On 14 December 2021 in the matter of Soliman v The Cultural Office of the Embassy of the State of Kuwait,[1] Chamberlains Law Firm successfully represented the Applicant employee with the Court awarding judgment in the employee’s favour making an order for the employer to pay the employee the entire disputed sum of $20,000.
The matter centred on termination of the employee following an improperly investigated complaint. The employee was called into a meeting with the employer and put on notice of a complaint that had been lodged about his conduct.
The employee was given no notice of the meeting or the complaint, and whilst he outright denied any wrongdoing on his part, the employee was not given any opportunity to respond to the allegations or have a proper investigation undertaken.
The case also considered the employer’s failure to pay the employee’s notice and entitlements upon termination, as well as interpretation of the “regularly imprecise” employment contract.
The case serves to signify the obligation placed on employers to ensure due process and procedural fairness is followed during an investigation into a complaint. His Honour found that in the face of the employee’s denial of any wrong-doing, the employer was not permitted to summarily dismiss the employee without:
Additionally, the case highlights the importance of crystal-clear wording in contracts of employment. The contract was “curiously worded” and purported to be governed by “the generally acknowledged principal of international law”.
His Honour referred to several authorities in finding that when considering the construction of a contract, the interpretation and meaning must be determined objectively. Additionally, His Honour made a point to note that no such “generally acknowledged principle of international law” has ever been identified.
[1] [2021] FedCFamC2G 351
Contact the Workplace Law Team at Chamberlains Law Firm for any questions and concerns.
A jury is used during criminal trials and are made up of 12 or more jurors, randomly selected Australian citizens, sworn in by oath or affirmation ‘to give a true verdict according to the evidence’. A jury is responsible for judging the facts of the case, evaluating truthfulness and reliability of witnesses, hearing evidence, and applying the law (as directed by the judge) and to ultimately determine if an accused is guilty or not guilty.
Jury trials most commonly take anywhere from a day to a matter of months to conclude. If you receive a notice and wish to be excused from jury duty, there are a few different ways you can do that.
The Jury Amendment Act 2010 outlines you require a ‘reasonable excuse’ to be excluded from jury duty. Reasonable excuses can include:
If you come from a non-English speaking background and have a limited understanding of the English language and written word, you can seek to be excluded from jury duty.
If you are single parent, unable to find alternative childcare, sole breadwinner, carer of ill or disabled family members, or in advanced stages of pregnancy, you are eligible to apply to be excluded from your jury duty obligations.
You are eligible to apply for an exemption if you have a mental or physical impairment or disability that may make you incapable or unsuitable in your duties as a juror. These include being heavily pregnant or have pregnancy-related medical issues, sickness, or infirmity. You may be required to provide a medical certificate or letter from a medical practitioner to support your application.
If you are currently enrolled in an Australian university or undertaking educational studies (such as TAFE), you are eligible to apply for exclusion from jury duty, particularly if you have examinations and lectures during the trial proceedings.
If you work for any of our state’s emergency services, are a medical practitioner, a dentist, or a pharmacist, you are automatically exempt from jury duty.
You can be exempt from jury duty if you are currently bound by a court order such as a good behaviour bond, apprehended violence order (AVO), on bail or remand, parole, community service order or a driving disqualification order. If you have previously served a term of imprisonment in the last 7 to 10 years or have been detained in a detention centre or juvenile facility in the previous 3 years, you will be exempt from attending jury duty.
You are eligible to apply for an exemption if you live further than 65 kilometres away from the courthouse or have limited or no access to public transportation.
If you have a pre-planned holiday and have received your summons for jury duty you may seek to be excluded from proceedings, and you may be required to provide copies of your hotel bookings, flights, or proof of tour bookings upon your application to be excused.
If you have attended court for jury duty, but did not serve as a juror, in the last 12 months or have served as a juror in the last 3 years, you can be excluded from jury duty.
If the accused is revealed as a friend, acquaintance or of some other knowledge to you, you can seek an exemption from jury service as a conflict of interest or of possible impartiality towards the accused.
Be aware, should you fail to appear to your jury duty summons without reasonable excuse or exemption, you are liable for up to $2,200 fine and if you provide false information by way of excuse or exemption you can be liable for up to $5,500.
Should you wish to apply for jury duty exemptions, please visit: https://juror.nsw.gov.au/home
Assisted by Casey Powell
NSW is set to continue to enjoy the practical benefits of witnessing important documents remotely via audio-visual link, following a decision to retain the temporary measures introduced in response to public health orders restricting movement and association during the COVID-19 pandemic.
The Electronic Transactions Amendment (Remote Witnessing) Bill 2021 has passed both houses of the NSW parliament, meaning the temporary measures brought in during the pandemic to enable parties to witness documents remotely will become permanent.
The Bill makes various amendments to the Electronic Transactions Act 2000 (NSW) and the Oaths Act 1900 (NSW), and captures the witnessing of documents including wills, deeds, affidavits and powers of attorney.
NSW Attorney General Mark Speakman has said the measures will improve access to justice for people living in regional and remote areas, as well as individuals suffering from illnesses, the elderly and people living with a disability. There are otherwise protections contained within the legislation to ensure the risk of fraud is minimal.
The Attorney General’s full statement can be accessed here.
We’re here to help
Should you or your business need assistance with witnessing a document remotely in NSW, please do not hesitate to contact our office.
Pleading complicated construction matters as global claims: a look at the decision in John Holland Construction & Engineering Pty Ltd v Kvaerner R J Brown Pty Ltd & Anor (1996) 8 VR 681
Global claims
Global or total cost claims are used in complex construction disputes where the loss suffered by one party is said to be attributed to several different factors.
Often, where multiple disruptions or delays affect a project’s progress, it is difficult to precisely identify which reason results in an alleged breach of contract, making the causal link to damages difficult to establish.
The risk for a party bringing a global claim is that each alleged cause of delay must be linked to the damage claimed. Though they are an acceptable way to bring an action, the difficulty lies in linking the damage claimed to specific events.
Further, there is the risk that the claim will duplicate loss or try to hide claims for damage not attributable to a breach of the principal. For this reason, the courts have approached these claims with caution.
Case discussion: John Holland Construction & Engineering Pty Ltd v Kvaerner R J Brown Pty Ltd & Anor (1996) 8 VR 681
The law in this area was discussed in great detail in the matter of John Holland Construction & Engineering Pty Ltd v Kvaerner R J Brown Pty Ltd & Anor (1996) 8 VR 681, in the judgment of Byrne J.
Facts
Woodside Offshore Petroleum Pty Ltd invited John Holland, operating as a joint venture with engineering companies Kvaerner Brown & CMPS & F Pty Ltd (Kvaerner), to submit a proposal in Holland’s name for the construction of a floating facility used in an oil-drilling operation.
Holland was successful in its bid, and having entered into a pre-bid contract with Kvaerner for design and engineer services, subsequently entered into a construction contract with Kvaerner for the Project.
John Holland commenced proceedings against Kvaerner Brown for damages and costs incurred in the completion of the Project arising out of:
(a) Breaches of both pre-bid and construction design contracts;
(b) Adjustment to sum payable under construction design contract for negative variations;
(c) Negligence in the performance of pre-bid design contract;
(d) Negligence in performance of construction design contract;
(e) Misleading and deceptive conduct;
(f) Negligence misstatement.
The reported matter concerned an interlocutory summons to strike out substantial portions of the pleadings.
The statement of claim framed the claim for damages on a global basis, claiming for composite loss as a result of the defendants’ alleged breaches of contract, supported by particulars referring to a schedule and various sub-schedules, which collectively compared the tender estimates against the actual loss to calculate the loss overall. Much of the loss claimed was unliquidated.
Whilst it was submitted by the defendants that the form of the document was repetitious and the allegations were too complex, Byrne J accepted that it was an appropriate way to plead complicated construction matters.
Breach of contract and extra costs incurred by John Holland
Byrne J was not concerned with the amount of the plaintiff’s loss – at paragraph 13, he cited the decision of Dixon and McTiernan JJ (at 143) in Fink v Fink (1946) 74 CLR 127, in that where a plaintiff establishes a breach of contract it will not be denied relief on the ground only that it is difficult to estimate the damages which flow from that breach.
What was of concern was the causal link between the loss claimed and the breach of contract, a pragmatic examination of any such causal link, and a common-sense approach to the logical principles of causation.
His Honour further noted that although a loss under contract may be attributed to a particular act or omission at law, notwithstanding other acts or omissions played a part in the occurrence of the loss, it is sufficient that the breach only is a material cause of the loss in question, and that the plaintiff’s pleading in the matter overcame this issue by “implying, rather than stating the necessary causal relationship”.
At [15], Byrne J clarified the function of a global claim (or total cost claim), stating that in its simplest form, “a contractor, as the maker of such claim, alleges against a proprietor several breaches of contract and quantifies its global loss as the actual of the work less the expected cost”.
This case was complicated by the fact that there were two contracts Holland alleged breaches of, and that the deficient design in some way caused the tender to be too low, or the construction cost to be too high, or both [at 17].
Whether a Global Claim prejudices the defendant from the outset
Byrne J turned to the court’s inherent scepticism of global or total cost claims, noting that whether the claim is likely to cause prejudice, embarrassment or delay the pleading itself and the claim or claims it makes must be examined [at 22].
His Honour confirmed his own opinion that the court should treat total costs claims with a great deal of caution and distrust [at 23]. The dictates of justice are to be considered the fundamental concern of the court, such that matter can be determined “expeditiously and economically, and above all, fairly”.
His Honour noted that the claim should be explored to determine whether it is hiding any ‘bogus’ claims by “presenting it in a snowstorm of unrelated and insufficiently particularised allegations” and recognised the burden that a global claim places on defendants in calling upon discovery and cross-examination when every item of the plaintiff’s claim alleged to be caused by the defendant.
The onus is therefore on the plaintiff in a global claim to ensure that the causal nexus alleged between the wrongful acts or omissions of the defendant and the loss suffered be set out with sufficient particularity so the defendant may know the case they have to meet – a failure to do so may be sufficient to strike out the claim.
Findings
His Honour found that several items alleging defective work failed to demonstrate a causal nexus between the act or omission and the loss claimed by Holland.
Conversely, the claims alleging that material take-offs were inadequate or erroneous, so Holland incurred delay costs in placing orders, were found to be sufficient in demonstrating the nexus, and that the issuance of particulars may address further concerns regarding individual design deficiencies.
Further costs were identified as having been incurred by Holland by way of Kvaerner failing to provide a design that fell within the requirements of the Petroleum (Submerged Lands) Act 1967 – his Honour was satisfied that a causal nexus could be drawn with regards to this claim.
Regarding Holland’s delay claims, the impact of the late delivery of drawings was particularised by providing comparative bar charts setting out actual and expected times of delivery and applying an hourly rate for the extra time required.
The extra time was calculated by deducting the estimated time from the actual time required to perform the work, and therefore sufficiently identified the nexus between the act (delay) and the head of loss (hourly rate and time).
“Negative variations”, or claims based on breach of contract where Kvaerner failed to perform works under the contracts resulting in Holland performing works and comparing the actual costs against the estimate, or Woodside performing works and back-charging Holland, were held to have discernible causal nexus.
Negligence claims
His Honour found it surprising that the matter brought claims in negligence (where it likely that it would be dealt with substantially under contract). This was particularly because if Holland failed under contract, succeeding in negligence comes with it a heavier onus and often brings a contributory negligence claim (at 31).
What was found was that the particulars of the negligence claims alleged a duty to perform a contract; however were given tortious tags in that it alleged the defendant was required to execute the contract with due care.
Noting that the performance of a contract, and its performance with due care, are essentially different at law, his Honour held that these pleadings should not stand.
Misleading and deceptive conduct claims
Holland alleged that certain statements made by Kvaerner made during the tender stage and then later prior to the commencement of the head contract induced them to agree to undertake the Project.
However, the issue his Honour took was that the losses for the statements were claimed cumulatively. As such, it was impermissible to “roll up the two different losses, notwithstanding that there may be some overlap”.
The causal nexus between the loss arising for misleading conduct generally was not apparent.
Application in NSW
John Holland Construction & Engineering Pty Ltd v Kvaerner R J Brown Pty Ltd & Anor was considered and applied in the matter of Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184.
The Court of Appeal, in that case, confirmed the judiciary’s scepticism towards global claims, stating that there are “there are no special legal principles that mean that plaintiffs in “building cases” win or lose differently from plaintiffs in other classes of contractual case”, and that there were no special principles of law which meant that the plaintiff in a building matter did not have to establish breach, causation and loss for each head of damage [at 186].
We’re here to help
Total cost claims are a complex area in building & construction law.
Should you or your business require advice or assistance concerning any of these issues, don’t hesitate to contact our office for a consultation. Our specialised lawyers are experts in building & construction law.
Encroachment Generally
Encroachment can be a frustrating issue for landowners. It occurs where an adjacent dwelling has been constructed to incorrect boundaries, or part of the building is overhanging or crossing over a boundary.
The Encroachment of Buildings Act 1922 (NSW) (EBA), which is the legislation that deals with this issue, defines encroachment as encroachment by a building and includes encroachment by an overhang of any part as well as encroachment by the intrusion of any part in or upon the soil.
Determining the correct boundary
Landowners can seek a boundary determination under Part 14A of the Real Property Act 1900 (NSW) to clarify the perimeter of their property.
2.2 Generally, residential construction contracts will contain provisions regarding property boundaries. Risk is often passed to the homeowner to ensure the boundaries are correct before construction commences.
Homeowners should ensure they are certain of the correct boundaries prior to any construction commencing which might impede or encroach on another property, exposing them to a claim under the EBA.
Remedies under the EBA
There are various remedies available under the EBA. Actions are brought in the Land and Environment Court of NSW and include removal of the encroaching structure or the payment of compensation to the aggrieved owner. Proceedings can be commenced by either the adjacent owner or the encroaching owner (s3(1) EBA).
Section 3(2) of the EBA provides that the following relief may be sought in the Land and Environment Court:
(a) the payment of compensation to the adjacent owner,
(b) the conveyance transfer or lease of the subject land to the encroaching owner, or the grant to the encroaching owner of any estate or interest therein or any easement right or privilege in relation thereto, and
(c) the removal of the encroachment.
Section 4(1) of the EBA provides that if the encroachment was not intentional and did not arise negligently, the minimum amount of compensation payable to the aggrieved owner is the value of the land itself.
However, in circumstances where the encroaching owner cannot satisfy the court that their conduct was not unintentional or negligent, the compensation payable can be up to three times the value of the land.
Further costs can be payable if the aggrieved owner has suffered additional loss or damage arising from the encroachment. This might include any depreciation in the value of the land and any loss incurred due to the orders made with respect to the encroachment (EBA s4(2)).
Sections 6 and 7 of the EBA also confer on the court the power to order a transfer, lease or easement concerning the encroachment, which is avenues also available under the Conveyancing Act 1919 (NSW).
We’re here to help
Whether an encroachment has been recently discovered or has been the subject of concern between neighbours for some time, dealing with an encroachment can be a frustrating issue for both parties.
Should you require advice concerning any of the matters discussed here, don’t hesitate to contact our building & construction law team for a consultation.
Contractors are often faced with various obstacles delaying the critical path of a construction programme. Often, those obstacles and delays are the result of actions of the principal, their employees or agents.
One of the most discussed issues in construction litigation is how a contractor may seek costs and damages arising from the delay caused by the principal and avoid the imposition of liquidated damages for failing to adhere to the construction programme and practical completion.
A principal to a construction contract is obliged to allow full and unrestricted access to the site and is required to make available as much as is required for the works to be performed under the relevant construction contract. A failure to do so may amount to a substantial breach: Carr v J A Berriman Pty Ltd (1953).
At common law, there is no automatic right to delay damages, as damages can only be recovered if they can be proven to be damages arising from a breach of contract. The automatic provision of delay damages can only occur if the contract specifically provides (most commonly liquidated).
Accordingly, there must be a sufficient nexus between the loss actually suffered and the event giving rise to the delay, as the loss must flow from the breach.
This is distinguished from delay costs, whereby a contract will provide for the recovery of costs expended in the absence of a breach but where delay has been experienced.
Typically, construction contracts will provide entitlement to further time in the event of a delay, and further, an express right to the costs and expenses arising by reason of the delay.
In the absence of an express entitlement, the aggrieved party would need to rely on compensation via the general law in the form of a cause of action for breach of contract (i.e. the failure to provide sufficient access to the site).
Where delay costs are available, they will typically be in the form of:
Where liquidated damages apply, the need to quantify the damages via a breach of contract at general law is removed.
In circumstances where liquidated damages arise from delay, those damages need to be a genuine pre-estimate of the damage resulting from the delay and owing to the initial breach. The nexus between act/omission and loss is essential. If they are not, the provision may be set aside as a penalty.
Where a construction contract does not provide an express entitlement to further time in the event of delay caused by the principal, time will be “set at large.”
Under the general law, a principal to a construction contract cannot hold the contractor to a specified completion date if the principal has prevented the contractor from completing by that date by act or omission.
Instead, time becomes at large, and the obligation to complete the project by the specified date is replaced by an implied obligation to complete within a reasonable time. The same principle applies between the main contractor and sub-contractors.
Generally, the prevention principle operates to prevent liquidated damages clauses from being enforceable by the party responsible for a breach or an act/omission causing a delay.
To avoid the operation of the prevention principle, most construction contracts and sub-contracts include provisions for an extension of time (EOT).
There is a strong argument that EOT clauses exist for the protection of both parties to a construction contract or subcontract, and that if a contract provides for an extension of time owing to acts of prevention by the principal, then the principle will not apply: Multiplex v Honeywell (2007) BLR 195 TCC.
The Court held that the prevention principle will not apply if:
In addition to an EOT, a contractor may be entitled to the associated costs and expenses arising by reason of delay or prolongation. Where a contract does not provide such express entitlement, the contractor would need to prove its entitlement via a general law cause of action (breach of contract) or an act of prevention by the other party.
The default entitlement of the contractor to prolongation under most standard forms is causes for which the other party is liable. This is defined as a “compensable delay.”
Therefore, a prolongation claim is one where a party to a contract is entitled to additional costs which arise as a result of a compensable delay.
Compensable delays affect the critical path and give rise to an entitlement to EOT, subsequently leading to the entitlement to recovery of prolongation costs.
Examples include:
…which would not have arisen if those instructions were not issued by the head contractor.
This is separate from a claim for disruption where certain events occur causing delay but do not trigger an EOT, and from excusable delay such as Force Majeure or inclement weather.
In essence, the prolongation claim must be:
Australian Courts have tempered the prevention principle where delays are contributed to concurrently by both parties (see Trollope & Colls Ltd v North West Metropolitan Hospital Board [1973] 1 WLR 601).
In Turner, it was held that the prevention principle applies only where the principal has caused the actual delay, and that the delay must be assessed in “all circumstances of the case.”
A contractor cannot rely solely on the prevention principle if it could not have completed its obligations on time regardless of the principal’s actions.
Whatever the terms of the contract, determining a contractor’s right to make a claim can still be a complex process.
Should you or your business need assistance concerning any matters discussed here, don’t hesitate to contact our Building & Construction Law team for a consultation.
Historically, the position at common law has been that a party who was not ready, willing and able to perform a contract was not entitled to be discharged from its performance by reason of the other party being in breach of an essential term.
This principle had previously been applied when dealing with an express right of termination, until the decision of the Full Federal Court in Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd [2009] FCAFC 85 (Allphones) clarified the law concerning the express right to terminate in circumstances where the party exercising that right had repudiated the contract themselves.
The matter concerned a franchise agreement relating to an Allphones retail shop location at Westfield Eastgardens.
Amongst other provisions, the franchise agreement provided that Hoy was entitled to be paid 72.5% of any commissions received by Allphones in respect of a sale from Hoy’s store of mobile phones connected to networks, who paid the sales commissions to Allphones.
During negotiations with Optus in 2004, Allphones secured an agreement that they would be paid $150 for each new post-paid phone activated under a “stretch bonus”. Allphones did not treat this as falling under the commission clause and, as such, did not pass on 72.5% of the bonuses to Hoy.
Furthermore, amounts were alleged to be payable to Hoy when customers renewed their contracts, with Optus paying Allphones a $30 bonus when this occurred. Allphones treated this as not being payable under the abovementioned commission clause.
Additionally, Allphones was making deductions to commissions owing to Hoy’s satisfaction with “refreshing” franchise stores’ appearances and get-ups.
In 2006, Allphones discovered that Hoy had been fraudulently “unlocking” mobile devices and onselling them without being subject to a fixed service provider. The franchise agreement permitted termination if Hoy was fraudulent in connection with the operation of the business.
Hoy, in response, contended that the withholding of commissions and deductions to commissions payable to Hoy was a repudiation of the franchise agreement. Allphones was not entitled to exercise an express power under that same agreement (being termination).
In the first instance, the primary judge found in favour of Hoy and determined that Allphones could not exercise the express power to terminate because “parties could only exercise rights under an agreement who were ready, willing and able to perform that agreement” [at 23].
Repudiation issue
On appeal, Allphones proffered two submissions regarding their alleged repudiation of the agreement. Those were that:
(a) Its actions were based on a bona fide interpretation of the agreement, and so could not be said to evince an intention not to be bound; and
(b) The primary judge erred in finding that the obligation to pay commission was an essential term.
As to (a), this argument was rejected by the primary judge, finding that Allphones did not genuinely hold this belief.
As to (b), the primary judge found that the “deliberate and deceitful” withholding of the commissions payable to Hoy over the life of the contract amounted to “an intention that he was prepared to carry out his part of the contract if and only when it suited him, and in the way that suited him [379]”.
Their Honours, therefore, upheld the finding that Allphones had repudiated the agreement. This left Allphones with the Entitlement to Terminate argument, which dealt with their express right to terminate pursuant to the agreement, despite being established that they themselves had repudiated.
The Entitlement to Terminate
It was accepted that Hoy had committed fraud under the agreement. However, the primary judge had considered Allphone’s own repudiation enough to disallow them of the right to exercise their express right of termination.
Perram J’s judgment helpfully walks through the primary judge’s reasoning, which considers the position at common law and how that has evolved, alongside academic literature supporting the same. In this regard, it is an exhaustive and complete judgment regarding express powers of termination under contract when in breach.
His Honour first reflected on the primary judge’s interpretation of the position at common law, citing the principle at [52] that “a party who was not ready, willing and able to perform a contract was not entitled to treat himself as discharged from its performance by reason of the other party being in breach of an essential term”, then holding that this principle should also apply in the case of an express contractual right of termination.
The primary judge cited the decisions in Collins v Baltern (1767) 2 Wils 347 at 351 (per Wilmot CJ) and Foran v Wight (1989) 168 CLR 385 at [408] (per Mason CJ) in support [at 52].
On appeal, Allphones submitted that the position at common law was irrelevant where it relied “on an express entitlement to terminate pursuant to [the contract]” [at 53].
At [55], addressing his views on the primary judge’s decision in this regard head-on, his Honour said:
I do not think it is necessary to reach a view on whether a party who has repudiated an agreement may take advantage of a breach by the other party of an essential term and, thereupon, terminate the agreement. That is because the outcome of that question has no impact on the position of express powers of termination. It is, I think, plain that parties could by their compact expressly provide that powers given to them under it could be exercised even where the party seeking to do so had repudiated the agreement. None of the familiar doctrines which can strike at the validity of contractual terms would invalidate such a provision.
Following on at [56], his Honour noted the absurd result that would follow if it were to be presumed that, where two parties had repudiated an agreement, neither would be able to exit the agreement notwithstanding the express bargain between them that either could.
This would, in effect, his Honour noted, “lock the victim of a fraud into an escapable bargain which its perpetrator as a result of an act of repudiation which may be trivial by comparison”.
Although Hoy raised in submissions a quote from Lord Findlay in Morris v Brown [at 53], which provided that:
…a party to a contract which imposes certain obligations and confers certain rights upon him cannot claim to exercise those rights while repudiating his obligations in material particulars…
his Honour found this to be obiter in the circumstances of the judgment, as no issue had arisen in Morris v Brown concerning the ability of a repudiating party to exercise an express power under a contract.
His Honour did manage to locate a decision of the Queensland Supreme Court[1] where the “suggested principle” had been applied, that being:
As a general principle, where a contract is terminated relying on such a contractual right, the parties’ rights are primarily defined by the contract and not by the general law. But the provisions of clause 13.1 do not abrogate or circumvent the principle that a party guilty of repudiatory conduct cannot rescind for the other party’s breach. No such exception to the application of the principle may be gleaned from any of the cases.
However, his Honour did not agree with the reasoning of Muir J, who had not provided any authority for nor the nature of the “general principle” he had cited.
Finding little support for the proposition in the general law, his Honour turned to academic literature, citing Professor Carter in the 2nd edition of Breach of Contract:
Thus, although a repudiation does not itself terminate the performance of the contract, the promisor, whether or not liable to pay damages, may be unable to rely upon a promisee’s failure to perform as a breach of contract.
However, from [63-70], his Honour concluded that the cases relied upon provide little support for the above proposition.
At [71], his Honour cites Chesire and Fifoot’s Law of Contracts (8th Australian edition), which reads at [943]:
A party who is unwilling or unable to perform the contract is not entitled to terminate a contract for breach by the other party.
His Honour notes that this statement is then footnoted by a list of authorities and followed by a statement that “the principle evidently applies (unless otherwise agreed, no doubt) to a contractual right to terminate: Burger King Corp v Hungry Jack’s Pty Ltd [2001] NSWCA 187″.
Again, however, his Honour disagreed with this application of this reference, stating that no such issue arose in Burger King.
His Honour then followed this with a statement that no such mention of the principle is found in several other leading authorities on contracts [73], effectively demonstrating that he had exhausted his research on the topic.
In summary, Perram J addressed the primary judge’s two main bases for the conclusion that Allphones could not terminate the agreement:
(a) That where a party has brought about the happening of an event which makes performance of a contract impossible, it should not be able to avoid the contract (Suttor v Gundowda Pty Ltd (1950) 81 CLR 414 at [441] per Latham CJ, Williams and Fullagar JJ).
(i) The facts of the case provided that Hoy’s fraud was entirely brought about by Hoy – for this principle to apply, the fraud would have needed to be causally connected with the actions of Allphones, which it was not.
(b) That the statement of Mason CJ in Foran v Wight [at 52], that the plaintiff is required to show that they are ready and willing to perform, had application to express contractual provisions.
(i) His Honour simply found that in the circumstances, and in consideration of extensive academic and legal text, he did not regard the principle as one whose existence should be accepted.
Allphones, despite repudiating the contract, was therefore found to have validly the agreement.
Key takeaways
Providing that a contract contains an express right for a party to terminate, a party who has repudiated the agreement in some manner may still exercise that right.
Common law had previously developed to a point which accepted that a party must show that they were ready, willing and able to perform an agreement in order to exercise any right to terminate, and extended to preventing express rights of termination under the contract. The decision in Allphones confirms that this is no longer the case.
Allphones has practical significance for many day to day commercial contracts, particularly building disputes, where parties are often alleged to have repudiated an agreement yet still want to reply on express rights arising under the contract.
Should you require assistance with navigating complex contractual disputes, please do not hesitate to contact our building & construction law team.
[1] Tropac Timbers Pty Ltd v A-One Asphalt Pty Ltd [2005] QSC 378, per Muir J at [21].
A discussion of the decision in Waterman v Gerling Australia Insurance Company Pty Ltd & Anor [2005] NSWSC 1066
Estoppel by convention is an equitable remedy founded on the conduct of relations between the parties based on an agreed or assumed state of facts, which both will be estopped or prevented from denying.
The elements of estoppel by convention, as summarised in Sze Tu v Lowe [2014] NSWCA 462 (at [431]), are as follows:
Often, conventional estoppel is enlivened when a party to a contract has operated in a manner not consistent with the terms of a contract (effectively breaching the contract), and where the other party subsequently relies on the breach to terminate or deny other relief under the contract, despite having accepted defective performance of that term for some time.
The aggrieved party must suffer some form of detriment for estoppel to be available as a remedy.
In Waterman v Gerling Australia Insurance Company Pty Ltd & Anor [2005] NSWSC 1066, the plaintiff, the owner of an aircraft, took out a contract for insurance of the aircraft with the defendant.
During the early stages of the policy, the plaintiff was regularly late in meeting instalment payments (indeed, on every occasion a payment was due), but notwithstanding these delays, was invited to renew the policy on the same terms and conditions.
Under the renewed policy, the plaintiff made an initial instalment payment; however, the second and third instalments on the policy were overdue and remained unpaid before the aircraft was destroyed in an accident.
Following the destruction of the insured aircraft, the plaintiff lodged a claim. The insurer declined indemnity under the policy on the basis that cover ceased when the premium was not punctually paid, however before the destruction of the aircraft, the insurers had not provided notice that cover had lapsed.
The policy, in its initial inception and as renewed, provided that if any instalment were not paid by its due date, the cover would be deemed to have ceased at midnight of that due date. This was known as the deferred premium endorsement under the policy.
The court was asked to consider whether waiver or estoppel precluded reliance on the endorsement, with the plaintiff arguing that the parties had proceeded on the common assumption that cover did not cease at midnight if a payment remained unpaid.
Brereton J noted [at 83] an estoppel will arise if the plaintiff can establish:
His Honour further noted that:
It is inherent in the idea of a mutually agreed or assumed convention that each party knew or intended that the other act on that basis. And it seems that a conventional estoppel will not arise unless departure from the assumption will occasion detriment to the plaintiff (M K & J A Roche Pty Ltd v Metro Edgley Pty Ltd (at [72]).
At [87], his Honour was minded to note that conventional estoppel will not arise unless “the parties have in fact adopted the alleged assumption as the convention basis of their relationship” (citing Dabbs v Seaman (1925) 36 CLR 538 at [549]).
Further, his Honour at [92] observed that it was not necessary that the parties, in adopting their assumption, have referred to the express terms of the contract, and cited the words of Lord Denning MR in Amalgamated Investment and Property Co Ltd (In Liq) v Texas Commerce International Bank Ltd (at 121):
“There is no need to inquire whether their particular interpretation is correct or not – or whether they were mistaken or not – or whether they had in mind the original terms or not. Suffice it that they have, by their course of dealing, put their own interpretation on their contract, and cannot be allowed to go back on it.”
With regard to the operation of the insurance contract following a continual and clear breach by the plaintiff, his Honour noted that both parties were proceeding on the assumption that punctual payment of premium instalments was not essential to the continuation of cover, “whatever might be the formal terms of the policy [at 93].”
His Honour continued at [93]:
“Together, the effect of these matters is to show that the Insurers and Mr Waterman were dealing with each other on the conventional basis that punctual payment of premiums was not essential to the continuation of cover, and once such a convention is established, it matters not if the terms of the deferred premiums endorsement provide otherwise, nor whether or not the parties adverted to those terms.”
Having established the convention between the parties, his Honour found that the requirement under the contract for punctual payment loses the essential character which it otherwise had under the endorsement provision of the contract for insurance, and that, at least without notice, neither party could insist on the strict legal position under the endorsement [at 94].
Having lost the ‘essential character’ that the deferred premium endorsement purportedly held at policy inception, the convention having been established that it was not essential, his Honour found that neither the:
“Duration nor the number of defaults in punctual payment can make any difference… because something more than continued or repeated default is required to restore essentiality to a provision which has lost it…because it was conventional that punctual payment was treated as not essential to the continuation of cover, that applied as much to a second default in punctual payment as to the first [at 94].”
Accordingly, the plaintiff was able to make out a case of estoppel, such as to preclude the insurers from relying on the provisions of the deferred premiums endorsement, and finding that the parties had been conducting their affairs on the “agreed or mutually assumed basis, inconsistent with the express terms of the policy” [at 98].
Of note, and with regard to the insurer’s position concerning the convention, his Honour said at [95] that “if they wished to revert to requiring strict compliance with the contractual terms, they were required to give notice of their intention so to do (cf Commonwealth v Verwayen (at 442) (Deane J)”.
Whilst the facts in Waterman concern premium payments under an insurance policy, the legal principle can be applied to any payments in commercial contracts where payment by a specific time or upon the happening of an event is deemed an essential term.
Often, this will occur when a commercial or residential construction contract requires progress or milestone payments. Continual performance of the contract following receipt of late payments will be deemed to be an acceptance that the term is likely not essential and will not allow the party receiving those payments to issue a breach notice with respect to late payments.
The application of equitable principles to everyday contracts can be a challenging concept. Should you or your business require advice to navigate any of these issues, don’t hesitate to contact our office for a consultation with our construction law team.
On 8 December 2021, the High Court of Australia handed down its judgment in Ahya-Ud-Din Arsalan v Alex Rixon; Dylan Nguyen v Azad Cassim [2021] HCA 40.
In summary, the High Court held that if a plaintiff’s vehicle is damaged as a result of a defendant’s negligence, the plaintiff may recover hire car costs from the defendant.
The High Court upheld the decisions of the New South Wales Court of Appeal, which had previously determined that, in three out of the four cases before it, the plaintiffs were entitled to hire car costs.
The High Court commented that the:
“…conclusion of the majority of the Court of Appeal should be upheld on the basis that Mr Rixon and Mr Cassim suffered heads of damage of physical inconvenience and loss of amenity and it was not unreasonable for them to take steps to mitigate both aspects of their loss by the hire, at a reasonable rate, of an equivalent car for a reasonable period of repair.”
The High Court heard submissions in relation to the correct method by which damages are to be assessed where a plaintiff suffers a temporary loss of use of their vehicle, whilst their vehicle is under repair and the plaintiff can establish a need for a use of a hire vehicle.
The High Court unanimously dismissed the appeals with costs in favour of the plaintiffs, and noted the following:
“The simple answer is that a plaintiff will usually be able to recover from a negligent defendant the reasonable costs incurred in hiring, for the period of repair, a substitute vehicle that is broadly equivalent to their damaged vehicle.
… Once the plaintiff acts to mitigate that loss by hiring a substitute vehicle, the onus of proof will lie upon the defendant to show that the costs incurred in mitigation were unreasonable.
… Once a plaintiff has proved heads of damage of physical inconvenience and loss of amenity of use, it will usually be difficult for a defendant to prove that the plaintiff acted unreasonably by seeking to hire a replacement vehicle. …”
Implications
The decision provides long sought after clarity as to the recoverability of hire car costs following a car accident.
However, the amounts recoverable on hire car claims remains subject to matters, including but not limited to:
Defences to statutory warranty claims under the Home Building Act 1989 (NSW): a discussion of the decision in The Owners – Strata Plan 83572 v Jackson Teece Chesterman Willis Pty Ltd & Ors [2019] NSWSC 942
Some of the most common claims brought under the Home Building Act 1989 (NSW) (Act) are claims for breaches of the statutory warranties available to property owners under s18B.
Those statutory warranties are implied into every contract for residential construction work in NSW and cannot be avoided by a party undertaking construction work.
Defences to those statutory warranties are available under s18F of the Act. One example of when a defence will be invoked is in circumstances where instructions to carry out works were provided by a party to a contract which was contrary to the written advice of the person doing the work (s18F(1)(a)).
The decision in The Owners – Strata Plan 83572 v Jackson Teece Chesterman Willis Pty Ltd & Ors [2019] NSWSC 942
A builder, who was directed by the project manager of a residential apartment development to complete remedial works that were contrary to his recommendations, was found not to have breached the statutory warranties in section 18B of the Act, and in making out a complete defence pursuant to section 18F(1)(a) of the Act also secured indemnity costs.
Facts & issues
The plaintiff was the owners’ corporation of a development known as “Bellevue on Bellevue” at Hunter Street and Bellevue Streets in Newcastle (Development). The Development comprised a commercial suite in the former Bellevue Hotel and an adjoining, seven-storey residential apartment complex.
In about October 2008, James Hardie “ExoTec” façade panels were installed on the exterior of the apartment complex. The panels are a compressed fibre cement sheet product installed with expressed joints.
The owners’ corporation was registered in April 2010. By this time, construction was almost complete; however, the building was leaking on all levels of the apartment complex. The leaking was allegedly caused by the failure of the original builders to properly install the Exo Tec panels and install head flashings in windows.
The fourth and fifth defendants (Mr and Mrs Neumann), a family building partnership, were engaged by the project manager, Cyre Group, to carry out various tasks necessary to obtain a final occupation certificate. They were also instructed to apply sealant to the expressed joints in the façade as a method of adding weather protection.
Having inspected the façade and the requirements for installation of the Exo Tec panels, Mr Neumann recommended that header flashings should be installed above all the windows in order to seal the building properly. He put his advice in a brief email to the project manager.
Nevertheless, Mr Neumann was instructed to only apply sealant to the façade joints. This decision was made despite Mr Neumann’s warning. There was also separate advice to the project manager from the project architect that the proper solution to the problem was to rectify the installation issues and that applying sealant to the joints may be only a short-term solution.
Issues considered
Stevenson J was asked to consider whether the remedial work completed by Mr Neumann on the façade was in a breach of the implied warranties in section 18B of the Act, including that the work is done with due care and skill.
The plaintiff retained a coatings expert, who gave evidence that the paint system on the building had failed for reasons associated with installation problems with the façade. He also asserted there were issues with the methodology used in installing the sealant that could have contributed to areas of the sealant failing.
The expert, however, produced only half a dozen photographic examples of sealant separation and was not able to provide any evidence that the sealant separation had played any role in water penetration of the building.
The plaintiff’s building expert also failed to provide evidence of any nexus between the work done by Mr Neumann and alleged defects in the building.
Further, his Honour noted that there had been no maintenance of the façade since the installation, contrary to James Hardie’s recommendations regarding ongoing maintenance of ExoTec panelling.
In addition, the plaintiff had not actually established any damage suffered by the Owners Corporation related to a breach of any warranties by Mr Neumann.
Ultimately, his Honour was satisfied that Mr Neumann’s written recommendation that proper, exhaustive remedial works be undertaken in lieu of the temporary sealant measures that were settled on was satisfactory to make out a defence to the plaintiff’s claim under section 18F(1)(a) of the Act.
Decision
The proceedings were dismissed, with indemnity costs awarded to the fourth and fifth defendants.
Key takeaways
Builders engaged to complete residential work under the Act should ensure that, if they are directed to perform work contrary to their recommendations or opinions, they record their advice in writing to the principal prior to undertaking the work.
The decision further stresses the importance of parties and their experts establishing the causal link between alleged breaches of statutory warranties and any loss said to have been suffered.
We’re here to help
Should you or your business need advice regarding statutory warranties or matters generally arising under the Home Building Act, please do not hesitate to contact our office for a consultation with our specialised team of building & construction law experts.