Lang v Cardinal Constructions Pty Ltd

[2008] WASCA 244

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT :   THE COURT OF APPEAL (WA)

CITATION:   LANG -v- CARDINAL CONSTRUCTIONS PTY LTD [2008] WASCA 244

CORAM:   WHEELER JA

PULLIN JA
BUSS JA

HEARD:   4 NOVEMBER 2008

DELIVERED          :   1 DECEMBER 2008

FILE NO/S:   CACV 13 of 2008

BETWEEN:   DAVID GRIFFITH LANG

Appellant

AND

CARDINAL CONSTRUCTIONS PTY LTD (ACN 009 045 069)
Respondent

ON APPEAL FROM:

Jurisdiction              :  DISTRICT COURT OF WESTERN AUSTRALIA

Coram  :NISBET DCJ

Citation  :LANG -v- CARDINAL CONSTRUCTIONS PTY LTD [2008] WADC 1

File No  :APP 44 of 2007

Catchwords:

Contract - Construction of warranty clause - Turns on own facts

Legislation:

Nil

Result:

Appeal dismissed

Category:    B

Representation:

Counsel:

Appellant:     Mr G E Nairn

Respondent:     Mr R D Shaw

Solicitors:

Appellant:     Macdonald Rudder

Respondent:     Lavan Legal

Case(s) referred to in judgment(s):

Expectation Pty Ltd v Pinnacle VRB Ltd [2002] WASCA 160

GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631

Masters v Cameron (1954) 91 CLR 353

1WHEELER JA:  This is an appeal from a decision of a District Court judge dismissing an appeal from a magistrate in relation to a claim for damages concerning an allegedly defective roof on a residence.  The issue which arises concerns the construction of what I would call the "warranty clause" in the contract for the building of the residence.  It arises in this way.

2On 6 August 1997, the contract was entered into.  It was for the construction of a residence on land in Cottesloe, and was entered into between the builder and the proprietor of that land.  The date of "practical completion" of the residence was 1 May 1998.  In November 2005, or thereabouts, the appellant proprietor, dissatisfied with the condition of the roof, had the roof replaced.  There have been proceedings in the Building Disputes Tribunal, pursuant to the Builders' Registration Act1939 (WA), but it is not necessary to consider those. On 22 March 2006, the appellant proprietor commenced proceedings in the Magistrates Court seeking damages in relation to the roof. The learned magistrate found that the claim was statute‑barred. He therefore dismissed the claim.

3The warranty clause was found in section 07600 of the document entitled "Specification", and was cl 107 in that section.  Including the heading to the clause, it read as follows:

Warranty

Provide to the Proprietor a warranty on the whole of the roof and roof plumbing including penetrations for pipes, flues, upstands etc. performed for mechanical equipment Sub‑Contractor which states that work shall remain waterproof and weather‑tight for the period of fifteen years from the date of Practical Completion.

4The questions which arose about the construction of this clause are whether it contemplated that the builder would provide the proprietor with a separate warranty document, and (whether a separate document was contemplated or not) whether the parties intended that the builder should immediately be bound by the terms of the warranty.  The learned magistrate considered that the clause placed an obligation on the builder only to provide a separate warranty, in the terms set out in cl 107, and that if the builder did not provide such a warranty, the builder could be sued for breach.  However, no warranty had been provided and no action for breach had been instituted within time. 

5It was accepted at the hearing of the appeal, as it seems to have been accepted below, that the question whether the parties intended that the builder be immediately bound by a warranty in the terms set out in cl 107 depended upon the intention of the parties, objectively ascertained by reference to the whole of the contractual documents entered into by the parties.  The argument before us proceeded on the assumption that if cl 107 required the provision of a separate warranty document, then the time at which that document had to be provided was either at practical completion, or within a reasonable period of time from practical completion.  There was some exchange between the court and counsel for the appellant concerning the extent to which the time for giving of the warranty had been the subject of analysis below, but the position maintained by counsel for the appellant was:  "I don't think it's in issue that the plaintiff [appellant] would be out of time if he was suing on that [ie, on a breach of a promise to provide a warranty]."  Although there may be some doubt, on a proper analysis of the contractual documents, whether that concession was correct, it seems to have been common ground below, and there was no ground of appeal suggesting any contrary conclusion. 

6The appellant contended before us, and before the District Court, that the warranty clause should be considered as an "entire agreement" as to warranty of the kind described by the High Court in Masters v Cameron (1954) 91 CLR 353 at 360 ‑ 361.

Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three cases. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.

In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common.

7The appellant contended that the warranty clause fell into the first class described in that passage.  However, in my view, an application of Masters v Cameron is not particularly helpful in the circumstances of the present case.  That case was concerned with the effect of a brief memorandum, which is set out in full in the reasons of the High Court, the substantive part of which occupied approximately 15 lines, and which was expressed to be "subject to the preparation of a formal contract of sale".  By contrast, the agreement of which the warranty clause in issue here forms part, is itself a formal contractual document, occupying some 90 pages of the green appeal book and detailed in its provisions.  The question in issue here is simply what the warranty clause means in the context of the whole of that detailed agreement. 

8Relevant aspects of the contract, which may assist in the construction of the warranty clause, are as follows.  The first relevant document is entitled "Lump Sum Contract for simple building works".  It extends over some 30 pages.  It is in a form apparently prepared by the Royal Australian Institute of Architects and Master Builders Australia, Incorporated, and is expressed to be "intended for building works ... of a simple nature where the Proprietor has appointed an Architect".  In the definitions section the words "the agreement" or "this agreement" are defined as:

1.2DEFINITIONS

...

1.2.4The Agreement or this Agreement - The entire, final and concluded agreement between the Proprietor and the Builder relating to the execution of the Works which agreement is as constituted by the documents listed in Item B4 of the Appendix which are for the purposes of this document referred to as the 'Contract Documents'. 

Item B4 in the appendix describes the "Contract Documents" as consisting of the lump sum contract itself, the specifications marked "Lang Residence ... " and certain drawings which have not been provided to us. 

9Under the heading "The Site" in section 3, is cl 3.3 which is entitled "Proprietor's Warranty" and which reads:

Subject to the provisions of clause 3.2 [not presently relevant] the Proprietor warrants that the site will satisfactorily support the Works. 

It is to be noted that this provision plainly is, by its terms, to be understood as a warranty operating from the commencement of the contract.

10Section 4 of the lump sum contract is concerned with subcontracts.  It provides that the builder may subcontract any part or parts of the works, but by subcontracting shall not be relieved of any of the builder's responsibilities under the agreement. 

11Document 00800 in the specification, entitled "Supplementary Conditions of Contract", provides that the builder is to supply to the architect, if requested, a complete list of subcontractors and suppliers proposed and that the proprietor, through the architect, reserves the right to reject any so specified. 

12Clause 4.3 provides:

4.3SUPPLY AGREEMENT CONDITIONS

The Builder shall not be required to make or give to the Proprietor, in respect of any of the goods, fittings or materials referred to in subclauses 10.7.1 and 10.7.2, any greater warranty or guarantee than the builder shall have received or be entitled to receive from the supplier thereof unless otherwise required by law. 

13Clauses 10.7.1 and 10.7.2 relevantly read:

10.7PROVISIONAL SUMS

A Provisional Sum (whether described as a Provisional Sum or Prime Cost Sum) means a sum included in the Contract Sum for:

10.7.1Work materials or goods expressed to be executed or supplied by the Builder; or

10.7.2the supply and fixing of materials or goods or the execution of work or the fabrication or manufacture and supply of materials or goods particular to and exclusively for the Works by persons to be identified by the Architect under clause 4.2; or

14The combined effect of section 7, item F of the appendix, and item F of the annexure in document 00850, is to require the builder to permit the execution of certain works, such as timber flooring and air‑conditioning, to be carried out by specialists who are deemed to be persons for whom the proprietor, rather than the builder, is responsible.  None of those works appears to be relevant to the roof. 

15Section 5 provides for the administration of the contract by the architect as agent for the proprietor, and section 6, after setting out certain of the responsibilities of the builder and of the proprietor, provides, in cl 6.8:

6.8MAKING GOOD DEFECTS

Any defects excessive shrinkages and other faults due to materials or workmanship not in accordance with this Agreement, which are apparent and notified in writing by the Architect to the Builder after the Date of Practical Completion and before the end of the Defects Liability Period stated in Item E of the Appendix, shall be made good by the Builder at the Builder's own cost unless the Architect shall otherwise instruct.  Should the Builder fail to comply the provisions of clause 5.5 shall apply.

The "Defects Liability Period" is defined in the appendix as 26 weeks after practical completion.  Practical completion is defined in cl 1.2, and ascertained in accordance with cl 9.1, which relevantly reads:

9.1        PRACTICAL COMPLETION

The Architect shall decide the date when in the Architect's opinion the Works reached a stage of Practical Completion and shall thereupon notify in writing the Proprietor and the Builder accordingly, provided that:

9.1.1Should the Builder give written notice to the Architect that in the Builder's opinion the Works have reached Practical Completion and the Architect does not within 10 days of receipt of such notice give notice in writing to the Builder of the matters and things remaining to be done for Practical Completion; or

...

then the Works shall be deemed to have reached Practical Completion on the date stated in the Builder's notice or the date of occupation as the case may be.

16Importantly, section 11 provides for the final certificate and final payment.  Clause 11.2 relevantly reads:

11.2FINAL CLAIM

On the expiration of the Defects Liability Period [defined in the appendix as 26 weeks after practical completion] or on the completion of making good any defects pursuant to clause 6.8, whichever shall be the later, the Builder shall submit to the Architect a final claim which shall include:

11.2.1All documents required and reasonably necessary for calculation of the amount to be certified; and

11.2.2all warranties, certificates, records, drawings and other documents called for under this Agreement; and

...

17Clause 11.3 provides that, within 10 days of receipt of the builder's final claim, the architect is to issue a final certificate.  That certificate has the effect of making any amount included in it a debt due and payable by the proprietor to the builder.  Clause 11.6 provides that, where the builder has provided a bank guarantee, within five days after the presentation of the final certificate, the proprietor is to release any remaining security, and, by cl 11.8, unless disputed in writing, the final certificate is evidence that the works have been completed in accordance with the terms of the agreement, with certain specified exceptions.

18Two matters relevant to the construction of the warranty clause in the specifications emerge from the lump sum contract.  The first is that the builder retains overall responsibility for the works, but it is accepted that the builder may subcontract, subject to the proprietor's right to reject proposed subcontractors.  Both counsel before us accepted that it was not unusual in Western Australia for very substantial parts of residential building works to be carried out by subcontractors.

19The second matter which emerges from the lump sum contract is the importance of practical completion, the final certificate and final payment process in adjusting the rights of the parties, once the building is substantially constructed.  The scheme which broadly appears is that, between the date of practical completion and the end of the defects liability period, the builder is to make good at the builder's own cost any defects which are notified by the architect.  At the conclusion of that period, the builder is to provide a variety of documents, including "all warranties" called for under the agreement, and once the final certificate is issued, the works are deemed to have been completed in accordance with the terms of the agreement, subject only to defects or omissions in any of the works not apparent at the date of the issue of that certificate.  Because of the way in which these provisions interact, there would be no apparent need for a builder's warranty to operate at any date prior to the issue of the final certificate.

20Turning to the specifications, there are a number of provisions dealing with warranties.  In the part entitled "Supplementary Conditions of Contract", cl 35 reads:

WARRANTY BONDS

The Builder or other approved Warrantors shall provide warranties as set out in document 00630. 

21Document 00630 is not one of the contract documents as defined by the appendix to the lump sum contract.  We do not have it, assuming it to exist.  The most that one can glean from this provision is that the parties appear to have contemplated that there would be circumstances in which either the proprietor, or the architect as agent for the proprietor, might approve the provision of warranties by persons other than the builder.  There is nothing to indicate whether any mechanism was provided for by any agreement entered into between the builder and the proprietor for such approval to take place.  The other warranty provisions take a variety of forms. 

22In section 02600, which deals with sanitary plumbing, hot and cold water and gas, cl 106 reads:

WARRANTY

Provide the Proprietor with warranties covering:

AMaterials:  in the form supplied by manufacturers of specified components.

BInstallation, for five years from the date of Practical Completion:  the complete piping installation and the specified components to which it is connected.

23A similar form of warranty clause is provided for in section 02700, covering sewerage and drainage.  Although it does not specifically provide for a manufacturer's warranty, rather than a builder's warranty, it appears to me that the warranty at cl 107 in section 09300, dealing with ceramic tiles, requires the builder to provide a warranty in relation to materials no wider in scope than the warranty provided by the supplier of the tiles.  That is because tile supply is the subject of a provisional sum, so that the effect of cl 4.3 and cl 10.7 of the lump sum contract limits the warranty requirement in that way.

24So far as I can tell, none of the sections dealing with brickwork, metal work or joinery provide for warranties.  One section, number 03300, dealing with concrete, clearly requires the provision of a separate document, since cl 107 there provides:

WARRANTY

Forward to the architect a statement guaranteeing that the concrete complies with the approved mix design and that concrete has attained required strength at 28 days.

25The remaining warranty provisions are all couched in slightly different wording, for reasons which are not immediately clear.  Under section 16000, electrical installation, cl 107 reads:

WARRANTY

Provide a warranty covering aspects of required work of this Trade Section, for a period of not less than ten years from the date of Practical Completion.

This is, in terms, very close to the wording of the warranty clause in issue in this case. 

26Under section 09900, dealing with painting, cl 108 reads:

WARRANTY

A warranty covering that preparation of surfaces, materials and material application installed under this contract shall show no deterioration and remain in good condition for a period of seven years from date of Practical Completion shall be given.

27"To give" is synonymous with one meaning of the word "provide".  Because of the difference in wording, it might be argued that the words "shall be given" in this clause indicate that the word "provide" in the clause in question here is not intended to indicate that the warranty is something which the builder will give, but, rather, it is a proviso or stipulation operating from the date of the contract.  There are, however, difficulties with this proposition, which I will indicate shortly. 

28Finally, section 09250, under the heading "Plasterboard", contains cl 106 which reads:

WARRANTY

Provide Warranty covering the work against defective materials and workmanship for a period of five (5) years from the date of Practical Completion.  The Warranty shall include a statement that the whole of the work has been carried out in accordance with relevant Australian Standards and Codes and manufacturer's instructions in effect at the time of installation.

29This clause reverts to the familiar "provide" form, but is clearly contemplating a document to be provided at, and to operate from, a future date.  That is because it stipulates that the warranty "shall include" a statement, clearly indicating that it is describing some other document which is to contain the relevant statement, and that the statement will be to the effect that work which, at the date of entry into the contract, has yet to be performed, has (at the date of the statement) been carried out in a particular way. 

30In my view, there is little utility in minute comparison of the various warranty clauses in the specification.  There are minor and apparently random variations in such matters as whether the number of years the warranty is to operate is spelt out in words alone, spelt out and underlined, or both spelt out and indicated as a figure.  Further, a comparison of the clause in question here and that contained under the heading "Plasterboard" strongly suggests that there is no particular reason for the use of the word "provide", rather than "give".  All that I think can be gleaned is that in relation to some of the warranty clauses, the parties clearly intended that the warranty would be provided in the form of a separate document and would operate at some time following the entry into the contract. 

31When one looks at the various warranty provisions, no reason appears from the contract itself as to why the parties could have intended that some of the various warranties should come into effect only in the future and only after the provision of a warranty document, while others would have been intended to bind the builder immediately as a warranty.  The appellant did not suggest why, for example, there would be some immediate need for a warranty in relation to the roof, but not in relation to the electrical installation, or the drainage.

32In the end, there are, I think, three simple reasons for rejecting the appellant's submission that, by the clause in question in this appeal, the builder was providing, as from the date of entry into the contract, a warranty that the roof would remain weather‑tight for the period specified, rather than agreeing that, at some future time, he would provide a warranty to that effect.  Those reasons are:

(1)The word "provide" in its ordinary meaning in common usage means to give in the future. If the parties had intended "the builder by this contract provides", they could have said so (cf cl 3.3 of the lump sum contract: [9] above).

(2)Some of the warranty provisions in the contract indicate with relative clarity that the parties did intend that a separate document would be provided at a future time.  There appears to be no reason for them to have intended the roof warranty to be treated differently.

(3)As I noted earlier, an analysis of the provisions of the lump sum contract suggests that the provision of a separate warranty, at least in relation to major defects such as a roof which was not weather‑tight, at any date earlier than the expiry of the defects liability period, would be unnecessary for the protection of the proprietor.

33In addition, as I have noted, there are some indications in the contract that the parties contemplated that any, or all, of the parts of the building might be carried out by subcontractors and it was possible that, in some circumstances, a warranty from a subcontractor might be satisfactory to the proprietor.  However, the contractual provisions are not particularly clear in this respect.

34For these reasons, grounds 1 and 2 of the appeal, which challenge the construction of the warranty clause which I have considered to be the correct one, must fail.  It remains only to deal with ground 3.

35Ground 3 reads as follows:

Ground 3

3.Alternatively, his Honour erred in law in finding in effect that:

(a)the general principle that a person cannot rely on their own breach of a contract to avoid liability thereunder did not apply to this case; and

(b)the respondent could rely upon its own default in failing to provide the appellant with a separate warranty document to escape its obligations under the Warranty Clause.

PARTICULARS OF GROUND 3

1.The said general principle is not limited solely to cases involving non‑fulfilment of a condition precedent by reason of a party's default.

2.In any event, the said general principle applied to this case given His Honour's finding (in effect) that the provision of the separate warranty document was a condition precedent to the respondent's obligation to perform the Warranty Clause.

36I regret that I simply do not understand this ground.  It proceeds, as I understand it, from the proposition that, where performance of a contract is conditional on some event which is within the control of a party, that party's failure to co‑operate in bringing about the event will generally disqualify that party from relying upon the non‑fulfilment of the condition:  see, for example, Expectation Pty Ltd v Pinnacle VRB Ltd [2002] WASCA 160 at [89], GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 637. It then seems to assert that the principle is of much wider application and that where a party to a contract agrees to do something, but fails to do it, the party either then cannot rely upon the limitation period to defeat a claim under the contract, or that the party must be treated as if the promise had been fulfilled, so that, in the present case, the appellant can sue upon the warranty, even though no warranty was, in fact, given. No authority was cited for a proposition of this kind. If that were the law, it is difficult to see much scope for the application of limitation provisions. Ground 3 must also fail.

37I would therefore dismiss the appeal.

38PULLIN JA:  I agree with Wheeler JA.

39BUSS JA:  I agree with Wheeler JA.