Kennett Pty Ltd v Janssen

Case [2014] SASC 164

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

KENNETT PTY LTD v JANSSEN & ANOR

[2014] SASC 164

Judgment of The Honourable Justice Blue

4 November 2014

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE - REPUDIATION - WHAT AMOUNTS TO REPUDIATION

The plaintiff builder, Kennett, entered into a subcontract with the defendant bricklayers, Janssen, to undertake for $423,080 the bricklaying for a new health care facility.  Disputes arose concerning progress and variation claims and the scope and conditions of the works under the subcontract.

On 25 February 2013, Janssen wrote to Kennett requiring that Kennett agree to pay its most recent progress and variation claim in full and various other terms and matters, failing which Janssen would cease trading on 28 February.  At the end of work on 26 February, Janssen suspended work and did not return to the site. 

On 4 March 2013, Janssen wrote to Kennett a further letter alleging that Kennett was in breach of contract by not paying progress and variation claims and changing the scope of work and stating that Janssen had suspended work and would only resume after all invoices were paid and a revised scope of work and variations were agreed.  Kennett responded later that day by issuing a notice terminating the subcontract for repudiation.

Kennett sues Janssen for damages for breach of contract.  Janssen denies that it repudiated the contract and counterclaims alleging that Kennett repudiated the contract and that Janssen is entitled to payment in quantum meruit.  Janssen concedes that objectively it was not entitled to suspend work and does not contend that objectively Kennett had been in breach of contract as at 4 March 2013.  However, Janssen contends that it would have been apparent to an objective observer in Kennett’s position that Janssen had formed an erroneous view that it was entitled to suspend work and that in all the circumstances its conduct was not repudiatory. 

Held by Blue J:

1.      Repudiatory conduct may be comprised of acts or omissions in breach of contract or of statements of intention as to future acts or omissions, provided that the conduct evinces an unwillingness or inability to render substantial performance of the contract (at [101]-[104]).

2.      The adoption by one party of an erroneous view as to the construction of a contract or another relevant matter apparent to a reasonable observer in the position of the other party is one factor to be taken into account in assessing whether a party’s conduct is repudiatory (at [107]-[108]).

3.      In assessing whether a party’s conduct is repudiatory, and in particular the effect of the adoption of an erroneous view, it will be highly relevant whether the party is in present breach of contract or merely stating an intention to engage in acts or omissions in the future which would be in breach of contract (at [116] and [158]-[159]).

4.      Considered objectively from the perspective of a reasonable observer in the position of Kennett, Janssen’s conduct…

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Kennett Pty Ltd v Janssen [2014] SASC 164
Case
[2014] SASC 164
Decision Date

CaseChat Overview and Summary

In Kennett Pty Ltd v Janssen, the plaintiff, a commercial builder, sued the defendants, commercial bricklayers, over a dispute concerning the termination of a contract for the construction of a health care facility. The primary issue was whether the defendants' actions on 4 March 2013 constituted a repudiation of the contract, or if the plaintiff's termination was the repudiatory act. The court also had to determine the quantum meruit payable if the defendants' termination was considered repudiatory. The case centred on the interpretation of contractual obligations and the implications of the defendants' suspension of work, which they claimed was justified due to the plaintiff's alleged breaches of the contract.

The court examined the nature of the defendants' actions and whether they amounted to a repudiation of the contract. It considered if the defendants' conduct, particularly their suspension of work, was a repudiatory act under the contract. Additionally, the court assessed whether the plaintiff's termination of the contract was justified and, if so, the appropriate damages payable by the plaintiff to the defendants in quantum meruit.

The court concluded that the defendants' conduct on 4 March 2013 was repudiatory, as it demonstrated an unwillingness or inability to perform the contract. The court found that the defendants' actions, including their suspension of work, were clear indicators of their repudiation of the contract. The court also determined that the plaintiff's subsequent termination of the contract was lawful. As a result, the court awarded damages to the plaintiff in the amount of $226,212.22, together with interest, and dismissed the defendants' counterclaim. The court directed the parties to provide further submissions on interest, costs, and any consequential orders.

Orders

Orders of the court

Held by Blue J:

1. Repudiatory conduct may be comprised of acts or omissions in breach of contract or of statements of intention as to future acts or omissions, provided that the conduct evinces an unwillingness or inability to render substantial performance of the contract (at [101]-[104]).

2. The adoption by one party of an erroneous view as to the construction of a contract or another relevant matter apparent to a reasonable observer in the position of the other party is one factor to be taken into account in assessing whether a party’s conduct is repudiatory (at [107]-[108]).

3. In assessing whether a party’s conduct is repudiatory, and in particular the effect of the adoption of an erroneous view, it will be highly relevant whether the party is in present breach of contract or merely stating an intention to engage in acts or omissions in the future which would be in breach of contract (at [116] and [158]-[159]).

4. Considered objectively from the perspective of a reasonable observer in the position of Kennett, Janssen’s conduct was repudiatory (at [136]-[155]).

5. If Janssen had been entitled to payment in quantum meruit, its entitlement would have been to payment of $85,482.64 together with GST and interest (at [257]).

6. Kennett is entitled to judgment for damages assessed at $226,212.22 together with interest (at [259]).

Background

Background to the litigation

The principal issues arising are as follows:1.Did the conduct of the defendants on 4 March 2013 amount to a repudiation of the contract?2.If not, did the purported termination of the contract by the plaintiff amount to a repudiation of the contract?3.If so, what amount should be assessed as payable by the plaintiff to the defendants in quantum meruit?BackgroundThe parties The plaintiff Kennett Pty Ltd (Kennett) is a commercial builder. It is a family business, having been formed in 1914. It is owned and controlled by John Kennett, who is the sole director. Scott Kennett, who is John Kennett’s son, is the construction manager. Philip Hole is the contracts manager. Piotr Rzad was the project manager and Gilbert Simpson and Kim Collins were the site managers for the project in question. The second defendant J & S Janssen Bricklayers Pty Ltd (Janssen Co) is a commercial bricklayer. It is a family business having been formed many years ago. It originally comprised a partnership of Jürgen Janssen and another person trading as J & H Janssen Bricklayers. In 1995, the first defendant Steven John Janssen (Mr Janssen) replaced his father’s partner and the partnership was renamed J & S Janssen Bricklayers (the partnership). In 2006, Jürgen Janssen and Mr Janssen registered the business name J & S Janssen Bricklayers. On 30 June 2010, Jürgen Janssen resigned from the partnership. At all material times, Mr Janssen held a builder’s licence. Janssen Co was incorporated by Mr Janssen and his then partner Ina Thiel in June 2010. It became the trustee of the Janssen Thiel Family Trust. On 1 July 2010, Janssen Co commenced trading as J & S Janssen Bricklayers Pty Ltd in lieu of the partnership. However, the registered details of the business name were not changed. On 30 June 2012, registration of the business name expired. Janssen Co focussed on commercial projects, whereas the partnership had focussed on residential projects. At all material times, Mr Janssen was the sole director and shareholder of Janssen Co. He was general manager. For ease of reference, I refer to Janssen Co and Mr Janssen collectively as “Janssen”. Luke Morton was site foreman for the project in question. Padman Health Care Facility Lockleys In the first half of 2012, Padman sought tenders for the construction of an 86 bedroom aged care facility on the corner of Henley Beach Road and Mellor Street, Lockleys. The building was to be of timber and steel frame construction with an external single brick leaf. It was to comprise two stories. Each accommodation room was to have a bay window. The building was to be in a reverse L shape. The foot of the L was designated the “western wing” (the west wing) and the upright of the L was designated variously as the eastern or northern wing (the east wing). The entire perimeter of the building was to be constructed of face brick. There were to be three internal courtyards constructed of face brick. There was to be a lift in the western and eastern courtyards and a lift in the east wing to be constructed of concrete block work filled with reinforced concrete and faced by bricks where visible. There were to be plant rooms on both floors to be constructed of concrete block work filled with concrete. Three fences on the boundaries designated FT1, FT2, and FT5 were to be constructed of stone pillars 2.4 metres apart with face brick above a stone plinth and capped by stone capping. The total brickwork was approximately 2,400 square metres and the total concrete blockwork was approximately 240 square metres.

Evidence

Evidence Before The Court

Janssen made several explicit concessions at and before trial. Janssen conceded that at all material times (including between 27 February and 4 March 2013) it did not have a lawful entitlement to suspend work under the Contract. Janssen conceded that, by suspending work, it acted in breach of the Contract and in particular in breach of clause 5.3 of the Terms and Conditions. Janssen conceded that Kennett was not in breach of the Contract by reason of not paying progress claims or variation claims in excess of the amounts paid by Kennett. These concessions relate to the objective rights and liabilities of the parties. Janssen’s case is that, considered from the perspective of a reasonable party in the position of Kennett, it was apparent that Janssen reasonably believed that, by its conduct, Kennett was in breach of the Contract and Janssen was not in breach of the Contract and that, so assessed, Janssen’s conduct was not repudiatory.Evidence Seven volumes of documents relevant to liability were tendered by consent.[4] Four volumes of documents relevant to the quantum of Janssen’s counterclaim were tendered by consent.[5] Each party also tendered several individual documents.[4] Exhibits P1 to P6 and D5.[5] Exhibits D1 to D4 (excluding tabs 29 to 86). Mr Janssen was the main witness for Janssen. Mr Morton and Anthony Salvemini, who was engaged by Janssen as a subcontracted bricklayer for the project from early November 2012 to early January 2013, were also called by Janssen to give evidence. Mr Hole was the main witness for Kennett. John Kennett, Scott Kennett and Mr Collins from Kennett also gave evidence. In addition, Hugh Kleinschmidt gave evidence and Christopher Short gave expert evidence. The evidence in chief of all witnesses was given by affidavit supplemented by oral evidence. There were several conflicts between the evidence of Mr Janssen and Mr Hole concerning discussions between them and, in some cases, concerning events at the jobsite. However, in general, cross examining counsel did not seek to put the contrary versions to the respective witnesses nor did they attempt to demonstrate through cross examination that their own witness’s version should be preferred. During the course of cross examination and during closing address, each party acknowledged that I am not in a position and am not called upon to make findings of fact preferring one witness’s version over that of the other witness. It is common ground that, at least for the purposes of liability, I am not called upon to make findings of fact based upon a credibility assessment of the witnesses. It is common ground that the result of this case does not turn upon the differences between the witnesses as to discussions or events at the jobsite. As a result, the findings of fact which I make are based upon the contemporaneous documents and upon evidence by the witnesses which was not contradicted by evidence given by the opponent’s witnesses. When a witness gave evidence that an oral agreement was made which was contradicted by another witness, I have proceeded on the basis that no such agreement was made. When a witness gave evidence that a specific matter was discussed which was denied by another witness, I have proceeded on the basis that the matter was not discussed. When a witness gave evidence that something specific was said which was contradicted by another witness, I have proceeded on the basis that it was not said.The law on repudiationGeneral principles

Decision

Reasons for decision

Janssen would have been entitled to interest under section 30C of the Supreme Court Act 1935 (SA) on that amount.Conclusion Janssen repudiated the Contract. Kennett lawfully terminated the Contract. Kennett is entitled to judgment against Janssen Co and Mr Janssen for damages of $226,212.22. Janssen’s counterclaim is dismissed. I will hear the parties as to interest, costs and any consequential orders.

Ratio Decidendi

Legal Principle Established

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