404] An arbitration agreement should be construed like any other contract (and with no particular presumptions): Rinehart v Welker.104 Martin CJ in Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd observed that: The weight of decisions in Australia and in leading commercial jurisdictions internationally establishes that courts will generally take a broad, liberal, and flexible approach to the construction of agreements to refer disputes to arbitration, and will favour a construction of an agreement which provides a single forum for the adjudication of all disputes arising from, or in connection with, that agreement.105

In Roux v Langtree106 Beach J said that there is ‘no reason in law why a guarantee cannot be in a form which requires an arbitration between other parties to determine liability and/or quantum under the guarantee’. However, in Sabemo Pty Ltd v de Groot107 Giles J held that a guarantor of a party to a contract containing an arbitration clause is not a party to the arbitration agreement contained in the contract: … a guarantor’s obligation is a separate obligation from that of a party to the contract even though one of the elements in its operation may be an amount becoming payable under the contract.108

By virtue of s 1AD of the Act, where the Crown is a party to an arbitration agreement, it is bound by the provisions of the Act.

Standard form clauses 18.22 The majority of written building agreements contain arbitration clauses. Although over the last twenty years in Australia, there has been a significant move away from using standard form contracts in major projects and towards the use of so-called ‘bespoke’ contracts, the major, current standard form contracts for traditional contracting on the basis of construction to the principal’s design include AS 4000–1997, ABIC MW–1 2008 and PC–1 1998. In addition, AS 2124–1992 and earlier editions of the AS 2124 form remain popular. Variations of these forms, particularly the AS 4000 series, that have been developed for particular styles of contracting are also popular. Variations dealing with design and construct projects and for use in back to back subcontracting are also widely used. As to NPWC3 see cl 45.109

[page 405] 18.23 In what Fullagar J in Carr v J A Berriman Pty Ltd110 described as a clause ‘in very wide terms providing for practically every possible kind of dispute which could arise under the contract’ cl 32 of Ed 5b provided: (a)

In the event of any dispute or difference arising between the Proprietor, or the Architect on [the Proprietor’s] behalf, and the Builder (subject to the provisions of clause 10 of these Conditions) either during the progress of the Works or after the determination, or abandonment, or breach of the Contract as to the construction of the Contract or as to any matter or thing of whatsoever nature arising thereunder or in connection therewith (including but not limited to any matter or thing left by this Contract to the decision, opinion, discretion, ascertainment or valuation of the Architect or the withholding by the Architect of any Certificate to which the Builder may claim to be entitled or the amount of any Certificate whether issued or withheld or the measurement and valuation mentioned in clause 19 of these Conditions or the rights and liabilities of the parties under clauses 22 or 23 of these Conditions) then either party shall give to the other notice in writing by certified mail of such dispute or difference. At the expiration of 7 days from the date of receipt of such notice by the Builder or the Proprietor as the case may be such dispute or difference (unless settled) shall be and is hereby referred to the arbitration of an architect member of the Royal Australian Institute of Architects being the President for the time being of the Chapter or Area Committee of that Institute in the State or Territory in which this Contract is made, or [the President’s] nominee, and a member of the Master Builders’ Association being the President for the time being of the Master Builders’ Association of the State or Territory in which this Contract is made or [the President’s] nominee. If the said Arbitrators shall fail to agree or to make an award within one month of the completion of the hearing or within such further period as the parties may in writing determine upon, an Umpire to be appointed by the Arbitrators upon entering upon the reference shall enter on the reference in lieu of them. Provided that if the Builder and Proprietor so agree the dispute or the difference shall be referred to an Arbitrator mutually appointed by them or in the event of disagreement on such appointment the aforesaid Presidents shall appoint an Arbitrator if so requested by the parties. The term President as employed in this sub-clause shall include any person so acting.

(b) In serving notice of dispute or difference and demand for arbitration pursuant to sub-clause (a) of this clause the party serving such notice shall provide evidence [of having] deposited with the Secretary of a Chapter or Area Committee of the Royal Australian Institute of Architects or the Secretary of the Master Builders’ Association of the State or Territory in which the Contract is made the sum of $200 by way of security for costs of the arbitration proceedings. The Arbitrator, Arbitrators or Umpire shall have the power to make from time to time any order in regard to further security for the costs of the arbitration proceedings. Such security shall

[page 406] be applied in accordance with the direction from time to time of the Arbitrator, Arbitrators or Umpire. (c) If the reference referred to in sub-clause (a) of this clause is made in the State of Queensland the

same may be made a rule of the Supreme Court upon application being made therefor in the manner provided in the Interdict Act 1867. (d) The award made by the Arbitrator, Arbitrators or Umpire as the case may be appointed pursuant to sub-clause (a) of this clause shall be final and binding on both the Builder and the Proprietor and neither party shall be entitled to commence or maintain any action upon the dispute or difference until such matter has been referred or determined as hereinbefore provided and then only for the amount of relief to which the Arbitrator, Arbitrators or Umpire by his or their award finds either party is entitled and the costs of the submission, reference and award and the apportionment thereof shall be in the discretion of the said Arbitrator, Arbitrators or Umpire, as the case may be.

18.24 Clauses 13.01–13.03 of the JCC form of contract provide as follows: 13.01 In the event of any dispute or difference arising between the Proprietor (or the Architect on [the Proprietor’s] behalf whether or not acting under paragraphs 5.02.01 or 5.02.02) and the Builder (subject to the provisions of Clause 6.09) at any time as to the construction of this Agreement or as to any matter or thing of whatsoever nature arising thereunder or in connection therewith then either party may give to the other notice in writing which shall be delivered by hand or sent by certified mail adequately identifying the matters the subject of that dispute or difference and the giving of such notice shall be a condition precedent to the commencement by either party of proceedings (whether by way of litigation or arbitration) with regard to the matters the subject of that dispute or difference as identified in that notice. 13.02 Within ten (10) days after service of a notice of dispute referred to in Clause 13.01 the parties shall confer at least once, but at the option of either party and provided the Architect so agrees, in the presence of the Architect, to attempt to resolve the dispute and failing resolution of the dispute, to explore and if possible agree on methods of resolving the dispute by other means. At each such conference each party shall be represented by a person having authority to resolve the dispute in the course of the conference. 13.03 In the event that the dispute cannot be resolved in accordance with the provisions of Clause 13.02 or if at any time either party considers that the other party is not making reasonable efforts to resolve the dispute, either party may by further notice in writing which shall be delivered by hand or sent by certified mail to the other party refer such dispute to arbitration or litigation. The service of such further notice under this Clause 13.03 shall also be a condition precedent to the commencement of any arbitration or litigation proceedings in respect of such dispute.

[page 407] 18.25 In complex provisions, cl 47 of AS 2124 provides: 47.1 If a dispute between the Contractor and the Principal arises out of or in connection with the Contract, including a dispute concerning a direction given by the Superintendent, then either party shall deliver by hand or send by certified mail to the other party and to the Superintendent a notice of dispute in writing adequately identifying and providing details of the dispute …

A claim in tort, under statute or for restitution based on unjust enrichment or for rectification or frustration, may be included in an arbitration. 47.2 Alternative 1 Within 14 days after service of a notice of dispute, the parties shall confer at least once, and at the option of either party and provided the Superintendent so agrees, in the presence of the Superintendent, to attempt to resolve the dispute and failing resolution of the dispute to explore and if possible agree on methods of resolving the dispute by other means. At any such conference each party shall be represented by a person having authority to agree to a resolution of the dispute. In the event that the dispute cannot be so resolved or if at any time either party considers that the other party is not making reasonable efforts to resolve the dispute, either party may by notice in writing delivered by hand or sent by certified mail to the other party refer such dispute to arbitration or litigation. Alternative 2 A party served with a notice of dispute may give a written response to the notice to the other party and the Superintendent within 28 days of the receipt of the notice. Within 42 days of the service on the Superintendent of a notice of dispute or within 14 days of the receipt by the Superintendent of the written response, whichever is the earlier, the Superintendent shall give to each party the Superintendent’s written decision on the dispute, together with reasons for the decision. If either party is dissatisfied with the decision of the Superintendent, or if the Superintendent fails to give a written decision on the dispute within the time required under Clause 47.2 the parties shall, within 14 days of the date of receipt of the decision, or within 14 days of the date upon which the decision should have been given by the Superintendent confer at least once to attempt to resolve the dispute and failing resolution of the dispute to explore and if possible agree on methods of resolving the dispute by other means. At any such conference, each party shall be represented by a person having authority to agree to a resolution of the dispute. In the event that the dispute cannot be so resolved or if at any time after the Superintendent has given a decision either party considers that the other party is not making reasonable efforts to resolve the dispute, either party may,

[page 408] by notice in writing delivered by hand or sent by certified mail to the other party, refer such dispute to arbitration or litigation.

By cl 1, where provisions ‘are expressed to be alternatives and the Contract fails to state which alternative applies, the first alternative shall apply’. See also AS 4000–1997 cl 42.3; and PC–1 (1998) cl 15.13.

ABIC MW

18.26 Section P provides a number of alternative methods for dispute resolution, including compulsory conference, mediation and expert determination. In relation to arbitration, section P4 provides: 1

Any arbitration is to be conducted before an agreed arbitrator or an arbitrator nominated by the chairperson of the Chapter of The Institute of Arbitrators & Mediators Australia in the state or territory shown in item 27 of schedule 1.

2

Any arbitration is to be conducted with and subject to the Rules for the Conduct of Commercial Arbitrations of The Institute of Arbitrators & Mediators Australia.

FIDIC contracts 18.27 None of AS 2124/AS 4000, ABIC MW and PC–1 has an international equivalent that is commonly used outside Australia. Internationally, the most commonly used construction project contract is the FIDIC construction contract, known as the red book. The FIDIC contract suite is produced by the International Federation of Consulting Engineers.111 Clause 20 of the FIDIC Contract entitled ‘Claims, Disputes and Arbitration’, provides procedures for submission and response to contractors’ claims, the appointment of the Dispute Adjudication Board (DAB), obtaining the DAB’s decision, amicable settlement and arbitration.

‘Dispute’ 18.28 Standard form and other arbitration clauses refer to ‘disputes’ or ‘disputes or differences’. In Hayter v Nelson and Home Insurance Co112 it was held that the words ‘disputes’ and ‘differences’ should be given their ordinary meaning and not confined ‘to cases where it could not then and there be determined whether one party or the other was in the right’. In Westfal-Larsen & Co A/S v Ikerigi Compania Naviera SA113 Bingham J said [page 409] that the word ‘dispute’ plainly indicates that a ‘controversy, or contention’ has

arisen between the parties — ‘It takes two to quarrel’. Adam J in Reservoir Hotel Pty Ltd v E S Clementson (Victoria) Pty Ltd expressed the view that: … where a difference has arisen in fact between the parties to a contract … a dispute within the meaning of an arbitration clause should … be considered [also] to have arisen, unless it is found that the contention is merely a specious pretext — a sham and not a bona fide contention.114

The making of a claim or demand does not of itself give rise to a dispute; nor does the rejection of a claim or demand.115 In Plucis v Fryer116 the High Court held that a mere refusal to pay an unchallenged certificate, whether progress or final, is not a dispute. In Commonwealth v Jennings Construction Ltd,117 on the question of when a dispute arose, Fullagar J in the Victorian Full Court held that it arose as soon as the rejection of a claim was communicated. In this he followed Concrete Developments Pty Ltd v Queensland Housing Commission.118

Option to arbitrate 18.29 In Hammond v Wolt119 Menhennitt J held that an agreement which gives either party an option to have differences submitted to arbitration is not an agreement to submit differences to arbitration.120 The ‘rule’ in Hammond v Wolt has since been disapproved. Giles J in Turner Corp v Austotel Pty Ltd121 said: If the parties have agreed that disputes are to be referred to arbitration should one of them so elect, that is aptly described as an agreement to refer the disputes to arbitration … In this respect, I have some difficulty with the proposition found in Hammond v Wolt and repeated in Woolworths Ltd v Herschell Constructions Pty Ltd (in liq) that the agreement to refer a dispute and the referral itself are one and the same thing, because they are not — the referral to arbitration occurs only because of the prior agreement of the

[page 410] parties that there shall be a referral when an election is made by giving the notice of referral to arbitration.122

The fact that one side can activate the arbitration process, when arbitration has been agreed upon, should in principle be irrelevant. It is, of course, common enough to find that the arbitration agreement, once identified, is called into operation only if certain conditions are fulfilled: for instance, if there is a dispute,

if notice identifying the dispute is given, and so on. To add notice of election as a further condition is consistent with this pattern; and for present purposes there seems no significant difference between a right to elect which is conferred in terms of proceeding to arbitration and a right to elect to proceed to arbitration or to litigation. Indeed, each would seem to mean much the same thing, given that the contract between the parties cannot nowadays be so expressed as, in effect, to exclude litigation. This is now the established position in England after Pittalis v Sherefettin.123 Following the Court of Appeal decision in ABB Power Plants Ltd v Electricity Commission of NSW t/as Pacific Power124 (on appeal from Giles J)125 this also is the established position in New South Wales. In Manningham City Council v Dura (Australia) Constructions Pty Ltd126 Phillips JA said he considered that Menhennitt J’s view: … has since been authoritatively rejected. The contract may contain an arbitration agreement notwithstanding that the reference of a particular dispute to arbitration will depend upon the exercise of an option …

The High Court subsequently oversaw the demise of Hammond v Wolt in PMT Partners Pty Ltd v Australian National Parks and Wildlife Service127 where Brennan CJ, Gaudron and McHugh JJ stated: The words ‘agreement … to refer present or future disputes to arbitration’ in s 4 of the Act are, in their natural and ordinary meaning, quite wide enough to encompass agreements by which the parties are bound to have their dispute arbitrated if an election is made or some event occurs or some condition is satisfied, even if only one party has the right to elect or is in a position to control the event or satisfy the condition.

More recently, in Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd,128 Corboy J confirmed that ‘the effect of the decision in PMT Partners was to disapprove of those cases that had applied the reasoning in Hammond v Wolt …’ Further, he said ‘the decision of the majority of the Queensland Court of Appeal in Mulgrave Central Mill Company Ltd [page 411] v Hagglunds Drives Pty Ltd129 indicated that PMT Partners also applied to an

agreement that involved multiple dispute resolution procedures culminating in arbitration at the option of one or both parties to the agreement.’

Appointment of arbitrator 18.30 Generally the parties are free to appoint any person they wish as their arbitrator but there are advantages in appointing a lawyer if legal issues are involved.130 By s 10 of the Commercial Arbitration Act 2011 (Vic), the parties are free to determine the number of arbitrators, failing which, the number of arbitrators is to be one. Section 11 of the Act provides that the parties are free to agree on a procedure of appointing the arbitrator or arbitrators, subject to the provisions of subsections (4) and (5). In an arbitration with a sole arbitrator, if the parties are unable to agree on the arbitrator, an arbitrator is to be appointed, on the request of a party, by the court. Where two parties wish to appoint a three-member tribunal, and are unable to agree on the procedure for appointment, each party is to appoint one arbitrator, and the two arbitrators so appointed are to appoint the third arbitrator. If a party fails to appoint the arbitrator within 30 days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within 30 days of their appointment, the appointment is to be made, on the request of a party, by the court. In an arbitration with two, four or more arbitrators or with three arbitrators and more than two parties, the appointment is to be made, at the request of a party, by the court. Where, under an appointment procedure agreed on by the parties, a party fails to act as required under the procedure; or the parties, or two or more arbitrators, are unable to reach an agreement expected of them under the procedure; or a third party, including an institution, fails to perform any function entrusted to it under the procedure, any party may request the court to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. The court, in appointing an arbitrator, must have due regard to any qualifications required of the arbitrator by the agreement of the parties and to such considerations as are likely to secure the appointment of an independent and

impartial arbitrator. An appointment or other measure for appointment ordered by the court is final. Usually, the arbitration agreement will provide for the arbitrator’s appointment by a third party — for example, by the chair of the state or territory chapter of the Institute of Arbitrators & Mediators Australia. For [page 412] an appointment to be valid, the essential conditions are that the proposed arbitrator must be notified of appointment, must agree to act in that role, and each relevant party must be informed.131 Ormiston J pointed out in Kudeweh v T & J Kelleher Builders Pty Ltd: ‘If one requires communication to and assent by the arbitrator, then it is difficult to see why communication to the parties should not also be required’.132 It is an essential characteristic of a valid appointment nominated by a third party, therefore, that the third party has informed the parties of the nomination.133 Upon appointment, as explained by Browne-WilkinsonV-C in K/S Norjarl A/S v Hyundai Heavy Industries Co Ltd,134 a ‘trilateral’ contract has been said to come into existence: The arbitration agreement is a bilateral contract between the parties to the main contract. On appointment, the arbitrator becomes a third party to that arbitration agreement, which becomes a trilateral contract.

The process of nomination or appointment of an arbitrator does not depend upon the arbitrator ‘entering upon’ the reference. Sections 12 to 15 of the Act provide the grounds and the procedure for challenge to the appointment of an arbitrator. Where an arbitrator withdraws, is unable to perform, or whose mandate is otherwise terminated, a substitute arbitrator must be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.

Arbitrator’s remuneration 18.31 The obligations of the parties under s 24B of the Commercial Arbitration

Act 2011 (Vic) extend to doing all things necessary for the proper and expeditious conduct of the arbitral proceedings, and include compliance without undue delay with any order or direction of the arbitral tribunal with respect to any procedural, evidentiary or other matter. Section 33B provides that unless otherwise agreed by the parties, the costs of an arbitration (including the fees and expenses of the arbitrator or arbitrators) are to be in the discretion of the arbitral tribunal. Any costs of an arbitration (other than the fees or expenses of an arbitrator) that are directed to be paid by an award, to the extent that they have not been taxed or settled by the arbitral tribunal, must be assessed in the court having jurisdiction under s 34 to hear applications for setting aside the award. [page 413] Usually the arbitrator’s remuneration is agreed upon in advance and often is fixed at a preliminary conference as an hourly rate. Before acceptance of appointment, but not afterwards, the arbitrator is entitled to insist upon payment of any special fees — such as a cancellation fee if a matter does not proceed on the scheduled date.135 Where there is no express agreement about remuneration, the arbitrator is entitled to reasonable reward.136 At common law, the arbitrator has a lien on the award until paid. Often, arbitrators will order that security be given in respect of the costs of the arbitration, which is usually in the form of money paid into a trust account and drawn upon by order of the arbitrator.

Ambit of jurisdiction 18.32 French J in Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd137 said that ‘the range of disputes covered by an arbitration clause must depend upon the language of the clause’. In that case he found that the parties had agreed upon a restricted form of words that limited the reference to matters ‘arising under’ the agreement. There was, therefore, ‘little room for movement’.138 Accordingly, he was satisfied that ‘neither the trade practices claim, nor the claims for breach of warranty and negligent misstatement’ fell within the clause: ‘They all arise out of matters which are antecedent to the contract even though they may involve questions which also go to its performance’.139

In Mir Brothers Developments Pty Ltd v Atlantic Constructions Pty Ltd140 it was held that a dispute about a collateral agreement did not arise out of the principal contract or concern either the performance or nonperformance of the parties’ obligations under such contract. The collateral agreement was independent of and separate from that contract. Although the authority of this decision has been questioned,141 it has not been overruled. However, in Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc,142 Tamberlin J noted that the Mir Brothers decision was narrowly confined to its special circumstances by Francis Travel Marketing Pty Ltd v Virgin [page 414] Atlantic Airways Ltd;143 that it was clear that the ‘current thrust of authority’ favoured the adoption of a broad interpretation of arbitration clauses; and that ‘the courts favour a one-stop adjudication of all disputes if this can be accommodated consistently with the language of the clause. The difficulties with a fragmented approach are manifest in the above authorities.’ In Construction Planning and Management Pty Ltd v Nikolaou144 Fullagar J held that a dispute about whether a settlement agreement had been made was within the arbitration clause although it had been argued that the settlement agreement was entirely separate from the building contract. Section 27C of the Commercial Arbitration Act 2011 (Vic) enables consolidation of arbitral proceedings, where common questions of law or fact arise in the proceedings; or the rights to relief claimed in the proceedings are in respect of, or arise out of, the same transaction or series of transactions; or, for some other reason specified, it is desirable that an order be made. On an arbitrator’s power to award relief and otherwise make orders under the Trade Practices Act (since replaced by Competition and Consumer Act 2010 (Cth) Sch 2), see Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd.145 It has been held that an arbitrator does not have power to strike out a claim as an abuse of process: Nauru Phosphate Royalties Trust v Matthew Hall Mechanical & Electrical Engineers Pty Ltd.146 Section 32(2) of the 2011 Act empowers the arbitral tribunal to issue an order for the termination of the proceedings when, inter alia,

the tribunal finds that the continuation of the proceedings has for any other reason become ‘unnecessary or impossible’; or the arbitral tribunal makes an award under section 25(2)(a) dismissing the claim, where a party fails to do anything necessary for the proper and expeditious conduct of the arbitration including where the arbitral tribunal is satisfied that there has been inordinate and inexcusable delay on the part of the claimant in pursuing the claim.

Determining the validity of the contract 18.33 The received doctrine, as he called it, is set out by Clarke JA in IBM Australia Ltd v National Distribution Services Ltd: ‘an arbitrator has no jurisdiction to determine whether or not a contract containing the arbitration clause under which he was appointed was, or should be declared to have [page 415] been, void ab initio’.147 Handley JA in that case explained that an arbitrator whose jurisdiction arises under a term of a contract cannot exercise a power to avoid that contract ab initio: ‘Such an award would destroy his jurisdiction to make any award at all’.148 In QH Tours Ltd v Ship Design & Management (Aust) Pty Ltd,149 however, Foster J (departing from the majority view of the Court of Appeal in IBM Australia), having reviewed the authorities including Heyman v Darwins Ltd,150 concluded he could not be satisfied that there is any rule of law which prohibits the empowering of an arbitrator to decide the initial validity of the contract containing the arbitration clause. Generally speaking, he said, an arbitration clause ‘can be regarded as severable from the main contract with the result that, logically, an arbitrator, if otherwise empowered to do so, can declare the main contract void ab initio without at the same time destroying the basis of his power to do so’.151 This would now appear to be the accepted view following Ferris v Plaister; Stap v Grey.152 Kirby P in that case said that the primary judge had been: … right to solve the apparent illogicality of permitting the arbitrator to uphold an attack on the validity of the contract ab initio on the footing that an arbitration clause constitutes a severable

agreement between the parties. It does not fall with the avoidance of the contract in which it is contained.153

Mahoney JA said he accepted ‘the device of severability as a useful device for achieving the accommodation of legal logic (“the invalidity of the contract carries with it the invalidity of the arbitration clause”) to the wide view of the scope of an arbitration clause’.154 Clarke JA said that once it is recognised that an arbitration clause is a self-contained contract, the logic [page 416] in the argument to the other effect disappears.155 Recently, in Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd,156 Martin CJ agreed that an arbitration clause is ‘considered to be a contract independent of the underlying contract in which it is contained’. In ACD Tridon Inc v Tridon Australia157 Austin J considered that on the present state of authority, there was a limitation preventing the parties from giving their arbitrator the power to determine the initial validity of the contract containing the arbitration clause, for the ‘logical’ reason given by Clarke JA. However, the limitation should be confined to circumstances where that rationale applies and would not prevent an arbitrator from determining, for example, that a contract had been validly determined. However, Refshauge J in Lightsource Technologies Australia Pty Ltd v Pointsec Mobile Technologies AB,158 albeit in obiter, considered that Austin J’s conclusion ‘may need to be revised in the light of decisions such as Ferris v Plaister’ and Comandate Marine Corp v Pan Australia Shipping Pty Ltd.159 Whatever uncertainty may have presented in previous decisions, s 16 of the 2011 Act makes it clear that an arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract is to be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void does not of itself entail the invalidity of the arbitration clause. A plea that the arbitral tribunal does not have jurisdiction must be raised not later than the submission of the statement of defence. A party is not precluded from raising such a plea by the

fact that the party has appointed, or participated in the appointment of, an arbitrator. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may, within 30 days after having received notice of that ruling, request the court to decide the matter. A decision of the court under subsection (9) that is within the limits of the authority of the court is final. While a request under subsection (9) is pending, the arbitral tribunal may continue the arbitral proceedings and make an award. This is a different point to the one considered in New South Wales v Coya (Constructions) Pty Ltd.160 In that case Cole J had to decide whether an arbitrator might determine what was constituted by ‘the contract’ under the arbitration clause. He said that whether an arbitrator may do so or not depends upon the width of the jurisdiction conferred by the clause.161 In the case before him, he held that the arbitrator was entitled to determine what [page 417] comprised the contract ‘whether it includes express or implied terms, and whether it includes oral terms in addition to the written terms and in that manner to “ascertain the rights and obligations of the parties in relation to the work under the contract”.’162

Non-arbitral settlement 18.34 By s 27D of the Commercial Arbitration Act 2011 (Vic), an arbitrator may act as a mediator in proceedings relating to a dispute between the parties to an arbitration agreement (mediation proceedings) if the arbitration agreement provides for the arbitrator to act as mediator (whether before or after proceeding to arbitration, and whether or not continuing with the arbitration); or each party has consented in writing to the arbitrator so acting.

Procedure 18.35 Procedure and conduct of arbitrations are closely related: see further Imperial Leatherware Co Pty Ltd v Macri & Marcellino Pty Ltd.163

Section 19 of the Commercial Arbitration Act 2011 (Vic) enables the parties, subject to the provisions of the Act, to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. If the parties cannot agree on the procedure to be adopted, the arbitral tribunal may, again subject to the provisions of the Act, conduct the arbitration in such manner as it considers appropriate. The power conferred on the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence; and to make orders or give directions for the examination of a party or witness on oath or affirmation. In decisions predating the 2011 Act (and concerning s 14 of the 1984 Act), a number of principles remain instructive. The procedure provision ‘does not give the arbitrator carte blanche in the sense of allowing him to adopt a procedure manifestly unjust’ … ‘procedural justice requires that arbitrators should, in long complex arbitrations, follow as nearly as reasonably practicable, the pre-trial pleading discovery and other procedures of the court’: Brooking J in Esso Australia Resources Ltd v Plowman.164 However, some arbitrations may be concerned with very simple straightforward problems requiring no more than a view and perusal of a few documents; ‘no pleadings or oral evidence may be necessary and the arbitration might be conducted quite informally’: South Australian Superannuation Fund Investment [page 418] Trust v Leighton Contractors Pty Ltd.165 To ‘slavishly follow court procedure may in fact defeat the aims of arbitration — to provide speedy determination of the dispute with a minimum of technicalities’: Nauru Phosphate Royalties Trust v Matthew Hall Mechanical & Electrical Engineers Pty Ltd.166 The arbitrator is given a wide discretion to control the procedural aspects of the arbitration and its ability to provide speedy determination of the real issues: Oldfield Knott Architects Pty Ltd v Ortiz Investments Pty Ltd.167 In practice, the procedure to be followed in an arbitration is established by the arbitrator at an early stage, often at a preliminary conference as noted earlier. The procedure usually will involve the delivery of points of claim and points of defence and then, possibly, points of reply. There may be mutual discovery. The parties may have the opportunity to agree to arbitration in accordance with the

Expedited Commercial Arbitration Rules of the Institute of Arbitrators & Mediators Australia. In complex cases, several conferences may be held between the arbitrator and the parties before the hearing.

Conduct of arbitration 18.36 In Gas & Fuel Corp of Victoria v Wood Hall Ltd & Leonard Pipeline Contractors Ltd168 Marks J, although speaking with reference to the Arbitration Act 1958 (Vic), said that ‘subject to the overriding principles of natural justice, arbitrators clearly have a discretion as to the way in which they conduct arbitrations’. Section 5 of the Commercial Arbitration Act 2011 (Vic) provides that in matters governed by the Act, no court may intervene except where so provided by the Act. The parties are free to agree on the place of arbitration: s 20. Failing agreement, the place of arbitration is to be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties. The arbitral tribunal may, unless otherwise agreed by the parties, meet at any place (whether or not in Victoria) it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of goods, other property or documents. [page 419] Section 21 of the Act provides that, unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. Arbitrators are under no absolute obligation to make particular hearing dates available. Their obligation is only to sit on such date or dates as may reasonably be required of them having regard to all the circumstances.169 As to ‘pleadings’, s 23 provides that, subject to any contrary agreement of the parties or a direction of the arbitral tribunal, within the period of time agreed by

the parties or determined by the arbitral tribunal, the claimant must state the facts supporting the claim, the points at issue and the relief or remedy sought, and the respondent must state the respondent’s defence in respect of these particulars. The parties may submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit. Either party may amend or supplement the party’s claim or defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow such amendment having regard to the delay in making it. A statement by a claimant or respondent is not required to be in a particular form. Subject to any contrary agreement by the parties, the arbitral tribunal is to decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings are to be conducted on the basis of documents and other materials: s 24. Unless the parties have agreed that no hearings are to be held, the arbitral tribunal must hold such hearings at an appropriate stage of the proceedings, if so requested by a party. The parties must be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of goods, other property or documents. All statements, documents or other information supplied to the arbitral tribunal by one party must be communicated to the other party. Also, any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision must be communicated to the parties. The parties may appear or act in person, or may be represented by another person of their choice, in any oral hearings under s 24. A person who is not admitted to practise as a legal practitioner in Victoria does not commit an offence merely by representing a party in arbitral proceedings in that State. The arbitral tribunal may appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal; and may require a party to give the expert any relevant information or to produce, or to provide access to, any relevant documents, goods or other property for the expert’s inspection: s 26. If required, the expert must, after delivery of the expert’s written or oral report, participate in a hearing where the parties [page 420]

have the opportunity to put questions to the expert and present expert witnesses in order to testify as to the points at issue. A party may, but only with the permission of the arbitral tribunal, obtain subpoenas from the court requiring a person to attend for examination before the arbitral tribunal; and/or produce to the arbitral tribunal the documents specified in the subpoena: s 27A. A person must not be compelled under any subpoena issued in accordance with subsection (1) to answer any question or produce any document that the person could not be compelled to answer or produce in a proceeding before the court. Pursuant to s 27B of the 2011 Act, where a respondent defaults in respect of a subpoena by refusing or failing to attend before the arbitral tribunal for examination when required; or refuses or fails to produce a document that the person is required to produce; or when appearing as a witness before the arbitral tribunal, refuses or fails to take an oath or to make an affirmation or affidavit when required, or refuses or fails to answer a question that the witness is required by the arbitral tribunal to answer; or refuses or fails to do any other thing which the arbitral tribunal may require, the court may, on the application of a party or the arbitral tribunal, make orders compelling a person in default to do any or all of the things required by the subpoena or arbitral tribunal. Application to the court for such orders is only with the permission of the arbitral tribunal. The court must not make an order in relation to a person who is not a party to the arbitral proceedings unless the person is given an opportunity to make representations to the court; and the court is satisfied that it is reasonable in all the circumstances to make the order. A person must not be compelled under an order to answer any question or produce any document which the person could not be compelled to answer or produce in a proceeding before the court. One of the important new features of the 2011 Act is express confidentiality. In Esso Australia Resources Ltd v Plowman170 it was held that it is a term of an arbitration agreement implied by law that unless both parties consent, the only persons who may be present at arbitration proceedings are those whose presence is necessary or expedient for the proper conduct of those proceedings. Under the Act, s 27E prohibits the parties and the tribunal, unless they agree otherwise, from disclosing confidential information in relation to the arbitral proceedings. However, information may be disclosed: with the consent of all the parties to the arbitral proceedings;

to a professional or other adviser of any of the parties; if it is necessary to ensure that a party has a reasonable opportunity to present the party’s case; [page 421] if it is necessary for the establishment or protection of a party’s legal rights in relation to a third party; if it is necessary for the purpose of enforcing an arbitral award; if it is necessary for the purposes of the Act; if the disclosure is in accordance with an order made or subpoena issued by a court; or if authorised or required by a relevant law or required by a competent regulatory body, and the person making the disclosure gives written details of the disclosure (including an explanation of the reasons for the disclosure) to the other parties and the arbitral tribunal: s 27F.171 Sections 27G to 27I further regulate the disclosure of confidential information by the arbitral tribunal and the court. Section 27J provides for determination of any preliminary point of law by the court arising in the course of the arbitration. An application may be made by a party only with the consent of the arbitrator or all the other parties, and with the leave of the court. Whether the arbitral tribunal is bound by the rules of evidence appears answered by s 19, as noted above, which confers on the arbitral tribunal power to determine the admissibility, relevance, materiality and weight of any evidence. In R v War Pensions Entitlement Appeal Tribunal; Ex parte Bott172 Evatt J said that the fact that a tribunal is not bound by the rules of evidence ‘does not mean that all rules of evidence may be ignored as of no account’.

Natural justice

18.37 Section 18 of the Commercial Arbitration Act 2011 (Vic) provides that the parties must be treated with equality and each party must be given a reasonable opportunity of presenting the party’s case. The breadth and depth of that obligation of ‘equal treatment’ may be informed by the common law principles of natural justice held in the past to be applicable to arbitrations. The general rules of natural justice are well settled but not applicable inflexibly.173 The arbitrator’s power to conduct an arbitration under the 2011 Act is ‘conditioned upon their observance of the rules of natural justice or to [page 422] use more contemporary language, procedural fairness’: Murray & Roberts Australia Pty Ltd v G B Lifestyles Pty Ltd.174 The ‘task for the arbitrator is to consider in each case what needs to be done to ensure that natural justice is provided’: Nauru Phosphate Royalties Trust v Matthew Hall Mechanical & Electrical Engineers Pty Ltd.175 The fundamental requirements of natural justice which must be fulfilled in a valid arbitration are that an adjudicator must be disinterested and unbiased (nemo judex in causa sua); and the parties must be given adequate notice and opportunity to be heard (audi alteram partem): Mond & Mond v Berger.176 Natural justice requires there to be no actual bias, and no apprehension of bias. But bias is not shown by a mere lack of nicety.177 The test of apprehended bias is whether a fair-minded observer would entertain a reasonable fear that the arbitrator is incapable of bringing a fair and unprejudiced mind to the hearing.178 Giles J in Pflieger v Sparks179 said that the apprehension of bias must be ‘firmly’ established. ‘Surmise or conjecture is not enough.’180 A fair and unprejudiced mind is not necessarily one which has not given thought to a matter or one which, having thought about it, has not formed any view or inclination of mind about it.181 In Road Regenerating & Repair Services [page 423]

v Mitchell Water Board182 Nathan J said that ‘an adjudicator in the position of an arbitrator must isolate himself in any social or convivial context with the disputants’. In that case the arbitrator, who was removed by the court, had on one occasion arrived at the building site in dispute in a vehicle driven by an officer of one of the parties after a journey of over 20 kilometres. An arbitrator must not hear evidence or receive representations from one side behind the back of, or in the absence of, the other.183 An arbitrator must not form a concluded opinion before all the evidence is in.184 There are circumstances where an arbitrator, who contests review proceedings brought on account of bias (where available on this ground), may be held personally liable in costs.185 Natural justice really means fairness between the parties.186 Generally if a party is aware of the case or argument asserted against him or her, natural justice is satisfied by giving such party the proper opportunity to respond; but the process of responding is not indeterminable.187 Natural justice does not necessarily require an opportunity to test by cross-examination,188 but it may be a denial of natural justice to refuse a party an adjournment because this may deny that party a reasonable opportunity of being able to properly present their case.189 It is not necessarily a denial of natural justice to proceed in the absence of a party.190 An arbitrator should proceed with [page 424] a hearing in the absence of a party only where it is clear that the absent party had adequate notice and the non-appearance was deliberate.191 In such circumstances, it is not the duty of the arbitrator to protect the interests of the unrepresented party: if a party knowing of a case, chooses not to turn up, it is not the arbitrator’s duty to do the case for that party.192 If reasonable excuse for not attending the hearing is shown, the court may set aside an award made by an arbitrator who has proceeded ex parte.193 An arbitrator possessing any special knowledge can and should use such knowledge so as to understand the evidence which is given.194 But arbitrators cannot in effect give evidence to themselves without disclosing it.195 Similarly, if on a view an arbitrator reaches a conclusion contrary to the evidence given at the

hearing, that conclusion should be brought to the attention of the parties for them to comment on before it is incorporated in the award.196 By s 34(2)(a)(ii) of the 2011 Act, an award may be set aside by the court where a party was not given proper notice of the appointment of an arbitral tribunal or of the arbitral proceedings or was otherwise unable to present the party’s case.

Duties of parties 18.38 Section 24B of the Commercial Arbitration Act 2011 (Vic) imposes a general duty on the parties to do all things necessary for the proper and expeditious conduct of the arbitral proceedings. That includes complying, without undue delay, with any order or direction of the arbitral tribunal with respect to any procedural, evidentiary or other matter; and taking any necessary steps to obtain a decision (if required) of the court with respect to any function conferred on the court under s 6 of the Act. A party must not wilfully do or cause to be done any act to delay or prevent an award being made. Under s 25, if, without showing sufficient cause, the claimant fails to communicate its statement of claim in accordance with s 23(1), the arbitral tribunal may terminate the proceedings. If the respondent fails to communicate its statement of defence as required, the arbitral tribunal may continue the proceedings without treating such failure in itself as an admission of the claimant’s allegations. If any party fails to appear at a hearing or fails to produce documentary evidence, the arbitral tribunal may [page 425] continue the proceedings and make the award on the evidence before it. If a party fails to do any other thing necessary for the proper and expeditious conduct of the arbitration, the arbitral tribunal, if satisfied that there has been inordinate and inexcusable delay on the part of the claimant in pursuing the claim, may make an award dismissing the claim or may give directions (with or without conditions) for the speedy determination of the claim. If a party fails to comply with a peremptory order, the arbitral tribunal may direct that the party in default is not to be entitled to rely on any allegation or material which was the subject

matter of the order; draw such adverse inferences from the failure to comply as the circumstances justify; proceed to an award on the basis of any materials that have been properly provided to the arbitral tribunal; or make any order that it thinks fit as to the payment of the costs of the arbitration incurred in consequence of the non-compliance.

Removal of arbitrator 18.39 The 1984 Act (s 44) enabled the court to remove an arbitrator where satisfied that: there had been misconduct (defined by s 4 to include corruption, fraud, partiality, bias and a breach of the rules of natural justice); undue influence exercised; or the arbitrator was incompetent or unsuitable to deal with the particular dispute.197 However, the Commercial Arbitration Act 2011 (Vic) has significantly narrowed the grounds for challenging the appointment, and hence for securing the removal, of an arbitrator. Section 12 of the Act requires arbitrators to disclose any circumstances likely to give rise to justifiable doubts about their impartiality or independence at the time when first approached about the appointment and then continuously throughout the arbitral proceedings. Beyond that, an arbitrator may be challenged only if circumstances exist that do give rise to justifiable doubts as to the arbitrator’s impartiality or independence, or if the arbitrator does not possess qualifications agreed to by the parties. ‘Justifiable doubts’ as to the impartiality or independence of an arbitrator exist ‘only if there is a real danger of bias on the part of the [page 426] person in conducting the arbitration’. A party may challenge an arbitrator appointed by the party, or in whose appointment the party has participated, only for reasons of which the party becomes aware after the appointment has been made. Section 13 of the 2011 Act sets out the challenge procedure. The parties are free to agree on a procedure for challenging an arbitrator, subject to subsection (4). Failing such agreement, a party who intends to challenge an arbitrator must,

within 15 days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstance referred to in s 12(3), send a written statement of the reasons for the challenge to the arbitral tribunal. Unless the challenged arbitrator withdraws from office or the other party agrees to the challenge, the arbitral tribunal must decide on the challenge. If a challenge under any procedure agreed on by the parties or under the procedure of subsections (2) and (3) is not successful, the challenging party, within 30 days after having received notice of the decision rejecting the challenge, may request the court to decide on the challenge. A decision of the court under subsection (4) that is within the limits of the authority of the court is final. While a request under subsection (4) is pending, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an award. It may be seen that the focus of the Act is more on bias than other forms of previously recognised ‘misconduct’. The court should be slow to find misconduct on the ground of partiality unless the facts deduced almost compel it to draw that inference.198 The Act, however, also provides for removal in the case of inability or failure to act: s 14. If an arbitrator becomes unable to perform the arbitrator’s functions in law or in fact or for other reasons fails to act without undue delay, the arbitrator’s mandate terminates if the arbitrator withdraws from office or if the parties agree on the termination. If a controversy remains concerning any of those grounds, any party may request the court to decide on the termination of the mandate, which decision is final. In Korin v McInnes,199 Brooking J declined to order the removal of an arbitrator whose health was in question. It was his view that the plaintiffs had failed to show that the arbitrator’s health at the time of the application was such that he was not able to properly perform the functions of an arbitrator. He said that ‘incompetence or unsuitability’ (under the previous s 44(c)) is not established unless the circumstances are such that a satisfactory arbitration cannot be had, the test being, ‘Can the arbitrator properly perform his functions, so that a satisfactory arbitration can be had?’ [page 427]

Interlocutory orders 18.40 By s 6 of the Commercial Arbitration Act 2011 (Vic), the assistance or intervention of the court is limited to the functions referred to in the following: appointment of arbitrators failing agreement between the parties: s 11(3), (4); challenge under any procedure agreed on by the parties and where not successful: s 13(4); failure of or impossibility for arbitrator to act: s 14(2); decision on arbitral tribunal ruling as a preliminary question: s 16(9); recognition and enforcement of interim measures by the arbitral tribunal: ss 17H, 17I; court-ordered interim measures: s 17J; determination of rules of procedure: s 19(6); court assistance in taking evidence: s 27; issuing subpoenas: s 27A; default in answering a subpoena: s 27B; prohibiting or allowing disclosure of confidential information: ss 27H, 27I; determination of preliminary point of law: s 27J; costs of abortive arbitration: s 33D; applications to set aside an award: s 34; and appeals against an award: s 34A. They are to be performed by the Supreme Court (or County or Magistrates’ Court if specified in the arbitration agreement). Section 17 of the Act enables the arbitral tribunal to order interim measures. An interim measure is any temporary measure, whether in the form of an award or in another form, by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to: maintain or restore the status quo pending determination of the dispute; or take action that would prevent, or refrain from taking action that is likely to cause,

current or imminent harm or prejudice to the arbitral process itself; or provide a means of preserving assets out of which a subsequent award may be satisfied; or preserve evidence that may be relevant and material to the resolution of the dispute. These may be recognised as akin to traditional orders such as interlocutory injunctions, freezing (asset preservation or Mareva) orders and search (or Anton Piller) orders. The party seeking such interim measures must satisfy the arbitral tribunal that: harm not adequately reparable by an award of damages is likely to result if the measure is not ordered, and that such harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted; and there is a reasonable possibility that the requesting party will succeed on the merits of the claim: s 17A. [page 428] The arbitral tribunal may also make orders under s 17 with respect to: security for costs; discovery of documents and interrogatories; giving of evidence by affidavit; the inspection of any property which is or forms part of the subject matter of the dispute; the taking of photographs of any property which is or forms part of the subject matter of the dispute; samples to be taken from, or any observation to be made of or experiment conducted on, any property which is or forms part of the subject matter of the dispute; and dividing, recording and strictly enforcing the time allocated for a hearing between the parties (a so called ‘stop clock’ arbitration). The arbitral tribunal may modify, suspend or terminate an interim measure it has granted, on application of any party or, in exceptional circumstances, and on prior notice to the parties, on the arbitral tribunal’s own initiative: s 17D. The arbitral tribunal may require the party requesting an interim measure to provide appropriate security in connection with the measure: s 17E. The arbitral tribunal

may require any party promptly to disclose any material change in the circumstances on the basis of which the measure was requested or granted: s 17F. The party requesting an interim measure is liable for any costs and damages caused by the measure to any party if the arbitral tribunal later determines that, in the circumstances, the measure should not have been granted. The arbitral tribunal may award such costs and damages at any point during the proceedings: s 17G. By s 17H, an interim measure issued by an arbitral tribunal is to be recognised as binding and, unless otherwise provided by the arbitral tribunal, enforceable on application to the court. Similarly, an interim measure issued by an arbitral tribunal under the law of another State or Territory is to be recognised as binding in Victoria and, unless otherwise provided by the arbitral tribunal, enforced on application to the court. The party who is seeking or has obtained recognition or enforcement of an interim measure must promptly inform the court of any termination, suspension or modification of that interim measure. The court may, if it considers it proper to do so, order the requesting party to provide appropriate security if the arbitral tribunal has not already made a determination with respect to security or where such a decision is necessary to protect the rights of third parties. Recognition or enforcement of an interim measure may be refused under s 17I only if the court is satisfied that: such a refusal is warranted on the grounds (for refusing recognition or enforcement of an award) set out in s 36(1)(a)(i), (ii), (iii) or (iv); or the arbitral tribunal’s decision with respect to the provision of security in connection with the interim measure has not been complied with; or the interim measure has been terminated or [page 429] suspended by the arbitral tribunal or, where so empowered, by the court of the State or Territory in which the arbitration takes place or under the law of which that interim measure was granted; or if the court finds that the interim measure is incompatible with the powers conferred on the court unless the court decides to reformulate the interim measure to the extent necessary to adapt it to its own powers and procedures for the purposes of enforcing that interim measure but without modifying its substance; or any of the grounds set out in s 36(1)(b)(i) or

(ii) apply to the recognition and enforcement of the interim measure. Any determination made by the court is effective only for the purposes of the application to recognise and enforce the interim measure. The court must not, in making a determination with respect to the recognition or enforcement sought, undertake a review of the substance of the interim measure. Pursuant to s 17J, the court has the same power of issuing an interim measure in relation to arbitration proceedings as it has in relation to proceedings in courts. The court is to exercise the power in accordance with its own procedures taking into account the specific features of a domestic commercial arbitration. Section 17J is in almost identical language to s 47 of the 1984 Act. It is expressed in broad and general terms.200 As Kirby P stated in Commonwealth v Cockatoo Dockyard Pty Ltd201 the section ‘is intended to empower the court, in cases properly before it, to make interlocutory orders to the extent that it is not elsewhere specifically provided for in other sections of the Act.’ Although ‘the section gives the court power to make ancillary orders of the first importance’,202 it was not intended to introduce a procedure for the close monitoring of procedural decisions of arbitrators. If, in a given case, the inherent jurisdiction of the court to prevent injustice were found to subsist, it would only be used in the most unusual of circumstances having regard to the comprehensive provisions of the Act.203

Award 18.41 Part 6 of the Commercial Arbitration Act 2011 (Vic) governs the making of awards and termination of proceedings. [page 430] Section 28 requires the arbitral tribunal to decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute. Any designation of the law or legal system of a given State or Territory must be construed, unless otherwise expressed, as directly referring to the substantive law of that State or Territory and not to its conflict of laws rules. Failing any designation by the parties, the arbitral tribunal must apply the law

determined by the conflict of laws rules which it considers applicable. The arbitral tribunal must decide the dispute, if the parties so agree, in accordance with such other considerations as are agreed to by the parties. In all cases, the arbitral tribunal must decide in accordance with the terms of the contract and must take into account the usages of the trade applicable to the transaction. In arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal must be made, unless otherwise agreed by the parties, by a majority of all its members: s 29. However, questions of procedure may be decided by a presiding arbitrator, if so authorised by the parties or all members of the arbitral tribunal. If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal must terminate the proceedings and, if requested by the parties and not objected to by the arbitral tribunal, record the settlement in the form of an arbitral award on agreed terms: s 30. An award on agreed terms is to be made in accordance with s 31 of the Act and must state that it is an award. Such an award has the same status and effect as any other award on the merits of the case. Section 31 prescribes the form and content requirements for an award. It must be made in writing and be signed by the arbitrator or arbitrators. The award must state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given or the award is an award on agreed terms under s 30. The award must state its date and the place of arbitration as determined in accordance with s 20, and it is taken to have been made at the place stated in the award. After the award is made, a copy signed by the arbitrators must be delivered to each party. When considering the requirement of reasons it must be remembered, as pointed out by Giles J in R P Robson Constructions Pty Ltd v D & M Williams,204 that arbitrators will not always be skilful in the expression of their reasons. Consequently it is sufficient if the reasons indicate to the parties why the arbitrator reached the conclusion or conclusions in fact arrived at as the foundation for the award, or if they apprise the parties of the broad outline and constituent facts of the reasoning on which the arbitrator has acted, and if they enable the court to see whether there has been any error of law.205 But there is no reason why an arbitrator may not [page 431]

incorporate by reference in the award written material not set out where that which is incorporated is ‘identifiable, ascertainable, and explicative’ of the arbitrator’s reasoning.206 The Victorian Court of Appeal in Oil Basins v BHP Billiton Ltd207 considered that the requirement for reasons is a ‘statutory importation of the same standard as applies in Australia to the giving of reasons by judges’. The court said that: … in order to be utile, the requirement is for reasons sufficient to indicate to the parties why the arbitrator has reached the conclusion to which he or she has come. To that extent, the requirement is no different to that which applies to a judge. Of course it is understood that arbitrators may not always be skilful in the expression of their reasons. Consequently, it is accepted that a court should not construe an arbitrator’s reasons in an overly critical way. But it is necessary that an arbitrator deal with issues raised and indicate the evidence upon which he or she has come to his or her conclusion.208

This aspect of the decision in Oil Basins did not meet with the High Court’s approval in Westport Insurance Corporation v Gordian Runoff Ltd.209 There, the plurality said that ‘the reference in Oil Basins to the giving by the arbitrators in that dispute of reasons to a “judicial standard” and cognate expressions placed an unfortunate gloss upon the terms of [the former NSW Act]’. However, the court did agree with the observations in Oil Basins to the effect that what is required to satisfy that provision will ‘depend upon the nature of the dispute and the particular circumstances of the case’, as illustrated by saying: ‘If a dispute turns on a single short issue of fact, and it is apparent that the arbitrator has been chosen for his or her expertise in the trade or calling with which the dispute is concerned, a court might well not expect anything more than rudimentary identification of the issues, evidence and reasoning from the evidence to the facts and from the facts to the conclusion.’ The High Court also accepted that ‘no wholly satisfactory formula can be found to flesh out the requirement’. Both parties were content for the Court to rest, like Allsop P,210 upon the applicable standard being that stated by Donaldson LJ of the English Court of Appeal in Bremer Handelsgesellschaft mbH v Westzucker GmbH (No 2): All that is necessary is that the arbitrators should set out what, on their view of the evidence, did or did not happen and should explain succinctly why, in the light of what happened, they have reached their decision and what that

[page 432]

decision is. This is all that is meant by a ‘reasoned award’ [in s 1(6) of the 1979 UK Act].211

Arbitral proceedings are terminated by the issuing of the final award: s 32. Further, the arbitral tribunal is to issue an order for the termination of the arbitral proceedings when: the claimant withdraws the claim, unless the respondent objects and the arbitral tribunal recognises a legitimate interest on the respondent’s part in obtaining a final settlement of the dispute; the parties agree on the termination of the proceedings; the arbitral tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible; or, the arbitral tribunal makes an award under s 25(2)(a) dismissing the claim. The mandate of the arbitral tribunal terminates with the termination of the arbitral proceedings, subject to ss 33 and 34(4). Correction and interpretation of an award is permitted under s 33. Within 30 days of receipt of the award, unless another period of time has been agreed on by the parties, a party, with notice to the other party, may request the arbitral tribunal to correct in the award any errors in computation, any clerical or typographical errors or any errors of similar nature. Also, if agreed by the parties, a party, with notice to the other, may request the arbitral tribunal to give an interpretation of a specific point or part of the award. If the arbitral tribunal considers such requests to be justified, it must make the correction or give the interpretation within 30 days of receipt of the request. The interpretation forms part of the award. The arbitral tribunal may correct any error of the type referred to above on its own initiative within 30 days of the date of the award. Further, a party, within 30 days of receipt of the award, may request the arbitral tribunal to make an additional award as to claims presented in the arbitral proceedings but omitted from the award. If the arbitral tribunal considers that request to be justified, it must make the additional award within 60 days. The arbitral tribunal may extend, if necessary, the above periods within which it may make a correction, interpretation or an additional award. By 33A, unless otherwise agreed by the parties, the arbitrator has the power to make an award ordering specific performance of any contract if the court would have power to order specific performance of that contract.

Interest 18.42 The Commercial Arbitration Act 2011 (Vic) provides for interest up to and after the making of the award. Under s 33E of the Act, where an arbitral tribunal makes an award for a payment of money (whether on a [page 433] claim for a liquidated or an unliquidated amount), the arbitral tribunal may include interest, at such reasonable rate as the arbitral tribunal determines either on the whole or on any part of the money; and for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. It does not authorise, however, the award of interest on interest. Nor does the provision apply in relation to any amount on which interest is payable as of right whether because of an agreement or otherwise; nor does it affect the damages recoverable for the dishonour of a bill of exchange. Where an arbitral tribunal makes an award for the payment of an amount of money, and the amount is to be paid by a particular date, then s 33F of the Act permits the arbitral tribunal to direct as part of the award that interest, including compound interest, at a reasonable rate set by the tribunal, will be payable if the amount is not paid on or before the due date. As to whether an arbitrator has power to order interest in the form of ‘Hungerford’ damages (for loss of use of the money), see Leighton Contractors Pty Ltd v Kilpatrick Green Pty Ltd.212

Costs 18.43 By s 33B of the Commercial Arbitration Act 2011 (Vic), unless otherwise agreed by the parties, the costs of an arbitration (including the fees and expenses of the arbitrator or arbitrators) are to be in the discretion of the arbitral tribunal. The tribunal may direct that the costs of an arbitration, or of any part of the arbitral proceedings, are to be limited to a specified amount. That direction may be varied at any stage, but must be done sufficiently in advance of the incurring of costs to which it relates, or the taking of any steps in the proceedings which

may be affected by it, for the limit to be taken into account. The arbitral tribunal may in making an award direct to whom, by whom, and in what manner, the whole or any part of the costs that it awards are to be paid. It may tax or settle the amount of costs to be paid as between party and party or as between legal practitioner and client. Any awarded costs of an arbitration (other than the fees or expenses of an arbitrator) that have not been taxed or settled by the arbitral tribunal, may be assessed in the Court which has jurisdiction under s 34 to hear applications setting aside the award. If no provision is made by an award with respect to costs, a party may, within 14 days after receiving the award, apply to the arbitral tribunal for directions as to the payment of those costs. The arbitral tribunal must, after hearing any party who wishes to be heard, amend the award by adding to it such directions as the arbitral tribunal thinks proper with respect to the payment of the costs of the arbitration. [page 434] Unlike the former costs provision,213 the 2011 Act does not expressly require an arbitrator to take into account offers of compromise. However, the breadth of the discretion in s 33B is such as arguably to include such considerations. If an arbitration is commenced, but for any reason fails, the court may, on the application of a party or the arbitral tribunal made within six months after the failure of the arbitration, make such orders in relation to the costs of the arbitration as it thinks just: s 33D. An arbitration is taken to have failed if a final award is not made by the arbitral tribunal before the arbitration terminates or an award made is wholly set aside by the Court. Subject to the statutory provisions, the usual rule is that the successful party is entitled to costs: ‘costs follow the event’. In G Hawkins & Sons Pty Ltd v Cable Belt (Aust) Pty Ltd214 Foster J said: The arbitrator has, of course, a wide discretion in the awarding of costs. However, he must exercise that discretion judicially. He must not depart from ordinary accepted principles without good and sufficient reason.

That decision was followed in Goodman Holdings v Hughes215 where McDougall J observed (and it had been ‘common ground’) that the general principle, that

costs follow the event, applies as much to arbitrations as it does to proceedings in court. In D Phillips Constructions (Vic) Pty Ltd v R F Mullavey and J F Adams216 Murray J declined to set aside an arbitrator’s award which did depart from the usual rule as to costs. In his Honour’s view, the arbitrator’s decision was ‘reasoned and deliberate and … quite inconsistent with inadvertently overlooking some relevant matters’.217 The decision in South Australian Superannuation Fund Investment Trust v Leighton Contractors Pty Ltd218 that an arbitrator did not have power to award costs on an indemnity basis, must now be seen as subject to the express provisions of s 33B(4) (c) of the Act permitting costs to be ordered on a party–party or solicitor–client basis.

Stay 18.44 In Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (No 3),219 Vickery J observed that s 53 of the 1984 Act gave the court a discretion [page 435] to stay proceedings if the parties were subject to an arbitration agreement, whereas s 8 of the 2011 Act confers no such discretion on the court. Section 8 of the 2011 Act provides that a court220 before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests (not later than when submitting the party’s first statement on the substance of the dispute) refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed. Where such court proceedings have been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court. Doubtless, where a court felt compelled to refer a matter to arbitration, it would, by virtue of its own rules and inherent power (where it exists), stay the court proceeding pending the outcome of the arbitration.

His Honour said the use of the imperative word ‘must’ in s 8(1), rather than the permissive ‘may’, which was employed in the superseded Commercial Arbitration Act 1984 (Vic), removes the court’s discretion to refuse to grant a stay, and renders the provision mandatory. The only reason a court can refuse to grant a stay is if the arbitration agreement is found to be ‘null, void, inoperative or incapable of being performed’. This means that if the requirements of the section are met, the court has no choice but to grant a stay of the proceeding before it and refer the matter to arbitration. He said that ‘this may result in some inefficiencies in case management in some cases, arising from the potential for litigation on the same project being conducted before different tribunals. Nevertheless the statutory meaning is clear.’ These provisions reflect the general philosophy that if the parties have chosen arbitration instead of the courts as the method of resolving the disputes referred to in their agreement, they should as a rule be held to that agreement.221 Or, as Northcroft J said in Steele v Evans (No 2),222 ‘Generally speaking, parties who appoint arbitrators and leave a dispute to their decision must abide by the result, unless misconduct be shown’. The courts, therefore, give weight to the principle that parties who have made a contract should keep to its terms.223 In WTE Co-Generation [page 436] v RCR Energy Pty Ltd,224 the defendant sought a stay of court proceedings challenging the dispute resolution provision of the contract as unenforceable on the grounds of uncertainty. Vickery J, in refusing the application, agreed225 that the tendency of recent authority is clearly in favour of construing such contracts where possible, in a way that will enable dispute resolution clauses (including arbitration) to work as the parties appear to have intended, and to be relatively slow to declare such provisions void either for uncertainty or as an attempt to oust the jurisdiction of the court. In Rinehart v Welker,226 the NSW Court of Appeal held that the words of an arbitration clause should be construed irrespective of language in accordance with the presumption that the parties are likely to have intended any dispute arising out of the relationship between them to be decided by the same tribunal, unless

clear language to the contrary exists. This is consistent with the approach commonly taken by courts to avoid multiplicity of proceedings and the possibility of inconsistent findings. However, in Sabemo Pty Ltd v de Groot227 Giles J refused a stay where he was not satisfied that the referral to arbitration was bona fide or that it would be prosecuted with despatch. In his Honour’s view, the referral had all the hallmarks of a late invocation of the arbitration agreement at the instance of the applicant in an endeavour to defer his reckoning with the plaintiff.228 That decision (and others like it) may be of limited future application now that s 8 of the 2011 Act mandates a stay of court proceedings, in favour of arbitration, unless the agreement is null and void, inoperative or incapable of being performed. In Aquagenics Pty Ltd v Tasmanian Water and Sewerage Corporation (Southern Region) Pty Ltd,229 it was held that s 8 had retrospective effect; it applies to stay applications heard after the 2011 Act commenced, regardless of whether the application was filed before its commencement. Section 17J, discussed above in interim measures, empowers a court to stay an arbitration.

Judicial review 18.45 Part 7 of the Commercial Arbitration Act 2011 (Vic), ‘Recourse against Award’, represents another, and arguably, one of the most significant changes to the 1984 regime. [page 437] Section 34 provides that recourse to the court against an arbitral award may be made only by an application for setting aside in accordance with subsections (2) and (3) or by an appeal under section 34A. An arbitral award may be set aside by the court only if the party making the application furnishes proof that: a party to the arbitration agreement was under some incapacity, or the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication in the agreement, under the law of Victoria; or the party making the application was not given proper notice of the appointment of an

arbitral tribunal or of the arbitral proceedings or was otherwise unable to present the party’s case; or the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration are separable from those not so submitted, only that part of the award which contains decisions on matters not so submitted to arbitration may be set aside; or the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of the Act from which the parties cannot derogate, or, failing such agreement, was not in accordance with the Act. Further, an award may be set aside it the court finds that: the subject matter of the dispute is not capable of settlement by arbitration under Victorian law; or the award is in conflict with the public policy of the State. An application to set aside an award may not be made after three months have elapsed from the date on which the party making that application has received the award or, if a request has been made under s 33, from the date on which that request has been disposed of by the arbitral tribunal. By s 34A, an appeal lies to the Court on a question of law arising out of an award if the parties agree, within three months of the date of the award, that an appeal may be made under the section, and the Court grants leave. The Court must not grant leave unless it is satisfied: that the determination of the question will substantially affect the rights of one or more of the parties; and that the question is one which the arbitral tribunal was asked to determine; and that, on the basis of the findings of fact in the award the decision of the tribunal on the question is obviously wrong, or the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question. An application for leave to appeal must identify the question of law to be determined and state the grounds on which it is alleged that leave to appeal should be granted. The court must determine an application for leave to appeal without a hearing unless it appears to the court that a hearing is required. An appeal must be made within three months of the date on which the party making the appeal received the award.

[page 438] On the determination of an appeal under the section the court may by order: confirm the award, or vary the award, or remit the award, together with the court’s opinion on the question of law which was the subject of the appeal, to the arbitrator for reconsideration or, where a new arbitrator has been appointed, to that arbitrator for consideration, or set aside the award in whole or in part. The court is not able to exercise its powers to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the arbitral tribunal for reconsideration. Where the award is remitted, the arbitrator must, unless the order otherwise directs, make the award within three months after the date of the order. Where the award of an arbitrator is varied on appeal, the award as varied has effect as if it were the award of the arbitrator. McHugh JA in Warley Pty Ltd v Adco Constructions Pty Ltd230 said it is often difficult to determine in a particular case whether a finding gives rise to a question of law: if ‘the only question in the case is whether evidence ought to be accepted or whether evidence which has been accepted established a particular fact, no question of law is involved’. The expression ‘arising out of’ may be the equivalent of the expression ‘arising under’ or that of the wider expression ‘connected with’.231 Justice to the parties often will call for an award to be remitted rather than set aside.232 Decisions concerning the 1984 Act and its requirement (s 38(5)) for ‘manifest error of law on the face of the award’ may be instructive in respect of the leave requirements within the 2011 Act for the decision to be appealed to be ‘obviously wrong’ or ‘open to serious doubt’. In Re Caf-Grains,233 Moynihan J said that the requirement ‘of manifest error on the face of the award requires that the error be obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator.’ [page 439]

In Promenade Investments Pty Ltd v NSW,234 Sheller JA said: The expression ‘error of law on the face of the award’ is one of a type well known to the courts. The award having been examined the question is whether there is apparent (and such is the denotation of the word ‘manifest’) an error of law. ‘Manifest error’ is an expression … used to indicate something evident or obvious rather than arguable … There should … before leave is granted be powerful reasons for considering on a preliminary basis, without any prolonged adversarial argument, that there is on the face of the award an error of law.

On the former requirement that the question be ‘one the determination of which may add substantially to the certainty of commercial law’ (which is or may be analogous to the current requirement for leave that the question be one of ‘general public importance’), Sheller JA said: … it should be one of wider and greater importance than, for example, the construction of a one-off clause in the context of a particular agreement between the parties … The expression ‘commercial law’ should be given no narrow construction.235

That is consistent with the decision in Leighton Contractors Pty Ltd v Kilpatrick Green Pty Ltd236 to the effect that the ‘Nema guidelines’ established in Pioneer Shipping Ltd v BTP Tioxide Ltd237 — that leave should not normally be given in a case involving the construction of a ‘one-off’ clause unless upon a mere perusal of the award, without argument, it is apparent that the meaning given to the clause is obviously wrong — do not apply as binding rules but serve only to indicate some of the important factors which must [page 440] be considered in exercising a discretion whether or not to grant leave upon a consideration of all the circumstances of the case. In Energy Brix Australia Corp Pty Ltd v National Logistics Coordinators (Morwell) Pty Ltd238 the Victorian Court of Appeal held that a losing party to an arbitration could seek leave to appeal to the Court of Appeal against the decision of a single judge refusing leave to appeal from an arbitrator’s award, something which had previously been in some doubt due to conflicting authority in other states.239 The court also considered, contrary to the practice observed by many single judges hearing applications for leave to appeal from an arbitrator’s award as endorsed in Leighton Contractors Pty Ltd v Kilpatrick Green Pty Ltd, that ‘prima facie, some reasons should be given in refusing leave to appeal’.240

The exercise of a court hearing full argument on a ‘rolled up’ application for leave to appeal and the substantive appeal has been heavily criticised as being ‘inimical to the purpose of the statute of minimising judicial supervision and review’: Chen v Kevin McNamara & Son Pty Ltd.241

Enforcement 18.46 By s 35 of the Commercial Arbitration Act 2011 (Vic), an arbitral award, irrespective of the State or Territory in which it was made, is to be recognised in Victoria as binding and, on application in writing to the court, is to be enforced subject to the provisions of the section and s 36. Section 36 sets out the grounds upon which recognition or enforcement of an arbitral award may be refused: a party to the arbitration agreement was under some incapacity; the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication in it, under the law of the State or Territory where the award was made; the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present the party’s case; the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration,242 provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognised and enforced; the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the State or Territory [page 441] where the arbitration took place; the award has not yet become binding on the parties or has been set aside or suspended by a court of the State or Territory in which, or under the law of which, that award was made; the subject-matter of the dispute is not capable of settlement by arbitration under the law of the State; or, the recognition or enforcement of the award would be contrary to the public policy of the State.

If an application for setting aside or suspension of an award has been made to a court, the court may, if it considers it proper, adjourn its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the party to provide appropriate security.

Liability of arbitrator 18.47 The previous Act (s 51) provided that an arbitrator would not be liable for negligence, but would be liable for fraud. Section 39 of the 2011 Act provides that an arbitrator is not liable for anything done or omitted to be done in good faith in the capacity of arbitrator. Further, an entity that appoints, or fails to appoint, a person as arbitrator is not liable in relation to the appointment, failure or refusal if done in good faith. There have been circumstances where arbitrators have been held liable for costs of review proceedings243 or to refund their fees.244

Scott v Avery clauses 18.48 Where an arbitration agreement contains a ‘Scott v Avery clause’,245 by which arbitration is made a condition precedent to court proceedings, the 1984 Act (s 55) provided that such a clause no longer had any operation to prevent the bringing or maintenance of legal proceedings,246 if all the parties to the arbitration agreement are domiciled or ordinarily resident in Australia when the agreement is entered into. The Commercial Arbitration Act 2011(Vic) does not contain any similar provision. However, the legislative intention of promoting arbitration is found in s 8 of the Act, which, as noted above, mandates that parties must arbitrate their dispute if there is a valid arbitration agreement which is capable of being performed, and cannot elect to proceed in the courts as an alternative to arbitration. [page 442]

STATUTORY TRIBUNALS Victorian Civil and Administrative Tribunal 18.49 The Victorian Civil and Administrative Tribunal (VCAT) was established in 1998,247 amalgamating 15 boards and tribunals to offer a one-stop shop dealing with a range of disputes, aimed at providing access to a ‘modern, accessible, efficient and cost effective’ civil justice system.248 It has two types of jurisdiction — original and review — and its functions are conferred by a number of enabling enactments.249 In so far as building matters are concerned, VCAT is chiefly responsible for resolving domestic building disputes according to the Domestic Building Contracts Act 1995 (Vic).250 Such matters are generally entered into VCAT’s Domestic Building List (DBL). The tribunal may make any order it considers fair to resolve a domestic building dispute.251 It also has jurisdiction over domestic warranty insurance claims. Other functions of the Tribunal allocated to the Domestic Building List are found under the following Victorian enabling Acts: Australian Consumer Law and Fair Trading Act 2012; Building Act 1993 (Vic) except Div 12 of Pt 12A; House Contracts Guarantee Act 1987; and Owners Corporations Act 2006 Pt 6 and Pt 11, Divs 1, 2, 3 and 4.252 For examples of where VCAT has been held to be a ‘court’ for the purposes of various other statutes, see Subway Systems Australia v Ireland,253 where Croft J found that VCAT was not a ‘court’ for the purposes of s 8 of the Commercial Arbitration Act 2011 (Vic). There is no monetary jurisdictional limit in the Domestic Building List. As such, it receives and determines matters ranging from relatively small claims for defective workmanship to multi-million dollar claims in relation to large-scale residential developments involving a wide array of legal and building contract issues. Extensive alternative dispute resolution procedures are employed by VCAT, which include, in addition to mediation conferences, compulsory conferences.254 However, any term in a domestic

[page 443] building contract which compulsorily requires a dispute under the contract to be referred to arbitration is void.255 In conducting hearings, the tribunal is required to act fairly and according to the substantial merits of a case; it is bound by the rules of natural justice, but not by the rules of evidence; and it is to conduct each proceeding with as little formality and technicality, and with as much speed as its legislative requirements and proper consideration may permit.256 VCAT may call in the assistance of an expert to advise it or refer any question to a special referee.257 Other VCAT lists which may deal with matters involving building works and related disputes, not otherwise in the Domestic Building List, include the Civil Claims List. Relevantly, the Civil Claims List handles matters involving ‘fair trading disputes’ and other claims brought under the Fair Trading Act 1999 (Vic) or under the Australian Consumer Law (ACL)258 in relation to the supply of goods or the provision of services. These disputes, in a domestic building context, may involve, for instance, a single trade contract for work which is otherwise excluded from building work to which the Domestic Building Contracts Act 1995 (Vic) applies.259 A party may appeal, on a question of law, from an order of VCAT to the Supreme Court (Court of Appeal in relation to the orders of the President or a Vice President) upon the granting of leave by the court.260

Building appeals board 18.50 The Victorian Building Appeals Board261 is an independent statutory body established under the Building Act 1993. It is empowered to determine [page 444] any matter relating to the Building Regulations 2006, the Building Code of Australia 2006 and specified provisions of the Building Act.262 Its aim is to

‘achieve building safety, amenity and sustainability outcomes matched to community goals.’263 The Board, comprising a panel of building experts, hears appeals, disputes and referrals in relation to building control matters. Determinations may include: on appeal, to affirm, quash, vary or set aside the decision and remit the matter back to the decision-maker or make its own decision; or otherwise, to waive, modify or vary the provisions of particular regulations based upon the particular case, or determine that a particular design or element of a building complies with the Act and Regulations. Board decisions cannot be appealed per se, but may be judicially reviewed by the Supreme Court, on matters of law.264 This however may be subject to legislative change in due course. _________________________ 1.

[1994] 1 AC 85 at 105; referred to in Alucraft Pty Ltd (in liq) v Grocon Ltd (No 2) [1996] 2 VR 386 and Fulham Partners LLC v National Australia Bank Ltd [2013] NSWCA 296. See also Canterbury Pipe Lines Ltd v Christchurch Drainage Board [1979] 2 NZLR 347 at 353 and P Davenport, ‘The Unpaid Builder’s Right To Stop Work’ (1994) 32(9) LSJ 36.

2.

[1994] 1 AC 85 at 105.

3.

L U Simon Builders Pty Ltd v H D Fowles [1992] 2 VR 189 at 194 per Smith J, referred to in Sopov v Kane Constructions Pty Ltd [2007] VSCA 257 at [79].

4.

R Fitch, Commercial Arbitration in the Australian Construction Industry, Federation Press, Sydney, 1989, p 17.

5.

(1990) 25 NSWLR 353 at 354, referred to in Ziliotto v Hakim [2013] NSWCA 359 at [11].

6.

See generally Hon Justice Smart, ‘Resolution of Construction and Associated Disputes’ (1987) 3 Building and Construction Law 11; Hon Justice Legoe, ‘Dispute Resolution, The Options, The Obstacles and The Openings’ (1989) 8 Arbitrator 70; S Hibbert, ‘Construction Claims Dispute Resolution — Future Directions’ (1990) 6 Building and Construction Law 239; D S Jones, ‘Arbitration and Alternative Dispute Settling’ (1990) 9 Australian Construction Law Reporter 86; Hon Justice von Doussa, ‘ADR The Changing Scene’ (1991) 10 Arbitrator 105; M Black, ‘The Courts, Tribunals and ADR’ (1996) 7 Australian Dispute Resolution Journal 138; I Lulham, ‘Domestic Building Disputes and VCAT’ (1998) 72 Law Institute Journal 51; A Burr and M Odams de Zylva, ‘New Statutory Regime for Construction Disputes in England’ (1998) 14 Building and Construction Law 7; J Sierra, ‘Dispute Resolution in Building Matters in Country Victoria’ (2002) 5(3) ADR 37.

7.

(1991) 23 NSWLR 13 at 24. See also Eko Investments Pty Ltd v Austruc Constructions Ltd [2009] NSWSC 208.

8.

(1994) 34 NSWLR 474 at 494–5 referred to in Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587.

9.

In Re Wakim; Ex parte McNally [1999] HCA 27, the High Court held that part of the Act which conferred state jurisdiction on the Federal Court to be constitutionally invalid. Since then Commonwealth, State and Territory governments have introduced legislation aimed to ensure that any

affected decisions of the Federal (and Family) Court remain valid and continue to be enforced. 10. Federal Court of Australia Act 1976 (Cth) s 19(1). 11. For example: Trade Practices Commission v Collings Construction Co Pty Ltd (1994) ATPR 41–350 and (1996) 142 ALR 43; Graham Evans Pty Ltd v Stencraft Pty Ltd [1999] FCA 290; Baulderstone Hornibrook Pty Ltd v Qantas Airways Ltd [2003] FCA 174; GEC Marconi Systems Pty Limited v BHP Information Technology Pty Ltd [2003] FCA 50; Plastec Australia Pty Ltd v Plumbing Solutions Pty Ltd [2012] FCA 510. 12. See in particular s 18 in Sch 2. 13. Federal Circuit Court of Australia Legislation Amendment Act 2012 (Cth). 14. Federal Circuit Court of Australia Legislation Amendment Act 2102 (Cth) ss 10 and 18. 15. Supreme Court Act 1986 (Vic). Elsewhere see: ACT: Supreme Court Act 1933 (Cth); Supreme Court Act (NT); Supreme Court Act 1970 (NSW); Supreme Court of Queensland Act 1991 (Qld); Supreme Court Act 1935 (SA); Supreme Court Act 1959 (Tas); Supreme Court Act 1935 (WA). 16. For example: County Court Act 1958 (Vic) ss 3(1), 37(1), 39(2); District Court Act 1973 (NSW) s 44; District Court of Queensland Act 1967 (Qld) s 68; District Court Act 1991 (SA) s 8; District Court of Western Australia Act 1969 (WA) s 50. 17. Magistrates Court Act 1989 (Vic) ss 3(1), 100(1). Elsewhere see: Magistrates Court Act 1930 (ACT) s 257; Local Court Act (NT) ss 3, 14; Local Court Act 2007 (NSW) s 29; Magistrates Courts Act 1921 (Qld) ss 2, 4; Magistrates Court Act 1991 (SA) s 8; Magistrates Court (Civil Division) Act 1992 (Tas) ss 3, 7; Magistrates Court (Civil Proceedings) Act 2004 (WA) ss 4, 5 and 6. 18. For example Magistrates Court Act 1989 (Vic) s 100(1)(c) discussed in Whelan Kartaway Pty Ltd v Donnelly [2012] VSC 45 at [29]. 19. Formerly the Federal Court Rules 1979 (Cth). 20. Elsewhere see: Court Procedures Rules 2006 (ACT); Supreme Court Rules (NT); Supreme Court Rules 1970 (NSW) and Uniform Civil Procedure Rules 2005 (NSW); Uniform Civil Procedure Rules 1999 (Qld); Supreme Court Civil Rules 2006 (SA); Supreme Court Rules 2000 (Tas); Rules of the Supreme Court 1971 (WA). 21. Elsewhere see: District Court Rules 1973 (NSW); District Courts Rules 1968 (Qld); District Court Civil Rules 2006 (SA); District Court Rules 2005 (WA). 22. Elsewhere see: Court Procedures Rules 2006 (ACT); Local Court Rules (NT); Local Court Rules 2009 (NSW) and Uniform Civil Procedure Rules 2005 (NSW); Uniform Civil Procedure Rules 1999 (Qld); Magistrates Court (Civil) Rules 1992 (SA) and Magistrates Court (Civil) Rules 2013 (SA); Magistrates Court (Civil Division) Rules 1998 (Tas); Magistrates Court (Civil Proceedings) Rules 2005 (WA). 23. See ss 8 and 29, whereby a court may make any order it considers appropriate in the interests of justice to address contraventions of the overarching obligations. 24. Supreme Court (Miscellaneous Civil Proceedings) Rules 2008 (Vic) O 3. 25. ‘The Technology, Engineering and Construction List (TEC List) — de force et de beauté’, by Vickery J, the founding judge in charge of the List: . 26. Practice Note No 2 of 2009. 27. County Court Civil Procedure Rules 2008 (Vic) r 34A.06(1)(e). 28. The ‘Technology and Construction List’ in the Supreme Court (see Uniform Civil Procedure Rules 2005 (NSW) r 45.7) and a ‘Construction List’ in the District Court (see Uniform Civil Procedure Rules

2005 (NSW) r 45.11). 29. [1973] VR 753 at 755. 30. [1994] 1 VR 371 at 376–7; cited in Knorr v Commonwealth Scientific and Industrial Research Organisation (CSIRO) (No 2) [2012] VSC 268 at [46]. 31. [1983] Qd R 40 at 45; considered in Heery v Criminal Justice Commission [2001] 2 Qd R 610. 32. Dunstan v Simmie & Co Pty Ltd [1978]VR 669; Verwayen v Commonwealth [1988] VR 203 at 206; Utiger v Brown [2002] VSC 306. 33. [2001] HCA 19 at [168]–[170]; referred to in E A Negri Pty Ltd v Technip Oceania Pty Ltd [2009] VSC 543 at [34]. 34. [2011] VSC 566 at [23]. 35. Elsewhere see: Federal Court Rules 2011 (Cth) Part 25; ACT: Court Procedures Rules 2006 (ACT) Pt 2.10; NT: Supreme Court Rules (NT) O 26; Local Court Rules (NT) Pt 20; NSW: Uniform Civil Procedure Rules (2005) r 51; Qld: Uniform Civil Procedure Rules 1999 (Qld) s 353 (offer to settle); SA: Supreme Court Civil Rules 2006 (SA) Part 11; District Court Civil Rules (SA) Pt 11 r 41; Magistrates Court (Civil) Rules 1992 (SA) r 55 (and Magistrates Court (Civil) Rules 2013 (SA) r 55); Tas: Supreme Court Rules 2000 (Tas) Pt 9; Magistrates Court (Civil Division) Rules 1998 (Tas) Pt 5; WA: Rules of the Supreme Court 1971 (WA) O 24, 24A; District Court Rules 2005 (WA) r 6; Magistrates Court (Civil Proceedings) Rules 2005 (WA) Pt 12. 36. Elsewhere see: Federal Court Rules 2011 (Cth) Div 23.2; Federal Circuit Court Rules 2001 (Cth) Div 15.2; ACT: Court Procedures Rules 2006 (ACT) Pt 2.12; NT: Supreme Court Rules (NT) O44; Local Court Rules (NT) Pt 24; NSW: Uniform Civil Procedure Rules 2005 (NSW) r 51.47; SA: Supreme Court Civil Rules 2006 (SA) Part 9; District Court Civil Rules 2006 (SA) Pt 9; Magistrates Court (Civil) Rules 1992 (SA) r 69 (and Magistrates Court (Civil) Rules 2013 (SA) r 69); Tas: Supreme Court Rules 2000 (Tas) Pt 19; Magistrates Court (Civil Division) Rules 1998 r 105; WA: Rules of the Supreme Court 1971 (WA) O 36A; District Court Rules 2005 (WA) Pt 5A; Magistrates Court (Civil Proceedings) Rules 2005 (WA) r 72. 37. See also the equivalent provisions in the corresponding Commonwealth, NSW and Tasmanian Acts. 38. [2011] HCA 21 at [37]–[42]. See also Dixon J in Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (formerly SC Land Richmond Pty Ltd) [2012] VSC 99. 39. (2001) 52 NSWLR 705 at 743–4. 40. Elsewhere see: Federal Court Rules 2011 (Cth) Pt 28; Federal Circuit Court Rules 2001 (Cth) Pt 27; Civil Procedure Rules 2006 (ACT) Div 2.11.7 Civil Procedure Act 2005 (NSW) Pts 4, 5; Uniform Civil Procedure Rules 1999 (Qld) Pt 4; Supreme Court Act 1935 (SA) s 65; District Court Act 1991 (SA) ss 32, 33; Magistrates Court Act 1991 (SA) ss 27, 28; Supreme Court Rules 2000 (Tas) Pt 20; Magistrates Court (Civil Division) Rules 1998 (Tas) Pt 4; Supreme Court Act 1935 (WA) Pt 6; District Court Rules 2005 (WA) Pt 4.2; Magistrates Court (Civil Proceedings) Rules 2005 (WA) Pt 11. 41. See Najjar v Haines (1990) 7 BCL 145 at 150 and see appeal decision (1991) 25 NSWLR 224; applied in Sinclair & Lindsay Sinclair Pty Ltd v Bayly & Earle (1994) 11 BCL 439. 42. Formerly O 34, Federal Court Rules 1979 (Cth). See also, for example, Newark Pty Ltd v Civil & Civic Pty Ltd (1987) 75 ALR 350. 43. Elsewhere see: Court Procedures Rules 2006 (ACT) Div 2.15.4; Supreme Court Rules (NT) r 50.01; Uniform Civil Procedure Rules 2005 (NSW) Pt 20 Div 3; Uniform Civil Procedure Rules 1999 (Qld) Pt 7; Supreme Court Civil Rules 2006 (SA) rr 208, 213; District Court Civil Rules 2006 (SA) rr 208,

213 82; Magistrates Court (Civil) Rules 1992 (SA) r 69A; Supreme Court Rules 2000 (Tas) Pt 22 Div 5; Rules of the Supreme Court 1971 (WA) O 35; District Court Rules 2005 (WA) r 26. 44. [1982] VR 762 at 765. See also Hoogerdyk v Condon (1990) 22 NSWLR 171. Compare, however, Maritime Services Board of NSW v Australian Shipping Commission (1991) 27 NSWLR 258; Super Pty Ltd (formerly known as Leda Constructions Pty Ltd) v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549; Netanya Noosa Pty Ltd v Evans Harch Constructions Pty Ltd [1995] 1 Qd R 650; Bold Park Senior Citizens Centre & Homes Inc v Bollig Abbott & Partners (Gulf) Pty Ltd (1998) 19 WAR 281. 45. However, also see Talacko v Talacko [2009] VSC 98 at [27]–[28] per Kyrou J. 46. Park Rail Developments Pty Ltd v R J Pearce Associates Pty Ltd (1987) 8 NSWLR 123 at 128. 47. Since replaced by the Commercial Arbitration Act 2011 (Vic). 48. (1987) 8 NSWLR 123 at 129. See also Tropeano v Monogram Pty Ltd [1992] 2 Qd R 324 at 329–30; applied in Netanya Noosa Pty Ltd v Evans Harch Constructions Pty Ltd [1995] 1 Qd R 650. 49. [1980] VR 479 at 494; applied in Abigroup Contractors Pty Ltd v BPB Pty Ltd [2000] VSC 261. See also Wenco Industrial Pty Ltd v W W Industries Pty Ltd [2009] VSCA 191 at [17]. 50. (1988) 17 NSWLR 60 at 67. See also Oddy v Fry [1998] 1 VR 142; Milne v Benjafield [2002] NSWSC 1126; Parker v Muir Family Investments [2002] NSWSC 240; A & P Parkes Constructions Pty Ltd v Como Hotel Holdings Pty Ltd (2006) 22 BCL 45; [2004] NSWSC 588; CPC Energy Pty Ltd v Bellevarde Constructions Pty Ltd [2007] NSWSC 1397. 51. (1992) 29 NSWLR 549 at 564; cited in Road & Traffic Authority of NSW v Welling [2003] NSWCA 14. 52. (1991) 11 BCL 28 at 31. 53. Leighton Contractors (SA) Pty Ltd v Hazama Corp (Australia) Pty Ltd (1991) 56 SASR 47 at 56 per Debelle J. See also Cape v Maidment (1991) 103 FLR 259; Re Markbys Renaissance Pty Ltd [1999] 3 VR 851; Unley Property Development Pty Ltd v Lelio Bibbo Pty Ltd [2000] SASC 388; Milne v Benjafield [2002] NSWSC 1126. 54. Skinner & Edwards (Builders) Pty Ltd v Australian Telecommunications Corp (1992) 27 NSWLR 567 at 575 per Cole J; followed in Presmist Pty Ltd v Turner Corporation Pty Ltd (1992) 30 NSWLR 478; considered in Gorczynski v Leichhardt Municipal Council (2001) 113 LGERA 422. See also ‘Referees’ Reports’ (1993) 9 Building and Construction Law 241. 55. White Constructions (NT) Pty Ltd v Commonwealth (1990) 7 BCL 193 at 196; applied in Cape v Maidment (1991) 103 FLR 259; Goliath Portland Cement Company Ltd v Gardiner Willis & Associates (a firm) [1996] Vic SC 369; DF McCloy Pty Ltd v Taylor Thomson Whiting Pty Ltd [2000] NSWSC 1142; considered in Gorczynski v Leichhardt Municipal Council (2001) 113 LGERA 422; approved in A & P Parkes Constructions Pty Ltd v Como Hotel Holdings Pty Ltd (2006) 22 BCL 45; [2004] NSWSC 588. 56. Skinner & Edwards (Builders) Pty Ltd v Australian Telecommunications Corp (1992) 27 NSWLR 567 at 575. But see W Jeffreys Holdings Pty Ltd v Appleyard & Assocs (1990) 10 BCL 298. On referees and natural justice see: Beveridge v Dontan Pty Ltd (1990) 23 NSWLR 13; Telecomputing PCS Pty Ltd v Bridge Wholesale Acceptance Corp (Aust) Ltd (1991) 24 NSWLR 513. 57. [1998] 1 VR 142. 58. [2009]VSCA 191 at [17]. 59. (1947) 47 SR (NSW) 495 at 498. See Scott v President, Councillors and Ratepayers of the Shire of Numurkah (1954) 91 CLR 300 at 313; Theocharis Polykarpou (1985) 18 A Crim R 288 at 290; R v Murphy [2001] VSC 319; Kira Holdings Pty Ltd v Liverpool City Council [2004] NSWLEC 81.

60. (1991) 105 FLR 124 at 128. 61. Park Rail Developments Pty Ltd v R J Pearce Associates Pty Ltd (1987) 8 NSWLR 123 at 126; see also Holland Stolte Pty Ltd v Murbay Pty Ltd (1991) 105 FLR 304 at 309. 62. Super Pty Ltd (formerly known as Leda Constructions Pty Ltd) v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 at 563. 63. (1991) 22 NSWLR 466 at 472. 64. [1973] VR 753 at 755. See also P Dwight, ‘Commercial Dispute Resolution in Australia — Some Trends & Misconceptions’ (1989) 1 Bond Law Review 1. 65. [2002] NSWSC 646; referred to in Plenary Research Pty Ltd v Biosciences Research Centre Pty Ltd [2013] VSCA 217. 66. See also P Gerber, P and J O Brennan, Best Practice in Construction Disputes: Avoidance, Management and Resolution, 2013, LexisNexis Butterworths, Chatswood, esp Chapter 9: ‘Introduction to the Concept and Philosophy of ADR’, pp 217–37. 67. (1990) 20 NSWLR 251 at 253; referred to in Alvaro v Temple [2012] WASC 98 at [55]. See also Australian Foods Co Pty Ltd v Pars Ram Bros (Aust) Pty Ltd [2002] NSWSC 1180. 68. [1984] VR 391 at 392–3. See Hon Mr Justice Rogers, ‘Advantages of Referring Building Disputes to the Courts’ (1990) 9 Australian Construction Law Reporter 83. 69. (1994) 34 NSWLR 474 at 494; referred to in Telesto Investments Limited v UBS AG [2013] NSWSC 503 at [268]. 70. For example, AS 2124, cl 47. 71. As considered in WTE Co-Generation v RCR Energy Pty Ltd [2013] VSC 314. 72. D Newton, ‘Alternative Dispute Resolution and the Lawyer’ (1987) 61 Australian Law Journal 562 at 563 (quoting Mr Pat Brazil). See also G Rooney, ‘Mediation and the Rise of Relationship Contracting’ (2002) 76 Law Institute Journal 40. 73. H Astor and C M Chinkin, Dispute Resolution in Australia, Butterworths, Sydney, 1992, p 96. 74. (1992) 28 NSWLR 194 at 203; referring to L Street, ‘The Language of Alternative Dispute Resolution’ (1992) 66 Australian Law Journal 194. 75. D Newton, ‘Alternative Dispute Resolution and the Lawyer’ (1987) 61 Australian Law Journal 562 at 563. 76. Ibid at 564. 77. Ibid at 565. See also Straits Exploration (Aust) Pty Ltd v Murchison United NL (2005) 31 WAR 187. 78. (1994) 34 NSWLR 474 at 495. 79. [2002] NSWSC 646 at [16]–[17]; referred to in Plenary Research Pty Ltd v Biosciences Research Centre Pty Ltd [2013] VSCA 217. See also M Tonkin, ‘Expert Determinations — Ten Years On’ (2004) 99 Australian Construction Law Newsletter 8. 80. See The Dispute Resolution Board Australasia Inc: . 81. [1984] 1 QB 644 at 670 per Donaldson MR; discussed in Walton Construction Co Pty Ltd v Illawarra Hotel Co Pty Ltd [2011] NSWSC 1188. 82. R v National Joint Council for the Craft of Dental Technicians (Disputes Committee); Ex parte Neate [1953] 1

QB 704 at 708. 83. [1974] AC 727 at 745. 84. [1990] VSC 267. 85. As amended by the International Arbitration Amendment Act 2010 (Cth). 86. (1991) 11 Aust Cons LR 18 at 21; distinguished in Manningham City Council v Dura (Australia) Constructions Pty Ltd [1999] 3 VR 13. 87. Baulderstone Hornibrook Engineering Pty Ltd v State Constructions Pty Ltd (1993) 61 SASR 94 at 97 per Legoe J; see also J Coggins, ‘Dispute Resolution in the Australian Construction Industry: Defining the Role of the Court in Modern International Commercial Arbitration — Is There Hope for Arbitration?’ (2011) 27 Building and Construction Law 292. 88. Address at the opening of the Law Term Dinner, 2009, The Law Society Of New South Wales, Sydney, 2 February 2009; referred to by Croft J in ‘Arbitration law reform and the Arbitration List G of the Supreme Court of Victoria’ presented at a discussion night hosted by the Building Dispute Practitioners’ Society Inc and the Business Law Section of the Law Council of Australia (Construction and Infrastructure Law Committee) on 5 May 2010. 89. Elsewhere see: Commercial Arbitration Act 1986 (ACT); Commercial Arbitration Act 2010 (NSW); Commercial Arbitration Act 2013 (Qld); Commercial Arbitration Act 2011 (SA); Commercial Arbitration Act 2011 (Tas); Commercial Arbitration Act 2012 (WA). 90. Section 43 of the Act. 91. TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia [2012] HCATrans 277. 92. From the Explanatory Memorandum and Parliament of Victoria, Alert Digest No 9 of 2011; Doug Jones, ‘The New Commercial Arbitration Acts: Five Points to Remember’ 8 November 2012, website: . 93. Premium Nafta Products Ltd v Fili Shipping Co Ltd [2007] 4 All ER 951; [2007] UKHL 40 at [20] per Lord Hoffman; referred to in Ashjal Pty Ltd v Alfred Toepfer International (Australia) Pty Ltd [2012] NSWSC 1306 at [53]. 94. Re Precision Fabrication Pty Ltd (1987) 49 NTR 1 at 8. See also Australia Pacific Airports (Melbourne) Pty Ltd v The Nuance Group (Australia) Pty Ltd [2005] VSCA 133 at [43]. 95. (1986) 4 BPR 9185; applied in Santos Ltd v Pipelines Authority of South Australia (1996) 66 SASR 38. 96. (1986) 4 BPR 9185 at 9191. 97. (1912) 56 Sol Jo 253; quoted in Ajzner v Cartonlux Pty Ltd [1992] VR 919 at 928–9; cited in Thomas Cook Pty Ltd v Commonwealth Banking Corporation (1986) 4 BPR 9185. See also Sissons v Oates (1894) 10 TLR 392 at 393 and Northbuild Constructions Pty Ltd v Discovery Beach Project Pty Ltd [2008] QCA 160. 98. (1992) 7 WAR 549 at 554; applied in Industrial Affairs, Minister for v Civil Tech Pty Ltd [1999] SASC 22. 99. Tasmanian Copper Co Ltd v Metals Extraction Co Ltd (1912) 8 Tas LR 59. 100. (1973) 6 SASR 358; cited in Electra Air Conditioning BV v Seeley International Pty Ltd ACN 054 687 035 [2008] FCAFC 169. 101. Section 7(4)–(8). Amcor Packaging (Australia) Pty Ltd v Baulderstone Pty Ltd [2013] FCA 253. 102. [1892] 1 QB 144 at 146. 103. Compare Lloyd LJ in Excomm Ltd v Ahmed Abdul-Qawi Bamaodah [1985] 1 Lloyd’s Rep 403 at 408; Abdullah M Fahem & Co v Mareb Yemen Insurance Co & Tomen (UK) Ltd [1999] 2 Lloyd’s Rep 738;

Abigroup Contractors Pty Ltd v Transfield Pty Ltd [1998] VSC 103; Baulderstone Hornibrook Engineering Pty Ltd v Kayah Holdings Pty Ltd (1999) 14 BCL 277; Savcor Pty Ltd v New South Wales and Cooinda Ceramics Pty Ltd (2001) 17 BCL 341; R Niemann, ‘Arbitration Agreements — Where Are We Up To?’ (2000) 16(1) Building and Construction Law 14; J Amor-Smith, ‘Australian International Arbitration Act and New York Convention of 1958’ (1999) 13 CLQ 4. 104. [2012] NSWCA 95. 105. [2013] WASCA 66 at [56]. 106. [1985] VR 799 at 804. 107. (1990) 8 BCL 128. 108. Ibid at 129. 109. On such clause see Minister for Main Roads for Tasmania v Leighton Contractors Pty Ltd (1985) 1 BCL 381; disapproved in P M T Partners Pty Ltd v Australian National Parks & Wildlife Service (1995) 184 CLR 301. 110. (1953) 89 CLR 327 at 342. 111. ‘Standard Form Contracting; the role for FIDIC contracts domestically and internationally’ by Toby Shnookal SC and Dr Donald Charrett, ibid. 112. [1990] 2 Lloyd’s Rep 265 at 268 per Saville J; referred to and applied in Halki Shipping Corporation v Sopex Oils Ltd (The Halki) [1997] 3 All ER 833. 113. [1983] 1 All ER 382 at 390; cited in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334. See also Northcliffe Constructions Pty Ltd v Stein (2001) 17 BCL 135; Origin Energy Resources Limited v Benaris International NV (No 2) [2002] TASSC 104. 114. [1961] VR 721 at 725; applied in Northcliffe Constructions Pty Ltd v Stein (2001) 17 BCL 135. 115. But see Sandhurst Engineering Ltd v Citra Constructions Ltd (1986) 3 BCL 198; referred to in Northcliffe Constructions Pty Ltd v Stein (2001) 17 BCL 135. 116. (1967) 41 ALJR 192; applied in Rinbridge Marketing Pty Ltd v Rinbridge Pty Ltd (1996) 12 BCL 213; Sampson v Quaine Constructions (2001) 26 SR (WA) 55. 117. (1985) 1 BCL 252 at 257; applied in Santos Ltd v Pipelines Authority of South Australia (1996) 66 SASR 38. 118. [1961] Qd R 356 at 360; applied in Santos Ltd v Pipelines Authority of South Australia, ibid. See also Federal Airports Corp v Rheem Australia Ltd (1992) 11 Aust Cons LR 171. 119. [1975] VR 108 at 116–17. 120. Followed in a number of subsequent cases referred to by Giles J in Turner Corp Ltd v Austotel Pty Ltd (1992) 27 NSWLR 592 at 598; Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40 at 46–7; and in Woolworths Ltd v Herschell Constructions Pty Ltd (in liq) (1992) 11 Aust Cons LR 18 at 21. 121. (1992) 27 NSWLR 592 at 599. 122. See also Allied Constructions Pty Ltd v Novacoal Australia Pty Ltd (1991) 25 NSWLR 54. 123. [1986] 1 QB 868. 124. CA(NSW), 8 February 1995, unreported. 125. See (1994) 11 BCL 59. 126. [1999] 3VR 13 at 16–17; affirmed in Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd

[2012] WASC 228 at [45]–[53]. 127. (1995) 184 CLR 301 at 310. 128. [2012] WASC 228 at [47]–[51]. 129. [2002] 2 Qd R 514. 130. See Re Wilson Constructions Pty Ltd and Council of the Shire of Noosa [1970] QWN 18. Note the comments of Wilcox J in Trade Practices Commission v Collings Construction Co Pty Ltd (1994) ATPR 41,350. 131. Tradax Export SA v Volkswagenwerk AG (‘La Loma’) [1970] 1 QB 537 at 544; See also Australian Foods Company Pty Ltd v Pars Ram Brothers Australia Pty Ltd [2002] NSWSC 1180, 1144; Nepean Highway Pty Ltd v Abnote Australasia Pty Ltd [2009] VSCA 308. 132. [1990] VR 701 at 714; applied in 526 Olive Street Pty Ltd (rec & mgr appt) v Westpac Banking Corporation (SC(NSW), Giles J, 7 July 1994, unreported). 133. [1990] VR 701 at 715. 134. [1991] 3 WLR 1025 at 1044; applied in Sea Containers Ltd v ICT Pty Ltd [2002] NSWCA 84. 135. See K/S Norjarl A/S v Hyundai Heavy Industries Co Ltd [1991] 3 WLR 1025. See also Sea Containers Ltd v ICT Pty Ltd [2002] NSWCA 84 at [94] as to the principles about how arbitrators should conduct themselves if they wish to vary a fee arrangement with the parties. 136. Ibid. 137. (1993) 43 FCR 439 at 444; applied Cadoroll Pty Ltd v Mauntill Pty Ltd [2000] ACTSC 79. See also BTR Engineering (Aust) Ltd v Dana Corp [2000] VSC 246. 138. (1993) 43 FCR 439 at 448. 139. Ibid. See also IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466; Kvaerner Oil & Gas Pty Ltd v Egis Consulting Australia Ltd [2003] NSWSC 36. 140. (1984) 1 BCL 80; considered in ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896. 141. See NSW v Coya (Constructions) Pty Ltd (1993) 10 BCL 152 at 156–7. 142. (1996) 150 ALR 54. 143. (1996) 39 NSWLR 160. 144. (1988) 4 BCL 255. 145. [2013] WASCA 66 at [56], citing with approval, apud alios, IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466; Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160; and Paharpur Cooling Towers Ltd v Paramount (WA) Ltd [2008] WASCA 11 at [33]– [45]. 146. [1994] 2VR 386 at 403; referred to in Cooper & Oxley Builders Pty Ltd v Bunnings Group Ltd [2008] WASC 63 at [98]. A court has an inherent jurisdiction, however, to prevent abuse of its process: McCaffrey v Council of the Shire of Port Stephens (1992) 11 BCL 68 at 69. 147. (1991) 22 NSWLR 466 at 485. See also Hon Justice R D Giles, ‘Severability of Dispute Resolution Clauses in Contracts’ (1995) 14 Arbitrator 38. 148. Ibid at 487. 149. (1991) 105 ALR 371 at 384. 150. [1942] AC 356.

151. QH Tours Ltd v Ship Design & Management (Aust) Pty Ltd (1991) 105 ALR 371 at 384; followed in HiFert Pty Ltd, Cargill Fertilizer Incorporated v Kiukiang Maritime Carriers & Western Bulk Carriers (Australia) Ltd (1997) 145 ALR 500; Ferris v Plaister; Stap v Grey (1994) 34 NSWLR 474 and applied in Cufone v Cruse [2000] SASC 17. 152. (1994) 34 NSWLR 474; not following IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466; considered in New South Wales Racing v TAB [2002] NSWSC 742. See also Multiplex Constructions Pty Ltd v Trans Australian Constructions Pty Ltd [1995] NTSC 14. Compare ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896 at [187] per Austin J: ‘On the present state of authority, it appears to me that there is a limitation preventing the parties from giving their arbitrator the power to determine the initial validity of the contract containing the arbitration clause, for the “logical” reason given by Clarke JA (in IBM Australia). However, the limitation should be confined to circumstances where that rationale applies. It does not prevent an arbitrator deciding whether the contract containing the arbitration clause has been validly terminated, or whether the contract may be rectified (having regard to the line of cases cited earlier).’ 153. (1994) 34 NSWLR 474 at 484. 154. Ibid at 496–7. 155. Ibid at 501. 156. [2012] WASCA 50 at [165]. 157. [2002] NSWSC 896 at [187]. 158. [2011] ACTSC 59. 159. (2006) 157 FCR 45. 160. (1994) 10 BCL 152. 161. Ibid at 156. 162. Ibid at 157. 163. (1991) 22 NSWLR 653 at 666. 164. [1994] 1 VR 1 at 13. See also the High Court (on the appeal) in Esso Australia Resources Ltd v Plowman (Minister for Energy & Minerals) (1995) 183 CLR 10, holding, inter alia, that there was no implied confidentiality in arbitrations; and Commonwealth v Cockatoo Dockyard Pty Ltd (1995) 36 NSWLR 662 at 670–7. Compare now the confidentiality provisions in s 27E of the Commercial Arbitration Act 2011 (Vic). 165. (1990) 55 SASR 327 at 329, 332; applied in Eastern Metropolitan Regional Council v Four Seasons Construction Pty Ltd [1999] WASC 167; considered in State of Victoria v Seal Rocks Victoria (Australia) Pty Ltd (2001) 3 VR 1, in relation to claim for public interest immunity over documents produced to the arbitrator. 166. [1994] 2 VR 386 at 398, agreeing with Imperial Leatherware Co Pty Ltd v Macri & Marcellino Pty Ltd (1991) 22 NSWLR 653. See also John Holland Pty Ltd v Hunter Valley Earthmoving Co Pty Ltd [2002] NSWSC 131. 167. [2000] WASC 141. See also Hon Justice de Jersey, ‘Reform of the Arbitration Process: Interlocutory and Hearing Steps’ (1996) 15 Arbitrator 181. 168. [1978] VR 385 at 394. See also Thiess Contractors Pty Ltd v Water Corporation of Western Australia (SC(WA), Parker J, 28 October 1997, unreported); Villani v Delstrat Pty Ltd [2002] WASC 112. 169. K/S Norjarl A/S v Hyundai Heavy Industries Co Ltd [1991] 3 WLR 1025 at 1039. See also Sea Containers

Ltd v ICT Pty Ltd [2002] NSWCA 84. 170. [1994] 1 VR 1. See also the High Court (on the appeal) in Esso Australia Resources Ltd v Plowman (Minister for Energy & Minerals) (1995) 183 CLR 10, holding inter alia, that there was no implied confidentiality in arbitrations; and Commonwealth v Cockatoo Dockyard Pty Ltd (1995) 36 NSWLR 662 at 670–7. 171. See also A Stephenson, and M Ong (2012), Clayton Utz Commentary Sheet: ‘The Domestic and International Arbitration Landscape in Australia’, . 172. (1933) 50 CLR 228 at 256. See further: Hon Justice Giles, ‘Dispensing with the Rules of Evidence’ (1992) 11 Arbitrator 31. Also see: Kojima v Australian Chinese Newspapers Pty Ltd [2000] NSWSC 1153; Rodriguez v Telstra Corp Ltd [2002] FCA 30; Allmore Constructions Pty Ltd v Failli [2002] VSC 483. 173. Beveridge v Dontan Pty Ltd (1991) 23 NSWLR 13 at 21; applied in Wakim v Mathiew Pty Ltd t/as Dove Migration Services [2002] NSWSC 405; Kojima v Australian Chinese Newspapers Pty Ltd [2000] NSWSC 1153. 174. [2013] WASC 345 at [64]. 175. [1994] 2 VR 386 at 398. See also Oldfield Knott Architects Pty Ltd v Ortiz Investments Pty Ltd [2000] WASC 141, reversed on appeal [2000] WASCA 255; Applied in Totalisator Agency Board of Western Australia v Rosendorff [2000] WASCA 227; John Holland Pty Ltd v Hunter Valley Earthmoving Co Pty Ltd [2002] NSWSC 131. 176. [2004] VSC 45 at [97]–[98], referring to Gas & Fuel Corp of Victoria v Wood Hall Ltd & Leonard Pipeline Contractors Ltd [1978] VR 385 at 396. See also M T Associates Pty Ltd v Aqua-Max Pty Ltd [1999] VSC 286; Oldfield Knott Architects Pty Ltd v Ortiz Investments Pty Ltd [2000] WASC 141; Qenos Pty Ltd v Mobil Oil Australia Pty Ltd (No 2) [2002] VSC 524. 177. R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546 at 553; applied in Kojima v Australian Chinese Newspapers Pty Ltd [2000] NSWSC 1153; Gordon v Australian Securities and Investments Commission [2002] FCA 1155; McClelland v Burning Palms Surf Life Saving Club (2002) 191 ALR 759; Thaler v Amzalak (No 2) [2013] NSWSC 632 at [175]. 178. Livesey v NSW Bar Association (1983) 151 CLR 288 at 293–4. See also Tracomin SA v Gibbs Nathaniel (Canada) Ltd [1985] 1 Lloyd’s Rep 586. In Du Toit v Vale (1993) 9 WAR 138 at 146 Scott J spoke of an apprehension that the arbitrator ‘might not bring an impartial and unprejudiced mind to the hearing’. Also Bienstein v Bienstein [2003] HCA 7; Ferguson v Cole [2002] FCA 1411; J Gardiner, ‘Standard of Conduct Expected of Arbitrators in International Arbitration’ (1996) 7 ADRJ 61. 179. (1990) 6 BCL 188 at 197; referred to in Najjar v Haines (1990) 7 BCL 145. 180. Metropolitan Properties Co (FGC) Ltd v Lannon [1969] 1 QB 577 at 599 per Lord Denning MR, an example of bias involving kinship. Applied and followed in Trustees of the Christian Brothers v Cardone (1995) 57 FCR 327, where the majority of the Full Federal Court said: ‘apprehension of bias must be reasonably and not fancifully entertained’. See also Metropolitan Fire & Emergency Services Board v Churchill [1998] VSC 51. Metropolitan Properties was distinguished in DJC v Detective Senior Constable Burg [1998] VSCA 139. 181. R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546 at 553. 182. [1990] Vic SC 267. See also R v Magistrates Court at Lilydale; Ex parte Ciccone [1973] VR 122; applied in Trustees of the Christian Brothers v Cardone (1995) 57 FCR 327. See also Magazzu v Business Licensing Authority [2001] VSC 5.

183. Xuereb v Viola (1988) 18 NSWLR 453 at 469. See also London Export Corp Ltd v Jubilee Coffee Roasting Co Ltd [1958] 1 WLR 271 at 277; Rhodes v Fletcher [2000] NSWSC 797; Slim v Kabra [2005] NSWSC 1190. 184. Telecomputing PCS Pty Ltd v Bridge Wholesale Acceptance Corp (Aust) Ltd (1991) 24 NSWLR 513 at 523; applied in Ceccattini v ICM 2000 Pty Ltd [1999] NSWSC 453; Rhodes v Fletcher [2000] NSWSC 797. 185. Du Toit v Vale (1993) 9 WAR 138 at 148–9. See also Giustiniano Nominees Pty Ltd v Minister for Works (1995) 16 WAR 87. 186. Telecomputing PCS Pty Ltd v Bridge Wholesale Acceptance Corp (Aust) Ltd (1991) 24 NSWLR 513 at 523. 187. Xuereb v Viola (1989) 18 NSWLR 453 at 468. See also Commissioner for the ACT Revenue v Alphaone Pty Ltd (1994) 34 ALD 324; considered and applied in Leda Holdings Pty Ltd v Vasilakis Holdings Pty Ltd; MEPC Australia Ltd v Vasilakis Holdings Pty Ltd (1997) Q ConvR 54-489; R v Tasmanian Gaming Commission [2001] TASSC 77; and York v General Medical Assessment Tribunal [2002] QCA 519. As to further evidence received by an arbitrator after the conclusion of the hearing, see Multiplex Constructions Pty Ltd v Suscindy Management Pty Ltd (2000) 16 BCL 436; Slim v Kabra [2005] NSWSC 1190. 188. R v War Pensions Entitlement AppealTribunal; Ex parte Bott (1933) 50 CLR 228; considered in Kojima v Australian Chinese Newspapers Pty Ltd [2000] NSWSC 1153. 189. Sullivan v Department of Transport (1978) 1 ALD 383 at 403 per Deane J. Followed in Schiffer v Pattison (2000) 177 ALR 754; Logounov v Federal Commissioner of Taxation [2000] FCA 1745; Kamel v Australia Brick Co Pty Ltd [2001] NSWSC 133; Schiffer v Pattison [2001] FCA 1094; Keams v Fair Trading Tribunal of NSW [2001] NSWSC 951. See also Campbell J in McClelland v Burning Palms Surf Life Saving Club (2002) 191 ALR 759. 190. E Kontek v Daveyduke Industries Mimivic Nominees Pty Ltd [1987] Vic SC 81. 191. Tryer v Shaw (1858) 27 LJ Ex 320; Benedetti v Sasvary [1967] 2 NSWR 792; applied in Resort Condominiums International Inc v Bolwell [1995] 1 Qd R 406. 192. Annie Fox v P G Wellfair Ltd (in liq) [1981] 2 Lloyd’s Rep 514; Caneebie Engineering Services Pty Ltd v Drummond [2001] QSC 318. 193. Oxford Clothing Co Pty Ltd v GIO (Tas) (1994) 4 Tas R 1; cited in Multiplex Constructions Pty Ltd v Suscindy Management Pty Ltd (2000) 16 BCL 436. 194. Annie Fox v P G Wellfair Ltd (in liq) [1981] 2 Lloyd’s Rep 514 at 522. 195. Ibid at 528. 196. Ibid at 530. 197. For decisions concerning ‘misconduct’, see: Hart v Duke (1862) 32 LJQB 55, cited in A C Robertson Pty Ltd (in liq) v Costa Brava Investments Pty Ltd (1961) 78 WN (NSW) 656 at 658); Steele v Evans (No 2) [1949] NZLR 548 at 557, applied in Burnett Transport Ltd v Davidson [1991] 1 NZLR 121. As to the distinction between technical misconduct constituted by irregularity and other misconduct, see London Export Corp Ltd v Jubilee Coffee Roasting Co Ltd [1958] 1 WLR 661 at 665; Du Toit v Vale (1993) 9 WAR 138 at 143; Consolidated Constructions Pty Ltd v Saipem Australia Pty Ltd (1999) 15 BCL 64. Where an arbitrator decided a case on a point which was never raised as an issue or argued, see: Interbulk Ltd v Aiden Shipping Co Ltd [1984] 2 Lloyd’s Rep 66; Giles v GRS Constructions Pty Ltd (2002) 81 SASR 575; Qenos Pty Ltd v Mobil Oil Australia Pty Ltd (No 2) [2002] VSC 524. Failing to decide an issue that was part of the reference to arbitration, see: Hollande-Stolte Pty Ltd v Murbay Pty Ltd (1991) 105 FLR 304 at 309. Misconduct is not inferred from error alone: Steele v Evans (No 2) [1949] NZLR 548; Gascor t/as Gas & Fuel v Ellicott, Esso Australia Resource Ltd & BHP Petroleum (NW Shelf) Pty Ltd [1997] 1 VR 332; Industrial Affairs, Minister for v Civil Tech Pty Ltd [1999] SASC 22.

198. Re Arbitration between Bailey and Hart (1883) 9 VLR (L) 311 at 319. 199. [1990] VR 723 at 727; considered in Gascor t/as Gas & Fuel v Ellicott [1995] Vic SC 625; applied in Industrial Affairs, Minister for v Civil Tech Pty Ltd [1999] SASC 22; Enterra Pty Ltd v ADI Ltd [2002] NSWSC 700. 200. Nauru Phosphate Royalties Trust v Matthew Hall Mechanical & Electrical Engineers Pty Ltd [1994] 2 VR 386 at 409. See also Oldfield Knott Architects Pty Ltd v Ortiz Investments Pty Ltd [2000] WASC 141, reversed on appeal [2000] WASCA 255; State of Victoria v Seal Rocks Victoria (Australia) Pty Ltd (2001) 3 VR 1; John Holland Pty Ltd v Hunter Valley Earthmoving Co Pty Ltd [2002] NSWSC 131; Arnwell Pty Ltd v Teilaboot Pty Ltd [2010] VSC 123. 201. (1995) 36 NSWLR 662, applied in Arnwell Pty Ltd v Teilaboot Pty Ltd [2010] VSC 123 at [15]. 202. Imperial Leatherware Co Pty Ltd v Macri & Marcellino Pty Ltd (1991) 22 NSWLR 653 at 667. 203. ABB Service Pty Ltd v Pyrmont Light Rail Company Ltd [2010] NSWSC 831 referring to Croft J in Arnwell Pty Ltd v Teilaboot Pty Ltd [2010] VSC 123 at [15]. 204. (1989) 6 BCL 219 at 221; applied AMEC Australia Pty Limited (formerly known as AMEC Construction Pty Ltd) v Pacific Power (1996) 13 BCL 210; Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37. 205. (1989) 6 BCL 219 at 222. 206. Ibid. See also Re Caf-Grains [1994] 2 Qd R 252 at 258. 207. (2007) 18 VR 346 at [50]–[54]. 208. Ibid. 209. [2011] HCA 37 at [49]–[54]; applied in Kocak v Wingfoot Australia Partners [2012] VSCA 259; Thaler v Amzalak (No 2) [2013] NSWSC 632 at [141]; Mackay Sugar Ltd v Sugar Australia Pty Ltd [2013] QSC 233 at [78]. 210. Gordian Runoff Ltd v Westport Insurance Corporation [2010] NSWCA 57; (2010) 267 ALR 74 at [215]. 211. [1981] 2 Lloyd’s Rep 130 at 132–3. 212. [1992] 2 VR 505, discussed in Elspan v Eurocopter [1999] NSWSC 555 where the court considered whether a claimant had an arguable legal entitlement to claim ‘special detriment’. 213. Subsections 34(5) and (6) of the 1984 Act. 214. (1986) 3 BCL 217 at 219. See also Ballantyne v Electricity Trust of South Australia (1994) 62 SASR 133 at 148. 215. [2009] NSWSC 682 at [42]. 216. [1980] VR 171. See also S A Baker, ‘Costs’ (1996) 15 Arbitrator 30. 217. Ibid at 176. See also G Hawkins & Sons Pty Ltd v Cable Belt (Aust) Pty Ltd (1986) 3 BCL 217 at 219. 218. (1996) 66 SASR 509. Questioned in Doran Constructions Pty Ltd (in liq) v Beresfield Aluminium Pty Ltd [1999] NSWSC 1198. 219. [2013] VSC 435 at [123]–[126]. 220. Subway Systems Australia v Ireland [2013]VSC 550:VCAT is not a ‘court’ for the purposes of s 8 of the Act. 221. See Ferris v Plaister; Stap v Grey (1994) 34 NSWLR 474 at 494–5; considered in Manningham City Council v Dura (Australia) Constructions Pty Ltd [1999] VSC 63. See also BTR Engineering (Aust) Ltd v

Dana Corp [2000] VSC 246; Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587. 222. [1949] NZLR 548 at 561. 223. See Re an Arbitration between Modern Road Construction Co Pty Ltd and Melbourne Harbour Trust Commissioners [1931] VLR 214 at 219. See also Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587 at 599, referring to Huddart Parker Ltd v The Ship Mill Hill (1950) 81 CLR 502 at 508–9: ‘there is a strong bias in favour of maintaining the special bargain’; Subway Systems Australia v Ireland [2013] VSC 550 at [32] and cases cited therein. 224. [2013] VSC 314 at [29] and cases cited therein. 225. With the remarks of Martin J in Downer EDI Mining Pty Ltd v Wambo Coal Pty Ltd [2012] QSC 290 at [10]. 226. [2012] NSWCA 95 at [1] and [189], applying Fiona Trust & Holding Corp v Privalov [2007] EWCA Civ 1329; [2007] 4 All ER 951. 227. (1990) 8 BCL 128. 228. Ibid at 131. 229. [2013] TASSC 13 at [24]–[30]. 230. (1988) 8 BCL 300 at 310; considered Carpaolo Nominees Pty Ltd v Marrosan Nominees Pty Ltd (1997) 136 FLR 328; BMD Constructions Pty Ltd v Golding Contractors Pty Ltd [2000] QSC 057; Lamac Developments Pty Ltd v Devaugh Pty Ltd [2002] WASCA 245; Oil Basins Ltd v BHP Billiton Ltd (2007) 18 VR 346; [2007] VSCA 255 at [63]. 231. Forsayth NL v Australasian Gold Mines NL (No 3) (1992) 8 WAR 176 at 182; applied in Thiess Contractors Pty Ltd v Water Corporation of Western Australia (SC(WA), Parker J, 28 October 1997, unreported). 232. Tuta Products Pty Ltd v Hutcherson Bros Pty Ltd (1972) 127 CLR 253 at 290. On revival of the arbitrator’s powers upon a setting aside see Mark Blake Builders Pty Ltd v Davis (SC(NSW), Giles J, 14 November 1994, unreported). See also S Laycock, ‘Section 43 of the Commercial Arbitration Act and the Power of Remission’ (1996) 12 Building and Construction Law 385. 233. [1994] 2 Qd R 252 at 258; applied in Goldflax Pty Ltd v Reefield Pty Ltd [1999] QSC 211 and Northbuild Construction Pty Ltd v Discovery Beach Project Pty Ltd [2010] QSC 94; BASF Coatings Aust Pty Ltd v Akzo Nobel Pty Ltd [2013] VSC 31. 234. (1991) 26 NSWLR 203 at 225–6. See also Concrete Constructions Group Ltd v D V P Engineering Pty Ltd (1997) 14 BCL 168; Qenos Pty Ltd v Mobil Oil Australia Pty Ltd (No 1) [2002] VSC 379; Energy Brix Australia Corp Pty Ltd v National Logistics Coordinators (Morwell) Pty Ltd [2002] VSCA 113; Dalcon Constructions Pty Ltd v Chu [2002] WASCA 290; Australian Foods Co Pty Ltd v Pars Ram Brothers (Australia) Pty Ltd [2002] NSWSC 1180; Allmore Constructions Pty Ltd v Failli [2002] VSC 483; Kinnane v Zee Homes Pty Ltd [2003] SASC 187; Fairyglen v Lunsmann [2003] NSWSC 696; Panmal Constructions Pty Ltd (ACN 002 797 417) v Warringah Formwork Pty Ltd (ACN 002 797 417) [2004] NSWSC 204; HIH Casualty and General Insurance (NZ) Ltd (in liq) v General Reinsurance Australia Ltd [2004] NSWSC 659; Decor Ceilings Pty Ltd v Cox Constructions Pty Ltd [2006] SASC 85; Mowby Pty Ltd v Moose Property Services Pty Ltd [2007] VSC 111; Filippini v The Real Estate Institute of Queensland Ltd [2008] QSC 113; Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37; Yesodei Hatorah College Inc v The Trustees of the Elwood Talmud Torah Congregation [2011] VSC 622 at [19]; Chen v Kevin McNamara & Son Pty Ltd [2013] VSC 539. 235. (1991) 26 NSWLR 203 at 226. 236. [1992] 2 VR 505. See also Qantas Airways Ltd v Joseland & Gilling (1986) 6 NSWLR 327; Thiess

Contractors Pty Ltd v Water Corporation of Western Australia (SC(WA), Parker J, 28 October 1997, unreported); Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd (No 2) [2010] VSC 70 at 18. 237. [1982] AC 724; Industrial Affairs, Minister for v Civil Tech Pty Ltd (1998) 70 SASR 394; (1998) 196 LSJS 247; Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566; [2001] FCA 1628; Anaconda Operations Pty Ltd v Fluor Australia Pty Ltd [2003] VSC 275. 238. [2002] VSCA 113. 239. Aintree Holdings Pty Ltd v Corderoy (1996) WAR 416; and Industrial Affairs, Minister for v Civil Tech Pty Ltd (1997) 69 SASR 348. 240. Energy Brix Australia Corp Pty Ltd v National Logistics Coordinators (Morwell) Pty Ltd [2002] VSCA 113 at [37]. 241. [2013] VSC 539 at [89] and cases cited therein. 242. For an example, see Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd [2011] NSWSC 1331. 243. See Du Toit v Vale (1993) 9 WAR 138 at 148–9. See also C Brabazon, ‘Dispute Resolvers’ Liability in Negligence’ (1997) 15 Arbitrator 227. 244. Mond v Berger [2004] VSC 150. 245. (1856) 5 HLC 811. 246. Muirfield Properties Pty Ltd v Hansen & Yuncken Pty Ltd [1987] VR 615. 247. Established under the Victorian Civil and Administrative Tribunal Act 1998 (Vic). 248. Hansard, second reading speech, 9 April 1998. 249. Victorian Civil and Administrative Tribunal Act 1998 (Vic) ss 40–44. 250. Section 57; formerly the province of the Domestic Building Tribunal. In Queensland, the equivalent is the Queensland Civil and Administrative Tribunal which was established by the Queensland Civil and Administrative Tribunal Act 2009 (Qld). Part 2 of that Act defines the QCAT’s jurisdiction. 251. Domestic Building Contracts Act 1995 (Vic) s 53. 252. Victorian Civil and Administrative Tribunal Rules 1998 (Vic), Sch 1, Pt 2. 253. [2013] VSC 550 at [41]. See also previous decisions that VCAT does not have jurisdiction under the former Trade Practices Act 1974: Park Lane Homes Pty Ltd v Enrik Corporation Pty Ltd [2002] VCAT 607; Karevski v SSS Builders [2002] VCAT 608. 254. Victorian Civil and Administrative Tribunal Act 1998 (Vic) ss 83–93. 255. Domestic Building Contracts Act 1995 (Vic) s 14. See Age Old Builders Pty Ltd v Swintons Pty Ltd [2002] VCAT 1489; appeal dismissed in Swintons Pty Ltd v Age Old Builders Pty Ltd [2005] VSCA 217 where it was held that s 14 only prohibited compulsory arbitration, but that a voluntary reference to an arbitrator after a dispute has arisen does not seek to exclude, modify or restrict any right conferred by the Act; Adam Wood Group Pty Ltd v Procon Builders Pty Ltd [2012] VCC 2001 at [30] where Judge Ginnane (now Ginanne J) agreed that s 14 did not prohibit other forms of dispute resolution such as expert determination; Chen v Kevin McNamara & Son Pty Ltd [2012] VSCA 63 at [7]. 256. Victorian Civil and Administrative Tribunal Act 1998 (Vic) ss 97, 98. 257. Victorian Civil and Administrative Tribunal Act 1998 (Vic) ss 94, 95. 258. For other States and Territories see: Civil and Administrative Tribunal Act 2011(ACT); Small Claims Act (NT); Civil and Administrative Tribunal Act 2013 (NSW); Civil and Administrative Tribunal Act

2009 (Qld); Civil and Administrative Tribunal Act 2013 (SA); Magistrates Court (Civil Division) Act 1992 (Tas); State Administrative Tribunal Act 2004 (WA). 259. Domestic Building Contracts Act 1995 (Vic) ss 5, 6. 260. Victorian Civil and Administrative Tribunal Act 1998 (Vic) s 148. 261. For specialised building tribunals elsewhere see: Building Act (NT) ss 12–19; Home Building Act 1989 (NSW) s 83B and Building Legislation Amendment (Quality of Construction) Act 2002 (NSW); Civil and Administrative Tribunal Act 2009 (Qld) read with Building Act 1975 (Qld); Building Work Contractors Act 1995 (SA) Pts 4, 5; Resource Management and Planning Appeal Tribunal Act 1993 (Tas) s 5 read with Building Act 2000(Tas); State Administrative Tribunal Act 2004 (WA) read with Building Act 2011(WA). 262. Building Act 1993 (Vic) Pt 10. 263. . 264. Administrative Law Act 1978(Vic) ss 3, 4. For examples, see: Beech v Building Appeals Board [2005] VSC 231; Salter v Building Appeals Board [2013] VSC 279.

[page 445]

19 BUILDING OPERATIONS ISSUES RAISED Adjoining owners and occupiers 19.1 Building operations, including the need for access and potential incursion and impacts on neighbouring properties, often give rise to questions concerning the rights of adjoining owners or occupiers. Broadly speaking, issues of interference with or infringement upon rights to which an adjoining property owner or occupier is entitled, include: the mode or manner of the building operations — trespass and nuisance; and the effects of the structure once completed — interference with easements and rights of support.

TRESPASS Generally 19.2 The right of a person in possession, or entitled to possession, of premises, to exclude others from the premises is a fundamental common law right. Since at least the 17th century, the law has recognised that every unauthorised intrusion into a person’s property is a trespass, regardless of how small such intrusion may seem.1 Trespass is a tort which depends upon a direct and intentional act of entry, not upon damage.2 An owner, builder or contractor who causes any part of the building works, or items used during the course of them, to encroach upon another’s boundary, without permission, will likely be responsible to the owner of the adjoining land in an action for trespass.

Trespass or unauthorised entry may occur during building operations by acts such as: encroachments by walls, structures or other buildings [page 446] upon adjoining properties; projections from construction sites or works;3 underpinnings to stabilise structures;4 wrongfully setting foot on the land of another;5 causing any object to fall onto the property of another;6 tunnelling into the subsoil of the property of another;7 causing chemical or water trespass; or dumping items on the property of another.8 19.3 Actionable trespass may result in removal of the trespassing item, steps being taken to ensure it does not recur, reinstatement, damages and/or injunctive relief.9 In Bendal Pty Ltd v Mirvac Project Pty Ltd,10 the intrusion of scaffolding and screening into the plaintiff’s airspace was held to constitute trespass by application of the test stated by Hodgson J in LJP Investment Pty Ltd v Howard Chia Investments Pty Ltd:11 that is to say, it is not a question of whether the incursion interferes with the occupier’s actual use of the land at the time, but rather whether the interference is at a height and of such a nature that it may inhibit any ordinary uses of the land that the occupier saw fit to undertake. Bryson J said that the owner of freehold land has a perfectly legitimate interest to decide who will come on to it, who will build there, who will stay off it and on what terms the owner is prepared to give leave and licence to be there whether on payment of money or on no terms at all. Further, his Honour held that a landowner, whose title is not in issue, is prima facie entitled to an injunction to restrain trespass on his or her land whether or not the trespass harms him or her.12 Accordingly Bryson J granted an injunction enjoining trespass by the protrusion of the mesh screening, despite the fact [page 447] that the works were to be completed only five weeks afterwards and that the defendant as a result would be required to stop the works and at that late stage devise a new method that did not encroach.

19.4 Consent or licence is a defence to a claim in trespass.13 In one case the construction of the defendant’s apartments necessitated insertion of a number of rock anchors into common property. Windeyer J held that consent could be given orally or in writing but in either case, it would need to be the consent of the owners’ corporation, not simply one of the owners (in the strata scheme). As there was no consent to the entry, it was therefore unauthorised, and was thus a trespass.

Airspace 19.5 As noted in 19.3 in Bendal Pty Ltd v Mirvac Project Pty Ltd,14 it was held that the test to be applied to determine whether incursions into airspace amount to trespass or not is not whether an incursion actually interferes with the occupier’s use of land at the time, but whether it is of a nature and at a height which may interfere with any ordinary uses of the land which the occupier may see fit to undertake. 19.6 The invasion of a plaintiff’s airspace by the projection of a crane jib was held to be a trespass and not a mere nuisance in Graham v KD Morris & Sons Pty Ltd.15 The court considered the crane jib was both an unsightly feature of the plaintiff’s land, a cause of nervousness and apprehension to her and interfered with that part of the airspace above her land which was requisite for the proper use and enjoyment of that land.16 Due to a flagrant disregard of the plaintiff’s rights, Campbell J granted an immediate injunction. Referring to Woollerton & Wilson v Richard Costain Ltd17 Campbell J said that if he did not grant the injunction, he would be ‘condoning a clear breach by the defendant of the plaintiff’s proprietary rights’ and that ‘the time to seek permission and for negotiation was prior to the commencement of the work’. In LJP Investments Pty Ltd v Howard Chia Investments,18 in granting an injunction to require removal of scaffolding extending 1.5 metres into the plaintiff’s airspace, Hodgson J held that ‘a person should not be permitted to use the land of another person for commercial gain for itself simply because its use of the other person’s land causes no significant damage to that other person’s land’ and that where a defendant shows high-handed disregard for [page 448]

a plaintiff’s rights, and by breaching those rights secures a great advantage while causing little damage to the plaintiff, it is sometimes appropriate to deter such conduct by awarding damages bearing some relationship to the advantage sought to be gained by the defendant.19 In a second judgment in that case,20 Hodgson J cited with approval the comments of Smith LJ in Shelfer v City of London Electric Lighting Co21 that whilst a plaintiff may be entitled, prima facie, to an injunction, there may be cases where the injunction should be refused such as when damages are the more appropriate remedy or where the plaintiff is disentitled by conduct or delay; or an injunction may be refused if the injury to the plaintiff’s rights is minor and capable of being adequately compensated by a money payment, and if grant of the injunction would be oppressive. However, the defendant may not be protected on this basis, for example, if acting in reckless disregard of the plaintiff’s rights. The jurisdiction to order damages instead of granting an injunction is not to be exercised for instance so as ‘to enable the defendant to purchase from the plaintiff against his will his legal right to the easement’. In Lang Parade Pty Ltd v Peluso,22 a developer erected two cranes that encroached into the airspace of adjoining land. The developer asserted a statutory right under s 180 of the Property Law Act 1974 (Qld) and sought to negotiate a right of access on commercial terms. In rejecting the developer’s entreaties, the owner contended that the Act required a determination of ‘adequate’ compensation for any loss or disadvantage the owner may suffer as a result of the imposition of the obligation; such compensation to be determined by measuring all factors of benefit or detriment including any increase in the profitability of the venture brought about by savings enjoyed by carrying out the works by means of encroachment. In rejecting the owner’s argument, Douglas J referred to the rationale of Windeyer J in Goodwin v Yee Holdings Pty Ltd23 that: … what is to be compensated is the loss arising from the compulsory acquisition or imposition of the easement; that is the loss of property arising from the taking out of the freehold estate the incorporeal proprietary interest of the easement. It is not compensation to be equated with or apportioned out of the gain to the dominant owner as a result of the imposition.

He decided a more appealing approach was adopted in Jacobsen Holdings Ltd v Drexel24 namely, ‘the price that willing parties would arrive at in friendly negotiation’. Further, damages should be measured by the benefit received by the trespasser, that is, out of use of the land, and that the damages

[page 449] recoverable should be the price a reasonable person would pay for the right of user.25

Remedies for trespass 19.7 Remedies for trespass may include injunctive relief and/or damages26 characterised as compensatory, aggravated or exemplary damages27 and for claims such as restoration costs,28 reinstatement, and diminution in value.29 Assessment of the appropriate remedy will always focus upon what is reasonable.30

NUISANCE Nuisance generally 19.8 The law of nuisance is divided into two areas — private and public nuisance.31 Certain types of nuisances are also prohibited under statute, often replacing the common law in the area.32 Whether a nuisance is public or private, due to the widely varying impact of activities of people in commerce or otherwise, and the entitlement to use exclusively possessed land as the owner or occupier chooses, the types of interferences that may be classified as a nuisance are open ended.33 This can make defining a nuisance at law difficult.34 19.9 Private nuisance relates to unreasonable and substantial interference with rights connected with the use and/or enjoyment of land of a person, while public nuisance involves substantial and unreasonable interference with communal rights at large — rights of people generally — not necessarily related to land.35 Additionally, for an injury due to public nuisance to be actionable, it must be the direct, necessary, natural and immediate [page 450] consequence of the wrongful act.36 Public nuisance may also result in criminal

sanctions depending on the nature of the nuisance in question.37 However, as certain legal principles are shared by both public and private nuisance, the same interference constituting a private nuisance may also in some circumstances establish public nuisance.38

Private nuisance 19.10 The tort of nuisance involves fault of some kind.39 Such fault generally involves foreseeability but liability is not strict.40 The kind of fault required depends upon whether the defendant created the nuisance in the first place or adopted or continued the nuisance.41 Liability for nuisance (unless the conduct gives rise to a claim based on strict liability)42 will not be established unless it can be shown the defendant acted recklessly or either failed to take action or took action knowing the likely impact upon the enjoyment by the plaintiff of its property.43 19.11 To constitute a nuisance, the interference must be unreasonable, having regard to a variety of factors including: the nature and extent of the harm or interference; the social or public interest value in the defendant’s activity; the peculiar sensitivity of the user or use of the claimant’s land; the nature of established uses in the locality (e.g. residential, industrial, rural); whether all reasonable precautions were taken to minimise any interference; and the type of damage suffered. As such, private nuisance is a substantial and unreasonable interference with the private right to use and enjoy land. To establish the cause of action, the plaintiff must demonstrate the holding of title to prosecute in respect of the particular nuisance, and that the defendant has interfered with its property right. Interference must be both substantial and unreasonable.44 The interference must result in physical or material damage, and/or interference with the use and enjoyment of the land.45 [page 451]

Creation of a nuisance

19.12 If the defendant deliberately or recklessly uses land in a way which the defendant knows will cause harm to a neighbour, and that harm is an unreasonable infringement of the neighbour’s interest in property, and thus an unreasonable use by the defendant, the defendant will be held liable for the foreseeable consequences. This covers all those cases of obvious or ‘patent’ nuisances, and they are peculiarly the cases which call for prevention or prohibition by injunction. It is no defence the defendant believed in an entitlement to do as was done or took all possible steps to prevent the action causing a nuisance. Generally it may be said that if the defendant knows or ought to know that conduct may cause harm to a neighbour and such harm is reasonably foreseeable, then the defendant is under a duty of care to prevent such harm by not engaging in such conduct. It should be noted that the formerly wellknown rule in Rylands v Fletcher has been subsumed under the law of negligence following the decision in Burnie Port Authority v General Jones Pty Ltd.46 Cases where a defendant has created a nuisance include:47 encroaching onto a neighbour’s land, short of trespass; causing physical damage to a neighbour’s land or building works or vegetation on it; and interfering with a neighbour’s comfort and convenient enjoyment of land. 19.13 If a defendant owner deliberately or recklessly uses land in such a way that it is known it will cause harm to a neighbour, and such harm is an unreasonable interference with the neighbour’s interest, and thus an unreasonable use by the defendant, the defendant generally will be liable for all the foreseeable consequences. Knowledge may be an issue in the application of the law of nuisance. It is necessary to show to the requisite degree not whether a risk is far-fetched or fanciful, but whether there is evidence of facts, matters or circumstances from which the defendant ought to have known of the nuisance.48 The question will then be whether, at the time the action giving rise to the consequences complained of was undertaken, the defendant had actual or constructive knowledge of the consequences of that action which consequences must be shown to be likely.49

Adopting or continuing a nuisance 19.14 Where a defendant continues with or adopts a nuisance, different criteria

apply before liability is imposed. An occupier of land ‘continues’ a nuisance or a potential nuisance if, with actual or constructive knowledge of its existence, such occupier fails, within a reasonable period of time, to [page 452] take reasonable measures to bring that nuisance to an end.50 An occupier of land who knows or ought to know of a nuisance, and that the possibility of danger occurring in consequence is a real risk, must take such positive action as a reasonable person would consider necessary in that occupier’s position to eliminate the nuisance.51 Mere encroachment into a neighbour’s land is not sufficient to complete an action for nuisance. Special damage must be suffered by the neighbour as a result of the encroachment to obtain a remedy. The cause of action for nuisance will ordinarily accrue on proof of damage occurring and damage will be the last element completing the cause of action.52 19.15 An occupier ‘adopts’ a nuisance should the occupier make use of the structure, building or object the subject of or that constitutes the nuisance.53 The duty on the occupier to take steps to eliminate the risk of reasonably foreseeable damage from the nuisance arises out of its knowledge of the nuisance.54 The defendant will be liable if, when the nuisance arose, it did not take any reasonable steps to bring it to an end upon becoming aware, or when the defendant ought to have become aware, of the nuisance, and damage results.55

Interference resulting in material damage to land 19.16 Where an interference results in material damage to the land, such as encroachment of a building onto the land, or such as physical damage to other structures on the land or water entering and damaging the land, the interference is taken as unlawful. In such cases, a plaintiff pursuing an action in nuisance does not need to establish that the defendant’s acts or the defendant’s use were unreasonable.56

Examples of this kind of nuisance, often arising out of building operations, include: a drain becoming blocked or laying a concrete driveway [page 453] causing water to overflow onto a neighbour’s land;57 allowing buildings to become dilapidated so that they, or parts of them, fall onto a neighbour’s land;58 dust;59 vibrations; water and/or blocking a watercourse (resulting in flooding);60 air pollution61 — smoke, odours62 and fumes,63 gas; noise;64 trees and/or vegetation;65 escaping objects;66 swimming pool excavations causing dampness and cracking on an adjoining property.67 19.17 Where nuisance is based upon physical damage, there will be a positive duty to take action when a defendant has, or ought to have had, knowledge of the existence of a defect in land or something on it and also of the danger the defect thereby created. The scope of the duty, however, involves doing only that which is reasonable in the circumstances so as to prevent or minimise known risk of damage or injury to a neighbour.

Interference with amenity or personal enjoyment of land 19.18 Interference with amenity or enjoyment of land is actionable only if the plaintiff is able to demonstrate the interference is unreasonable and substantial. Substantial68 interference with a plaintiff’s amenity or enjoyment of land occurs where the inconvenience caused by the defendant materially interferes with the ordinary physical comfort of human existence according to reasonable standards within the general community,69 or where interference affects the ability of the person to enjoy the normal comforts and rights associated with possession of land.70 The interference does not need to be continuing or recurrent but causation must be established.71 A useful test is [page 454]

what is reasonable according to the ordinary uses of people living in society, or a particular society.72 Nuisances of this kind generally arise from something coming from the defendant’s land73 such as noise,74 vibration,75 dust,76 sediment from soil erosion,77 noxious smuts and pollution,78 smoke,79 and offensive odours and stenches.80 19.19 Courts will look to balance the right of the plaintiff to enjoyment of property with the right of the defendant to undertake the activity in question. In assessing whether the activity is unreasonable or not, a court may consider factors such as severity and type or nature of activity,81 duration and time,82 location,83 motive,84 and precautions taken by the defendant to minimise any interference having regard to practicality and cost in all the circumstances.85

Noise, vibration and dust 19.20 Controlling dust and other emissions during building operations is a legal obligation, particularly should there be the possibility of asbestos fibres. In addition to the common law of nuisance, environmental protection and workplace health and safety legislation will usually regulate such emissions, setting strict controls, and setting penalties for breach. The approval processes for the majority of Australian construction and building works also include provisions for addressing and mitigating the potential for such emissions. Primarily to reduce environmental risks, these planning and control provisions also specify construction practices that must be implemented [page 455] where activities may result in water, air or noise pollution that may annoy or affect the health or amenity of neighbouring landowners or communities. 19.21 Difficult problems of the balancing of interests may arise, for example, in relation to the use of jack hammers or concrete saws to demolish a substantial concrete building which is surrounded by office buildings. Usually what a plaintiff wants is not damages as such but peace and quiet to be maintained, and this means an injunction. An interlocutory injunction will not be granted,

however, except on the usual undertaking as to damages — that is, the undertaking of the plaintiff to abide by any order the court may make as to damages should it subsequently find the defendant has sustained loss by reason of the injunction being granted which the plaintiff ought to pay. The possible amount of the liability required to be so assumed deters many aggrieved persons from seeking interlocutory relief, with the result that in many cases the occupier adjoining the works, having made a complaint, takes no legal proceedings. Many of those who have suffered from the noise of jack hammers, compressors, drill rigs, concrete vibrators and the like must have wondered whether an ordinary contractor takes any steps to minimise noise, except under the compulsion of legal process. It is thought that in many, although by no means all, cases, relatively inexpensive means of noise abatement, such as the construction of a simple housing, are available to the contractor. 19.22 In Harrison v Southwark and Vauxhall Water Co86 Vaughan Williams J said that no nuisance is committed if all reasonable care and skill is used in the work of demolition, even though the resulting noise and dust would be a nuisance if they were not created in the course of demolition, for the law takes into consideration the object and duration of the alleged nuisance. This case was distinguished in Harris v Carnegie’s Pty Ltd87 on the ground that the dust complained of had caused property damage so that the defendant was liable even though all reasonable precautions had been taken. In Wherry v K B Hutcherson Pty Ltd,88 Hodgson J accepted as correct that noise caused by demolition and rebuilding will not be actionable if the operations are being reasonably carried on and all reasonable and proper steps are taken to ensure that no undue inconvenience is caused to neighbours. He also accepted that for a nuisance of this kind to be actionable, it must be a real interference with the comfort or convenience of living according to the standard of the average person.89 [page 456] A developer may acquire several buildings with a view to demolishing them and erecting a new building on site. The buildings may be occupied by tenants, with whom the developer seeks to come to terms on the question of the surrender of their leases. Care must be taken to ensure compliance with

obligations under any applicable residential tenancies legislation. It may happen that the developer by negotiation is able to obtain possession of all but one of several buildings and then embarks upon the demolition of those buildings, leaving the other building, occupied by the tenant whose price is too high, untouched for the time being. That tenant, either by way of ventilating a genuine grievance in relation to noise, dust or vibration, or in an attempt to attract a higher bid for the balance of the term, may complain that the building operations constitute a nuisance or are a breach of a covenant for quiet enjoyment. Prior to Kalmac Property Consultants Ltd v Delicious Foods Ltd90 there does not appear to be any reported case in which demolition operations have been held to be a breach of the covenant for quiet enjoyment. In Matania v National Provincial Bank Ltd91 a claim for breach of the covenant failed on the ground that the acts done by the person claiming under the landlord were not lawful and were not done with the consent of the landlord, the law being that the covenant for quiet enjoyment does not extend to the unlawful acts of persons claiming under the landlord unless the landlord has consented to them. Had it not been for this defence, it would seem the Court of Appeal would have held that the acts were a breach of the covenant. In Harris v Carnegie’s Pty Ltd,92 the plaintiff was the lessee of a handbag shop in part of a building owned by the defendant. The defendant was demolishing and reconstructing the building in part. A claim in nuisance with regard to dust succeeded, but a claim for breach of the covenant of quiet enjoyment failed.93 Scaffolding erected outside a shop occupied by a tenant in such a way as to obstruct to some extent access to the shop and its window may be a breach of the covenant for quiet enjoyment as was held in Owen v Gadd.94 In Kalmac Property Consultants Ltd v Delicious Foods Ltd95 partial demolition of a building of which the demised shop formed part was held to be a [page 457] breach of an implied covenant that the entire building would continue to exist throughout the term of the lease, as well as of a covenant for quiet enjoyment. 19.23 In Aussie Traveller Pty Ltd v Marklea Pty Ltd,96 the Queensland Court of Appeal upheld the decision at first instance where a breach of the covenant was

found to exist by virtue of the activities of another tenant causing dust and noise which substantially interfered with the plaintiff’s business. In doing so, it rejected a suggestion to be found in some cases that the interference must be such as to amount to a ‘practical frustration’ of the purposes of the lease. It held also that there was no need for there to be authorisation or active participation on the part of the lessor. The case failed to distinguish between breach of the covenant for quiet enjoyment and breach of the implied term not to derogate from the grant, if there be any real distinction between the two which seems doubtful in many cases. In Tenth Vandy Pty Ltd v Natwest Markets Australia Ltd97 a claim by a lessee under a commercial lease arising out of internal and external refurbishment works adversely affecting customer flows was rejected as ‘relatively short lived’ and nothing to do with its massive decline in financial performance.

Remedies 19.24 A plaintiff relying upon a substantial interference to ground a claim in nuisance does not need to prove that the alleged nuisance caused physical damage to the property in order to prove an unreasonable and substantial inference in property rights and make out its cause of action in nuisance.98 Even when there is no physical damage to property, the interference may cause annoyance, inconvenience and discomfort to the occupier in its enjoyment of the property. However, a failure to prove actual damage may result in an award of only nominal damages.99 Remedies available to a plaintiff include injunctive relief, damages and abatement. 19.25 Courts have authority to grant a wide variety of injunctions to restrain private nuisances.100 An interlocutory or permanent injunction may [page 458] be granted to restrain an act that constitutes private nuisance, applying the ordinary principles involved with a grant of each.101 Injunctions also may be granted for actual or possible nuisance.102 A mandatory injunction may require

removal of the nuisance where there is a very strong chance that damage will ensue at a future time due to the interference created by the defendant103 but generally speaking mandatory injunctions are not readily granted by courts. Once the plaintiff has established a legal right and wrongful or threatened interference with that right, an injunction will usually be granted. There is generally no condition precedent that damage be reasonably foreseeable.104 However, an injunction for private nuisance may be refused where, for example, damages are an adequate remedy instead;105 where the defendant has delayed or could be considered to have acquiesced to the apparent interference;106 or where the defendant has abated the nuisance to avoid future interference or has agreed to do so.107

Damages 19.26 Damages108 alone may be an appropriate remedy for a tort of nuisance and may include for property damage or diminution in value resulting from the nuisance or consequential loss.109 Aggravated and exemplary damages are also potentially available for nuisance.110 Damages may be awarded for loss of amenity; that is for use and enjoyment of land.111 The usual requirements for claims in tort of reasonable foreseeability,112 causation and remoteness of damage apply to damages in nuisance. However, the defendant’s act does not need to be the sole cause. It is sufficient if it is a cause.113 [page 459] These damages are assessed according to the degree of annoyance or discomfort caused by the nuisance. A plaintiff however may not recover damages for mere inconvenience, or prior to actual injury to land, until actual damage has been caused. While damages may be awarded to a plaintiff for the annoyance and loss of amenity associated with the nuisance, the plaintiff may not recover damages for reduction in the value of its land in the absence of material damage to that land. 114

19.27 Generally, damages may be awarded instead of an injunction115 where for instance granting an injunction would be oppressive to the defendant; or where

the injury is small, for it may be assessed and sufficiently compensated by a reasonable payment; or where equitable damages would be more appropriate instead of a quia timet injunction. As a complement or alternative to either injunction or damages, a plaintiff may take reasonable steps on its own — a ‘self-help’ remedy — to abate the nuisance, although the cost of doing so, by going onto the land of another, is generally not recoverable as damages for the nuisance.116 Also there are certain inherent risks involved in taking such a possibly risky course.

EASEMENTS Easement formation 19.28 It is generally accepted that there are four essential requirements for a valid easement:117 1.

There must be a dominant and a servient tenement. In Australia, unless statute provides otherwise, an easement may not exist ‘in gross’. It must always be annexed to a dominant tenement. Whether a right is annexed to land is determined by construing the instrument that created the right.

2.

The easement must accommodate the dominant tenement, that is, the easement must benefit the dominant tenement and be connected with its enjoyment. The crucial matter in determining whether the easement accommodates the dominant tenement is whether it has a necessary connection with the land and whether it is reasonably necessary for its better enjoyment as a parcel of land. The existence of [page 460] this accommodation is a question of fact and depends largely upon the nature of the land and the right claimed. Although the easement must accommodate the dominant tenement, it may also benefit others with no proprietary interest in the dominant tenement.

3. 4.

The same person must not own and occupy both dominant and servient tenements. However, this is modified in some jurisdictions by statute.118 The right claimed as an easement must be capable of forming the subject matter of a grant. Accordingly, easements may not be granted for such things as free flow of air, protection from television interference, or to protect privacy or a view.

19.29 In Jea Holdings (Aust) Pty Ltd v Registrar-General of NSW,119 Windeyer AJ held that an easement for car parking could be validly created so long as it did not deprive the owner of the burdened land of the reasonable use of that land parcel in its entirety. He added that to be capable of forming the subject matter of the grant, the rights granted by the easement: must not be too wide or vague; must not amount to joint occupation of the land between the easement holder and the landowner; must not substantially deprive the landowner of legal possession of its land; and must not constitute mere rights of recreation.

Interference with easements 19.30 Before commencing building operations, especially in the city, it is usually essential that owners or contractors consider whether the works will be likely to interfere with any easements existing in favour of adjoining land. Commonly encountered easements that require attention prior to commencement or even design of works include easements of light, easements of air, rights of support and underpinning. Additionally, access to sites by workers, for delivery and removal of machinery and materials, and access for vehicles, can present issues in relation to easements. 19.31 As the grant of an easement entitles only reasonable enjoyment of the right conferred, which is quite different to that enjoyed by an owner in fee simple, interference with an easement is generally not actionable unless it is substantial or material.120 The servient owner retains all the rights of an owner except those conferred on the dominant owner by the easement. Therefore, some conduct may not automatically result in actionable interference, such as: building to the very edge of the site of an easement; building in the airspace above the site of an easement;

[page 461] fencing a side of the right of way.121 However, while the servient owner is entitled to fence the right of way to secure its property along the whole boundary, it may not interfere with a reasonable user of the right of way by the dominant owner by gates that meet the dominant owner’s requirements; erecting a gate across the way;122 or fixing a locked gate where the dominant owner also is supplied with the key.123 During construction and building operations, workers often require access and/or parking close to the work site. In Trewin v Felton,124 Brereton J said: … in the absence of an implied term, a right of carriageway which authorises passing and repassing to and from the dominant property, does not authorise parking on the site of the easement, except to the extent that it is necessarily part of passing and repassing to and from the dominant property, for example, to halt for a brief moment to put down or pick up a passenger, as that was de minimis, but no more.

Easements of light 19.32 In Australia, easements of light may only be acquired by an express or implied grant.125 Where an easement is created by an express grant, the extent of the use will depend upon construction of the terms of the grant.126 Such an easement may be granted for an existing building and structures yet to be built.127 The right to light was judicially accepted in Australia in the early 1900s.128 However, not all interferences with an easement of light will necessarily constitute a wrongful interference.129 The correct approach to determining the question of how much interference will result in a breach involves consideration of how much light remains after an obstruction, rather than [page 462] the amount of light of which the dominant owner is deprived.130 A generally

accepted test is what is required for the ordinary purposes of inhabitancy or business of the tenement according to ordinary notions.131 19.33 Under general law, a land owner has no right to either natural or artificial light in the absence of an easement of light as granted or acquired. Such easement of light gives the owner or occupier of land the right to prevent the owner or occupier of an adjacent servient tenement from building or doing anything upon that tenement that could or would obscure the light to the dominant land. Earlier on, in addition to easements of light created by express grant, easements arose by virtue of the doctrine of lost modern grant, even though it was held that the land be Torrens title under the operation of the Transfer of Land Act 1958 (Vic).132 By the doctrine of lost modern grant, the ‘owner of the dominant tenement was presumed to have made or to have the benefit of a fictitious deed binding the owner of the subservient tenement and to have enjoyed that benefit for a continuous period of 20 years’.133 In Hamilton v Joyce134 the doctrine of lost modern grant was held to be part of the law of New South Wales. However, various states and territories have prohibited acquisition of an easement of light through the doctrine of lost modern grant after certain dates (between 1902 and 1911).135 For example, the effect of the Victorian provision is that an easement of light by long user cannot exist unless the building in respect of which it is claimed was in existence in October 1887, and that after 7 October 1907, no right to the access or the use of light to or for any building is capable of coming into existence by reason only of the enjoyment of such access or use for any period or by reason of any presumption of a lost grant based upon such enjoyment. In Nguyen & Le v Davies136 the South Australian District Court rejected a claim for an easement of light in accordance with s 22 of the Law of Property Act 1936 (SA). The court further held that while an easement of necessity may be created as a result of certain rights, an easement of light may not be claimed as of necessity because it had been held that a room could always be used without such light.137 [page 463] 19.34 Rights associated with easements for light may be difficult to interpret.

However, it has been held that the right to uninterrupted access and enjoyment of light and air in the doors and windows of a building is a valid and enforceable easement,138 and that the amount of light given under such a right will be that which is necessary for the usual occupation of the tenement, whether it be residential or business in nature, and which is in accordance with ordinary notions.139 In Commonwealth v Registrar of Titles for Victoria140 Gavan Duffy and Rich JJ continued: An easement is appurtenant to and for the benefit of the dominant tenement as a whole, and not to or for the benefit of any particular building. The abandonment by the owner of the servient tenement of what is really his right to build as and when he chooses on his own land, but what for convenience we may call his right to obstruct the passage of light and air across his land, may be either total or partial. The part abandoned here is so much of the whole as is inconsistent with a right in the owner of the dominant tenement to the uninterrupted access and enjoyment of light and air to the doors and windows of any buildings already erected or thereafter to be erected on such tenement.

Extinguishment by unity of seisin 19.35 Traditionally, an easement is extinguished by unity of seisin (or ‘estates’ or ‘possession’).141 Unity of seisin means the acquisition of both tenements for a fee simple absolute142 and the general rule is that a person cannot have an easement over such person’s own land.143 If the owner of the two tenements does not have an estate in fee simple in each of them, the result is not extinguishment but suspension of the easement for so long as the unity of ownership continues.144 Further, in order for extinguishment to take place there must be not only unity of ownership but also unity of possession. In Richardson v Graham145 the owner in fee simple of land subject to an easement of light acquired the fee simple in the dominant land. The dominant land was in the possession of a tenant and it was held by the Court of Appeal that the easement had not been extinguished. While the general rule is clear, Needham J in Margil Pty Ltd v Stegul Pastoral Pty Ltd146 held that unity of ownership or possession does not cause a right of way or other easement to disappear where that right or other easement [page 464] is necessary to the use of the land which previously had the benefit of the easement. But as he also went on to hold, even if unity of ownership did cause

destruction of a right of way or other easement which is noted on the certificate of title of the dominant tenement, a subsequent transfer of the former dominant tenement may revive such right or other easement by reference to such right or other easement.147 However, extinguishment by unity of estates has been abolished in most Australian States by legislation.148 19.36 The operation of the Torrens system also may effectively revive easements previously extinguished at common law by unity of estates. Registration creates a statutory title to land, which can be different to the title of the previous registered owner. For instance, referring to an easement during transfer may revive that easement.149

Abandonment 19.37 An easement may be abandoned. The demolition of one building and its replacement by another may well result in the abandonment of an easement of light.150 But even if in such a case there is no abandonment, it may be impossible for the owner of the dominant tenement to prove an interference will be caused by the building to be erected on the servient land because of the difficulty of establishing the extent of correspondence or lack thereof between windows of the old building and windows of the new building.151 19.38 To show abandonment of an easement at common law, the servient owner has the burden of proving that the easement has been abandoned.152 To determine abandonment, courts look at the intention of the dominant owner.153 The dominant owner must have demonstrated a fixed intention never at any time thereafter to assert the right or to attempt to transmit it to anyone else.154 For this to occur, the dominant owner must have knowledge of the easement.155 Intention to abandon is very difficult to demonstrate. At common law, non-use alone will not sufficiently prove abandonment. [page 465] In States other than Victoria,156 statutory mechanisms exist for removal or variation of easements on the basis of abandonment, enabling easier proof of

abandonment in instances of non-use, generally for periods of at least 20 years prior. In theVictorian decision of Bookville Pty Ltd v O’Loghlen,157 Kaye J was not prepared to find that abandonment had extinguished an easement despite the fact the owner of the dominant tenement had built a garage completely blocking the carriageway. His Honour found there was no abandonment because the owner of the dominant tenement could have constructed a door in the northern wall of the garage permitting access to the laneway. Accordingly, the intention to never again use the easement was not exhibited. He indicated his view that, in Victoria, based on s 73 of the Transfer of Land Act 1958 (Vic), indefeasibility was superior to the common law principles of abandonment. As the easement remained registered on the titles to both servient and dominant land, it was immune from destruction under the common law principle of abandonment.

What constitutes infringement? 19.39 In the case of an easement of light created by long user (where or if still possible), the authorities establish that the right is not a right to receive the accustomed amount of light, but merely a right to receive that amount of light which is necessary for the ordinary comfortable enjoyment of the premises. In the case of an easement of light created by express grant, the parties may in general formulate the right in any way they please.158 There is no reason in theory why the parties should not agree, on the one hand, that the dominant tenement should continue to receive the accustomed amount of light, or, on the other hand, that the dominant tenement should continue to receive only such amount of light as is necessary for the ordinary comfortable enjoyment of the premises. It must in each case be a matter of the construction of the instrument. To determine what acts amount to disturbance or infringement of an easement of light by express grant, the content of the right must be examined in detail. [page 466] In Perpetual Trustee Company Ltd v Westfield Management Ltd,159 the NSW Court of Appeal considered a statement in Gallagher v Rainbow160 where McHugh J in the High Court had said that ‘the court will not construe the grant in a way

that would enable an easement to be used in a manner that goes beyond the use contemplated by the parties at the time of the grant.’ Hodgson JA was of the view that that statement needed to be applied with care. Instead, he thought there was but one question: what use does the grant authorise? He added that no separate investigation into the use contemplated by the parties was either necessary or permissible; however, regard could be had to surrounding circumstances, including the physical circumstances of the dominant and servient tenements and the use actually being made of them at the time of the grant. However, on appeal,161 the High Court held that it was not possible to use extrinsic material to interpret the meaning of the easement. The court considered that the use of the phrase ‘go, pass, and repass’ indicated that the purpose of the easement was simply to access the dominant tenement. The easement was not designed to allow access by the dominant owner to another adjoining property. If the easement was intended to permit access to a more remote property, the words ‘and across’ would have been added to the easement. 19.40 In Markos v Autor,162 Austin J concluded that it was necessary to construe an easement having regard to the language of the instrument creating it and by reference to surrounding circumstances at the time of the grant.163 He said that the subjective purpose and/or contemplation of the parties to the grant were not matters to be addressed other than to the extent that they are reflected in the terms of the grant, and the admissible surrounding circumstances. In Burke v Frasers Lorne Pty Ltd,164 a right of way had been asphalted for many years. As part of a planning condition to reserve at least 50 per cent of the land for deep soil landscaping, the servient owner replaced the asphalt with reinforced turf. The reinforced turf still permitted access by the dominant owner to its property but the surface was inferior to asphalt. The court held that the dominant owner had been entitled to a driveway, so long as it was not excessive, but that the servient owner could not substitute that for an inferior form of access, even though reasonable access was still available. The result in this case could with respect appear questionable to some. [page 467] In Sertari Pty Ltd v Nirimba Developments Pty Ltd,165 a right of way providing

access to a 550 acre former airfield was expressed widely as ‘full and free right to every person with an estate or interest in the dominant tenement to go, pass along and re-pass at all times … with or without vehicles … both to and from the said dominant tenement or any part thereof.’ The terms of the easement also specified the cost of maintaining the easement lay with the owner of the servient land. The dominant owner wished to develop its land to include 236 unit residences and 351 parking spaces, which would substantially increase not only traffic on the servient land but also associated maintenance costs. The servient owner refused to consent to the development application for upgrade to the access, and objected to the increased use on the basis that both were inconsistent with the easement’s purposes. The NSW Court of Appeal rejected the servient owner’s case and found that its refusal to consent to the development application obstructed the dominant owner’s exercise of rights under the easement, which was just as much an infringement as physical obstruction. The court noted that the servient owner must have consented to the development application which the council required to execute roadworks to carry additional traffic. Further, in accordance with the High Court’s decision in Westfield Management Ltd v Perpetual Trustee Company Ltd,166 the court held that extrinsic material, such as a planner’s report or the terms of development consent, were not permitted to be used to read down the width of a wide, general grant of easement, and that in construing an easement, the court will be limited to ‘the material in the folio identifiers, the registered instrument, the deposited plans, and the physical characteristics of the tenements’. In Mantec Thoroughbreds Pty Ltd v Batur,167 the court held that surrounding circumstances, or the presumed intentions of the parties at the time an easement was created, may be considered relevant when determining the scope of an easement. The dominant owner sought a declaration that there existed a right to make improvements to the right of way for all forms of farm vehicles, trucks and large machinery to pass over the easement. The Victorian Supreme Court held however that, while the dominant owner did have the right to undertake such improvements, such right was not unlimited. Any improvements or works would be limited to what would be reasonably necessary for the effective and reasonable enjoyment of the easement. An improvement could not cause injury to the servient tenement. Further, it held that the right to deviate only arises when some form of obstruction is created by the servient owner. The dominant owner usually does not have a right of deviation onto another part of the servient tenement.

[page 468]

Implied easements and the rule in Wheeldon v Burrows 19.41 Where there is no express grant of a right to light it may be necessary to consider whether there has been an implied grant or reservation under the rule in Wheeldon v Burrows: On the grant by the owner of a tenement of part of that tenement as it is then used and enjoyed, there will pass to the grantee all those continuous and apparent easements … or, in other words, all those easements which are necessary to the reasonable enjoyment of the property granted, and which have been and are at the time of the grant used by the owners of the entirety for the benefit of the part granted. The second proposition is that, if the grantor intends to reserve any right over the tenement granted, it is his duty to reserve it expressly in the grant. Those are the general rules governing case of this kind, but the second of those rules is subject to certain exceptions.168

19.42 Generally speaking, if a vendor wishes to create over the property sold some right for the benefit of the property retained, the vendor must do so expressly and this was pointed out by McHugh JA in Kebewar Pty Ltd v Harkin.169 An easement will be implied in favour of the property retained only where it can be inferred that both parties intended that the easement should be created, and this intention will not be inferred merely because the easement is necessary to the reasonable enjoyment of the property granted.170 The vendor must show that the facts are not reasonably consistent with any view other than one that a common intention to create the right existed.171 A vendor selling part of the land, knowing that the purchaser intends to erect a building upon that land, impliedly undertakes not to use adjoining land owned by the vendor so as to injure or interfere with the building.172

Implied easements supplementing a formal grant of land 19.43 Several forms of implied easement may supplement the terms of a formal grant of land where one or more of the parties have either not expressly considered the need for an easement or have assumed that it existed. Historically, easements have been inferred or implied: from the terms of conveyance or

lease;173 from the description of the land, usually related to rights of way;174 when a particular use of the land was intended [page 469] by the parties but not specifically stated (or reserved) in the grant;175 under the doctrine of non-derogation of the grant, such as in the rule in Wheeldon v Burrows,176 where a grantee acquires all the quasi-easements (continuous and apparent) that were reasonably necessary and existing at the time of the severance.177

Easements of necessity 19.44 One of the recognised exceptions to the general rule that the grantor must expressly reserve an easement is the case of easements of necessity Generally speaking, easements of necessity arise in cases where access to a property is a problem as, for instance, where it is landlocked.178 An easement of light is not an easement of necessity for the purposes of the rule that an easement of necessity will be impliedly reserved in favour of land retained.179 An easement of support may, but will not necessarily, be regarded as an easement of necessity.180 In Shubrook v Tufnell181 an easement of support was implied in favour of houses retained over a private road granted so as to render unlawful excavations on the private road causing the houses to be let down. The Divisional Court held that the easement was one of necessity and accordingly was not required to be expressly reserved. In New South Wales, for example, if an easement is reasonably necessary for the effective use or development of the land to be benefited by the easement, the Supreme Court may make an order imposing an easement over land182 upon consideration of whether: the use of the benefited land will not be inconsistent with public interest; the owner of the burdened land, and those with registered interests in the burdened land, can be adequately compensated for any loss or other disadvantage from the imposition of the easement; and, the applicant has

made all reasonable attempts, without success, to obtain the easement or an easement having the same effect. 19.45 The easement does not need to be absolutely necessary to satisfy the test of ‘reasonable necessity’. However, the easement must be more than merely desirable, preferable to other alternatives, or convenient. The court will consider all relevant matters in deciding the reasonable necessity, including [page 470] the impact upon the burdened land. In Samy Saad v City of Canterbury,183 a right of carriageway over part of a reserve/community land was imposed so as to facilitate construction of a house on the applicant’s land. Having regard to the fact that the applicant’s land was effectively landlocked; the impossibility of developing the land in accordance with its zoning unless and until adequate access was provided for cars and construction vehicles; and the minimal impact of the right of carriageway on the public’s use and enjoyment, the court held that the right of carriageway was reasonably necessary for the use or development of the applicant’s land. In Victoria, s 12(2) of the Subdivision Act 1988 (Vic) provides for implication into certain plans of subdivision, for the benefit of each lot and any common property, ‘all easements and rights necessary to provide’: support, shelter or protection; passage or provision of water, sewerage, drainage, gas, electricity, garbage, air or any other service of whatever nature (including telephone, radio, television and data transmission); rights of way; full, free and uninterrupted access to and use of light for windows, doors or other openings; and, maintenance of overhanging eaves. 19.46 Implied and prescriptive subdivisional easements may exist and bind unsuspecting purchasers of the servient land, particularly where the necessity for them can be implied from circumstances that exist from time to time.184 Purchasers cannot be expected to anticipate easements that may only become necessary as a result of future development of the dominant land that was not contemplated in the plan. For example, in Gordon v Body Corporate Strata Plan 3023,185 an easement was implied under s 12(2) of the Subdivision Act 1988 (Vic) for a building that was being extended 32 years after the initial subdivision.

In some jurisdictions, courts have statutory power to create or vary easements for purposes that may enable building operations or development.186 Courts may also have power to make an order permitting entry to adjoining premises to repair or demolish buildings on the applicant’s land.187

Easement of air 19.47 An easement of air may be acquired by express grant.188 This type of easement would generally be required to allow access of light or air across the servient lot to particular parts of the dominant lot. [page 471] 19.48 Formerly, the easement could also be acquired under the doctrine of the lost modern grant.189 By s 196 of the Property Law Act 1958 (Vic), since 30 October 1924, no grant of an easement is presumed from evidence only of user or enjoyment of the access of air to a defined aperture on the dominant tenement.190 Since 20 years’ uninterrupted enjoyment is required by the doctrine of lost modern grant,191 an easement of air by long user will exist only if a building erected on the dominant tenement had enjoyed air uninterruptedly for a period of 20 years prior to 30 October 1924. While an express grant of an easement of air may be general,192 an easement acquired by long user (where this is still possible) must relate to air flowing in a defined channel.193

RIGHTS OF SUPPORT 19.49 It was observed in Blewman v Wilkinson194 that it ‘has long been accepted that a landowner has a right to enjoy his own land in its natural state’. Owners of land have a natural right to support from the neighbour’s land so that the owner’s land is maintained at its natural level. These natural rights exist in law and do not require any further action to acquire.195 The natural right to support of land is breached when support is withdrawn or dramatically altered by one land owner, and damage results to an adjoining land owner. Legislation also has been

implemented in some Australian states and territories to provide for and/or extend this right of support.196

Nature of right 19.50 As noted in 19.49 it was observed in Blewman v Wilkinson197 that it ‘has long been accepted that a landowner has a right to enjoy his own land in its natural state’. The Lord Chancellor in Charles Dalton v Henry [page 472] Angus & Co198 said that in ‘the natural state of land one part of it receives support from another, upper from lower strata and soil from adjacent soil’. There is a natural right to the support of land by land and withdrawal of that support is actionable even though there be no negligence.199 More recently, in SJ Weir Ltd v Bijok,200 Blue J in the South Australian Full Court, citing the High Court remarks in Jemena Gas Networks (NSW) Ltd v Mine Subsidence Board,201 summarised the common law in relation to the right of support by adjoining land, and the tort of nuisance in respect of the removal of such support: 1.

an owner of land has a right to the support of that land in its natural state from the adjacent and subjacent land of neighbouring owners;

2.

this right is a natural incident of the ownership of the land itself;

3.

an interference by an adjoining land owner with the right of support only occurs, and the tort of nuisance is only committed, at the point at which the owner’s land subsides, as opposed to the point at which the adjoining land owner excavates or takes away the support;

4.

there is no natural right of support for structures (as distinct from the natural right of support for land in its natural state);

5.

a right of support for structures can be acquired by the grant of an easement, or at common law (subject to relevant legislation) by prescription through the structure having relied upon such support uninterruptedly for at least 20 years;

6.

such a right of support of structures is in the nature of an easement, as opposed to a natural incident of the land itself (and may be governed by relevant legislation);

7.

once a right of support of structures has been acquired, its incidents are the same as the right of support of natural land;

8.

damages for injury to a structure flowing from subsidence caused by a withdrawal of support (as distinct from the additional weight of structures on the land) are recoverable; and

9.

conversely, if the support is withdrawn and the land would not have subsided but for the weight of the structures thereon, there is no interference with the right of support of the land. [page 473]

Support of buildings 19.51 As pointed out by Giles J in Pantalone v Alaouie202 although there is a natural right in an owner of land to have such land supported by the land of an adjoining owner, ‘there is no natural right in that owner to have the additional weight of buildings on his land supported by the land of the adjoining owner’. This rule has been criticised by as being ‘inappropriate for modern conditions’.203 However, in the absence of the High Court ruling to the contrary, it has continued to form part of Australian law.204 Legislation in a number of States attaches to land an obligation, in terms, not to do anything on or below it that will withdraw support from any other land or from any building, structure or erection on or below that other land.205 Although there is a natural right to the support of land in its unimproved state, which does not depend on the creation of an easement, an easement for the support of buildings from adjoining land must be created in a manner recognised by law such as by grant, implication or prescription. For instance, in Victoria, s 12(2)(c) of the Subdivision Act 1988 (Vic) provides that all easements and rights necessary to provide ‘support, shelter or protection’ are implied into a plan of subdivision. This probably covers support of buildings206 and party walls, but only where the land and structures are contained in a plan of subdivision.

19.52 Historically, where buildings had common walls, the structure and lots were often owned by the one person. Where this was the case and one property was subsequently sold to another owner, an implied easement may have arisen either on the basis of the rule in Wheeldon v Burrows207 or the principle of nonderogation from grant. Implied reservation of an easement for support is an exception to the rule that a grantor cannot claim any easement over land granted for the benefit of land retained unless expressly reserved.208 Where no such right of implication arises, a prescriptive right may be available.209 Otherwise, at common law, there is no natural right to support of a shared boundary wall between two lots and one owner may [page 474] remove that part of the wall on its side of land even where doing so may result in collapse of the adjoining wall and building.210 Clearly though, care is required to avoid claims for negligence and trespass. As seen in SJ Weir Ltd v Bijok,211 although there is no natural right to the support of buildings by land, if there is a withdrawal of support to land (not the actual buildings) and the subsidence causes damage to buildings standing on that land, the owner of the land may be entitled to recover, in addition to damages for subsidence of the land, damages for injury to the buildings.212 However, and importantly, the additional weight of the buildings on the land must not be the cause of the injury or subsidence. Damage is an element in a cause of action for loss of support. Therefore, no action will lie for the costs of preventing damage to land or buildings which is merely threatened.213

Interference with right of support 19.53 An action for interference with an easement for support may arise if the support is removed, and a detrimental change occurs to the dominant tenement due to the removal.214 Interference with an easement or right of support may be actionable even in the absence of negligence.215 Usually the action is against the

neighbour personally, but anyone whose activity on the land created the nuisance — such as an engineer or excavator — is liable.216 In New South Wales, s 177 of the Conveyancing Act 1919217 provides that for the purposes of the common law of negligence, a duty of care exists in relation to the right of support for land in its natural state. This simply means that a person cannot do anything in relation to land that would remove the support afforded to any other land. The duty may be excluded or modified by express agreement. 19.54 The employer of an independent contractor who interfered with an easement of support was held liable in Bower v Peate.218 It was said in that case that it is necessary to show that ‘in the natural course of things, injurious consequences to [the adjoining] neighbour must be expected to arise’ in order to attract this liability for the independent contractor’s work.219 However, in Stoneman v Lyons220 Mason J said that Bower v Peate stated the [page 475] obligation of the principal too widely. He held that in order for the principal to be liable, it must appear that the principal was guilty of some negligent act or omission or authorised some negligent act or omission by the contractor. Barwick CJ221 agreed with Mason J, and Gibbs J222 agreed with both Stephen and Mason JJ. The case, however, was one in which no easement of support was proved, a distinction adverted to by Mason J.223 In Northern Sandblasting Pty Ltd v Harris,224 McHugh J rejected any possibility of extending the notion of strict liability in nuisance as seen in Bowen v Peate, to an action in negligence, which would have the effect that a defendant who engages in a course of conduct which might result in harm to others no longer has a mere duty to take care but the more stringent duty to ensure that reasonable care is taken. He said such extension ‘would involve re-writing the whole law of torts’ and would be contrary to the High Court decisions in Stoneman v Lyons and Jones v Bartlett.225 The decision in Kondis v State Transport Authority226 shows that there are cases in which an employer will be held liable, directly and not merely vicariously, for the negligent actions of an independent contractor, notwithstanding the exercise of reasonable care in the selection of the contractor. But the facts giving rise to

the decision in that case concerned the special position of an employer under a duty to provide a safe system of work for its employees. In Stevens v Brodribb Sawmilling Co Pty Ltd,227 an employer was held not liable for injury to an independent contractor caused by the admitted negligence of another independent contractor. On the other hand, in Nikolic v Commonwealth Accommodation & Catering Services Ltd,228 Miles CJ held that it is no defence to an action for negligence to say that instead of using its own employees, a corporate body such as the cleaning contractor or the building contractor, engaged independent contractors over whom it had no control and who, as it happens, failed to exercise reasonable care. These examples of negligence, however, may stand quite separately and the principles may not be applicable to duty of care and rights of support matters.229 [page 476] In Piling Contractors (Qld) Pty Ltd v Prynew Pty Ltd,230 in carrying out excavation works and faulty piling work for a development which involved extensive excavations for an underground car park, the piling contractor allowed sand to escape through a gap in the retaining wall which resulted in subsidence of the support for the adjoining house. An expert referee determined that the contractor had been negligent by reason that it was aware that the sandy subsurface soil at the development site constituted a danger, in that expert reports indicated a need for considerable caution, but that it had nonetheless continued with the excavation and thereby had ‘courted danger’, was reckless in its failure to take adequate precautions in a situation of known risk, took action that increased the risk, and failed to comply with the development consent. The referee’s report was adopted by the court. Macready AsJ considered the nature of the duty of care under s 177 of the Conveyancing Act 1919 (NSW) and held that it extended to support of adjoining buildings but did not include omissions. The court confirmed that before the introduction of s 177 in 2000, the common law right to support of land in its natural state was said to be an incident of land itself.231 If excavations on an adjoining property undermined the support for a neighbour’s land, the excavator had committed an actionable nuisance for which strict liability attached without proof of any negligence.232 This rule was qualified by the situation where an individual built upon its property and in doing so, added

unnatural weight to those lands. In that instance, it could not recover if the neighbour, in excavating its own adjoining property, removed support for that land and caused damage to the next door property, because although neighbours were obligated to provide support for each other’s land, the obligation did not extend to supporting the additional weight that buildings placed upon adjoining yet separately owned lands.233 Macready AsJ also found that a statutory cause of action for breach of condition of the development consent was available. 19.55 In relation to responsibility for the acts of independent contractors, Macready AsJ, applying Walker v Corporation of the City of Adelaide,234 said the law is that ordinarily, a building owner or occupier will not be liable for the negligence of an independent contractor it had engaged;235 but there may be cases where the building owner or occupier may be liable for the negligence of its independent contractor where the owner or occupier owes a duty to [page 477] a third party which it cannot delegate by assigning the performance of it to an independent contractor; although it may be accepted that, in some instances, the duty owed by a building owner or occupier is non-delegable, the principles which serve to identify a situation in which such a duty is non-delegable have proved difficult to define precisely, as illustrated by the High Court in Stoneman v Lyons. In Stoneman v Lyons,236 Mason J observed that: … the principles governing the liability of a person for damage caused to a third party in the execution of dangerous operations undertaken by his contractor form a branch of the law notorious for its difficulty. Its complexity is not diminished by the wealth of discordant statements which have been made in the decided cases. Although the general rule is that a person is not liable for the negligence of his independent contractor, it is accepted that a person who owes a duty to a third party cannot avoid responsibility for discharging that duty by delegating performance of it to an independent contractor. The question then is: what is the extent of the duty owed by one landowner to a neighbouring landowner in connection with an excavation to be made by a contractor employed by the former on his land which will, if not made with due care, endanger the building of his neighbour?237

In considering different formulations of the duty by reference to distinctions between hazardous and extra-hazardous acts, his Honour considered that that case

was no occasion to decide whether the doctrine of absolute duty or strict liability for extra-hazardous acts is part of the common law in Australia, although he referred to powerful authority for the proposition that it is not. He added that if it has an application: … it would be wrong to classify the demolition and erection of a building (necessarily involving an excavation) in immediate proximity to the wall of an adjoining building as an extra-hazardous act, and thereby impose an absolute duty of care on the landowner by virtue of which he becomes responsible for collateral negligence of the contractor in the form of a negligent act or omission inconsistent with his instructions and not readily to be foreseen.

New building on dominant land 19.56 One interesting question is that of the effect of the demolition of a building in respect of which an easement of support had been created and its replacement by another building. Where one building is replaced by another, the new building may impose no greater weight upon the soil than the old, but the chances are that it will or may do so. What is not clear is whether a new, and heavier, building enjoys upon its erection what might be regarded as a limited right of support — limited to the amount of support to which the old building was, in effect, entitled. [page 478] 19.57 Higinbotham CJ appears to have left this question open in Johns v Delaney,238 His Honour there said that it might be that the right of lateral support, sufficient to uphold a six-roomed wooden house, had been established by lapse of time, but that a right of support sufficient to uphold the far greater burden of a two-storey brick building had not yet been acquired.239 His Honour does not appear to have made any findings on the question whether the subsidence would have occurred even if there had merely been a six-roomed wooden house erected on the land. On one view of the law, this would be a material question; a possible view is that, just as the natural right to support of land will sustain an action in respect of damage to buildings where the subsidence would have occurred even if the buildings had not existed (see 19.56), so in a case where an easement of support exists in respect of one building and that building is replaced by a heavier structure damages may be recovered for injury to

the new structure where the subsidence would have occurred even if the burden on the land had merely been that constituted by the old building. Although an argument might be put in support of this view, the law appears to be that where a building in respect of which an easement of support has been acquired is demolished and replaced by a new building, then, provided at all events that the new building differs substantially from the old, the easement of support has been extinguished.240

Stranger liable without easement 19.58 Where a building enjoys de facto support from land but no easement of support has been acquired, a stranger who interferes with the support is liable.241 In each of the cases supporting this proposition the case against the strangerdefendant involved an allegation of negligence and the question whether negligence was a necessary element did not arise. Parke B held against the defendant in Jeffries v Williams,242 saying that as the defendant did the work causing damage without taking due care not to do damage to the plaintiffs’ property, the plaintiffs were entitled to a verdict. In Keegan v Young, 243 Hutchison J held that the stranger-defendant ‘had a duty of care towards the first respondent in respect of the de facto support of his property, notwithstanding that those owners themselves would not have, and, accordingly, on the finding of negligence against him he is liable for the damage’. These cases are not authorities entitling a plaintiff to succeed against a stranger in the absence of proof of negligence. [page 479] In Bognuda v Upton & Shearer Ltd,244 the contractor employed by the adjoining owner to carry out the excavation work was regarded in the same light as the adjoining owner and not as a stranger. The question of any such distinction was not argued on appeal.245 19.59 In A-G v Whangarei City Council,246 the owner of land on which there was subsidence caused by earlier mining works on such land was held to have a right of action against the original excavator (which had passed as a right against the

Crown) even in the absence of negligence and even though it was not the owner of the land when the works were carried out. But, of course, in that case it may be said there was a right of support from subjacent land which was in existence.

Duty of care when excavating 19.60 Interference with an easement of support is actionable even in the absence of negligence; in this sense the right to support is ‘absolute’. The question remains whether the owner of a building in respect of which no easement of support exists may assert that an adjoining landowner owes a duty of care when excavating. In cases where no easement of support, that is to say, no ‘absolute’ right to support, exists, it would nevertheless be possible to hold that there is still a right to the exercise of reasonable care by the adjoining owner. In other words, one must not confuse a duty not to withdraw support with a duty not by negligence to withdraw support. If, however, the true basis of the decisions which establish that there is no natural right of support for buildings is that a landowner may act regardless — even though support from adjoining buildings is withdrawn so long as support from adjoining land is not withdrawn — then this principle is inconsistent with the existence of a duty of care. In the absence of clarifying legislation such as s 177 of the Conveyancing Act 1919 (NSW), the common law on this area remains in some conflict. In Dalton v Henry Angus & Co,247 it was stated that, until an easement of support had been operating for over 20 years, there is no duty upon an adjoining landowner to take reasonable precautions in excavation works to prevent damage to a neighbour. Lord Penzance, in that case, said that in the absence of a right of support for a building, in addition to support for the land in its natural state, whether conferred by grant or prescription, ‘the owner of the adjacent soil may with perfect legality dig that soil away, and allow his neighbour’s house, if supported by it, to fall in ruins to the ground.’248 [page 480] In Piper v Walsh,249 there was an allegation of negligence. The plaintiff apparently did not prove an easement of support. The Victorian Full Court held

that the defendant was entitled to succeed on the ground that the weight of the house had caused the collapse. The report though is unclear as to the view the Full Court took of the significance of the allegation of negligence. In Johns v Delaney,250 Higinbotham CJ, while recognising that the authorities were in conflict, held, relying especially upon the speech of Lord Penzance, that no duty of care in the conduct of excavation operations is cast upon an owner of land in favour of an adjoining owner. His Honour went on to hold that the defendants were liable on the ground that a trespass, by way of underpinning without consent, had imposed a duty of care. This decision was reversed by the Full Court, which held that a claim based on trespass by underpinning without consent failed on two grounds: it had not been pleaded, and the plaintiff conceded that the falling of the wall was not due to the trespass. The judgment of the Full Court is inconsistent with the existence of a duty of care, and to that extent, the Full Court was in agreement with the Chief Justice. The Full Court spoke of the defendant landowner having done only ‘what she had a perfect legal right to do on her own land’.251 In Anderson v Mackellar County Council,252 Jacobs JA held that it was open to allege a breach of duty in that ‘the defendant neglected and failed to adopt proper and adequate means to prevent damage which in the natural course of things might have been expected to flow from the operations of the defendant unless proper and adequate means to prevent such damage were adopted.’253 In Bognuda v Upton & Shearer Ltd,254 the New Zealand Court of Appeal held that a neighbour owed a duty to exercise reasonable care for the protection of an adjoining landowner’s wall in exercising a right to excavate adjacent soil. The judgments analysed carefully the judgment of Lord Penzance, noting the expressed reluctance with which Lord Penzance had found himself bound to hold that no such duty existed. They considered the developments in the law of negligence since that time and authorities in the United States and Canada imposing a duty of care on a landowner. In Stoneman v Lyons,255 Stephen J expressed the view that it is ‘at least arguable that, as the law of negligence now stands, the threatened burdening of land with an easement of support in favour of a building next door does [page 481]

not entail the consequence that the owner of the land thus threatened may excavate up to his own boundary regardless of the effect upon his neighbour’s building.’256 In the circumstances of that case, it was not necessary finally to determine the question, but his Honour pointed out that the rule under consideration was ‘ill-adapted to conditions in modern cities’. Mason J found that the facts of the case did not reveal a failure on the part of the excavating landowner to take reasonable care to avoid injury to the respondents in consequence of the excavation.257 The excavation work in that case had been done by an independent contractor. Mason J held that in order to make the principal liable, it must appear that the principal was guilty of some negligent act or omission or authorised some negligent act or omission by the contractor in executing the operations. Barwick CJ, as noted in 19.54, concurred in this judgment while Gibbs J concurred with Stephen and Mason JJ. In Morgan v Lake Macquarie City Council,258 the NSW Court of Appeal considered a submission challenging the principles expressed in Charles Dalton v Henry Angus & Co259 as being ‘out-moded and inflexible law’. Clarke JA declined to re-examine Dalton for two reasons: he agreed with the statement of McHugh JA (with whom the other two judges agreed) that ‘if the rule in [Dalton v Henry Angus& Co] is to be overturned, it can only be done by the High Court’; and because the appellants neither pleaded nor proved the withdrawal of support by the Council. 19.61 In Fyvie v Anand,260 Young J said ‘the law as to support of land by adjoining land, especially when both parcels of land are, as they are in this case, under the Torrens system, is in a very archaic and unsatisfactory state’. He referred to Giles J’s analysis in Pantalone v Alaouie261 who considered that the law itself, based on Dalton v Henry Angus& Co, was ‘quite unsuitable for modern Australian conditions’. However, it was observed that Giles J and also Brownie J, in LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd,262 thought that it was the duty of first instance judges of the Supreme Court to continue to follow the Dalton v Henry Angus& Co line of authority until the Court of Appeal or the High Court should decide otherwise. His Honour stated the governing principle as Brownie J put it in the LJP case as: ‘… a person does not have a right of lateral support for their building, as opposed to land in its natural state. Accordingly, it is no wrong by a neighbour to excavate in such a way that the buildings on the neighbouring land will be endangered, at least in the ordinary case. It is,

however, a wrong to so excavate that the land in its natural state would collapse.’ Notwithstanding, [page 482] his Honour considered there was some suggestion in Stoneman v Lyons263 and in Bognuda v Upton and Shearer Ltd,264 that Dalton v Henry Angus & Co was ‘in its last days’. 19.62 In 1997, the New South Wales Law Reform Commission recommended265 the abolition of the rule in Dalton v Henry Angus & Co and the establishment of a regime of liability for support to land based in negligence, with the introduction of a provision similar to s 179 of the Property Law Act 1974 (Qld).266 In 2000, the New South Wales Government amended the Conveyancing Act 1919 (NSW) by introducing s 177, which created a duty of care in relation to the right of support for land. It provides for the exclusion or modification of the duty by express agreement, and it abolishes actions in nuisance for removal of support. In Yared v Glenhurst Gardens,267 Austin J observed that: … the section was intended to remove doubt as to the existence of a duty of care in relation to the maintenance of lateral support of a neighbour’s land. The effect of the section is to remove from consideration of the negligence claim, the highly artificial rules in nuisance which had developed out of the decision of the House of Lords in Dalton v Henry Angus & Co (1881) 6 App Cas 740: as to the old rules, see Kebewar Pty Ltd v Harkin (1987) 9 NSWLR 738, 741. In nuisance, a defendant’s omission to maintain lateral support was not sufficient to establish liability. However, on ordinary principles of negligence, a defendant has an obligation to take reasonable care to prevent or reduce foreseeable injury caused by failure to maintain lateral support.

The 2008 decision in Piling Contractors (Qld) Pty Ltd v Prynew Pty Ltd,268 in the context of s 177 (and likely for the purposes of legislation to similar effect in other Australian states and territories) has clarified the position that the right to support from adjoining land includes the right to support for the buildings on the land. In Jukes v Larter,269 the plaintiffs sought an extension of an interlocutory injunction to stop excavation works which threatened the safety and integrity of their house. In relation to any serious question as to the existence of a duty of care owed by the defendants, Beech-Jones J described it as ‘either assumed or created by s 177’.

[page 483]

UNDERPINNING Generally 19.63 Underpinning which intrudes upon another person’s property without that person’s consent is a trespass: see further 19.2. Statutes have been passed, however, giving an adjoining owner a right to underpin in certain circumstances. Not all states and territories have passed laws on this and there is little uniformity in laws passed.270

Victorian statutory scheme 19.64 In Victoria, underpinning is dealt with as an aspect of ‘protection work’ governed by Pt 7 of the Building Act 1993 (Vic) and Pt 6 of the Building Regulations 2006 (Vic) made under that Act. An owner is required to carry out protection work in respect of an adjoining property, before and during the carrying out of any building work, if required by the relevant building surveyor.271 Before commencing any building work for which a building permit is required, the owner must serve on the owner of the adjoining property and the relevant building surveyor the required notice of the proposed works.272 The adjoining owner, not later than 14 days after such notice, must give notice either (to the owner) agreeing to the work or (to the owner and the relevant building surveyor) disagreeing with the work or requiring more information to enable the surveyor to consider the proposal.273 An adjoining owner who fails to respond within time is deemed to have agreed to the work.274 On receipt of a notice either disagreeing or requiring more information, the relevant building surveyor must examine the proposal and make a determination about the appropriateness or otherwise of the work.275 The Minister may appoint a suitable person to act as agent for an adjoining owner who cannot be found or who is incapable of acting.276

The work may only be carried out if the adjoining owner has agreed to it or is deemed to have agreed to it or if the matter is determined by the relevant building surveyor or, in the case of an appeal to the Building Appeals Board in relation to the matter, if the matter is determined by the Board.277 [page 484] Before commencing the work, an owner must take out insurance against damage caused by the works to the adjoining property and also against liabilities likely to be incurred to adjoining occupiers and members of the public during the carrying out of the work.278 Before work actually commences, the owner or owner’s agent in company with the adjoining owner or adjoining owner’s agent, must make a full and adequate survey of the adjoining property and record all existing cracks and defects in the adjoining property.279 Upon no less than 24 hours’ notice, an owner may enter between the hours of 8am and 6pm ‘on, over, under or into the air space above’ any adjoining property to carry out required protection work either agreed to or deemed to be agreed to or as determined under the Act.280 An owner must compensate any adjoining owner or adjoining occupier for ‘inconvenience, loss or damage’ suffered in connection with the carrying out of such work,281 although that does not relieve the owner from any liability for injury to the adjoining owner or adjoining occupier because of such work.282

Breach of statutory duty 19.65 Where there is a duty to underpin, the question arises whether a failure to carry out that duty creates a private right of action. Whether or not a statute gives a civil cause of action to a person suffering damage as a result of a breach of a statutory duty, is a question of construction. In O’Connor v S P Bray Ltd,283 as mentioned elsewhere in this work, Dixon J stated ‘it may be said that a provision prescribing a specific precaution for the safety of others in a matter where the person upon whom the duty laid is, under the general law of negligence, bound to exercise due care, the duty will give rise to a correlative private right unless

from the nature of the provision or from the scope of the legislation of which it forms a part a contrary intention appears.’ In Stockwell v State of Victoria,284 Gillard J adopted the following statement by Lord Browne-Wilkinson in X (Minors) v Bedfordshire County Council: The basic proposition is that in the ordinary case a breach of statutory duty does not, by itself, give rise to any private law cause of action. However a private law cause of action will arise if it can be shown, as a matter of construction of

[page 485] the statute, that the statutory duty was imposed for the protection of a limited class of the public and that Parliament intended to confer on members of that class a private right of action for breach of the duty.285

19.66 Early support for the view that statutory provisions such as those referred to above dealing with protection works do create a private right of action is to be found in Clancy v Davis,286 where the NSW Full Court held that the plaintiff was entitled to succeed and appears to have taken the view that an action lay for breach of the statutory duty to underpin imposed by s 59 of the Sydney Improvement Act 1879 (NSW) as opposed to merely regarding such breach as evidence of common law negligence. In Anderson v Mackellar County Council,287 the NSW Court of Appeal held that Ordinance 71 made under the Local Government Act 1919 (NSW), which dealt with underpinning and shoring, did create a private right of action and was valid. It must be noted, however, that the court placed much reliance on s 318(8) of that Act, which gave power to make ordinances defining the respective rights, duties and obligations of owners of adjoining buildings in relation to party walls, chimneys and other things. While the court considered that a factor against the creation of a private right was the apparent purpose of the Act, to provide for building regulation for the benefit of the community generally, the court also considered that matters supporting the view that a private right was created where the fact that the common law right of support, in the absence of an easement, was limited to land and the ‘enormous benefit’ conferred by the legislative provision on the adjoining owner.288 In Stoneman v Lyons,289 breach of statutory duty was said to arise from a regulation in the Uniform Building Regulations (Vic) which provided that if

excavation or demolition was to be made in proximity to an existing building, then underpinning and shoring-up precautions had to be taken. The owner of land had engaged a builder under a contract which required him to consult with an architect before performing such work, but then, without consulting either owner or architect, the builder commenced the work without taking the precautions, and caused damage. In Piling Contractors (Qld) Pty Ltd v Prynew Pty Ltd,290 where as noted above, defective excavation and piling works caused damage to an adjoining house, the court held that a statutory cause of action existed for a breach of a condition of development consent imposed under ss 78 and 78F of the Environmental Planning and Assessment Regulation 1994 (NSW). [page 486]

Damages 19.67 The appropriate measure of damages in a case where a private home was damaged by undermining was considered by the NSW Court of Appeal in Evans v Bolag.291 In that case, developers rendered the plaintiff’s home uninhabitable by mining and excavation work conducted on land next door. They promised to repair, but having failed to do so, conceded liability when they were sued in nuisance, negligence and breach of contract. Samuels JA, with whom the other members of the court agreed, held that in cases involving tortious damage to a building, it cannot be said that the normal measure of damage is the amount of diminution in the value of the land and improvements. An equally admissible measure of damage is the cost of reinstatement and restoration.292 The court looked at the reasonableness of the plaintiff’s desire to reinstate the property, which was to be judged, in part, by the advantage to the plaintiff of reinstatement measured against the extra cost to the defendant of having to pay damages for reinstatement rather than damages calculated by the diminution in value of the plaintiff’s property. The court held that it was reasonable to reinstate the plaintiff’s home. The decision is consistent with others such as Anthoness v Bland Shire Council,293 in which the property damaged has some special value to the plaintiff. In Pantalone v Alaouie,294 Giles J applied Evans v Bolag and held that in respect to tortious damage to buildings, the question of whether the measure of damages

is to be the cost of reinstatement or damages for diminution in value is to be tested by the reasonableness of the plaintiff’s desire to reinstate the property, having regard to the advantages to the plaintiff of reinstatement and the extra cost to the defendant in having to pay damages for reinstatement rather than damages for diminution in value. If the cost of restoration exceeds the value of the destroyed property, a plaintiff is entitled to the cost of reinstatement only if it is reasonable to have the property reinstated and restored.295 _________________________ 1.

Semayne v Gresham (1604) Yelv 29; 77 ER 194; Halliday v Nevill (1984) 155 CLR 1; Plenty v Dillon (1991) 98 ALR 353; Slaveski v State of Victoria [2010] VSC 441.

2.

Entick v Carrington (1765) 2 Wils 275; 95 ER 807; Simpson v Bannerman (1932) 47 CLR 378; Plenty v Dillon (1991) 171 CLR 635 at 639; Bade v Rural City of Murray Bridge [2008] SASC 9 at [69].

3.

Bendal Pty Ltd v Mirvac Project Pty Ltd (1991) 23 NSWLR 464 (mesh screening intruding over property).

4.

Stoneman v Lyons (1975) 133 CLR 550; Burton v Spragg [2007] WASC 247. See also Clifton Developments (Vic) Pty Ltd v Owners Corporation 1 Plan No PS510766U [2012] VCC 695 (subsequent purchaser’s liability for continuing trespass by encroachment concealed from view when first occurring).

5.

Coco v R (1994) 179 CLR 427 (statutory authority to trespass must be in clear and unambiguous language).

6.

Watson v Cowen [1959] Tas SR 194 (pushing dirt onto property by bulldozer); Owners Strata Plan 4085 v Mallone [2006] NSWSC 1381 (rocks falling from defendant’s land onto plaintiff’s land below due to earlier mining of cliff face before defendant became owner).

7.

Bulli Coal Mining Co v Osborne [1899] AC 351; Burton v Spragg [2007] WASC 247; Ucak v Avente Developments Pty Ltd [2007] NSWSC 367 (removal of lateral support to plaintiff’s property and installation of ground anchors beneath it).

8.

Stereff v Rycen [2010] QDC 117.

9.

Woollerton and Wilson Ltd v Richard Costain Ltd [1970] 1 All ER 483; Stoneman v Lyons (1975) 133 CLR 550; Bendal Pty Ltd v Mirvac Project Pty Ltd (1991) 23 NSWLR 464.

10. Bendal Pty Ltd v Mirvac Project Pty Ltd (1991) 23 NSWLR 464 at 468. See also Capebay Holdings Pty Ltd v Sands [2002] WASC 287; Glenbrook Nominees Pty Ltd and City of Perth [2009] WASAT 3 at [47]; PCH Melbourne Pty Ltd v Break Fast Investments Pty Ltd [2007] VSC 87. 11. (1990) 24 NSWLR 490. 12. Patel v W H Smith (Eziot) Ltd [1987] 1 WLR 853 at 858. See also Jaggard v Sawyer [1995] 1 WLR 269; Douglas Gafford v A H Graham And Grandco Securities Limited [1998] EWCA Civ 666; Roberts v Rodney District Council [2001] 2 NZLR 402; Das v Linden Mews Ltd [2002] EWCA Civ 590; Finesky Holdings Pty Ltd v Minister for Transport for Western Australia [2002] WASCA 206. 13. Proprietors of Strata Plan 20297 v G & S Developments Pty Ltd [2008] NSWSC 257. 14. (1991) 23 NSWLR 464.

15. [1974] Qd R 1, referred to in State of Western Australia v Ward (2002) 213 CLR 1; [2002] HCA 28. 16. [1974] Qd R 1 at [4]. 17. [1970] 1 All ER 483. 18. (1990) 24 NSWLR 490. 19. (1990) 24 NSWLR 490 at 497. Applied in Fyvie v Anand (1994) 6 BPR 13,743; Fanigun Pty Ltd v Woolworths Ltd [2006] QSC 28; PCH Melbourne Pty Ltd v Break Fast Investments Pty Ltd [2007] VSC 87. 20. (1989) 24 NSWLR 491 at 496. 21. [1895] 1 Ch 287 at 322–3. 22. [2005] QSC 112. 23. (1997) 8 BPR 15,795 at 15,801. 24. [1986] 1 NZLR 324. 25. Ibid at [35]; Attorney-General v Blake [2001] 1 AC 268 at 278. 26. PCH Melbourne Pty Ltd v Break Fast Investments Pty Ltd [2007] VSC 87 at [62]. 27. Stereff v Rycen [2010] QDC 117. 28. Hansen v Gloucester Developments Pty Ltd [1992] 1 Qd R 14 at 30. 29. State of SA v Simionato [2005] SASC 412 at [100]. 30. Hansen v Gloucester Developments Pty Ltd [1992]1 Qd R 14. 31. Sedleigh-Denfield v O’Callaghan [1940] AC 880; Southport Corp v Esso Petroleum Co Ltd [1954] 2 QB 182. 32. See e.g. Water Act 1989 (Vic) s 16(2). See also: Protection of the Environment Operations Act 1997 (NSW) s 268; Environmental Protection Act 1994 (Qld), ss 15, 440; Airports Act 1996 (Cth) s 131D; Public Health and Wellbeing Act 2008 (Vic); Building Act 1993 (Vic). 33. Victoria Park Racing and Recreation Grounds Co Ltd v Taylor (1937) 58 CLR 479 at 503. 34. For example: Sedleigh-Denfield v O’Callaghan [1940] AC 880 at 888, 903. 35. Attorney-General v PYA Quarries Ltd [1957] 2 QB 169; Cartwright v McLaine & Long Pty Ltd (1979) 143 CLR 549; R v Rimmington [2006] 1 AC 459; McFadzean v Construction, Forestry, Mining and Energy Union [2007] VSCA 289; Onus v Telstra Corporation Ltd [2011] NSWSC 33. 36. Harper v GN Haden & Sons Ltd [1933] Ch D 298; Leichhardt Municipal Council v Montgomery [2007] HCA 6. See also Onus v Telstra Corporation Ltd [2011] NSWC 33 at [122]. 37. Hunter v Canary Wharf Ltd [1997] AC 655. 38. Boyce v Paddington Borough Council [1903] 1 Ch 109 at 114; Sedleigh-Denfield v O’Callaghan [1940] AC 880 at 905, 907. 39. Sutherland Shire Council v Becker [2006] NSWCA 344 at [119]; Robson v Leischke [2008] NSWLEC 152; Montana Hotels Pty Ltd v Fasson Pty Ltd (1986) 61 ALJR 282 at 284. 40. Sedleigh-Denfield v O’Callaghan [1940] AC 880 at 904. 41. Robson v Leischke [2008] NSWLEC 152 at [47]. 42. In Australia, strict liability within the rule in Rylands v Fletcher (1868) LR 3 HL 330 has been subsumed within the law of negligence: Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520. However, strict liability can still be created by statute.

43. Quick v Alpine Nurseries Sales Pty Ltd [2010] NSWSC 1248 at [140]. 44. S J Weir Ltd v Bijok [2011] SASCFC 165. 45. Harris v Carnegie’s Pty Ltd [1917] VLR 95; Halsey v Esso Petroleum Co Ltd [1961] 2 All ER 145; Robson v Leischke [2008] NSWLEC 152 at [42]–[48]; Holloway v Newcastle City Council [2013] NSWDC 62 at [112]. 46. (1994) 179 CLR 520. 47. Quick v Alpine Nurseries Sales Pty Ltd [2010] NSWSC 1248 at [142]. 48. Rickard v Allianz Australia Insurance Ltd [2009] NSWSC 1115 at [188]–[189]. 49. Quick v Alpine Nurseries Sales Pty Ltd [2010] NSWSC 1248 at [144]. 50. Sedleigh-Denfield v O’Callaghan [1940] AC 880; Torette House Pty Ltd v Berkman (1940) 62 CLR 637 at 657–8; Montana Hotels Pty Ltd v Fasson Pty Ltd (1986) 61 ALJR 282 at 284; City of Richmond v Scantelbury [1991] 2 VR 38 at 41, 42; Proprietors of Strata Plan No 14198 v Cowell (1989) 24 NSWLR 478 at 484; Delaware Mansions Ltd v Westminster City Council [2002] 1 AC 321 at 332; Holloway v Newcastle City Council [2013] NSWDC 62 at [112]. 51. Sedlei-Denfield v O’Callaghan [1940] AC 880 at 894, 904 and 913; Proprietors of Strata Plan No 14198 v Cowell (1989) 24 NSWLR 478 at 484. 52. Holloway v Newcastle City Council [2013] NSWDC 62 at [113]; Lister v Hong [2006] NSWSC 1135 at [23], [30]. 53. Sedlei-Denfield v O’Callaghan [1940] AC 880 at 894, 904 and 913; Proprietors of Strata Plan No 14198 v Cowell (1989) 24 NSWLR 478 at 484. 54. Quick v Alpine Nurseries Sales Pty Ltd [2010] NSWSC 1248 at [149]. 55. Valherie v Strata Corporation No 1841 [2004] SASC 170; Sutherland Shire Council v Becker (2006) 150 LGERA 184 at 226. 56. Bamford v Turnley (1860) 2 F & F 231; 122 ER 27; Harris v Carnegie’s Pty Ltd [1917] VLR 95; Kraemers v A-G (Tas) [1966] Tas SR 113. 57. Sedleigh-Denfield v O’Callaghan [1940] AC 880; Bennetts v Honroth [1959] SASR 170; Pemberton v Bright [1960] 1 WLR 436. 58. Todd v Flight (1860) 9 CB NS 377; 142 E R 148; Wringe v Cohen [1940] 1 KB 229. 59. Harris v Carnegie’s Pty Ltd [1917] VLR 95: dust, noise, vibration and foul smell; Thompson v Sydney Municipal Council (1938) 14 LGR (NSW) 32. 60. Gartner v Kidman (1962) 108 CLR 12; Quick v Alpine Nurseries Sales Pty Ltd [2010] NSWSC 1248. 61. McKell v Rider (1908) 5 CLR 480. 62. Halsey v Esso Petroleum Co Ltd [1961] 2 All ER 145; Baulkham Hills Shire Council v AV Walsh Pty Ltd [1968] 3 NSWR 138: offal plant; Bone v Seale [1975] 1 All ER 787. 63. St Helen’s Smelting Co v Tipping (1864) 4 B & S 616; 11 ER 1483; Salvin v North Brancepeth Coal Co (1874) LR 9 Ch 705; Manchester Corp v Farnworth [1930] AC 171. 64. Vincent v Peacock [1973] 1 NSWLR 466; Haddon v Lynch [1911] VLR 230. 65. P Baer Investments Pty Ltd v University of New South Wales [2007] NSWLEC 128; Vella v Owners of Strata Plan 8670 [2007] NSWLEC 365; Holloway v Newcastle City Council [2013] NSWDC 62. 66. Lester-Travers v City of Frankston [1970] VR 2.

67. Ikic v Evans (1989) 7 BCL 114. 68. Sturges v Bridgman (1878) 11 Ch D 852. See: Andreae v Selfridge & Co Ltd [1937] 3 All ER 255 (vibrations from factory); Munro v Southern Dairies Ltd [1955] VLR 332 (noise); Thompson-Schwab v Costaki [1956] 1 All ER 652 (noise smells and flies due to horses); Raciti v Hughes (1995) 7 BPR 14,837 (street soliciting); Onus v Telstra Corporation Ltd [2011] NSWSC 33 at [149] (backyard lighting). 69. Bayliss v Lea [1961] NSWR 1002; Robson v Leischke [2008] NSWLEC 152 at [84]. 70. Walter v Selfe (1851) 4 De G & Sm 315; 64 ER 849; Haddon v Lynch [1911] VLR 5. 71. Hargrave v Goldman (1963) 110 CLR 40. 72. Elston v Dore (1982) 149 CLR 480 at 488; Michallef v Galea [2001] NSWSC 984; Quick v Alpine Nurseries Sales Pty Ltd [2010] NSWSC 1248 at [161]. 73. Hunter v Canary Wharf Ltd [1997] AC 655 at 685. 74. Halsey v Esso Petroleum Co Ltd [1961] 1 WLR 683 at 697–702; Vincent v Peacock [1973] 1 NSWLR 466; Cohen v City of Perth [2000] WASC 306. 75. Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287; Hoare & Co v McAlpine [1923] 1 Ch 167. 76. Pwllbach Colliery v Woodman [1915] AC 634; Thompson v Sydney Municipal Council (1938) 14 LR (NSW) 32; Kidman v Page [1959] Qd R 53. 77. Van Son v Forestry Commission of New South Wales (1995) 86 LGERA 108 at 126–7. 78. St Helen’s Smelting Co v Tipping (1864) 4 B & S 616; 11 ER 1483; Halsey v Esso Petroleum Co Ltd [1961]1 WLR 683. 79. Crump v Lambert (1867) LR 3 Eq 409; Manchester Corp v Farnworth [1930] AC 171. 80. Bainbridge v Chertsey Urban District Council (1914) 84 LJ Ch 626; Don Brass Foundry Pty Ltd v Stead (1948) 48 SR (NSW) 482; Halsey v Esso Petroleum Co Ltd [1961]1 WLR 683; Baulkham Hills Shire Council v A V Walsh Pty Limited [1968] 3 NSWR 138. 81. Andreae v Selfridge & Co Ltd [1937] 3 All ER 255. Compare Clarey v The Principal and Council of the Women’s College (1953) 90 CLR 170. 82. Wherry v KB Hutcherson Pty Ltd (1986) 4 BCL 164; Sedleigh-Denfield v O‘Callaghan [1940] AC 880 (minor interference over a long time). 83. Sturges v Bridgman (1878) 11 Ch D 852. 84. Hollywood Silver Fox Farm Ltd v Emmett [1936] 1 All ER 825. 85. Painter v Reed [1930] SASR 295. 86. [1891] 2 Ch 409 at 414. See also Warne v Nolan [2001] QSC 053 at [89] per Muir J: ‘Duration of the interference is a relevant consideration, but a short lived interference may be regarded as substantial if it causes permanent damage to land’. 87. [1917] VLR 95. See also Daily Telegraph Ltd v Stuart (1928) 28 SR (NSW) 291; Andreae v Selfridge & Co Ltd [1938] Ch 1; Van Son v Forestry Commission of New South Wales (1995) 86 LGERA 108; Wildtree Hotels Ltd v London Borough of Harrow [1998] EWCA Civ 978; Deepcliffe Pty Ltd v Council of the City of Gold Coast [2001] QCA 342; Warne v Nolan [2001] QSC 053. 88. (1986) 4 BCL 164 at 170. 89. Ibid. 90. [1974] 2 NZLR 631; referred to in Nordern v Blueport Enterprises Ltd [1996] 3 NZLR 450; Aussie

Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1. 91. [1936] 2 All ER 633. See also Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520; Southwark London Borough Council v Mills [1998] 3 WLR 49; Van Son v Forestry Commission of New South Wales (1995) 86 LGERA 108; Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185; R Mulheron, ‘The Interplay of Quiet Enjoyment and Assignment’ (2000) 8 APLJ 181. 92. [1917] VLR 95. 93. [1917] VLR 95 at 101. 94. [1956] 2 QB 99; considered in Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1; Spathis v Hanave Investment Co Pty Ltd [2002] NSWSC 304; Worrall v Commissioner for Housing for the ACT [2002] FCAFC 127; Kazas & Associates Pty Ltd v Multiplex (Mountain Street) Pty Ltd [2002] NSWSC 840. 95. [1974] 2 NZLR 631. 96. [1998] 1 Qd R 1, as referred to in Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185 at [39]; applied in Byrnes v Jokona Pty Ltd [2002] FCA 41. See also Kazas & Associates Pty Ltd v Multiplex (Mountain Street) Pty Ltd [2002] NSWSC 840; and Worrall v Commissioner for Housing for the ACT [2002] FCAFC 127 at [75]: ‘to be a breach of the covenant there must be a substantial inference with the tenant’s quiet enjoyment’. 97. [2012] VSCA 103. 98. Thompson-Schwab v Costaki [1956] 1 All ER 652; Barbagallo v J & F Catelan Pty Ltd [1986] 1 Qd R 245 at 248; Roberts v Rodier [2006] NSWSC 282 at [119]. 99. Barbagallo v J & F Catelan Pty Ltd [1986] 1 Qd R 245 at 248; Quick v Alpine Nurseries Sales Pty Ltd [2010] NSWSC 1248 at [167]. 100. Gartner v Kidman (1962) 108 CLR 12; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; Melaleuca Estate Pty Ltd v Port Stephens Council [2006] NSWCA 31; Quick v Alpine Nurseries Sales Pty Ltd [2010] NSWSC 1248; Onus v Telstra Corporation Ltd [2011] NSWSC 33. 101. Carter v Murray [1981] 2 NSWLR 77 at 80; Dollar Sweets Pty Ltd v Federated Confectioners Association of Australia [1986] VR 383; Quick v Alpine Nurseries Sales Pty Ltd [2010] NSWSC 1248. 102. Redland Bricks Ltd v Morris [1970] AC 652; Onus v Telstra Corporation Ltd [2011] NSWSC 33. 103. Yared v Glenhurst Gardens Pty Ltd (2002) 10 BPR 19 at 485; Redland Bricks Ltd v Morris [1970] AC 652 at 665–6. 104. Cambridge Water Co v Eastern Counties Leather Plc [1994] 2 AC 264 at 300. 105. Yared v Glenhurst Gardens Pty Ltd [2002] NSWSC 11. 106. Spencer v Silva [1942] SASR 213 at 221–2. 107. Kidman v Page [1959] Qd R 53. 108. Bone v Seale [1975] 1 All ER 787 at 794; Young v Wheeler (1987) Aust Torts Reports 80-126 at [80]– [126]; Jaggard v Sawyer [1995] 2 All ER 189; Stockwell v State of Victoria [2001] VSC 497 at [483]. 109. Harris v Carnegie’s Pty Ltd (1917) 23 ALR 75; Halsey v Esso Petroleum Co Ltd [1961] 2 All ER 145; Hunter v Canary Wharf Ltd [1997] 2 All ER 426. 110. Van Son v Forestry Commission of New South Wales (1995) 86 LGERA 108; Walsh v Ervin [1952] VLR 361 at 371. 111. Bone v Seale [1975] 1 All ER 787 at 794; Hunter v Canary Wharf Ltd [1997] 2 All ER 426.

112. City of Richmond v Scantelbury [1991] 2 VR 38 at 45. 113. Fennell v Robson Excavations Pty Ltd [1977] 2 NSWLR 486 at 492. 114. Young v Wheeler (1987) Aust Torts Reports 80-126 at 68,971–2; Gunnersen v Henwood [2011] VSC 440 at [348]. 115. Barbagallo v J & F Catelan Pty Ltd [1986] 1 Qd R 245; York Bros (Trading) Pty Ltd v Commissioner of Main Roads [1983] 1 NSWLR 391 at 399–400. 116. Lagan Navigation Co v Lambeg Bleaching, Dyeing and Finishing Co Ltd [1927] AC 226; Young v Wheeler (1987) Aust Torts Reports 80-126; Proprietors of Strata Plan No 14198 v Cowell (1989) 24 NSWLR 478; Burton v Winters [1993] 1 WLR 1077 at 1081; Seiwa Pty Ltd v Owners Strata Plan 35042 [2006] NSWSC 1157; Owners Strata Plan 30339 v Torada Pty Ltd [2008] NSWSC 1154; Nguyen & Le v Davies [2011] SADC 63 at [78]; Owners Strata Plan 32735 v Heather Lesley-Swan [2012] NSWSC 383 at [191]. 117. Re Ellenborough Park [1955] 3 All ER 667 at 673 per Lord Evershed MR. 118. See, for example, Conveyancing Act 1919 (NSW) s 88B: Real Property Act 1900 (NSW) s 46A. 119. [2013] NSWSC 587. 120. Ex parte Purcell (1982) 47 LGRA 433 at 439; Prospect County Council v Cross (1990) 21 NSWLR 601. Substantial and material are equivalent per Austin J in Markos v O R Autor [2007] NSWSC 810 at [55]– [59]. 121. Trewin v Felton [2007] NSWSC 851. 122. Siple v Blow (1904) 8 OLR 547 at 554; Gee v Burger [2009] NSWSC 149 at [46]. 123. Denton v Phillpot (1990) NSW Conv R 55-543 at [55]–[543]. 124. [2007] NSWSC 851 at [47]–[52]. 125. Williams v State Transit Authority of NSW [2004] NSWCA 179; Robson v Leischke [2008] NSWLEC 152. 126. Westfield Management Ltd v Perpetual Trustee Company Ltd [2007] HCA 45. 127. Commonwealth v Registrar of Titles for Victoria (1918) 24 CLR 348; considered in Clos Farming Estates Pty Ltd v Easton [2001] NSWSC 525, followed in JEA Holdings (Aust) Pty Ltd v Registrar-General (NSW) [2013] NSWSC 587. See also Queanbeyan Leagues Club v Poldune Pty Ltd (1996) 7 BPR 15,078 where McLelland CJ in Eq spoke of the categories of permissible easements, as those which ‘must alter and expand with the changes that take place in the circumstances of mankind’. 128. Delohery v Permanent Trustee Co of New South Wales (1904) 1 CLR 283; Commonwealth v Registrar of Titles for Victoria (1918) 24 CLR 348. 129. Higgins v Betts [1905] 2 Ch 210 at 215 per Farwell J; Robson v Leischke [2008] NSWLEC 152 at 173. 130. Hortons’ Estate Ltd v James Beattie Ltd [1927] 1 Ch 75 at 77; Litchfield-Speer v Queen Anne’s Gate Syndicate (No 2) Ltd [1919] 1 Ch 407 at 411–12. 131. Colls v Home and Colonial Stores Ltd [1904] AC 179 at 204. 132. Nelson v Hughe [1947] VLR 227; applied in Sunshine Retail Investments Pty Ltd v Wulff [1999] VSC 415. 133. Murphy v City of South Melbourne (1987) 27 APA 404 at 405. See also Sunshine Retail Investments Pty Ltd v Wulff [1999] VSC 415. 134. [1984] 3 NSWLR 279. 135. See: Conveyancing Act 1919 (NSW) s 179; Property Law Act 1974 (Qld) s 178; Law of Property Act 1936 (SA) s 22; Land Title Act 1980 (Tas) ss 138J–138L; Property Law Act 1958 (Vic) s 195; Property

Law Act 1969 (WA) s 121. 136. [2011] SADC 63 at [69]–[70]. 137. Ray v Hazeldine [1904] 2 Ch 17 at 20. 138. Commonwealth v Registrar for Titles of Victoria (1918) 24 CLR 348. However, see Nguyen & Le v Davies [2011] SADC 63 at [70]. 139. Colls v Home & Colonial Stores Ltd [1904] AC 179. 140. Ibid at 355–6. 141. Nelson v Walker (1910) 10 CLR 560 at 590. 142. R v Inhabitants of Hermitage (1692) Carth 239; 90 ER 743. 143. Margil Pty Ltd v Stegul Pastoral Pty Ltd [1984] 2 NSWLR 1 at 9; considered in Bunney v South Australia (2000) 77 SASR 319. 144. M’Carthy (administratrix) v Cunningham (1877) 3 VLR (L) 59 at 63–4. 145. [1908] 1 KB 39. 146. [1984] 2 NSWLR 1 at 10. See also Bunney v South Australia (2000) 77 SASR 319. 147. [1984] 2 NSWLR 1 at 10–11. 148. See: Conveyancing Act 1919 (NSW) s 88B(3)(c)(iii); Real Property Act 1900 (NSW) s 47(7); Land Title Act 1994 (Qld) s 88; Real Property Act 1886 (SA) s 90C(2); Conveyancing and Law of Property Act 1884 (Tas) s 9A; Land Titles Act 1980 (Tas) s 109. 149. Margil Pty Ltd v Stegul Pty Ltd [1984] 2 NSWLR 1; Bunney v South Australia (2000) 77 SASR 319. 150. Scott v Page (1886) 31 Ch D 554; Re The Transfer of Land Act 1885; Application by Schultze (1894) 13 NZLR 605. 151. See News of the World Ltd v Allen Fairhead and Sons Ltd [1931] 2 Ch 402. 152. Bookville Pty Ltd v O’Loghlen [2007] VSC 67 at [18]. 153. Ibid at [15]. 154. Tehidy Minerals Ltd v Norman [1971] 2 QB 528 at 553. 155. Shelmerdine v Ringen Pty Ltd [1993] 1 VR 315 at 338–9. 156. For instance see: Conveyancing Act 1919 (NSW) s 89; Land Titles Act 1980 (Tas) s 108; Transfer of Land Act 1893 (WA) s 229A(2). Section 73 of the Transfer of Land Act 1958 (Vic) empowers the Registrar, upon application by a registered owner, to delete the recording of any easement that has been abandoned or extinguished. A dominant owner may object by lodging a caveat. Section 73A of the Act empowers the Registrar to create a folio for land that omits the recording of ‘any right or easement of way’ that has been under continuous and exclusive adverse occupation for at least 30 years. 157. [2007] VSC 67. 158. Commonwealth v Registrar of Titles for Victoria (1918) 24 CLR 348 at 353. See also Clos Farming Estates Pty Ltd v Easton [2001] NSWSC 525; City Developments Pty Ltd v Registrar-General of the Northern Territory [2001] NTCA 7; and T Wilson, ‘What’s in an Easement? More than Just the Name’ (2001) 16 APLB 33. 159. [2006] NSWCA 337. 160. (1994) 179 CLR at 624.

161. Westfield Management Ltd v Perpetual Trustee Company Limited (2007) 233 CLR 528. 162. Markos v Autor [2007] NSWSC 810 at [51]. 163. Ibid at [15]. 164. [2008] NSWSC 988. 165. [2007] NSWCA 324. 166. (2007) 233 CLR 528. 167. (2009) 25 VR 507. 168. (1879) 12 Ch D 31; applied in Wilcox v Richardson (1997) 43 NSWLR 4; Wherry v Trustees of the Sisters of Charity of Aust (2000) 111 LGERA 216; Daar Pty Ltd v Feza Foundation Ltd [2001] NSWSC 949; Rarere v Phildagap Ltd [2011] NZHC 1810; Cuzeno Pty Limited v The Owners Strata Plan 65870 [2013] NSWSC 1385. 169. (1987) 9 NSWLR 738 at 741; applied in Wherry v Trustees of the Sisters of Charity of Aust (2000) 111 LGERA 216. 170. Taylor v Browning (1885) 11 VLR 158; Lyons v Winter (1899) 25 VLR 464; Aldridge v Wright [1929] 2 KB 117. See also Abrahams v Flynn [1996] ANZ ConvR 149. 171. Re Webb’s Lease [1951] Ch 808; Abrahams v Flynn [1996] ANZ ConvR 149. 172. Siddons v Short Harley & Co (1877) 2 CPD 572 at 577. 173. Nickerson v Barraclough [1981] Ch 426. 174. Roberts v Karr (1809)1 Taunt 495; 127 ER 926. 175. Pwllbach Colliery Co v Woodman [1915] AC 634 at 646. 176. (1879) 12 Ch D 31. 177. (1879) 12 Ch D 31. 178. See Lamos Pty Ltd v Hutchison (1984) 3 BPR 9350 at 9354. 179. Ray v Hazeldine [1904] 2 Ch 17; Aldridge v Wright [1929] 2 KB 117; both referred to in Abrahams v Flynn [1996] ANZ ConvR 149. 180. Richards v Rose (1853) 9 Exch 218; 156 ER 93; Aldridge v Wright [1929] 2 KB 117; Howarth v Armstrong (1897) 77 LT 62. 181. (1882) 46 LT 886. See also Bolton v Clutterbuck [1955] SASR 253; Abrahams v Flynn [1996] ANZ ConvR 149. 182. See Conveyancing Act 1919 (NSW) s 88K. 183. [2012] NSWSC 389. 184. Body Corporate No 41342R v Sheppard [2008] VSCA 118 at [59]–[60]. 185. (2004) 15 VR 557. 186. Law of Property Act (NT) ss 163–164; Conveyancing Act 1919 (NSW) s 88K; Land and Environment Court Act 1979 (NSW) s 40; Property Law Act 1975 (Qld) s 180; Conveyancing and Law of Property Act 1884 (Tas) s 84J; Land Titles Act 1980 (Tas) s 110(4)–(12). 187. See, for example, Access to Neighbouring Land Act 2000 (NSW). 188. Commonwealth v Registrar of Titles for Victoria (1918) 24 CLR 348. See also Clos Farming Estates Pty Ltd v

Easton [2001] NSWSC 525; City Developments Pty Ltd v Registrar-General of the Northern Territory [2001] NTCA 7; and T Wilson, ‘What’s in an Easement? More than Just the Name’ (2001) 16 APLB 33. 189. See Bass v Gregory (1890) 25 QBD 481. 190. As to the position elsewhere see: Land Title Act (NT) Div 4; Conveyancing Act 1919 (NSW) s 179; Property Law Act 1974 (Qld) s 198A; Law of Property Act 1936 (SA) s 22; Prescription Act 1934 (Tas) s 9; see also Conveyancing and Law of Property Act 1884 (Tas) s 84C(1) and Land Titles Act 1980 (Tas) s 108; Property Law Act 1969 (WA) s 121. 191. Delohery v Permanent Trustee Co (1904) 1 CLR 283; considered in Pekel v Humich (1999) 21 WAR 24; Yared v Glenhurst Gardens Pty Ltd [2002] NSWSC 11. 192. Commonwealth v Registrar of Titles for Victoria (1918) 24 CLR 348. 193. Ibid at 353. 194. [1979] 2 NZLR 208 at 209. See also A-G v Whangarei City Council [1987] 2 NZLR 150 at 153; applied in Pantalone v Alaouie (1989) 18 NSWLR 119. 195. Gordon v Body Corporate Strata Plan 3023 (2004) 15 VR 557. 196. For instance: Law of Property Act (NT) s 162; Conveyancing Act 1919 (NSW) s 179; Property Law Act 1974 (Qld) s 179. 197. [1979] 2 NZLR 208 at 209. See also A-G v Whangarei City Council [1987] 2 NZLR 150 at 153; applied in Pantalone v Alaouie (1989) 18 NSWLR 119. 198. (1881) 6 App Cas 740 at 791; referred to in Carroll v Azolia Pty Ltd [1998] ANZ ConvR 485; distinguished in Yared v Glenhurst Gardens Pty Ltd [2002] NSWSC 11. 199. Johns v Delaney (1890) 16 VLR 729 at 732; Byrne v Castrique [1965] VR 171. 200. (2011) 112 SASR 127; [2011] SASCFC 165 at [69]. 201. (2011) 85 ALJR 666. 202. (1989) 18 NSWLR 119 at 129. See also Rees v Skerrett [2001] EWCA Civ 760; Stockport Metropolitan Borough Council and British Gas Plc v Reddish Vale Golf Club [2001] EWCA Civ 212. 203. LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1988) 6 BCL 45 at 47; and in Singapore in Xpress Print Pty Ltd v Monocrafts Pte Ltd [2000] 3 SLR 545 at [35]. 204. See Kebewar Pty Ltd v Harkin (1987) 9 NSWLR 738 at 740–1. See also Sutherland Shire Council v Becker [2006] NSWCA 344 at [5]. 205. See: Law of Property Act (NT) s 162; Conveyancing Act 1919 (NSW) s 181B; Property Law Act 1974 (Qld) s 179; Conveyancing and Law of Property Act 1884 (Tas) s 34B. 206. Compare Piling v Prynew Nemeth [2008] NSWSC 118 at [50]–[55], which interpreted a similar provision in the NSW legislation. 207. [1874–80] All ER Rep 669. 208. McGrath v Campbell [2006] NSWCA 180. 209. For instance, in New South Wales, s 88BB of the Conveyancing Act 1919 (NSW) provides that registration of easements entitles parties to the support of buildings by party walls. 210. Cubbitt v Porter (1828)8 B & C 257; 108 ER 1039 at 1042. 211. (2011) 112 SASR 127; [2011] SASCFC 165. 212. Pantalone v Alaouie (1989) 18 NSWLR 119 at 129.

213. Midland Bank Plc v Bardgrove Property Services Ltd (1992) 60 BLR 1. 214. Fennell v Robson Excavations Pty Ltd [1977] 2 NSWLR 486. 215. Johns v Delaney (1890) 16 VLR 729 at 732; Byrne v Castrique [1965] VR 171. 216. Pantalone v Alaouie (1989) 18 NSWLR 119 applied in Burton v Spragg [2007] WASC 247 at [15]. 217. As amended by the Conveyancing Amendment (Law of Support) Act 2000 (NSW). 218. (1876) 1 QBD 321. See also Northern Sandblasting Pty Ltd v Harris (1996) 188 CLR 313. 219. (1876) 1 QBD 321 at 326. 220. (1975) 133 CLR 550 at 576. 221. Ibid at 553. 222. Ibid at 559. 223. Ibid at 575–6. 224. (1996) 188 CLR 313 at 366, referred to by Meagher JA in Dawmac Industries Pty Ltd v Anson [2001] NSWCA 42 at [12]. 225. (2000) 75 ALJR 1. 226. (1984) 154 CLR 672. See also Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520; Bleathman v Peterson’s Industrial Paint Services [2001] TASSC 128; Hillcoat v Keymon Pty Ltd [2002] QCA 527; New South Wales v Lepore [2003] HCA 4; Rich v Queensland (2003) 195 ALR 412; TNT Australia Pty Ltd v Christie [2003] NSWCA 47. 227. (1986) 160 CLR 16; applied in Wilke v Astra Pharmaceuticals Pty Ltd [2001] NSWCA 135; Hollis v Vabu Pty Ltd (2001) 207 CLR 21; Williams v Trimview Roof Restoration Pty Ltd [2001] WASCA 414; distinguished in Kolodziejczyk v Grandview Pty Ltd [2002] NSWCA 267; Tolhurst v Cleary Bros (Bombo) Pty Ltd [2008] NSWCA 181. 228. (1992) 106 FLR 413 at 418. Compare, however, NRMA Insurance Ltd v F R Coyle Pty Ltd (1994) 13 Aust Cons LR 210 at 215. 229. See Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520. 230. [2008] NSWSC 118, undisturbed on appeal in Prynew Pty Limited v Nemeth [2010] NSWCA 94; Prynew Pty Limited v Nemeth [2011] NSWCA 5; Tsu v Nemeth [2012] NSWCA 29. See also Roberts v Rodier [2006] NSWSC 282 at [102]–[105]. 231. Dalton v Henry Argus & Co (1880-81) LR 6 App Cas 740 at 791. 232. [2008] NSWSC 118 at [40] referring to Fennell v Robson Excavations Pty Ltd [1977] 2 NSWLR 486 at 493 per Glass JA. 233. Pantelone v Alaouie (1989) 18 NSWLR 119 at 129 per Giles J; Dalton v Henry Argus & Co (1880-81) LR 6 App Cas 740 at 772 per Fry J. 234. (2004) 88 SASR 225. 235. Referred to as the ‘general rule’ and exceptions discussed in Day v The Ocean Beach Hotel Shellharbour Pty Ltd [2013] NSWCA 250 at [14]–[15]. 236. (1975) 133 CLR 550. 237. (1975) 133 CLR 550 at [17]. 238. (1890) 16 VLR 729.

239. Ibid at 731. 240. See Lloyds Bank Ltd v Dalton [1942] Ch 466 at 471–2. 241. Jeffries v Williams (1850) 5 Exch 792; 155 ER 347; Elizabeth Bibby v Carter (1895) 4 H & N 153; 157 ER 795; Keegan v Young [1963] NZLR 720. See also Bognuda v Upton & Shearer Ltd [1971] NZLR 618 at 620. 242. (1850) 5 Exch 792 at 801; 155 ER 347 at 351. 243. [1963] NZLR 720 at 726. 244. [1971] NZLR 618; discussed in Brouwers v Street [2011] 1 NZLR 645. 245. See [1972] NZLR 741 at 744. 246. [1987] 2 NZLR 150; referred to in Tautau v Ministry of Transport [1991] 2 NZLR 204. 247. (1881) 6 App Cas 740 at 804. 248. Ibid. 249. (1874) 5 AJR 13. 250. (1890) 16 VLR 729 at 733–5. 251. Ibid at 739. 252. (1968) 87 WN (Pt 2) (NSW) 308. 253. Ibid at 314. 254. [1972] NZLR 741. 255. (1975) 133 CLR 550; considered in Toomey v Scolaro’s Concrete Constructions Pty Ltd (in liq) [2001] VSC 279. 256. (1975)133 CLR 550 at 566–7. 257. Ibid at 576. 258. NSW, Court of Appeal, 2 September 1993, Clarke JA, unreported. 259. (1881) 6 App Cas 740. 260. (1994) 6 BPR 13,743. 261. (1989) 18 NSWLR 119. 262. (1988) 6 BCL 45. 263. (1975) 133 CLR 550. 264. [1972] NZLR 741. 265. (1997) Report 84. 266. Attaching to all land an obligation ‘not to do anything on it which will withdraw support from any other land or from any building, structure, or erection which has been placed upon it’. 267. [2002] NSWSC 11 at [126]. 268. [2008]NSWSC 118. 269. [2012] NSWSC 369 at [28]. 270. See: Building Act (NT) ss 77–99; Local Government (General) Regulation 2005 (NSW); Home Building Regulations 2004 (NSW); Building Act 1975 (Qld); Building Regulations 2006 (Qld);

Development Act 1993 (SA) s 60; Development Regulations 2008 (SA) reg 75; Building Act 2000 (Tas) Pt 9; Building Act 2011 (WA); Building Regulations (WA) 2012 Pt 7. 271. Building Regulations 2006 (Vic) reg 602. 272. Building Act 1993 (Vic) s 84(1). 273. Building Act 1993 (Vic) s 85(1). 274. Building Act 1993 (Vic) s 85(2). 275. Building Act 1993 (Vic) s 87(1). 276. Building Act 1993 (Vic) s 90(1). 277. Building Act 1993 (Vic) s 88(1). 278. Building Act 1993 (Vic) s 93(1). 279. Building Act 1993 (Vic) s 94(1). 280. Building Act 1993 (Vic) s 95. 281. Building Act 1993 (Vic) s 98. 282. Building Act 1993 (Vic) s 99. 283. (1937) 56 CLR 464 at 478. 284. [2001] VSC 497 at [253]–[257]; referred to in Saitta Pty Ltd v Commonwealth [2003] VSC 346. See also Toomey v Scolaro’s Concrete Constructions Pty Ltd (in liq) [2001] VSC 279 at [132], where breaches of the Building Code of Australia were held to give rise to private rights because its objects included ‘to protect the safety and health of people who use buildings. 285. [1995] 2 AC 718 at 734–5. 286. (1882) 3 LR (NSW) 299. 287. (1968) 87 WN (Pt 2) (NSW) 308. 288. Ibid at 310. 289. (1975) 133 CLR 550. 290. [2008] NSWSC 118. 291. [1976] 1 NSWLR 36; applied in Keddell v Regarose Pty Ltd [1995] 1 Qd R 172; considered in Bamford v Albert Shire Council (1996) 93 LGERA 335; Tellamist Pty Ltd v Port Stephens Shire Council [2003] NSWSC 234. See also Piling Contractors (Qld) Pty Ltd v Prynew Pty Ltd [2008] NSWSC 118 at [192]– [198] where damages were assessed as the cost of rectification, not replacement. 292. [1976]1 NSWLR 36 at 39. 293. [1960] SR (NSW) 659. See also Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd (2002) 18 BCL 122; [2001] NSWCA 313; and Gagner Pty Ltd trading as Indochine Cafe v Canturi Corporation Pty Ltd [2009] NSWCA 413. 294. (1989) 18 NSWLR 119 at 136–8. 295. Parramatta City Council v Lutz (1988) 12 NSWLR 293 at 335. See also Tellamist Pty Ltd v Port Stephens Shire Council [2003] NSWSC 234. As to the measure of damages for damage done to unimproved land see Hansen v Gloucester Developments Pty Ltd [1992] 1 Qd R 14; Bamford v Albert Shire Council (1996) 93 LGERA 335; Black Creek Deer Farm Pty Ltd v ANZ Banking [1997] ANZ ConvR 16; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd [2008] FCAFC 38 at [29].

INDEX References are to paragraphs

A Abandonment building agreement, termination …. 12.2 easement …. 19.37 ABIC MW–1 arbitration standard form clauses …. 18.26 possession of site …. 4.12 practical completion occupancy before …. 9.24 ABIC MW 2008 bills of quantities …. 15.7 defect liability period …. 11.1 express powers of termination proprietors …. 12.3 progress certificates interest …. 9.19 practical completion date of …. 9.23 meaning …. 9.22 occupancy before …. 9.24 variation by architect, and …. 9.23

progress claims …. 9.21 standard ABIC clauses …. 9.21 recovery by builder of costs and expenses delay, due to …. 6.13 subcontracts …. 14.1 suspension of works …. 6.11 time extension for delay …. 6.12 variations …. 10.2, 10.5, absence of written order and recovery …. 10.7 orders in writing …. 10.6 ABIC MW–2008 H Vic Internal aids to construction …. 2.6 Air easement of …. 19.47–19.48 Airspace trespass …. 19.5–19.7 Alternative dispute resolution (ADR) growth in …. 18.12 mediators and conciliators, arranging …. 18.18 types of …. 18.13 arbitration …. 18.19, 18.21 see also Arbitration conciliation …. 18.16, 18.17 determination by certifier …. 18.18 Dispute Resolution Board …. 18.18 executive meetings …. 18.14 independent expert appraisal …. 18.18

mediation …. 18.15 mini-trials …. 18.18 negotiated settlement …. 18.18 Approval condition precedent, as …. 9.2 dishonest approval …. 9.3 overriding requirement …. 9.1 Arbitration see also Arbitrators ambit of jurisdiction …. 18.32 arbitration agreement …. 18.21 award …. 18.41 conduct of …. 18.36 costs …. 18.43 determining validity of contract …. 18.33 dispute …. 18.28 enforcement …. 18.46 governing legislation …. 18.20 interest …. 18.42 interlocutory orders …. 18.40 judicial review …. 18.45 natural justice …. 18.37 nature of …. 18.20 non-arbitral settlement …. 18.34 option to arbitrate …. 18.29 parties, duties of …. 18.38 procedure …. 18.35

Scott v Avery clauses …. 18.48 standard form clauses …. 18.22–18.28 ABIC MW–1 …. 18.26 AS 2124 …. 18.24–18.25 FIDC contracts …. 18.27 JCC …. 18.24 statutory tribunals Building Appeals Board …. 18.50 Victorian Civil and Administrative Tribunal …. 18.49 stay of proceedings …. 18.44 Arbitration agreement …. 18.18, 18.21 Arbitration clauses Ambit of jurisdiction …. 18.32 certification …. 9.14, 9.15, 9.16 uncertainty of contract …. 7.13 variations to contract …. 10.11 Arbitrators see also Arbitration appointment …. 18.27 liability of …. 18.47 removal …. 18.39 remuneration …. 18.31 Architects able and willing to act …. 4.19 certification, duty in …. 17.5 Client and Architect Agreement …. 17.2 client, duty to …. 17.10

concept design …. 17.1 contract administration …. 17.1 copyright …. 17.9 design development …. 17.1 documentation administration …. 17.1 duality of role …. 17.4 estimates …. 17.7 practice of other architects …. 17.12 registration …. 17.3 remuneration …. 17.6 role of …. 17.1 secret agreement …. 9.11 subservience and independence …. 9.12 substitute, appointment …. 17.8 supervision, duty of …. 17.11 third parties, duty to …. 17.13 AS 2124–1992 amendment of certificate …. 9.17 arbitration standard form clauses …. 18.22 bills of quantities …. 15.7 guarantee of quantities …. 15.14 final certificates …. 9.25 progress certificates …. 9.18 AS 4000–1997 bills of quantities …. 15.7

defect liability period …. 11.1 final certificate …. 9.25 frustration …. 12.1 guarantee of quantities …. 15.14 AS 4300–1995 bills of quantities …. 15.7 progress certificate interest …. 9.19 Assignment nature of …. 13.1 liabilities, of …. 13.2, 13.8 vicarious performance …. 13.9 prohibition of contractual provisions …. 13.10 effect of …. 13.12 issue of ‘final say’ …. 13.11 rights, of …. 13.2, 13.3 assignee takes subject to equities …. 13.5 equitable assignment, formalities for …. 13.4 nature of rights assignable …. 13.7 statutory assignments …. 13.6 Australian Consumer Law building cases …. 16.1

B Bills of quantities

contract documents …. 2.2 contracts and quantities contracts incorporating quantities …. 15.12 guarantee of quantities …. 15.14 quantities when not part of contract …. 15.13 nature of a bill …. 15.1 preparation of bill formulating bill …. 15.8 quantities not furnished …. 15.9 pricing the bill amount of tender …. 15.11 estimators …. 15.10 quantity surveying …. 15.2 quantity surveyors liability …. 15.17 profession of …. 15.15 work of …. 15.16 sections of bill function of bill …. 15.7 measured work …. 15.4 preliminaries …. 15.3 provisional items …. 15.5 total of tender …. 15.6 tender documents …. 5.2 Bonus early completion …. 6.2

Builders builder’s plant, use of contractor ousted from site …. 12.17 determination of contract completion at builder’s cost …. 12.16 express powers of determination …. 12.4 indemnity, entitlement to …. 4.18 negligence …. 16.10 recovery of costs and expenses delay, due to …. 6.13 registration …. 3.7 relieved of liability instructions, by …. 11.2 Building agreements see Building contracts Building and Construction Industry Security of Payment Act 1999 (NSW) …. 9.20 Building and Construction Industry Security of Payment Act 2002 (Vic) …. 9.20 Building contracts see also Contract document agreement need for …. 1.1 conduct of the parties …. 1.3 incomplete …. 1.3 imputed intention of parties …. 1.3 objective nature of …. 1.3 assignment, prohibition …. 13.10 bills of quantities …. 15.1 see also Bills of quantities

determination …. 12.1 see also Determination doctrine of entire contracts …. 8.1–8.8 entire contract clauses …. 2.6 illegality …. 3.5–3.7 implied terms …. 4.1 see also Implied terms of contract mutual manifestation of assent …. 1.2 implied from circumstances …. 1.2 principal types of contract cost plus contract …. 1.4 lump sum contract …. 1.4 schedule of rates contract …. 1.4 standard form …. 1.4 repudiation …. 12.5 see also Repudiation rise and fall clauses …. 7.1 see also Rise and fall clauses time for completion …. 6.1 see also Time for completion uncertainty …. 3.1 see also Uncertainty variations …. 10.1 see also Variations waiver …. 3.8 see also Waiver Building disputes alternative dispute resolution see Alternative dispute resolution (ADR) building cases …. 16.1 Building Cases List …. 18.5 disputation …. 18.1 litigation …. 18.3 see also Litigation negligence, trend towards …. 16.2, 16.12 resolution, avenues for …. 18.2

Building operations adjoining owners and occupiers …. 19.1 easements …. 19.31 see also Easements nuisance …. 19.8 see also Nuisance principle legal issues …. 19.2 rights of support …. 19.49 see also Rights of support trespass …. 19.2–19.4 see also Trespass underpinning see Underpinning Buildings meaning …. 2.20 rights of support …. 19.51 new building on dominant land …. 19.56

C Cause of action extinguishment …. 11.9 negligence …. 16.4 time cause of action arises breach of contract …. 11.8 negligence …. 11.8 Certificate of practical completion …. 9.4 date of practical completion importance …. 9.23 occupancy before …. 9.24 practical completion date of …. 9.23

meaning …. 9.22 Certification see also Certificate of practical completion actual certification …. 9.4 amendment of certificate …. 9.17 arbitration clause …. 9.14 architect, duty in …. 17.5 certificate attacked as erroneous …. 9.16 certification or reasons for refusal …. 9.6 certifying by implication …. 9.5 court’s power to re-open …. 9.15 disqualifying circumstances …. 9.10 engineers negligent certification …. 17.17 final certificates …. 9.8 see also Final certificates fraud or collusion …. 9.9 progress certificates …. 9.7 see also Progress certificates right to be heard …. 9.13 secret agreement …. 9.11 subservience and independence …. 9.12 variations to contract …. 10.9 withdrawal of certificate …. 9.17 Collusive tendering see Tenders Common law collusive tendering, cases …. 5.14 Competition and Consumer Act 2010 (Cth) building cases …. 16.1

misleading or deceptive conduct …. 8.13 unconscionability …. 7.14 relevant considerations …. 7.14 Compromise building disputes …. 18.7 subcontracts …. 14.13 Conciliation …. 18.16 Condition precedent approval or certification …. 9.2 Contra proferentem rule clauses in contracts …. 2.14 Contract documents bills of quantities …. 2.2 building contracts …. 2.1 kinds of contract documents agreement …. 2.2 conditions …. 2.2 drawings …. 2.2 miscellaneous documents …. 2.2 schedule of rates …. 1.7, 2.2 specification …. 2.2 interpretation of documents ambiguity, and …. 2.16 background knowledge available to parties …. 2.16 buildings, meaning …. 2.20 conflicts in and between documents …. 2.9

contra proferentem rule …. 2.14 general approach …. 2.5 internal aids to construction …. 2.6 objectively determined commercial purpose …. 2.5, 2.16 oral contracts and printed conditions …. 2.13 parol evidence rule …. 2.15 printed word, effect of …. 2.7 prior negotiations …. 2.17 reasonableness …. 2.10 subsequent conduct …. 2.18 terms describing building to be erected …. 2.19 surrounding circumstances …. 2.16 unconscionability …. 2.11 words struck out …. 2.8 main standard forms ABIC BW–1 2002 Basic Works Contract …. 2.3 ABIC EW–1 2003 …. 2.3 ABIC MW–2008 Major Works Contract …. 2.3 ABIC MW–2008 Major Works Housing …. 2.3 ABIC MW–2008 H Vic …. 2.3 ABIC MW–2011 Qld …. 2.3 ABIC SW–2008 Simple Works Contract–Housing …. 2.3 JCC, replacement of …. 2.3 other standard forms CM 2012 (Construction Management Contract) …. 2.4

DECON2 SC 2005 (Design and Construct Subcontract – lump sum) …. 2.4 HIC 5 (Home Improvement Contract) …. 2.4 IC 2007 (Independent Contractors Agreement) …. 2.4 UHC1 …. 2.4 Contractors see also Subcontractors employment of …. 4.15 inaccurate information supplied to contractual liability …. 8.12 contractual provisions …. 8.14 negligent misrepresentation …. 8.15 other liability …. 8.13 licence, revocation of …. 4.14 ousting from site …. 12.17 Contracts see Building contracts; Contract documents Copyright architects …. 17.9 engineers …. 17.16 Cost-based clauses …. 7.6, 7.7 Cost plus contracts …. 1.9 bonus or penalty provision …. 1.10 nature of contract …. 1.9 Costs arbitration …. 18.43 demolition costs …. 11.5 determination of contract completion at builder’s cost …. 12.16

recovery by builder delay, due to …. 6.13 repair costs …. 11.5 tendering …. 5.5

D Damages see also Liquidated damages damages related issues different work undertaken …. 11.11 extinguishment of cause of action …. 11.9 inconvenience, damages for …. 11.16 mitigation …. 11.10 plaintiff’s use of damages award …. 11.13 profit on sale …. 11.12 repairs paid for by others …. 11.14 stress, damages for …. 11.15 time cause of action arises …. 11.8 date when assessed …. 11.7 delay in completion …. 6.2 demolition or repair costs …. 11.5 design engineers …. 11.6 measure of damage …. 11.4 negligent act, loss caused by …. 16.8 proprietor repudiates …. 12.18 purpose of damages …. 11.3 recovery by builder

delay, due to …. 6.13 repudiation, acceptance of, and …. 12.8 specific performance …. 11.17 DECON2 (Design & Construct Contract — Lump Sum) …. 2.4 Default notice contents …. 12.10 Defects builder relieved of liability instructions, by …. 11.2 damages …. 11.3 see also Damages damages related issues …. 11.8 see also Damages defects liability periods, and …. 11.1 specific performance …. 11.17 Delay in completion see also Time for completion damages …. 6.2, 6.3 doctrine of penalties …. 6.4 penalty …. 6.3, 6.7 recovery by builder of costs and expenses …. 6.13 time extension for …. 6.12 Demolition costs …. 11.5 Design engineer see also Engineers negligence damages …. 11.6 Determination abandonment …. 12.2

agreement between parties …. 12.1 breach by other party …. 12.1 contractual terms …. 12.1 express contractual power, by …. 12.1 express powers of builder’s powers …. 12.4 proprietor’s powers …. 12.3 frustration …. 12.1 issues in determination of contracts assessing cause shown reasonableness …. 12.12 completion at builder’s cost …. 12.16 default notice, contents …. 12.10 method of giving notice …. 12.9 notice given unreasonably …. 12.14 notice given vexatiously …. 12.14 ouster of contractor from site builder’s plant, use of …. 12.17 power to determine accept repudiation, and …. 12.15 premature notice …. 12.11 proprietor repudiates measure of damages …. 12.18 reasonable diligence …. 12.13 show cause notice, contents …. 12.10 loss of right to liquidated damages …. 6.10 repudiation …. 12.5 see also Repudiation Documents see Contract documents; Tenders Domestic Building Contracts Act 1995 (Vic) …. 9.20 Drawings

contract documents …. 2.2 tender documents …. 5.2 Duty of care …. 16.5 breach of duty …. 16.6

E Easements abandonment …. 19.37–19.38 actional interference …. 19.31 air, of …. 19.47 car park, for …. 19.29 dominant and servient tenement, requirement …. 19.28 extinguishment by unity of seisin …. 19.35–19.36 formation …. 19.28 implied supplementing formal grant of land …. 19.43 Wheeldon v Burrows, rule in …. 19.41–19.42 infringement …. 19.39–19.40 interference with …. 19.30 light, of …. 19.30, 19.32–19.34 necessity, of …. 19.44–19.46 reasonable enjoyment of right …. 19.31 substantial or material interference with right …. 19.31 Ed 5b arbitration standard form clauses …. 18.22

final certificates …. 9.26 Engineers administration of contract …. 17.2 client, duty to …. 17.15 copyright …. 17.16 design standard, departure from …. 17.18 negligent certification …. 17.17 role …. 17.14 third parties, duty to …. 17.19 Equitable assignment formalities …. 13.4 Entire contract clauses …. 2.6 Estimates architects …. 17.7 tenders, as …. 5.11 Estimators bills of quantities …. 15.10 Expert evidence building disputes …. 18.8 Extras work outside the contract …. 10.13

F Final certificates …. 9.4, 9.5, 9.8 ABIC MW 2008 …. 9.26 AS 4000–1997 …. 9.26

defects liability period …. 9.23 Ed 5b …. 9.26 JCC …. 9.26 NBWC3 …. 9.26 Forfeiture deposit, of …. 6.5 materials or plant, of …. 6.6 moneys, of …. 6.6 Forms see Standard form Formula-based clauses …. 7.6, 7.8 Fraud or collusion certificate, withholding …. 9.3 certification …. 9.9, 9.10 collusive tendering …. 5.13–5.15 final certificate defects in work …. 9.23 Fraudulent misrepresentation information supplied to contractor …. 8.13

G Guarantees performance of obligations drafting …. 10.10

I Illegality

contracts contrary to statute …. 3.5 enforceability …. 3.6 question of construction …. 3.5 public policy, against …. 3.5 quantum meruit …. 3.6 registration of builders …. 3.7 Implied terms of contract general implication of terms …. 4.1 business efficacy …. 4.2 inference from prior conduct …. 4.3 trade custom or usage …. 4.3 particular implied terms architect’s availability …. 4.19 best endeavours …. 4.6 builder’s entitlement to indemnity …. 4.18 compliance with regulations …. 4.8 efficacy of works …. 4.7 employment of contractor …. 4.15 fitness for purpose …. 4.5 materials …. 4.5 obligation of good faith …. 4.6 permits …. 4.11 possession of site …. 4.12 progress payments …. 4.16 public authority, ancillary work by …. 4.17 revocation of contractor’s licence …. 4.14

sale of house to be erected …. 4.9 sufficient working space …. 4.13 time for completion …. 4.10 workmanship …. 4.4 Inconvenience damages for …. 11.16 Indemnity builder’s entitlement to …. 4.18 Interest award made by arbitrator …. 18.42 Interlocutory orders …. 18.40

J JCC (Joint Contracts Committee) arbitration standard form clauses …. 18.22 bills of quantities …. 15.7 variations …. 10.2 Judicial review arbitration award …. 18.45

L Letters of comfort …. 5.6 Letters of intent tenderers, intent to enter into contract with …. 5.6

Liabilities, assignment see Assignment Light easement of …. 19.30, 19.32–19.34 Limitations Act cause of action in negligence limitation period …. 16.9 Liquidated damages delay in completion …. 6.3 doctrine of penalties …. 6.4 loss of right to …. 6.7 determination of contract …. 6.10 proprietor, prevention by …. 6.8 waiver …. 6.9 penalty, or …. 6.3 Litigation building disputes Building Cases List …. 18.5 expert evidence …. 18.8 jurisdiction of courts …. 18.3 offer of compromise …. 18.7 preliminary questions …. 18.6 procedure …. 18.4 references out of court …. 18.9 special referee …. 18.10 ‘as the interests of justice require’ …. 18.10 objection to …. 18.10

thorough, analytical and scientific approach …. 18.10 view …. 18.11 Local authorities negligence …. 16.11 Lump sum contracts …. 1.4 nature of contract …. 1.5 types of lump sum contract fixed or firm price …. 1.6 rise and fall, subject to …. 1.6

M Materials forfeiture of …. 6.6 implied term in contract …. 4.5 recovery by subcontractor …. 14.14 Mediation …. 18.13, 18.16 mediators/conciliators, arranging …. 18.18 ‘structured negotiation’ …. 18.15 Mitigation of loss …. 11.10

N Natural justice arbitration …. 18.37 Negligence breach of duty …. 16.6 builders …. 16.10

building cases generally …. 16.1 duty of care …. 16.5 elements of cause of action …. 16.4 engineers design standard, departure from …. 17.18 negligent certification …. 17.17 limitation period …. 16.9 local authorities …. 16.11 loss caused by negligent act …. 16.7 meaning …. 16.3 measure of damage …. 16.8 statutory provisions …. 16.12 trend towards …. 16.2 Negligent misrepresentation information supplied to contractor …. 8.13, 8.15 subcontractors …. 14.8 Noise vibration and dust nuisance …. 19.8 Notice of determination see Determination Nuisance adopting or continuing a nuisance …. 19.14–19.15 assessment of risk …. 19.13 coming to a nuisance …. 19.8, 19.12 deliberate or reckless use of land …. 19.13 dust, vibrations and air pollution …. 19.16, 19.20 duty of care …. 19.12

doctrine of foreseeability …. 19.10 interference resulting in material damage to land …. 9.16 interference with amenity or personal enjoyment of land …. 19.18 balance of interests …. 19.19 relevant considerations …. 19.19 causation …. 19.18 interlocutory injunction …. 19.21 noise vibration and dust …. 19.20 balance of interests …. 19.21 demolition operations …. 19.22 mitigation …. 19.20–19.22 practical frustration …. 19.23 private element of fault …. 19.10 liability …. 19.10 unreasonable and substantial interference with rights …. 19.9, 19.10–19.11 remedies …. 19.24 abatement …. 19.24 damages …. 19.26 injunctive relief …. 19.24 nominal damage …. 19.24 permanent injunction …. 19.25 self-help …. 19.27

O Omissions portion of the work …. 10.14 Onus of proof payment quantum meruit …. 8.11 Oral contracts printed conditions, and …. 2.13

P Parol evidence rule written contracts …. 2.15 Payment entire contracts doctrine of …. 8.1 payments and acceptance …. 8.6 progress payments …. 8.5 substantial performance …. 8.2 repudiation …. 8.3 taking benefit of work …. 8.4 implied promise to pay …. 10.8 inaccurate information supplied to builder action for damages …. 8.13 contractual liability …. 8.12 contractual provisions …. 8.14 fraudulent misrepresentation …. 8.13

negligent misrepresentation …. 8.11, 8.15 progress certificate …. 8.5 progress payments …. 4.16, 8.5 standard form building contracts …. 8.5 repudiation …. 8.3 quantum meruit …. 8.8 arising out of obligation by law …. 8.9 entire contract …. 8.10 onus of proof …. 8.11 repudiation of contract …. 8.3 security of payment …. 8.7 subcontractor …. 14.4 statutory schemes for payment …. 14.5 subcontracts pay when paid clauses …. 14.9 retention moneys …. 14.10 wasted pre–contract expenditure doctrine of unjust enrichment …. 8.17 principle of restitution …. 8.16 Penalties characterisation …. 6.4 delay in completion …. 6.3 doctrine of penalties …. 6.4 liquidated damages, or …. 6.3 Permits implied term of contract …. 4.11

Possession of site ABIC MW 2008 …. 4.12 Practical completion, certificate of see Certificate of practical completion Profit on sale defects in building damages …. 11.12 Progress certificates …. 9.4, 9.7 Building and Construction Industry Security of Payment Act …. 9.20 interest …. 9.19 progress claims …. 9.21 standard ABIC clauses …. 9.21 progress payments …. 9.18 Progress payments see also Payment progress certificate …. 9.5, 9.18 Proprietor architect, role of …. 17.4 express powers of determination …. 12.3 prevention by loss of right to liquidated damages …. 6.8 repudiation by measure of damages …. 12.18 subcontractor, and, relationship …. 14.4–14.8 Public authority ancillary work done by …. 4.17

Q

Quantity surveyors liability of …. 15.17 profession of …. 15.15 quantity surveying …. 15.2 work of …. 15.16 Quantum meruit basis of claim …. 3.6 illegality of contract …. 3.6 payment …. 8.8 entire contract …. 8.10 onus of proof …. 8.11 repudiation …. 8.3 restitution, distinction …. 3.6 unjust enrichment …. 3.6 unregistered builders …. 3.7

R Reasonable diligence …. 12.13 Rectification building agreements …. 3.10 common mistake by parties …. 3.10 correction of errors …. 3.10 requirements for …. 3.11 Registration architects …. 17.3 Regulations

compliance with …. 4.8 Repairs costs …. 11.5 paid for by others …. 11.14 Repudiation acceptance of …. 12.8 power to determine, and …. 12.15 damages …. 12.8 effect of …. 12.7 instances of …. 12.6 meaning …. 12.5 proprietor, by measure of damages …. 12.18 Restitution basis of claim …. 3.6 doctrine of …. 3.6 prima facie obligation …. 3.6 principle of …. 8.16 quantum meruit, distinction …. 3.6 unjust enrichment …. 3.6 Rights, assignment see Assignment Rights of support duty of care when excavating …. 19.60–19.62 interference with …. 19.53–19.54 independent contractors …. 19.54–19.55 nature of right …. 19.50

new building on dominant land …. 19.56–19.57 stranger liable without easement …. 19.58–19.59 support of buildings …. 19.51–19.52 Rise and fall clauses …. 7.2 advantages …. 7.5 cost–based clauses …. 7.6, 7.7 formula–based clauses …. 7.6, 7.8 interpretation …. 7.4 origins and purposes …. 7.3 principle of rise and fall …. 7.1–7.2 uncertainty arbitration clauses …. 7.13 cases on rise and fall …. 7.10, 7.12 doctrine of …. 7.9 drafting rise and fall clauses …. 7.11 unconscionability principles laid down by High Court …. 7.14 statute, under …. 7.15 statutory regulation …. 7.15

S Sale of land house to be erected …. 4.9 Schedule of rates contracts …. 1.4 contents of …. 1.8 essential characteristics …. 1.9

nature of contract …. 1.7 Scott v Avery clause …. 18.48 Show cause notice contents …. 12.10 Specific performance court order …. 11.17 Specifications contract documents …. 2.2 tender documents …. 5.2 Standard forms building contracts …. 2.3, 2.4 progress claims and payments …. 9.16 recovery by builder, costs and expenses ABIC MW 2008 Major Works Contract …. 6.13 suspension of works …. 6.11 time extension for delay …. 6.12 States and territories arbitration governing legislation …. 18.20 local contracts, forms …. 2.4 payment under construction contracts legislation …. 9.20 rise and fall clauses statutory regulation …. 7.15 statutory assignments …. 13.6 statutory schemes for payment …. 14.5

Statutory tribunals building disputes Building Appeals Board …. 18.50 Victorian Civil and Administrative Tribunal …. 18.49 Stay of proceedings arbitration …. 18.44 Stress damages for …. 11.15 Subcontractors see also Subcontracts head subcontractor, liability breach of contract …. 14.11 employees of subcontractors, to …. 14.12 meaning …. 14.2 nominated …. 14.16 proprietor, and express warranties …. 14.7 negligent misrepresentation …. 14.8 payment of subcontractor …. 14.4 statutory schemes for payment …. 14.5 warranties …. 14.6 withdrawal of tender …. 5.8 Subcontracts see also Subcontractors compromises …. 14.13 incorporated terms of head contract …. 14.15 liability under …. 14.11, 14.12 materials on site …. 14.14

pay when paid clauses …. 14.9 prime cost and provisional sums …. 14.17 retention moneys …. 14.10 right to subcontract …. 14.1 subject matter and form …. 14.1 types and forms …. 14.3 Substantial performance entire contracts …. 8.2 Superintendents administration of contract …. 17.2 Swimming pool excavation nuisance …. 19.16

T Tenders acceptance of tender …. 5.10 bills of quantities …. 15.1 see also Bills of quantities collusive tendering common law cases …. 5.14 practice of …. 5.13 statutory position …. 5.15 estimates …. 5.11 forfeiture clauses …. 6.5–6.6 recalling tenders …. 5.9 standing offers …. 5.12 tender documents …. 5.2

tender, meaning …. 5.1 tendering conforming and non–conforming tenders …. 5.4 cost of tendering …. 5.5 invitation to tender …. 5.3 letters of intent …. 5.6 withdrawal of tender subcontractor, by …. 5.8 tenderer, by …. 5.7 Time for completion bonus or damages …. 6.2 forfeiture clauses deposit, of …. 6.5 materials or plant, of …. 6.6 moneys, of …. 6.6 implied term of contract …. 4.10 liquidated damages provisions doctrine of penalties …. 6.4 liquidated damages or penalty …. 6.3 loss of right to liquidated damages …. 6.7 determination of contract …. 6.10 proprietor, prevention by …. 6.8 specific performance …. 6.10 waiver …. 6.9 standard form provisions recovery by builder of damages or costs

ABIC MW–1 2008 …. 6.13 suspension of works …. 6.11 ABIC MW–1 2008 …. 6.11 time extension for delay …. 6.12 ABIC MW–1 2008 …. 6.12 time requirement …. 6.1 Trade Practices Act 1974 (Cth) collusive tendering …. 5.15 misleading or deceptive conduct …. 8.13 unconscionability …. 2.12, 7.14 Trespass airspace …. 19.5–19.7 generally …. 19.2 land …. 19.3–19.4 remedies …. 19.7

U Uncertainty ambiguous provisions …. 3.1 blanks not completed …. 3.4 doctrine of …. 7.9 incomplete …. 3.1 indefinite agreements …. 3.3 obligation to act in good faith …. 3.3 omission of essential terms …. 3.1 rise and fall clauses …. 7.10–7.13

cases on rise and fall …. 7.10 drafting …. 7.11 subject to contract …. 3.3 standard form contracts …. 3.2 void for …. 3.1 Unconscionability Australian Consumer Law …. 7.14 contract documents equitable intervention …. 2.12 unconscionable conduct doctrine …. 2.11 rise and fall clauses …. 7.14–7.15 Underpinning breach of statutory duty …. 19.65–19.66 damages …. 19.67 generally …. 19.63 right to …. 19.63 Victorian provisions …. 19.64 Unity of seisin extinguishment by …. 19.35 Unjust enrichment …. 8.17

V Variations contractual provisions …. 10.2 extras …. 10.13 omissions …. 10.14

ordering variations absence of written order and recovery …. 10.7 arbitration clause …. 10.11 certification …. 10.9 drafting guarantees …. 10.10 implied promise to pay …. 10.8 orders in writing …. 10.6 power not unlimited …. 10.4 power to order …. 10.3 valuation of variations contract adjustment …. 10.5 waiver …. 10.12 terminology …. 10.1 Vicarious performance …. 13.9

W Waiver abandonment of right …. 3.8 concept of …. 3.8 contractual provisions …. 3.9 right to recover damages for delay …. 6.9 variations to contract …. 10.12 Warranties subcontracts …. 14.6 express warranties …. 14.7 Workmanship

efficacy of works, and …. 4.7 implied terms in contract …. 4.4