Allmen Industries Pty Ltd v Action Recovery Services Pty Ltd

COUNSEL : Mr J Hemmings (Appellant) Mr P Sternberg (Respondent) SOLICITORS : Coudert Brothers (Appellant) Elias Gates & Associates (Respondent) CATCHWORDS : Building sub-contract - subcontractor stopped work - dispute as to which party repudiated the contract - "of-the-cuff" reserved judgment - inadequate findings unrelated to the pleadings - conflict of evidence - new trial - ND DECISION : Appeal allowed with costs; Cross appeal dismissed with costs; Retrial ordered; Respondent granted a certificate under the Suitors Fund Act 1951

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40231/99 DC 9694/97 FITZGERALD JA FOSTER AJA BROWNIE AJA

ALLMEN INDUSTRIES PTY LTD v ACTION RECOVERY SERVICES PTY LTD

1 FITZGERALD JA: The appellant, Allmen Industries Pty Ltd, was a subcontractor to Concrete Constructions, which had been engaged to construct Blocks A, B, C, D, and E and ancillary structures at the Canterbury Hospital. Allmen in turn contracted with the respondent, Action Recovery Services Pty Ltd, to erect steelwork which was to be supplied by Allmen. 2 Following an on-site meeting on 29 January 1997 between Mr Henry, an employee of Allmen, and Mr Dell, an employee of Action, and a further meeting by them with a representative of Concrete Constructions the following day, Mr Dell submitted a written quote for $76,250 on behalf of Action on 4 February 1997. Mr Henry, on behalf of Allmen, sent Action a written order in response to that quote, accepting the price quoted, on 21 February 1997. 3 Action's written quote and Allmen's written order respectively provided: Quote (4 February 1997) "Allmen Engineering, ….. Re: Canterbury Hospital Following out site meeting at Canterbury Hospital in regards to installing steel work for roofing. As discussed at meeting with Concrete Constructions site manager there would be very little, if any, tower crane made available to us for installation. Taking this into account we have allowed for mobile cranes to install steelwork on buildings D & E from around outside. We can use mobiles on sections off Blocks E, B & A only from around outside owing to limited access. Therefore we have allowed for a 5 Ton track crane to install remaining steel on these locations. Included in quotation is supply of all working platform labour and grouting of columns. OUR PRICE: - $76,250.00 …." Order (21 February 1997) "Allmen Engineering Canterbury Hospital ….. To: Action Recovery Services PLEASE SUPPLY THE FOLLOWING GOODS OR SERVICES IN GOOD ORDER & CONDITION: ERECTION OF STEELWORK FOR CANTERBURY HOSPITAL, BLOCKS A, B, C, D & E, WALKWAYS, MAIN ENTRY CANOPY & AMBULANCE BAY CANOPY INCLUDE. ALL PURLINS, BRIDGING, SCAFFOLDING, CRAINAGE, ACCESS, GROUTING RE: YOUR QUOTE DATED 4/2/97 $76,250." 4 Action commenced to perform its contract with Allmen on 17 February 1997 (prior to Allmen's written order) and stopped work and left the site on 8 May that year. Action alleged, and the trial judge accepted, that Allmen had repudiated the contract. Allmen alleged that Action repudiated the contract when it stopped work and left the site. 5 Action sued Allmen, which counterclaimed. Most pleadings were amended, some more than once. Nonetheless, neither the pleadings nor the trial judge's judgment satisfactorily identified the issues, and his Honour dealt with some matters on a basis not advocated by either party. 6 Action's final pleading was an Amended Statement of Liquidated Claim. The relief claimed was stated as follows: "9. Interest on the above sum pursuant to Section 83 A of the District Court Act. 10. Damages, interest and costs.

The "above sum" referred to in paragraph 9 was calculated in paragraph 8, which alleged that, as a result of its acceptance of Allmen's repudiation of their contract, Action had "…lost the benefit of the said agreement and lost the revenue that it would otherwise have received thereunder and … suffered loss and damage." "Particulars" were given in the following terms:

Additional work carried out at request of [Allmen] $22,469.08

$49,539.75 ". 7 Action's pleading did not allege that it stopped work because Allmen refused to pay it money to which it was entitled under the contract or that it was entitled to be paid the contract price when it stopped work. 8 Allmen's final cross-claim was for: "(a) Damages in the sum of $193,746.90; (b) Interest; (c) Costs; (d) Any other order the Court deems fit to order." 9 The trial judge gave judgment for Action for $41,750 (after amendment "pursuant to the slip rule") "plus costs". The amount awarded included "whatever claim [Action] has to the present time pursuant to s 83A [of the District Court Act]". Implicitly, Allmen's cross-claim was dismissed, presumably with costs. 10 Allmen's notice of appeal seeks the following orders: "1. That the appeal be allowed. 2. That the judgment of Christie J dated 11 March 1999 (as amended under the slip rule on 18 March 1999) be set aside. 3. In lieu thereof, an order for the Defendant/Cross Claimant on its cross claim. 4. Costs. 5. Any other Orders the Court thinks necessary or appropriate."

(According to its written submissions, Allmen now claims to be entitled to damages of $230,811.90). 11 Action has cross-appealed, and seeks the following orders: "1. That the cross-appeal be upheld. 2. Judgment in the Court below be set aside and in lieu thereof "Judgment for the Cross-Appellant in the sum of $49,500 plus interest as assessed pursuant to Section 83A from 10 May, 1997 to date." 3. That the costs order made in the Court below on 28 April 1999 be set aside. 4. Costs. 5. Such further or other order as this honourable Court considers appropriate. 12 The ultimate issue at trial was whether Action was entitled to stop work and leave the site. Its claim that it was entitled to do so was founded on the premise that it was entitled to terminate the contract for Allmen's repudiation. (The difficulty caused by Action's pleaded allegation that it "… accepted [Allmen's] repudiation by letter dated 16 June, 1997" Amended Statement of Claim, para. 7. has been glossed over.) The trial judge held that Allmen had repudiated the contract when Action stopped work and left the site. Unless that conclusion was correct, Action has not disputed that it repudiated the contract when it stopped work and left the site. The critical issue, therefore, is whether Allmen repudiated the contract. 13 Action's only allegations concerning the nature or terms of the contract were contained in the following paragraphs: "3. On or about 21 February, 1997 [Action] agreed with [Allmen] to supply men, tools and equipment to install roof support steel supplied by [Allmen] at a project site known as The Canterbury Hospital at a price of $76,250. 4. It was an implied term of the said contract that [Allmen] would adhere to a precise delivery schedule and supply steel to the project site which could properly be erected by [Action] pursuant to the said agreement." 14 Although Action has still not formulated the contract which it alleges with any precision, no attempt was made in this Court to justify the implication of the term specified in paragraph 4 of its pleading. Broadly stated, Action now seems to allege, and effectively argued that the trial judge found, Action submitted that some of the "findings" for which it contended are to be "implied" into the trial judge's reasons. that:

(a) the parties' contract consisted of Action's written quote of 4 February 1997 and Allmen's written order of 21 February 1997, together with terms discussed and orally agreed between Mr Dell (on behalf of Action) and Mr Henry (on behalf of Allmen) on 29 January 1997 (and perhaps 30 January 1997), and documents, including plans, which were provided to Mr Dell, principally, if not wholly, at the meeting on 29 January;

(b) it was an express term of the parties' contract that Action would be able to complete its work "in a 10 week period on a 2 week on, 2 week off, basis" (a 6 day working week was assumed);

(c) it was an implied (or perhaps express) term of the parties' contract that Allmen would supply Action with steel at the times and in the condition necessary for it to complete its work under the contract "in a 10 week period on a 2 week on, 2 week off, basis"; and (perhaps)

(d) it was an implied (or perhaps express) term of the contract that Action was entitled to be paid the contract sum when it had completed 10 weeks' work. 15 Although Action contended that the "10 week period" commenced on 17 February 1997 and ended 10 weeks later, Mr Dell conceded in his evidence that the "10 week period" related to 10 weeks work, and that "a 10 week period on a 2 week on, 2 week off, basis" which commenced on 17 February would finish 18 weeks later. 16 The paragraph alleging repudiation in Action's Amended Statement of Liquidated Claim was in the following terms: "[Allmen] has wrongfully and in breach of the said agreement: (a) supplied steel to the said site incorrectly and carelessly painted; (b) supplied steel to the he said site with incorrectly welded fixing brackets; (c) supplied steel support columns which were not of correct dimensions; (d) supplied purlings with incorrect dimensions; (e) supplied purlings with incorrect rake; (f) supplied steel columns with incorrectly located brackets for the affixing of purlings; (g) wrongful placement of reinforcing steel in concrete floor which prevented the drilling and fixing of steel columns in positions as per plan; (h) failure to supply working drawings for the erection of steel; (i) failure to supply steel in accordance with timetable prepared by [Allmen]. By the said conduct herein, [Allmen] has evinced an intention no longer to be bound by the said agreement and has repudiated the same." 17 The "timetable" referred to in subparagraph 6(i) of Action's pleading might be intended to be a reference back to the "precise delivery schedule" referred to in paragraph 4 of its pleading. Action made no attempt to prove either a "precise delivery schedule" or a "timetable". 18 Although the extent and significance of the delay is disputed, Allmen accepts that it delayed Action's performance of its work by the non-delivery or late delivery of steel and the delivery of steel which was incorrectly manufactured or painted. If (as Action alleged) Allmen's non-delivery or late delivery of steel or delivery of steel which was incorrectly manufactured or painted constituted breaches of the contract by Allmen, Action continued with the contract until 8 May. It was common ground that, in the period between 17 February and 8 May (in excess of 11 weeks) Action performed only part of the contract work (probably less than half). Action also performed some additional work at Allmen's request for which it claimed and received extra payment. There is no suggestion that Allmen's breaches were worse in the period immediately preceding 8 May 1997 than they had been earlier. However, Action's attitude changed. By 5 May, apparently on the basis that it had worked for more than 10 weeks without "weeks off" and that the contract price was related to its estimated costs for labour and equipment for 10 weeks work with a 20% profit margin, Action seems to have considered that, in addition to the payments which it had received under the contract and for extra work, it was entitled to be paid the balance of the contract price. 19 The trial judge accepted Mr Dell's evidence of a meeting between the parties on or about 5 May 1997, a telephone conversation which he had with Mr Henry on or about 8 May, and his subsequent conversation that day with Allmen's site representative immediately prior to Action stopping work. 20 Mr Dell's evidence of the meeting on or about 5 May was that he said: "This is ridiculous what is happening,…. we cannot install the steel. Every time we go to do something, there is problems. We are just not achieving anywhere, we are not going anywhere, we are not doing anything. We have now been on the project for over 10 weeks. We quoted to do this job in 10 weeks, we have now expended the time on this project. Through no fault of our own, we have been stopped installing the steel because of the problems that have arisen and we are at the moment now that it is economically unattainable to continue on in this manner."

Mr Dell went on to suggest to Mr Henry ".. that we could terminate the contract where it is and continue the job on a do and charge basis" or "the second … option would be that we could renegotiate the remainder of the contract at a fixed price." 21 According to Mr Dell, Mr Henry stated that "… the drafting was the problem on the first instance of all the work that we were doing and the hold ups were in the paint shop. He has engaged two more drafting companies to complete the project and a new painting contracting and this would resolve a lot of the problems that were occurring." 22 No decision was reached at the meeting on or about 5 May. 23 In Mr Dell's evidence of his telephone conversation with Mr Henry on or about 8 May he said that "Mr Henry rejected our proposal and stated to me that I had a contract and I had to finish the job at that contract." Mr Dell told Mr Henry "that I was not prepared to continue in the basis of the job the way it was going." 24 After that telephone conversation, Mr Dell "… went to the site, … [and] informed … Allmen … that I would be removing my personnel and equipment off site, that we have struck an intolerable situation and cannot continue." Mr Dell then directed Action's employees to leave the site, but left some of its equipment on site temporarily so that Allmen "could continue doing some work for rectification without any delays." 25 The trial judge's reasons for holding that Allmen repudiated the parties' contract were stated in the following passages: "… I accept the general tenor of the plaintiff's evidence that this project was very very significantly behind time. I accept that it was so significantly behind time by way of failure of delivery of steel or delivery of faulty steel, that in fact the defendant company was never in a position to honour its portion of the contract, which I find was, amongst other things, to keep the supply of steel up to the plaintiff so that the work could be carried out within the time-frame envisaged. … Matters obviously reached a head approximately early May … … The contract was clearly not capable of being performed in the manner in which the plaintiff had agreed to perform it and I think that the plaintiff was entitled to regard the defendant's refusal, and there was a refusal, because I accept Mr Dell's version of what was said at this conversation of 5 May, and I accept the outcome of it. There was a refusal to renegotiate or have anything to do with it, anything to do with any renegotiation and indeed Mr Henry agrees that he said words to Mr Dell to the effect, "Look you've signed a deal and you're going to carry it out and there's going to be no problem about it." Because Mr Dell taking the view with the plaintiff company that they were entitled to an amendment to the contract or an entirely new contract because they had, as best they could, performed the contract in the manner in which the defendant was prepared to allow them up to 5 May. That is, they had been there ten weeks full time instead of two weeks on and off, they had had their workmen there all the time. They have clearly on any view of the evidence as to damages, expended the amount in terms of wages and crane hire and so on. I accept that a lot of that time was wasted by reason of the fact that they were re-fixing steel and were waiting on steel and were not able to pursue the contract in the manner in which they desired and the manner in which they had agreed with the defendant that they would. The defendant's refusal to and/or inability to alter that situation was, in my view, a repudiation of the contract which the plaintiff was entitled to accept and did accept." 26 The trial judge proceeded to award Action damages on the basis, broadly stated, that it was entitled to be paid the contract price (presumably on the basis that they had performed the contract, or possibly incurred all the costs associated with performance, although less than half the work was completed) with a deduction for "exigencies". "I am left in no doubt that there ought be a verdict for [Action]. The difficulty is damages. It is not easy to glean from all of these documents what exactly is the length and breadth of [Action's] claim for damages. I bear in mind that damages are assessed and not calculated. I think there probably are one or two exigencies in relation to whether [Action] would ever have made the full profit out of this contract and certainly they have been paid for any variations that they submitted, although they claim of course they have not submitted any variations for what I loosely describe as "down time", that is, waiting for things and fixing things that should have been correct in the first place. … The statement of claim I think fairly sets it out. … The statement of claim, the one I am looking at, is the further amended statement of claim, which I think was the final version that came off the press, set out what I understand to be the correct figures …. . That was the contract price, the additional work, and consequently striking a total and then deducting what they had been paid in connection with the contract price and the additional work. … … I think the figures set out in the statement of claim are accurate when they say that the claim is the contract price plus the additional work less the amount paid by the defendant. … That would make their claim theoretically forty-nine thousand five hundred and thirty-nine dollars seventy-five. I do think however there was, (just simply having regard to the nature of the contract), I do not know that one could say with any certainty because the contract was never allowed to proceed in the manner in which perhaps it should have proceeded, that they would have made every dollar that they had anticipated. There may have been of course other additional work they would have claimed for. There may have been disputes about that, I do not know. Just, in all the circumstances of this contract and the manner in which it appears to have been conducted, I do not believe they would have ever made the full profit. I think there was likely to be some difficulties in the final completion of this matter. I note also that they have an interest claim pursuant to s. 83A of the District Court Act. Using what I suppose some would describe as a broad brush approach, I propose to reduce the amount that they have claimed, in terms of exigencies, by something of the order of fifteen, perhaps twenty percent. But to that I would need to add an allowance for interest pursuant to s. 83A up to the present time. Doing the best I can with all of the figures I propose to enter a judgment of the plaintiff in the sum of thirty-seven thousand five hundred dollars, and I intend to include in that amount whatever claim the plaintiff has to the present time pursuant to s.83A. It is little more than a guesstimate in term of exigencies, but I do not think the plaintiff is entitled to all of its claim and interest on all of its claim, having regard to the ups and downs of this type of contract, and particularly this one. There will be a verdict and judgment for the plaintiff against the defendant in the sum of thirty-seven thousand five hundred dollars and costs and I specifically say that sum is to include any 83A element in respect of interest. …" 27 Action made an application "pursuant to the slip rule" and its judgment was increased. His Honour said: "I felt that [Action] was entitled to the balance of that contract price, less somewhere between fifteen to twenty per cent for exigencies, and I also specifically said that I felt [Action] was entitled to the balance of that contract price, less somewhere between fifteen to twenty per cent for exigencies, and I also specifically said that I felt [Action] was entitled to the balance of the monies that [Action] had charged [Allmen] in respect of work on the Anzac weekend and, I think, the weekend following, I am just not sure, but the figure involved was agreed, or at least, not disputed, at $4289.75. I subsequently entered judgment when I did some mathematics on a pad, for $37,500. I am convinced, simply by the pure mathematical calculation, that I have intended to award approximately $4250 to [Action] which I did not include because on any version of the figures, I also said I had added in a component for s 83(A) interest in a global figure, and I recall doing that so the result must have been absent an allowance for that weekend work. I propose to round that figure down marginally from $4289.75 to $4250. I shall add that figure of $4250 to the judgment so that the judgment will now become $41,750 plus costs."

28 Whatever the trial judge intended to convey by the paragraphs which have been set out his Honour's reasons cannot be related to the case put forward for his determination by Action's pleading. Allmen went further, and challenged a number of the factual findings on the basis that they were unsupported by, or contrary to, the evidence. Allmen also argued that the damages awarded included one amount twice and probably three times. As it pointed out, there is little discussion of the evidence in the judgment, which was an oral judgment delivered some days after the hearing apparently without a transcript of the evidence, or (some of the judge's remarks suggest) all or some of the exhibits. It is difficult to discern the benefit to the parties or the public in such an "off-the-cuff" judgment, with significantly increased risk of error and appeal and, even if an appeal is unsuccessful, dissatisfaction by the party which has lost because its case cannot be seen to have been considered properly. 29 It is unnecessary to say more of these matters. The terms of the contract, and in particular Allmen's contractual obligations, have not been identified, and it is impossible to discern whether his Honour's conclusion that Allmen repudiated the contract is correct or incorrect. His Honour's reliance on matters which were not pleaded, and, on one view at least, a conclusion that Allmen repudiated the contract by refusing to renegotiate it and insisting on its performance according to its terms, increase the objections to the judgment, which cannot stand. 30 Essential findings have not been made and there is considerable conflict in the evidence. It is not feasible for this Court to find the facts on which the claim and cross claim must be decided. 31 Regrettably, there is no alternative but to allow the appeal with costs and dismiss the cross appeal with costs and order a retrial. The respondent should be granted a certificate under the Suitors Fund Act 1951, if qualified. 32 FOSTER AJA: I agree with Fitzgerald JA. 33 BROWNIE AJA: I agree with Fitzgerald JA. **********

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