Opat Decorating Service (Aust) Pty Ltd v Hansen Yuncken (SA) Pty Ltd No. SCGRG 93/595 Judgment No. 4878 Number of Pages 8 Contracts (1994) 11 BCL 360

[1994] SASC 4878

COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA BOLLEN(1), PRIOR(2) and DUGGAN(3) JJ

CWDS
Contracts - general contractual principles - construction and interpretation of contracts - Arbitration - building sub-contract - a requirement in the sub-contract that notice of a claim for extension of time within which to complete "the works" be given within a certain time is mandatory, is a condition precedent to the consideration of the claim. Port Jackson Stevedoring Proprietary Ltd v Salmond and Spraggon (Aust) Pty Ltd (1977-78) 139 CLR 231; Darlington Futures Ltd v Delco Aust P/L (1986) 161 CLR 500; Jennings Constructions Ltd v Q H and M Birt P/L (1986) 8 NSWLR 18 and Wormald Engineering P/L v Resources Conservationists Co (1989) 8 BCL 158, applied.

HRNG ADELAIDE, 10 November 1994 #DATE 8:12:1994

Counsel for appellant:     Mr R D Ross-Smith with Mr C W Goodall

Solicitors for appellant: Thomsons

Counsel for respondent:    Mr M N Rice with Mr P W Nobbs

Solicitors for respondent: Ross McCarthy

ORDER
Appeal dismissed.

JUDGE1 BOLLEN J This is an appeal from the decision of a single judge who heard, by leave, an appeal from the decision of an arbitrator.

2. The appellant was the sub-contractor of the respondent. The respondent was the head contractor in a building or project for or about "Telecom Headquarters Building" (see the front page of the sub-contract). The head contract and the sub-contract were on standard printed forms. The head contract is given the designation "NPWC3". The sub-contract is given the designation "SCNPWC3". Mr Ross-Smith, for the appellants, said that "they are described as back to back documents".

3. The issue on appeal to the single judge and now to this Court is the interpretation of provisions in the sub-contract for the giving of notice of a claim for an extension of time.

4. Mr D Sarah was appointed arbitrator. Preliminary conferences were held. It was agreed that the question of interpretation of provisions "for notice" would be dealt with as a preliminary point. The arbitrator addressed the arguments addressed to him. He handed down an interim award on the point. In fact it became a decisive award. The arbitrator held that the provisions requiring notice which the sub-contractor had failed to meet were mandatory. The failure to give notice as required by the sub-contract was fatal to the claim which the appellant wished to make. Thus the appellant left the arbitral forum defeated without investigation of the merits of its proposed claim for extension of time.

5. The appellant appealed by leave. Mohr J upheld the award of the arbitrator. The appellant comes here pursuant to leave granted by Millhouse J.

6. The appellant wished to claim an extension of time for the completion of "works".

7. The relevant or possibly relevant provisions of the sub-contract are:-
    "31(b) 'Where the Sub-Contractor is delayed in the
    execution of the Works by any cause arising out of any
    breach of the provisions of this Contract or out of any
    other act or omission on the part of the Contractor his
    employees or agents or by any act or omission on the part
    of the Principal, the Superintendent or the employees,
    professional consultants or agents of the Principal or by
    any other cause (except a cause arising out of any breach
    of the provisions of this Contract or any other act or
    omission on his own part or on the part of his employees,
    agents or sub-contractors or their employees or agents) and
    that delay might reasonably be expected to result in a
    delay in the execution of the Work under the Contract, the
    Sub-Contractor shall if he desires to claim an extension of
    time for completion of the Works give to the Contractor not
    later than fourteen (14) days after the cause of delay
    arose notice in writing of his claim for an extension of
    time for completion of the Works together with a statement
    of the facts which he bases his claim.'"

8. And:-
    "47. 'The Contractor shall not be liable upon any claim by
    the Sub-Contractor in respect of any matter arising out of
    this Contract unless the claim, together with full
    particulars thereof, is lodged in writing with the
    Contractor not later than fourteen (14) days after the date
    of the occurrence of events or circumstances on which the
    claim is based, or written notice of intention to make the
    claim specifying the nature of the claim is lodged with the
    Contractor with that time and the claim, together with full
    particulars thereof, is lodged in writing with the
    Contractor not later than fourteen (14) days before the
    issue of the Final Certificate under the Head Contract.'"

9. The appellant acknowledges that it did not give the notice required within the time prescribed by those clauses. Notice was given later - out of time.

10. The arbitrator heard argument from the parties. He published his award to which he attached his reasons. He had committed them to writing. His award is:-
    "My award is that the Claimant is barred from pursuing the
    matters pleaded in the Notice of Dispute, dated the 25th
    day of September 1990, due to its failure to comply with
    the notice requirements of clause 31 (b), 31 (g) or clause
    47 of the Sub Contract document."

11. In his reasons the arbitrator said:-
    "On the basis of the evidence before me and the foregoing,
    I agree with the Contractor's contention that the Sub
    Contractor pursuant to clause 31 (b) of the Sub Contract is
    barred by its failure to make a claim for such extensions
    of time within the limits therein as set forth in clauses
    31 (b), 31 (g) or 47 of the Sub Contract.

It is therefore a mandatory requirement for the
    Sub Contractor to comply with the terms of clause 31 (b),
    and Clause 47 reminds the Sub Contractor of its obligation,
    providing it has complied with clause 31 (b) to lodge all
    outstanding claims to be made within 14 days before the
    issue of the Final Certificate under the Head Contract."

12. Mohr J quoted the passage which I have just quoted. He gave emphasis to the phrase "clause 47 reminds the sub-contractor...". I agree with the giving of that emphasis. In the circumstances here it is, in my opinion, Clause 31(b) which is really important. Clause 47 can well be seen as a reminder.

13. Mohr J mentioned Clauses 31(e) and 31(g). These, he said, correctly, if I may say so, had no relevance. Mohr J said:-
    "Mention should be made of Clauses 31(e) and 31(g), which
    read:-
    '31(e) Notwithstanding that the Sub-Contractor has not
    given notice of a claim for an extension of time for
    completion of the Works pursuant to this clause, the
    Contractor may, at any time and from time to time and for
    any reason he thinks sufficient, by notice addressed to the
    Sub-Contractor extend the time for completion of the Works
    by nominating a date specified in the notice as the date
    for the completion of the Works and the date so specified
    in the notice shall, for the purpose of this Contract, be
    deemed to be the date for the completion of the Works.
    ...

31(g) Any extension or extensions of time granted or
    allowed by the Contractor pursuant to the provisions hereof
    may be granted or allowed at any time before the issue of
    the Final Certificate under the Head Contract.'

In my opinion these claims have no bearing on whether non
    compliance within Clause 31(b) is a bar to the
    Sub Contractor being granted an extension of time. Clause
    31(e) appears to be aimed at allowing the Contractor, for
    reasons it deems proper, to grant a blanket extension of
    time without the necessity of any Sub-Contractor applying
    for such. For instance if the main work under the Contract
    was held up or delayed for some reason the contractor may
    well see fit to grant such an overall extension of time.

So far as Clause 31(g) is concerned the fact is that no
    such extension of time has been granted. The Contractor
    relies on its submission that compliance with Clause 31(b)
    is mandatory."

14. Mohr J attacked the central point. He described it as "whether compliance with Clause 31(b) is a necessary step to the granting of an extension of time". I respectfully agree with that description of the central point.

15. Mohr J considered the argument of counsel and particularly noticed two cases. In the result he said:-
    "In my opinion the giving of the required notice and
    particulars under Clause 31(b) or adopting the procedure
    set out in Clause 47, neither of which the sub-contractor
    did, are pre-requisites for the granting of extension of
    time except in the circumstances of Clause 31(e) and (g)
    and the arbitrator was correct in so holding."

16. He, therefore, dismissed the appeal.

17. I set out all the grounds of appeal:-
    "1. The learned Judge erred in law in finding that the
    giving of a written notice in accordance with the time
    limits prescribed in Clause 31(b) of the contract between
    the Appellant and the Respondent is a condition precedent
    to the granting of an extension of time.

2. The learned Judge erred in law in finding that the
    notice procedure under Clause 47 of the contract between
    the Appellant and the Respondent is applicable to claims
    for the grant of an extension of time, and that compliance
    therewith is a condition precedent to the granting of an
    extension of time.

3. The learned Judge erred in law in holding that
    compliance with the notice requirements of Clauses 31(b) or
    Clause 47 were options, or alternatives, available for the
    Contractor.

4. The learned Judge erred in law in failing to have any or
    any sufficient regard to the absence of clear and
    unambiguous words in Clause 31(b) leading to the conclusion
    that failure to comply with the time limit prescribed
    therein is a complete bar to a claim for extension of time.

5. The learned Judge ought to have found that the fourteen
    (14) day time limit prescribed in Clause 31(b) is not
    mandatory, and that failure to strictly comply does not
    preclude a claim.

6. The learned Judge ought to have found that Clause 47 has
    no application or relevance where there is a specific
    contractual clause, namely Clause 31(b), prescribing
    relevant the notice requirements for an extension of time
    claim."

18. But I think all these grounds boil down to the question - is the time limit in s.31(b), and perhaps in s.47, mandatory? Is the giving of notice within the time limit a condition precedent to the granting (or perhaps more accurately "the consideration of the claim for extension of time") of an extension of time? The arbitrator and Mohr J have each answered "Yes" to these questions. The appellant says that each was wrong in law.

19. In this appeal we have had the advantage of admirable arguments and submissions on each side.

20. Mr Ross-Smith did not contend that the requirement for the giving of notice at all was not mandatory. He did contend that the giving of it within the time stated was not mandatory, not a condition precedent to the consideration of the claim. Amongst other forceful contentions he said:-
    "... if it is intended to be that failure to give notice
    within a time strictly is fatal to a claim, that we put,
    respectfully, that the language of the contract must make
    that abundantly clear rather than any other way.

We say, that a condition precedent or pre-condition, such
    as the one which the builder would argue does not usually
    arise out of more general expressions in the contract, and
    we say again, particularly in circumstances such as the one
    at bar, in this contract, relevant to the subject claims,
    there was no expressed provision making the giving of
    notice, within time, a condition precedent or making time
    of the essence in respect of the giving of notices."

21. In his forceful argument Mr Rice contended that arbitrator and judge was each correct.

22. We were referred to several cases. In my opinion no case is decisive of the matter nor could any case be decisive. We may see principles in cases. But in the end it is the words used in the relevant clause or clauses of the sub-contract which are decisive. What in this sub-contract do these words mean? What did the parties negotiating at arms' length mean when they agreed to the insertion of the relevant words in the sub-contract? And I do not think Clause 47 to be really significant here. As I have said, I think that it is Clause 31(b) which really matters.

23. I have appeared to brush aside past cases. But let me mention a few.

24. In speaking of a "time limitation clause" in Port Jackson Stevedoring Proprietary Ltd v Salmond and Spraggon (Aust) Pty Ltd (1977-78) 139 CLR 231 at 238 Barwick CJ said:-
    "The decision in Suisse Atlantique ... indicates, in my
    opinion, that whilst exemption clauses which, for present
    purposes, can be assumed to include a time limitation such
    as cl.17, should be construed strictly, they are of course
    enforceable according to their terms unless their
    application according to those terms should lead to an
    absurdity or defeat of the main object of the contract or,
    some other reason, justify the cutting down of their
    scope."

25. There is, in my opinion, nothing in the reasoning of Mohr J which leads to absurdity or defeats any object of the sub-contract. Nor is there any reason for cutting down the scope of the words which create the time limit.

26. In Darlington Futures Ltd v Delco Aust P/L (1986) 161 CLR 500 at 510 the High Court held that the exclusion clause there was to be interpreted and determined according to the natural and ordinary meaning read in the light of the circumstances as a whole. The High Court said that the same principle would apply to the consideration of limitation clauses. I think that the arbitrator and Mohr J read the relevant words in the way approved by the High Court.

27. In Jennings Constructions Ltd v Q H and M Birt Pty Ltd (1986) 8 NSWLR 18 Smart J had to deal with s.47 of SCNPWC3. He considered that the time limit in s.47 was a condition precedent with the granting of an extension. It was mandatory. Mohr J quoted this passage from the reasons of Smart J:-
    "The purpose of cl.47 is to ensure that notice is given at
    an early stage so that the contractor can inspect and
    investigate promptly the events or circumstances and
    consider his position."

28. Mohr J said "Those words apply with equal force to the giving of notice under Clause 31(b)". I agree. Mohr J went on to speak of the reasoning of Smart J thus:-
    "His Honour in that case described clause 47 as a 'residual
    clause' and that is true in a sense. It may also apply to
    a sub-contractor seeking an extension of time. Such a
    sub-contractor may not be in a position to give full
    particulars and it seems that clause 47 gives him the right
    to give what is in effect a preliminary notice and delay
    giving particulars until a time prior to 14 days from the
    issuing of the final certificate. Such a notice would give
    the contractor an opportunity of reviewing the progress of
    the whole contract at the time of the notice so that when
    full particulars are given it would be in a position to
    review the whole question."

29. I respectfully agree although I attach little or no importance to Clause 47.

30. The case of Wormald Engineering Pty Ltd v Resources Conservationists Co
(1989) 8 BCL 158 was referred to by Mohr J and discussed before us. A reading of the reasons of Rogers CJ Comm.D shows, in my opinion, that His Honour determined the issue before him by considering the meaning of the relevant words in the way approved by the High Court in the cases which I have mentioned. His Honour looked at the contract at the relevant words and at the purpose of the words. He held that failure to give notice as required by the contract was destructive of the claim made in that case. He asked himself the question whether in the circumstances the giving of notice as required by the relevant clause was a condition precedent to payment. He answered "Yes".

31. Neither Wormald's case nor Jennings' case is decisive here. But they are powerful demonstrations of the way in which a court should consider the words in Clause 31(b) and, if thought necessary, Clause 47 of SCNPWC3.

32. Let me look at Clause 31(b). It begins by speaking of circumstances in which the parties contemplate that the appellant might want an extension of time within which to complete work. The parties when negotiating the contract, knowing the exigencies of the trade, agreed that some such circumstances might arise. What should be done about it? They answered this question by saying that the notice should be given by the appellant to the respondent, by sub-contractor to contractor. They decided something about the time within which notice should be given. What did they decide? They decided that it should be given within fourteen days after the cause of delay arose. They knew the exigencies of the trade. They knew what practical questions or issues would arise when notice was given. They knew when it was best for the notice to be given. They fixed on that fourteen day period. And they meant the clause which emerged from these deliberations to be effective within its terms. That is to say they meant what Clause 31(b) says to be the position. They meant to bind themselves to it.

33. And Clause 47 is perhaps a fortification of that view. It is "residual". But that does not matter. I say again that I see Clause 47 as a reminder (supra). I think that is the best way to look at s.47 here.

34. I respectfully agree with the arbitrator and with Mohr J about the meaning and operation of Clause 31(b). It is a mandatory provision. I agree, with respect, that Mohr J is correct in his interpretation of Clause 47 although I do not think that matters.

35. I would dismiss the appeal.

JUDGE2 PRIOR J I agree with the reasons published by Justice Bollen. The appeal should be dismissed.

JUDGE3 DUGGAN J In my view the appeal should be dismissed for the reasons given by Bollen J.