Carr v JA Berriman Pty Ltd

[6]

The annexed conditions which are referred to in the contract are long and elaborate. Clause 1 is a long clause, but it is desirable to set out most of it. It provides: "The Builder shall carry out and complete the Works in accordance with this contract in every respect and in accordance with the directions and to the reasonable satisfaction of the Architect. The Architect may in his absolute discretion and from time to time issue further drawings, details and/or written instructions, written directions and written explanations (all of which are in these conditions collectively referred to as "Architect's Instructions") in regard to: (a) The variation or modification of the design, quality or quantity of the Works or the addition or omission or substitution of any work. (b) Any discrepancy in or divergency between the Contract Drawings and/or Specification. (c) The removal from the site of any materials brought thereon by the Builder, and the substitution of any other materials therefor. (d) The removal and/or re-execution of any works executed by the Builder. (e) The postponement of any work to be executed under the provisions of this contract. (f) The dismissal from the Works of any person employed thereupon who may be incompetent or misconduct himself. (g) The opening up for inspection of any work covered up. (h) The amending and making good of any defects under clause 12 of those Conditions. The Builder shall forthwith comply with all Architect's Instructions. If compliance with Architect's Instructions involves any variation, such variation shall be dealt with under clause 9 of those conditions and the value thereof shall be added to or deducted from the Contract Sum. If compliance with Architect's Instructions involves the Builder in loss or expense beyond that provided for in or reasonably contemplated by this contract, then, unless such instructions were issued by reason of some breach of this contract by the Builder, the amount of such loss or expense shall be ascertained by the Architect and shall be added to the Contract Sum."

[7]

Clause 9 provides that no variation shall vitiate the contract, but, unless a price therefor shall have previously been agreed, all variations authorized by the architect or subsequently sanctioned by him shall be valued and such price or value shall be added to or deducted from the contract sum as the case may be. Clause 16 provides that on or before the date for possession stated in the appendix complete possession of the site shall be given to the builder subject nevertheless to provisions for extension of time contained in cl. 18. Clause 18 provides for extension at the discretion of the architect of the time provided for the completion of the contract by the builder in certain specified events which do not involve delay or default on the part of the builder. Its actual terms need not be set out, because none of the events mentioned in it occurred. The date stated in the appendix on which possession of the site is to be given by the owner to the builder is 29th May 1950. Clause 20 provides that the contract may be determined by the builder in a number of events, and it provides what the respective rights and liabilities of the builder and the proprietor are to be in the event of a determination by the builder under any of its provisions. The presence of this clause is to be noted, but its actual provisions do not matter, for, again, none of the events contemplated by it took place. Clause 26 contains an arbitration clause in very wide terms providing for practically every possible kind of dispute which could arise under the contract. It provides that the award of the arbitrator shall be final and binding on both parties, and it further provides that neither party shall be entitled to commence or maintain any action upon any dispute or difference until such matter shall have been referred to or determined by the arbitrator, and then only for the amount of relief to which the arbitrator finds either party to be entitled. The contract contains a "rise and fall" clause in usual terms. This clause contains a provision that the builder shall within eight weeks of the date of the making of the contract enter into contracts for the supply of all necessary goods, services, &c.

[10]

The erection of the building was never, in fact, commenced. On 31st July 1950 the company's solicitor wrote to the architect, Mr. Oser, in the following terms: "I am instructed to inform you that the site has not been excavated in accordance with the provisions of clause A 1 of the specifications and that my client immediately upon execution of the contract arranged with a company for fabrication of the steel pursuant to clause E 1 of the specifications. My client regards the proprietor's failure to prepare the site and his arrangements with Arcos Products Pty. Ltd. contrary to clause E 1 of the specifications as two distinct breaches of the building agreement. I therefore give you notice of cancellation of the contract in accordance with the provisions of clause 20 (1) thereof and of my client's intention to institute immediate action for recovery of damages against the proprietor in accordance with the provisions of clauses 20 (3) (ii) and (v) of the said agreement". A similar notice of cancellation and claim for damages was given on the same day to Mr. Carr. It is to be noted that cl. 20 of the conditions, to which the letter refers, contains nothing which could justify the cancellation of the contract. It has not been suggested in argument that any of the events mentioned in cl. 20 actually occurred. If, however, a right to rescind at common law had accrued to the builder on 31st July, the letter of that date will operate as an effective rescission, leaving the builder with a right to recover damages for loss of the contract. If, on the other hand, no such right had accrued to the builder, that letter is itself a repudiation of the building contract by the builder and entitles the building owner to sue forthwith to recover the damages, if any, which he suffers by loss of the contract. The central question in both cases, therefore, is whether a right in the builder to rescind had arisen on 31st July: see generally Tramways Advertising Pty. Ltd. v. Luna Park (N.S.W.) Ltd. [1] and Associated Newspapers Pty. Ltd. v. Bancks [2] .

[13]

With regard to the "preparation of the site" the matter stood thus. The site was a piece of land having a frontage of about 100 feet by a depth of about 200 feet. Clause E 1 of the specifications provided, as has been seen, that the proprietor should excavate the land to a given level and "hand it over" to the builder at that level, and cl. 16 of the contract, read with the "Appendix", provided that complete possession of the site should be given to the builder on or before 29th May 1950. It is thus clear that the proprietor was required by the contract (1) to excavate the site to the prescribed level and (2) to give possession of it duly excavated to the builder on or before 29th May. With regard to what (if anything) had been done by way of excavation before 31st July, there was a conflict between Mr. Oser and Mr. Berriman, the managing director of the company. The evidence of the former, however, was very vague, and Owen J. accepted the whole of Mr. Berriman's evidence without any qualification. His Honour also accepted the evidence of the company's foreman, Morthen. (It is worthy of note that Mr. Carr was not called as a witness.) From this evidence it appears that Berriman and Oser and Morthen and Carr's foreman went to the site about 15th or 18th May. There was then "heavy machinery all over it". From this and other evidence I gather that the site was practically covered by heavy material which would appear to have been purchased by Carr from the Commonwealth Disposals Commission. Oser said: "Good God, nothing has been done here", and asked Carr's foreman when they were going to get the material off the site. The foreman said that he had nowhere to put it. Oser pointed to vacant land adjoining the site and told him to "get it shifted over there". Oser also asked Carr's foreman if they could have the site cleared in three weeks, to which the reply was "yes". The 29th May was, of course, at that time about a fortnight ahead. Both Berriman and Morthen visited the site again both before and after 29th May, the former frequently, and both say that nothing whatever appeared to have been done. Not only did the material on the site remain there, but a quantity of additional heavy material, described as pontoons, was deposited on the adjacent land to which Oser had directed or suggested that the material on the site should be removed.

[15]

With regard to the other breach of contract alleged in the letter written by the company's solicitor on 31st July, the matter stood thus. Clause E of the specification provided, as has been seen, that all steel should be supplied by the proprietor, and that all structural steel should be delivered by the proprietor to contractor's or sub-contractor's yard. The builder was to allow for the fabricating and erecting of all structural steel work. This means, of course, that the structural steel is to be supplied by the proprietor, but is to be fabricated by the contractor or by a sub-contractor to him. Before the making of the contract Mr. Berriman had obtained a tender from a company named Hurll & Douglas Pty. Ltd. for the fabricating of this steel. The price quoted was £3,948. On 7th June 1950 the company wrote to Hurll & Douglas, advising that this quotation was accepted. It was a term of the rise and fall clause of the contract that the builder should enter into all necessary sub-contracts within eight weeks of the signing of the contract. That period expired on 28th June. Oser was informed of the acceptance of the tender of Hurll & Douglas shortly after 7th June. On 19th July Oser wrote a letter to the company in the following terms: "I have been instructed to inform you that my clients, Messrs. T. Carr & Co., have made arrangements with Arcos Products Pty. Ltd. of Parramatta Road, Lidcombe, to supply and fabricate the structural steel work for the above job, and that the respective order has been placed with this firm. In explanation I would like to add that this arrangement was made necessary by the peculiar steel supply position of to-day. I shall be glad if you would kindly inform me at the earliest of your allowance for the fabrication of the steel, which thus becomes a deduction post (sic) from your contract". It is not only fair to Mr. Oser, but it is of very considerable importance, to point out that he was in no way responsible for the making of this contract between Carr and Arcos Products for the fabrication of the structural steel. He knew, as has been said, of the contract between Berriman and Hurll & Douglas, and he said that he was surprised when he heard that Carr had let the fabrication of the steel to Arcos. He said that it occurred to him that Berriman "might be a bit annoyed about it". Mr. Berriman was in fact much more than "a bit annoyed". To use his own words, he was "very upset" - as he well might be, seeing that he not only lost a profit which he estimated at about £450, but, being unable to carry out his contract with Hurll & Douglas, became liable in damages to that company. The fabrication of the structural steel represented, of course, a very substantial part of the contract. Mr. Berriman immediately consulted his solicitor, who wrote on 20th July to Mr. Oser, asking for a copy of the contract. Having obtained and considered the contract, he wrote the letter of 31st July which is set out above. On 20th July Mr. Berriman had dismissed the company's foreman, Morthen.

[19]

But in any case it is impossible to bring what was actually done in this case within the terms of cl. 1 of the conditions. Let it be conceded, for the sake of argument, that the power given to the architect by that clause is wider than I think it is. Yet Mr. Oser did not, in the exercise of his discretion, give any direction or instruction such as is contemplated by that clause. Mr. Oser was never asked to exercise his discretion. On 12th July Arcos Products gave to Carr a quotation for the supply and fabrication of the structural steel. This offer appears to have been accepted in writing by Carr on 21st July, but the witness Kuner, the manager of Arcos Products, said that they had received an assurance from Carr some time earlier that they would receive the work. Carr then apparently informed Mr. Oser that he had let the fabrication of the steel to Arcos Products. Mr. Oser, as has been said, was "surprised" at this news. He knew that Berriman had long since made a contract with Hurll & Douglas for the fabrication of the steel. The position was that Carr was obliged by his contract to supply steel for fabrication to Berriman or to a sub-contractor nominated by Berriman. After Berriman had informed Oser that he had made his contract with Hurll & Douglas, he (Carr) was under a contractual duty to supply the structural steel required for the factory to Hurll & Douglas. He informed Oser that he intended to break his contract in this respect. Mr. Oser was no doubt placed in a difficult position by the proprietor's arbitrary action. It seems to me that nothing that he could do at that stage could possibly alter the fact that Carr had repudiated his contract with Berriman as to a substantial part of it. His somewhat remarkable letter of 19th July to Berriman does not even purport to be a discretionary direction by an architect to omit work from a building contract. It simply informs Berriman that Carr has repudiated a part of the contract. It "explains" that this breach of contract was "necessary". It asks to be informed of the allowance made for the fabrication of the steel, which, it indicates, is to be deducted from the contract price. A mere deduction from the contract price was, of course, quite inappropriate to the situation which Carr had created. It is impossible, to my mind, to regard this letter as either more or less than a communication by architect to builder of a repudiation of part of the contract by the building owner.

[25]

On the other hand, the effect of the builder's election not to rescind was to leave it open to the building owner to remedy his breach. If he did remedy it, the builder would be bound to accept the late performance, though entitled, of course, to sue for any damage suffered by him through the delay. The position thus remaining open, it is correct, in my opinion, to say, as Mr. Ferguson said, that a failure to remedy the breach might continue so long and in such circumstances as to evince an intention on the part of the building owner no longer to be bound by the contract. In other words, the only legitimate inference might be that he is saying: "Not only have I broken my contract by not doing the thing on the due day, but I am not going to do the thing at all", or "I am not going to do the thing at all unless and until I find it convenient to do it". In this way a right to rescind might arise which is not based on breach of the particular promise as such. That promise, even if essential to begin with, has become non-essential by reason of the election of the promisee, but the promisee may nevertheless be able to establish that the conduct of the promisor with respect to his promise amounts to a refusal to be bound by the contract: cf. Associated Newspapers Ltd. v. Bancks [1] . It was on this view of the present case that the majority of the Full Court dismissed the appeal. Their Honours thought that the failure to do anything at all towards performance of the contractual duty, the failure to make any attempt even to move any of the machinery from the site, the placing of further machinery on the adjoining land, the absence of any explanation or any assurance that any steps at all would be taken in the immediate future - that all these things showed that the building owner intended to take steps towards the performance of his duty if and when it suited him and not before. In other words, they showed that he did not intend to be bound by the contract within the meaning of the authorities. This view of the case rests on a sound legal foundation: the only question is whether it is warranted by the facts. The chief difficulty about accepting it lies in the fact that much heavy rain fell during the whole of June and July, and, although evidence accepted by the learned trial judge indicates that what was required could have been done between 3rd and 29th May, other evidence strongly suggests that the weather in June and July presented serious difficulties in connection with the removal of the machinery and the excavation of the site. And, as Mr. Barwick rightly said, while the state of the weather is quite irrelevant on the question whether a breach of contract has been committed, it is very relevant on the question of the intention of the building owner with reference to the performance of the particular promise in question.

Carr v JA Berriman Pty Ltd - [1953] HCA 31 - HCA 1953 case summary — Zoe

At a glance

Court

Decision date

Before

Source

Judgment (33 paragraphs)

Parties