TURNER CORPORATION LTD v CO-ORDINATED INDUSTRIES PTY

Court of Appeal (NSW)|1995-05-30|Before: By Meagher JA, By Powell JA, Sheller JA, Meagher JA

TURNER CORPORATION LTD v CO-ORDINATED INDUSTRIES PTY LTD

MEAGHER, SHELLER and POWELL JJA 30 May 1995, 24 July 1995 [1995] NSWCA 476

CONTRACT - COMPLETION CLAUSE EXTENSION OF TIME FOR COMPLETION OF CONTRACT - COSTS FACTS: On 1 November 1988 Turner Corporation Ltd (the contractor) and Co-ordinated Industries Pty Ltd (the principal) entered into a written contract for the erection and completion of a hotel development. Group Architects Pty Ltd was the 'superintendent' under the contract. The contract provided that the time for practical completion was 20 February 1990.

On 27 June 1991 the principal gave the contractor a notice which purported to make the principal take over the works and exclude the contractor from the works, under CL44 of the general conditions of the contract. CL44 provided that if, in the opinion of the principal, the contractor would be unable or unlikely to complete the works within the time provided or within any extended time granted by the superintendent, the principle could act as it thought fit.

CL35.4 of the contract made provision for the contractor to apply to the superintendent for an extension of time for the completion of the works, and for the superintendent to grant or refuse that extension, with or without an application having been made by the Contractor. Extensions were granted by the superintendent to the contractor until 9 March 1991.

In a summons before the trial judge, the appellant contractor claimed that the notice of 27 June 1991 was repudiatory. The appellant submitted that CL44 was expressed in the language of futurity, and that it would be an absurdity for the principal to form an opinion on 27 June 1991 that work would not be completed on or before 9 March 1991. This submission was rejected by the trial judge.

An arbitration by an expert consulting construction engineer (the referee) found this issue of repudiation in the principal's favour. In a separate summons before the trial judge, the contractor sought to have the principal adopt the referee's report. The trial judge ordered that this report be adopted. At that summons, the trial judge also answered separate questions on the effect of the notice of 27 June 1991 in the principal's favour. The trial judge ordered the contractor to pay the costs of both summonses.

(1) (By Meagher JA, Sheller and Powell JJA agreeing) The time for completion of the contract being an ambulatory date, there is nothing anomalous in the principal 'forming an opinion' on 2 June 1991 that the contractor was 'unable or unwilling' to finish the works before 9 March 1991, the time limited by the last extension. The trial judge's adoption of the referee's report should be confirmed.

(2) (By Powell JA, Sheller JA agreeing) The respondent having been substantially, if not totally, successful on the motion for the adoption of the referee's report and for the answering of separate questions, the trial judge's order for costs accorded with the generally accepted principle that in inter partes litigation, costs follow the event, and should not be interfered with.

(3) (By Powell JA, Sheller JA agreeing) The appellant's argument that the trial judge gave no reasons for the order as to costs between the parties on the summons to have the referee's report adopted should not be entertained. The trial judge's judgment is lengthy

and deals in considerable detail with the questions which had been debated before him; and the trial judge was at no stage informed that his reasons were considered insufficient, and was not asked to provide reasons.

(4) (By Meagher JA, dissenting) The appellant contractor having been successful on a summons to have the principal adopt the referee's report, the trial judge's order that the contractor pay the costs of the summons was a miscarriage of his Honour's discretion.

Meagher JA On 1 November 1988 Turner Corporation Ltd, as contractor, and Co-ordinated Industries Pty Ltd, as principal, entered into a written contract, the general conditions of which conformed with NPWC Edition 3 (1981), for the erection and completion of an hotel development at Church Street Parramatta. The 'Superintendent' under the contract was Group Architects Pty Ltd.

The contract provided that the time for practical completion was 20 February 1990, based on the agreed date for commencement of 7 November 1988.

There were many disputes between the parties, which led the principal to give to the contractor on 27 June 1991 a notice which in terms purported to make the principal take over the works and exclude the contractor from the works.

The principal purported to act under CL44 of the contract.

The principal has always claimed that the notice was validly given. The contractor has always maintained that it was repudiatory.

An arbitration by Mr TM McDougall, an expert consulting construction engineer, found this issue in the principal's favour. Rolfe J ordered that his report be adopted, and answered certain specific questions on the effect of the notice in the principal's favour. The contractor has now appealed to this Court from Rolfe J's decision.

The relevant power which the principal purported to exercise is contained in CL44.1 of the contract. It is in the following terms:

"...df in the opinion of the Principal the Contractor will be unable or unlikely to complete the works within the time specified pursuant to CL35.2 hereof the Principal may act in accordance with the provisions of subpara(a) or subpara(b) of the last preceding paragraph as it thinks fit.

CL35.2, to which CL44.1 refers, is in the following terms:

"The Contractor shall execute the work under the Contract to Practical Completion of the Works within the period or by the date stated in the Annexure hereto or within any extended time granted or allowed by the Superintendent pursuant to subCL35.4.

"Where the Contract specifies that a separable part of the Works shall be executed to Practical Completion within a period or by a date different from the period or date fixed by the Contract for the Practical Completion of the Works the Contractor shall execute that separable part of the Works to Practical Completion within the period or by the date so specified or within any extended time granted or allowed by the Superintendent in relation thereto Pursuant to subCL35.4.

"Upon the Date of Practical Completion of the Works or a separable part of the Works the Contractor shall deliver up the Works or that separable part of the Works to the Principal."

CL35.4, to which CL35.2 refers, is (so far as it is relevant) in the following terms:

URIRNER CORPORATION LTD v CO-ORDINATED INDUSTRIES PTY LTD (Meagher JAB

"Where the Contractor is delayed in the execution of the Works by any cause arising out of any breach of the provisions of the Contract or out of any other act or omission on the part of the Principal, the Superintendent or the employees, professional consultants or agents of the Principal or by any other cause (except a cause arising out of any breach of the provisions of the Contract or any other act or omission on his own part or on the part of his employees, agents or sub-contractors or their employees or agents) which he considers to be such as to justify an extension of the time fixed by the Contract for Practical Completion of the Works, the Contractor shall, if he desires to claim an extension of time for Practical Completion of the Works, give to the Superintendent not later than twenty eight days after the cause of delay arose notice in writing of his claim for an extension of time for Practical Completion of the Works, together with a statement of the facts on which he bases his claim.

"Tf the Superintendent determines that the cause of the delay is such as to justify an extension of time for Practical Completion of the Works the Superintendent shall grant the Contractor such extension of time for Practical Completion of the Works as the Superintendent thinks fit and shall, as soon as practicable after he has granted that extension of time, notify the Contractor thereof.

"Tf the Superintendent determines that the cause of the delay is not such as to justify an extension of time for Practical Completion of the Works, the Superintendent shall, as soon as practicable thereafter notify the Contractor of that determination.

"Notwithstanding that the Contractor has not given notice of a claim for an extension of time for Practical Completion of the Works pursuant to this sub-clause, the Superintendent may, at any time and from time to time and for any reason he thinks sufficient, by notice addressed to the Contractor extend the time for Practical Completion of the Works and the date so specified in the notice shall, for the purpose of the Contract, be deemed to be the date for practical Completion of the Works.

"Where the Contract specifies that a separable part of the Works shall be executed to Practical Completion within a period or by a date different from the period or date provided for Practical Completion of the Works the provisions of this sub-clause shall apply to and with respect to the extension of time for Practical Completion of that separable part of the Works; and for that purpose references in this sub-clause to the Works shall be read as references to that separable part of the Works.

"Any extension or extensions of time granted or allowed by the Superintendent pursuant to this sub-clause may be granted or allowed at any time before the issue of the Final Certificate.

"No claim for extra costs incurred by the Contractor by reason of or as a result of or arising from the exercise by the Superintendent of the power to grant or allow any extension of time under this sub-clause shall be entertained by the Principal unless the need for the extension of time was due to any breach of the provisions of the Contract by or any other act or omission on the part of the Principal, the Superintendent or the employees, professional consultants or agents of the Principal."

From these provisions it will be observed that the time for practical completion stated in the contract is not a permanently fixed date. It is capable of extension, indeed multiple extensions. In this regard it should be noted that there is always the possibility that further extensions of time will be granted

(a) Many circumstances may give rise to a claim for an extension of time;

(b) It is the superintendent who grants extensions of time, not the principal;

(d) The extensions of time may be granted at any time before the issue of the final certificate.

The appellant contractor's main submission was that in order to exercise the CL44.1 power, the principal would first have to 'form an opinion' that the contractor was unable or unlikely to complete the works 'within the time specified pursuant to CL35.2'. It is submitted that CL44.1 is expressed in 'the language of futurity'; and it would be an absurdity on one day to 'form an opinion' that something would not be done on or before a date long since past. On that day one would know, one would not have to opine. In the present case, so the argument runs, on 27 June 1991 when the notice was issued, how could it sensibly be said that the principal could 'form an opinion' that the works would not be complete by 9 March 1991 (the latest day for which the extensions were granted) when it knew that they had not been?

The difficulty with this argument - and in my opinion it is a fatal difficulty - is that the 'time for completion' in this contract is an ambulatory date. It is, in context, '20 February 1990 or such other date to which an extension applies'. In other words, on 27 June 1991 the principal did not know what further extensions would be granted, and, if granted, how far in the future they would extend. There is, therefore, nothing anomalous in 'forming an opinion' on 2 June 1991 that the contractor is 'unable or unwilling' to finish the works before the time limited by the last extension.

I might add that, granted this contention, no argument was advanced that the power was exercised mala fide or even unreasonably.

That disposes of the first issue adversely to the appellant.

The second issue concerns costs. The matter proceeded by way of two different summonses. The first was a summons of the contractor to adopt the referee's report (exactly why this should be so remains a mystery to me, since the report was substantially adverse to the contractor). This was opposed with some vigour by the principal, which did not want adopted a report in its own favour. Argument raged for about five days. The second summons concerned the construction issue which I have discussed. The trial judge ordered the contractor to pay the costs of both summonses, although it was wholly successful on the first summons. In these circumstances I regard the result as so inexplicably unjust that I must conclude his Honour's discretion miscarried.

I should therefore propose that the following orders be made:

In lieu of Order No 3, order that the plaintiff pay the first defendant's costs of the proceedings to adopt the report.

Sheller JA I have had the benefit of reading the judgments prepared by Meagher and Powell JJA. For the reasons given by Meagher JA I would confirm the adoption of the Referee's report and answers given to the separate questions by Rolfe J. However for reasons given by Powell JA I would not interfere with the costs order made by Rolfe J. Accordingly I agree with Powell JA that the appeal should be dismissed with costs.

URIRNER CORPORATION LTD v CO-ORDINATED INDUSTRIES PTY LTD (Powell JAB

Powell JA Two questions were argued on the hearing of this matter:

the first, leave to appeal in respect of which had earlier been granted, whether Rolfe J had erred in the construction which he had given to CL44.1, as amended, of the General Conditions of the contract between the parties; and

the second, leave to appeal in respect of which appears not earlier to have been granted, but reserved to this Court to determine, whether Rolfe J erred when, on 26th August 1994, he ordered the Appellant to pay the costs of both the proceeding to adopt the Referee's Report and of "the hearing of the separate questions".

So far as the first of these questions is concerned, I agree with Meagher JA, for the reasons which he gives in his Judgment which I have read in draft. that Rolfe J did not fall into error.

I am, however, unable to share Meagher JA's view that, in making the Order for costs which is now in question, Rolfe J fell into error, it following that, if, as appears to be the case, leave to appeal be necessary, I would not grant it, and that, if, contrary to my understanding, leave to appeal had earlier been granted, I would dismiss the appeal in this respect.

While it appears to be true that, when the Appellant moved for the adoption of the Referee's Report, the hearing proceeded over a number of days, equally does it appear to have been true that a significant part of the hearing was devoted to argument as to "the separate questions" - some 10 in number - all or most of which Rolfe J - either on a final, or a provisional, basis - resolved in favour of the Respondent; the importance of that argument is demonstrated by the fact that, when the Appellant sought, and was granted, leave to appeal, it submitted that the determination of questions 2 - the first of the questions argued on the hearing before this Court - and 10 - which was not argued on the hearing before this Court

would effectively resolve the central issue - repudiation - in the proceedings, so that all that would remain would be the Respondent's Cross-Claim for damages against the Appellant. In the result, therefore, the Respondent was substantially, if not totally, successful on the hearing before Rolfe J. If this be a correct assessment, then the Order for costs which his Honour made is one which, in my view, accorded with the generally accepted principle that, in inter partes litigation, costs follow the event.

On the hearing before this Court, an attempt was made to argue that his Honour gave no reasons for his Order. I would not entertain that argument for two reasons:

the Judgment, of which his Honour's Order forms part, is some 57 pages in length, and deals in some considerable detail with the various questions - principally "the separate questions" - which had been debated before him;

neither at the time of delivery of his Judgment, nor when the matter was listed before him 1 week later - at which time he was informed that an application for leave to appeal in respect of the Order for costs was to be made - was Rolfe J, either, informed that his reasons were considered insufficient, or, asked to provide reasons.

I would propose that the Appeal be dismissed with costs.

Appeal dismissed with costs. COUNSEL: Appellant: B WALKER/M PEMBROKE

Appellant: CORRS CHAMBERS WESTGARTH Respondent: COLIN BIGGERS AND PAISLEY

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