TQM Design & Construct Pty Ltd v Entire Concrete Pty Ltd

Judgment (9 paragraphs)

[1]

Overview

By Statement of Claim filed 7 March 2023, the Plaintiff ("TQM"), a commercial builder, sought damages of $539,641.80 for breach of contract against the Defendant ("Entire"), a supplier of concrete to the building industry.
Notwithstanding the amount claimed in the pleading, the case was opened on the basis of damages of $90,930.30, but ultimately presented in final submissions at $65,379.88.
The claim arises out of a delivery by Entire of concrete on 20 December 2022, at the request of TQM, to a building site under the control of TQM.
TQM's case is that the concrete was defective, in the sense that it had, to use the jargon of the industry, "gone off", in that it was already hardening while still in the trucks.
TQM submits that the concrete delivered was not fit for its known purpose, in particular that it was not capable of being adequately pumped from the truck in which it was delivered onto the site to form part of a slab, and thus amounted to breaches of at least one of the implied terms incorporated into the contract by operation of s 19(1) of the Sale of Goods Act 1923 (NSW) ("Sale of Goods Act").
Entire's answer to the claim is that the concrete was in perfectly good condition when it was delivered and thus there was no breach of any term of the contract. Entire contends that the reason TQM rejected the delivery, or at least part of it, was for reasons wholly unrelated to its quality. Entire also submits that, on proper analysis, its obligation under the contract was to deliver concrete to the roadside adjacent the building site. Thereafter, it was TQM's obligation to unload the concrete by having available "hoppers" to receive pumped out concrete. Entire contends that it has not been proved that the concrete was in an unsatisfactory state at the time of the actual delivery, but rather, if it has been demonstrated that any of the concrete had "gone off" by the time it was being pumped out of trucks, that was a consequence of TQM's dilatory conduct and as such, there was no breach of any implied term of the contract as to the quality of the concrete at the time it was delivered. Finally, Entire also relies on a term found in a "Conditions of sale" document on its website, which it says became part of the contract because of what was contained in a delivery docket signed on behalf of TQM at the time of delivery, which it is said excludes any implied terms and/or reduces the damages available. There is an issue as to whether the terms on that delivery docket became part of the contract. TQM denies any such incorporation. There is also a question as to what that term, if incorporated, actually means.

The condition of the concrete

Evidence was given on behalf of TQM by a number of witnesses, all of whom, with the exception of one, Mr Pham, were present on the day the concrete was delivered.
Those witnesses were Peter Galvin, Shane Knight, and Andrew Ryan.
Each of those witnesses gave reasonably detailed direct evidence, which I considered honest and quite compelling, that the condition of the concrete in some of the trucks at the time they were either unloaded or attempted to be unloaded on the day was such that it was not possible to pump it properly or adequately from the truck onto site without the various pipes becoming blocked and damaging the pumps. They each formed the opinion, and this was based not just on their lay observations but on their considerable experience working on building sites for many years, that the concrete was not acceptable and the pour was called off and the concrete not yet poured was rejected. The trucks returned to Entire's premises still with concrete in them.
Mr Pham, who is a structural engineer, also gave evidence. He was not present on the day and most of his opinion is based on an assumption that what the witnesses I have identified said is accepted. However, he went further and, in a report that he prepared shortly after the event as to what should be done to remediate the situation, recorded his opinion that what he saw after the event and why it is that he recommended the remediation work that he did. Mr Pham's observations are based on photographs of the concrete that was actually delivered, he said those photographs "quite vividly illustrate the difficulties faced during the concrete placement, including inadequate work ability, poor distribution, and compromised compaction". Again by reference to the photographs, Mr Pham said that "these images provide visual evidence of the challenges encountered and underscore the significance of addressing these concerns promptly and effectively" and that the "visual documentation… Offers a tangible representation of the challenges faced during concrete placement, supporting the need for remediation". I can see no reason to doubt that those statements represented Mr Pham's honest opinion at the time of his inspection.
Entire called witnesses, including Mr Chris Dennett and a Michael Vooles, who were both truck drivers employed by Entire on the day. They described the afternoon in question as being somewhat chaotic in terms of traffic control and that there were many radio calls going on, lots of trucks involved, and there was a wait time of perhaps 35 to 45 minutes before some trucks were unloaded and that extra water was added to the concrete. They did observe some difficulties with blockages to the pipes at the concrete delivery point.
What none of the witnesses called on behalf of Entire said, was that they observed the concrete being in such a condition on the day that there was no problem pumping it. In other words, they gave no direct evidence that they observed the concrete, when poured, was fit for its intended purpose. This was so in circumstances where they actually saw some of the pour occurring and did notice some difficulties.
The totality of the evidence does paint a picture of the trucks arriving after lunch in circumstances where there were problems with traffic control and the like. From this, combined with evidence that some of the concrete in the first two trucks (although this was not concrete described as "pumping", but rather was for use in the columns) was tested as satisfactory, is the basis upon which Entire submits that it ought be inferred that, at the time the trucks arrived adjacent to the site, the concrete in them was fit for purpose and that any problems that may have been observed when pumping commenced was due to delays which was the fault of TQM. At the very least, Entire submits that the totality of evidence is such that TQM has not discharged its onus to prove the concrete was not fit for purpose at the time the trucks arrived on the site. It is that point in time that Entire says is the relevant moment to consider the condition of the concrete. I do not think that is entirely correct. There must be some leeway to allow for a reasonable time for people receiving the concrete to get organised, especially when 18 trucks of concrete were expected to arrive in the space of a few hours. Moreover, Entire emphasises that the evidence of TQM is limited to the evidence of some of the concrete in some of the trucks and that it was not reasonable for TQM on the day, nor is it possible for me to infer now, that the concrete in all of the trucks was in the same condition.
TQM's witnesses were cross-examined and various theories floated, including a theory that the real reason the pour was called off on the day was not because of any concerns anyone at TQM had in relation to the quality of the concrete, but rather a concern that things were running late and that the Development Consent condition as to the hours for construction work to take place was inevitably going to be breached. That proposition was never actually put to any of the witnesses. Nor was it suggested that they were not telling the truth. To accept that submission would involve a very serious finding that their evidence before me was entirely fabricated. Nonetheless, none of the witnesses agreed that any concern as to timing on the day had anything to do with their decision to call off the delivery.
I am comfortably satisfied, based on the direct evidence given by the three witnesses called by TQM and the evidence of Mr Pham which strongly corroborates and is entirely consistent with that evidence, that the condition of the concrete when it was attempted to be pumped out of some of the trucks was not such that it could be properly transferred from the delivery trucks onto the site.
That, of course, is not the end of the matter. In fact, as Entire points out, it is potentially the answer to the wrong question. The real question is whether it has been proved by TQM that, at the time of delivery which I accept is some reasonable time after the trucks arrived adjacent to the site, the concrete was in a state so that it was fit to be pumped.
There is, of course, no direct evidence of that one way or the other. It would be impossible for anyone to give direct evidence as to what was going on inside any of the trucks when they arrived, before an attempt was made to pump them out. Entire relies on some testing that was done of the concrete in the first two trucks, which concrete was intended to be used to build some columns, which said that it was satisfactory. However, there is no evidence as to the balance of the concrete in the various trucks, other than what various witnesses actually observed on the day.
As I have said, the evidence of what was seen on the day is all one way. More to the point, as far as delay in starting the pour is concerned, Michael Vooles and Chris Dennett did not give any evidence to the effect that they were held up for a significant period of time before the trucks could be unloaded and that therefore, that being a possible explanation for the concrete being difficult to pump. Rather, the only direct evidence on the topic was wholly consistent with there being serious difficulties in pumping the concrete, and nothing relating to the time taken to pump it out.
I think it was reasonable in the circumstances for TQM, having identified that the concrete in a number of trucks was not fit for its known purpose, to reject the whole of the delivery. Whatever the technical analysis by a lawyer of the contract may be, i.e. whether it was for a single delivery of concrete or a series of deliveries, the obvious intent of both parties was that there be a totality of concrete delivered on the day and that all of it would be fit for its known purpose.
Taking all the evidence into account, I am not prepared to draw the inference that Entire seeks to the effect that any problem with the concrete was because of delay after delivery. I am satisfied that the concrete, when it was pumped, was not fit for purpose. I do not think that was because of a delay in pumping operation. In my judgement, the concrete was not in a satisfactory state at the time it arrived on site, so to allow it to be pumped out, which was part of its obvious purpose.
As that was the purpose of the purchase, which was known to both parties, I am satisfied that if there is a term in the contract to the effect that the products purchased had to be fit for that purpose, then it was breached.
I now turn to the question of whether such a term formed part of the contract.

The delivery docket

The first question is when the contract for the sale of goods was formed. There is a significant quantity of evidence which all points in one direction, that is there was an order for the concrete to be delivered. There was discussion between TQM and Entire as to the terms of any delivery. Entire made it clear that the concrete would not leave its control (let alone be delivered) unless and until an amount of $49,478 was received in clear funds into its bank account. Whilst TQM protested as to that specific amount and said that any payment would be subject to a final accounting as to the amount actually due, there was, in my opinion, clearly a contract in place at the time the trucks arrived at the building site. At the latest, it was formed when the money was received. That contract was that Entire would deliver the identified quality of concrete to the site that day and that it had received on account of whatever amount was ultimately invoiced, as consideration for the delivery of $49,478 in advance.
In my judgement, that was a binding and enforceable contract. It came into existence no later than the payment of money, which occurred shortly before the trucks were dispatched on 20 December. The proposition can be tested this way. In the event that the eighteen trucks of concrete had arrived at the site on 20 December and TQM had refused to accept any delivery and sent the trucks back to Entire, that would have inevitably resulted in Entire properly treating such conduct as a repudiation of an enforceable contract and suing for damages for breach. Any defence based on the proposition that no contract existed would have failed.
It follows, that the series of delivery dockets, some of which were signed by various employees of TQM have no contractual force unless they can be seen as either a variation to that contract or perhaps a mutual agreement to abandon the original contract and to create a new one. Either way there needs to be identified fresh consideration for one of those alternatives: see Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd [2018] NSWCA 213 ("Cellarit") at [232]. So much is accepted by TQM.
Fresh consideration cannot be the mere agreement by Entire to deliver the concrete. That is because on my analysis there had already been a contract where that promise had been made. To make the same promise again would not provide further consideration. Again, the matter can be tested by asking the question of what would have happened if TQM had refused to sign the delivery docket containing the relevant provision. To my mind, that would have had no contractual significance at all and it would have been a breach by Entire to refuse to pump the concrete in those circumstances.
Entire submits, based on Cellarit, that upon a proper analysis of the conditions of sale referred to in the delivery docket which were available at the time on the website of Entire, it did contain promises going both ways. For example, whilst there is said to be a limitation of liability provision, which obviously is a promise valuable in the hands of Entire, there are also a number of promises in the forms of guarantees by Entire which confer valuable rights on TQM. I think that is right and therefore, if those terms were adopted into the contract by the parties, they would have contractual force as a variation.
The question then becomes whether, in all the circumstances, the delivery docket's reference to terms on the website are sufficient for those terms to be incorporated into the contract, or perhaps legally provide sufficient evidence to conclude objectively that the parties intended those terms to operate as a variation of the contract that was already in place.
It is axiomatic that the failure of a party to read terms of a written contract does not in any way mean that a party who signs a document knowing and intending it to have legal effect is in some way relieved from what it says: see for example Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [45]. The relevant question therefore becomes did the parties intend the delivery docket to create some legal rights and obligations or was the intention upon signing it to do no more than acknowledge receipt?
The answer to that question in each case must always be heavily fact dependent.
It has been suggested in various cases that delivery dockets do not necessarily amount to documents that would be identified objectively as contractual: DJ Hill & Co Pty Ltd v Walter H Wright Pty Ltd [1971] VR 749 (but cf. Eggleston v Marley (1979) 21 SASR 51).
On behalf of Entire, it is submitted that the delivery docket was intended to be contractual. It contains, relevantly, the following statement: "Customer accepts the product and no-site adjustment as documented and have read "Condition of Sale" on our website at…"
In my opinion, on its face, there is no indicia on the document consistent with an intention that it be contractually binding. For example, it has no provision for any particular officer or officeholder of the recipient to sign it. It appears to be intended to be signed by whoever happens to be on site, that person may or may not have had authority to bind TQM contractually. This tends to suggest that it was intended to be nothing more than evidence of delivery. The reference to the Conditions of Sale is also in terms of an acknowledgment that they have been read, not a statement that they will become binding as part of the contract that already existed.
As it happens, some of the delivery documents appear to have been signed by people like site supervisors of TQM, who it can be inferred probably would have had authority to contractually bind the company, but others appear to have been signed by other random individuals and others are not signed at all. This also suggests that the intention was to be proof of delivery and not to change the contractual arrangement.
Taking all those matters into account, I am not satisfied that it was the parties intention to vary the contract that had already been made earlier that day by incorporation of the Terms and Conditions found on Entire's website.
It seems to me that the case is somewhat analogous to the situation of a bank, having entered into a contract with a customer, then seeking to impose a variation of the contract by handing the customer a booklet said to contain terms and conditions: see for example National Australia Bank Ltd v Dionys [2016] NSWCA 242, where it was held to be not open to a bank to unilaterally incorporate terms by handing over a booklet post-contract. What is needed is more than reference to another document, but rather steps need to be taken to bring the claim to the other party's attention: Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 208 (Wilson & Toohey JJ), 228 (Brennan J); also Carnival v Karpink (2022) 294 FCR 524 at [169] (Derrington J, Allsop CJ agreeing).
That is not what happened here. What needs to be brought to the other party's attention is that the document is intended to have contractual effect. I am not satisfied that, by incorporation or variation, the terms to be found on the website of Entire were incorporated into the contract. I do not think that a bland reference to a website on a delivery docket signed on site is sufficient to infer an intention on both parties to be bound.
However, if I am wrong in that regard and those terms did become contractual, I do not think that provides much comfort to Entire.
The relevant clause relied upon is clause 2 of the conditions of sale document then on the Internet. It is in the following terms: "2. Save as herein expressly provided or unless otherwise specifically agreed in writing, no warranty is given as to the mass composition of quality of material sold, the fitness of the material for any particular purpose whatsoever and any and all express of implied conditions, statements or warranties whether statutory or otherwise, are hereby expressly included to the fullest extent possible under law AND…"
The clause is, to say the least, badly drafted. It is quintessentially ambiguous. On the one hand, it suggests that no warranty is given as to the fitness of the material for any particular purpose, but then in the same sentence says that all express or implied conditions et cetera are hereby "included to the fullest extent possible under law…".
It may well be that the draftsperson's intention was to use the word 'excluded'. Nonetheless, on the face of the provision, it is ambiguous in that it conveys two contradictory statements at once. In the circumstances, if this provision was part of the contract but had come into the contract by way of incorporation in the way suggested by Entire, it would have to be construed strictly against Entire. On that basis, it by no means conveys a clear and unequivocal intention by the parties to exclude the operation of the Sale of Goods Act. The words used by the parties are just not clear enough to convey that intention. Read in one way, the words say the exact opposite.
For those reasons, I am satisfied that the implied terms contained in the Sale of Goods Act are terms of the relevant contract, and on the facts as I have found them to be, that term was breached by Entire because of the substandard quality of the concrete delivered.
As might be obvious from a case that started life as a claim for $539,641.80, but in final submissions is presented as being a claim of $65,379.88, a series of significant components of the damages claim have fallen away both during and before the hearing.
What is left is a claim for direct costs proved by invoices for the replacement remediation work.
The items range from a few hundred dollars up to $25,509, which was an amount paid to Boral for replacement concrete.
There is a comprehensive list of the claimed items in MFI-2, which has been filed. Most of the items are not the subject of dispute. I will not set out the items not in dispute in this judgment, rather I will focus on where issue has been taken by Entire. The first is for a claim for $16,115, paid to a company called "2-way", that is the total amount of an invoice from 2-way directed to TQM. However, two line items, which on the face of the invoice are clearly stated to "included", are the supply of pump labour and operator on 20 December 2022, which was not the rectification day. The price for the same work was $10,400, referable to 16 January 2023, which was the rectification day. I am not persuaded that any amount over and above $10,400 should be allowed for that item and therefore reduce the claim by $5,715.
There is also a challenge to an amount of $5280 paid to an engineering company called Symplex. The submission by Entire is that invoice is directed to a related party of TQM and not TQM itself. However, I am satisfied on the evidence that TQM bore the ultimate liability for the costs because of its obligation to indemnify that related party for the cost.
I am satisfied that, as a consequence of the breach of the implied term of contract by Entire which I have identified, TQM is entitled to damages of $59,664.88.

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Judgment (9 paragraphs)

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