WINROBE PTY LTD v SUNDIN'S BUILDING CO PTY LTD

Court of Appeal (NSW)|1992-08-20|Before: Sheller JA, Kirby P, Cripps JA, Giles J

The application is directed to that part of my judgment which deals with a notice purportedly given, pursuant to CL31 of the Building Contract, by the appellants, the Principal under the contract. Para(a) of that clause provided that if the Contractor, the respondent to the appeal, should make default in the following respect, inter alia,

"(ii) If he fails to proceed with the Project with due diligence or in a competent mannef,.........

AND if, in the face of a default that is capable of remedy, he shall continue that default for ten (10) days after notice in writing has been given to the Contractor specifying the default and stating the Principal's intention of determining the Contractor's employment, THEN the Principal may, without prejudice to any other rights or remedies, by notice by registered mail determine the employment of the Contractor under this Contract."

The Principal gave a notice in a form which is set out in my judgment. The notice recited that the Contractor had failed to proceed with the Project with due diligence or in a competent manner. It then recited, in summary form, CL31 and in its body stated:

" (1) That pursuant to CL31 of the Contract the Principal gives notice that the Contractor has failed to proceed with the Project with due diligence or in a competent manner particulars whereof are set out in the Schedule to this notice AND FURTHER TAKE NOTICE that if the Contractor shall continue the default for ten days after this notice has been given to the Contractor then it is the intention of the Principal to determine the Contractor's employment under the Contract."

The particulars given in the Schedule were as follows:

"The Contractor has failed to proceed with the Project with due diligence or in a competent manner in that the Contractor has designed and constructed the Works in such a manner that the same encroach upon the Rights of Carriageway burdening the Site being Lots 4 and 5 in Deposited Plan 748030 so as to preclude

URJ WINROBE PTY LTD v SUNDIN'S BUILDING CO PTY LTD [No 2] (Sheller JA) 3

the Proprietors of Strata Plan No 34735 which is the registered proprietor of the dominant tenement from having the benefit of such Rights of Carriageway. "

The appellants claimed that the Contractor was obliged to redesign and construct or reconstruct the Works. It failed to take any steps to do so and, accordingly, it is said that the notice effectively enabled the Principal to determine the Contractor's employment. The Contractor's failure is said to be a failure to proceed with the project with due diligence or in a competent manner.

In the course of his judgment of 18 December 1990, from which this appeal was brought, Giles J said:

"Tt follows from the view which I have expressed that there was no failure on the part of the contractor to proceed with the Project with due diligence or in a competent manner. As the principal pointed out, the Project included the contractor's obligation to design the Works as well as to construct the Works. Implicit in the principal's notice given on 23 August 1990 was that the contractor was obliged to redesign and construct or reconstruct the Works so that there was no encroachment on the rights of carriageway interfering with the enjoyment of the rights of carriageway by the owners of lot 3. The principal relied for this obligation on an express obligation which it said was found in CLI (a) of the articles of agreement and CL11 CL13 and CL20 of the conditions, and did not contend for an implied obligation to correct a design (eg Equitable Debenture Assets Corporation Ltd v William Moss Group Ltd (1984) Con LJ 74) or warn of a defective design (eg Victoria University of Manchester v Wilson (1988) Con LJ 416). Any such implied obligation may well have been inconsistent with the express terms of the contract, but that did not arise. For the reasons I have given, I do not think that in August 1990 there was any obligation on the contractor to so redesign the Works.

On the contrary, the contractor was obliged to execute the work shown upon the Contract Drawings, and thus to construct the Works by building on the rights of carriageway in such a way as to interfere with the enjoyment of the rights of carriageway. The principal could vary the Works, but its remedy was in damages for the breach of the warranty in CL20 of the conditions. Hence the principal was not entitled to terminate the contract, as it purported to do by the notices of 23 August and 13 September 1990, pursuant to CL31 of the conditions."

In the course of my judgment I held, contrary to the conclusion reached by Giles J, that the Contractor was by contract obliged to remedy any defect in the design and stated that I was inclined to think that the nature of the contract was such that it would be obliged to build in accordance with the redesign.

Accordingly I thought it necessary to determine whether the notice was effective in the circumstances of the case to enable the Principal to determine the contract. I considered it was not because it failed to specify the default and state with reasonable explicitness what was required to be done about it.

I said that I did not agree that it was implicit in the notice that the Contractor was obliged to redesign and construct or reconstruct the Works so that there was no encroachment on the Right of Carriageway. "It certainly was not explicit." I said:

"A notice given to a party in default under a contract that if something required to be done is not done the contract will be put to an end must state with

reasonable explicitness what it is that is being required to be done; O'Brien v Dawson (1941) 41 SR 295 at 304.

Tf as it was entitled to do the Principal required the Contractor to redesign and demolish that part of the Works which interfered with the rights of carriageway it was in my opinion bound to say so explicitly in the notice. The Works were 80 per cent complete. Properly understood the notice did not require the Contractor in order to avoid termination to demolish within ten days so much of the Works as interfered with the rights of carriageway and to redesign them so that they did not so interfere. It is plain from the language the Principal used that it did not intend this by its notice. This is also consistent with what had taken place between the parties up to that time. In my opinion the notice was not effective under CL31 to enable the Principal to determine the employment of the Contractor under the contract."

The correctness of this conclusion is challenged by the appellants on this application. In support of this challenge the appellants have referred to the following cases: Pauling v The Mayor of Dover (1855) 10 Ex 753; 156 ER 644; Re Stewardson Stubbs and Collett Pty Ltd and Bankstown Municipal Council (1965) 2 NSWLR 1671; Hooker Constructions Pty Ltd v Chris' Engineering Contracting Co (1970) ALR 821; Eriksson v Whalley (1971) 1 NSWLR 397; Hounslow LBC v Twickenham GD Ltd (1971) Ch 233; Brenmar Building Co Pty Ltd v The University of Newcastle (unreported, Court of Appeal, 12 December 1977); Brown and Doherty Ltd v Whangarei County Council (1988) 1 NZLR 33 and Yendex Pty Ltd v Prince Constructions Pty Ltd (1989) 5 BCL 74. Of these all but three, Pauling, Brenmar and Yendex are decisions of single judges. None detracts from the general principle that I stated in my judgment by reference to O'Brien v Dawson nor indeed as a general principle do the appellants challenge it. The appellants say two things: first that a reference to the default as described in CL31 (a) (ii), that is to say by saying that the Contractor has failed to proceed with the project with due diligence or in a competent manner, is a sufficient "specifying" of the default; second that the contract did not require the Principal to specify what must be done to put the matter right; compare Hounslow LBC v Twickenham GD Ltd at 264G.

The respondent referred to Leros Pty Ltd v Terara Pty Ltd (1992) 66 ALJR 399 at 405 where, in the context of the requirements for the form of a caveat to protect an estate or interest in land under the West Australian Transfer of Land Act 1893, three members of the High Court said that it seemed to them "that 'specify' should be understood in the sense of 'mentioned definitely or explicitly' ".

For the reason, as will appear, that I consider that, had the appellants taken objection to its doing so, this Court would not have entertained an argument that the notice under CL31 was defective, I do not think it appropriate to do more than, in deference to the arguments and researches of counsel, express a tentative view about the arguments now put on behalf of the appellants.

As to the first, the cases relied upon by the appellants were all concerned with claims by the proprietor that the builder had failed to maintain an appropriate rate of progress and, in that sense, not complied with its general obligations under the contract. To adapt the language of Baron Park in Pauling's case the work in general had been done in a negligent and sluggish manner. They were not cases, such as the present, involving, if the defect was to be put right, redesign and demolition. As Moffitt J, as he then was, pointed out in Stewardson Stubbs at 1674, lack of reasonable diligence or competence may be capable of remedy in two possible senses, that is repairing the results of the lack of past diligence or

URJ WINROBE PTY LTD v SUNDIN'S BUILDING CO PTY LTD [No 2] (Sheller JA) 5

competence or, alternatively, merely by proceeding in the future with reasonable diligence and competence. In Pauling's case Baron Park, sitting as a member of the Exchequer Court said:

"T think, that, if the engineer had wished the plaintiff to do some particular piece of work, as, for instance, to pull down and rebuild some portion of the work, the notice should have specifically stated to what extent he required the particular work to be done. But here the objection of the engineer is, that the work in general is done in a negligent and sluggish manner. It is, therefore, sufficient for him to give a general notice of this description. He tells the plaintiff he is proceeding in a negligent and slow manner, and requires him to do the work better, and with more expedition. Such a notice is good."

So far as I am aware this statement has never been doubted. It is argued on behalf of the respondent that it applies to the present case and demonstrates the notice to have been defective.

As to the second point, a clause such as CL31 may well be regarded as intended, if possible, to provide an opportunity to avoid the necessity for termination and to allow the contract to be completed in accordance with its terms. That being so, I incline to the view, in the circumstances of the present case, that the expression "specifying the default", if what is required is rectification rather than future performance, (compare per Samuels JA in Brenmar Building Co Pty Ltd v The University of Newcastle), calls for the notice to state with reasonable explicitness what it is that is required to be done. None of the authorities now cited suggests otherwise.

The appellants, however, submit that the effectiveness of the notice under CL31 was not an issue at the hearing before Giles J. The respondent denies that the point was conceded. But the appellants' argument is that the issue was whether the Contractor was in breach of an obligation entitling the Principal to give the notice it did. Giles J held that it was not in breach of such an obligation. I took the contrary view. During the course of argument in this Court the effectiveness of the notice was raised by the Court. It is desirable to set out in full the passages from the transcript of argument. The hearing of the appeal extended over two days and the matter was raised in the course of both the appellants' and the respondent's submissions on the first day and again in the appellants' submissions in reply on the second day.

A. In the course of the appellants' submissions on the first day of the hearing of the appeal:

"SHELLER JA: Your notice does not say - Produce a proper design. It seems to be attacking the fact the initial failure entitles you to terminate? COLES: One would get that impression. That should be read, in my submission, as referring to the initial, or original, failures to proceed in the sense that the design was flawed from inception, and it also should be read as a failure, therefore, to amend or rectify that design as a progression as the works got under way.

SHELLER JA: CL31 (a) (b) seems to be talking about some ongoing process. The contract has been made, and the contractor fails to proceed with the project. The trouble I have at the moment is that 177 (this is a reference to the page in the appeal book where the notice was, in part, set out) seems to be talking about some pre-contract failure to do something? I do not understand the principle upon which you say that entitles you to terminate in accordance with that notice, because you depend upon that notice?

COLES: We do not for the general right. All we say is we have asserted a state of affairs in that notice, namely, that the contractor has failed to proceed with the project with due diligence and in a competent manner. Then we particularise that. He has designed and constructed the works in a manner that they encroach. Accepting what your Honour says the clause contemplates, by use of the word 'proceed' - the progressive steps involved in the project, we say, those are the steps the contract provides for. We say, if there was at the outset a faulty design, then proceeding with the project in accordance with that design was not proceeding with the project with due diligence.

We say, inasmuch as it was incumbent upon the contractor to continue to design, and to redesign, from time to time, that he failed to proceed with that aspect with diligence, competence or at all, and the proof of that position was that there was constructed the building in the way referred to in the schedule, that is to say, encroaching. We say that is right, that is what happened.

Be that as it may, quite apart from any other provision of the contract apart from CL1(a) and CL13, there was a state of affairs clause, CL31 (a) (ii), which describes, namely, failure to proceed with the project in a diligent or competent manner.

We say that can be identified, really, throughout the course of the works from the inception of the plans up to and including the whole of the period before May but the principal was ignorant of the infringing quality of the design, and, upon becoming aware, there was a continuing failure to proceed between May and August - notice was given. There was then a failure to comply with it. His Honour took the notice - and we do not shrink from the accuracy of the description - as being a notice requiring the contractor to redesign or reconstruct accordingly. He took no steps as to that. After 10 days no intimation of the course to be embarked upon by the contractor in remedy had become apparent.

SHELLER JA: The problem I have in this case is what the contractor was asked to do was contribute to the amount of settlement that had to be paid to the neighbour. This is not a case in which the contractor was asked to fix his design up?

COLES: He was required to remedy the breach, and his Honour took that to mean a requirement that he redesign and, so far as necessary, reconstruct.

SHELLER JA: There was never the slightest suggestion that would happen. The idea was they would pay out the neighbour? COLES: No doubt the principal hoped that some accommodation could be reached with the owner in due course, no doubt for the payment of money if necessary. The renunciation of the obligations is to be found, in all the circumstances, page 4 of my outline of submission.

COLES: Not only that, he denied it was his responsibility. Upon receipt of a notice saying - Fix it - he did nothing, against the background of having already initially furnished a design which was - we say - in breach of his obligations of skill and care and, secondly, having had drawn to his attention what he should have already suspected, that the design he had tendered resulted in serious consequences, he, of his own initiative, did nothing affirmative about it.

SHELLER JA: Where do we find a request from the proprietor that the design be put right, or fixed?

SHELLER JA: I have some difficulty reading that as saying that?

URJ WINROBE PTY LTD v SUNDIN'S BUILDING CO PTY LTD [No 2] (Sheller JA) 7

COLES: The notice was at 176 volume 1. His Honour said - page 738.6 (read). That is not to say that other recipients might have read the notice differently. Certainly, we would see the notice conveyed that meaning. We understand the submissions put against us on that question tend to assume that his Honour's reading of the notice was the reading for which we contend, because it is said that has other consequences, so far as the characterisation of breach is concerned, as being an anticipatory one.

I read to your Honours the passage a moment ago that assimilated within the repudiation the evincing of the intention to perform substantially in a manner inconsistent with the obligations, or to perform in a manner more or less dependent upon the promisor's own discretion.

We place considerable reliance on the express intimation coming from Mr Sundins in the passage at 270, that is to say, Mr Sundins' assertion - we are not responsible for the problem with the right of way. We had the earlier conversation, where he stated he did not regard it as appropriate, at least at that stage, for the appellants to be paying any money, indicating that he himself was not going to contribute."

B. In the course of the respondent's submissions on the first day of the hearing of the appeal:

"DONOHOE.............4+ My friend, when he came to CL31, had to grapple with questions from Mr Justice Sheller on the inelegance of the notice, which appears at 176 and the apparent incongruity between the language of CL31 - CL31 (a). We submit that CL31 (a)(ii) is prospective in its natural sense, and it is, in its terms, quite inappropriate to describe an error found in the design undertaken by the contract - so entered into.

We point to 'fails to proceed' and we say those words contemplate, and are appropriate to, the getting on with the detailed design after the contract had been entered into.

When one looks at the task faced by the draftsman at 176 it becomes apparent (read). No particulars were furnished, and the moment one attempted to furnish them they would have been of events pre-contract. One searches in vain for any indication of when this occurred.

SHELLER JA: If this design was defective and required to be fixed up why was it not your obligation to fix it up?

DONOHOE: Because we had not been given a direction by the principal as to what to do. The principal said - Give me some money to buy off the neighbours.

SHELLER JA: In a sense that is what the case is all about - the effectiveness of that notice? That is central? DONOHOE: Yes, we say that.

SHELLER JA: In a broad sense you acknowledge that there was an obligation under the contract to continue a design process of some sort which would have involved fixing up a defective preliminary design. The point you make is that you were never asked to do that?

DONOHOE; Yes, and we say the whole of the appellant's case has to be based on this tortured construction point to get a result if the construction is, as Mr Justice Giles found it to be, and it really is not a repudiation case. The building was 80 per cent complete and ahead of schedule. That was said in the first affidavit. This was a job that was going well. The builder claimed a bonus and recovered bonus on the basis he would have finished early - page 11.K. The only reason work stopped was because payments stopped. While it may be said - Here was a case, if the construction of the contract that Mr Justice Giles held to be the correct construction, is not the correct construction then my clients ought to have

understood that they had an obligation. The reality is they were confused. They were not saying - We do not propose to complete this job. This is a case where they wanted to get on, finish and get their bonus. It really is artificial to try and construct these arguments of repudiation based upon appreciation of points of law and construction because the Court would not readily find an intention to repudiate."

C. In the course the appellants' submissions on the second day of the hearing of the appeal:

"COLES........ My friend said yesterday the designer in the present case was not asked to fix the design. Once he became aware of the problem he ought to have set about fixing it or evincing an inclination to fixing it whether asked or not. Secondly, he was asked albeit in a somewhat different context, that is, the notice of 23 August. Inasmuch as there might be an express or implied requirement to notify on our part the contractor that he ought to - if there is to be implied an obligation to ask him before there was implied a duty to act - it is dispensed with by the contractor's inclination that such an implication would be

by washing his hands of the matter, that meant the contractor was maintaining an untenable construction of the contract. He never ventured a design or anything toward the solution of the problem.

We understood it to be suggested yesterday firstly it might be conceded by the contractor that there was a continuing design duty. If there be conceded such a duty independently to be inspired by the variation clause such a concession which is a correct one suggests the processes adopted by Giles J to resolve the matter were not the correct ones. Apart from that what was then said was one should accept the inference of repudiation should not lightly be drawn. The repudiation in the present case comprised the evincing by the contractor of an intention not to perform at all or only to continue performing on his own terms. We rely upon his express avowal 'It is not my responsibility'. We rely on his failure to do nothing to address his mind to anything when we sent him the notice and we rely upon his response, issuing a notice suspending the works, a notice was not one he was entitled to issue, but which evinces an intention not to perform any further design obligations at all including reconstruction obligations necessary pursuant to that design in the events which happened.

One can test the matter by asking what does the principal do when he has a defective design, an exposure for a large amount of money or great inconvenience to third parties, the possibility of enormous cost and on the other hand the person to whom he should be looking for assistance, his builder, says it is not my responsibility and I am not prepared to do anything. What should have been done? We do not say it was the obligation of the builder there and then to demolish the right of access ramp, he needed to evince some readiness to go on with the contract to accommodate the consequences of his breach. It was not good enough to do nothing. It got worse. We have, in giving notice on 23 August saying please do something, responded with a notice to say 'We are downing tools' but at 67 we are sent a notice of demand under the Companies Code threatening to wind up. The notice is not in evidence but the solicitors for the principal wrote a letter about it and from p 67 it appears there was sent on 31 August 1990 a notice of demand under s364 of the Companies Code which is a section which provides if one does not pay within 21 days one is deemed to be insolvent and may be would up accordingly.

URJ WINROBE PTY LTD v SUNDIN'S BUILDING CO PTY LTD [No 2] (Sheller JA) 9

One is entitled to issue a demand if one is unequivocally entitled to be paid an amount. The builder was saying he was entitled to an indefeasible title which the principal would either pay him or be deemed insolvent,. The threat to wind up the principal was not going to coerce it but if brought to fruition would deprive it of the intention of litigating with the owners of Lot 3. Where is any evidence or demonstration of the evidence to go on with the contract in its terms. We did not in sending the notice of 23 August want the ramp to be demolished one would have thought

COLES: Some indication by a builder in the difficult circumstances in which we found ourselves he was to perform the obligations in the context of proffering as soon as practicable a demonstration by way of some further design of something that if in the worst of all worlds we were obliged to demolish we could at least have under way in point of gaining council approval and the like something from the builder pursuant to his design obligation which would have been a comfort in the position in which we found ourselves.

CRIPPS JA: Was that aspect explored at the trial, what you should have done?

COLES: Was there evidence of these various opportunities?

CRIPPS JA: Yes or what you should have or should not have done in response to all this.

COLES: Someone being cross examined as to what he should have done, I don't think so. I really can't say.

SHELLER JA: You asked for money, then issued a notice which on my reading really does not say what you want at all. You are just moving away from the real thing. If you wanted this to be redesigned it was easy enough to say so, but you didn't say that.

SHELLER JA: I find it difficult to read that as a requirement that the contractor prepare a new design and make the building conform with it.

COLES: One would ask how does one rule out if one does not read it as requiring some action?

SHELLER JA: Evasive. What strikes me at the moment is that you wanted money if you had really written to them and said what you wanted it would be "We wanted a contribution.... *.

COLES: There was no point. Even when the sum was $10,000 -

SHELLER JA: In any event that is the impression I had and that is not said and I find it very difficult to get out of this language a plain statement you really wanted what you now say, namely, a redesign.

SHELLER JA: The question is whether you asked for it.

COLES: By drawing the attention to the identified deficiency in the old one we flagged the desirability of a conforming one. The notice did not ask for money. The last thing we wanted was to pull the access ramp down unless that was a matter of the

SHELLER JA: You didn't really want the contractor to redesign it.

COLES: Yes we did. Supposing we are in the position we have to pull it down. We will need to have something in its place. That was the position at the time we gave the notice. We either leave things in limbo and submit to a contractor who only demands payment of money or bring things to a head and say 'Against the day we must pull this down you must have a conforming plan available to satisfy your obligations'.

The validity of the repudiation argument does not depend on any question of construction of the contract but on the principles to which we have referred. If the notice is inoperative for CL31 purposes which we deny, it takes its position as part of the position that one views these things, from the standpoint of the innocent party. Not the party who knowing of the error persisted in it. From the standpoint of one who is confronted with what has gone on one looks at his expectations. One readily infers from there being no response, but a notice to suspend and a demand under the Companies Code, he was not going to perform this contract other than in the way he wanted himself. What is an innocent person to do when he finds himself in this dilemma? The first thing he could do is pay out and hope. He can hope in paying up the builder will carry on, and he can hope the builder will remain solvent long enough for the proprietor to recover damages. It would be pointless to issue a variation order because he has already said no to the request. He is going to assert an entitlement to be paid for it. In the present case there could have been no question that Sundin would refuse to recognise the right which his Honour suggested existed to set off the expense of complying with the variation order against what we denied as his responsibility. What was the proprietor to do? At least by sending his notice he flushed out from the proprietor the very answer to the question what is the contractor going to do and the answer was a resounding nothing. That the principal can stew."

In answer to the suggestion that the notice under CL31 was defective, it was not submitted by the appellants either on the first day of the hearing of the appeal, when it was first raised, or on the second day, that the matter was not in issue at the trial nor were the cases now relied upon referred to. In fact no authority was referred to. Rightly or wrongly after the matter had been reserved this left the Court in the position where it assumed that the validity of the notice was an issue. Prior to judgment, which was delivered over two months after the hearing of the appeal, no application was made to deal with these matters.

The appellants now seek on this application to rely upon cases not previously referred to but, more importantly, to argue that on the basis of well-known principle, it was not open to us to treat the notice as ineffective. This latter submission was not initially relied upon in the application to review the judgment but emerged as a basis for doing so during the course of oral argument which took place on 20 August 1992.

In their written submissions dated 26 August 1992 the appellants say:

" (a) The point on which the Court has pronounced against the Notice was not the subject of any Notice of Contention, nor of any application to amend the Notice of Contention, nor of any specifically formulated arguments by the respondent in either its written or oral submissions;

(b) The appellants failed to appreciate the significance of the interchanges in argument on the question of the content or effect of the Notice. It was not the appellants' understanding that the Court would necessarily be disposed ultimately to take a view of the Notice different to that of the trial judge. More importantly, it was not made apparent that even if the Court so differed from the trial judge, the result would be that the Notice should be condemned as ineffective for the purposes of CL31, with the consequence that the appellant by later relying upon it to terminate the contract became itself a repudiator. The specific proposition that the principal was bound in law explicitly to stipulate for redesign and demolition (as opposed to the observation that it had failed so to provide) under penalty of having its Notice pronounced against was not canvassed in argument, the debate on the run being limited essentially to the contention that Giles J was

URJ WINROBE PTY LTD v SUNDIN'S BUILDING CO PTY LTD [No 2] (Sheller JA) 14

correct in his view. The possible application of the general proposition illustrated in other contexts by O'Brien v Dawson was not raised nor dealt with.

(c) Thus, when the question of the correct reading of the Notice arose at 20 of the transcript of argument (preceded by some discussion at 17) the appellant said at 20.8: 'We understand the submissions put against us on that question tend to assume that his Honour's reading of the Notice was the reading for which we contend....'.

(d) The respondent, for its part, simply took on board the suggested 'inelegance' of the Notice (page 28.6) without seeming to develop any submission thereon. Likewise (at transcript page 29A) it embraced without elaboration the propositions put to it, but in the context of its own arguments (appearing from 29.8 et seq) on other aspects of the case.

(e) However, it may be acknowledged that the remarks of Giles J at AB 738 were open to interpretation as representing a conclusion on a matter which the Court might have thought had been in issue. In the course of argument the appellant failed clearly or at all to inform the Court expressly that there had been no such issue. Equally, the respondent, inasmuch as it embraced matters put from the Bench, did not in terms indicate that it had not sought to impugn the Notice in the Court below upon the ground ultimately discerned in the Court's judgment. In making this observation, the appellant intends no criticism of the respondent's conduct, since it is not apparent that the respondent itself had any reason to apprehend that the Court would necessarily resolve the case against the appellant on the specific basis ultimately identified in the judgment.

(f) If the appellant had understood, on the other hand, that the respondent was itself advancing a significantly new case, notwithstanding its Notice of Contention and the absence of any application to amend the same, it might reasonably have been expected that the appellant would have been astute to point out to the Court that there had been no issue nor debate, and that the point was not now open to the respondent upon the matter in the Court below.

The considerations of procedural fairness referred to above suggest that the Court should not have found it necessary or appropriate to reach any conclusion adverse to the appellant on the basis of the sufficiency of its Notice.

However, the Court has now heard full argument on the correctness of that conclusion. The authorities now cited strongly indicated that the approach taken to the construction of the Notice was erroneous. The Court should therefore review its conclusions in the light of those authorities and in the light of the opportunity which further consideration of the actual text of the appellant's Notice has afforded. It would now be open to the Court to recognise that the Notice, construed according to the principles appearing from the cases, was a valid Notice which sufficiently complied with the obligation in CL31 to 'specify the default'."

In the course of my judgment I pointed out that at the time the notice was given the Works were 80 percent complete. I said:

"Properly understood the notice did not require the Contractor in order to avoid termination to demolish within ten days so much of the Works as interfered with the Rights of Carriageway and to redesign them so that they did not so interfere. It is plain from the language which the Principal used that it did not intend this by its notice. This is also consistent with what had taken place between the parties up to that time."

In the course of submissions the appellants say: "(b) The contention that the 'Principal wanted money' appears to derive from inferences (not drawn by the trial judge) from evidence of a conversation between Mr Slattery and Mr Sundin (AB76; and reproduced in the Court's judgment at 19-20). However, this conversation had occurred on 22 June 1990.

(c) By the date of the Notice the situation had materially altered for the worse. On 10 August 1990 the adjoining owners intimated their intention to cross claim in the Equity proceedings for an order for the removal of buildings and structures erected on the right of carriageway (AB78G to K).

(d) In these circumstances it is entirely unfair to assert,in effect, that the appellant had no bona fide basis for issuing the Notice. It was at very least entitled to have its contractor take positive steps within the time limited by the Notice, to set in train the production of a conforming design. Moreover the Principal would have deferred making such a requirement at its own peril.

The first difficulty is occasioned by reason of the fact that the formal adequacy of the Notice was not in issue in the Court below. Thus:

(a) there was no occasion for evidence being specifically directed to "surrounding circumstances and accompanying declarations' with the question of the construction of the Notice actually in mind;

(b) Narrative evidence as to the parties' dealings at various times could not be expected to have been adduced with the specific question of the construction of the Notice in mind;

(c) There is thus danger in, for example, treating conversations, such as that on 22 June 1990 (relating to 'money') as definitive or exhaustive of the relevant circumstances existing two months later. This is especially so when the adjoining owner's claim for money had in the meantime grown from $20,000 (AB76) to $800,000 (AB77Q); and the adjoining owners had asserted a specific claim requiring demolition as at 10 August 1990 (AB78G). Moreover, the appellant had not been able to obtain a hearing date for its proceedings in the Equity Division.

(d) Nevertheless the reasoning in the judgment (at 38.6) assumes that 'the Notice was issued in the context of the Principals telling the contractor that it should contribute to a sum to be paid to the owner of the right of carriageway'. This conclusion appears to find its foundation only in the conversation some two months earlier.

(e) More significantly is the observation at 21.3 of the judgment; ".... there is nothing in the discussion or correspondence between the Principal and the Contractor to suggest that either entertained as a serious prospect that the development should be redesigned and demolished and rebuilt so as not to interfere with the rights of carriageway...' The reality is that there was no proper evidentiary exploration or forensic debate before Giles J on this very question. It had not been in issue.

(f) Likewise, no occasion arose for any cross examination of Mr Sundin to suggest to him that he understood the requirements of the Notice as imposing obligations upon him of the kind contended for. He might reasonably be thought to have taken the same view of the Notice as that which commended itself to Giles J at AB738S. This probability is underscored by the content of the submissions made to Giles J referred to above. Plainly, an acknowledgment by the respondent's witness that he so understood the Notice, would render otiose any conjecture as to its meaning or effect. "

URJ WINROBE PTY LTD v SUNDIN'S BUILDING CO PTY LTD [No 2] (Sheller JA) 13

In the respondent's written submissions in reply it was said that the language of the notice was not ambiguous and that it was unnecessary to refer to surrounding circumstances to construe it. Further it was said to be not to the point that the respondent may not have advanced every conceivable argument on the validity of the notice.

In the well-known passage in the judgment of the majority in the High Court in Coulton v Holcombe (1986) 162 CLR | at 7-8 their Honours said: "In a case where, had the issue been raised in the Court below, evidence could have been given which by any possibility could have prevented the point from succeeding, this Court has firmly maintained the principle that the point cannot be taken afterwards: see Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438, Bloemen v The Commonwealth (1975) 49 ALJR 219."

Later their Honours quoted from the decision of the High Court in University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481 at 483:

"Tt is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so."

Ihave come to the conclusion that if, during the course of argument before us, the appellants had taken the point, based on Suttor v Gundowda Pty Ltd and Coulton v Holcombe, we would have considered ourselves bound to proceed on the basis that the notice given under CL31 was effective to lay the ground for the determination by the appellants of the contract, if the ground for giving it was otherwise made out. The appellants have not particularised evidence that they would or might have called had it been plain to them that the issue was before Giles J a live one. I am, however, satisfied that if, before Giles J, the point had been taken that the notice was defective in not sufficiently specifying the default or what was required to remedy it, the appellants may well have wished to cross examine or lead evidence of surrounding circumstances at the time the notice was given to assist in the interpretation of it on the basis that its language was ambiguous or susceptible of more than one meaning; compare Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 352. In my judgment I referred to the fact that it was consistent with what had taken place between the parties up to the time of the notice to say that the Principal did not intend by its notice to require the Contractor to redesign and reconstruct the Works. The point not having been taken by the respondent I do not think the appellants should suffer from their inability to call further evidence as to the surrounding circumstances. Such evidence may well have prevented the point from succeeding. As I have said, in my opinion, if these matters had been addressed to us during the hearing of the appeal, we would not have allowed the respondent to rely upon the point.

The question is what should now be done about it. I accept that the issue was not raised before Giles J. I think in fairness the most that the respondent can say is that the point was not conceded. The respondent did not seek by notice of contention or otherwise, initially, to raise the point on the appeal. In oral argument it was embraced by the respondent but not in the forefront of its argument. Such being the case, in my opinion, the matter having been brought to our attention, and this application having been made, we should review the

judgment and, having done so, vary it and the orders proposed to take account of the way in which the notice was treated by the parties at the hearing before Giles J.

I think the costs on the appeal must be reconsidered in light of the appellants'

5 failure during argument to bring these matters to our attention.

Motion for review of reasons for judgment and earlier proposed orders, allowed;

Reasons for judgment published by the Court on 30 June 1992, and orders

10 proposed therein, withdrawn; 3. Costs reserved; and 4. Judgment in the appeal reserved.

Cripps JA I agree with the reasons of Sheller JA and the orders he proposes. 15 1. Motion for review of reasons for judgment and earlier proposed orders, allowed; 2. Reasons for judgment published by the Court on 30 June 1992, and orders proposed therein withdrawn;

20 3. Costs reserved; and 4. Judgment in the appeal reserved.

Instructed by: Church and Grace Counsel for the Opponent: P Donohoe QC/S Deane-Johns Instructed by: Carroll and O'Dea

KIRBY P, SHELLER and CRIPPS JJA 20 August 1992, 24 December 1992 [1992] NSWCA 278

At a glance

Court

Decision date

Before

Source

Judgment (119 paragraphs)

Parties

Cases Cited (14)

Cited By (2)