Downer Connect Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd (No 2)
[2008] VSC 443
•24 October 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
BUILDING CASES LIST
No. 6051 of 2005
| DOWNER CONNECT PTY LTD (ACN 057 593 503) | Plaintiff |
| v | |
| McCONNELL DOWELL CONSTRUCTORS (AUST) PTY LTD (ACN 002 929 017) | Defendant |
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JUDGE: | HARPER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 20 OCTOBER 2008 | |
DATE OF JUDGMENT: | 24 OCTOBER 2008 | |
CASE MAY BE CITED AS: | DOWNER CONNECT PTY LIMITED v McCONNELL DOWELL CONSTRUCTORS (AUST) PTY LTD (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 443 | |
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CONTRACT – Hearing of preliminary question pursuant to r.47.04, SCR – Loss caused by delay - Whether an implied term that neither party would delay, disrupt or prevent the performance of the contract – Whether an obligation to provide a trench in accordance with the plaintiff’s timetable to enable installation of a telecommunications conduit – Business efficacy – Ambiguity of implied term - Mackay v Dick (1881) 6 AC 251 considered - Stirling v Maitland (1864) 5 B & S 840 at 852; 122 ER 1043 applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M.H. Whitten | Corrs Chambers Westgarth |
| For the Defendant | Mr M.R. Scott | Clayton Utz |
HIS HONOUR:
On 11 January 2002, the plaintiff, Downer Connect Pty Ltd (“Downer”) executed a sub-contract with the defendant McConnell Dowell Constructors (Aust) Pty Ltd (“McDow”) to install a telecommunications conduit in a pipeline trench to be dug by McDow as part of its obligations under a head contract with Duke Australia Operations Pty Ltd and DEI Tasmanian Holdings Pty Ltd (collectively “Duke”).
The trench was designed to contain not only the telecommunications conduit, but also a major gas pipeline running from northern Tasmania to Hobart. As I understand it, the telecommunications conduit was to be laid in the trench as an ancillary benefit of its construction; the laying of the gas pipeline being the principal object of the exercise. McDow was responsible to Duke for both the conduit and the pipeline.
The project ran into difficulties. As a result, Downer was unable to perform its subcontract works in accordance with its expected timetable. The consequence, Downer alleges, was additional costs. These it now seeks to recover by way of damages from McDow.
The allegation is that the loss flows from McDow’s breach of the subcontract. But none of its written terms cover the breach alleged. Rather, Downer pleads that the subcontract contained implied terms upon which it now relies. That reliance was emphasised by the plaintiff in its written submissions of 15 September 2008 in which, at paragraphs 12 and 23, the following appears:
It is important to note that Downer’s pleaded claims are for damages resulting from McDow’s breach of the contended for implied terms. Downer’s claim is not for additional payment under the various payment mechanisms under the subcontract, or rectification of them, whether by way of variations, delay, costs or otherwise.
Downer’s claim is not for additional payment pursuant to any mechanism or provision within the subcontract. It is a breach case by which it claims damages from McDow for breach of the implied terms. In that way, Downer’s case is not one for rectification of the contract; it does not seek to add to or change the provisions within the subcontract which deal with payment.
The terms in question are set out in paragraph 6 of the second statement of claim:
6. Further, there were implied terms to the subcontract, that:
6.1 Neither party would prevent the other from performing it; and
6.2Further or alternatively, during the course of the project, McDow would:
(a)not delay, disrupt or prevent Downer from performing its subcontract works; and
(b)perform its head contract works so as to ensure sufficient open, prepared trench was available for Downer to install the conduit and thereby enable Downer to perform its subcontract works in accordance with the subcontract.
Particulars are given in paragraph 6, immediately below the pleading of the implied terms. It is alleged that the terms are to be implied by reason of (among other things) the necessity to give business efficacy to the subcontract, the relationship between the parties to it, and the nature of the subcontract works. It is further alleged that the terms are to be implied in order to construe the subcontract consistently with the head contract. Thus, it is alleged, McDow was entitled to claim from Duke such additional costs as were attributable to a variation in the head contract, including “any change to the sequencing, conduct or timing of the head contract work.”[1] Article 6.1(a)(vi) of the head contract is cited as the repository of that entitlement; and the reader is asked, as I understand the pleading, to take it that, if the implication for which the plaintiff contends were drawn, the subcontract would accord a like entitlement to Downer.
[1]Second statement of claim, para. 6 particular (iv)(B).
The second statement of claim then pleads that McDow was in breach of the implied terms. It “delayed, disrupted and prevented Downer from performing its subcontract works”,[2] and failed to perform the work required under the head contract so as to make available to Downer “sufficient open, prepared trench … to install the conduit and thereby enable Downer to perform its subcontract works in accordance with the subcontract.”[3]
[2]Ibid, para. 7.1.
[3]bid, para. 7.2.
Again, particulars are given. Insofar as these appear in the body of the second statement of claim, however, they merely restate the substantive pleading: that is, that Downer “was repeatedly delayed, disrupted and prevented in the performance of its subcontract works by reason of McDow’s delay”[4] in ensuring that sufficient open, prepared trench was available for Downer to install the conduit.
[4]Ibid, para.7.2, particular (g).
Particulars are to be employed when necessary. This is a case in which necessity speaks with a loud voice. McDow must be given that information about the plaintiff’s case without which it, as the defendant, would be taken by surprise. While pleadings define the issues in general terms, particulars control the generality of the pleadings, restrict the evidence to be led by the parties, and give the other party the information it needs if it is to know the case it will have to meet.[5]
[5] Pilato v Metropolitan Water Sewerage and Drainage Board (1959) 76 WN (NSW) 364 at 365.
The particulars to which I have thus far referred do not comply with those requirements. They are, however, supplemented by further particulars. These are to be found in schedules to the second statement of claim. Schedule A is headed “Particulars of delay, disruption and prevention by McDow”. The first entry is: “No excavation by McConnel Dowell. No trenches available.” This is consistent with the plaintiff’s general position – which, as I understand it, is that McDow is, by the implied terms, liable to pay Downer damages for every delay which had as a consequence Downer’s inability to lay its conduit whenever Downer was ready to do so. The reason for that inability might be sourced with McDow or it might not; McDow was liable nevertheless.
This observation is made good when recourse is had to other items in Schedule A. The 10th such item is: “Stand down due to rocks and water”; and the next, similarly: “Delay to production. Excavation – water in trench.” Likewise, entries 12 and 13 refer to water in the trench, with entry 12 containing a complaint not about the slow pace of the job, but about the haste with which, because of the water, some jobs had to be done. It reads:
Waited for pipe layers. Because of water in trench, pipe layers had to fill pipe with padding. This was done in haste causing conduit to bend.
Other entries, for example no. 29, make the same complaint. Others again, such as numbers 22, 23 and 26, refer to rock as the reason for the delay. And numbers 38 (“Delay due to weather – fog”) and 46 (“Wet weather all day”) are examples of weather holding up progress. Yet again, some entries (numbers 54 and 55 are examples) simply record: “Delay to production.” Each individual period of delay is added to each other to reach the total claimed as the delay period. This is then used as the basis for the calculation of the cost, to Downer, of the delay – and hence the amount of Downer’s damages.
The point of relevance, however, is that these are not “Particulars of delay, disruption and prevention by McDow”. Some, such as the last example referred to above (“Delay to production”) are particulars of nothing. For all the reader is told, the delay to which reference is there made might have been the sole responsibility of Downer. Others, but not all, are particulars of delay, disruption and prevention that on their face would not be covered by the implied terms pleaded in paragraph 6 of the second statement of claim.
The plaintiff disputes this last proposition. It submits that, inherent in the subcontract, was an obligation resting on McDow to have ready for Downer, come what may, a trench into which Downer could at once lay its conduit as soon as Downer was ready to do so. That, the plaintiff maintains, is the result once one incorporates into the subcontract the implied terms for which it contends.
An implied term is not one upon which the parties have agreed. It is one which the court presumes would have been agreed had the parties turned their minds to it. It must, therefore, be capable of clear expression – for that and another, allied, reason. The explicit terms of an agreement, whether oral or in writing, are often enveloped in ambiguity. When they are, it is sometimes frustratingly difficult to effect the resolution of that ambiguity. The courts must not consign an implied term, or the parties to the relevant contract, to a similar fate. So the law takes the view that “[p]rima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying …”[6] They are, therefore, cautious when asked to imply a term.
[6]Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 at 227 per MacKinnon LJ.
That caution is reflected in other principles governing the exercise. One such principle is that it is not enough that the term propounded be reasonable, or that its incorporation would result in a more appropriately crafted agreement, or would achieve a better balance between the rights and obligations of the parties. More is required. A term will not be implied unless it is necessary to give business efficacy to the contract.
In my opinion, it was not and is not necessary, in order to give this subcontract business efficacy, to imply into it the terms set out in paragraph 6 of the second statement of claim. Risk is an inevitable incident of works such as those involved in the construction of the Tasmanian pipeline: the weather, the terrain, the supply of materials, variations in the plans – these and other factors will impinge upon the timely and efficient progress of the job, and therefore on the cost of doing it. Those associated with carrying out the tasks demanded if the works are to be accomplished are free to deal with those risks as they agree between themselves; and they are free to place them beyond the contractual relationship.
Another, and I think more substantial, objection to the implication for which Downer contends is that the implied terms are not capable of clear expression. This can be tested in two ways. First, one can examine the particulars to see whether or not they clearly fall within those terms. In my opinion, they do not. One example will, I think, make the point. Downer claims, as portion of the damages it says are payable to it by McDow, the cost of delays caused by adverse weather and adverse terrain. But it cannot be said that McDow prevented Downer from performing the subcontract by causing rain, or by placing rocks in the path of the trench, and that therefore McDow is clearly in breach of paragraph 6.1 of the second statement of claim. Nor can it be said that, by means of the weather or the terrain, McDow delayed, disrupted or prevented Downer from performing its subcontract works, and therefore is clearly in breach of paragraph 6.2(a). Equally, it could not be said that McDow was bound, on pain of being in clear breach of the term set out in paragraph 6.2(b), to perform its head contract works so as to ensure that, adverse weather or adverse terrain notwithstanding, sufficient open, prepared trench was available to Downer to install the conduit.
The alternative test is to ask whether a contractual provision that McDow would not prevent Downer from performing the subcontract would unambiguously cover a situation in which, through no fault of McDow, it rained so much that trench digging had to be discontinued, causing Downer loss.
These terms, in the context of this case, cannot be said to be so obvious that they go without saying, or are capable of such clear expression as to be unambiguous.
The plaintiff relied, in its submissions before me, on a number of authorities. One of them was Mackay v Dick[7], a Scottish case heard in the House of Lords. In his speech, Lord Blackburn said:
I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectively be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.
[7](1881) 6 AC 251.
I do not take Lord Blackburn to be saying, in that passage, that each party agrees to guarantee the performance of all that is necessary to be done on its part. Still less was his Lordship saying that each party must perform miracles, such as to conjure the disappearance of rocky terrain, or cause the clouds to dissolve, in order to discharge its liability to do all that is necessary to be done on its part.
The facts in Mackay’s case would in any event put any such meaning into the category of obiter dicta. Mr Mackay agreed to buy a steam excavator from Messrs Dick & Stevenson, engineers. A condition of the sale was that the excavator be capable of moving a certain quantity of clay from a “properly opened up face” in a railway cutting. When tested by Mr Mackay in a cutting that was not so opened, it failed. He refused to test it anywhere else, and refused to proceed with the sale. He was ordered to pay the purchase price.
This, it will be seen, was case in which the party said to be in breach of an implied term was directly and immediately the cause of the breach.
In my opinion, the principle to be applied in this case is to be found in the following passage from the judgment of Cockburn CJ in Stirling v Maitland:[8]
[I]f a party enters into an arrangement which can only take effect by the continuance of a certain existing state of circumstances, there is an implied engagement on his part that he shall do nothing of his own motion to put an end to that state of circumstances, under which alone the arrangement can be operative. [My emphasis].
[8](1864) 5 B & S 840 at 852; 122 ER 1043 at 1047.
The implied terms for which the plaintiff argues in the present case are ambiguous to the extent that they do not qualify or clarify the meaning of the words “prevent”, “hinder”, “disrupt” “ensure” or “delay”. Those words are in the relevant circumstances inappropriate unless they reflect the fact that the defendant cannot be made responsible in damages to the plaintiff if those damages are not caused by some fault for which the defendant is, as between it and the plaintiff, responsible. They accordingly fail the test of clarity, and are not so obvious as to go without saying.
For all the above reasons, the preliminary point must be determined in favour of the defendant.
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