South Australian Railways Commissioner v Egan

South Australian Railways Commissioner v Egan - [1973] HCA 5 - HCA 1973 case summary — Zoe

[26]

This is an appeal from a judgment of the Supreme Court of South Australia determining adversely to the appellant, the South Australian Railways Commissioner, an objection in point of law raised by the defence of the appellant, who is the defendant in an action brought in that Court by the respondent. By the statement of claim delivered in that action the respondent claims the following relief: (a) payment for work done and materials supplied; (b) damages for breach of contract; (c) a release of a guarantee; (d) the return of certain plant and material of the respondent detained by the appellant or their value and damages for their detention; and (e) alternatively to (d), damages for conversion. It is alleged in the statement of claim that by a contract made between the parties the respondent agreed to complete for the appellant, and the appellant to pay for, certain bridges and culverts on a railway line. The respondent alleges that the appellant wrongfully repudiated the contract. The first of the respondent's claims is to be paid quantum meruit for the work done and materials supplied in commencing to perform the work required by the contract and the second claim is for damages for breach of the contract. The guarantee to which the third claim refers was given to the appellant by the Bank of Adelaide, but it was procured by the respondent pursuant to his obligation under the contract to give security for the due completion and delivery of the work; the respondent alleges that if the appellant obtained (albeit wrongly) payment from the bank under the guarantee the respondent would thereupon become indebted to the bank. The plant and material to which the claims for detinue and conversion refer were allegedly purchased by the respondent for use in respect of the contract. It is necessary to notice only two of the matters raised in the appellant's defence. It was alleged (and this was denied in the respondent's reply) that the contract was validly determined pursuant to cl. 30 of the general conditions of the contract. I shall later set out the provisions of that clause. Further the appellant by par. 9 of his defence objected in point of law that the respondent "cannot bring or maintain this action to recover any money for or in respect of or arising out of an alleged breach of contract or for or in respect of any matter or thing arising out of this contract" as he had failed to obtain a certificate, order or award from the Chief Engineer for Railways for any amount sued for as required by cl. 35 of the general conditions. The material parts of that clause read as follows:

[30]

In the event of any doubt, dispute, or difference arising or happening, relating to, touching, or concerning the works, or any portion thereof, or the value, quantities, qualities, description, or manner of work done and executed by the Contractor or relating to, touching, or concerning the exercise of any of the powers of the Commissioner, the Chief Engineer for Railways, the Superintending Officer, or any other person employed by the Commissioner under this contract, or any claim made by the Contractor in consequence thereof, or in any way arising therefrom or relating to, touching or concerning any inconsistency, ambiguity, or variance in, or the meaning or intention of the contract or relating to, touching, or concerning any certificate, order or award which may be made by the Chief Engineer for Railways, or in anywise whatsoever relating to the interests of the Commissioner or of the Contractor in the premises, or to any alleged breach of contract, or touching or concerning any other matter or thing in any way connected with or relating to this contract or anything therein contained or provided, every such doubt, dispute, or difference, shall from time to time, and so far as the same has not herein before been left to the decision or determination of the Chief Engineer for Railways, be referred to and settled and decided by the Chief Engineer for Railways, whose decision thereon shall be final and conclusive. The clause then contains a proviso under which the contractor is given power, if dissatisfied with "any certificate or decision of the Chief Engineer for Railways made, given or pronounced touching or concerning the mode or manner of measuring the works, or the prices to be paid for any work done, for which none of the prices in the schedule shall be applicable" to give to the Commissioner "notice in writing, setting forth the grounds of his objection and requiring that the matter be referred by way of appeal hereunder". The proviso goes on to say that in such a case, such certificate or decision shall be referred by way of appeal to the award, order, determination or decision of either the Engineer-in-Chief for the State of South Australia or the Chief Engineer of the Harbors Board of that State, as the Minister of Works for the State shall appoint after the lapse of one month from the date when the Chief Engineer for Railways shall have certified that the works have been finally and satisfactorily completed and fully delivered to the Commissioner, "and the Arbitrator so appointed shall be the sole arbitrator of the matters in this proviso mentioned as referable by way of appeal". 1. (1941) 65 C.L.R. 543, at pp. 549-550. 2. [1928] V.L.R. 283.

[34]

The question whether cl. 30 operates to impose a penalty does not arise at this stage and was not argued and it would therefore not be right to decide it. Assuming the clause to be effective, however, it would have the operation, as the respondent rightly submitted, of depriving the respondent of all right to payment. It was submitted that it followed that, since cl. 35 operates to bar only money claims, and since under cl. 30 the respondent can have no money claim against the appellant, therefore cl. 35 can have no application to the circumstances of the case. With all respect, I cannot accept that argument. If the Commissioner acted under cl. 30 he might, of course, if the clause were effective, have a money claim against a contractor, but his cause of action against the contractor would not be complete until he had fulfilled the condition precedent imposed by cl. 35. Clearly, therefore, cl. 35 can apply to some cases arising under cl. 30. In any case, however, there is no inconsistency between cll. 30 and 35. The latter clause makes the certificate, order or award a condition precedent to the right to recover money in respect of, inter alia, any matter or thing arising out of the contract. The former clause, if effective, brings about the result that, in the cases to which it applies, the contractor has no right to recover any further payment from the Commissioner. It would follow, on the assumption that cl. 30 is effective, that the Chief Engineer for Railways, properly applying cl. 30 to a case in which it was applicable, might be bound to refuse a certificate, order or award in favour of the contractor. It would not follow that a contractor who had not obtained such a certificate, order or award could maintain an action. Of course, in the present case, the respondent has denied that the contract was validly determined pursuant to cl. 30, and therefore is contending in effect that cl. 35 has no application simply because the appellant erroneously asserts that the contract was determined under cl. 30. Such a contention is manifestly unsound.

[36]

I therefore hold that, unless the appellant is precluded from relying on the provisions of cl. 35, the respondent is prevented by those provisions from bringing or maintaining against the appellant any action of the kind to which the clause refers. However, the clause upon its proper construction refers only to actions brought "to recover any money". The words "or for or in respect of any matter or thing arising out of this contract" govern "money" and not "suit or action". This is made even plainer by the fact that the certificate, order or award to which the clause refers is "for the amount sued for". In considering the application of cl. 35, two questions arise: (1) is the claim one to recover money? (2) if so, is it a claim to recover money for, or in respect of, or arising out of, any breach of the contract or for, or in respect of, any matter or thing arising out of the contract? On behalf of the appellant it was submitted that cl. 35 has the effect of barring the whole action if one of the claims made therein is a claim of the kind described in cl. 35 and if no certificate, order or award has been obtained. If this statement were correct, it would mean that a contractor who had not obtained a certificate, order or award might bring an action to enforce a claim which was not a claim to recover money, but that if he joined a money claim of the kind mentioned in cl. 35 the whole action would be barred. However, the validity of cl. 35 depends, as I have indicated, on the theory that the obtaining of the certificate, order or award is a condition precedent to the existence of the cause of action. If it appeared that a cause of action existed independently of the obtaining of the certificate, order or award, an attempt to exclude the jurisdiction of the Court to enforce it would be contrary to public policy. Obviously cl. 35 makes the existence of a certificate, order or award a condition precedent only in the cases to which the clause expressly refers. Other rights and liabilities are left untouched by the clause, which must be strictly construed. The effect of the clause is, therefore, to prevent the continuance of an action only in so far as it involves claims to recover money that fall within the clause. The action may proceed with respect to the claims that do not fall within the clause.

[38]

It then becomes necessary to decide whether the other claims fall within the clause. The claim for damages for breach of contract, in my opinion, clearly comes within the clause; damages are payable in money and the claim to recover money for a breach of the contract is within the express words of cl. 35. The claim to payment for work done and materials supplied is also, in my opinion, within the clause; it is a claim to recover money for something arising out of the contract, i.e. for work done and materials supplied under the contract: cf. Government of Gibraltar v. Kenney [1] . The remaining claims are for detinue and conversion; the latter claim is to recover money and the former claim involves the recovery of money, although it is primarily to recover the goods. However, assuming that the claims both in detinue and in conversion may be described as claims to recover money, are they claims of the kind to which the following words of cl. 35 refer? Clearly they are not claims for, or in respect of, or arising out of, any breach of the contract. The respondent alleges not that the appellant detained or converted the goods in breach of the contract, but simply that the goods are the respondent's goods and that the appellant detains them or has wrongly taken possession of them and used them. Further, in my opinion, these claims are not claims to recover money for or in respect of any matter or thing arising out of the contract. To come within these words the matter or thing for or in respect of which the claim to recover money is made must have arisen out of the contract. The matters or things for or in respect of which the claims to detinue and conversion are made were the taking, keeping and use by the appellant of the respondent's goods. They are claims in tort, and it is no part of the claim of the respondent that the taking, keeping or use was done either in breach of or in pursuance of the contract. So far as these claims are concerned the contract is irrelevant; it is enough for the respondent to say that the goods were his and that the appellant wrongly took, kept or used them. Of course the appellant by way of defence sets up the contract and asserts that he was justified by cl. 30 in treating the goods as his own. However, cl. 35 does not extend to bar actions in which a defence pleaded by the defendant arises under the contract. It does not extend to actions involving any dispute arising out of the contract, and for that reason cases such as Heyman v. Darwins, Ltd. [1] , concerning as they do clauses referring particular kinds of "disputes" to arbitration, as distinguishable. It may well be said that the present dispute can only be solved by reference to the contract and that the dispute therefore arises out of the contract. However, the precise words of cl. 35 must be given effect and they render it necessary not to consider whether the dispute or the defence arises under the contract but whether the claim is one to recover money for, or in respect of, or arising out of, a breach of the contract or for or in respect of any matter or thing arising under the contract. The claims in detinue and conversion are not claims of that description. If the appellant succeeds in showing that cl. 30 is effective and applicable, the result will be, not that cl. 35 ought to have been applied, but simply that the respondent will have established no cause of action. For these reasons in my opinion cl. 35 does not debar the respondent from maintaining the claims in detinue and conversion.

[45]

Mr. Bridgland, as Deputy Railways Commissioner, replied on 10th June 1966 by a letter in which he said, inter alia: The matters which the contractor is entitled to require to be referred to arbitration are limited to those specified in the proviso to the first paragraph of clause 32 of the contract and your client has no right under the contract to require the matter of the determination of the contract to be referred to arbitration. The letter went on to say that under the provisions of cl. 30, upon the determination of the contract, implements the property of the contractor used for the carrying out of the contract, and all materials provided by him, upon the ground upon which the work was being carried on or adjacent thereto, become and are the sole and absolute property of the Commissioner. It appears from that letter that Mr. Bridgland considered that the respondent was endeavouring to seek an arbitration under the terms of the proviso to cl. 32 to which I have already referred. He was led to this opinion by the terms in which the respondent's communications of 18th May 1966 and 25th May 1966 were framed; the earlier of those documents, by the use of the words "by way of appeal" seems to refer to the proviso and the latter notice in stating "the grounds of such appeal" would appear to support the impression which the earlier document created. Mr. Bridgland was right in saying that the proviso had no application to the circumstances of the case. If the appellant had prevented the Chief Engineer for Railways from deciding or determining a dispute which the respondent wished to refer to him under cl. 32 and had thereby deprived the respondent of the opportunity of obtaining a certificate, order or award within cl. 35, it would have been unconscionable of the appellant then to assert that an action was not maintainable for want of such a certificate, order or award, and such an assertion could not successfully have been made, for it is a well-established principle that a party who has prevented fulfilment of a condition precedent cannot set up the fact of its non-fulfilment: Heyman v. Darwins, Ltd. [1] ; Panamena Europea Navigacion (Compania Limitada) v. Frederick Leyland & Co. Ltd. (J. Russell & Co.) [2] . However, in my opinion, the correspondence falls far short of showing that the appellant is disentitled to set up the non-fulfilment of the condition precedent. There is nothing to show that the respondent endeavoured to disabuse the appellant of the erroneous belief that what was sought was an arbitration by way of appeal under the proviso or that he made any further effort to obtain a certificate, order or award. The allegation of waiver has not been made out. 1. [1942] A.C., at p. 387. 2. [1947] A.C. 428, at p. 436.

[50]

The perfectly open judgment, the absence of all previously formed or pronounced views, which in an ordinary arbitrator are natural and to be looked for, neither party to the contract proposed to exact from the arbitrator of their choice. They knew well that he possibly or probably must be committed to a prior view of his own, and that he might not be impartial in the ordinary sense of the word. What they relied on was his professional honour, his position, his intelligence; and the contractor certainly had a right to demand that whatever views the engineer might have formed, he would be ready to listen to argument, and, at the last moment, to determine as fairly as he could, after all had been said and heard. In the present case, on the material so far put before the Court, the most that can be said in favour of the view that the Chief Engineer for Railways is disqualified from giving a certificate, order or award is that he has already reached a decision upon the matters in dispute, so that he can no longer approach them with an impartial mind. However, that is not enough to disqualify him. There are two citations, both from judgments in Scottish cases, in the judgment of Lord Thankerton in Panamena Europea Navigacion (Compania Limitada) v. Frederick Leyland & Co. Ltd. (J. Russell & Co.) [3] , that are apposite to the present case. In Scott v. Carluke Local Authority, Lord President Inglis said [4] : But he had two duties to perform - to superintend and control the work, and also to act as arbiter. It is the combination of these duties which makes a reference of this kind so peculiar. But it is impossible to say that because a man faithfully and zealously executes the one function that he thereby debars himself from acting in the other. And in Halliday v. Duke of Hamilton's Trustees Lord Justice-Clerk Macdonald said [5] : If the employers proceed to arbitration, then the engineer, as arbiter, must receive all competent evidence which the contractor thinks proper to bring before him and give an honest opinion upon it. The fact that he has expressed an opinion as an engineer before receiving the evidence does not prevent him from afterwards applying his mind judicially to the questions at issue in the light of the evidence adduced. 1. [1893] 1 Ch. 238, at p. 247. 2. [1893] 1 Ch., at p. 247. 3. [1947] A.C., at pp. 438, 443. 4. (1879) 6 R. 616, at p. 617. 5. (1903) 5 F. 800, at p. 809.

At a glance

Court

Decision date

Before

Source

Judgment (64 paragraphs)

Parties