Elesanar Constructions P/L v Thiess Contractors P/L
[1999] QSC 5
•22 January 1999
IN THE SUPREME COURT
OF QUEENSLAND
No. 9673 of 1997
Brisbane
Before Justice Wilson
[Elesanar Constructions P/L v Thiess Contractors P/L]
BETWEEN:
ELESANAR CONSTRUCTIONS PTY LTD (ACN 000 804 384)
Plaintiff
AND:
THIESS CONTRACTORS PTY LIMITED (ACN 010 221 486)
Defendant
CATCHWORDS: BUILDING AND ENGINEERING CONTRACTS - subcontract - summary judgment - whether there are triable issues - whether plaintiff failing to notify defendant of dispute as required under contract gives rise to estoppel - counter-claim - whether claim for damages for defective work is a debt owing under the contract - equitable set off - jurisdiction of District Court.
District Court Act 1967 ss. 68, 77
Morgan & Son Ltd v. S Martin Johnson & Co Ltd [1949] 1 KB 107
Counsel:Mr A. Abaza (sol.) for the plaintiff
Mr J. Sweeney for the defendant
Solicitors: Andrew P. Abaza for the plaintiff
Clayton Utz for the defendant
Hearing Date: 16 November 1998
REASONS FOR JUDGMENT - WILSON J.
Delivered the 22nd day of January 1999
The plaintiff seeks against the defendant summary judgment for the sum claimed in the writ together with interest and costs.
By a specially endorsed writ issued on 27 October 1997 the plaintiff claimed $143,300.72 as the balance price of crushed rock and pavement gravel sold and delivered by it to the defendant. In the particulars of claim the plaintiff alleged:-
“The Plaintiff sold and delivered to the Defendant crushed rock and pavement gravel at the Defendant’s request and pursuant to an agreement in writing made the 3rd day of April 1993 between the Plaintiff and the Defendant for a project at Cunningham Arterial Road, Harcourt Road and Rudd Street Interchanges, Archerfield to the balance value of $143,300.72.
Particulars
31.01.1994 Invoice $ 31,955.76 31.02.1994 Invoice $ 46,690.84 31.03.1994 Invoice $ 61,145.24 30.04.1994 Invoice $ 3,508.88 $ 143,300.72
The Defendant has not paid to the Plaintiff the balance sum of $143,300.72.”
On 3 November 1997 the defendant entered a conditional appearance. The judgment summons was taken out on 30 October 1998 and returnable on 16 November 1998. During the hearing on 16 November the defendant submitted to the jurisdiction of the court.
The defendant as head contractor entered a contract with the Queensland Department of Transport in relation to a project at Cunningham Arterial Road, Harcourt Road and Rudd Street Interchanges, Archerfield. Part of the work, namely the supply and delivery of crushed rock pavement gravels, was subcontracted to the plaintiff trading as Reedy Creek Quarries.
The plaintiff contends that the subcontract was contained in a written document entitled “Subcontract Agreement No. 18012”. Clauses 1 - 3 of that Agreement were as follows:-
“1.The Subcontractor shall entirely at its own expense and assuming all risks in any way connected therewith perform the work set out in Schedule A (below) such work being part of a contract hereinafter called the ‘Head Contract’ particulars of which are set out in Schedule B (below) to be performed by the Contractor and shall supply all labour, equipment and materials required therefor.
2.The Subcontractor shall perform such work to the complete satisfaction of the Contractor and the Principal’s Engineer or Architect, in accordance with all the terms, provisions, conditions, plans and specifications of the Head Contract so far as they may be applicable thereto and also in accordance with the general conditions of acceptance of this Subcontract as shown overleaf and any other special conditions as may be annexed hereto.
3.As full consideration for the performance of such work the Contractor will pay to the Subcontractor the amounts shown in Schedule C (below) with such additions or reductions as may be subsequently agreed in writing.”
Further, the general conditions of subcontract included the following:-
“Only these General Conditions and the terms, provisions, plans and specifications of the Head Contract shall apply to this Subcontract unless otherwise agreed and in the event of any conflict the conditions of the Subcontract both general and special (if any) shall prevail. All plans and documents pertaining to the Head Contract will be available for perusal at the Contractor’s site office.”
The defendant contends that the contract was partly in writing (constituted by the subcontract agreement into which the head contract documents were incorporated) and partly oral.
Despite the formulation of the claim in the writ the plaintiff has not put the four invoices into evidence. Instead, it presented argument by reference to progress certificate no. 19 dated 6 October 1994 issued by the defendant, a copy of which is exhibit “PNL3” to the affidavit of Peter Neville Lyons filed on behalf of the defendant. (A copy of the exhibit is annexed to these reasons for judgment.)
Jill Ivory, the plaintiff’s weigh bridge and dispatch clerk, deposed in paragraph 30 of her affidavit sworn on 28 October 1998:-
“The total charged correctly by RCQ to Thiess under the Contract, and which amounts I verify from the Company records prepared by me is as follows:
Total charged
$1,133,738.76
Total paid
$ 990,438.04
The balance owing is
$ 143,300.72”
Peter Neville Lyons, the defendant’s civil engineering manager, responded to this in paragraph 15 of his affidavit sworn on 16 November 1998 as follows:-
“As to paragraph 30 of Ms Ivory’s affidavit I say that the contract value was $1,045,105.35 and the value of work completed by the plaintiff under the Subcontract was $978,052.11. Now produced and shown to me and marked ‘PNL 3’ is a copy of progress certificate 19 with provides a breakdown of these amounts.”
The plaintiff’s argument is summarised in its written submissions as follows:-
“8. Exhibit ‘PNL 3’, records an amount of $140,116.76 as owing by Thiess to the Plaintiff. The Exhibit records on the second page ‘Total Value of Work Completed to Date’ - $1,045,105.35 but there is a ‘deduction’ from that amount, not explained or verified, of $3,068.76; another ‘deduction’ of $68,574.00; and admitted sundries of $1,520.76 not added.
9. The calculation is:
Contract Value[1]. $ 1,045,105.35
Add Sundries referred to
in ‘PNL 3’ $ 1,520.76$ 1,046,626.11
[1]Para 15 of Mr Lyons affidavit.
Add unspecified and unverified
deduction $ 3,068.76$ 1,049,694.87
Add unspecified and unverified
deduction $ 68,574.00
carried forward 1,118,268.87
Less Payments asserted to date
on ‘PNL 3’ $ 972,886.98
Sub Total $ 145,381.89Less payment recorded by ‘PNL 3’ $ 5,265.13 [sic - should be $5,165.13]
Balance owing $ 140,216.86 [sic - should be $140,216.76]
10. There are, the Plaintiff points out in fairness to Thiess, three Clerical errors on the figures in ‘PNL 3’ nett in favour of Thiess, amounting to $220.37:
Item 4 : - 00.27¢
Item 5 : - 00.18¢
Item 6 : $ 526.31
Item 11: $ 306.39¢
Nett
adjustment $ 220.37
11. Allowing the nett adjustment of $220.37 to Thiess the difference between the case for the Plaintiff and the case for Thiess amounts to $3,404.33 [sic - should be $3,304.33] which is no ground to resist the application: and no ground to hold the Plaintiff further out of its money.
12. The difference in amount is so small that it ought to be resolved in favour of the Plaintiff by the weight of the evidence of the Plaintiff with reference to the whole of the evidence and having regard to the following matters.”
In my view the calculations in paragraph 9 of the plaintiff’s written submissions involve a wrong analysis of exhibit “PNL 3”. In the plaintiff’s calculations $68,574.00 (shown on the progress certificate as back charges) has been added back into the equation. This ought not to have been done, because the amount was subtracted after, and not before, the figure of $1,045,105.35 was reached. If the figure of $68,574.00 is subtracted from the plaintiff’s balance of $140,216.86, there is the sum of $71,642.86 (or more correctly $71,642.76) owing by the defendant to the plaintiff. That is the sum of the deductions shown on the progress certificate ($3,068.76 + $68,574.00 = $71,642.76).
The plaintiff makes an adjustment in favour of the defendant of $220.37. On that basis the amount owing by the defendant would be $71,422.39.
This would suggest that the matters in issue are those which comprise the $3,068.76 and the $68,574.00. However, the supporting documentation referred to (progress claim no. 15 and letter dated 5 September 1994) is not before the court.
Also exhibited to Mr Lyons’ affidavit is a draft defence and counter-claim.
The affidavit material and the oral argument concentrated on two issues - whether the plaintiff was entitled to be paid for the use of certain body trucks and the amount for which the plaintiff was entitled to be paid for the supply of stabilizing agent.
So far as the body trucks are concerned, the plaintiff’s claim amounted to $23,587.10 as particularised in a schedule to Ms Ivory’s affidavit.
Material had to be delivered to a ABG511 paver used by the defendant. In order to ensure that the material was discharged efficiently, consistently and without spillage, there had to be a certain relationship between the dimensions of the delivery vehicle and the paver. The body trucks were used for this purpose. The plaintiff contends that it was entitled to extra payment for the use of the body trucks while the defendant contends that it was not so entitled.
The subcontract was a schedule of rates contract. Schedule C to it provided an item as follows: additional rate for cartage by eight-wheel body truck rate $0.30 (per tonne). The body trucks fitted that description.
The defendant relies on clause 7.1.2(b) of the specification to the head contract (which was incorporated into the subcontract) to say that the plaintiff is not entitled to any additional payment. It provided as follows:-
“Vehicles used for the delivery of the mix shall be of the open body truck type equipped with adequate covers and capable of transporting and discharging the mixture without segregation.
If discharging into the hopper of a paving machine, the vehicles shall be designed or equipped with the capacity to efficiently discharge into the hopper consistently and without spillage.”
Mr Lyons has said that the $0.30 additional rate shown in the schedule to the subcontract was for the supply of eight-wheeler body trucks for use in tight and confined spaces at the direction of the defendant, and not in respect of the use of body trucks in conjunction with the ABG511 paver. It is not clear to me whether this is put forward as the proper interpretation of the schedule having regard to the matrix of facts in which the subcontract was made, or whether it is put forward as an oral term of the agreement (the defendant’s contention being that the agreement was partly oral and partly in writing).
Be that as it may, the plaintiff’s claim is not for an additional $0.30 per tonne, but for actual amounts paid per tonne in excess of $4.40. These amounts vary between $0.55 and $2.10 per tonne.
In the circumstances there is a triable issue with respect to the claim for the body trucks.
Presumably the balance of the plaintiff’s claim ($119,713.62) is for extra payment for cement.
The essence of the plaintiff’s complaint is the alleged alteration of the cement content from 4.2 per cent to 3.5 per cent. I have had difficulty understanding the basis of this claim. Having regard to the calculation in paragraph 19 of Ms Ivory’s affidavit, I take it that the plaintiff’s point is that, had the ordered cement content been 4.2 per cent rather than 3.5 per cent, it would have been entitled to greater remuneration. This is illustrated as follows:-
$153.00 x 4.2 % = $6.43/t
$153.00 x 3.5 % = $5.36/t.I notice that the deduction of $3,068.76 in progress certificate no. 19 is described as “difference in cement costs between cement % invoiced & actual cement %. Details attached to progress claim no. 15”.
It was provided in schedule C to the subcontract that the plaintiff should be paid for stabilizing agent (cement) at $153.00 per tonne. The defendant says that the dispute is how to measure the tonnage.
The subcontract was a schedule of rates contract. The plaintiff tendered on the basis of a cement content of 4.2 per cent: see Ms Ivory’s affidavit paragraphs 7 - 9 and the document headed “Addendum Specific Job Requirements” which is exhibit B to that affidavit.
The specification called for pavement material with a “characteristic value not less than” the “ordered cement content”. See specification clauses 7.2.1 and 8.2.2. The ordered cement content could not be determined until after the tender had been let, because the specification provided that the stabilizing agent should be ordered by the engineer after tests had been carried out on a preliminary sample of the paving material which the contractor intended to use.
In her affidavit Ms Ivory deposed to cement being first added at 4.2 per cent “in accordance with Thiess’ direction Attachment B.” This was a reference to the “Addendum Specific Job Requirements” previously referred to. That was part of the specification upon which the plaintiff tendered rather than a direction from Thiess. On 29 March 1993 Thiess gave a direction that the cement content was to be 3.5 per cent. There was further testing carried out up until 22 April 1993 when the defendant advised that it wanted a characteristic value of 3.5 per cent.
In these circumstances there is a triable issue as to whether the plaintiff was ever entitled to be paid for stabilizing agent at the rate of 4.2 per cent.
It was a term of the subcontract that the plaintiff would notify the defendant of any matter in dispute under the subcontract within thirty days, failing which the plaintiff would be deemed to have waived any claim arising therefrom: general condition 10. The defendant asserts that the plaintiff failed to notify it of the dispute within that time and that the plaintiff has accordingly waived its claim and is now estopped from advancing any claim it might otherwise have had. It is not clear what detriment is relied upon in support of such an estoppel. On the evidence and submissions on this application, I am not prepared to find that the defendant has raised a triable issue with respect to waiver or estoppel. Of course, the defendant may still be able to make out either or both of these defences at trial.
The defendant has raised a counter-claim amounting to $81,214.00. In the draft pleading it is alleged as follows:-
“In breach of the term mentioned in paragraph 10 hereof, the Plaintiff failed to provide material with a Characteristic Value not less than the ordered cement content.
As a result of the Plaintiff’s breach:
(a)some material which did not conform with the specification was removed and replaced at a cost of $35,620;
(b)the Defendant laid an additional 40mm of asphalt to overcome the weakness in the sub-base in some areas at a cost of $35,814;
(c)the Defendant incurred engineering consulting fees in the sum of $5,280;
(d)the Defendant had moneys withheld pursuant to its head contract with MRD due to the reduced level of service of material which fell below specification requirements in the sum of $4,500.”
By clause 8 of the general conditions of subcontract in the event of default on the part of the plaintiff the defendant had the right at its discretion to use any moneys owing to the plaintiff for the purpose of paying any debts owing by the plaintiff in respect of the agreement. The defendant asserts that it had used money owing to the plaintiff for the purpose of rectifying the defective work (presumably that which is the subject of the counter-claim). Accordingly it claims to set off against any sum which it may owe the plaintiff so much of the counter-claim as will be necessary to extinguish that sum.
I do not accept that a claim for damages for defective work is a “debt owing under the contract”. However, such a claim may be set off against the plaintiff’s claim pursuant to the principles in Morgan & Son Ltd v. S Martin Johnson & Co Ltd [1949] 1 KB 107.
In summary, upon a proper analysis of progress certificate no. 19 and making the clerical adjustment allowed by the plaintiff, the amount owing by the defendant to the plaintiff (if no account is taken of the deduction and back charges) is $71,422.39. The defendant has a counter-claim for $81,214.00. That counter-claim may also be set off against the claim pursuant to the principles of equitable set off. That in itself is enough to raise a triable issue to defeat the application for summary judgment.
If it were necessary for me to decide this application by reference to the arguments about payment for percentage cement content and the supply of body trucks, I would be prepared to find that there are triable issues with respect to both.
In the circumstances the application for summary judgment is dismissed.
The question arises whether this action ought to be remitted to the District Court. By s. 68 of the District Court Act 1967 the District Court has jurisdiction in personal actions in which the principal amount claimed does not exceed $250,000.00, even though the addition of interest would take the total amount above that sum. Pursuant to s. 77 of that Act, the action can be remitted to the District Court. I will hear the parties on whether this ought to occur in the present case.
I will hear the parties also on the question of costs.
Annexure
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